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Alexander v. Incway Corporation

United States District Court, Ninth Circuit

October 11, 2013

THOMAS E. ALEXANDER, Plaintiff,
v.
INCWAY CORPORATION, a Wyoming corporation, COMPANIES INCORPORATED, a Wyoming corporation, PRESIDENTIAL SERVICES INCORPORATED, a Nevada corporation, KEVIN W. WESSELL, an individual, CASEY LAWRENCE, an individual, MATT MITCHELL, an individual, and DOES 1 through 10, inclusive, Defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW AFTER COURT TRIAL

DALE S. FISCHER, District Judge.

This case having come on for trial without a jury, and the Court having heard live testimony, viewed videotaped deposition testimony, and reviewed designated deposition testimony, and having duly considered the evidence, the credibility of the witnesses, the entire file of the Court, and the contentions and arguments of counsel, the Court makes the following findings of fact and conclusions of law in accordance with Rule 52(a) of the Federal Rules of Civil Procedure.

FINDINGS OF FACT

PLAINTIFF THOMAS E. ALEXANDER

1. Plaintiff Thomas E. Alexander is a real estate agent in Anchorage, Alaska. [Reporter's Transcript: June 18, 2013 (RT1), 4:10-18.]

2. In about June 2008, Alexander was considering opening an offshore account, but had no prior experience with such accounts. (The witnesses often seem to use the term "offshore account" to mean "offshore company." See RT 1, 29:7-8.) Alexander was concerned because he was involved in a large development in Anchorage, the economy had started to turn bad, and the development started getting "questionable." He was one of four partners, and the other partners were not financially stable, so he wanted to set aside some assets that would be protected. [RT1, 5:2-4, 7:18-19, 29:7-14.]

3. Alexander went online and found Companies, Incorporated (CI). He concluded it had a "very substantial web page that looked like they knew what they were doing, " and called its toll free telephone number, 1-800-COMPANIES. [RT1, 5:5-10.]

4. When Alexander first made contact with CI, he had more than $524, 700 available for deposit in an offshore bank account. [Reporter's Transcript: June 19, 2013 (RT2), 88:19-25.]

5. After explaining to the receptionist that he wanted to explore the option of opening an offshore account, Alexander eventually was put through to Defendant Kevin W. Wessell. [RT1, 5:16-20.]

6. Alexander asked Wessell how the process worked, and Wessell explained that the account could be set up in Nevis, a small country in the Caribbean. When Alexander expressed concern about putting his money there, Wessell said that the offshore corporation would be registered in Nevis, but the money would go into a bank at some other place. [RT1, 6:3-12.]

7. Alexander told Wessell that his only goal was to have his money in a safe place where he could access it at any time. He did not want it in a CD. [RT1, 7:3-6, 7:25-8:3, 24:14-16.]

8. Alexander had always heard about Swiss bank accounts, and asked Wessell if the account could be in a Swiss bank. Wessell told him that Sweden has a better banking system and stronger banking laws, and Wessell highly recommended that he deposit his money in a financial institution called The Alps. Alexander had never heard of The Alps before. He said he would "think about it." [RT1, 6:22-7:17, 8:10-12; RT2, 88:13-16.]

9. In September 2008, defendant Matt Mitchell[1] called and told Alexander that he would help Alexander set up the offshore LLC in Nevis, and would mail Alexander the necessary information. Mitchell also said defendant Casey Lawrence would help Alexander set up the bank account. [RT1, 8:12-23.]

10. Alexander then received a large, impressive package in the mail, containing stock certificates and directions about what to fill out. Exhibit 5 looks like what he received. That Exhibit purports to be materials from CI, and purports to have been copyrighted by Wessell and Presidential Services Incorporated (PSI). [RT1, 9:9-10:13; Ex. 5.]

11. The materials state that CI provides "a full service solution, " (Ex. 5 at 38[2]), that CI has been "Trusted since 1977, " (Ex. 5 at 40), and that CI is "committed to constantly improving [its] services, " (id.). The materials indicate that CI is a division of PSI. (Id. at 41.) The materials would be likely to convince the average person that CI was skilled at assisting people who wanted to "Lawsuit-proof [their] assets" and "judgment-proof [their] wealth." (Id.)

12. It appears Alexander actually established the offshore entity, Cold Play Ventures, LLC, (Ex 5 at 65, et seq.), but there is no suggestion that the funds Alexander had available were ever transferred to Cold Play or that Cold Play (as opposed to Alexander himself) sent any funds to The Alps.

13. Alexander also received documents that he was to complete to open the account with The Alps. (Ex. 6.) He completed them and sent them back to Lawrence. [RT1, 10:14-11:8.]

14. Alexander saw The Alps' web page before he wired any money. The only thing he looked at before wiring money was the home page, which showed a big building and had Alexander's login. The home page of the website conveyed to Alexander that The Alps was the Wells Fargo and the Bank of America of Sweden; and that a bank that has its headquarters in the World Trade Center must be a pretty substantial bank. Although Alexander referred to Exhibit 24 as the website he saw before making his initial deposit in 2008, the Exhibit has a copyright date of 2009. There are several possible explanations for this apparent inconsistency - and defendants did not produce a copy of a previous website home page - or provide any testimony or evidence that Exhibit 24 was not the same or substantially similar to the web page that Alexander would have seen in 2008. [RT1, 39:14-23 and 32:14-23, 14:15-24; Ex. 24.]

15. Wessell represented to Alexander that Sweden had the best banking regulations anywhere, that Sweden did not have branches in the United States, that Sweden was better than Switzerland, that many or most of Wessell's clients are in Sweden at a bank called The Alps, and that he would recommend that Alexander deposit his money with The Alps. [RT1, 7:10-7:15, 36:6-16.]

16. Alexander also recalled more generally that he did business with Wessell, Mitchell, and Lawrence because they boasted about their 30 years of experience helping people and taking care of them, talked about honesty, integrity and vast knowledge in this area, that they had many happy clients at The Alps and that it was the right thing to do. All three made statements that the Swedish had the strongest banking regulations anywhere, and assured him that Sweden was a safe place to be, that his money was safe and that he could access it at any time. He was told that it was "highly recommended" that he put his money in Sweden. [RT1, 23:15-23:21, 35:7-17, 36:6-11; RT2, 88:13-88:16.]

17. Mitchell admitted that The Alps was the only Swedish bank that he knew of that they were working with, and one of the things he was doing was recommending it to customers. [RT2, 41:2-15.]

18. In March 2009, when Alexander considered whether to diversify, Lawrence sent him a list of five banks. During a later telephone call, Lawrence and Alexander talked more about The Alps and she said; "Well, we have a lot of clients there. Everybody has always done well." [RT1, 50:1-51:12.]

19. Neither Wessell, Mitchell, nor Lawrence advised Alexander that credit unions in Sweden are not regulated. [RT1, 51:13-18.]

20. Neither Wessell, Mitchell, nor Lawrence advised Alexander that Wessell or Mitchell were directors of The Alps. Alexander has not established that Lawrence knew that Mitchell was a director, but she believed that Wessell was the chairman. [RT1, 23:23-24:4-13; RT2, 72:11-16.]

21. Neither Wessell, Mitchell, nor Lawrence advised Alexander that the money he was depositing with The Alps would be used to make real estate investments in Washington. [RT1, 24:12-16.]'

22. Alexander testified that he did no investigation about Swedish credit unions before he wired money because that is what he was paying CI to do. The only due diligence he did was to talk to Wessell, Mitchell, and Lawrence. He had never thought that it was necessary to do any due diligence on any bank that he had used before, such as Bank of Hawaii. [RT1, 40:16-:22, 46:10-14, 47:5-13, 53:3-53:12.]

23. Alexander believed he had all the information he needed to know about The Alps by talking to Wessell and Lawrence. [RT1, 40:12-40:15.]

24. Alexander had no reason to believe that what Wessell, Mitchell, and Lawrence told him was not true. [RT1, 23:11-22, 40:12-40:15.]

25. Lawrence gave Alexander instructions on how to wire money, which Alexander took to his bank in Hawaii. Alexander initially transferred $25, 000 in December 2008 to be sure the wire would go through. [RT1, 11:17-12:15, 13:10-23, Exs. 26, 31.]

26. In January 2009, Alexander made two additional transfers from his bank in Hawaii to be deposited with The Alps: one in the amount of $200, 000, and another in the amount of $300, 000.

27. After Alexander had wired money to The Alps, Alexander's brother sent Alexander an email directing his attention to The Alps' website's "About Us" page. The information on that page indicates that The Alps is not a bank, it's nothing like the United States' equivalent of a credit union, that there might be delays in receiving a withdrawal request, and that The Alps invests in real estate. Alexander had not looked at this page before sending his money to The Alps. [RT1, 31:4-33:21.]

28. In late July 2011, Alexander attempted to wire transfer $320, 000 from his account with The Alps directly to a title company in Hawaii because he and his wife were purchasing a property in Hawaii. [RT1, 16:4-8, 17:10-13.]

29. Although The Alps' account showed the money had been withdrawn, the funds did not arrive when expected. Alexander followed up with emails to The Alps, but never received a response. He called The Alps, but was told by the person who answered that he had called an answering service for over 200 companies. [RT1, 16:10-17:21, 18:8-16; Ex. 28.]

30. The following day, Alexander called CI and left messages for Lawrence, but did not hear back from her. [RT1, 19:3-19:12.]

31. Alexander would never have given his money to The Alps to invest in real estate in Washington. He was "having a real estate development issue" himself, and he would not have given his money to somebody else to invest in real estate, especially considering the state of the economy and real estate prices. [RT1, 24:17-22; 33:25-34:2; see RT1, 29:7-14.]

32. Had Alexander known that The Alps was Wessell's and Mitchell's bank, he would never have placed his money there. [RT2, 88:17-88:18.]

33. Alexander has never recovered any portion of the $524, 785, and has spent close to $175, 000 in attorney's fees and costs to get it back. [RT1, 23:6-9.]

PANKAJ TOPIWALA

34. Pankaj Topiwala, whose deposition testimony was introduced at trial, earned a Ph.D in mathematics from the University of Michigan, and has taught at Tulane University, the University of Chicago and the University of Boston. He is currently the CEO of Fast VDO, LLC, a company that received more than five million dollars from a patent license agreement entered into in January 2009. [Topiwala Depo., 7:6-7:21 and 39:19-40:20.]

35. Topiwala contacted CI after doing a search on the internet. [Topiwala Depo., 8:12-8:21.]

36. Topiwala spoke with Mitchell dozens of times and probably a dozen times with Wessell. On at least five occasions, he spoke with both of them when they were on the line at the same time. [Topiwala Depo, 9:1-9:19.]

37. Topiwala was seeking tax planning advice and wanted to manage and protect his assets until the taxes on those assets were due 15 months later. [Topiwala Depo, 10:9-13.]

38. Both Wessell and Mitchell advised Topiwala that The Alps credit union offered a five percent return on a fixed CD for a one year deposit. [Topiwala Depo, 10:15-10:19.]

39. Wessell told Topiwala that he himself had invested funds in The Alps, and recommended it as a safe place to invest funds. [Topiwala Depo, 96:3-96:11.]

40. Topiwala had never heard of The Alps before his conversations with Wessell and Mitchell. [Topiwala Depo, 11:3-11:5.]

41. Before he transferred any money, Topiwala specifically asked Wessell and Mitchell several times about their relationship with The Alps. Wessell and Mitchell denied that they had any relationship with The Alps, but said that Wessell was a depositor. [Topiwala Depo, 28:11-29:1, 95:6-95:20.]

42. Topiwala specifically asked Wessell and Mitchell about the management structure of The Alps. They responded that The Alps was a small privately held credit union and that information about it was not publicly available. [Topiwala Depo, 29:2-29:7.] These statements contradict the information on The Alps' "About Us" web page.

43. Wessell and Mitchell told Topiwala that the assets of The Alps were well protected because they were deposited in a much larger well-known publicly-traded Swiss bank called Bank Vontobel. [Topiwala Depo, 11:21-12:5.]

44. Based on what he had been told, Topiwala transferred $5.5 million to the Bank Vontobel, to be credited to the account held by The Alps. [Topiwala Depo, 17:3-17:9.]

45. Topiwala tried to contact The Alps, and there was occasionally an operator he got through to, but he never got a response from The Alps directly. All responses came from CI. [Topiwala Depo, 17:19-19:10.]

46. When Topiwala asked Mitchell specifically why The Alps was not responding to him, Mitchell said, "The Alps is talking to you." [Topiwala Depo, 102:21-103:4.]

47. After trying unsuccessfully to get information from Bank Vontobel about The Alps account, Topiwala told Wessell and Mitchell that he was concerned about his funds. They both assured him that his funds were perfectly safe and that there was nothing to worry about. [Topiwala Depo, 21:3-21:18.]

48. On March 2, 2010, Topiwala e-mailed Mitchell to advise that he planned to withdraw his funds. Mitchell then advised him that The Alps didn't have the cash to return, but had other non-liquid assets. [Topiwala Depo, 23:5-23:15.] Nevertheless, Topiwala apparently received $3, 000, 000 in cash, and a promissory note for $1, 800, 000. The note was secured by real property and is now in default. Topiwala may receive more than the amount he deposited as a result of the liens on the properties securing the note. [RT 2, 131:9-132:13.]

49. Topiwala did not know that his money would be used for real estate loans. If he had known, he would not have provided the funds. [Topiwala Depo, 25:8-25:20.]

NEIL VACCHIANO

50. Neil Vacchiano has been involved in real estate investing, developing, and building for 32 years. [RT1, 63:3-63:8.]

51. In 2008, Vacchiano decided to stop building and developing activities, and was looking for a safe place to put his money. He did some investigation about asset protection or offshore accounts. [RT1, 63:9-23.]

52. Vacchiano found CI on the internet and called 1-800-COMPANIES. [RT1, 63:23-64:8.]

53. In speaking with CI, most of Vacchiano's conversations were with Richard Guiterrez and Casey Lawrence. He had some conversations with Mitchell and none with Wessell. [RT1, 65:6-10.] When Vacchiano first called 1-800-COMPANIES he spoke with Gutierrez. Gutierrez told Vacchiano that it would cost $2, 450 to set up an offshore account. Vacchiano initially asked for an LLC to be established, but CI recommended and formed two LDCs. CI "kind of pushed" the LDC on him. [RT1, 63:8-66:11.]

54. Gutierrez suggested that Stockholm, Sweden would be a safer place to put his money than Switzerland, because there was a stable, well-established credit union that had been there "for a lot of years and expected to be there for a hundred more years." [RT1, 65:12-18.]

55. Gutierrez and Lawrence suggested that Vacchiano set up a deposit account with The Alps. [RT1, 74:5-11]

56. Vacchiano spoke often with Casey Lawrence. She seemed knowledgeable about The Alps, and told Vacchiano that she has been setting up deposit accounts at The Alps for lots of different people. [RT1, 66:16-23.]

57. Lawrence faxed or e-mailed application forms for The Alps for Vacchiano to complete, and also sent wiring instructions and the passwords for accessing his account. [RT1, 66:24-67:14.]

58. Vacchiano sent more than $318, 000 to Zurich in favor of The Alps. [RT1, 67:23-68:7.]

59. In 2010, Vacchiano called Lawrence and told her that he wanted $90, 000 wired to his local bank. [RT1, 68:8-68:17.]

60. For a month, Vacchiano tried to contact Lawrence. He would call, but she was not there, and he could never get hold of her. [RT1, 68:19-68:23.]

61. Eventually Vacchiano reached Lawrence and she referred him to Matt Mitchell. Mitchell told him that everyone who has money in The Alps had to ...


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