Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Lucero v. Ira Services, Inc.

United States District Court, N.D. California, San Francisco Division

November 7, 2019

LUIS HURTADO LUCERO, Plaintiff,
v.
IRA SERVICES, INC., et al., Defendants.

          ORDER GRANTING IRA DEFENDANTS' MOTION TO DISMISS RE: ECF NO. 81

          LAUREL BEELER UNITED STATES MAGISTRATE JUDGE.

         INTRODUCTION

         Plaintiff Luis Hurtado Lucero alleges that he was defrauded into placing his retirement savings of approximately $350, 000 into a self-directed individual retirement account (“IRA”) program - the “Lazzaro & Associates five-year trading portfolio” - on the premise that the Program would pay him $2, 000 a month, tax free, for five years, and then return his principal. Per the Program, Mr. Lucero's retirement savings were used to buy shares in two companies: Liber Abaci, Inc. and Enterprise Technologies, LLC, later registered with the California Secretary of State as Atlas Enterprise Technologies, LLC. The Program turned out to be an illegal Ponzi scheme - Mr. Lucero alleges that the two companies were created solely for the purpose of defrauding him out of his savings. The companies are now defunct and their shares proved to be nearly worthless.

         In this lawsuit, Mr. Lucero sued Christopher Lazzaro and William Benson Peavey, who allegedly ran the Ponzi scheme, and IRA Services, Inc. and IRA Services Trust Company (collectively, “IRA Defendants”), the custodian and administrator of Mr. Lucero's IRA account, and raised the following claims:

1. a scheme to defraud, in violation of the Racketeer Influenced Corrupt Organizations (“RICO”) Act, 18 U.S.C. § 1962(c), based on predicate acts of alleged mail and wire fraud, against all defendants,
2. a scheme to defraud, in violation of the RICO Act, 18 U.S.C. § 1962(d), against all defendants,
3. unfair and fraudulent conduct, in violation of the California Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq., against Messrs. Lazzaro and Peavey,
4. breach of contract, against Messrs. Lazzaro and Peavey, and
5. aiding and abetting, against the IRA Defendants.

         The IRA Defendants move to dismiss the claims against them under Federal Rule of Civil Procedure 12(b)(6). The court held a hearing and grants the IRA Defendants' motion to dismiss because (1) a plaintiff cannot plead a RICO claim where the alleged fraud was in connection with the purchase or sale of securities and (2) Mr. Lucero does not adequately plead an underlying breach of duty that the IRA Defendants aided and abetted and does not plead that the IRA Defendants had actual knowledge of or substantially assisted that breach. The court dismisses the RICO claims with prejudice. The court dismisses the aiding-and-abetting claim without prejudice and grants Mr. Lucero leave to amend.

         STATEMENT[1]

         1. The Program and Buying Shares

         In 2012, Mr. Lucero, a maintenance technician at the UCSF Hospital in San Francisco, was set to retire with approximately $350, 000 in savings.[2] Around this time, he was introduced to Mr. Peavey, who presented himself as an attorney in the San Francisco Bay Area knowledgeable in tax-free retirement planning.[3] Mr. Peavey introduced Mr. Lucero to “other members of the RICO Enterprise, ” and they convinced Mr. Lucero to participate in a program called the “Lazzaro & Associates five-year trading portfolio” (“Program”).[4]

         The Program was purportedly set up such that Mr. Lucero would deposit all of his retirement funds into an account with IRA Services Trust Company for a five-year term beginning on January 1, 2013.[5] The funds were to be used to buy stock in two companies, Liber Abaci, Inc. and Enterprise Technologies, LLC, later registered with the California Secretary of State as Atlas Enterprise Technologies, LLC (“AET”).[6] Mr. Lucero then was to receive a $2, 000 monthly return on his investment, tax free.[7] After five years, in December 2017, Mr. Lucero would be able to either terminate his investment and take out his principal investment, or exercise a right to renew the Program for another five years.[8]

         Between October 2012 and January 2013, Mr. Lucero transferred $358, 013.21 into an IRA Services or IRA Services Trust Company account.[9] The IRA Defendants were the administrator and custodian of this account (and charged custodial fees of $180-360 a year).[10] In October 2012, the IRA Defendants transferred $10, 000 out of Mr. Lucero's account to Atlas Management, Inc. to buy 100 membership units of AET at $100 per share.[11] Over December 2012 and January 2013, the IRA Defendants transferred $340, 000 out of Mr. Lucero's account to Liber Abaci to buy 17, 000 shares of Liber Abaci stock at $20 per share.[12]

         2. Monthly Payments

         For a while, Mr. Lazzaro sent Mr. Lucero his monthly payments pursuant to the Program (first on a monthly basis and then on a quarterly basis).[13] In September 2014, however, Mr. Lucero did not receive his 2014 third-quarter payment.[14] He has not received another payment from the Program since that time.[15]

         3. Account Statements and Reported Account Values

         Mr. Lucero received quarterly financial statements from IRA Services Trust Company showing all activity pertaining to his account, including the share valuation and fair-market value of his Liber Abaci and AET holdings.[16] Between 2012 and September 2016, the statements reported that his account balance remained at approximately $350, 000, with his Liber Abaci and AET share valuations remaining at $20 and $100, respectively.[17]

         In September 2016, the share valuation of his Liber Abaci shares, as reported on his account statement, dropped from $20 per share to $0.16 per share, dropping his account balance from approximately $350, 050 to $12, 723.72.[18] The statement said that the Liber Abaci shares were valued at $0.16 per share “on 11/30/2012.”[19] No. further explanation was provided.[20] Mr. Lucero alleges that “[t]his is particularly distressing since IRA Services and IRA Trust Co. wired money out of Plaintiff's account in the amount of $40, 000 on January 18, 2013” - i.e., after November 30, 2012 - “for the purchase of additional 2, 000 Liber Abaci shares, when they knew that the shares were actually valued at $0.16.”[21] In December 2016, the IRA Defendants mailed Mr. Lucero a corrected account statement that changed the date of the $0.16 Liber Abaci share valuation from “11/30/2012” to “3/31/2013.”[22]

         Mr. Lucero alleges that each of the defendants knew that the share valuation of Liber Abaci stock at the time that Mr. Lucero invested his retirement savings (i.e., late 2012) was $0.16 per share instead of the $20 share price Mr. Lucero paid for the stock.[23] Specifically, Mr. Lucero alleges that Mr. Peavey held an account with the IRA Defendants and, in November 2012, bought 25, 000 shares of Liber Abaci at $0.16 per share.[24] IRA Services Trust Company administered this transaction, as evidenced by the company stamp on the subscription agreement.[25] Despite Mr. Peavey's having bought Liber Abaci shares for $0.16 a share in November 2012, the IRA Defendants then transferred $300, 000 directly to Liber Abaci's bank account - without any authorization from Mr. Lucero - to buy Liber Abaci shares at $20 per share in December 2012.[26]IRA Services Trust Company administered this transaction as well, as evidenced by the company stamp on the subscription agreement.[27] The IRA Defendants then transferred an additional $40, 000 into Liber Abaci's bank account to buy additional Liber Abaci shares at $20 per share in January 2013.[28] Mr. Lucero alleges that the IRA Defendants knew of the $0.16 share valuation at the time Mr. Lucero purchased his Liber Abaci shares but falsely reported the shares as valued at $20 per share through September 2016, before “inadvertently” disclosing the $0.16 share valuation.[29]

         4. Aftermath

         Both Liber Abaci and AET were suspended by the Franchise Tax Board as of October 2014.[30]

         Mr. Lucero is not able to withdraw the remaining assets in his IRA Services account because Liber Abaci and AET cannot be contacted.[31]

         Mr. Lucero recently learned that both Liber Abaci and AET were created shortly before he began participating in the Program.[32] He alleges that the companies were created for the sole purpose of defrauding him, with the money that was used to buy shares in those companies then being transferred to Messrs. Peavey and Lazzaro.[33]

         STANDARD OF REVIEW

         A complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief” to give the defendant “fair notice” of what the claims are and the grounds upon which they rest. See Fed. R. Civ. P. 8(a)(2); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A complaint does not need detailed factual allegations, but “a plaintiff's obligation to provide the ‘grounds' of his ‘entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.