Docstoc

Hansen-vs-Jenson-186

Document Sample
Hansen-vs-Jenson-186 Powered By Docstoc
					  Case 2:04-cv-00867-TS-BCW            Document 186         Filed 08/12/2008      Page 1 of 37




Stephen J. Hill (1493)
Robert B. Lochhead (1986)
Jenifer L. Tomchak (10127)
PARR WADDOUPS BROWN GEE & LOVELESS
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
Telephone: (801) 532-7840
Facsimile: (801) 532-7750
Attorneys for Plaintiffs


                        IN THE UNITED STATES DISTRICT COURT
               IN AND FOR THE DISTRICT OF UTAH, CENTRAL DIVISION


 KENNETH G. HANSEN, an individual,
 DAVID RUTTER, an individual, TODD                     THIRD AMENDED COMPLAINT
 FISHER, an individual, FIBERTEL, INC, a                   [Jury Trial Demanded]
 Utah corporation, and K&D
 DEVELOPMENT, LC, a Utah limited
 liability company, and DOUGLAS A.
 SMITH, an individual,

         Plaintiffs,

 vs.

 MARC S. JENSON, an individual, MSF
 PROPERTIES, LC, a Utah limited liability
 company, BANK ONE, N.A., a national
 banking association, MARK ROBBINS, an                    Case No. 2:04-cv-867-TS-BCW
 individual, MADTRAX GROUP, LLC, a
 Utah limited liability company, SPENCER                         Judge Ted Stewart
 BRANNAN, an individual,
                                                         Magistrate Judge Brooke C. Wells
         Defendants.


         Plaintiffs Kenneth G. Hansen, David Rutter, Todd Fisher, FiberTel, Inc., a Utah

corporation, K&D Development, LC, a Utah limited liability company, and Douglas A. Smith


264246
  Case 2:04-cv-00867-TS-BCW             Document 186          Filed 08/12/2008       Page 2 of 37




(collectively “Plaintiffs”), by and through counsel, hereby complain against the above-named

Defendants and allege as follows:

                              I.     DESCRIPTION OF PARTIES

         1.     Plaintiff Kenneth G. Hansen (“Hansen”) is an individual residing in Salt Lake

County, Utah.

         2.     Plaintiff David Rutter (“Rutter”) is an individual residing in Utah County, Utah.

         3.     Plaintiff Todd Fisher (“Fisher”) is an individual residing in Utah County, Utah.

         4.     Plaintiff FiberTel, Inc. (“FiberTel”), is a Utah corporation with its principal place

of business in Utah County, Utah. Fisher is the CEO and principal shareholder of FiberTel.

         5.     Plaintiff K&D Development, LC (“K&D”) is a Utah limited liability company

with its principal place of business in Utah County, State of Utah. The members of K&D are

Rutter and FiberTel.

         6.     Plaintiff Douglas A. Smith (“Smith”) is an individual residing in Salt Lake

County, Utah.

         7.     Defendant Marc S. Jenson (“Jenson”) is an individual residing in Salt Lake

County, Utah.

         8.     Defendant MSF Properties, LC (“MSF”), is a Utah limited liability company with

its principal place of business in Salt Lake County, Utah. Jenson is the sole manager and

principal of MSF. In connection with the transactions described herein, MSF was an alter ego

and mere instrumentality of Jenson, and therefore Jenson and other members of the Enterprise

(as defined herein) are liable for the actions of MSF relating to the claims made herein.




264246                                            2
  Case 2:04-cv-00867-TS-BCW             Document 186          Filed 08/12/2008       Page 3 of 37




         9.     Defendant Bank One, N.A. (“Bank One”) is a national banking association with

its main office in Chicago, Illinois, and is the successor by merger to Bank One, Utah, N.A., and

maintains an office in Salt Lake County, Utah.

         10.    Defendant Mark Robbins (“Robbins”) is an individual residing in Salt Lake

County, Utah.

         11.    Defendant MadTrax Group, LLC (“MadTrax”), is a Utah limited liability

company having its principal place of business in Salt Lake County, Utah. Plaintiffs are

informed and believe and therefore allege that, in connection with the transactions described

herein, MadTrax was an alter ego and mere instrumentality of Robbins and/or Jenson, and

therefore Robbins, Jenson and other members of the Enterprise (as defined herein) are liable for

the actions of MadTrax relating to the claims made herein.

         12.    Defendant Spencer Brannan (“Brannan”) is an individual who at all relevant times

resided in Weber County, Utah, and who currently resides in the State of California.

         13.    Although not specifically named as defendants herein, in connection with the

transactions described herein, several entities served as mere instrumentalities and alter egos of

Brannan, including First Wasatch Development, Inc. (“First Wasatch”), Uinta Ridge

Development, Inc., Diversified Funding International, Inc. (“Diversified Funding”), International

Diversified Funding Corporation (“International Diversified”) and Carden Appraisal Service,

LLC (“Carden Appraisal”), and therefore Brannan and other members of the Enterprise (as

defined herein) are liable for the actions of these entities relating to the claims made herein.




264246                                            3
  Case 2:04-cv-00867-TS-BCW             Document 186         Filed 08/12/2008        Page 4 of 37




                             II.    JURISDICTION AND VENUE

         14.   Plaintiffs filed this action in the Third Judicial District Court for Salt Lake

County, State of Utah, on the basis that (a) the Third Judicial District Court for Court has

personal jurisdiction because many of the parties are residents of the Salt Lake County, because

defendant Bank One has a place of business in Salt Lake County, and because many of the

claims arose in Salt Lake County, Utah, and (b) venue properly lies in the Third District Court

for Salt Lake County, pursuant to Utah Code § 78-13-7 (2003).

         15.   Defendants Jenson and MSF removed this action to the United States District

Court for the District of Utah pursuant to 28 U.S.C. § 1441 on the basis at this Court has original

and supplemental jurisdiction over this action pursuant to 28 U.S.C. §§ 1331 and 1367.

         16.   Defendant Bank One, N.A., has joined and consented to the removal.

                   III.    ALLEGATIONS COMMON TO ALL CLAIMS

         A.    Nature of Claims

         17.   This action centers on a fraudulent scheme planned chiefly by Jenson and

executed by Jenson, Brannan, Robbins and others. The first step of the fraud began in the

summer of 2000. At that time Robbins owned a company called Wasatch Cycle, Inc. (“Wasatch

Cycle”), which was in the business of manufacturing low-cost bicycles for sale to missionaries of

the Church of Jesus Christ of Latter-day Saints (“LDS Church”). Robbins owned 50% of two

related entities, Vtrax Sports, LLC (“Vtrax”) and Madwagon.com, LLC (“Madwagon.com,

LLC”), both Utah limited liability companies. Robbins’ plan was that Vtrax would distribute

bicycles through Sears and other “big box” stores, and Madwagon.com would distribute bicycles

over the Internet. Robbins also owned a third related entity, MadTrax, LLC, through which he


264246                                            4
    Case 2:04-cv-00867-TS-BCW                Document 186           Filed 08/12/2008          Page 5 of 37




intended to acquire Mongoose Bicycle, a division of Brunswick Corporation. Robbins owed

Cherokee & Walker (“Cherokee”), a Utah venture capital firm, $4.5 million (the “Cherokee

Loan”). Cherokee loaned that amount to Robbins in January of 2000 for use as working capital

and to satisfy a bridge loan that Robbins had taken to buy out his former business partners.

Cherokee owned the remaining 50% of both Vtrax and Madwagon.com, which it had acquired

from Robbins for a capital investment of $500,000. Working relations between Cherokee and

Robbins were strained. In June of 2000, Robbins and Cherokee reached an agreement whereby

Robbins would repay the Cherokee Loan and purchase Cherokee’s interest in Vtrax and

Madwagon.com for $8 million (the “Cherokee Buyout”). Robbins began looking for investors

who could fund the Cherokee Buyout. Plaintiffs are informed and believe and therefore allege

that, prior to completing the Cherokee Buyout, Robbins transferred his interests in Wasatch

Cycle, Vtrax and Madwagon.com to MadTrax. Marc Jenson, a “hard money” lender,1 agreed to

loan Robbins the $8 million for the Cherokee Buyout, taking a security interest in MadTrax and

also, directly or indirectly, in Wasatch Cycle, Vtrax, Madwagon.com and MadTrax as collateral

for the deal. A major inducement to Jenson was the prospect of acquiring Mongoose, which

Jenson and Robbins believed would have access to a $165 million credit line, of which they

planned to invest $100 million in a secret money-trading program.

         18.     The next part of the fraudulent scheme involved luring investors to provide the

funds that Jenson would use for the Cherokee Buyout with the prospect of making huge returns,

not by the operation of a bicycle company but by purportedly gaining access to a secret money-


1
    Hard money lenders are often referred to as lenders of last resort, when banks and other lenders turn down
    requests for loans. Hard money lenders often charge as much as 25% APR and will often stack points – upfront
    costs – on top of that.

264246                                                  5
  Case 2:04-cv-00867-TS-BCW            Document 186        Filed 08/12/2008       Page 6 of 37




trading program. Jenson recruited Brannan and others (collectively the “Co-Conspirators”) to

raise the funds. The plan was that Jenson and his alter ego MSF would raise $4 million and that

Brannan and the remaining Co-Conspirators would raise the remaining $4 million. Jenson

explained to the Co-Conspirators that, following MadTrax’s acquisition of Mongoose (the

“MadTrax Deal”)MadTrax would be able to secure a $165 million loan. Out of the proceeds of

that loan, Jenson, with the assistance and advice of others, would place $100 million in a

verification of deposit (“VOD”) account, which would enable participation in a “prime bank” or

“high yield investment” (“HYIP trading program”). The money in the so-called VOD accounts

was also sometimes referred to as “show money” because, according to the perpetrators, the

money never leaves the account and generates huge returns without any risk of loss. Such HYIP

trading programs have no legitimacy. The fraud artists who promote these schemes often use the

word “prime” – or a synonymous phrase, such as “top fifty world banks” – to cloak their

programs with an air of legitimacy. The Co-Conspirators, with Jenson’s knowledge and

encouragement, promised huge returns on investment to Plaintiffs, all based on the prospect of

the completion of the MadTrax Deal, and the subsequent investment in HYIP trading prospects

using the Mongoose credit line that would become available to MadTrax upon completion of the

MadTrax Deal. As explained more fully below, Jenson and the other Co-Conspirators were

successful in raising sufficient funds to complete the Cherokee Buyout, after which Jenson

obtained control of Wasatch Cycle, Vtrax, Madwagon.com and MadTrax.

         19.   Jenson and Brannan used entities that they controlled as mere instrumentalities

and alter egos including MSF, Uinta Ridge, Diversified Funding, International Diversified,

Carden Appraisal and First Wasatch, to facilitate the investment fraud and as conduits for cash.


264246                                          6
  Case 2:04-cv-00867-TS-BCW            Document 186         Filed 08/12/2008       Page 7 of 37




They attempted to cloak the Plaintiffs’ investments as loans in order to avoid securities

registration and disclosure requirements.

         20.   At the request of Jenson and Robbins, Bank One aided and abetted the prime bank

aspect of the fraud by providing both letters and making oral statements to investors that gave

investors confidence that Jenson and Robbins had made arrangements for MadTrax to obtain

$165,000,000 in cash that would be deposited in a VOD account at Bank One.

         21.   The Defendants also used affiliations of The Church of Jesus Christ of Latter-day

Saints (“LDS Church”) to gain investors’ confidence. Among other things, Jenson and the other

Co-Conspirators told Plaintiffs of Wasatch Cycle’s agreement with the LDS Church for the sale

of bicycles to missionaries. (Schemes of this nature are sometimes characterized as “affinity

frauds,” that is, investment scams that prey upon members of identifiable groups, such as

religious or ethnic communities, the elderly, or professional groups.)

         22.   Jenson, Robbins, and others all were involved in making arrangements, or at least

appearing to make arrangements, for fictitious HYIP trades using $100,000,000 for a VOD out

of the $165,000,000 that would become available after completion of the MadTrax Deal.

         23.   Jenson, Brannan and others acting at their direction told investors that only certain

banks, and a few select traders authorized by the Federal Reserve, are allowed to participate in

HYIP trading programs, which are often purportedly designed to generate funds for humanitarian

and other worthwhile projects. On occasion, particular traders purportedly allow individual

investors to participate in these secret trading programs by pooling the individual’s funds with

funds from other investors until a certain amount, often $100 million, is accumulated for a trade.

The primary lure of the MadTrax Deal was that it would generate the $100 million necessary for


264246                                           7
  Case 2:04-cv-00867-TS-BCW             Document 186         Filed 08/12/2008       Page 8 of 37




participation in HYIP trades, and those trades would produce enormous profits that would

supposedly enable the Defendants to return to investors all of their initial investment, whether

money or property, together with a sizeable interest payment or fee.

         24.   After taking Plaintiffs’ money and property, several of the Defendants, including

particularly Brannan and Bank One made lulling statements to Plaintiffs to assure them that their

investments were sound and would be repaid.

         25.   After the State of Utah and various victims of the fraudulent scheme began to

investigate, Jenson attempted to conceal the fraud and tampered with witnesses to deflect the

investigation away from him and toward others.

         26.   Although Jenson may have used some portion of Plaintiffs’ investments to

acquire 100% of MadTrax, there was no Mongoose acquisition and there were no HYIP trades.

Jenson wrested control of Wasatch Cycle, Vtrax, Madwagon.com and MadTrax from Robbins in

late 2000, as the Mongoose purchase fell through, and ran those companies himself until they

ceased operation in 2002. Defendants have not repaid or returned to Plaintiffs any portion of

their respective investments.

         B.    The Racketeering Enterprise

         27.   At all times relevant to this lawsuit there existed an enterprise or enterprises

within the meaning of 18 U.S.C §§ 1961(4) and 1962(c) comprised of a group of individuals and

entities associated in fact, including Jenson, Robbins, Brannan and MSF (the “Enterprise”).

         28.   The Enterprise came into being with the common purpose of raising money

through various artifices and schemes to defraud for use in connection with HYIP trading

programs. In furtherance of this common purpose, Jenson recruited Brannan to act as his agent


264246                                           8
  Case 2:04-cv-00867-TS-BCW             Document 186          Filed 08/12/2008       Page 9 of 37




to raise money to enable Jenson and Robbins to complete the Cherokee Buyout, which was

supposed to have made it possible to complete the MadTrax Deal and then place $100,000,000 in

a VOD account for use in HYIP trading programs.

         29.    This Enterprise was an ongoing unit and the various associates functioned as a

continuing unit, although particular associates may have entered, dropped out, or reentered from

time to time. In addition to their illicit fundraising activities, the associates have engaged in

conduct calculated to conceal the fraudulent nature of their conduct, through lulling verbal and

written statements to investors, as well as tampering with witnesses and giving false testimony

under oath.

         30.   Each member of the Enterprise has conducted and/or participated in the affairs of

the enterprise in furtherance of the common purpose.

         C.    The Racketeering Activities

               1.      The Setup

         31.    In the summer of 2000, a group including David Storrs, Vern Houst, Paul

Woolsey and Alan Dahl (the “Storrs Group”) introduced Brannan and others, including Randy

Cardon, Ryan Phelps, Barry Daniels, Allen Lucas and Troy Stroud (the “Canada Group”), to an

investment opportunity in Canada that required the Canada Investment Group to raise $6 million

in addition to funds they already believed they had available. While searching for investors,

members of the Canada Investment Group met Lawrence Critchfield. Critchfield explained to

the Canada Group the concept of HYIP trading programs, and told the Canada Group it was

necessary to establish VOD accounts showing $10 million or $100 million, apparently depending

on the specific trades involved in the program, in order to participate. Critchfield claimed that he


264246                                            9
 Case 2:04-cv-00867-TS-BCW            Document 186        Filed 08/12/2008      Page 10 of 37




and associated individuals and entities, including Richard “Skip” Christensen, Sterling

Investment Trust (“Sterling”), Delaware Funding & Guaranty, Solucorp Industries, Ltd., a

Canadian corporation based in New York (“Solucorp”), Ron Featherstone, Michael Heshelman

and Gregg Gizzi of Lehman Brothers in New York (the “Critchfield Group”), had access to such

trading programs. Critchfield stated that he could arrange for the Canada Group to participate in

HYIP trades if they would assist him in resolving a situation involving Solucorp that purportedly

related to problems the company was having with the SEC.

         32.   At about the same time, Brannan spoke with a hard money lender, Steve Bramley

of Creekside Funding, Inc. (“Creekside”), who introduced Brannan to Marc Jenson. Jenson

agreed to make the additional funds available for the Canadian project through a hard money

loan through his account with Merrill Lynch. Jenson made as much as $16 million available in

his account for the Canadian program. No money ever left Jenson’s account, no Canadian deal

was ever completed, and all of the money was eventually returned to Jenson. Nevertheless, in

return for Jenson making the funds available, Brannan signed a promissory note or similar

document purportedly indicating he owed Jenson the amount Jenson made available in his

account.

         33.   As an investment in the Canadian HYIP program by the Canada Group was

falling apart, another investment in one or two other, separate, potential HYIP programs touted

by the Critchfield Group began taking shape. This plan directly involved Solucorp and,

indirectly, MadTrax, thereby co-mingling the two deals.

         34.   The investment flow began with approximately $2.3 million going to the

Critchfield Group via Sterling Real Estate. (Because of the co-mingling of investor funds,


264246                                         10
 Case 2:04-cv-00867-TS-BCW            Document 186         Filed 08/12/2008       Page 11 of 37




precisely identifying which investors contributed to the $2.3 million is not certain. Defendant

Jenson may have been one of them.) The Critchfield Group was to use the $2.3 million to help

Solucorp resolve a problem with the SEC purportedly involving inventory of MBS reagent that

had been booked as sold but not sold. Sterling ended up owning the inventory, which it used in

furthering the scheme to defraud. Solucorp, with the inventory problem solved, could

purportedly gain access to investors who could pool perhaps $100 million to use in a prime bank

investment, and Sterling would be handsomely rewarded with $22 million for its $2.3 million

investment.

         35.   At the same time the deal was being negotiated with Solucorp, members of the

Critchfield Group, including Critchfield, Heschelman and Featherstone, were in New York with

Brannan attempting to organize a HYIP investment through yet another secret prime bank trader

(sometimes referred to as the “Prime Arranger” or “Prime Facilitator”) that Heschelman and

Featherstone claimed access to. That trader would use a $100 million VOD generated through

the MadTrax acquisition of Mongoose.

         36.   The Critchfield and Brannan/Jenson Groups, acting in concert, used the Solucorp

inventory as so-called “collateral” to induce investors to put $8 million into the Cherokee

Buyout. Completion of the Cherokee Buyout would enable completion of the MadTrax Deal,

which in turn would lead to a $100 million “show” or VOD account that could be used with the

Critchfield Group’s secret trader.

         37.   At Jenson’s request and with his encouragement, members of the Canada Group

and the Critchfield Group, successfully solicited investments from several individuals for

completion of the Cherokee Buyout and the subsequent MadTrax Deal, including Rick Jackson,


264246                                          11
 Case 2:04-cv-00867-TS-BCW            Document 186        Filed 08/12/2008      Page 12 of 37




Lee Jackson and Morris Ebeling, as well as Plaintiffs. In addition, Jenson obtained a $4,000,000

loan from Bodell Construction Company made payable to MSF that was to be applied toward the

Cherokee Buyout. The facts pertaining to the Plaintiffs’ investments are set forth immediately

below.

               2.     The Hansen Fraud

         38.   On or about August 29, 2000, mortgage broker Mitch Hemsley (“Hemsley”), an

individual acquainted with Brannan and/or other members of the Canada Group, approached

Hansen and invited Hansen to make what Hemsley described as a “short-term bridge loan” to

Uinta Ridge, Inc., a defunct Nevada corporation controlled by Brannan (“Uinta Ridge”).

Hemsley explained that Uinta Ridge and MSF had each agreed to invest $4 million in MadTrax

to facilitate MadTrax’s buyout of a large bicycle company. According to Hemsley, the

transaction was initially scheduled to occur on August 18, 2000. Hemsley represented Uinta

Ridge had a commitment from a lender for the $4 million, but on August 25, 2000, the proposed

lender revealed that it did not have the funds and backed out of the deal. Therefore, Hemsley

explained, Uinta Ridge was desperate to raise short-term money by August 30, 2000, to avoid

forfeiture of a non-refundable $500,000 commitment fee that Uinta Ridge had given Jenson.

Hemsley represented that, because of Uinta Ridge’s desperate situation, it would be willing to

pay a substantial sum to Hansen for the short-term use of funds.

         39.   According to Hemsley, Uinta Ridge wanted Hansen to deposit $1.5 million in a

designated bank account for a short period of time, approximately three or four days. Hemsley

represented that Hansen’s money would not leave the account and would be returned after that

time, and Hansen would be paid $50,000 as a fee for the short-term use of his funds.


264246                                         12
 Case 2:04-cv-00867-TS-BCW             Document 186         Filed 08/12/2008      Page 13 of 37




         40.    Hemsley presented Hansen with a notebook (the “Uinta Notebook”) purportedly

prepared by Brannan, which explained in greater detail the nature of the requested short-term

loan and the above-described representations. The Uinta Notebook indicated that Uinta Ridge’s

net equity exceeded $10 million, and that the proposed short-term bridge loan transaction was

therefore absolutely safe.

         41.   On the afternoon of August 29, 2000, Hemsley sent a facsimile letter to Hansen,

which summarized and repeated the above-described representations.

         42.   Brannan and other Defendants, through the Uinta Notebook, made the following

representations to Hansen in furtherance of the common purpose of the Enterprise, in addition to

the representations already described above:

               a.      An Executive Summary contained in the Uinta Ridge Notebook stated that

                       Uinta Ridge owned: (i) two parcels of real property located in Utah

                       having a total value net of mortgages of $4,185,000; and (ii) MBS Reagent

                       Inventory purchased from Solucorp valued at $8,580,050, for a combined

                       equity value of $12,765,050. The Notebook also contained a balance

                       sheet data August 21, 2000, somewhat inconsistently reflecting total assets

                       of Uinta Ridge valued at over $12.6 million and liabilities of less than

                       $2.2 million, for a total equity of over $10.4 million.

               b.      Uinta Ridge had a firm contract to sell its MBS Reagent Inventory,

                       consisting of 10,930 tons, to defendant Sterling (acting through its

                       purported trustee, defendant Critchfield), to be delivered at Nanjing,




264246                                           13
 Case 2:04-cv-00867-TS-BCW            Document 186         Filed 08/12/2008      Page 14 of 37




                      China, for a purchase price of $785 per ton, or a total purchase price of

                      $8,580,050, payable on September 29, 2000.

               c.     Uinta Ridge had assurances from Solucorp, the manufacturer of the MBS

                      Reagent Inventory, that Solucorp sells its MBS Reagent at $800 per ton or

                      more, and that it had a ready market at that price for substantially more

                      volume than the inventory purportedly being sold to Sterling.

         43.   The two parcels of real property described in the Uinta Ridge Notebook as assets

of Uinta Ridge consisted of the following:

               a.     Commercial real property located at approximately 1400 East 100 South,

                      Lehi, Utah, which had an appraised value as of June 20, 2000 of

                      $1,960,000 (the “Lehi Property”); and

               b.     Property described as the Kolob Mountain Ranch, which had an appraised

                      value as of January 1, 1999 of $3,500,000.

         44.   In fact, the real property did not belong to defendant Uinta Ridge. K&D owned

the Lehi Property, and Rutter’s in laws owned Kolob Mountain Ranch.

         45.   The MBS Reagent Inventory either did not belong to Uinta Ridge or did not have

the value indicated in the Uinta Notebook. Plaintiffs have not been able to determine either the

existence or ultimate disposition of the MBS Reagent Inventory.

         46.   The Uinta Notebook also included a letter addressed “To Whom It May

Concern,” dated August 22, 2000, and signed by Ben Lightner (“Lightner”), a Wealth Advisor in

the Private Banking Group of Bank One, and its authorized agent (the “Bank One Letter”). The

letter represented that MadTrax and its individual members Jenson and Robbins would be


264246                                         14
 Case 2:04-cv-00867-TS-BCW             Document 186         Filed 08/12/2008      Page 15 of 37




depositing $165,000,000 into Bank One, and that such funding would come from a loan

agreement between MadTrax and Arimex Investments, a Bahamian company (“Arimex”).

         47.     Jenson and Robbins obtained the letter from Bank One, and provided it to

Brannan , for the purpose of inducing investors to provide funds to buy out Cherokee’s interest

in MadTrax.

         48.     Bank One knew, or should have known, that it had no reasonable basis for the

statements made in the Bank One Letter and/or acted negligently or in reckless disregard of the

consequences of providing the assurance contained in the letter without conducting appropriate

due diligence.

         49.     At no time did Bank One, whose attorney told Plaintiffs’ counsel that “Mr.

Lightner conducted significant due diligence and investigation prior to sending the letter,”

disclose that one of the individuals named in the letter who was also Bank One’s client, Marc

Jenson, had a prior federal conviction for bank fraud and tax evasion. Neither did Bank One

disclose that Mark Robbins, also a private banking client of Lightner’s, was using a false

personal financial statement to mislead potential investors.

         50.     Christensen set up a meeting for himself, Hansen and Brannan on August 31,

2000, at the Bank One office on West Broadway in Salt Lake City. At the meeting at Bank One,

Christensen explained to a bank official that Hansen would be depositing a large sum of money,

and they needed to put the money in an account that would require two signatures, including

Hansen’s, for withdrawal. Christensen explained that the money was not going to leave the bank

account, and that Brannan only needed to be able to show that he had the funds on deposit.




264246                                           15
 Case 2:04-cv-00867-TS-BCW            Document 186         Filed 08/12/2008       Page 16 of 37




         51.   The Bank One official indicated that the bank would not be able to accommodate

their request. Christensen, Brannan and Hansen then went to the offices of U.S. Bank at the

intersection of South Temple and Main Street in Salt Lake City, where they met with an officer

of U.S. Bank who agreed to set up an account.

         52.   Hansen suggested that they set up the account in the joint names of Brannan and

Hansen. At Brannan’s insistence, however, they set up the U.S. Bank account in the name of

First Wasatch, which Brannan represented was a company he controlled.

         53.   During the course of the meeting on August 31, Hansen asked Brannan to explain

more fully the reason why Brannan needed to use Hansen’s $1.5 million. Brannan explained that

he was tied in with people who were buying a major bicycle company, and that they needed

$8 million on deposit in order for the transaction to go forward. Brannan explained that

Hansen’s $1.5 million would just put them over the top. Brannan assured Hansen that Brannan

was associated with a solid company, and that Hansen’s money was absolutely safe.

         54.   Later in the day on August 31, 2000, acting in reasonable reliance on the above

described representations Hansen deposited $1.5 million by wire transfer into an account in the

name of First Wasatch at U.S. Bank.

         55.   Immediately after Hansen deposited the $1.5 million in the First Wasatch account

at U.S. Bank account, Brannan caused U.S. Bank to issue a counter check drawn on that account

for $1.5 million made payable to Jenson and MSF.

         56.   On or about September 16, 2000, after Brannan failed to pay Hansen as promised,

in consideration of Hansen’s forbearance from taking immediate legal action, Brannan promised

to repay Hansen the original $1,500,000, plus a service fee of $355,000, for a total of


264246                                          16
 Case 2:04-cv-00867-TS-BCW            Document 186         Filed 08/12/2008      Page 17 of 37




$1,855,000, on or before September 30, 2000. Brannan agreed to secure this promise by a Deed

of Trust on an approximately thirteen acre parcel of real property situated in Davis County, Utah,

(the “Summerwood Property”), which Brannan represented he owned. Brannan further

represented that he had contract rights under that certain Agreement dated August 11, 2000,

between Uinta Ridge and Sterling, a copy of which is contained in the Uinta Notebook. Brannan

agreed to assign to Hansen Brannan’s rights under said contract.

         57.   In furtherance of the above-described representations and agreements, on or about

September 16, 2000, Brannan made, executed and delivered Hansen the following documents:

(i) a certain Assignment; (ii) a certain Promissory Note - Deed of Trust (the “September 2000

Note”); and (iii) a certain Second Deed of Trust.

         58.   Brannan defaulted on his obligations under the September 2000 Note and the

other above-described agreements, in that he wrongfully failed and refused to pay Hansen any

part of the $1,855,000 as promised.

         59.   On or about January 5, 2001, in consideration of Hansen’s continuing forbearance

from taking immediate legal action, Brannan made and delivered to Hansen that certain

Promissory Note - Deed of Trust (the “January 2001 Note”). By the January 2001 Note,

Brannan promised to repay Hansen on or before February 1, 2001, the original $1,500,000, plus

a service fee of $500,000, or a total of $2 million, plus $1,000 per day from and after October 29,

2000 until paid.

               3.     The K&D Fraud

         60.   In about June of 2000, Rutter and Curtis Hall met with Brannan, who stated that

he was attempting to raise funds for what he described as a Federal Reserve trading program.


264246                                          17
 Case 2:04-cv-00867-TS-BCW            Document 186         Filed 08/12/2008      Page 18 of 37




Brannan promised very lucrative rates of return on a short-term basis for those investing in the

Federal Reserve trading program.

          61.   At a meeting in late August or early September of 2000, Brannan explained to

Rutter and Fisher of FiberTel that he was trying to arrange funding for the purchase of a bicycle

company called MadTrax that would have access to a $100 million credit line that could be used

in a Federal Reserve or HYIP trading program. Brannan asked Rutter to offer the Lehi Property

as collateral to secure a short-term loan that would be used to complete the MadTrax Deal.

Brannan promised Rutter that within thirty days he would repay the loan and also pay off an

existing mortgage on the Lehi Property. Brannan assured Rutter the transaction would be

absolutely safe and would provide the funds necessary for completion of the MadTrax Deal.

          62.   To assure Rutter that MadTrax would have access to the $100 million credit line,

Brannan showed Rutter the Bank One Letter. Brannan also told Rutter about the MBS Reagent

Inventory, which he said had a value of $8 million, and indicated a sale of the MBS Reagent

Inventory was pending that could provide a source of funds for payment of the obligations to

Rutter.

          63.   On September 26, 2000, Rutter met with Brannan at the office of Marc Jenson,

who Brannan described as his partner on the MadTrax Deal. In reasonable reliance upon

Brannan’s representations and the Bank One Letter, in Jenson’s office, Rutter executed a Deed of

Trust on behalf of K&D on the Lehi Property (the “Holt Trust Deed”) to secure a $345,000 loan

from Dale Holt to Brannan (the “Holt Loan”). The loan proceeds were paid to Jenson and/or

MSF.




264246                                          18
 Case 2:04-cv-00867-TS-BCW            Document 186         Filed 08/12/2008      Page 19 of 37




         64.   In or about early November of 2000, Brannan informed Rutter that there had been

some problem and he had not secured enough funds to reach the minimum participation level

required to complete the MadTrax Deal. He asked Rutter to execute another deed of trust on the

Lehi Property to secure a loan from Creekside Funding in the amount of approximately $700,000

(the “Creekside Loan”). At that time, as further inducement and reassurance to Rutter, Brannan

showed Rutter a second Bank One letter signed by Lightner dated October 19, 2000, addressed

to Union Bank of Switzerland, which stated, among other things, that MadTrax and its individual

members had assets of $971,716,000, of which $165,000,000 would be deposited into a Bank

One account (the “Second Bank One Letter”). Brannan also offered Rutter additional cash as

consideration for allowing the Lehi Property to be used as collateral for the Creekside Loan.

         65.   Thus reassured, and in reasonable reliance on Brannan’s representations and the

Second Bank One Letter, on November 2, 2000, Rutter executed on behalf of K&D a second

Trust Deed on the Lehi Property (the “Creekside Trust Deed”) securing the Creekside Loan.

Brannan promised Rutter a significant profit for K&D’s providing the Creekside Deed of Trust

to secure the Creekside Loan, and Brannan promised, orally and in writing, that there was no risk

for K&D, that the investment was secure and that the Creekside Loan was cross-collateralized

with significant property owned by Brannan such that the Lehi Property was not at any risk.

         66.   Brannan failed to pay or retire the Holt or Creekside Loans and pay off the loan

secured by the first Deed of Trust on the Lehi Property.

         67.   Holt initiated foreclosure proceedings on the Lehi Property.




264246                                         19
 Case 2:04-cv-00867-TS-BCW             Document 186         Filed 08/12/2008     Page 20 of 37




         68.   On June 20, 2001, Creekside successfully purchased the Lehi Property at Holt’s

foreclosure sale and became the sole owner of the Lehi Property, having purchased Holt’s

interest and the interest of the beneficiary K&D’s first Deed of Trust.

         69.   At the time of the Holt foreclosure, K&D had a viable and legitimate offer to

purchase the Lehi Property for $2,060,400, which K&D was prepared to accept. This

opportunity was lost as a result of the Holt foreclosure.

         70.   Brannan has advised Rutter and Fisher that the funds obtained in the Holt and

Creekside Loans were paid to Jenson and/or MSF but otherwise has offered no explanation for

how the funds were actually used.

         71.   Brannan knew that his representations about the security and lack of risk of the

Hold and Creekside Loans were false at the time he made them.

               4.      The Smith Fraud

         72.   In early November of 2000, Smith had a telephone conversation with Brannan in

which Brannan told Smith he needed property for collateral on a short-term loan and asked

Smith if he had property. Smith owned property located at 11560 South 700 East in Draper,

Utah (the “Draper Property”), and a condominium unit in Murray, Utah (the “Murray Property”)

(collectively the “Smith Properties”). The Draper Property was worth approximately $400,000

and the Murray Property was worth approximately $90,000. Smith owed a total of

approximately $198,000 on the two properties.

         73.   Smith had a series of conversations with Brannan. During these conversations

Brannan told Smith if Smith would let Brannan use the Smith Properties as collateral, Brannan

would pay Smith $40,000 and return those properties free and clear to Smith within four weeks.


264246                                           20
 Case 2:04-cv-00867-TS-BCW            Document 186        Filed 08/12/2008      Page 21 of 37




Brannan told Smith the transaction was passive; that he would have no obligation to repay any

loan; and that there was no risk to the Smith Properties. Brannan told Smith that the funds

obtained as a result of the loan secured by the Smith Properties would be used for an investment

program.

         74.   During his conversations with Smith, Brannan showed Smith the Bank One

Letter, the Second Bank One Letter and possibly other letters from Bank One to reassure him

that the loan secured by the Smith Properties would be repaid. But for his having seen those

Bank One letters, Smith would not have pledged the Smith Properties.

         75.   In reasonable reliance on Brannan’s representations and particularly the Bank One

letters, on November 28, 2000, Smith went to the law office of Ray Moore in Sandy, Utah, for

the closing of the transaction. Brannan, Rutter, Barry Daniels, Troy Stroud and Roy Moore were

present at the closing. Moore represented the lender, Creekside Funding.

         76.   Smith pledged the Draper Property and the Murray Property under a Trust Deed

as security for the $709,000 Creekside Loan described above.

         77.   At the same time Brannan, Rutter and Smith signed a Pledge of Collateral

Agreement pursuant to which Brannan and Rutter agreed to indemnify Smith for the fair market

value of the Smith Properties should Creekside foreclose on Smith’s property as a result of

failure to repay the Creekside Loan. Subsequently, by memorandum agreement dated April 18,

2005 (“the Memorandum Agreement”), Smith agreed to release Rutter from any obligations

under the Pledge of Collateral Agreement in return for Rutter’s promise to advance attorneys’

fees and costs of this litigation, and to divide with Smith the amount up to a maximum payment




264246                                         21
 Case 2:04-cv-00867-TS-BCW             Document 186         Filed 08/12/2008      Page 22 of 37




to Smith of $280,000, net of Rutter’s costs and attorneys’ fees, that may be recovered on Smith’s

and the related claims set forth herein.

         78.   Smith remained in contact with Brannan following the closing. Brannan told

Smith there were normal delays and that Brannan would pay Smith additional interest because of

the delay. In February of 2001, Smith told Brannan he was negotiating to sell the property in

Draper and needed the Draper Property released. Smith received a notice of default dated

February 27, 2001, on the Smith Properties. Even then, in an effort to induce Smith to forebear

from taking action against Brannan and others, Brannan continued to represent to Smith that

required payments would be made on the loan secured by the Smith Properties.

         79.   Smith did not understand the process and lost the Smith Properties in a

foreclosure sale in June of 2001.

         80.   Neither Brannan nor any other member of the Enterprise has repaid any amount to

Smith for the loss of the Smith Properties or accounted to Smith for the loss of those properties.

         81.   Brannan’s representations to Smith to induce Smith to pledge the Smith

Properties as collateral, and to forebear from taking action after Smith received the notice of

default, were false when made, and Brannan knew them to be false when made.

               5.      Lulling Statements and Conduct

         82.   In late 2000 or early 2001, in an attempt to obtain information and recover his lost

money, Hansen met with Lightner at Lightner’s office at Bank One on 300 South Street in Salt

Lake City. Hansen inquired of Lightner about the status of MadTrax and the expected line of

credit. In response, Lightner, acting on behalf of Bank One, assured Hansen that MadTrax was a

solid company, and that Lightner fully expected that MadTrax would obtain access to a large line


264246                                          22
 Case 2:04-cv-00867-TS-BCW            Document 186         Filed 08/12/2008      Page 23 of 37




of credit that would enable MadTrax to repay Hansen his $1.5 million. Lightner told Hansen that

Lightner was personally familiar with the principals of MadTrax and stated that Bank One was

still supportive of MadTrax. Lightner represented that it was just taking longer than anticipated

to complete the financial transactions necessary to enable MadTrax to repay Hansen.

         83.   During the course of the meeting between Lightner and Hansen, and in order to

provide further assurances to Hansen, Lightner presented Hansen with a Business Plan of Vtrax

Sports, which Lightner explained was an affiliate of MadTrax. Among other things, the Vtrax

Business Plan stated the following: (1) that Vtrax was finalizing an equity partnership with

Ballistic International, described as one of the largest bike frame and shock manufacturers in the

world; (2) that Vtrax was finalizing an equity partnership with IDEAL Corporation, a major bike

manufacturer that manufactures bicycles for such brands as Specialized, Trek, GT and Schwinn;

(3) that Vtrax had entered into a licensing agreement with ICON Health and Fitness for the rights

to NordicTrack, Pro-Form and HealthRider brand names; and (4) that an affiliate of Vtrax,

Wasatch Cycle, “provides bikes world-wide for the LDS Missionary Program.” The Business

Plan represented Vtrax (and by implication MadTrax) as a promising company with excellent

business prospects.

         84.   Many or all of the above-described representations by Bank One were false when

made, and Bank One knew, or should have known, of their falsity. Lightner knew, or should

have known, that he had no reasonable basis for the assurances he gave to Hansen and/or acted in

reckless disregard of the consequences of providing the above-described verbal assurances.

         85.   Plaintiffs are informed and believe and therefore allege that Lightner gave the

above-described verbal assurances to Hansen at the request or suggestion of Jenson or others


264246                                          23
 Case 2:04-cv-00867-TS-BCW              Document 186        Filed 08/12/2008       Page 24 of 37




associated with the Enterprise for the purpose of concealing the wrongful conduct of the

Enterprise Defendants, lulling Hansen into a false sense of security, and preventing investigation

into the unlawful activities of the Enterprise.

         86.   During the period of time from September 2000 to the summer of 2004, Brannan

repeatedly gave verbal assurances to Hansen that Brannan was about to consummate various

business deals that would enable Brannan to repay Hansen the full amount owed to him.

         87.   The above-described representations by Brannan were false when made, and

Brannan knew of their falsity.

         88.   Brannan gave the above-described assurances to Hansen for the purpose of

concealing the wrongful conduct of the Enterprise Defendants, lulling Hansen into a false sense

of security, and preventing investigation into the unlawful activities of the Enterprise.

         89.   Acting in reasonable reliance on the assurances from Bank One and Brannan,

Hansen deferred undertaking a more thorough investigation of the Enterprise or taking legal

action to enforce his rights against the defendants.

         90.   Throughout 2001 and 2002, Brannan repeatedly promised to repay the Plaintiffs

for their losses and assured them that various deals were in the works that would enable him to

do so. Finally, on May 17, 2002, after repeated promises by Brannan to pay Rutter and Fisher

for their loss of the Lehi Property, Brannan executed a Letter Agreement whereby he promised to

repay to Rutter and Fisher the total sum of $2,148,000 within 18 months. The Letter Agreement

also provided that, if suit is brought to enforce the Letter Agreement, the prevailing party would

be entitled to reasonable attorneys’ fees and costs associated therewith.




264246                                            24
 Case 2:04-cv-00867-TS-BCW             Document 186         Filed 08/12/2008       Page 25 of 37




         91.     Brannan failed to make any of the payments required in the Letter Agreement and

is in default.

         92.     Brannan knew at the time he executed the Letter Agreement that he did not have

the means to pay the obligations established therein, and knowingly executed the Letter

Agreement to obtain Plaintiffs’ forbearance from pursuing their legal rights against him and

other Defendants.

         93.     Acting in reasonable reliance on Brannan’s assurances of repayment, as set forth

in the Letter Agreement, Rutter and Fisher deferred undertaking a more thorough investigation of

the Enterprise or taking legal action to enforce their rights against the Defendants.

                 6.     Witness Tampering and False Testimony

         94.     In June of 2002, Lee Jackson brought a lawsuit against Marc Jenson and MSF

arising out of the series of events outlined above. Near the same time, the Utah Division of

Securities (UDS) began investigating Brannan and Jenson, later charging Brannan with

communications fraud.

         95.     During an interview with a UDS investigation, Brannan explained the investments

he promoted with Jenson, including the MadTrax Deal and planned HYIP trades. When Brannan

told Jenson he had told the whole story to regulators, Jenson presented papers showing that

Brannan owed Jenson $16 million (or similar amount). Jenson told Brannan that if he said he

was raising money for investments he would have broken the securities laws. Jenson

purportedly told Brannan he needed to say that he raised money to repay a loan from Jenson;

then everything would be legal. Jenson told Brannan if he told the whole story everyone would

suffer. Brannan quoted Jenson as saying, “Don’t make it ugly for you or me. I will make


264246                                           25
 Case 2:04-cv-00867-TS-BCW             Document 186        Filed 08/12/2008      Page 26 of 37




everything work out fine. Stick to the story (that Brannan was raising money to repay a loan).

Don’t worry. I’ll pay everyone off.”

         96.   Jenson’s lawyers prepared an affidavit, which Brannan signed, stating, among

other things, that Jenson, as the sole manager and principal of MSF providing consulting services

and advanced funds to First Wasatch, which Brannan controlled, on a loan basis. The affidavit

further stated that in from August through November of 2000, First Wasatch caused

approximately $5,948,000 to be paid to MSF directly or to other parties for the account of MSF,

and that such payments were made against obligations of First Wasatch to MSF. According to

the affidavit, First Wasatch obtained funds paid to or for the account of MSF by soliciting the

advancement of funds as loans from certain parties, including $1,500,000 from Hansen, and

MSF had no obligation to repay Hansen or other parties from which Brannan solicited funds on

behalf of First Wasatch. Finally, the affidavit stated that no MSF party had ever authorized

Brannan or First Wasatch to offer or sell securities of MadTrax, Wasatch Cycles, Vtrax Sports,

LLC, and Madwagon.com, LLC. Both Brannan and Jenson knew the statements in the affidavit

were false and misleading when made.

         97.   At about the same time, Jenson asked Allen Lucas to sign a similar affidavit,

faxing a copy to Lucas from Jenson’s company, Wilshire Investments, on Halloween,

October 31, 2002. When Lucas refused to sign, Jenson asked Lucas to come to his office in

Holladay, Utah. Jenson tried to persuade Lucas of his version of the transaction, but Lucas still

declined to sign. As Lucas left Jenson’s office, Jenson came up to him, put his hand on Lucas’

shoulder, said he knew Lucas was planning to attend law school and if he stayed close to




264246                                          26
 Case 2:04-cv-00867-TS-BCW              Document 186         Filed 08/12/2008        Page 27 of 37




Brannan’s story, as outlined in Brannan’s false affidavit, Lucas would not have to worry about

paying for law school.

                                  IV.    CLAIMS FOR RELIEF

         A.     First Claim for Relief – Civil Violation of 18 U.S.C. § 1962(c) – Jenson,
                Robbins, Brannan and MSF, as the “Enterprise”

         98.    Plaintiffs re-allege and incorporate all prior paragraphs by this reference as if set

forth fully herein.

         99.    At all times herein, each Defendant identified herein as part of the “Enterprise”

was a “person” within the meaning of 18 U.S.C. §§ 1961(3) and 1962(c).

         100.   As detailed above, at all times relevant, there existed an enterprise within the

meaning of 18 U.S.C. §§ 1961(4) and 1962(c), comprised of an association-in-fact whose

members included Jenson, Robbins, Brannan and MSF (hereinafter collectively the “Enterprise

Defendants”).

         101.   At all times relevant to this Complaint, this Enterprise was engaged in activities in

or affecting interstate commerce.

         102.   As more particularly described in the foregoing allegations, at a given point in

time, each of the Enterprise Defendants associated with the association-in-fact Enterprise and did

conduct or participate, directly or indirectly, in the conduct of this association through a pattern

of racketeering activity, including unlawful activity within the meaning of 18 U.S.C. 1961(1),

1961(5), and 1962(c), by engaging in multiple instances of mail fraud in violation of 18 U.S.C.

§ 1341, wire fraud in violation of 18 U.S.C. § 1343, bank fraud in violation of 18 U.S.C. § 1344

and/or witness tampering in violation of 18 U.S.C. § 1512.



264246                                            27
 Case 2:04-cv-00867-TS-BCW              Document 186       Filed 08/12/2008       Page 28 of 37




         103.   With respect to the Enterprise Defendants’ acts of mail fraud, as more particularly

described in the foregoing allegations:

                a.     The Enterprise Defendants engaged in scheme or artifices to defraud

                       Plaintiffs and others of money or property; and

                b.     The United States Mail was used on numerous occasions in furtherance of

                       those schemes or artifices to defraud.

Each such use of the mail in furtherance of these schemes and artifices to defraud constituted the

offense of mail fraud as proscribed and prohibited under 18 U.S.C. 1341.

         104.   With respect to the Enterprise Defendants’ acts of wire fraud, as more particularly

detailed in the forgoing allegations:

                a.     The Enterprise Defendants engaged in schemes or artifices to defraud

                       Plaintiffs and others of money or property; and

                b.     Interstate wires were used on numerous occasions in furtherance of those

                       schemes or artifices to defraud.

Each such use of the interstate wires in furtherance of these schemes or artifices to defraud

constituted the offense of wire fraud as proscribed and prohibited under 18 U.S.C. § 1343.

         105.   With respect to the Enterprise Defendants’ acts of bank fraud, as more

particularly detailed in the foregoing allegations, the Enterprise Defendants executed a scheme or

artifice to obtain money under the custody or control of a financial institution by means of false

or fraudulent pretenses. Each such scheme or artifice constituted the offense of bank fraud as

proscribed and prohibited under 18 U.S.C. § 1344.




264246                                          28
 Case 2:04-cv-00867-TS-BCW             Document 186          Filed 08/12/2008       Page 29 of 37




         106.   With respect to the Enterprise Defendants’ acts of witness tampering, as more

particularly detailed in the foregoing allegations, Defendant Jenson:

                a.     Knowingly used intimidation or corruptly persuaded another person, or

                       attempted to do so, with the intent to influence, delay or prevent the

                       testimony of a person in an official proceeding;

                b.     Knowingly used intimidation or corruptly persuaded another person, or

                       attempted to do so, with the intent to cause or induce a person to withhold

                       testimony from an official proceeding; and

                c.     Corruptly otherwise obstructed, influenced or impeded any official

                       proceeding, or attempted to do so.

         107.   The predicate acts committed with respect to the Plaintiffs as described above

have continued over a period from 2000 up to the present and were fraudulently concealed by the

Defendants as alleged herein. These predicate acts were related in that they had the same or

similar purpose of furthering the wrongful conduct, and they had similar participants, victims

and methods of commission.

         108.   By reason of Defendants’ violation of 18 U.S.C. § 1962(c), the Plaintiffs have

been injured in their business and property in an amount to be proven at trial.

         109.   Pursuant to the provisions of 18 U.S.C. § 1964(c), the Plaintiffs are entitled to

recover threefold the damages sustained as a result of the above-described violations of

18 U.S.C. § 1962(c).

         110.   Pursuant to the provisions of 18 U.S.C. § 1964(c), the Plaintiffs are entitled to

recover the costs of this action, including reasonable attorneys’ fees.


264246                                           29
 Case 2:04-cv-00867-TS-BCW              Document 186         Filed 08/12/2008       Page 30 of 37




         B.     Second Claim for Relief – Civil Violation of 18 U.S.C. § 1962(d) – Jenson,
                Robbins, Brannan and MSF, as the “Enterprise”

         111.   Plaintiffs hereby re-allege and incorporate all prior paragraphs by this reference as

if set forth fully herein.

         112.   At all times herein, each Defendant identified herein as part of the “Enterprise”

was a “person” within the meaning of 18 U.S.C. §§ 1961(4) and 1962(d).

         113.   As detailed above, at all times relevant, there existed an enterprise within the

meaning of 18 U.S.C. §§ 1961(4) and 1962(c), comprised of an association-in-fact whose

members included the Enterprise Defendants.

         114.   At all times relevant to this Complaint, this Enterprise was engaged in activities in

or affecting interstate commerce.

         115.   There were primary violations of 18 U.S.C. § 1962(c). Each of the Enterprise

Defendants conspired to commit the following identified primary violations of 18 U.S.C.

§ 1962(c) insofar as such violations relate to the transactions and conspiracies described in the

foregoing allegations.

         116.   As more specifically described in the foregoing allegations, each Enterprise

Defendant conspired within the meaning of 18 U.S.C. § 1962(d) to conduct or participate,

directly or indirectly, in the conduct of this association through a pattern of racketeering activity,

including unlawful activity within the meaning of 18 U.S.C. §§ 1961(1), 1961(5) and 1962(c) by

engaging in multiple instances of mail fraud in violation of 18 U.S.C. § 1341, wire fraud in

violation of 18 U.S.C. § 1343, bank fraud in violation of 18 U.S.C. § 1344 and/or witness

tampering in violation of 18 U.S.C. § 1512.



264246                                            30
 Case 2:04-cv-00867-TS-BCW             Document 186          Filed 08/12/2008       Page 31 of 37




         117.   Each Enterprise Defendant committed numerous acts in furtherance of the

conspiracy, including but not limited to those predicate acts expressly set forth in the foregoing

allegations.

         118.   By reason of the Enterprise Defendants’ violation of 18 U.S.C. § 1962(d),

Plaintiffs have been injured in their business and property in an amount to be proven at trial.

         119.   Pursuant to the provisions of 18 U.S.C. § 1964(c), the Plaintiffs are entitled to

recover threefold the damages sustained as a result of the above-described violations of

18 U.S.C. § 1962(d).

         120.   Pursuant to the provisions of 18 U.S.C. § 1964(c), the Plaintiffs are entitled to

recover the costs of this action, including reasonable attorneys’ fees.

         C.     Third Claim for Relief – Civil Conspiracy (As Against All Defendants other
                than Bank One)

         121.   Plaintiffs hereby re-allege and incorporate all prior paragraphs by this reference as

if set forth fully herein.

         122.   As more particularly described above, the Defendants (other than Bank One)

agreed to create a scheme, the object of which was to defraud the Plaintiffs and other innocent

third parties of substantial sums of money and/or real property.

         123.   Each of the Defendants (other than Bank One) knew that the conduct of the other

Defendants constituted a breach of duty to the Plaintiffs, but nevertheless gave substantial

assistance or encouragement to the other Defendants in their fraudulent and unlawful conduct.

         124.   Each of the Defendants (other than Bank One) actively participated in the scheme

by making fraudulent or misleading misrepresentations and omissions and/or taking active steps

to cover up the fraudulent scheme. Specific unlawful acts committed by several of the

264246                                           31
 Case 2:04-cv-00867-TS-BCW               Document 186          Filed 08/12/2008       Page 32 of 37




Defendants in furtherance of the conspiracy include, but are not limited to, acts of mail fraud,

wire fraud, bank fraud, theft by deception and/or witness tampering, all as detailed in the

foregoing allegations and other Claims for Relief.

          125.   Defendants’ actions in this regard constitute a civil conspiracy to defraud and

commit other unlawful acts against the Plaintiffs.

          126.   As a direct and proximate result of the Defendants’ conspiratorial scheme, each of

the Plaintiffs has been damaged in an amount to be proven at trial.

          127.   Each of the Defendants (other than Bank One) is jointly and severally liable for

all damages resulting from any action taken in furtherance of the conspiratorial scheme, whether

committed before or after the Defendant joined the conspiracy.

          D.     Fourth Claim for Relief – Negligent Misrepresentation (Bank One)

          128.   Plaintiffs hereby re-allege and incorporate the prior allegations as if fully set forth

herein.

          129.   Bank One knew, or should have known, that it had no reasonable basis for the

statements made in the Bank One Letter and the Second Bank One Letter (collectively the

“Letters”) with respect to MadTrax, Robbins and Jenson depositing $165,000,000 into an

account at Bank One. Bank One did not conduct any reasonable due diligence investigation with

respect to such matter.

          130.   Bank One was in a superior position to know the truth concerning the facts in the

Letters that were misrepresented to Plaintiffs and the facts that were omitted.




264246                                             32
 Case 2:04-cv-00867-TS-BCW               Document 186          Filed 08/12/2008       Page 33 of 37




          131.   Bank One prepared and delivered the Letters with the intent that investors would

rely thereon, and in so doing had a duty to exercise reasonable care in providing the information

contained in the Letters.

          132.   In making the representations in the Letters, Bank One was negligent in

determining whether the representations were true or whether there was any reasonable basis for

making the representations and in omitting facts that should have been disclosed. Bank One had

a pecuniary interest relative to the subject transactions.

          133.   The information contained in the Letters was false.

          134.   Plaintiffs reasonably relied on the Letters in making their investment decisions.

          135.   As a direct and proximate result of Bank One’s negligent misrepresentations and

omissions, K&D, and its members Rutter and FiberTel, have been damaged in an amount to be

proven at trial but not less than the value of the Lehi Property; and Smith has been damaged in

an amount to be proven at trial but not less than the value of the Smith Properties less any

encumbrances thereon.

          E.     Fifth Claim for Relief – Breach of the September 2000 Note (Brannan)

          136.   Plaintiffs hereby re-allege and incorporate the prior allegations as if fully set forth

herein.

          137.   Pursuant to the terms of the September 2000 Note Brannan is obligated to pay

Hansen the sum of $1,855,000 plus interest.

          138.   Brannan has wrongfully failed and refused, and continues wrongfully to fail and

refuse, to pay Hansen the amounts due and payable under the September 2000 Note.




264246                                             33
 Case 2:04-cv-00867-TS-BCW               Document 186          Filed 08/12/2008       Page 34 of 37




          139.   Hansen is entitled to judgment against Brannan for all amounts due under the

September 2000 Note.

          F.     Sixth Claim for Relief – Breach of the January 2001 Note (Brannan)

          140.   Plaintiffs hereby re-allege and incorporate the prior allegations as if fully set forth

herein.

          141.   Pursuant to the terms of the January 2001 Note Brannan is obligated to pay

Hansen the sum of $2,000,000 plus interest.

          142.   Brannan has wrongfully failed and refused, and continues wrongfully to fail and

refuse, to pay Hansen the amounts due and payable under the January 2001 Note.

          143.   Hansen is entitled to judgment against Brannan for all amounts due under the

January 2001 Note.

          G.     Seventh Claim for Relief – Breach of the Letter Agreement (Brannan)

          144.   Plaintiffs hereby re-allege and incorporate the prior allegations as if fully set forth

herein.

          145.   Pursuant to the terms of the Letter Agreement, Brannan was obligated to pay

Plaintiffs Fisher and Rutter the sum of $2,148,000 no later than November 17, 2003.

          146.   Brannan has wrongfully failed and refused, and continues wrongfully to fail and

refuse, to pay Fisher and Rutter under the Letter Agreement.

          147.   Fisher and Rutter are entitled to judgment against Brannan for all amounts due

under the Letter Agreement.




264246                                             34
 Case 2:04-cv-00867-TS-BCW               Document 186          Filed 08/12/2008       Page 35 of 37




          H.     Eleventh Claim for Relief – Unjust Enrichment (Jenson and Brannan)

          148.   Plaintiffs hereby re-allege and incorporate the prior allegations as if fully set forth

herein.

          149.   Defendants Jenson and Brannan have been unjustly enriched at the expense of the

Plaintiffs.

          150.   In equity and good conscience, these Defendants who have been thus unjustly

enriched should be required to repay Plaintiffs the amounts by which they have been so enriched.

                                      PRAYER FOR RELIEF

          WHEREFORE, Plaintiffs pray for relief against the Defendants as follows:

          1.     On Plaintiffs’ First Claim for relief – Civil Violation of 18 U.S.C. § 1962(c)

(Enterprise Defendants): for judgment against the Enterprise Defendants, jointly and severally,

for compensatory damages for injury to Plaintiffs’ business and/or property in an amount to be

proven at trial, but not less than $2,000,000, plus treble damages and the cost of this action,

including reasonable attorneys’ fees, pursuant to the provisions of 18 U.S.C. § 1964(c).

          2.     On Plaintiffs’ Second Claim for relief – Civil Violation of 18 U.S.C. § 1962(d)

(Enterprise Defendants): for judgment against the Enterprise Defendants, jointly and severally,

for compensatory damages for injury to Plaintiffs’ business and/or property in an amount to be

proven at trial, but not less than $2,000,000, plus treble damages and the cost of this action,

including reasonable attorneys’ fees, pursuant to the provisions of 18 U.S.C. § 1964(c).

          3.     On Plaintiffs’ Third Claim for relief – Civil Conspiracy (All Defendants other

than Bank One): for judgment against all Defendants other than Bank One, jointly and severally,

for compensatory damages in an amount to be proven at trial, but not less than $2,000,000.


264246                                             35
 Case 2:04-cv-00867-TS-BCW                Document 186       Filed 08/12/2008       Page 36 of 37




         4.     On Plaintiffs’ Fourth Claim for relief – Negligent Misrepresentation (Bank One):

for judgment against Bank One for compensatory damages in an amount to be proven at trial, but

not less than $2,000,000.

         5.     On Plaintiffs’ Fifth Claim for relief –Breach of the September 2000 Note

(Brannan): for judgment against Brannan for compensatory damages in an amount to be proven

at trial, but not less than $1,855,000.

         6.     On Plaintiffs’ Sixth Claim for relief –Breach of the January 2001 Note (Brannan):

for judgment against Brannan for compensatory damages in an amount to be proven at trial, but

not less than $2,000,000.

         7.     On Plaintiffs’ Seventh Claim for Relief – Breach of the Letter Agreement

(Brannan): for judgment against Brannan for compensatory damages in an amount to be proven

at trial, but not less than $2,148,000.

         8.     On Plaintiffs’ Eighth Claim for Relief– Unjust Enrichment (All Defendants Other

than Bank One): for judgment against those Defendants who have been unjustly enriched by

Plaintiffs, in amounts to be proven at trial, but in an amount in the aggregate of not less than

$2,000,000.

         9.     Under All Counts: for pre- and post-judgment interest, for the costs of this action,

including reasonable attorneys’ fees, and for all other just and equitable relief as this Court

deems just.

                                  DEMAND FOR JURY TRIAL

         The Plaintiffs hereby demand a trial by jury of all issues triable by jury and submit the

statutory jury fee herewith.


264246                                            36
 Case 2:04-cv-00867-TS-BCW           Document 186          Filed 08/12/2008     Page 37 of 37




         DATED this 12th day of August, 2008.

                                                     PARR WADDOUPS BROWN GEE & LOVELESS



                                                     By:      /s/ Jenifer L. Tomchak            .
                                                            Stephen J. Hill
                                                            Robert B. Lochhead
                                                            Jenifer L. Tomchak
                                                            Attorneys for Plaintiffs

Plaintiffs’ Addresses:

Kenneth G. Hansen
30 East 100 South, Suite 100
Salt Lake City, UT 84111

David W. Rutter
1260 East 150 South
Lindon, UT 84042

Todd Fisher
555 East 2600 North
Provo, UT 84604

FiberTel, Inc.
P.O. Box 1071
Springville, UT 84663

K&D Development, LC
1260 East 150 South
Lindon, UT 84042

Douglas A. Smith
13924 South Saddlehorn
Bluffdale, UT 84065




264246                                          37

				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:345
posted:3/10/2011
language:English
pages:37