And NY AG Schneiderman dials up the pressure. Including asking the court to send one of the perps to the slammer for 6 months for contempt of court.
July 2, 2015 filing - MEMORANDUM OF LAW IN OPPOSITION TO RESPONDENTS’ MOTIONS (MOTION SEQUENCE #1 AND #2) AND IN SUPPORT OF PETITIONER NEW YORK STATE ATTORNEY GENERAL’S CROSS-MOTION (MOTION SEQUENCE #3)
70 pages of goodness - AGs office appears to be really pissed. Here's the Table of Contents for the AG's filing. Click on the link if you want more.
Table of Contents - Part 1
July 2, 2015 filing - MEMORANDUM OF LAW IN OPPOSITION TO RESPONDENTS’ MOTIONS (MOTION SEQUENCE #1 AND #2) AND IN SUPPORT OF PETITIONER NEW YORK STATE ATTORNEY GENERAL’S CROSS-MOTION (MOTION SEQUENCE #3)
70 pages of goodness - AGs office appears to be really pissed. Here's the Table of Contents for the AG's filing. Click on the link if you want more.
Table of Contents - Part 1
Page
TABLE OF AUTHORITIES .................................................. .................................................. ... vi
PRELIMINARY STATEMENT .................................................. .................................................. 1
STATUTORY AND REGULATORY FRAMEWORK .................................................. .............5
TABLE OF AUTHORITIES .................................................. .................................................. ... vi
PRELIMINARY STATEMENT .................................................. .................................................. 1
STATUTORY AND REGULATORY FRAMEWORK .................................................. .............5
A. The Martin Act Prohibits Fraud in the Sale of Real Estate Securities ...........................5
B. The Martin Act Requires that the Offering or Sale of Real Estate Securities Be Made
Only on the Basis of the Representations Contained in the Offering Plan ..................6
C. GBL § 354 Authorizes Ex Parte Court-Ordered Discovery, and Injunctive Relief that
Is Expedient and Proper .................................................. .............................................7
D. Sponsor Control and the Essence of Timeshare Ownership ........................................8
STATEMENT OF THE FACTS .................................................. ...............................................10B. The Martin Act Requires that the Offering or Sale of Real Estate Securities Be Made
Only on the Basis of the Representations Contained in the Offering Plan ..................6
C. GBL § 354 Authorizes Ex Parte Court-Ordered Discovery, and Injunctive Relief that
Is Expedient and Proper .................................................. .............................................7
D. Sponsor Control and the Essence of Timeshare Ownership ........................................8
A. The Manhattan Club .................................................. .................................................1 0
B. All Respondents are Involved in the Offering of Real Estate Securities at the
Manhattan Club .................................................. .................................................. ......12
C. Sponsor and the Eichners Certified the Offering Plan .................................................1 3
D. In 2014, NYAG Opened an Investigation and Uncovered Fraud in the Offering of
Real Estate Securities at the Manhattan Club .................................................. ..........14
1. Sponsor’s Sales Staff Directly Contradicted the Offering Plan’s
Representations Concerning the Product Being Offered ...............................14
a. Sponsor’s Selling Agents Made Material Misrepresentations
Concerning the “Equity Component” of the Ownership Interest
Being Offered........................................... ............................................14
b. Sponsor’s Selling Agents Made Material Representations
Concerning the Manhattan Club’s Rental of Rooms to the General
Public .................................................. .................................................1 6
c. Sponsor’s Selling Agents Misrepresented the Reservation Policies
Applicable to Owners of “Flexible” Interests ....................................16
d. Sponsor’s Selling Agents Required NYAG’s Undercover
ii
Investigators to Make their Investment Decision Based on Oral
Representations Only .................................................. .........................17
2. Sponsor Failed to Disclose an Arrangement for the Hypothecation or Sale of
Notes Executed by Purchasers in Conjunction with the Sale of Ownership
Interests .................................................. .................................................. ...18
3. Sponsor Has Been Selling Securities for Years Without a Valid Broker-
Dealer Registration; the Offering Plan Expired Last Year ............................18E. The Order .................................................. .................................................. .................19
F. New Evidence of Fraud Attained During the Public Investigation ............................19
NYAG, and There is No Evidence that Sponsor Served the 89th Amendment to
the Offering Plan on Purchasers in Contract .................................................. ..............26
H. NYAG Routinely Contacts Victims of Fraud under Investigation .............................27
I. Respondents Have Withheld Material Information about Their Business Practices and
Have Prolonged NYAG’s Investigation with Dilatory Conduct .................................27
K. T. Park Central LLC, Park Central Management LLC, the Marketing Group and
Lager Repeatedly Violated Court Orders During this Investigation by
Withdrawing Funds from Frozen Accounts .................................................. .............30
B. All Respondents are Involved in the Offering of Real Estate Securities at the
Manhattan Club .................................................. .................................................. ......12
C. Sponsor and the Eichners Certified the Offering Plan .................................................1 3
D. In 2014, NYAG Opened an Investigation and Uncovered Fraud in the Offering of
Real Estate Securities at the Manhattan Club .................................................. ..........14
1. Sponsor’s Sales Staff Directly Contradicted the Offering Plan’s
Representations Concerning the Product Being Offered ...............................14
a. Sponsor’s Selling Agents Made Material Misrepresentations
Concerning the “Equity Component” of the Ownership Interest
Being Offered........................................... ............................................14
b. Sponsor’s Selling Agents Made Material Representations
Concerning the Manhattan Club’s Rental of Rooms to the General
Public .................................................. .................................................1 6
c. Sponsor’s Selling Agents Misrepresented the Reservation Policies
Applicable to Owners of “Flexible” Interests ....................................16
d. Sponsor’s Selling Agents Required NYAG’s Undercover
ii
Investigators to Make their Investment Decision Based on Oral
Representations Only .................................................. .........................17
2. Sponsor Failed to Disclose an Arrangement for the Hypothecation or Sale of
Notes Executed by Purchasers in Conjunction with the Sale of Ownership
Interests .................................................. .................................................. ...18
3. Sponsor Has Been Selling Securities for Years Without a Valid Broker-
Dealer Registration; the Offering Plan Expired Last Year ............................18
F. New Evidence of Fraud Attained During the Public Investigation ............................19
1. Respondents Misrepresented the Number of Available Units in the Club ......19
a. From at Least May 1, 2009 to May 24, 2012, Rooms Were Rented to
the General Public in a Manner that Violated the Seventh Restated
Offering Plan .................................................. ....................................19
b. The Offering Plan Continues to Misrepresent the Manhattan Club’s
Reservation System .................................................. ..........................20
c. The Offering Plan Misrepresents the Amount of Units Available to
Manhattan Club Owners .................................................. ...................21
2. Sponsor Fails to Pay Maintenance Fees on Time and Nevertheless
Earns Millions of Dollars in Rental Income on its Inventory, While
Reducing Inventory that Would Otherwise Be Available to Manhattan
Club Owners .................................................. ................................................21
3. In Violation of the Offering Plan’s Representations, the Manhattan Club
Charged Owners for Yearly Maintenance Fees and Real Estate Taxes Before
Owners’ Anniversary Dates .................................................. .........................22
4. The Offering Plan’s Representations Concerning the Relationship Between
the Timeshare Association and Urban Are Misleading ...................................22
a. The Plan Represents that the Sponsor-Controlled Board of Directors of
the Timeshare Association Delegated All of its Powers to Urban, and
Paid Urban for Providing Services . .................................................. ..22
b. Urban Had No Employees Until August 2014, When It Added 12
Employees from the Marketing Group and/or The Continuum
Company .................................................. ............................................23
iii
c. Urban Was Set Up as a Pass-Through Entity by which Distributions
Were Made to Sponsor and the Respondent-Individuals, Using the
Timeshare Association’s Monies .................................................. .....24
5. Lager Sent Owners Forbearance and Deed-in-Lieu of Foreclosure
Agreements in Violation of the Order .................................................. ...........26
G. Sponsor’s Broker-Dealer Registration Statements Still Have Not Been Filed witha. From at Least May 1, 2009 to May 24, 2012, Rooms Were Rented to
the General Public in a Manner that Violated the Seventh Restated
Offering Plan .................................................. ....................................19
b. The Offering Plan Continues to Misrepresent the Manhattan Club’s
Reservation System .................................................. ..........................20
c. The Offering Plan Misrepresents the Amount of Units Available to
Manhattan Club Owners .................................................. ...................21
2. Sponsor Fails to Pay Maintenance Fees on Time and Nevertheless
Earns Millions of Dollars in Rental Income on its Inventory, While
Reducing Inventory that Would Otherwise Be Available to Manhattan
Club Owners .................................................. ................................................21
3. In Violation of the Offering Plan’s Representations, the Manhattan Club
Charged Owners for Yearly Maintenance Fees and Real Estate Taxes Before
Owners’ Anniversary Dates .................................................. .........................22
4. The Offering Plan’s Representations Concerning the Relationship Between
the Timeshare Association and Urban Are Misleading ...................................22
a. The Plan Represents that the Sponsor-Controlled Board of Directors of
the Timeshare Association Delegated All of its Powers to Urban, and
Paid Urban for Providing Services . .................................................. ..22
b. Urban Had No Employees Until August 2014, When It Added 12
Employees from the Marketing Group and/or The Continuum
Company .................................................. ............................................23
iii
c. Urban Was Set Up as a Pass-Through Entity by which Distributions
Were Made to Sponsor and the Respondent-Individuals, Using the
Timeshare Association’s Monies .................................................. .....24
5. Lager Sent Owners Forbearance and Deed-in-Lieu of Foreclosure
Agreements in Violation of the Order .................................................. ...........26
NYAG, and There is No Evidence that Sponsor Served the 89th Amendment to
the Offering Plan on Purchasers in Contract .................................................. ..............26
H. NYAG Routinely Contacts Victims of Fraud under Investigation .............................27
I. Respondents Have Withheld Material Information about Their Business Practices and
Have Prolonged NYAG’s Investigation with Dilatory Conduct .................................27
1. The Respondent-Entities Delayed Production of E-mails and Have Yet to
Complete Production .................................................. .....................................28
2. The Respondent-Entities’ Document Productions Relating to the
Transfer of All Inventory in the Manhattan Club Raise New Questions .........28
3. Respondents Failed to Comply with Additional Discovery Demands ...........29
J. The Respondent-Individuals Have Not Testified Yet .................................................. 30Complete Production .................................................. .....................................28
2. The Respondent-Entities’ Document Productions Relating to the
Transfer of All Inventory in the Manhattan Club Raise New Questions .........28
3. Respondents Failed to Comply with Additional Discovery Demands ...........29
K. T. Park Central LLC, Park Central Management LLC, the Marketing Group and
Lager Repeatedly Violated Court Orders During this Investigation by
Withdrawing Funds from Frozen Accounts .................................................. .............30
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