Perkumpulan Investor Crisis Ctr. Dressel-WBG v. Wong

PERKUMPULAN INVESTOR CRISIS CENTER DRESSEL - WBG, Plaintiff, v. DANNY MK WONG, et al., Defendants.

CASE NO. C09-1786-JCC

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE

DATED: March 14, 2014

THE HONORABLE JOHN C. COUGHENOUR

ORDER

This matter comes before the Court on the motion to dismiss filed by Defendant Jared Sherer and joined by Defendants Donald and Michelle Sherer¹ (Dkt. Nos. 388) and Plaintiff's opposition thereto (Dkt. Nos. 412). Upon review, the Court concludes that Plaintiff's RICO claim is barred under section 107 of the Private Securities Litigation Reform Act and DISMISSES that claim with prejudice.² In light of the dismissal of Plaintiff's sole federal claim,the Court declines to exercise its supplemental jurisdiction over this matter and dismisses the remaining claims without prejudice. The Court also rules on the parties' sanctions motions (Dkt. No. 485, 487, 499) and motion to seal (Dkt. No. 526) as explained herein.

I. BACKGROUND

A. The Dressel Ponzi Scheme

The instant matter "sounds in allegations of international financial fraud." (Dkt. No. 169 at 2.) Plaintiff Perkumpulan Investor Crisis Center Dressel - WBG ("Perkumpulan") represents Indonesian investors whom Defendants allegedly defrauded of hundreds of millions of dollars. Defendants were the operators of Dressel Investment Limited, which Plaintiff describes as a "classic Ponzi scheme" that began its fraudulent efforts in 2001 and ultimately collapsed in 2007. According to Plaintiff's complaint, Defendants represented to thousands of Indonesian individuals that the Dressel principals were qualified investment professionals capable of delivering annual returns between twenty-four and twenty-eight percent. In reliance upon these representations, Plaintiff alleges, Indonesian individuals invested tens of thousands of dollars each in Dressel's fraudulent scheme. Rather than investing the money as promised, Defendants allegedly operated a Ponzi scheme on the basis of "lies and deception," whereby they used newer investors' funds to repay earlier investors and stole large amounts of the money for personal use. (Dkt. No. 381 at ¶¶ 4.7-4.8.)

Plaintiff includes as "RICO" or "Ponzi Scheme" defendants Donald and Michelle Sherer, Kenneth McCabe, Danny Wong, Joseph Yau, Dwight Williams, Luis Garza, Kelly and David Thacker, and former-defendant Frank Ho. (Id. at ¶ 4.2.) These individuals together operated the investment scheme through Dressel BVI and an Indonesian corporation, PT Wahana Bersama Globalindo ("WBG"), which served as "the marketing agent and principal representative ofDressel BVI." (Id. at ¶ 4.3.) Dressel, with WBG as its sales agent, allegedly solicited Indonesian individuals to invest in two separate funds: (1) the Strategic Portfolio Management Scheme Fund ("SPORTSMANS Fund"), which promised a dividend yield of twenty-four percent per annum for a minimum investment of $5,000; and (2) the Global Markets Portfolio Fund ("GMP Fund"), which promised a divided yield of twenty-eight percent per annum for a minimum investment of $10,000. (Id. at ¶ 4.4.) Defendants solicited Indonesian investors at presentations given by the Ponzi Scheme Defendants in Indonesia; through brochures distributed to potential investors; through the Dressel website; and through WBG marketing personnel, who allegedly worked at the Ponzi Scheme Defendants' direction. (Id. at ¶¶ 4.5, 4.12-4.31; see Dkt. No. 169 at 3-6.)

Perkumpulan's complaint alleges in detail the role of each Ponzi Scheme Defendant. Donald and Michelle Sherer allegedly served as the "Director in Charge" and "Office Manager" of Dressel from 2001 to 2005, respectively. Plaintiff alleges that the Sherers played a crucial role in operating the Dressel Ponzi Scheme. Both individuals traveled to Indonesia to solicit Indonesian investors in person and signed investment certificates after receiving investors' funds. In 2005, the Sherers purported to resign from Dressel, but Plaintiff alleges that they continued to spend investors' stolen funds and even demanded "hush" payments from other members of the scheme. (See id. at ¶¶ 3.11-3.12.) Additionally, the Sherers allegedly engaged in sham litigation intended to conceal their role in the scheme. (Id.)

Defendants Danny Wong, Joseph Yau, Luis Garza, and former-defendant Frank Ho, are individuals who allegedly played major roles in the Dressel scheme.³ Perkumpulan alleges that Danny Wong became a Director of Dressel in 2001 and largely masterminded the Ponzi Scheme while living in Asia. Joseph Yau and Frank Ho allegedly worked as associates of Mr. Wong in carrying out Dressel's activities in Asia. According to Perkumpulan, both Danny Wong andJoseph Yau traveled to Indonesia to solicit investors in person and had repeated communications with investors to assuage their concerns about the fraudulent investments. (Id. at ¶¶ 3.5-3.7.) Mr. Garza allegedly worked as WBG's Surabaya branch manager and, at the direction of Danny Wong, Joseph Yau, and other Ponzi Scheme Defendants, directed and/or sent wire transfers of stolen funds so as to enrich himself and others. (Id. at ¶¶ 3.28, 4.2, 4.12, 4.44-4.47.) Mr. Garza also oversaw the Mexican operations of the Dressel Scheme and allegedly engaged in sham litigation intended to keep the fraud from being disclosed after the fact. (Id.) Additionally, Defendant Dwight Williams is a Utah lawyer who allegedly served as legal counsel to Danny Wong and Dressel BVI, and represented himself to others as Dressel's General Counsel. Mr. Williams, like other Ponzi Scheme Defendants, traveled to Indonesia to solicit investors for the Dressel scheme. Perkumpulan further alleges that Mr. Williams drafted correspondence to potential investors commending Danny Wong's "business character" so as to lend legitimacy to the Dressel Ponzi Scheme and its directors. (Id. at ¶ 3.8.)

Finally, Plaintiff names as RICO Defendants Kelly and David Thacker, and Kenneth McCabe. The Thackers were "owners and directors" of Dressel who misrepresented themselves as experts to Indonesian investors, when in reality they were unqualified and planned to steal investors' funds. Perkumpulan alleges that the Thackers met with Indonesian investors in person, met with Dressel's marketing agents in Seattle, and met with WBG representatives in Indonesia in "an ongoing effort to solicit investors in the Dressel Ponzi Scheme and to fleece Indonesian investors." (Id. at ¶¶ 3.9-3.10.) Defendant Kenneth McCabe was also a director of Dressel and "later became a 50% shareholder." As explained in more detail below, Mr. McCabe held himself out to prospective investors as "an international expert on finance and economics" at numerous in-person presentations and signed investor certificates for Dressel BVI. (Id. at ¶ 3.13.) Together, these defendants operated the Dressel Ponzi Scheme, allegedly defrauding Indonesian investors of hundreds of millions of dollars.

Plaintiff's complaint lists in detail the alleged misrepresentations made to investors. In May 2001 at a presentation in Jakarta, Indonesia, for example, Defendants Donald Sherer and Joseph Yau misrepresented their qualifications to prospective investors. Mr. Sherer allegedly told potential investors that he was an investment professional when he was in fact a disbarred attorney who worked as a bus driver. Mr. Yau similarly portrayed himself as a former investment banker who joined Dressel because "he wanted to do something on his own," when in reality he had been censured by Hong Kong financial authorities. Neither Sherer nor Yau mentioned this public censure. (Id. at ¶ 4.13.) Later in 2001, Donald Sherer represented to prospective investors that Dressel had a "fiduciary and moral obligation to be as safe as we can" in investing funds entrusted with Dressel's operators; that he had years of experience in the foreign exchange industry; and that he had taught financial management for years. (Id. at ¶ 4.14.) Plaintiff alleges that these statements, too, were false. (Id.)

And so the alleged misrepresentations continued. In 2004, Donald and Michelle Sherer, along with Danny Wong and Dwight Williams, solicited new Indonesian investors at another presentation. There, they represented that "the Indonesian investors would be the 'partners' of Dressel BVI; that the investment performance of Dressel BVI was better than Merrill Lynch; and that Dressel had profits averaging 40 percent per annum," which enabled Dressel to pay investors twenty-four to twenty-eight percent returns. (Id. at ¶¶ 4.14-4.21.) Beyond the in-person presentations and WBG marketing efforts, Plaintiff alleges, Defendants espoused many of the same misrepresentations in brochures provided to investors and on its website, which was hosted from the United States. (See id. at ¶¶ 4.22-4.31.) For example, Dressel's website described Dressel as a legitimate investment opportunity and misrepresented the qualifications of Donald and Michelle Sherer, Kenneth McCabe, and David Thacker. (Id. at ¶¶ 4.26-4.31; see also id. at ¶¶ 4.22-4.25 (detailing misrepresentations in brochures.)) Plaintiffs allege that such representations were intended to deceive the Indonesian investors and conceal the fact that the defendants were in reality operating a Ponzi Scheme to steal investors' money. (Id. at ¶ 4.21.)

When investors relied on Defendants' misrepresentations and invested in Dressel's funds, the investor signed a "Portfolio Management Agreement" that named Dressel as Portfolio Manager. (Id. at ¶ 4.6.) For some time, investors received the promised returns. But by September 2006, Dressel stopped making payments to investors and the alleged Ponzi scheme began to unravel. Danny Wong attempted to assuage investors' concerns, writing letters and assuring investors in person that Dressel was fully functioning and intended to honor its contractual obligations. But the assurances rang hollow. Plaintiff alleges that ultimately, Dressel proved unable to meet its commitments...