Perkumpulan Investor Crisis Ctr. Dressel—wbg v. Regal Financial Bancorp Inc.

781 F.Supp.2d 1098

PERKUMPULAN INVESTOR CRISIS CENTER DRESSEL—WBG, Plaintiff,

v.REGAL FINANCIAL BANCORP, INC., et al., Defendants.

No. C09–1786–JCC.

United States District Court, W.D. Washington,at SEATTLE.

Feb. 17, 2011.

Craig Weiner, Douglas Gross, Ofer Reger, Hofheimer Gartlir & Gross, New York, NY, David Ryan Ebel, Matthew Turetsky, Milton A. Reimers, Schwabe Williamson & Wyatt, Seattle, WA, for Plaintiff.Andrew Lyn Symons, Inslee Best Doezie & Ryder, Bellevue, WA, Juli E. Farris, Laura R. Gerber, Lynn Lincoln Sarko, Keller Rohrback, Gregory J. Wong, Stephen A. Smith, K & L Gates LLP, Benjamin J. Stone, Cozen O'Connor, Douglas Lowell Davies, Davies Law Group, Seattle, WA, Blake D. Miller, Craig H. Howe, Miller Guymon, P.C., Salt Lake City, UT, James A. Morsch, Butler Rublin Saltarelli & Boyd, Chicago, IL, Victor M. Minjares, Attorney General of Washington, Olympia, WA, for Defendants.Dwight B. Williams, Salt Lake City, UT, pro se.Donald Sherer, Wrangell, AK, pro se.Michelle Sherer, Wrangell, AK, pro se.

ORDER

JOHN C. COUGHENOUR, District Judge.

This matter comes before the Court upon the separate motions to dismiss of several different defendants. (Dkt. Nos. 85, 96, 98, 99 & 110). In addition to Defendants' motions, the Court has considered Plaintiff's responses to those motions (Dkt. Nos. 105, 123, 125, 127 & 129), and Defendants' replies thereto. (Dkt. Nos. 112, 135, 136, 137 & 138). Having therefore reviewed the record, the Court has determined that oral argument is unnecessary. For the reasons explained below, the Court hereby GRANTS the motion of Defendants Brian Hill and Kevin Hylton (Dkt. No. 85), and DENIES the motions of the remaining defendants.

I. FACTUAL ALLEGATIONS

This case sounds in allegations of international financial fraud. ¹ Plaintiff is an association of thousands of Indonesian investors who allege that Defendants defrauded them of hundreds of millions of dollars. Defendants were the operators of the now-defunct Dressel Investment Limited, a company which Defendants describe as a legitimate investment enterprise which failed, but which Plaintiff describes as a classic Ponzi scheme. According to Plaintiff, Defendants represented to Indonesian investors that Dressel principals were investment professionals capable of delivering annual returns of between twenty-four and twenty-eight percent. Because of these representations, Plaintiff alleges, thousands of Indonesian investors trusted Defendants with relatively small fortunes of tens of thousands of dollars each. Finally, Plaintiff alleges that Defendants never properly invested the money with which they had been entrusted, but in fact used the contributions from newer investors to make payments to earlier investors, thereby operating a classic Ponzi scheme. Many investors lost their life savings. (Complaint 20–24 (Dkt. No. 1)).

Plaintiffs allege that Defendants' representations about Dressel Investment were lies, and that Defendants never invested the Indonesian clients' money in legitimate profit-making enterprises. Instead, they used the money to launch and fund their own businesses and to purchase, for example, helicopters for themselves. ( Id. 36–38). Defendants also allegedly lied about their own qualifications: For example, Defendant Donald Sherer represented himself as being an investment professional when he was in fact a disbarred attorney who had been reduced to making his living by driving busloads of Utah State residents into Nevada State for weekend gambling excursions. ( Id. 26).

A. Defendants

Plaintiff's complaint describes three broad categories of defendants, each of which played a distinct role in the scheme to defraud. First, Danny Wong, Frank Ho and Joseph Yau led operations from Asia, where they lived during the time at issue. The three Asian defendants also attended presentations in Indonesia, at which attendees were induced to invest in the Ponzi scheme. ( Id. 5–7). Second, Dwight Williams, David Thacker, Kelly Thacker, Donald Sherer, Michelle Sherer and Kenneth McCabe ran the day-to-day operations of the scheme from Utah State, where they lived during the time at issue. Many of the Utah defendants also conducted presentations in Indonesia with potential investors. ( Id. 7–13). Finally, Regal Financial Bank and Jesse Tam, the bank's founder and chief executive officer, provided financial and other material support for the scheme from Washington State. Several directors of Regal Financial Bank have also been named as defendants. Danny Wong, one of the Asian defendants, was also a major shareholder of Regal Financial Bank. ( Id. 13–16).

B. Presentations

Plaintiff's complaint describes four separate presentations at which Defendants convinced Indonesian individuals to invest in Dressel. ( Id. 26–29). The first meeting occurred in May 2001 at the Grand Hyatt Hotel in Jakarta, Indonesia, and was led by Defendant Donald Sherer and Defendant Joseph Yau. Sherer allegedly represented that the firm was negotiating a fifteen-year tax holiday with the Government of the Cayman Holidays, when in fact no such negotiations were ongoing. Plaintiff alleges that Sherer also misrepresented his own qualifications and the qualifications of other members of the Dressel organization: He allegedly told potential investors that he was an investment professional when he was in fact a disbarred attorney who earned a living by driving busloads of gamblers from Utah State to Nevada State for weekend excursions. Sherer also allegedly told potential investors that Yau had terminated a lucrative career as an investment banker and affiliated himself with Dressel because Yau “wanted to do something on his own.” ( Id. 26). In fact, Yau had joined Dressel after being publicly censured by Hong Kong financial authorities. Neither Sherer nor Yau mentioned this public censure. ( Id. 26–27).

The second meeting occurred in September 2001, and was also attended by Sherer and Yau. Sherer allegedly falsely represented to potential investors that he had years of experience working in foreign exchanges and that he had taught financial management. ( Id. 27). Plaintiff alleges that Sherer and Yau also provided potential investors with brochures that described Dressel as offering “ethical and unbiased decision-making, aimed at client portfolio long-term enrichment.” ( Id. 30). The brochures introduced other defendants to potential investors, prominently describing Defendants Kenneth McCabe and Michele Sherer as financial professionals. In fact, Plaintiff alleges, neither had experience working in high finance. ( Id. 30). The brochures also listed Defendant Dwight Williams as the company's attorney and Defendant Tanner LC as its accountant. Finally, the brochures also listed the account number and routing information of Dressel's bank account with Defendant Regal Financial Bank, where potential investors were told that they could wire their money. ( Id.).

The third meeting occurred in June 2004 in the Hyatt Regency Hotel in Bandung, Indonesia. It was attended by Defendants Danny Wong, Dwight Williams, Donald Sherer and Michele Sherer. ( Id. 28). The defendants allegedly promised investors annual returns of between twenty-four and twenty-eight percent, telling investors that Dressel's previous annual returns had averaged forty percent per annum. ( Id.). Plaintiff alleges that these representations were false. ( Id.). Dressel brochures containing similar misrepresentations were distributed to attendees. ( Id.).

The fourth meeting occurred in July 2004 in Surabaya, Indonesia, and was attended by Defendants Danny Wong, Dwight Williams and Donald Sherer. Potential investors were allegedly told that Dressel used Defendant Regal Financial Bank as its bank in part because Dressel had an ownership stake in the bank. Allegedly, they were also told that Dressel was “assisting the bank in its expansion to Beijing, Guangzhou, Las Vegas, and other areas of the world.” ( Id. 28). Plaintiff alleges that Wong told attendees that Dressel invested in companies throughout the world, including China, Japan and Europe, when in fact no such global investments existed. Williams allegedly told attendees that the company generally invested in publicly traded companies, when only one such investment actually existed. ( Id.). In fact, Plaintiff alleges, almost all of investors' funds were used to directly enrich Defendants or to fund their own businesses.

C. Web Site

Dressel launched a web site in February 2001 with the domain name of www. dressel- inv. com. ² The web site contained many of the same alleged misrepresentations which Defendants had made to potential investors at the meetings in Indonesia. For example, it described Dressel as a legitimate investment opportunity and misrepresented the qualifications of Donald Sherer and Michele Sherer. (Complaint 31–34 (Dkt. No. 1)). The web site also allegedly stated that Defendant David Thacker had “extensive experience with and understanding of mining issues,” that Defendant Kenneth McCabe had more than forty years of experience in the “marketing and administration of various financial products,” and that McCabe had provided consulting services to several foreign governments on “economic and financial matters.” ( Id. 32). In fact, Plaintiff alleges that Thacker had no such experience in mining operations, and that McCabe was a retired department manager from Sears Roebuck. ( Id.).

The web site was allegedly changed in August 2005 to announce that Dressel had “chosen the State of Washington as its North American hub,” and that it had recently opened an office in downtown Seattle. ( Id. 32). The alleged changes also announced that Defendants David Thacker and Kelly Thacker had been named to Dressel's board of directors. Finally, the web site was allegedly changed in December 2005 to announce that Defendant Danny Wong had been made a member of Regal Financial Bank's advisory board, and that Wong was a bank shareholder. ( Id...