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Westernbank v. Kachkar , RICO Amended Complaint

Westernbank v. Kachkar , RICO Amended Complaint

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Published by davejphys
The ammended complaint in the RICO case of Westernbank v. Kachkar and Inyx
The ammended complaint in the RICO case of Westernbank v. Kachkar and Inyx

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Published by: davejphys on Sep 24, 2009
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UNITED STATES DISTRICT COURTDISTRICT OF PUERTO RICO ____________________________________________ WESTERNBANK PUERTO RICO,x::::07 Civ.-1606 (ADC)FIRST AMENDED COMPLAINTPlaintiff,::v.::JACK KACHKAR,STEVEN HANDLEY,COLIN HUNTER,JAY M. GREEN,RIMA GOLDSHMIDT,VIKTORIA BENKOVITCH,andINYX, INC.,:::::::::Defendants. ____________________________________________ :xPlaintiffWesternbank Puerto Rico (“Westernbank”),for itsFirst AmendedComplaint (“Complaint”) against the above-listed Defendants,allegesas follows:
1.This is an action brought for violations of the federal Racketeer Influencedand Corrupt Organizations Act (“RICO”), the laws of the CommonwealthofPuerto Rico, andnumerous contractualobligations owed to Westernbank. Westernbank, through its asset-basedlending division (Westernbank Business Credit),loaned over $142 millionto Inyx, Inc. (“Inyx”)and its subsidiaries (collectively, the “Inyx Companies”), all of which were under the operationand controlofDefendants Jack Kachkar, Steven Handley, Colin Hunter, JayM. Green, and RimaGoldshmidt (the “Inyx Operators”). The Inyx Operators, however, caused the Inyx Companiesto systematicallydefraud Westernbank so that they could obtainfunding from Westernbank under false pretext and thereafter use the funding, among other things, to enrich the Inyx
Case 3:07-cv-01606-ADC Document 3 Filed 08/23/2007 Page 1 of 54
2Operators and to give the false impression that Inyx was a viable enterprise. Westernbank nowseeks torecover damages itsuffered as a result of the myriad fraudulent and materialmisrepresentationsmade or caused to be made to it by the Inyx Operators and as a result of allthe Defendants’ refusals to comply with their contractual obligations, including obligations under various guaranteesand security agreements described below. Westernbank’s damages, withouteven taking into account interest, attorneys’ fees, costs and trebled damages under RICO, exceed$142 million.2.Under the terms of the Inyx loan agreements described in more detail below, Westernbank agreed (among other things) to provide lines of credit to several of the InyxCompanies that they could draw down upon based on a percentage of their accounts receivable,as evidenced by invoices and reportsprovided by the Inyx Companies to Westernbank BusinessCredit (“WBC”).
The loan agreements’ terms also required the Inyx Companies to direct their customers to make payments on their accounts not to an InyxCompany, but instead to a WBC-controlled lock box account, the proceeds ofwhich would be used in part to pay down the loanobligations of the Inyx Companies to WBC.3.The Inyx Operators caused the Inyx Companies to abuse and misuse these procedures in a variety of ways in order to defraud and stealmoney from Westernbank. For example, the Inyx Operators caused the Inyx Companies to submitfraudulent invoices to WBCso that theycould misappropriateadditional funds under their lines of credit. To this end, theInyx Companies submitted duplicate invoicesto WBC, even though the Inyx customer wouldonly pay on one of the invoices. The Inyx Companies also submitted fake invoices to WBCthatwere never sent to Inyx customers. The Inyx Operators represented or caused others to represent
WBC is not a legal entity separate from Westernbank, but a division of Westernbank.
Case 3:07-cv-01606-ADC Document 3 Filed 08/23/2007 Page 2 of 54
3to WBCthat all of these invoices were real and legitimate, but the Inyx Companies alsomaintained internal books and records,hidden from WBC, reflecting the true fact that theseinvoices were fraudulent and uncollectible.4.The Inyx Operators also surreptitiously caused Inyxcustomers to direct paymentswhich should have been paid into the lock box account for Westernbank’s benefit intoother bank accounts controlled by the Inyx Operators and free of Westernbank’s control. Themoney in these accounts, which should have been provided to WBCto pay down the InyxCompanies’ debt, was instead paid out to, among others, Inyx and Kachkar. Those diversions of funds occurred on numerous occasions, involved several different Inyx customers,and totaledtens of millions of dollars. The Inyx Operators concealed these diversions from WBCby providing it with records showing that these sums were still owed from customers when, in fact,theyhad been paid by the customers into accounts other than the lock box account. Once again,the Inyx Companies secretlymaintained internal books and records, hidden from WBC,reflecting the true fact that customers had paid these sums.5.Another fraudulent scheme by the Inyx Operators was to cause certainInyx Companies to offset accounts receivables owed to them from their customers against debtsthe Inyx Companies owed to the customers. Under the terms of the loan agreements, this wasimpermissiblebecause the accounts receivable had been assigned to Westernbank;the InyxCompanies had no right to extinguish these accounts receivable in exchange for customersextinguishing debts the Inyx Companies owed them. Such offsets occurred on numerousoccasions,involved several different Inyx customers, and totaled over $15million.6.All told, the Inyx Operators, through their pattern of fraud, caused theInyx Companies to amass a huge indebtedness under their loan agreements with Westernbank 
Case 3:07-cv-01606-ADC Document 3 Filed 08/23/2007 Page 3 of 54

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