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Adversary Proceeding

Adversary Proceeding

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Published by GazetteOnline
Adversary proceeding in Delaware bankruptcy case.
Adversary proceeding in Delaware bankruptcy case.

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Published by: GazetteOnline on Jan 19, 2012
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01/19/2012

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INSIDER COMPLAINT
IN THE UNITED STATES BANKRUPTCY COURTFOR THE DISTRICT OF DELAWARE
In re: ) CHAPTER 11)PITT PENN HOLDING CO., INC.,
et al.
1
 ,
) Case No. 09-11475 (BLS)) (Jointly Administered)Debtors. )))Industrial Enterprises of America, Inc., on behalf of )itself, its estate and as assignee of its shareholders, ))Plaintiff, )
Adv. Proc. No.
)v. ))John Mazzuto, James Margulies, Jeffrey Levinson, )Killeen & Associates, P.C., Crawford Shaw, )M4 Capital LLC, George Cannan, Robert Casper, )Caroline Costante, Jay 3 Corp., James Mazzuto, )John Stefiuk, James Strupp, David Zazoff, )ZA-Consulting LLC, Barry Margulis, Scott Margulis, )Alan Berger, Mitch Seifert, Barry Honig, Lloyd Dohner, )Lloyd Dohner d/b/a Donson Brooks Marketing, )JG Capital, Inc., River Valley Inc. jointly and severally )with Peter Vanucci, David Selmon, Steven Berger, )Margulies & Levinson, Theresa Mazzuto, Berger Apple, )Robert Dan Redmond, Computer Protech, Inc., and )Black Nickel, Inc., ))Defendants. ))
COMPLAINT
 Plaintiff Industrial Enterprises of America, Inc. (“IEAM”) on behalf of itself, its estateand as assignee of its shareholders, formerly known as Advanced Bio/Chem Inc., respectfullyalleges the following as its complaint against defendants John Mazzuto, James Margulies, JeffreyLevinson, Killeen & Associates, P.C., Crawford Shaw, M4 Capital LLC, George Cannan, Robert
1
The debtors are: Pitt Penn Holding Co. (Case No. 09-11475), Pitt Penn Oil Co. LLC (Case No. 09-11476),Industrial Enterprises of America, Inc. (Case No. 09-11508), EMC Packaging, Inc. (Case No. 09-11524), Today'sWay Manufacturing LLC (Case No. 09-11586), and Unifide Industries LLC (Case No. 09-11587), all of which havebeen jointly administered
 
INSIDER COMPLAINT
2Casper, Caroline Costante, Jay 3 Corp., James Mazzuto, John Stefiuk, James Strupp, DavidZazoff, ZA-Consulting LLC, Barry Margulis, Scott Margulis, Alan Berger, Mitch Seifert, , BarryHonig, Lloyd Dohner, Lloyd Dohner d/b/a Donson Brooks Marketing, JG Capital, Inc., AndrewKramer, River Valley, Inc. jointly and severally with Peter Vanucci, David Selmon, StevenBerger, Margulies & Levinson, Theresa Mazzuto, Berger Apple, Robert Dan Redmond,Computer Protech, Inc. and Black Nickel, Inc. (collectively, “Defendants”).
JURISDICTION AND VENUE
1.
 
This Court has jurisdiction over this proceeding under 28 U.S.C. § 1334(b).2.
 
This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2).
 
3.
 
Venue of this matter is proper under 28 U.S.C. § 1409.
 INTRODUCTION
4.
 
This adversary proceeding arises out of a large-scale scheme to loot IEAM, afraud that required not only the malfeasance of miscreant corporate officers, but the willfulparticipation of Defendants who accepted illegally-issued IEAM securities to which they werenot entitled, for which they paid no consideration and which, upon information and belief, theyresold for full market value to the detriment of IEAM and its shareholders.
The Mazzuto Scheme
5.
 
As is further detailed below, the affairs of IEAM became corrupted through theillegal conduct of a conspiracy led by John Mazzuto (“Mazzuto”) and James Margulies(“Margulies”). For ease of reference, this conspiratorial effort shall be collectively referred to asthe “Mazzuto Scheme.” The Mazzuto Scheme was a complex and deliberate association-in-factconceived for, and dedicated to, the commission of fraud. Defendants were beneficiaries of theMazzuto Scheme.
 
INSIDER COMPLAINT
36.
 
From 2004 to 2009, the Mazzuto Scheme set out and accomplished its basicillegal aim: to insinuate itself into the governance and operation of a publicly-traded corporation,to undermine the business affairs of that public corporation by falsely reporting its operations aswholly successful to increase its market value and share price, to manipulate further the price of the public host’s stock higher through false operations and transactions (including, but notlimited to, false stock offerings, fraudulent stock transfers and issuances, and fraudulent publicstatements and filings), and to “cash in” on the fruits of illicit labors through illegal transfer andsale of IEAM’s securities.7.
 
In furtherance of this illegal scheme, Defendants accepted approximately6.2 million shares of freely traded IEAM stock, which was illegally issued and for whichDefendants paid nothing. In total, the stock they received was worth nearly $22.8 million.Defendants knew or should have known that their receipt of the stock was pursuant to this illegalscheme. Through this action, Plaintiff seeks, at a minimum, a return of the value of the sharesreceived by Defendants.8.
 
The overall Mazzuto Scheme caused direct and proximate harm to IEAM,including monetary losses and liabilities, in excess of $150 million. Moreover, IEAM’sshareholders lost hundreds of millions more dollars as a direct and intended result of theMazzuto Scheme, from which Defendants benefitted.
THE PARTIES
9.
 
Plaintiff IEAM is a corporation organized under the laws of the State of Nevada,with principal places of business located in Ohio, Pennsylvania, New Jersey and New York.IEAM is a holding company for businesses in packaging and distribution for sale of after marketautomotive and related products. On or about May 1, 2009, IEAM filed for bankruptcyprotection in the U.S. District Court for the District of Delaware.

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