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George Pajon vs Sean Larkin

George Pajon vs Sean Larkin

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3.

Defendant Sean Larkin (referred to herein as the "Larkin") is, and at all times

1 Richard A. Kolber, Esq. (SBN 125869)

LAW OFFICES OF RICHARD A. KOLBER 2 2029 Century Park East, Suite 900

Los Angeles, CA 90067-2910

3 Telephone: (310) 557-1902

Fax: (310) 557-1904

4

ORIGINAL.! FII ED

North .. _.{:J

. West DIstrict

MAY 102011

5 Attorneys for Plaintiffs George Pajon, Jr. and El Cubano Music, Inc. LOS ANGEl .:

.. SUPERIOR cot~r

6

SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF LOS ANGELES

7 8 9

10 GEORGE PAJON, JR. and EL CUBANO MUSIC, INC.,

11 12 13

Plaintiff,

vs.

) Case No.:

) ) ) ) ) ) ) ) ) ) ) )

)

._

lC093578

26

mentioned herein was, an individual residing in the County of Los Angeles, State of California, at

SEAN LARKIN, an individual and doing

14 business as LARKIN BUSINESS MANAGEMENT; LARKIN BUSINESS

15 MANAGEMENT, LLC; and DOES 1-50, inclusive,

16 17 18 19

20 21 22 23 24 25

Defendants.

COMPLAINT FOR:

1. BREACH OF ORAL CONTRACT FOR PROFESSIONAL SERVICES

2. BREACH OF ORAL INDEMNITY

AGREEMENT;

3. PROFESSIONAL NEGLIGENCE;

4. BREACH OF FIDUCIARY DUTY;

5. CONSTRUCTIVE FRAUD

Plaintiffs George Pajon, Jr. and El Cubano Music, Inc. allege as follows:

Parties

1. Plaintiff George Pajon, Jr. (referred to herein as Plaintiff or "Pajon") is, and at all

times mentioned herein was, an individual residing in the County of Los Angeles, State of

2. Plaintiff El Cubano Music, Inc. is a California corporation with its principal place

of business in the County of Los Angeles, State of California.

California.

27

times doing business as Larkin Business Management.

28

1

COMPLAINT

'.

1

4.

Plaintiff is informed and believes and based thereon alleges that Defendant Larkin

2 Business Management, LLC (referred to herein as "LBM") is a limited liability company 3 organized under the laws of the State of California. Plaintiff is informed and believes, and based 4 thereon alleges, that at all times mentioned herein and relevant hereto, each of the Defendants was 5 the agent, servant, and/or employee of each of the remaining Defendants, and in doing the things 6 hereafter alleged was acting within the course and scope of such agency, servitude and/or 7 employment.

8 5. The names and capacities of DOES 1 through 50, inclusive, whether individual,

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

corporate, associate or otherwise, are presently unknown to Plaintiff, who sues these defendants by such fictitious names. Plaintiff will seek leave of this Court to amend this complaint to show the true names and capacities of such defendants when ascertained.

6. Defendant Larkin is liable for the acts of each of the other Defendants as alleged in

this complaint as the alter egos of each other. Recognition of the separate existence of these defendants would promote injustice because Larkin dominated and controlled LBM and each of the other Defendants as follows, on information and belief: he used the corporate identities as an instrumentality to commit the fraud alleged herein, ignored corporate separateness and formalities, failed to properly capitalize the business, co-mingled funds, and formed the business entity for fraudulent purposes and to shield himself from liability for his wrongful acts and omissions.

Facts Common To All Claims

7.

Plaintiff Pajon is a respected and successful guitar player, songwriter and music

producer, most known for his involvement with the musical group Black Eyed Peas. EI Cubano Music, Inc. ("EI Cubano") is Pajon's "loan-out" company. At all relevant times, Defendant Larkin, doing business as Larkin Business Management, and Defendant LRB, were in the business of providing so-called professional business management services to individuals including, but not limited to, receiving, managing and disbursing their income, paying their bills, preparing tax returns, evaluating and making investments, as well as handling other matters pertaining to generally-accepted practices of business managers representing individuals in the entertainment industry.

2

COMPLAINT

1

COMPLAINT

2 Defendants, and at all times they placed their faith and confidence in Defendants, whom they

8.

At all relevant times hereto, Plaintiffs were the business management clients of

3 entrusted with their financial well-being. The business relationship commenced in or about 1999

4 for Pajon and 2004 for EI Cubano and terminated in or about July 2009. In exchange for 5 Defendants' agreement to provide professional business management services to Plaintiffs,

6 Plaintiffs agreed to pay and did pay Defendants pay five percent (5%) of Plaintiffs' total gross

7 compensation, except for Plaintiff s touring income, during the entirety of Defendants'

8 representation of Plaintiffs .

9.

.

During the 10-year business relationship, Defendants represented that Sean Larkin

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

was a certified public accountant with tremendous experience in the entertainment industry. In fact, albeit it unknown to Plaintiff, Larkin was not a CPA nor did he have any other professional credentials in accounting. Based on Defendants' representations regarding Larkin's credentials

and experience, Plaintiff entrusted Defendants with - and Defendants voluntarily and expressly undertook responsibility for - rendering to Plaintiff various standard business management services, including but not limited to maintenance of all of Plaintiffs bank accounts, payment of Plaintiffs bills, obtaining mortgage loans, handling Plaintiffs investments and retirement funds, and handling all tax matters on behalf Plaintiff, including but not limited to the preparation of tax returns and payment of taxes on Plaintiffs behalf. Each year, Defendants represented to Plaintiffs that they paid Plaintiffs' taxes.

10.

In or about July 2009, Plaintiff became aware that Defendants, who were still acting

as his business manager, and who were responsible for the preparation, filing and payment of taxes

on behalf of Plaintiff and his loan-out corporation, failed to prepare or file any Federal or State tax returns or pay any taxes on behalf of Plaintiff or his loan-out corporation for a sequential period of six (6) years from 2004-2009. This resulted in a large tax liability, including significant penalties and interest charges, that accrued over time without Plaintiffs knowledge. As a direct result of Defendants' acts and omissions, Plaintiffs loan-out corporation was suspended by the State of California, having been deemed an invalid corporation several years earlier without Plaintiffs

knowledge. At the same time, Plaintiffs learned that Defendants had mismanaged merchant

3

5 6 7 8 9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

COMPLAINT

1 account and other financial relationships utilized to pay for Pajon's wedding, and such 2 mismanagement caused Pajon to incur in excess of $20,000 of losses. Further, Plaintiffs learned 3 that Defendants steered them into investments that were not only unsound, but in which 4 Defendants had an ownership interest that they intentionally hid from Plaintiffs. Tluough said

investments, Defendants caused Plaintiffs to incur more than $25,000 in losses.

11. In or about July 2009, upon learning of Defendants' failure to prepare tax returns,

promptly pay taxes, and do other actions required to be done by Defendants pursuant to their professional duties owed to Plaintiff, Plaintiff terminated Defendants' services.

12. When Plaintiffs confronted Larkin after learning that Defendants failed to file tax

returns or pay taxes on his behalf or on behalf of his loan-out corporation, Larkin - on his own behalf and on behalf of LBM - admitted Defendants' failures, apologized for his actions and agreed to indemnify Plaintiffs in the same manner and under the same terms as Defendants had agreed to indemnify certain members of the Black Eyed Peas, who were also Defendants' clients (hereinafter the "BEP Clients") and whose finances Defendants had mismanaged in an identical fashion.

13.

Plaintiffs are informed and believes and based thereon allege that Defendants had

previously agreed in writing to indemnify the BEP Clients, after acknowledging Defendants' failure to prepare and file their tax returns for numerous years (hereinafter the "BEP Indemnity Agreement"). Plaintiffs are informed and believes and based thereon alleges that, in the 'HEP Indemnity Agreement, Defendants acknowledged that they failed to file tax returns on behalf of the BEP Clients and agreed to indemnify the BEP Clients for all costs associated with Defendants' acts and omissions, including payment of any unpaid back taxes and all other fees and charges associated or connected therewith.

14. In consideration for Defendants' oral agreement to indemnify Plaintiffs in

accordance with and pursuant to the terms of the written BEP Indemnity Agreement, Plaintiffs agreed to refrain from exercising their legal rights to seek redress for the wrongs and damages they sustained as a result of Defendants' acts, omissions, breach of contract, breach of fiduciary duties and professional negligence. Additionally, Larkin also confirmed to the Black Eyed Peas'

4

1 management that he intended to indemnify Plaintiffs in the same manner as the BEP Indemnity 2 Agreement, which would allow the Black Eyed Peas to avoid adverse publicity regarding 3 Defendants' wrongful conduct towards Plaintiffs and to "keep it in the family." The oral 4 indemnity agreement between Defendants and Plaintiffs as alleged herein is hereafter referred to as 5 the "Pajon Indemnity Agreement".

6 15. In connection with and in further consideration for Plaintiffs' agreement to the 7 Pajon Indemnity Agreement, Defendants orally agreed to pay Plaintiff $150,000 as an initial 8 payment toward taxes owed. to the California Franchise Tax Board, and the damages Plaintiffs 9 suffered as a result of Defendants' acts and omissions. Shortly thereafter, Defendants did in fact

10 pay Pajon $75,000 of said $150,000 under the Pajon Indemnity Agreement, and as such partially 11 performed under the Pajon Indemnity Agreement. Defendants have failed and refused to pay 12 Plaintiffs any further monies under the Pajon Indemnity Agreement.

13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

16.

Plaintiffs have made demand on Defendants to repay all the back taxes and all

associated costs, which are in excess of $1,000,000 and rising daily due to accruing interest and penalties.

FIRST CAUSE OF ACTION

FOR BREACH OF ORAL CONTRACT FOR PROFESSIONAL SERVICES (Against All Defendants)

17. Plaintiffs incorporate by reference as though fully set forth herein the allegations set

forth in paragraphs 1 through 16.

18. In or about the summer of 1999, Plaintiff and Defendants entered into an oral

agreement in which Defendants agreed to provide professional business management services to Plaintiff, including but not limited to the preparation and filing of tax returns and payment of taxes on Plaintiffs behalf, in exchange for a fee equal to five percent' (5%) of Plaintiffs gross compensation.

19. Defendants breached said oral agreement as alleged herein by failing to prepare or

file tax returns on Plaintiffs' behalf, by failing to make tax payments on Plaintiffs' behalf for the period 2004-2009, by failing to disclose said facts to Plaintiff, by mismanaging financial

5

COMPLAINT

1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

relationships in connection with Pajon's wedding, by directing Plaintiffs into shoddy investments in which Defendants held a secret interest, by failing to keep Plaintiff fully apprised of his true financial condition and by falsely informing Plaintiffs that they had paid Plaintiffs' taxes. By said conduct, Defendants furthermore breached the covenant of good faith and fait dealing implied in said agreement.

20. Plaintiff fully performed under the oral agreement for professional services, except

to the extent his performance was excused and/or waived by Defendants or by operation oflaw.

21. Plaintiff did not learn of Defendants' breach of the oral agreement until July 2009,

and could not have discovered the breach earlier using reasonable diligence because he reasonably entrusted all of his personal and business finances to Defendants and relied on their professional ethics and expertise, because he had no reason to suspect that Defendants had breached the agreement or were withholding information from him, because Defendants expressly and/or impliedly led Plaintiff to believe that they were satisfactorily performing under the terms of the agreement, and because Defendants intentionally concealed said breaches from Plaintiff.

22. As a result of Defendants' breaches of the foregoing oral agreement, Plaintiff has

suffered damages in an amount exceeding $1,000,000, to be proven at trial.

SECOND CAUSE OF ACTION

FOR BREACH OF ORAL INDEMNITY AGREEMENT (Against All Defendants)

23. Plaintiffs incorporate by reference as though fully set forth herein the allegations set

forth in paragraphs 1 through 22.

24. Plaintiffs and Defendants entered into the oral Pajon Indemnity Agreement as

alleged herein. The terms of the Pajon Indemnity Agreement are identical to the terms of the written BEP Indemnity Agreement.

25. Defendants and each of them breached the Pajon Indemnity Agreement by failing to

pay all the costs and expenses associated with Defendants' acts and omissions, including payment of any unpaid back taxes, interest, penalties and all other fees associated or connected therewith.

26.

Prior to Defendants' breach of the Pajon Indemnity Agreement, Plaintiffs fully

6

COMPLAINT

3

As a result of Defendants' breaches of the Pajon Indemnity Agreement, Plaintiffs

1 performed under the terms of said agreement, except to the extent their performance was excused 2 andlor waived by Defendants andlor by operation of law.

27.

4 have suffered damages in an amount exceeding $1,000,000, to be proven at trial.

5 THIRD CAUSE OF ACTION

6 FOR PROFESSIONAL NEGLIGENCE

7 (Against All Defendants)

8 28. Plaintiffs incorporate by reference as though fully set forth herein the allegations set

9 forth in paragraphs 1 through 27

10 29. As Plaintiffs' business managers, Defendants owed Plaintiffs a duty to use the skill 11 and care that a reasonably careful business manager in the entertainment industry would have used 12 under similar circumstances.

13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

30.

Defendants breached said duty to Plaintiffs as alleged herein, by, among other

things: (a) failing to prepare and file State and Federal tax returns on Plaintiffs' behalf for the years 2004-2009; (b) failing to pay State and Federal taxes on behalf of Plaintiffs as required by law for the years 2004-2009; (c) failing to regularly and accurately report to Plaintiffs about the status of their State and Federal taxes; (d) failing to regularly and accurately keep Plaintiffs apprised as to their actual andlor potential tax liability; (e) falsely informing Plaintiffs that they had paid Plaintiffs' taxes; (f) intentionally concealing Defendants' failure to perform under the oral agreement for professional services; (g) putting Plaintiff at risk for criminal prosecution in connection with Defendants ongoing failure to file returns and pay taxes on Plaintiffs' behalf, and failing to disclose said risk to Plaintiffs; and (h) directing Plaintiffs into shoddy investments that secretly benefited Defendants due to their undisclosed ownership interest therein ..

31. In doing the foregoing acts and omissions, Defendants and each of them breached

the applicable standard of care by failing to use the skill and care that a reasonably careful business manager in the entertainment industry would have used in similar circumstances.

32. As a result of Defendants' professional negligence, Plaintiffs have suffered

damages in an amount exceeding $1,000,000, to be proven at trial.

7

COMPLAINT

1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

FOURTH CAUSE OF ACTION FOR BREACH OF FIDUCIARY DUTY (Against All Defendants)

33. Plaintiffs incorporate by reference as though fully set forth herein the allegations set

forth in paragraphs 1 through 32.

34. A business manager owes a fiduciary duty to his client, requiring him to act with

the utmost good faith in the best interest of his client. By retaining Defendants as their business manager, Plaintiffs placed trust and confidence in them and in their honesty, ethics, and management skills regarding Plaintiffs' confidential business and financial affairs. As Plaintiffs' business managers and as a result of Plaintiffs entrusting the entirety of their financial and tax matters to Defendants in reliance upon their legal duties, and their professional experience and expertise, Defendants owed Plaintiffs a fiduciary duty.

35. Defendants breached said duty to Plaintiffs as alleged herein, by, among other

things: (a) failing to prepare and file State and Federal tax returns on behalf of Plaintiffs for years 2004-2009; (b) failing to pay State and Federal taxes on behalf of Plaintiffs as required by law; (c) failing to regularly and accurately report to Plaintiffs about the status oftheir State and Federal taxes; (d) falsely informing Plaintiffs that they had paid Plaintiffs' taxes; (e) failing to regularly and accurately keep Plaintiffs apprised as to their actual and/or potential tax liability; (f) intentionally concealing Defendants' failure to perform under the oral agreement for professional services, and their failure to prepare and file tax returns on Plaintiffs' behalf and to pay any required taxes accordingly; (g) putting Plaintiffs at risk for criminal prosecution in connection with Defendants ongoing failure to file returns and pay taxes on Plaintiffs' behalf and failing to disclose or warn Plaintiffs of said risk; (h) directing Plaintiffs into shoddy investments that secretly benefited Defendants due to their undisclosed ownership interest therein; and (i) putting their own interests above Plaintiffs' interests by hiding and concealing their wrongful acts and omissions; and (j) generally failing to act as a reasonable business manager would under the circumstances.

36.

In engaging in these acts and omissions and by putting their own self-interest and

self-preservation ahead of the financial and legal interests of Plaintiffs, Defendants and each of

8

COMPLAINT

3 4 5 6 7 8 9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

1 2

them acted intentionally and blatantly contrary to the fiduciary duties they owed to Plaintiffs.

37. Plaintiffs were misled to their prejudice by Defendants' promises to perform under

the professional services agreement and the Pajon Indemnity Agreement. Plaintiffs were further misled by Defendants that tax returns had been timely filed and taxes timely paid.

38. As a direct result of Defendants' wrongful acts and omissions, which constitute a

breach of the fiduciary duties Defendants owed to Plaintiffs, Plaintiffs have been damaged in an amount not presently ascertained, exceeding $1,000,000, to be established at trial. Defendants' acts and omissions as alleged herein were a substantial factor in causing Plaintiffs' harm.

39. Defendants' actions were done with malice aforethought, fraud and oppression in

that they never intended to perform their duties as Plaintiffs' business managers, and in that subsequently they intentionally concealed their acts and omissions from Plaintiffs to ensure their breaches of contract, breach of fiduciary duty and professional negligence would go undetected, all at Plaintiffs' expense and while accepting payment from Plaintiffs. Defendants' election to protect their own self-interests and conceal their wrongful acts and omissions placed Plaintiffs at risk for criminal prosecution without his knowledge. Defendants failed to warn Plaintiffs that they were exposed to any such risk. Based upon this conduct, Plaintiffs are entitled to an award of punitive damages against Defendants and each of them.

FIFTH CAUSE OF ACTION FOR CONSTRUCTIVE FRAUD (Against All Defendants)

40. Plaintiffs incorporate by reference as though fully set forth herein the allegations set

forth in paragraphs 1 through 39.

41. As alleged herein, a fiduciary relationship existed between Plaintiffs and

Defendants.

42. Defendants failed to disclose their secret intention not to perform under their oral

contracts with Plaintiffs. Defendants further failed to disclose their intention to put their own interest and self-protection over and above their fiduciary, contractual and professional duties to Plaintiffs. Defendants further failed to disclose that they breached the professional services

9

COMPLAINT

1 agreement, that they failed to prepare and file Federal and State tax returns on behalf of Plaintiffs 2 for the years 2004-2009, or that they failed to pay any taxes on behalf of Plaintiffs. Defendants 3 falsely informed Plaintiffs that they had paid Plaintiffs' taxes. Defendants further failed to disclose 4 that they placed Plaintiffs into shoddy investments that secretly benefited them due to their 5 undisclosed ownership interest therein. Defendants failed to disclose that they did in fact continue 6 over a number of years to place their own self-interest and self-preservation above the interests of 7 Plaintiffs in order to avoid liability for their misdeeds and omissions.

8 43. Defendants intended to deceive and did deceive Plaintiffs after Plaintiffs relied

9 upon the experience and expertise Defendants represented they had at the time.

10

44.

As a direct result of Defendants' wrongful acts and omissions which constitute a

11 breach of their fiduciary duties owed to Plaintiffs, Plaintiffs have been damaged in an amount not 12 presently ascertained, exceeding $1,000,000, to be established at trial. Defendants' acts and 13 omissions as alleged herein were a substantial factor in causing Plaintiffs' harm.

14 45. Due to Defendants' status as a fiduciary of Plaintiffs at all relevant times hereto, 15' they should be deemed to hold any and all monies owed to Plaintiffs in connection with these

16 17 18 19 20 21 22 23 24 25 26 27 28

allegations in constructive trust.

46. Some or all of Defendants' actions were done with malice aforethought, fraud and

oppression in that they never intended to perform their duties as Plaintiffs' business managers, and in that subsequently they intentionally concealed their acts and omissions from Plaintiffs to ensure their breaches of contract, breach of fiduciary duty and professional negligence would go undetected, all at Plaintiffs' expense. Plaintiffs are therefore entitled to an award of punitive damages against Defendants and each of them.

SIXTH CAUSE OF ACTION FOR UNJUST ENRICHMENT (Against All Defendants)

47. Plaintiffs incorporate by reference as though fully set forth herein the allegations set

forth in paragraphs 1 through 38, and 41 through 45.

48. As a result of Defendants' breaches of contract, breach of fiduciary duty,

10

COMPLAINT

9 of Plaintiffs.

10 WHEREFORE, Plaintiffs pray for relief as follows:

, .
, *
1
2
3
4
5
6
7 8

50.

As a result of the foregoing, said fees should be held in a constructive trust in favor

professional negligence and constructive fraud as alleged herein, Defendants have been unjustly enriched by the amount of fees paid to Defendants by Plaintiffs during the time Defendants were not providing the agreed-upon consideration or fulfilling their legal and moral duties to Plaintiffs.

49. In light of the foregoing, and in order to prevent Defendants' unjust enrichment,

Plaintiffs seek disgorgement of all fees paid to Defendants during the years 2004-2009, the period

in which they provided no tax services, advice, counseling, data, in connection with Plaintiffs' State and Federal tax returns, in an amount not yet ascertained but to be proven at trial.

11 ON ALL CAUSES OF ACTION

12

1.

For general and/or special damages in excess of the minimum jurisdiction of this

13 Court according to proof at the time of trial.

14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

2. 3.

For costs of suit herein; and

For such other and further relief as the Court may deem just and proper.

ON THE FOURTH AND FIFTH CAUSES OF ACTION

1. 2.

For exemplary and punitive damages.

For the imposition of a constructive trust.

Dated: May 9, 2011

LAW OFFICES OF RICHARD A. KOLBER

By: PJJr «4 ~. tooh

Richard A. Kolber

Attorneys for Plaintiffs George Pajon, Jr. and El Cubano Music. Inc.

11

COMPLAINT

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