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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA MIAMI DIVISION www.flsb.uscourts.gov In re: JCT FINANCIAL, LLC, Debtor. ____________________________/ DREW M. DILLWORTH, as the Chapter 7 Trustee for the estate of JCT FINANCIAL, LLC, Plaintiff, vs. JOSEPH A. UMBACH, PAUL CATOGGIO, JCT-GRENADA FUNDING, LLC, GRENADA FUND, LLC, CESAR M. ROMAN, JUAN-RICARDO SCHMIDT, JCT-HOLDINGS, LLC, RICARDO BAJANDAS, and VILLANUEVA & BAJANDAS, LLP a/k/a VILLANUEVA, BAJANDAS & LIEBGOTT, LLP a/k/a VILLANUEVA, BAJANDAS & FITZGERALD, LLC, ADV. NO. 12-01803-BKC-AJC CASE NO. 10-30952 BKC-AJC CHAPTER 7

Defendants. ____________________________/ AMENDED COMPLAINT Plaintiff, Drew M. Dillworth (Plaintiff or Dillworth) as the duly appointed Chapter 7 Trustee (Trustee) of the estate of JCT Financial, LLC (Debtor or JCT), sues Defendants, Joseph A. Umbach (Umbach), Paul Catoggio (Catoggio) JCT-Grenada Funding, LLC (Funding), Grenada Fund, LLC (GF), Cesar M. Roman (Roman), Juan-Ricardo Schmidt

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(Schmidt), JCT-Holdings, LLC (JCT-H), Ricardo Bajandas (Bajandas) and Villanueva & Bajandas, LLP a/k/a Villanueva, Bajandas & Liebgott, LLP a/k/a Villanueva, Bajandas & Fitzgerald, LLC (V&B), and states: Jurisdiction and Parties 1. This adversary proceeding is brought pursuant to 11 U.S.C. 542, 544(b), 547,

548, and 550, and Fed.R.Bankr.P. 7001, and is a core proceeding under 28 U.S.C. 157 (b)(2) (A), (E), (F), (H), and (O), except that Counts 1 through 7, and Counts 24 through 25, are noncore. This Court has subject matter jurisdiction under 28 U.S.C. 1334(b). 2. 3. Venue is proper pursuant to 28 U.S.C. 1409. An involuntary petition (Petition) for relief under Chapter 7 of the United States

Bankruptcy Code was filed against JCT on July 22, 2010. 4. 5. On August 18, 2010, an Order for Relief was entered against JCT. On August 18, 2010, the United States Trustee appointed Plaintiff, Dillworth, as

Chapter 7 Trustee of JCTs estate. 6. JCTs financial statements reflect that, at the beginning of 2009, it had assets in

excess of $11 million. 7. JCTs financial statements further reflect that it was insolvent at all times from at

least December 31, 2007 through the Petition date. 8. JCTs sworn bankruptcy schedules (ECF No. 10 in the main case) reflect that, on

the Petition date of July 22, 2010, JCT had total assets of $191.39, against liabilities of $3,813,994.98.

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9. million. 10.

According to the Claims Register, claims filed in this Case to date exceed $12

Umbach is a resident of Palm Beach County, Florida. Umbach is the managing

member of Joes Financial, LLC n/k/a Umbach Financial Group, LLC (UFG), a Florida limited liability company. Umbach controls 100% of Umbach Enterprises, LLC n/k/a Rockford Financial Fund, LLC (RFF), a Florida limited liability company, by virtue of UFGs status as RFFs managing member. RFF, in turn, owns and controls 100% of defendant Funding, as its managing member. Accordingly, Umbach indirectly controls Funding through the foregoing chain of

entities in which he holds, directly or indirectly, a 100% controlling interest. 11. Funding is a Delaware limited liability company created by Umbach in 2006 to serve

as a lending vehicle for the Debtor. 12. GF is a Delaware limited liability company whose managing member is UFG. GF is

controlled by Umbach through UFG, and was created by Umbach in 2006 to serve as a 33.33% owner and managing member of the Debtor. 13. GF originally was intended by Umbach to serve as the lending vehicle for the

Debtor, but was replaced by Funding in practice. 14. Catoggio is a resident of Palm Beach County, Florida. Catoggio is Umbachs son-

in-law. After 22 years with Ernst & Young, including serving in Ernst & Youngs New York office as an Executive Director, Catoggio joined Umbachs operations in October 2007 as a director of UFG, RFF, Funding, and GF.

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15.

Roman is a resident of Miami-Dade County, Florida. Roman is a 50% owner and

managing member of defendant JCT-H, and a manager of the Debtor. Roman also was the President of the Debtor. 16. Schmidt is a resident of Miami-Dade County, Florida. Schmidt is a 50% owner

and managing member of JCT-H, and a manager of the Debtor. Schmidt also was the Chief Financial Officer of the Debtor. 17. JCT-H is a Florida limited liability company, and a majority owner and managing

member of the Debtor. 18. Bajandas is a member of the Florida Bar and at all relevant times has been practicing

law in south Florida. 19. 20. 21. V&B was at all relevant times doing business as a south Florida law firm. Bajandas was at all relevant times a member of V&B. Bajandas, through V&B, served as corporate counsel to JCT at all relevant times

from the inception of JCT through the filing of the involuntary petition against JCT. 22. Pursuant to Fed.R.Bankr.P. 7020 and Local Rule 7003-1(D), joinder of

Defendants as parties in this adversary proceeding is appropriate because the acts of Defendants giving rise to liability under the various counts of this Complaint arise from a common nucleus of operative facts, and from the same transactions and occurrences, or series of transactions and occurrences, and present common and related issues of law and fact. 23. All conditions precedent to bringing the causes of action asserted herein have been

performed, have occurred, or have been waived.

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JCT and Its Factoring Business 24. JCT was formed in 2005 by Roman and Schmidt. At JCTs inception, Roman and

Schmidt were its managing members and, together, owned a majority interest in the company. 25. At all relevant times, JCT engaged in the business of factoring accounts receivable

for foreign commercial clients. 26. JCTs sources of capital consisted of (i) capital contributions by its owners; (ii)

loans from banks; (iii) a line of credit from Funding; and (iv) loans documented by JCTs issuance of promissory notes to mostly foreign miscellaneous individuals and entities whom JCT referred to as investors or junior investors.
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2006: GF Becomes a Member of JCT; GFs Affiliate, Funding, Becomes its Senior Secured Lender 27. In or about May 2006, JCT began negotiating with Umbach for a line of credit

and/or equity contribution to be provided by Umbach or an entity controlled by him. 28. Umbach agreed to provide financing for JCT, on the condition that he also acquire

an equity participation in JCT. 29. In September 2006, JCTs capital structure was reorganized pursuant to an

Amended and Restated Operating Agreement, a copy of which is attached as Exhibit A. 30. Following the reorganization, GF - an insider and affiliate (as defined in 11

U.S.C. 101) of Funding - owned a 33.33% equity interest in JCT. Romans and Schmidts

Consistent with the nomenclature used by the parties at all relevant times, this Complaint sometimes will refer to these outside parties as investors, although, in fact, they were lenders and creditors of JCT. Investor loans were evidenced by promissory notes supposedly secured by endorsements of credit insurance policies.
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interests in JCT were transferred to JCT-H, a new entity created by Roman and Schmidt in which each of Roman and Schmidt ultimately owned a 50% interest. 31. 32. GF. 33. Under the Amended and Restated Operating Agreement, GF enjoyed enhanced Roman and Schmidt also were the managing members of JCT-H. Umbach was the sole member of UFG, and UFG, in turn, was the sole member of

protections of its minority equity interest, including provisions requiring supermajority approval of certain transactions. 34. On September 27, 2006, at the same time that GF acquired its equity interest in

JCT, Funding and JCT also entered into a Credit and Security Agreement. An incomplete copy of the Credit and Security Agreement is attached as Exhibit B. (Plaintiff will seek a complete copy of the Credit and Security Agreement in discovery.) 35. Under the Credit and Security Agreement, Funding agreed to extend a revolving,

five-million dollar line of credit to JCT, secured by a blanket first interest in all of JCTs assets, including all of its accounts receivable and all of its interest in its credit insurance policies (discussed below). 36. JCT agreed to these terms, notwithstanding the fact that Roman, JCTs President,

had questioned whether the grant of a senior blanket lien to Funding was fair to JCTs existing investors. 37. Moreover, in negotiating the terms of the Credit and Security Agreement, the

parties deleted a provision ---- 6.30 that would have required JCT to obtain and purchase

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fidelity insurance. (In order to acquire effective fidelity insurance, it would have been necessary for JCT to truthfully disclose - contrary to representations it routinely made to its investors (i) that the investor loans were not secured, by, or protected by loss payee status under, JCTs credit insurance policy and (ii) that, JCT had in fact now pledged all of its interest in the policy and its proceeds to Funding) . The Credit Insurance Policies 38. JCT originally obtained its credit insurance from National Union Fire Insurance

Company on the accounts receivable that it was factoring. 39. Commencing in 2007, JCT began purchasing such credit insurance from EULER

Hermes American Credit Indemnity Company (Euler). 40. On October 1, 2007, JCT obtained an endorsement on a $4 million Multi-Markets

Business Credit Insurance Policy issued by Euler (Policy No. 41095453) identifying JCTs Miami law firm, V&B, as JCTs Bank/Lender and as loss payee on the policy. 41. 42. In fact, V&B never served as a bank or lender to JCT. By 2010, JCTs Euler coverage had increased to $6 million but, despite obtaining

such expensive credit insurance, and despite suffering extensive credit losses exceeding $4.7 million, as detailed herein, JCT never made any significant claim against Euler under the credit insurance policies.

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False Representations to Investors 43. Notwithstanding its credit line from Funding, JCT continued to borrow money on

an unsecured basis from numerous investors (including, without, limitation, Thomas Cordero Araujo and/or Veronica Cordero, Jamie Cordero Arajo and/or Rita Almedia, Oswaldo Munoz and/or Lopez de Munoz, Fausto H. Sanchez, Emilio Ginatta Higgins, Hector San Andres Pesantez, Artemio Valencia Delgado, Gilmore Development, Inc., Coysburg Investments, S.A., Gemstar International, Inc., Jamie Perez Azua, Kenia Cobe a de Cevallos, and Mauricio Ceballos or Alicia de Ceballos). 44. JCT falsely represented to investors that the accounts receivable JCT would

purchase with the monies from the investors would be covered by credit insurance, and that the investors would be named as loss payees as to said receivables. 45. For example, a representative promotional memo from JCT to one investor stated,

in relevant part: Although we take a reduced risk with the companies that buy our customers products, JCT insures that credit risk with an insurance policy issued by Euler Hermes ACI, which is the biggest insurance company in the world (certified with AA, by Standard & Poors and by AM Best). All accounts receivable are 100% secured by JCT against bankruptcy, insolvency and default. ... The investor as a warranty receives the endorsement of the insurance policy mentioned before. That policy is expressly identified on a promissory note which is given to the investor as confirmation of this warranty. The promissory note bears an attachment consisting of a certificate from the trustee of the policy, Villanueva, Bajandas & Liebegott, LC [sic], who names the investor as the beneficiary of the trust up to the amount that is owed. ... All JCTs financial activity is backed up by the insurance mentioned supra. (Rough translation from Spanish to English).

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46.

A representative letter from Bajandas on V&B letterhead, to an investor is

attached as Exhibit C. The letter states, in relevant part: This letter confirms that of the Policy face amount of $4,000,000.00 the amount of $300,000.00 has, by written instruction of JCT, as long as the Policy remains in effect, been endorsed in favor of you. 47. A representative promissory note from JCT is attached as Exhibit D. The note

states, in relevant part: This Note ... is secured by Policy of Credit Insurance, Policy No. 4058618 issued by EULER Hermes American Credit Indemnity Co. ... which secures the factoring of accounts receivable of borrowers clients duly endorsed to the order of Lender as Loss Payee. 48. On October 16, 2008, Bajandas after months of issuing loss payee confirmation

letters to investors on JCTs behalf abruptly requested that, before requesting that V&B issue any further confirmation letters, JCT furnish him with a complete AR receivable listing .... to verify each receivable against the policy .. [as] this may be a bar violation if I dont get some kind of due diligence. 49. At all relevant times beginning no later than 2008, JCT --- with the active

participation, knowledge, and encouragement of Schmidt, Roman, Umbach, and Catoggio --was borrowing funds, on an unsecured basis, from various outside investors; (i) without disclosing that, in many cases, the underlying credit transaction being financed was not covered by credit insurance, contrary to JCTs representations; (ii) based on the false representation that the individual loans obtained from the investors would be secured by the Euler credit insurance policy; (iii) without disclosing that the receivables financed with investor funds would immediately become subject to Fundings blanket security interest; (iv) without disclosing that JCTs interest
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in the Euler credit insurance policy and proceeds was itself subject to Fundings blanket security interest; and (v) without disclosing that JCT was encountering operational and cash flow problems. 50. Indeed, at the very inception of Fundings lending relationship with JCT, Roman,

Schmidt, and Umbach recognized, and acted on, a need to deceive JCTs outside investors. Fundings original proposed UCC-1 financing statement had included, inter alia, a standard collateral description including [a]ll accounts now owned or existing or hereafter acquired. See attached Exhibit E. Roman expressly advised Schmidt and Umbach that such a filing would be unacceptable to the rest of our investors and stated We cannot give you as collateral receivables that have been funded by a third party. See attached Exhibit F. 51. Nonetheless, JCT and Funding proceeded to do just that, although they artfully

redrafted the UCC-1 financing statement to make it appear - falsely - that Funding was obtaining a security interest only in a discrete pool of receivables that it was itself financing. See attached Exhibit G. 2008: JCTs Financial Condition Deteriorates 52. $8 million. 53. In August 2008, Robert Tchatal (Tchatal), (another UFG employee), expressed In May 2008, Catoggio confirmed that Funding had increased JCTs credit line to

concern that the recently negotiated 8 million line [had already been] exceeded [by JCT] by almost $200,000.00. 54. Shortly thereafter, Catoggio projected that Fundings exposure on the line was

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approximately $8.9 million. 55. By September 2008, JCT and all of the Defendants knew that JCT was in dire

financial straits, and that its problems included non-payment and probable fraud by three significant customers Xynergia, Grupo Buena, and Iacex. 56. JCTs loss exposure to Xynergia, Grupo Buena, and Iacex exceeded $4.7 million.

However, JCT did not advise the investors of this issue, and continued to borrow money from outside investors even after JCT learned of this problem. 57. Moreover, the continued unsecured borrowings from outside investors simply

served to enable JCT to purchase new receivables that became part of Fundings collateral base. Funding Increases Its Control Over JCT in the Final Months 58. Funding began increasing its pressure on JCT, including a demand for a payment

schedule requiring weekly payments of at least $100,000. 59. On November 14, 2008, Roman advised Funding that all of JCTs liquidity was

being remitted to Funding. 60. By this time, Umbach, Catoggio, and Funding were effectively controlling JCTs

operations. All disbursements to outside investors had to be approved personally by Umbach, who, together with Catoggio, received monthly or quarterly reports on the junior investors by name and amount. 61. On July 2, 2009, in response to an e-mail from Catoggio questioning a $500,000

pay-down of JCT short term investors, Roman explained, [W]hen we made demand to Estrada there were 2 investors that found out and requested payment of their investments. This was done

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prior to our commitment with you, in order to avoid a big problem with the rest, as you know rumors can damage a company. We WILL NOT redeem any other junior investors as agreed. 62. On July 7, 2009, JCT entered into a Forbearance Agreement with Funding. An

unsigned copy of this agreement is attached as Exhibit H. Plaintiff will seek a signed copy in discovery. 63. Just one month earlier, in June 2009, JCT also obtained loans in excess of

$600,000 from a foreign creditor, Westwood Capital Markets (Westwood), based upon the misrepresentation that JCT could, and would, collateralize these obligations. See Westwood Proof of Claim No. 4-1 (copy attached as Exhibit I). 64. Umbach, exercising his control over JCT, refused to allow JCT to honor its

collateralization commitment to Westwood, or to return Westwoods $600,000. 65. Indeed, on July 23, 2009, Catoggio complained that JCT was still making interest

payments to investors. 66. Subsequently, on July 29, 2009, Umbach approved JCTs July interest payments to

investors to keep the investors placated. 67. On August 27, 2009, Catoggio sent an e-mail to Roman suggesting a servicing

arrangement under which, inter alia, all of JCTs bank account balances and client accounts would be transferred to Funding, and Funding would receive a right of first refusal on any new business opportunities generated by JCT-H. Catoggio warned that failing a firm proposal in this regard, Funding would require a meeting on September 1 to effectuate the transfer of assets [of JCT] to [Funding].

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68.

Roman advised Westwood, that this August 27, 2009 proposal e-mail of

Umbach (Paul Catoggio) was fraudulento y descarado (i.e., fraudulent and brazen-faced). 69. On August 28, 2009, Bajandas wrote to Roman and Schmidt anticipating litigation

and warning that investor funds should not be used to support operations. 70. On September 17, 2009, Funding and JCT entered into a Stipulation Agreement.

(Plaintiff will seek a copy of this Stipulation Agreement in discovery.) 71. On November 19, 2009, JCT entered into a Second Forbearance Agreement with

Funding, a copy of which is attached as Exhibit J. 72. On November 19, 2009, JCT also entered into a Peaceful Possession Agreement

with Funding, a copy of which is attached as Exhibit K. 73. On April 14, 2010, JCT sent an e-mail to its creditors advising them that Funding

has taken possession of all assets of the company. The Consent Judgment and Consent Receivables Transfer 74. On April 27, 2010, Funding obtained a Consent Final Judgment (the Consent

Judgment) in state court against JCT for $4,142,171.84 and for immediate possession of the Collateral. A copy of this judgment is attached as Exhibit L. 75. Pursuant to the Consent Judgment on April 27, 2010, JCT transferred property

(the Consent Receivables Transfer) consisting of more than $6.8 million in accounts receivable and other collateral to Funding. An itemization of the accounts receivable transferred appears on the attached Exhibit M.

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Roman and Schmidt Covertly Assist Umbach in Depleting JCTs Assets 76. On information and belief, Roman and Schmidt continued, post-petition, to enjoy a

beneficial financial relationship with Umbach, Catoggio, Funding, and/or one or more entities controlled by Umbach. 77. By April 2010, JCT was in wind-down mode. By this time, Funding was actively

factoring receivables itself, and soliciting transactions from JCTs customers, with the active assistance of Roman and Schmidt. 78. Funding instructed its employees to cease communicating with JCT through

Romans and Schmidts respective JCT e-mail addresses, and directed Roman and Schmidt to supply non-JCT related e-mail addresses for future communications with Funding. 79. Roman and Schmidt attempted to conceal the fact that they were assisting

Funding in undermining JCT, by conducting these activities through a new company, Marcyn Holdings, LLC, a Florida limited liability company, that had been formed in April, 2010 by their respective wives Marcia Roman and Cynthia Constain. Count 1 (Breach of Fiduciary Duties Roman and Schmidt) 80. Plaintiff realleges the allegations of paragraphs 1 through 79 and incorporates

those allegations by reference. 81. As officers and managers of JCT, Roman and Schmidt (the Managers) owed

fiduciary duties to JCT of loyalty and care, pursuant to 608.4225(1), Fla. Stat. 82. By their actions and inactions as described herein, the Managers breached their

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duties of loyalty and care to JCT, which required that they, inter alia, conduct JCT's business and affairs with due care, base material decisions on adequate information and deliberation, place the interests of JCT, and once insolvent, its creditors, ahead of their own self-interests or personal considerations, and act in good faith. 83. The Managers breached their fiduciary duties and legal obligations to JCT and,

upon JCTs insolvency, to JCT's creditors, by, inter alia: (a) Causing JCT to borrow money from investors under false pretenses, knowing that the proceeds of such loans would increase Fundings collateral, but would otherwise confer no benefit on JCT or its unsecured creditors; Allowing Funding, Umbach and Catoggio to dictate operational decisions of JCT, including which customers receivables could be purchased, and how company funds could be spent. During the one-year period preceding the petition date, as it became clearer that the Debtor was in dire financial straits, acting in their own personal interests, and contrary to the Debtors interests, by cooperating in transactions that favored Funding and Umbach at the expense of other creditors, with the hope and expectation that Umbach would provide them with employment, business, or other financial benefits after the dissolution of the Debtor; and Failing to assert claims under JCTs credit insurance policy.

(b)

(c)

(d)

For example, in a March 25, 2010 e-mail, Roman noted to JCTs attorney that: I am concerned about the servicing proposal Umbach has sent us, as it may be taken by the investors as part of the agreement that we have with Umbach, as we will continue to work the good portfolio in a different company. 84. The Managers wrongful conduct constituted a breach of their fiduciary duties of

care, loyalty, and good faith owed to JCT, and when it became insolvent, its creditors.

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85.

The Managers wrongful conduct exhibited a conscious disregard for the best

interests of JCT, and/or willful misconduct. 86. damaged. WHEREFORE, Plaintiff demands judgment in his favor and against Roman and Schmidt, jointly and severally, for (i) damages, including punitive damages (ii) allowable pre-judgment and post-judgment interest, (iii) allowable attorneys' fees and costs, and (iv) other and further just and proper relief. Count 2 (Aiding and Abetting Romans and Schmidts Breach of Fiduciary Duty Umbach) 87. 88. Plaintiff adopts and realleges paragraphs 1 through 79, and 81 through 86, above. Umbach knew of the fiduciary duties that the Managers had to JCT, and knew that As a result of the aforementioned breaches of duties, JCT was substantially

the Managers were breaching their fiduciary duties, as described above. 89. Umbach knowingly, intentionally, and substantially assisted the Managers in their

breach of fiduciary duty, resulting in significant damage to JCT. WHEREFORE, Plaintiff demands judgment in his favor and against Umbach for (i) damages, including punitive damages, (ii) allowable pre-judgment and post-judgment interest, (iii) allowable attorneys' fees and costs, and (iv) other and further just and proper relief. Count 3 (Aiding and Abetting Romans and Schmidts Breach of Fiduciary Duty - Catoggio) 90. Plaintiff adopts and realleges paragraphs 1 through 79, and 81 through 86, above.

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91.

Catoggio knew of the fiduciary duties the Managers had to JCT, and from on or

about October 2007 forward, knew that the Managers were breaching their fiduciary duties as described above. 92. Catoggio knowingly, intentionally, and substantially assisted the Managers in their

breach of fiduciary duty, resulting in significant damage to JCT. WHEREFORE, Plaintiff demands judgment against Catoggio for (i) damages, including punitive damages, (ii) allowable pre-judgment and post-judgment interest, (iii) allowable

attorneys fees and costs, and (iv) other and further just and proper relief. Count 4 (Breach of Fiduciary Duties Umbach and Catoggio)

93.

Plaintiff realleges the allegations of paragraphs 1 through 79 and incorporates

those allegations by reference. 94. At all relevant times, JCT relied upon its special relationship with Funding and its

controlling principals, Umbach and Catoggio, who exercised actual and de facto control and dominance over JCT, its finances, and its business operations. 95. creditors. 96. Umbach and Catoggio breached their fiduciary duties, which required that they, Accordingly, Umbach and Catoggio owed fiduciary duties to JCT and its

inter alia, place the interests of JCT, and once insolvent, its creditors, ahead of their own selfinterests or personal considerations, and act in good faith.

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97.

Umbach and Catoggio breached their fiduciary duties and legal obligations to

JCT and, upon JCTs insolvency, to JCT's creditors, by, inter alia: (a) Permitting JCT to borrow money from investors under false pretenses, knowing that the proceeds of such loans would increase Fundings collateral, but would otherwise confer no benefit on JCT or its unsecured creditors; and During the one-year period preceding the petition date, as it became clearer that JCT was in dire financial straits, acting in their own personal interests, and contrary to JCTs interests, by cooperating in transactions that favored Funding and Umbach at the expense of other creditors.

(b)

98.

Umbachs and Catoggios wrongful conduct exhibited a conscious disregard for

the best interests of JCT, and/or willful misconduct. 99. damaged. WHEREFORE, Plaintiff demands judgment in his favor and against Umbach and Catoggio, jointly and severally, for (i) damages, including punitive damages (ii) allowable prejudgment and post-judgment interest, (iii) allowable attorneys' fees and costs, and (iv) other and further just and proper relief. Count 5 (Breach of Fiduciary Duty Funding) 100. Plaintiff realleges the allegations of paragraphs 1 through 79 and incorporates As a result of the aforementioned breaches of duties, JCT was substantially

those allegations by reference. 101. By virtue of the virtually total control that it exerted over JCT, Funding stood in a

special relationship of confidence and trust with JCT. As such, Funding owed fiduciary duties to

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JCT. 102. Indeed, as stated in an October 29, 2008 e-mail from Catoggio to Roman and

Schmidt, Funding viewed JCT first and foremost as a partner in this venture and only secondarily as a lender. 103. Funding breached its fiduciary duties to JCT and, upon JCTs insolvency, to JCT's

creditors, by, inter alia: (a) Causing JCT to borrow money from investors under false pretenses, knowing that the proceeds of such loans would increase Fundings collateral, but would otherwise confer no benefit on JCT or its unsecured creditors; and Self-dealing and acting in its own interests, and contrary to the Debtors interests, by cooperating in transactions that favored Funding and Umbach at the expense of other creditors.

(b)

104.

Fundings wrongful conduct exhibited a conscious disregard for the best interests

of JCT, and/or willful misconduct. 105. damaged. WHEREFORE, Plaintiff demands judgment in his favor and against Funding for (i) damages, including punitive damages (ii) allowable pre-judgment and post-judgment interest, (iii) allowable attorneys' fees and costs, and (iv) other and further just and proper relief. Count 6 (Aiding and Abetting Fundings Breach of Fiduciary Duty Umbach) 106. above.
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As a result of the aforementioned breaches of duties, JCT was substantially

Plaintiff adopts and realleges paragraphs 1 through 79, and 101 through 105,

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107.

Umbach knew of the fiduciary duties that Funding had to JCT, and knew that

Funding was breaching its fiduciary duties, as described above. 108. Umbach knowingly, intentionally, and substantially assisted Funding in its breach

of fiduciary duty, resulting in significant damage to JCT. WHEREFORE, Plaintiff demands judgment in his favor and against Umbach for (i) damages, including punitive damages, (ii) allowable pre-judgment and post-judgment interest, (iii) allowable attorneys' fees and costs, and (iv) other and further just and proper relief. Count 7 (Aiding and Abetting Fundings Breach of Fiduciary Duty - Catoggio) 109. above. 110. Catoggio knew of the fiduciary duties that Funding had to JCT, and knew that Plaintiff adopts and realleges paragraphs 1 through 79, and 101 through 105,

Funding was breaching its fiduciary duties, as described above. 111. Catoggio knowingly, intentionally, and substantially assisted Funding in its breach

of fiduciary duty, resulting in significant damage to JCT. WHEREFORE, Plaintiff demands judgment against Catoggio for (i) damages, including punitive damages, (ii) allowable pre-judgment and post-judgment interest, (iii) allowable

attorneys fees and costs, and (iv) other and further just and proper relief. Count 8 Avoidance of Fraudulent Transfer 11 U.S.C. 548(a)(1)(A) (Consent Receivables Transfer) 112. Plaintiff adopts and realleges paragraphs 1 through 79 above.
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113.

JCT made the Consent Receivables Transfer with actual intent to hinder, delay, or

defraud its creditors. 114. Pursuant to 11 U.S.C. 548(a)(1)(A), Plaintiff is empowered to avoid the Consent

Receivables Transfer. WHEREFORE, Plaintiff demands entry of judgment avoiding the Consent Receivables Transfer, together with such other and further relief as this Court shall deem appropriate. Count 9 Avoidance of Fraudulent Transfer 11 U.S.C. 548(a)(1)(B) (Consent Receivables Transfer) 115. 116. Plaintiff adopts and realleges paragraphs 1 through 79 above. JCT received less than a reasonably equivalent value in exchange for the Consent

Receivables Transfer. 117. At the time of the Consent Receivables Transfer, JCT was insolvent, or became

insolvent as a result of the Consent Receivables Transfer. 118. At the time of the Consent Receivables Transfer, JCT was engaged in a business

for which any property remaining with it was an unreasonably small capital. 119. Pursuant to 11 U.S.C. 548(a)(1)(B), Plaintiff is empowered to avoid the Consent

Receivables Transfer. WHEREFORE, Plaintiff demands entry of judgment avoiding the Consent Receivables Transfer, together with such other and further relief as this Court shall deem appropriate.

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Count 10 Avoidance of Fraudulent Transfer --11 U.S.C. 544(b) and 726.105(1)(a), Fla. Stat. (Consent Receivables Transfer) 120. 121. Plaintiff adopts and realleges paragraphs 1 through 79 above. The Consent Receivables Transfer was a transfer of property of JCT within the

meaning of 726.102(12), Fla. Stat. 122. JCT made the Consent Receivables Transfer with actual intent to hinder, delay, or

defraud its creditors. 123. The Consent Receivables Transfer is voidable under applicable law by at least one

creditor holding an unsecured claim that is allowable under 11 U.S.C. 502 or that is not allowable only under 11 U.S.C. 502(e). 124. Pursuant to 11 U.S.C. 544(b) and 726.108(1)(a), Fla. Stat., Plaintiff is

empowered to avoid the Consent Receivables Transfer . WHEREFORE, Plaintiff demands entry of judgment avoiding the Consent Receivables Transfer, together with such other and further relief as this Court shall deem appropriate.

Count 11 Avoidance of Fraudulent Transfer --11 U.S.C. 544(b) and 726.105(1)(b), Fla. Stat. (Consent Receivables Transfer) 125. 126. Plaintiff adopts and realleges paragraphs 1 through 79 above. The Consent Receivables Transfer was a transfer of property of JCT within the

meaning of 726.102(12), Fla. Stat. 127. JCT did not receive a reasonably equivalent value for the Consent Receivables
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Transfer. 128. At the time of the Consent Receivables Transfer, JCT (i) was engaged or was

about to engage in a business or a transaction for which its remaining assets were unreasonably small in relation to the business or transaction; or (ii) intended to incur, or believed or reasonably should have believed that it would incur, debts beyond its ability to pay as they became due. 129. The Consent Receivables Transfer is voidable under applicable law by at least one

creditor holding an unsecured claim that is allowable under 11 U.S.C. 502 or that is not allowable only under 11 U.S.C. 502(e). 130. Pursuant to 11 U.S.C. 544(b) and 726.108(1)(a), Fla. Stat., Plaintiff is

empowered to avoid the Consent Receivables Transfer. WHEREFORE, Plaintiff demands entry of judgment avoiding the Consent Receivables Transfer together with such other and further relief as this Court shall deem appropriate. Count 12 Avoidance of Fraudulent Transfer 11 U.S.C. 548(a)(1)(A) (Two-Year Dividend Transfers) 131. 132. Plaintiff adopts and realleges paragraphs 1 through 79 above. Within two years of the Petition date, JCT made dividend payments (the Two-

Year Dividend Transfers) to JCT-H and GF. The attached Exhibit N identifies the Two-Year Dividend Transfers. 133. JCT made the Two-Year Dividend Transfers with actual intent to hinder, delay, or

defraud its creditors. 134. Pursuant to 11 U.S.C. 548(a) (1) (A), Plaintiff is empowered to avoid the Two23

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Year Dividend Transfers. WHEREFORE, Plaintiff demands entry of judgment avoiding the Two-Year Dividend Transfers, together with such other and further relief as this Court shall deem appropriate. Count 13 Avoidance of Fraudulent Transfer 11 U.S.C. 548(a)(1)(B) (Two-Year Dividend Transfers) 135. above. 136. JCT received less than a reasonably equivalent value in exchange for the Two-Year Plaintiff adopts and realleges paragraphs 1 through 79, and 132 through 134,

Dividend Transfers. 137. At the time of the Two-Year Dividend Transfers, JCT was insolvent, or became

insolvent as a result of the Two-Year Dividend Transfers. 138. At the time of the Two-Year Dividend Transfers, JCT was engaged in a business

for which any property remaining with it was an unreasonably small capital. 139. Pursuant to 11 U.S.C. 548(a)(1)(B), Plaintiff is empowered to avoid the Two-

Year Dividend Transfers. WHEREFORE, Plaintiff demands entry of judgment avoiding the Two-Year Dividend Transfers, together with such other and further relief as this Court shall deem appropriate. Count 14 Avoidance of Fraudulent Transfer --11 U.S.C. 544(b) and 726.105(1)(a), Fla. Stat. (Two-Year Dividend Transfers) 140. Plaintiff adopts and realleges paragraphs 1 through 79, and 132 through 134,

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above. 141. Each of the Two-Year Dividend Transfers was a transfer of property of JCT

within the meaning of 726.102(12), Fla. Stat. 142. JCT made the Two-Year Dividend Transfers with actual intent to hinder, delay, or

defraud its creditors. 143. The Two-Year Dividend Transfers are voidable under applicable law by at least

one creditor holding an unsecured claim that is allowable under 11 U.S.C. 502 or that is not allowable only under 11 U.S.C. 502(e). 144. Pursuant to 11 U.S.C. 544(b) and 726.108(1)(a), Fla. Stat., Plaintiff is

empowered to avoid the Two-Year Dividend Transfers. WHEREFORE, Plaintiff demands entry of judgment avoiding the Two-Year Dividend Transfers, together with such other and further relief as this Court shall deem appropriate. Count 15 Avoidance of Fraudulent Transfer --11 U.S.C. 544(b) and 726.105(1)(b), Fla. Stat. (Two-Year Dividend Transfers) 145. above. 146. Each of the Two-Year Dividend Transfers was a transfer of property of JCT Plaintiff adopts and realleges paragraphs 1 through 79, and 132 through 134,

within the meaning of 726.102(12), Fla. Stat. 147. Transfers. 148. At the time of the Two-Year Dividend Transfers, JCT (i) was engaged or was
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about to engage in a business or a transaction for which its remaining assets were unreasonably small in relation to the business or transaction; or (ii) intended to incur, or believed or reasonably should have believed that it would incur, debts beyond its ability to pay as they became due. 149. The Two-Year Dividend Transfers are voidable under applicable law by at least

one creditor holding an unsecured claim that is allowable under 11 U.S.C. 502 or that is not allowable only under 11 U.S.C. 502(e). 150. Pursuant to 11 U.S.C. 544(b) and 726.108(1)(a), Fla. Stat., Plaintiff is

empowered to avoid the Two-Year Dividend Transfers. WHEREFORE, Plaintiff demands entry of judgment avoiding the Two-Year Dividend Transfers together with such other and further relief as this Court shall deem appropriate. Count 16 Avoidance of Fraudulent Transfer 11 U.S.C. 548(a)(1)(A) (Four-Year Dividend Transfers) 151. 152. Plaintiff adopts and realleges paragraphs 1 through 79 above. Within four years of the Petition date, JCT made dividend payments (the FourThe attached Exhibit N identifies the Four-Year

Year Dividend Transfers) to JCT-H and GF. Dividend Transfers. 153.

JCT made the Four-Year Dividend Transfers with actual intent to hinder, delay, or

defraud its creditors. 154. Pursuant to 11 U.S.C. 548(a)(1)(A), Plaintiff is empowered to avoid the Four-

Year Dividend Transfers. WHEREFORE, Plaintiff demands entry of judgment avoiding the Four-Year Dividend
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Transfers , together with such other and further relief as this Court shall deem appropriate. Count 17 Avoidance of Fraudulent Transfer 11 U.S.C. 548(a)(1)(B) (Four-Year Dividend Transfers) 155. above. 156. JCT received less than a reasonably equivalent value in exchange for the FourPlaintiff adopts and realleges paragraphs 1 through 79, and 152 through 153,

Year Dividend Transfers. 157. At the time of the Four-Year Dividend Transfers, JCT was insolvent, or became

insolvent as a result of the Four-Year Dividend Transfers. 158. At the time of the Four-Year Dividend Transfers, JCT was engaged in a business

for which any property remaining with it was an unreasonably small capital. 159. Pursuant to 11 U.S.C. 548(a)(1)(B), Plaintiff is empowered to avoid the Four-

Year Dividend Transfers. WHEREFORE, Plaintiff demands entry of judgment avoiding the Four-Year Dividend Transfers, together with such other and further relief as this Court shall deem appropriate. Count 18 Avoidance of Fraudulent Transfer --11 U.S.C. 544(b) and 726.105(1)(a), Fla. Stat. (Four-Year Dividend Transfers) 160. above. 161. Each of the Four-Year Dividend Transfers was a transfer of property of JCT Plaintiff adopts and realleges paragraphs 1 through 79, and 152 through 153,

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within the meaning of 726.102(12), Fla. Stat. 162. JCT made the Four-Year Dividend Transfers with actual intent to hinder, delay, or

defraud its creditors. 163. The Four-Year Dividend Transfers are voidable under applicable law by at least

one creditor holding an unsecured claim that is allowable under 11 U.S.C. 502 or that is not allowable only under 11 U.S.C. 502(e). 164. Pursuant to 11 U.S.C. 544(b) and 726.108(1)(a), Fla. Stat., Plaintiff is

empowered to avoid the Four-Year Dividend Transfers. WHEREFORE, Plaintiff demands entry of judgment avoiding the Four-Year Dividend Transfers, together with such other and further relief as this Court shall deem appropriate. Count 19 Avoidance of Fraudulent Transfer --11 U.S.C. 544(b) and 726.105(1)(b), Fla. Stat. (Four-Year Dividend Transfers) 165. above. 166. Each of the Four-Year Dividend Transfers was a transfer of property of JCT Plaintiff adopts and realleges paragraphs 1 through 79, and 152 through 153,

within the meaning of 726.102(12), Fla. Stat. 167. Transfers. 168. At the time of the Four-Year Dividend Transfers, JCT (i) was engaged or was JCT did not receive a reasonably equivalent value for the Four-Year Dividend

about to engage in a business or a transaction for which its remaining assets were unreasonably small in relation to the business or transaction; or (ii) intended to incur, or believed or reasonably
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should have believed that it would incur, debts beyond its ability to pay as they became due. 169. The Four-Year Dividend Transfers are voidable under applicable law by at least

one creditor holding an unsecured claim that is allowable under 11 U.S.C. 502 or that is not allowable only under 11 U.S.C. 502(e). 170. Pursuant to 11 U.S.C. 544(b) and 726.108(1)(a), Fla. Stat., Plaintiff is

empowered to avoid the Four-Year Dividend Transfers. WHEREFORE, Plaintiff demands entry of judgment avoiding the Four-Year Dividend Transfers together with such other and further relief as this Court shall deem appropriate. Count 20 Avoidance of Preferential Transfers --11 U.S.C. 547(b) 171. 172. 173. Plaintiff adopts and realleges paragraphs 1 through 79 above. At all relevant times, Funding was an insider of the Debtor. Within one year of the petition date, the Debtor purchased new accounts

receivable (with funds borrowed on an unsecured basis from investors). Fundings blanket lien on the Debtors accounts attached to these new accounts and loan proceeds. 174. The attachment of Fundings security interest to each of the new accounts and loan

proceeds acquired within one year of the petition date was a transfer of property of JCT (each a One-Year Transfer and collectively the One-Year Transfers) within the meaning of the Bankruptcy Code. 175. The One-Year Transfers comprise the attachment of Fundings security interest to

the accounts and loan proceeds identified (in the AR Invoices and AR Payments columns,

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respectively) on the attached Exhibit O. 176. 177. The One-Year Transfers were made to or for the benefit of Funding, a creditor. The One-Year Transfers were made on account of an antecedent debt owed by the

Debtor to Funding. 178. 179. The One-Year Transfers were made while the Debtor was insolvent. The One-Year Transfers enabled Funding to receive more than it would have

received in this Chapter 7 case if the transfers had not been made and Funding had received payment of its antecedent debt to the extent provided by the provisions of Title 11, U.S. Code. 180. The One-Year Transfers, in the aggregate, caused a reduction, as of the date of the

filing of JCTs petition and to the prejudice of other creditors holding unsecured claims, of the amount by which the debt secured by Fundings lien exceed the value of all security interests for such debt one year before the filing of the petition. 181. Transfers. WHEREFORE, Plaintiff demands entry of judgment avoiding the One-Year Transfers together with such other and further relief as this Court shall deem appropriate. Count 21 Avoidance of Insider Preference --11 U.S.C. 544(b) and 726.106(2), Fla. Stat. 182. above. 183. Funding had reason to believe that the Debtor was insolvent, or was incurring Plaintiff adopts and realleges paragraphs 1 through 79, and 172 through 180, Pursuant to 11 U.S.C. 547(b), Plaintiff is empowered to avoid the One-Year

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debts beyond its ability to pay as they became due, at the time of each of the One-Year Transfers. 184. 185. JCT has creditors whose claims actually arose prior to the One-Year Transfers. The One-Year Transfers are voidable under applicable law by at least one creditor

holding an unsecured claim that is allowable under 11 U.S.C. 502 or that is not allowable only under 11 U.S.C. 502(e). 186. Pursuant to 11 U.S.C. 544(b) and 726.106(2), Plaintiff is empowered to avoid

the One-Year Transfers. WHEREFORE, Plaintiff demands entry of judgment avoiding the One-Year Transfers together with such other and further relief as this Court shall deem appropriate. Count 22 Recovery of Avoided Transfers --11 U.S.C. 550(a) 187. above. 188. Funding was the initial transferee of the Consent Receivables Transfer and of the Plaintiff adopts and realleges paragraphs 1 through 79, and 113 through 186,

One-Year Transfers. 189. GF and JCT-H were initial transferees of the Two-Year Dividend Transfers and

the Four-Year Dividend Transfers. 190. Umbach was a subsequent transferee of the Consent Receivables Transfer, the

One-Year Transfers, the Two-Year Dividend Transfers, and the Four-Year Dividend Transfers. 191. Roman and Schmidt were subsequent transferees of the Two-Year Dividend

Transfers and the Four-Year Dividend Transfers.

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192.

To the extent that this Court avoids the Consent Receivables Transfer, the One-

Year Transfers, the Two-Year Dividend Transfers, and/or the Four-Year Dividend Transfers (collectively, the Avoidable Transfers) pursuant to any or all of Counts 6 through 19 above, Plaintiff is entitled to recover the value of said transfers, plus interest, from the transferees of those respective transfers, as identified above, pursuant to 11 U.S.C. 550(a). WHEREFORE, Plaintiff demands judgment against Defendants in the amount of the respective Avoidable Transfers received by each, plus interest and costs, together with such other and further relief as this Court shall deem appropriate. Count 23 Objection to and/or Equitable Subordination of Claims --11 U.S.C. 510(c) 193. Plaintiff adopts and realleges paragraphs 1 through 79, 101 through 105, and 188

through 192, above. 194. On January 18, 2011, Funding filed Proof of Claim 17-1, which appears to be

asserted as a secured claim in the amount of $2,907,594.01 (the "Funding Claim"). 195. Plaintiff objects to the Funding Claim and/or seeks the equitable subordination of

the Funding Claim based upon the allegations and claims referenced above. 196. Funding engaged in inequitable conduct in assuming effective control of JCT, and

in knowingly allowing JCT to incur unsecured debt that would not be paid (and which Funding would not allow to be paid) and that would only be used to purchase receivables to be added to, or otherwise increase, Fundings collateral pool.

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197. Funding. 198. Code. 199.

Fundings inequitable conduct injured creditors and gave unfair advantage to

Equitable subordination of Fundings claim is consistent with the Bankruptcy

In addition, pursuant to 11 U.S.C. 502(d), no claim by Funding should be

allowed unless and until it has disgorged any transfers avoided herein. 200. Accordingly, the Court should exercise the full extent of its equitable powers to

disallow the Funding Claim, or, to the extent the Funding Claim or any part thereof is allowed, to equitably subordinate such claim for distribution purposes pursuant to sections 510(c)(1) and 105(a) of the Bankruptcy Code. WHEREFORE, the Trustee respectfully requests (i) that the Funding be disallowed and/or, to the extent allowed, be subordinated in full, and (ii) such other and further relief as may be just and proper. Count 24 (Successor Liability - Funding) 201. Plaintiff adopts and realleges paragraphs 1 through 79, 101 through 105, and 188

through 192, above. 202. By virtue of the control that it asserted over JCT, and by virtue of the Consent

Receivables Transfer, Funding became a mere continuation of JCT.

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203.

By virtue of the control that it asserted over JCT, and by virtue of the Consent

Receivables Transfer, Funding engaged in a fraudulent effort by Funding to obtain the benefit of JCTs assets (including assets purchased with funds provided by JCTs creditors) and to avoid the liabilities of JCT. 204. As such, Funding is responsible for all of JCTs unpaid obligations to its creditors.

WHEREFORE, the Trustee respectfully requests that this Court enter final judgment against Funding in an amount equal to all outstanding creditor claims against JCT, plus interest, costs, and attorneys fees and that it grant such other and further relief as may be just and proper. Count 25 (Professional Negligence Bajandas and V&B)

205.

Plaintiff adopts and realleges the allegations of paragraphs 1 through 79, and 81

through 85, and incorporates those allegations by reference. 206. As corporate counsel employed by JCT, Bajandas and V&B owed a duty to JCT

to properly inform JCT of its true relationship with Funding, as well as JCTs duties to its creditors, including each of the junior investors. 207. Moreover, Bajandas and V&B owed a duty to JCT to properly advise JCT in

respect of the pursuit of credit insurance claims, and the wind-down of JCTs business. 208. The negligent acts and omissions of Bajandas and V&B served to facilitate

Fundings take-over of JCTs business and assets, and was the proximate cause of, or

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substantially contributed to, JCTs present liability to the junior investors and its other creditors. WHEREFORE, the Trustee respectfully requests that this Court enter final judgment against Bajandas and V&B in an amount equal to all outstanding creditor claims against JCT, plus interest, costs, and attorneys fees and that it grant such other and further relief as may be just and proper.
WE HEREBY RESPECTIVELY CERTIFY that we are admitted to the Bar of the United States District Court for the Southern District of Florida and are in compliance with the additional qualifications to practice in this court set forth in Local Rule 2090-1(A).

KOZYAK TROPIN & THROCKMORTON, P.A. Co-Counsel for Plaintiff 2525 Ponce de Leon, 9th Floor Coral Gables, Florida 33134 Tel: (305) 372-1800 By: /s/Charles W. Throckmorton Charles W. Throckmorton Florida Bar No. 286192

AND PAUL JOSEPH McMAHON, P.A. Co-Counsel for Plaintiff The Wiseheart Building 2840 S.W. Third Avenue Miami, Florida 33129 Tel: (305) 285-1222

By:

/s/Paul J. McMahon Paul J. McMahon Florida Bar No. 204552

340005.1

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