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Arthur S. Linker Jeff Friedman Merritt Pardini KATTEN MUCHIN ROSENMAN LLP 575 Madison Ave. New York, NY 10022 Telephone: (212) 940-7007 Facsimile: (212) 940-7134 Attorneys for Plaintiffs David Rubin and Henry Lan, Solely in their capacity as the Receivers for The Consumers Trust, and The Consumers Trust. David L. Barrack FULBRIGHT & JAWORSKI L.L.P. 666 Fifth Avenue New York, New York 10103 Telephone: (212) 318-3000 Attorneys for Plaintiffs The Official Committee of Unsecured Creditors of The Consumers Trust UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK x : In re: Chapter 11 : THE CONSUMERS TRUST, : Case No. 05 60155 : Debtor (REG) x DAVID RUBIN and HENRY LAN, solely in their capacity as : the Receivers for THE CONSUMERS TRUST, and THE : OFFICIAL COMMITTEE OF UNSECURED CREDITORS : OF THE CONSUMERS TRUST, as the Legal : Representatives of THE CONSUMERS TRUST, and THE : CONSUMERS TRUST, : : Plaintiffs, : : - against : ADVERSARY NO. : 07-03138 (REG) ADRIAN ROMAN, JUSTIN ROMAN, NICHOLAS : ROMAN, EUROFINANCE S.A., CONSUMER : PROMOTIONS, INC., CP PROMOTIONS, LTD., JAMES : RIGSBY, AARON J. RACINE, MONACO, SANDERS, : GOTFREDSON, RACINE & BARBER, L.C., GRAHAM : JAYNES and GT ENTERPRISES, : : Defendants. x ORDER GRANTING PLAINTIFFS MOTION FOR DEFAULT JUDGMENT AND SUMMARY JUDGMENT AGAINST DEFENDANTS ADRIAN ROMAN, JUSTIN ROMAN, NICHOLAS ROMAN, EUROFINANCE S.A. AND CP PROMOTIONS, LTD.
84297082

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Upon the Notice of Motion and Motion of David Rubin and Henry Lan, solely in their capacity as the Receivers for The Consumers Trust (TCT), and the Official Committee of Unsecured Creditors of TCT, as the Legal Representatives of TCT, and TCT, as Liquidating Debtor (collectively, the Plaintiffs), dated May 29, 2008, for a default judgment, pursuant to Bankruptcy Rule 7055, and summary judgment, pursuant to Bankruptcy Rule 7056, against defendants Adrian Roman, Justin Roman, Nicholas Roman, Eurofinance S.A., and CP Promotions, Ltd. (the Defendants), together with the affidavits of service thereof upon the Defendants; the Defendants not having answered or otherwise responded to the Complaint and being in default, and not having responded to the Motion or appeared at the hearing thereof; the Court having reviewed the Complaint, Affidavits of Service, Clerks Entries of Default, Notice of Motion, Motion, Statement of Facts as to Which There is No Genuine Issue to be Tried, Declaration of Jeff J. Friedman, and Declaration of David Stephenson, together with the exhibits thereto; and the Court having determined that there is no genuine issue as to any material fact and that Plaintiffs are entitled to judgment against the Defendants as a matter of law; the Court hereby finds and concludes as follows: Findings of Fact 1. TCT was formed under the laws of England, pursuant to a trust deed dated March

25, 2002 between Euro, as settlor, and Richard Caplan, Wesley Harrison, Andrew Davis, and Dennis Bonley, as trustees (collectively, the Trustees). Euro was TCTs sole residual equity holder at all times relevant to this proceeding. See Ex. 6;1 Complaint 12, 28 (Ex. 1).2 ________________________
1

References in the form Ex. __ or Exs. __ are to the exhibits attached to the Declaration of Jeff J. Friedman, submitted in support of Plaintiffs motion. 2 The Defendants have not answered or otherwise responded to the Complaint, their time to answer or otherwise respond has expired, and they are in default. Adversary No. 07-03138, Docket Entries 3135. As a result, this Court treats the factual allegations contained in the Complaint as true.

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2.

TCT was used by Defendants as the vehicle to operate a deceptive consumer sales

promotions scheme known as the Cashable Voucher Program (the Program). Exs. 7, 8; Complaint 27-28, 31-32. 3. Plaintiffs David Rubin and Henry Lan (the Receivers) are Receivers for TCTs

property, including its property located in the United States and Canada. Rubin and Lan were appointed as Receivers for TCT by an order of the High Court of Justice of England and Wales (the High Court), dated November 14, 2005. Ex. 9 at 1; Complaint 13, 49. 4. Plaintiff The Official Committee of Unsecured Creditors of The Consumers Trust

(the Committee) was appointed by the Office of the United States Trustee in accordance with 11 U.S.C. 1102, on December 29, 2005. Pursuant to TCTs Second Amended Joint Plan of Liquidation (the Plan), confirmed by the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court) on October 24, 2007, the Receivers and the Committee have standing as Legal Representatives of TCT to bring this adversary proceeding. Plan 5.3-5.4 (Ex. 4); Complaint 16. 5. Roman, the founder of Euro, has masterminded consumer sales promotions

schemes for the better part of the past two decades. Exs. 28 at 1, 55; Complaint 27-29. 6. Romans most recent scheme was TCT. Roman controlled all aspects of TCT

and, together with the other defendants, ran its day-to-day operations. Ex. 10 at 3-6; Complaint 59-60. 7. Through TCT, Roman created and implemented the Cashable Voucher Program

and played a significant role in other aspects of the Program such as marketing and promotions. Ex. 10 at 3-6; Racine deposition at 89 (Ex. 12); Wertheimer deposition at 30, 70-72, 74 (Ex. 13); Complaint 60.

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8.

Roman, through Euro, selected defendants Consumer Promotions, Inc.

(Consumers Promotions) and CPI to promote and market the scheme in the U.S. and Canada, respectively. Ex. 14; Complaint 60. 9. Roman also participated personally in the promotion and marketing of the

Program, by directly providing participating merchants with the promotional materials needed to lure a greater number of consumers into buying goods and services pursuant to the Program. Exs. 14, 15; Complaint 60. 10. Roman also worked closely with GT Enterprises and Graham Jaynes, who was

Romans confidant and foreign liaison. Davis deposition at 141-42 (Ex. 16); Werthheimer deposition at 19-20 (Ex. 13); Complaint 60, 62. 11. Euro is a British Virgin Islands Company, formed by Roman on January 21, 1992,

for the sole purpose of facilitating Romans consumer sales promotions scheme. Exs. 7, 17, 18, 28; Complaint 18, 28. 12. Roman was Euros sole shareholder from its inception until February 21, 2003,

when Roman purportedly sold Euro to Hibiscus Holdings Limited (Hibiscus), a Seychelles corporation. Exs. 7, 10 at 4. 13. After the sale of Euro to Hibiscus, Roman remained employed at Euro and

continued to control the financial and promotion aspects of TCT and the Program. Ex. 10 at 3-6. 14. Roman drafted documents on behalf of TCT that were signed by the Trustees or

TCTs attorney at Romans directive. Ex. 10 at 5. 15. Roman decided what the terms of the Cashable Vouchers would be and the

Trustees never suggested any substantive changes to the terms Roman had decided upon. Ex. 10 at 5.

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16.

Roman made all of the substantive financial decisions about how TCT was to

operate and was qualified by the Court in the Missouri Attorney General Action as an expert in regard to TCTs business and financial affairs. Ex. 10 at 5. 17. It was Romans responsibility to retain and pay counsel in the United States on

behalf of TCT. Ex. 10 at 5. 18. Roman retained Robin Wertheimer (Wertheimer) to act as counsel on behalf of

TCT in the United States. Roman controlled and directed the decisions that governed Wertheimers representation of TCT, and instructed Wertheimer on how the program was to work. Wertheimer would also bind TCT at Romans instruction. Ex. 10 at 5. 19. Consumers Promotions had a license agreement with Euro, which granted

Consumer Promotions the right to market the Cashable Voucher Program to merchants in the U.S. and to train merchants in how to use and sell the programs to consumers. Ex. 14; Complaint 26. 20. In order to promote the Program, Consumer Promotions employees solicited

merchants through the mail, by phone and by print advertising. Ex. 15. 21. Once a merchant had agreed to participate in the Program, trainers employed by

Consumer Promotions would meet directly with the merchant, provide him with training materials and guidelines, and instruct the merchant in how to best describe the Program to consumers in order to increase sales. Ex. 19; Complaint 34. 22. CPI was the Canadian marketing arm of the Cashable Voucher Program. Davis

deposition at 18 (Ex. 16); Rigsby deposition at 182-83 (Ex. 20); Complaint 26. CPI operated independently from its American counterpart, Consumer Promotions. Rigsby deposition at 182 (Ex. 20).

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23.

Together Consumer Promotions and CPI contracted with merchants in numerous

states and provinces throughout the United States and Canada, including Alabama, Arizona, Arkansas, California, Colorado, Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington and Wisconsin. Exs. 7 at WHM14074P - 78P, 22 at 2; Complaint 26. 24. These contracts resulted in an estimated 70,000 consumers holding Cashable

Vouchers across North America. Ex. 22 at 3. 25. Nick is one of Romans sons. For approximately eighteen months during TCTs

operational period, Nick, at Romans direction, worked at the offices of TCT trustees Davis and Bonley. Davis deposition at 24-25, 140-41 (Ex. 16). 26. at 13, 28. 27. Nick was heavily engaged in marketing the Cashable Voucher Program. He Nick was compensated by TCT through his receipt of payments made by TCT. Id.

became the lead figure in the creation of a website designed to advertise the Cashable Voucher Program to merchants throughout the United States and Canada. Davis deposition at 140 (Ex. 16); Rigsby deposition at 147 (Ex. 20); Complaint 61. 28. In addition, Nick was involved in programming activities and data-entry and

processing for TCT. Davis deposition at 13-14 (Ex. 16); Complaint 61. 29. Nick also played a significant administrative role in TCT, performing accounting

work for TCT and participating in voucher claims adjudications. Racine deposition at 79-80 (Ex. 12); Complaint 61. 6

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30.

Defendant Justin Roman (Justin) is another son of Roman. He was involved in

both marketing and administration for the TCT business enterprise. Davis deposition at 140-41 (Ex. 16); Complaint 61. 31. Justin also was paid from TCT funds. Davis deposition at 25, 28 (Ex. 16);

Complaint 61. 32. Justin assisted his brother Nick in the creation of the Cashable Voucher Program

website. Id.; Rigsby deposition at 147 (Ex. 20); Complaint 61. 33. Justins marketing on behalf of the Program involved more traveling and in-

person promotion, and Justin made several trips to the United States on behalf of TCT. During these trips he would assist Consumer Promotions in marketing the Program. Rigsby deposition at 147 (Ex. 20). 34. When he was not traveling on behalf of the TCT business enterprise, Justin

worked for TCT out of Daviss and Bonleys office, performing administrative duties for TCT such as programming and data entry. Davis deposition at 13-14, 24, 140-41 (Ex. 16); Rigsby deposition at 147 (Ex. 20). 35. In 2005, facing an increasing number of lawsuits and financial woes, Roman and

Euro began efforts directed towards filing a bankruptcy petition in the U.S. on behalf of TCT. Ex. 21; Complaint 46-48. 36. In order to facilitate the filing of a bankruptcy petition, Roman and Euro decided

to seek the appointment of Receivers for TCTs property. Ex. 22 at 6; Complaint 48. 37. On November 13, 2005, Roman and Euro, with the acquiescence of TCTs

Trustees, applied ex parte for the appointment of Receivers in the High Court in the action

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styled, Eurofinance SA (Applicants) v. Richard Caplan, Wesley Harrison, Andrew Davis, Dennis Bonley (Respondents). Ex. 8 at 1, 39-42; Ex. 22; Ex. 23 at 11; Complaint 48. 38. By applying to the High Court for the appointment of Receivers for the specific

purpose of obtaining the requisite authority for TCT to file a bankruptcy petition to obtain the protections and benefits of the Bankruptcy Code, including the automatic stay, the ability to reject executory contracts, the collection and filing of claims in one court, and the ability to confirm a plan, Roman and Euro invoked this Courts subject matter jurisdiction. Ex. 10 at 6, Complaint 31-33. 39. The High Court approved Euros application on November 14, 2005, and

plaintiffs Rubin and Lan were appointed as Receivers for TCT. Ex. 9; Complaint 48. 40. On December 5, 2005, TCT filed a voluntary petition for relief under Chapter 11

of the Bankruptcy Code in the Bankruptcy Court. Case No. 05-60155, Docket entry 1. 41. On December 20, 2005, TCT filed a motion pursuant to section 365 of the

Bankruptcy Code to reject the Cashable Vouchers issued by TCT, and a motion to reject the tripartite contracts (Merchant Agreements), between TCT, Consumer Promotions (in the United States) or CPI (in Canada), and more than 1,100 merchants in the United States and Canada (Merchants), who participated in the Program. Case No. 05-60155, Docket entries 26, 27. 42. On December 21, 2005, Euro, through its attorneys, filed a Notice of Appearance

in the Bankruptcy Court. Case No. 05-60155, Docket entry 28. 43. Because Euro did business in the United States and because it filed a Notice of

Appearance in this Court, Euro is subject to the personal jurisdiction of this Court. Ex. 10 at 6, Complaint 32-33.

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44.

On March 31, 2006, the Bankruptcy Court entered orders approving the rejection

of the Cashable Vouchers and, to the extent they were executory, the Merchant Agreements. The parties to those executory contracts (including the holders of the Cashable Vouchers) thereby became pre-petition breach-of-contract creditors. Exs. 24, 25; Complaint 51, 53. 45. Creditors have filed proofs of claims in the TCT bankruptcy case with respect to

their breach of contract rights and their rejection damages claims. More than 30,000 proofs of claims have been filed. Total allowed general unsecured claims exceed $160 million. Complaint 54. 46. The Defendants all were properly served with process in accordance with

Bankruptcy Rule 7004. The Defendants who reside within the United States were served by first class mail, and those who reside outside of the United States were served personally with process and with a copy of this Courts order dated January 22, 2008, fixing the time for service of an answer. Ex. 2. 47. Since incorporating Euro in 1992, Roman, directly and through Euro, has been

engaged in designing, owning, operating, directing and controlling consumer sales promotions schemes. Ex. 10 at 3-6; Complaint 27-29. 48. The first of Romans and Euros promotions schemes was the Buyback

Program, which began in 1992 and operated exclusively in Europe. Ex. 28 at 1. 49. The Buyback Program allowed participating merchants to provide vouchers or

cheques to consumers who bought non-consumable goods. These vouchers supposedly entitled their holders to a full refund if they simply returned, after five or ten years, the items in connection with which the vouchers were issued. Exs. 28 at 1, 55 at 1. 50. After about six to eight months of operation, the Buyback Program was changed

to the Cashback Program so that it could function with consumable goods and services. The 9

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terms of the Buyback and Cashback Programs were very similar, the only difference being that in order to receive a full refund of the purchase price of consumables or services under the Cashback Program, a consumer would only need to return his voucher. Exs. 28, 55 at 1. 51. Between 1992 and 1997, the ownership of the Cashback Program changed hands

several times. Exs. 7, 26, 29. 52. Despite the changes in ownership, the Cashback Program continued to be

operated by Roman, who operated the enterprise through various corporate entities that he created for this purpose. Ex. 26. 53. By 1997, the success of the Cashback Program caught the attention of Englands

Department of Trade and Industry, which launched an investigation into the machinations of its corporate owner at the time, Intervest Capital Limited. During the course of this investigation, Intervests owner, Simon Samuels, absconded with Intervests assets. As a result, Intervest was wound up and put into liquidation by the High Court, effectively ending the Cashback Program as it had existed until that point. Exs. 28 at 2, 55 at 2. 54. After having operated profit-skimming trust-rebate enterprises in Europe for most

of the 1990s, Roman and Euro decided to expand their market of operations into the U.S. and Canada. To this end, in 2000, Roman and Euro began forming and running consumer sales promotions programs in North America. Exs. 28 at 2-3, 55 at 2-3. 55. The first such scheme run by Roman and Euro was called The Cashback Trust.

As stated in The Cashback Trusts trust deed, the trust was formed in order to administer a rebate program. Ex. 27. 56. This rebate program centered upon a rebate coupon called a Cashable Bond.

These Cashable Bonds promised consumers to whom they were issued a substantial refund if

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only they would submit the Bond subject to the terms and conditions printed on the back of each Bond. Ex. 28 at 3; Complaint 44. 57. Euro implemented the Cashable Bond Program through its promotions and

marketing arm, Cashback USA, Inc., which was owned and operated by defendant James Rigsby; who subsequently formed Consumer Promotions. When Cashback USA, Inc. would make a successful pitch to a merchant, Cashback USA, Inc., along with The Cashback Trust, would enter into an agreement with the prospective merchant. Ex. 27 at WHM01019-22. 58. These agreements required merchants to provide consumers with Cashable

Bonds whenever a consumer purchased a participating good or service. Ex. 28 at 2-3. 59. In exchange for the right to issue the Cashable Bonds, the merchants were

required to remit to the trust 15% of the face value of every Bond they issued. Exs. 27, 28 at 3, 4. 60. The Cashback Trust was significantly under-funded from its creation and could

never have fulfilled its promise to provide rebates for properly submitted Cashable Bonds. The reason for this is that Euro funded the trust with only a single British Pound at its inception. Ex. 27 at WHM01015-16. 61. The Cashback Trust trust deed stated that the trust was supposed to receive further

funding out of the payments of the merchants participating in the Cashable Bond Program. Id. 62. However, only 40% of the these merchants payments wound up in the trust for the

payment of rebate claims. Ex. 28. 63. The 60% majority of the payments were skimmed off by Roman and Euro and

divided among themselves and their fellow schemers. Id. According to Romans and Euros

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scheme, then, only 6% of the original purchase price was to be left in The Cashback Trust for the payment of rebates. Exs. 28 at 3; 55 15. 64. About a year after The Cashback Trust scheme was created, Kansas regulatory

authorities began voicing concern that use of the term Bond in connection with The Cashback Trusts rebate program could cause consumers to mistakenly believe that they were receiving a security in exchange for their purchases. Wertheimer deposition at 112-13 (Ex. 13). 65. These concerns ultimately resulted in the Kansas Security Commissioner entering

into a Memorandum of Understanding (the Understanding) with Euro and the Cashback Trust, on August 16, 2001. Ex. 30; Complaint 45. 66. By the terms of the Understanding, Euro and The Cashback Trust agreed that they

would no longer call the coupons issued under the plan Cashable Bonds, but would instead call them Cashable Rebates, and a date was set by which the marketing materials provided to merchants to promote the Cashable Bond program would have to be replaced to reflect the change in the coupon name. Id. 67. In the month following the Understanding, Euro set-up another trust-rebate

scheme to carry on the work of The Cashback Trust. Created on September 14, 2001, this new trust, called The Consumers Trust (the Other TCT), was identical in almost every way to The Cashback Trust. Ex. 31; Complaint 45. 68. Similar to The Cashback Trust, the Other TCT was undercapitalized at its

inception. In addition, per Euros instructions to the Other TCTs trustees, 60% of the merchants payments were to be diverted out of the trust and paid to Euro and its fellow schemers. Ex. 28. 69. Even the promotion and marketing of the Cashable Rebates continued through

Cashback USA, Inc., which, after the demise of The Cashback Trust, changed its name to Cashable Rebates, Inc. Rigsby deposition at 32-33 (Ex. 20). 12

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70.

On March 20, 2002, the Kansas Attorney General entered in a Memorandum of

Understanding with Euro and Cashable Rebates, Inc. (the Second Understanding) enjoining Euro and Cashable Rebates, Inc. from engaging in certain deceptive business practices. In particular, the Second Understanding restricted Euros ability to use the term rebate in connection with the Cashable Rebate Program. Ex. 32 at 3-7. 71. A mere five days after the Second Understanding went into effect, Euro formed

TCT. Ex. 6; Complaint 45. 72. TCT was structured in a manner identical to The Cashback Trust and the Other

TCT. Wertheimer deposition at 112-13 (Ex. 13); Complaint 45. 73. Similar to the earlier programs, Euro was the settlor and creator of TCT, and was

also its residual equity owner. Ex. 6; Complaint 12. 74. Caplan and Harrison, the trustees of The Cashback Trust and the Other TCT, were

also trustees of TCT. Exs. 6, 27, 31; Complaint 12. 75. Like the earlier trusts, Euro funded TCT with only a single British Pound at its

inception. Ex. 6 at 2; Complaint 42. 76. The sales promotion operated through TCT, dubbed the Cashable Voucher

Program operated in the same way as the Cashable Bond and Cashable Rebate Programs. Exs. 6, 27, 31; Complaint 32. 77. Any differences between the previous programs and the Cashable Voucher

Program were semantic. Wertheimer deposition at 112-13 (Ex. 13); Complaint 30. 78. In addition, TCTs promoter, Consumer Promotions, was simply a newer version

of, and had the same owner as, Cashable Rebates, Inc., which had been formed to promote the Other TCT. Exs. 6, 27, 31; Complaint 30. 13

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79.

Similar to its predecessors, the Cashable Voucher Program was a rebate

promotion marketed to merchants as a sure-fire way to increase their sales. Ex. 15; Complaint 34. 80. The Program functioned pursuant to tripartite Merchant Agreements between

TCT, Consumer Promotions (in the United States) or CPI (in Canada), and more than 1,100 Merchants in the United States and Canada who sold a variety of high-priced consumer products and services. Ex. 33; Complaint 33. 81. Once a Merchant had entered into a contract with TCT and Consumer Promotions

or CPI, the Program allowed Merchants to offer customers the opportunity to supposedly receive cash back for all or part of the purchase price of items or services purchased from the Merchants if they fully complied with all of the obtuse and misleading requirements of vouchers (Cashable Vouchers or Vouchers) issued to them. In exchange for the right to issue Cashable Vouchers Merchants would be required to pay TCT 15% of the face amount of all Cashable Vouchers issued by them. Ex. 15 at WHM06421; Complaint 34-35 82. Once a Merchant had enlisted in the Program, he had no discretion as to how to

issue Cashable Vouchers; he was required to issue Vouchers to every consumer who purchased a participating item or service. Ex. 33 at 4.2; Complaint 32. 83. TCT was funded with only a single British Pound at its inception. Ex. 6 at 2;

Complaint 42. 84. Similar to those of the earlier schemes, TCTs trust deed states that the trust was

supposed to be further funded by payments made to TCT by Merchants participating in the Cashable Voucher Program. The Trust Deed also provided that the Trustees would agree on what proportion of the funds received by TCT from Merchants should be retained by the trust for

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the payment of valid claims based upon the historical claims results of similar promotions owned and launched by Euro in 1992. Ex. 6 at 2; Complaint 42. 85. However, the Trustees conducted no analysis of historical claims results of prior

programs. Moreover, the Buyback and Cashback Programs that were operated in Europe during the 1990s were very different from the Cashable Voucher Program. Therefore, any analysis of the results of those programs could not have yielded statistics that would have had any significance in the Programs context. Ex. 10 at 4 ( 11), 5 ( 17, 20); Complaint 41. 86. The Trustees made no attempt whatsoever to reach any informed decision

concerning appropriate capitalization of TCT. Instead, on March 25, 2002, the very date on which TCT was created, Roman, through Euro, sent a letter to the Trustees dictating to them how the Merchants payments should be divided up. Ex. 34; Complaint 37. 87. According to Roman and Euros instruction letter, only 40% of the Merchants

payments were to be retained for Cashable Voucher redemptions. Id. 88. Taking into account that Merchants were responsible for remitting to TCT only

15% of the face value of each Cashable Voucher they issued, only 6% of the original purchase price of the selected items was to be used to capitalize TCT. Complaint 36, 40. 89. Roman, through Euro, sent a second letter with slightly different directions to the

Trustees on May 17, 2002. However, this second instruction reaffirmed that TCT would only be keeping 40% of the Merchants payments. Ex. 35; Complaint 37. 90. Roman and Euros instruction letters to the Trustees directed that the 60% of the

Merchants payments received by TCT pursuant to the Merchant Agreements be removed from TCT and distributed to Euro and the other parties in the TCT business enterprise, including the Defendants. Roman and Euros letters instructed the Trustees to divide the 60% lump sum as follows: (i) 6% to the Trustees (subsequently increased to 6.5%); (ii) 17.5% to Consumer 15

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Productions (or CPI), (iii) 30.5% to Euro (subsequently reduced to 30%), (iv) 3% to GT and/or Jaynes, and (v) 3% to American lawyers, who from approximately March 2004 through February 2005 were Racine and Monaco. Exs. 34, 35; Complaint 37. 91. Starting in mid-2002, Nick and Justin, sons of Roman, each began to receive

payments equal to approximately 2% of the Merchants payments generated from sales in the U.S. Complaint 37; Schedules A and B to the Complaint. 92. Defendants received transfers from TCT (Transfers) between April 2002 and

October 2005, in the following aggregate amounts: Eurofinance S.A. Nicholas Roman Justin Roman CP Promotions, Ltd. $6,393,535.15 $432,338.86 $238,514.31 __ Cdn$1,988,144.71 __ __ Cdn$1,318,310.92

Declaration of David Stephenson 7, Exs. A and B. 93. Defendants received Transfers from TCT between December 6, 2004 and

December 5, 2005 (the one-year period prior to TCTs bankruptcy filing), in the following aggregate amounts: Eurofinance S.A. Nicholas Roman Justin Roman CP Promotions, Ltd. $827,768.89 $21,119.16 __ __ Cdn$293,309.04 __ __ Cdn$164,576.71

Declaration of David Stephenson 8, Exs. A-1 and B-1.

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94.

At the time of each of the Transfers, TCT was insolvent because the amount

retained by TCT only 6% of the face amount of the Cashable Vouchers was insufficient to pay TCTs obligations to its creditors, including the consumers who hold Cashable Vouchers issued by TCT. Complaint 43. 95. The defendants diversion of the bulk of TCTs funds, together with the

substantial likelihood that TCT would be sued by State Attorney Generals because of its deceptive marketing practices, left TCT insolvent from its inception. Complaint 38-40, 42-43. 96. The Transfers were made without fair consideration at a time when TCT (i) was

insolvent or would be rendered insolvent by such Transfers, (ii) was engaged and/or was about to engage in a business or transaction for which the property remaining in TCTs hands after such Transfers was an unreasonably small capital, and/or (iii) intended or believed or reasonably should have believed that it would incur debts beyond its ability to pay as they matured. Compliant 81. 97. The Transfers (i) to Euro (and thus Roman), Nick and Justin were the equivalent

of dividends to equity owners while TCT was insolvent and for which TCT received no consideration and/or (ii) were payments to Euro, Roman, Nick, Justin and CPI for services which conferred less than fair consideration (or less than reasonably equivalent value) on TCT. The inadequacy of TCTs funds rendered it insolvent and also left it with unreasonably small capital at the time of the Transfers. Complaint 82. 98. Defendants were general partners of TCT and it was insolvent on the dates such

Transfers were made and/or it became insolvent as a result of such Transfers. Complaint 88. 99. The Transfers that were made within one year prior to the commencement of the

TCT bankruptcy case were transfers of an interest of TCT in property within the meaning of 11 U.S.C. 101(54) and 547(b), and were made to or for the benefit of a creditor, for or on

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account of an antecedent debt, while the debtor was insolvent. Defendants are insiders of TCT within the meaning of 11 U.S.C. 101(31). The Transfers enabled them to receive more than they would have received if (1) the case were a chapter 7 liquidation; (2) such Transfers had not been made; and (3) the transferees received payment of such debt to the extent provided by the provisions of the Bankruptcy Code. Complaint 90. 100. TCTs predecessors, The Cashback Trust and the Other TCT, had both been sued

by Kansas officials because their marketing of their respective programs was deceptive to consumers. Complaint 45. 101. Nevertheless, the defendants created TCT as a replica of these previous trust-

rebate schemes. The only difference between the TCT scheme and its predecessors was the name of the voucher used. The vouchers issued and the marketing and promotion techniques were virtually identical. The consumer deception that was an essential element to the enterprise virtually guaranteed that TCT would be sued and that, as part of a judgment or a settlement in the states in which the scheme operated, it would owe substantial amounts of money, beyond its ability to pay. Indeed, TCTs consumer deceptions led to the Missouri Attorney General suit and the loss of $1,850,000. Complaint 40. 102. Fear of similar suits by other state Attorneys General who were actively

investigating the scheme caused TCT to file its bankruptcy petition. Ex. 22 at 7-10. 103. Consumers who purchased goods and services pursuant to the Cashable Voucher

Program were misled by the marketing materials prepared and provided to the Merchants by defendants. Glaring inconsistencies existed between the operation of the Cashable Voucher Program as portrayed in the marketing materials and the manner in which the program actually functioned. Complaint 40, 42.

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104.

While several versions of the Cashable Voucher were in circulation, each with

slightly different terms and conditions, they all contained the same guarantees about how TCT funds would be invested. Ex. 36; Complaint 36. 105. Consumers were told that From merchant payments received against vouchers

issued in the same week, a series of no-risk US only trust account investments are made by the trust (weekly fund) the full returns from which (capital and interest) are used exclusively to pay validly claiming voucher holders on maturity or prior to maturity. Id. 106. In fact, the full returns were not used exclusively to pay valid claims; most of

the Merchants payments were diverted from TCT by the defendants and distributed amongst themselves, per Euros instruction letters to the Trustees. Complaint 37. 107. The Defendants never followed through on their pledge to form a series of U.S.

bank accounts in which to place and differentiate the week by week payments the Merchants were required to make under the Merchants Agreements. Instead, most of the funds reserved to pay claims were deposited and commingled in a general bank account at Blue Ridge Bank and Trust Co., in Kansas City, Missouri. Payments related to Cashable Vouchers in any given week were freely intermingled with payments from other weeks. Ex. 37; Magerkurth deposition at 36 (Ex. 47); Davis deposition at 207 (Ex. 16). 108. The defendants instructed the Merchants to suppress crucial aspects of the claims

redemption process, and not share them with consumers. When promoting the Cashable Voucher Program consumers were told that it was a memory test, but were not told about the difficult and arbitrary claims redemption process that a timely claim must go through to be approved. This stressing of memory as the crucial factor in obtaining a rebate, as opposed to comprehension, was a part of Consumer Promotions formal marketing campaign. These marketing materials directed Merchants, when asked by consumers how the Cashable Voucher

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Program could turn a profit if it paid back large sums of money to consumers, to explain that the programs profitable due entirely to consumer forgetfulness. Ex. 19; Complaint 39-40. 109. Despite what the marketing materials suggested, it was the ability to comprehend

and to comply with obtuse, complex and misleading instructions dealing with the redemption process, located in 8 point Arial font on the back of the vouchers, that was the most challenging aspect of the redemption process. One reason for this is that the instructions required voucher holders to perform a series of largely arbitrary actions designed to frustrate them and which the Trustees themselves did not fully comprehend. Davis deposition at 77-78, 107 (Ex. 16); Bonley deposition at 57-58 (Ex. 38); Complaint 40. 110. But what made comprehension of the instructions even more essential was that

the voucher redemption process as applied and adjudicated by the defendants was exacting and unforgiving. Exs. 36, 39; Complaint 40. 111. Even if a consumer remembered to timely submit a claim, if any instruction was

deviated from in the slightest, a voucher-holders claim would be denied. Rugg deposition at 5960 (Ex. 40); Cavanaugh deposition at 57 (Ex. 41); Ex. 39; Complaint 40. 112. The only way the Cashable Voucher Program could be solvent was if an

extraordinarily large percentage of timely submitted claims were denied. This was made apparent by the statistical analysis done on the Buyback Program, which supposedly supplied the mathematical framework for the later schemes, including TCT. According to this analysis, almost 20% of the people who were issued coupons submitted rebate claims for the full amount of the purchase price. Ex. 42; Complaint 40. 113. Photographs of seven ostensibly successful claimants, each of whom received

rebates equaling 100% of the face amount of their Cashable Vouchers, were contained in the

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marketing materials given to Merchants and distributed to consumers and Cashable Voucher holders. Ex. 43. 114. The pictures of the supposedly successful claimants gave the consumers the false

impression that the rebate was easy to obtain and that the rebate amounts would come close to the full face amount of their Vouchers. Tennyson deposition at 22-27 (Ex. 44); Thomas deposition at 24 (Ex. 45); Tunison deposition at 12-18 (Ex. 46); Davis deposition at 206 (Ex. 16). 115. Despite what the defendants were telling consumers, the photographs of the

Voucher holders in the promotional materials were not of successful claimants. Ex. 43; Magerkurth deposition at 33-43 (Ex. 47). 116. The Voucher holders that appeared in the pictures in the promotional materials

did not have their claims approved by submitting their Vouchers in for redemption in a timely manner and complying with the claims process stated on the back of the Cashable Vouchers. Magerkurth deposition at 33-43 (Ex. 47); Tennyson deposition at 22 (Ex. 44); Thomas deposition at 24 (Ex. 45); Tunison deposition at 12-18 (Ex. 46). 117. The seven consumers in the marketing photographs were each paid the full face

amount of the Vouchers much earlier than the three years consumers were required to wait before submitting a Voucher. Magerkurth deposition at 33-43 (Ex. 47). 118. In addition, the seven consumers did not receive payment of their Vouchers from

the funds set aside for payouts to successful claimants. Their payments came from an exceptions fund maintained by Euro. Ex. 43 at WHM00711. 119. The promotional materials prepared by the defendants and distributed to

Merchants and consumers contained a letter from the Sinclairs Leigh Sorene auditing firm confirming the existence of insurance coverage for TCT funds. Ex. 48.

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120.

Many Merchants used the existence of insurance to influence consumers into

purchasing goods or services pursuant to the Cashable Voucher Program. However, despite the letter supplied in the marketing materials assuring that the claims funds were insured, no such insurance coverage existed. The only insurance coverage in effect in relation to TCT was professional liability coverage for Caplans Solicitors and Davis Bonley Accountants provided by Queens Land British Empire Insurance Group. Some materials supplied to Merchants did state this very point. Nevertheless, the conflicting information regarding insurance, supplied to the Merchants by Euro suggested to Merchants and consumers that the claims funds were insured against any contingency, not just Trustee professional malpractice. This deceptive information impacted how Merchants marketed the Program and ultimately influenced consumers decisions regarding whether to purchase the Program related goods or services. Tennyson deposition at 27 (Ex. 44); Bader deposition at 29 (Ex. 49); Meyer deposition at 58-63 (Ex. 50). 121. By early 2005, as consumers submitted Vouchers for redemption (including

backdated Vouchers which TCT had issued in exchange for vouchers from prior programs operated by defendants), it became apparent that the Cashable Voucher Program was more than simply a memory test. Consumers who had their timely claims denied by TCT took the issue up with their respective state Attorneys General. Exs. 21, 51, 52, 54; Thomas deposition at 19-49 (Ex. 45); Complaint 40. 122. Prompted by these consumer complaints, on or about February 16, 2005, the

Attorney General of Missouri, filed suit against TCT and Consumer Promotions asserting that they had committed multiple violations of Missouris Merchandising Practices Act. Ex. 52; Complaint 46. 123. The Missouri Attorney Generals complaint also named additional defendants,

including Euro, Roman and the Trustees. Id.

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124.

On August 31, 2005, after a four-day preliminary injunction hearing, a Stipulation

for Entry of Consent Judgment and Dismissal was entered in the Missouri AG action. On September 2, 2005, Roman and Euro instructed and caused TCT to pay $1,850,000 to the Missouri AG, including investigative costs and administrative fees, in settlement of the litigation. Ex. 53; Complaint 47. 125. Even though Euro, Roman and the Trustees also were named as defendants, TCT

paid the settlement entirely from funds held in trust for the benefit of the Cashable Voucher holders. Ex. 8 at 15; Complaint 47. Conclusions of Law 1. This Court has subject matter jurisdiction over this proceeding pursuant to 28

U.S.C. 1334. This proceeding asserts causes of action arising under Title 11, U.S.C., and/or arising in or related to the above-captioned case under Title 11, U.S.C. This proceeding is a core proceeding within the meaning of 28 U.S.C. 157(b). 2. Because Defendants were served with the summons and complaint by personal

delivery by process servers, in accordance with Bankruptcy Rule 7004(a)(1), which incorporates Fed. R. Civ. P. 4(f) and 4(h), which incorporate The Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents, 20 U.S.T. 361, service of process was sufficient. 3. The exercise of personal jurisdiction over Defendants is consistent with the

Constitution and laws of the United States. This Court has statutory long arm personal jurisdiction over Defendants under Bankruptcy Rule 7004(f). 4. This Court has both specific and general jurisdiction over the Defendants. The

Defendants specifically sought out the United States as a place to do business and specifically sought out U.S. merchants and U.S. consumers with whom to do business. The TCT consumer sales promotions program promoted by CPI in Canada was an integral part of the TCT consumer

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sales promotions program promoted by Consumer Promotions in the United States. Defendants have had sufficient minimum contacts with the United States, and the exercise of personal jurisdiction would not offend traditional notions of fair play and substantial justice. The exercise of personal jurisdiction over Defendants therefore satisfies the Fifth Amendment due process requirement. 5. The Defendants formed and operated the TCT business enterprise as general

partners, and are therefore each liable for the claims against TCT held by its creditors, in the amount of $160 million. 6. By virtue of their control and domination of TCT, the Defendants owed fiduciary

duties to TCT, including the duty of loyalty, the duty of care, and the duty to avoid self-dealing and conflicts of interest. The Defendants perpetrated numerous self-interested, careless and disloyal acts that violated the fiduciary duties they owed TCT and aided and abetted similar violations of those fiduciary duties. 7. Roman and Euro were responsible for mulcting TCT at its inception. Roman and

Euro appointed trustees of TCT who were beholden to them completely. The Defendants rubber-stamped whatever instructions they received from Roman, and routinely signed letters and correspondences drafted by Roman. Roman made every substantive decision that arose during the course of the TCT business enterprise, and the Trustees and the other defendants deferred to Romans decisions without question or hesitation. 8. Roman and Euro breached their fiduciary duties by failing to independently

inquire into the financial viability of the Program and failing to determine the adequacy of the monies retained by TCT to meet its obligations. 9. The Defendants breached their fiduciary duties by inadequately capitalizing TCT

and skimming off the majority of Merchants payments to TCT.

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10.

The Defendants breached their fiduciary duties to TCT by binding TCT to

voucher agreements and Merchant Agreements without first determining whether the Program was adequately funded. 11. The Defendants breached their fiduciary duties to TCT by taking the entire

$1,850,000 Missouri Attorney General settlement payment from TCT itself, despite the fact that this payment was unauthorized and an act of self-dealing. 12. By reason of Defendants breaches of their fiduciary duties, TCT was damaged in

the amount of $160 million. 13. The Defendants owed duties of care flowing from their roles as fiduciaries and by

virtue of their control and domination of TCT. The Defendants negligent conduct breached the duty of care they owed to TCT, and this breach proximately caused damages to TCT, in the amount of $160 million. 14. The Defendants improperly used their control of TCT and the Program to obtain

substantial monetary benefits for themselves resulting in unjust enrichment. The Defendants have a duty to pay restitution to TCT equal to the amounts that they diverted from TCT, as follows: Eurofinance S.A. and Adrian Roman, jointly and severally Nicholas Roman Justin Roman CP Promotions, Ltd. 15. $6,393,535.15 $432,338.86 $238,514.31 __ Cdn$1,988,144.71 __ __ Cdn$1,318,310.92

Roman and Euro were beneficiaries of TCTs payment of the $1,850,000

Missouri Attorney General settlement and have a duty to pay restitution to TCT in that amount.

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16.

Because Euro and Roman completely dominated TCT and used their domination

for the purposes of committing fraud, the veil of TCT should be pierced. Euro and Roman, jointly and severally, therefore are liable for TCTs debts, in the amount of $160 million. 17. Because Roman dominated Euro, and used this domination to commit wrongs

against TCT and its creditors, Euros corporate veil should be pierced and Roman is liable for Euros, and thus TCTs, debts, in the amount of $160 million. 18. Transfers to the Defendants in the following amounts were fraudulent

conveyances under applicable New York and Missouri law and Bankruptcy Code 548, and the Defendants are liable to TCT under applicable New York and Missouri law and Bankruptcy Code 550, in the following amounts: Eurofinance S.A. and Adrian Roman, jointly and severally Nicholas Roman Justin Roman CP Promotions, Ltd. WHEREFORE it is hereby ORDERED that Plaintiffs Motion for a Default Judgment, pursuant to Bankruptcy Rule 7055, and Summary Judgment, pursuant to Bankruptcy Rule 7056, against defendants Adrian Roman, Justin Roman, Nicholas Roman, Eurofinance S.A. and CP Promotions, Ltd. is granted; and it is further ORDERED that Plaintiffs have judgment on Count I of the Complaint (Claim for Declaratory and Further Relief), declaring that the defendants Adrian Roman, Justin Roman, Nicholas Roman, Eurofinance S.A. and CP Promotions, Ltd. formed and operated the TCT business enterprise as general partners, and are therefore each liable for the claims against TCT held by its creditors; and it is further 26 $6,393,535.15 $432,338.86 $238,514.31 __ Cdn$1,988,144.71 __ __ Cdn$1,318,310.92

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ORDERED that Plaintiffs have judgment on Counts II (Breach of Fiduciary Duty) and III (Negligence) of the Complaint, against defendants Adrian Roman, Justin Roman, Nicholas Roman, Eurofinance S.A. and CP Promotions, Ltd., jointly and severally, in the amount of $160 million; and it is further ORDERED that Plaintiffs have judgment on Counts IV (Unjust Enrichment and Restitution), VI (Fraudulent Conveyance Under State Fraudulent Conveyance Laws), VII (Fraudulent Transfers Under 11 U.S.C. 548(a)) and X (Liability of Transferees of Avoided Transfers Under 11 U.S.C. 550) of the Complaint, against defendants Adrian Roman, Justin Roman, Nicholas Roman, Eurofinance S.A. and CP Promotions, Ltd., in the following amounts: Eurofinance S.A. and Adrian Roman, jointly and severally $6,393,535.15 Cdn$1,988,144.71, in U.S. dollars at the rate of conversion in effect on the date of judgment __ __ Cdn$1,318,310.92, in U.S. dollars at the rate of conversion in effect on the date of judgment

Nicholas Roman Justin Roman CP Promotions, Ltd.

$432,338.86 $238,514.31 __

and it is further ORDERED that Plaintiffs have judgment on Count IV of the Complaint (Unjust Enrichment and Restitution) against defendants Eurofinance S.A. and Adrian Roman, jointly and severally, in the additional amount of $1,850,000; and it is further ORDERED that Plaintiffs have judgment on Counts VIII (Fraudulent Transfers Under 11 U.S.C. 548(b)) and X (Liability of Transferees of Avoided Transfers Under 11 U.S.C. 550) of the Complaint against defendants Adrian Roman, Nicholas Roman, Eurofinance S.A. and CP Promotions, Ltd., in the following amounts:

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Eurofinance S.A. and Adrian Roman, jointly and severally

$827,768.89

Cdn$293,309.04, in U.S. dollars at the rate of conversion in effect on the date of judgment __ Cdn$164,576.71, in U.S. dollars at the rate of conversion in effect on the date of judgment

Nicholas Roman CP Promotions, Ltd.

$21,119.16 __

and it is further ORDERED that Plaintiffs have judgment on Count V of the Complaint (Veil Piercing), declaring that the corporate veil of Eurofinance S.A. be pierced to hold defendant Adrian Roman liable for the debts of defendant Eurofinance S.A. to TCT, and that the veil of TCT be pierced to hold defendants Eurofinance S.A. and Adrian Roman, jointly and severally, liable to Plaintiffs for the debts of TCT, in the amount of $160 million; and it is further ORDERED that the Clerk of the Court may accept proof by affidavit or declaration under penalty of perjury regarding the market rate of exchange of Canadian dollars into U.S. dollars in order to establish the rate for conversion of Canadian dollars into U.S. dollars on the date of judgment and to enter judgment in U.S. dollars; and it is further ORDERED that, there being no just reason for delay, pursuant to Bankruptcy Rule 7054, the Clerk of this Court forthwith shall enter judgment as aforesaid against defendants Adrian Roman, Justin Roman, Nicholas Roman, Eurofinance S.A. and CP Promotions, Ltd. Dated: New York, New York July 18, 2008 S/ Robert E. Gerber _______________________ ROBERT E. GERBER UNITED STATES BANKRUPTCY JUDGE

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