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Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 2 of 36 Page ID #:553
1 Plaintiffs allege:
2 JURISDICTION AND VENUE
3 1. This action arises under 18 U.S.C. §§ 1961, 1962 and 1964. This Court
4 has original jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1337.
5 2. This Court has supplemental jurisdiction over Plaintiffs' state law claims
6 under 28 U.S.C. § 1367(a).
7 3. Venue is proper in this Court under 18 U.S.C. § 1965 and 28 U.S.C. §
8 1391 because at least one defendant resides, is found, has an agent, or transacts his
9 affairs in the Central District of California. Further, a substantial part of the events
10 or omissions giving rise to the claims pleaded in this Complaint occurred in the
11 Central District of California and at least one defendant may be found in this District.
12 PARTIES
13
Plaintiffs
14 4. Plaintiffs Douglas B. Nurock and Francesca Stone both live in South
15 Lake Tahoe, California. In October 2005, the N urock Plaintiffs purchased a residence
16 for $269,000 from Pelican Eyes Piedras y Olas Sociedad Anonima ("PEPO"). The
17 residence was called Casa Fantasia, and it is located in Phase 2 of the Pelican Eyes
18 Resort ("Resort").
19 5. Plaintiffs Michael K. Moezzi, individually and as Trustee of the Michael
20 . Moezzi Family Trust UA 411612003, and Nazanin Moezzi both live in Gainesville,
21 Florida. In early 2006, the Moezzi Plaintiffs purchased a residence for $379,000 from
22 PEPO. The residence was called Casa Florida, and it is also located in Phase 2 of the
Resort ("Resort").
Joseph Dahlheimer,
"Dahlheimer Plaintiffs") live in
Ruthane Dahlheimer
and
Dahlheimer Plaintiffs

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 3 of 36 Page ID #:554
1 Verde, and it is also located in Phase 2 of the Pelican Eyes Resort ("Resort").
2 Defendants
3 7. Defendant Pelican Eyes Holding Company, LLC ("PEHC") is a
4 California limited liability company that has its headquarters in Long Beach,
5 California. PEHC controls the Resort.
6 8. Defendant Pelican Rescue, LLC ("PRO") is a California limited liability
7 company that has its headquarters in Long Beach, California. PRO is the Managing
8 member of PEHC, and owns approximately 40% of PEHC. PRO and PEHC are
9 hereinafter collectively referred to as the "Pelican Eyes Companies."
10 9. Defendant Administradora de Hoteles de San Juan del Sur, S.A.
11 ("ADH") is a company formed under the laws of Nicaragua.
12 10. Defendant Inversiones Inmobiliara de San Juan del Sur Sociedad
13 Anonima ("lIS") is a company formed under the laws of Nicaragua.
14 11. Defendant Inversiones Togo Sociedad Anonima ("Togo") is a company
15 formed under the laws of Nicaragua.
16 12. PEHC, the California limited liability company, owns all but one share
17 of ADH, all but one share of lIS and all but one share of Togo. PEHC thus controls
18 all three of those entities.
19 13. Defendant James K. Hankla ("Hankla") is the President and one of the
20 managing members ofPEHC. Hankla is also one of the managing members of PRO.
21 14. Defendant Michael J. Emling ("Emling") is an active member of the
State Bar of California. Emling is a managing member of PEHC and is also a
managing member PRO.
15. that this Complaint
participants, but it was controlled
others,
16. are unaware true names

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 4 of 36 Page ID #:555
1 named herein as DOES 1 through 10, inclusive. Plaintiffs are informed and believe
2 and, upon that basis, allege that each of the Defendants designated as DOES 1
3 through lOis responsible in some manner for the acts, transactions and occurrences
4 referred to in this Complaint, and that the damages alleged by Plaintiffs in this
5 Complaint were directly and proximately caused by said Defendants' conduct.
6 Plaintiffs will ask leave of Court to amend this Complaint to show the true names and
7 capacities of the Defendants designated as DOES 1 through lOin this Complaint
8 when they have been ascertained.
9 VICARIOUS LIABILITY
10 17. Plaintiffs are informed and believe and, upon that basis, allege that at all
11 relevant times, each of the Defendants was an agent, servant, or employee of one or
12 more of the remaining Defendants, was at all times herein mentioned acting within
13 the course and scope of such actual, apparent or ostensible agency or employment and
14 was acting with the permission, knowledge, consent and/or ratification of the other
15 Defendants.
16 18. Plaintiffs are informed and believe and, upon that basis, allege that at all
17 relevant times, each of the Defendants herein knew of the breaches of duties owed to
18 Plaintiffs that are described in this Complaint, and gave the other Defendants herein,
19 and each of them, substantial assistance or encouragement to engage in the conduct
20 constituting such breaches of duty. Alternatively, Plaintiffs are informed and believe
21 and, upon that basis, allege that at all relevant times, each of the Defendants herein
gave substantial assistance to the other Defendants herein in violating the duties they
owed to Plaintiffs, and in so doing, also violated their own duties Plaintiffs.
1 are informed and and, upon that that all
relevant the Defendants herein was aware that
the DOE
conduct and that each the ,-,"-L,,-L'UUiH.J
4

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 5 of 36 Page ID #:556
1 Defendants to engage in that conduct and intended that the wrongful conduct alleged
2 herein occur.
3
NATURE OF THIS COlVIPLAINT
4 20. Plaintiffs seek to recover the damages they sustained as a result of a
5 fraudulent scheme the Defendants conducted. As a result that scheme, Plaintiffs lost
6 real estate worth millions of dollars, all of which wound up in the hands of Defendant
7 PEHC. Moreover, in the course of the scheme, Plaintiffs were solicited to (and did)
8 invest in securities offerings by PEHC that sought to raise funds to "rescue" the
9 Resort from its financial problems.
10 21. More specifically, PEPO sold a residence called Casa Fantasia to the
11 Nurock Plaintiffs in approximately October 2005. The residence was located in the
12 Resort. A Purchase and Sale Agreement binding under the law of Nicaragua was
13 executed, but that Agreement was never recorded, nor was a deed issued to the
14 Nurock Plaintiffs. Instead, title to the property remained in the hands of PEPO.
15 However, the Nurock Plaintiffs were repeatedly assured that a deed would be shortly
16 forthcoming and would be issued when the process of registering the Resort as a
17 condominium development under Nicaraguan law was completed. The Nurock
18 Plaintiffs took possession of Cas a Fantasia and used and enjoyed the residence for
19 several years after they purchased it.
20 22. PEPO sold the Moezzi Plaintiffs a residence called Casa Florida in early
21 2006. The residence was located in the Resort. A Purchase and Sale Agreement
binding under the law of Nicaragua was executed, but that Agreement was never
recorded, nor was a deed issued to the Moezzi Plaintiffs. Instead, title to the property
remained in hands PEPO. the Plaintiffs were
25 assured that a deed would be shortly forthcoming and would
the as a
5

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 7 of 36 Page ID #:558
1 those of other similarly situated persons. Defendants did not intend to, and never did,
2 convey deeds to any of the residences to the Plaintiff class.
3 26. The scheme the Defendants perpetrated to achieve their objective was
4 to claim to have a promissory note ("Note") that nobody has ever seen for a $195,000
5 debt supposedly owed by PEPO to a corporation the Defendants had caused to be
6 formed after they started to "rescue" the Resort. When PEPO defaulted on the
7 supposed Note, Defendants instigated a lawsuit in Nicaragua against PEPO. In the
8 lawsuit, one attorney represented the plaintiff corporation recently formed by the
9 Defendants (the "Plaintiff Corporation"), and another attorney from the same law
10 office represented PEPO - i.e., the party on the other side of the lawsuit! Both
11 attorneys were paid by the same person or entity. PEPO's attorney then caused about
12 $15 million worth of real estate to be transferred to the Plaintiff Corporation
13 noteholder in "satisfaction" of its "$195,000 claim." Included in that real estate were
14 the residences which Plaintiffs had purchased, as well as the residences of other
15 similarly-situated persons. As part of the scheme, no transfer of title was made to the
16 Plaintiffs. The net result is that Plaintiffs paid for the real estate, and now,
17 accordingly to the Defendant "rescuers," Plaintiffs have nothing, while Defendant
18 PERC owns all of that real estate through various wholly owned subsidiaries.
19 GENERAL ALLEGATIONS
20 Background
21 27. Pelican Eyes Resort was founded in 2003 and is located in San Juan del
Sur, Nicaragua. It is a resort consisting of approximately 27 acres near the Pacific
Coast of Nicaragua. It includes two restaurants, three swimming pools, landscaped
common and over 60 units. The Resort was initially III
2003 Chris Berry as a place live, and then into a resort as friends and
lIUIIH.,,' in the area.

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 10 of 36 Page ID #:561
1
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move forward, get deeds to those with homes, build or refund
unconstructed homes out of the homeowner side of the income ... "
(Emphasis added).
4 (b) "The present situation is that Pelican Rescue LLC now owns most of
5 phase one through a Nicaragua subsidiary, as a result of agreement with
6 the bank and that bank foreclosure process. This is a self contained
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functional property as far as we are concerned. As to phase two, the
property is presently under a lien. This has the advantage of preventing
other outside creditors from having a go at any particular individual's
house. Under current thinking, we would go ahead and foreclose on that
11 part ourselves, and then proceed to make new deals with those
12 homeowners, including getting the deeds issued." (Emphasis added).
13 41. On or about December 8, 2009, the Pelican Homeowners LLC ("PH")
14 was formed. That entity was an Ohio limited liability company and was to operate as
15 a voice for the homeowners in the Resort.
16 42. On or about December 13,2009, Defendants Hankla, Emling and PRG,
17 amOfl1! others, sent an email to Plaintiff Nurock and others. In that email, these
'-'
18 Defendants stated: H[t]he HOSC and PRG are also working jointly on special projects
19 concerning Phase 2 and other as yet unencumbered PEPO land." (Emphasis added).
20 43. On or about December 22, 2009, the first private placement
21 memorandum ("First PPM") was issued by PEHC, controlled by Hankla and Emling
(among others). Among other things, it stated the following:
(a) That PEHC was with PEPO Unit owners to implement
(b) That the Resort included privately residential
that PEPO, S.A.
That
the Units;
10

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 11 of 36 Page ID #:562
On
a
January 10, and under
(Emphasis added).
pursuant
11

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 12 of 36 Page ID #:563
1 Moezzi Plaintiffs purchased 50 units in PEHC for $50,000.
2 47. On or about January 19,2010, and under and pursuantto the First PPM,
3 the Nurock Plaintiffs sent a check for $20,000 to purchase 20 units of PEHC, and
4 thereafter completed the purchase of those units.
5 48. On or about January 29,2010 and subsequently, on about June 8, 2010,
6 and under and pursuant to the First PPM, the Dahlheimer Plaintiffs sent a check for
7 $25,000 to purchase 25 units ofPEHC (in January) and $10,000 for an additional 10
8 units.
9 49. On or about January 22, 2010, Defendant Hankla, acting on behalf of at
10 least PRG and PEHC, sent an email toresidenceowners.includingPlaintiffs.in
II which he stated, among other things, that:
12 (a) "At the end of the day, one of two things is going to happen. You
13 are going to get a home with a deed, or you are going to get your
14 money back. If I had to bet, I would bet that you are going to get
15 a home with a deed." The email was signed "J. Kirk Hankla,
16
17
18
Managing Member, Pelican Rescue Group."
(b) "I think it is time to put a drop dead date on homeowner
participation because it is the right thing to do for those who have
19 invested and to whom I now owe a fiduciary duty."
20 50. On or about January 23,2010, Garrett sent an email to Nurock, among
21 others, in which he advised that PH had entered into a "Development Agreement"
with PRG. Garrett advised, among other things, that:
(a) "This a contract between Homeowners and the Pelican Rescue
LLC that the framework, relationship and
obligations of each entity to the other. It is this agreement which
Pelican
in the
promises made

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 13 of 36 Page ID #:564
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Resort. A copy of the Executive Summary follows this newsletter.
"
(b) "PRO has committed formally to cooperate with Homeowners and
all Unit Owners and share all material information relating to the
Development. Most significantly, in the Agreement, PRG has
acknowledged that the unsecured (and sometimes poorly
documented claims of the rnembers of Homeowners . . . are binding
obligations on PEHC. " (Emphasis added).
(c) The "Executive Summary" stated in pertinent part that: "PRO has
agreed to secure title to all of the real estate in the development
and to transfer marketable title to Units to their rightful owners."
(Emphasis added).
(d) The "Executive Summary" also stated that: "[w]ith respect to
Phase 2 of the Development, PRO has caused the original lien
placed by BanCentro on that land to be transferred to
Administradora de Hoteles de San Juan del Sur S.A.
(" Administradora H
). Administradora is a wholly-owned subsidiary
ofPEHC. Because the amount of that lien is relatively small, PRO
has proposed that Owners (through Powers of Attorney granted
to trusted representatives in Nicaragua) can contribute their
claims against PEPO to Cobranzas S.A. ("Cobranzas") in
exchange for shares of Co branz as. Administradora will contribute
its claims PEPO to Cobranzas in for shares
sufficient Cobranzas will
conduct a judicial PEPO and obtain title to
Phase
real 'vLlLUL'v

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 14 of 36 Page ID #:565
1 another PEHC subsidiary, lnversiones Inmobiliarias de San Juan
2 del Sur ("Inversiones")." (Emphasis added).
3 51. On or about March 5, 2010, Garrett sent another email to Plaintiff
4 Nurock, among others, in which he reported that an informal owners meeting attended
5 by various persons, including Defendants Hankla and Emling, had occurred, and
6 further reported that: "[a] survey team is on site obtaining precise data in order to
7 consolidate each Parcel under our Resort, and this is the first step toward separating
8 individual unit sites in the process of acquiring deeds to our properties." (Emphasis
9 added.)
1 0 52. On or about March 22, 2010, Umana, acting as the judicial representative
11 of ADH, filed an action in Nicaragua in which ADH alleged that PEPO had defaulted
12 on the supposed promissory Note, and sought to recover the sum due under that Note.
13 53. Chris Berry was not given notice of the action filed by Umana against
14 PEPO.
15 54. Prior to the filing of the action by ADH against PEPO on the Note,
16 PEPO's attorneys, G&B, appointed attorney Roger Perez Aguilar ("Aguilar") to act
17 for PEPO. At the time Aguilar was appointed, he was working in the same law office
18 as Umana, counsel for Plaintiff ADH.
19 55. On or about April 9, 2010, Aguilar appeared in the action and
20 participated in a "Mediation Procedure" for ADH's claim against PEPO. Aguilar
21 announced that PEPO did not have the money to payoff the $195,000 Note, and
22 instead transferred to ADH all of PEPO's remaining real estate assets as well as
Plaintiffs' real estate. This transfer was purportedly in satisfaction of the $1 ,000
The property that Aguilar transferred included millions of dollars
which had been bought and paid
the plaintiff

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 15 of 36 Page ID #:566
1 57. PEHC paid the attorneys for both ADH and PEPO for their participation
2 in this activity.
3 58. On or about April 22, 2010, the Nurock Plaintiffs sent a check for
4 $20,000.00 to the Pelican Loan Company ("PLC") to purchase 20 shares of its stock.
5 This check was sent because the operators claimed they desperately needed money
6 to help with the "crushing" legacy debt, in order to provide Plaintiffs with a deed to
7 their property.
8 Defendants Disclose That PEHC Owned the Property Which they Had
9 Represented in the First PPl\t1 Was Owned by The Plaintiffs and The Class
10 59. On or about February 21, 2011, despite the statements in the First PPM,
11 and in the Development Agreement, Hankla announced at a meeting that all real
12 estate in the Resort was now owned by PEHC, and that no one who had paid money
13 to PEPO to purchase residences in the Resort owned any of those residences.
14 60. On or about March 15, 2011, Defendants issued a second private
15 placement memorandum ("Second PPM"). Among other facts, PEHC asserted in that
16 PPM the following:
17 (a) The Resort was acquired by PRG through a combination of
18 foreclosures and purchases;
19 (b) The interest of PRG in the Resort had now been transferred to
20 PEHC;
21 (c) Titles were never granted to putative purchasers of individual
units, except in a few cases;
(d) The classes of PEPO stakeholders, of persons who
built or un-built, or loaned without ,"-,,"A fLU
That as a result of the PEHC and
That if a Plaintiffs here did
15

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 17 of 36 Page ID #:568
1 66. Plaintiffs assert claims that are typical of the entire class, and will fairly
2 and adequately represent and protect the interests of the class in that Plaintiffs have
3 no interest antagonistic to those of the other members of the Class. Class counsel is
4 competent and experienced in the prosecution of class action litigation.
5 67. In the prosecution of this action, expenses will be incurred for attorney
6 fees and costs. Such attorney fees and costs are necessary and will inure to the benefit
7 of the members of the class.
8
9 FIRST CLAIM FOR RELIEF
10 (Violation of Section 10(b) of the Securities and Exchange Act of 1934
11 and Rule 10b-S On Behalf of The Plaintiff Class
12 Against All Defendants)
13 68. Plaintiffs incorporate by reference the allegations contained III
14 Paragraphs 1 through 67 of this Complaint.
15 69. Defendants participated in a plan, scheme and course of conduct which
16 was intended to and did deceive Plaintiffs, enabled Defendants to sell a fraudulent
17 investment to Plaintiffs, and caused them to lose significant funds. In furtherance of
18 this unlawful scheme, plan and course of conduct, Defendants: (a) employed devices,
19 schemes, and artifices to defraud; (b) made untrue statements of material fact and/or
20 omitted to state material facts necessary to make the statements not misleading; and
21 (c) engaged in acts and practices, and a course of business which operated as a fraud
22 and deceit upon the Plaintiffs in the purchase of their investment, in violation of
Section 10(b) of the Exchans:re Act and Rule lOb-5. At least some of that conduct
-< 7 4..,/
to 62 Complaint. Defendant PEHC and its wholly
owned affiliates ADH, lIS, and TOGO are being sued as primary participants the
as Control
and Defendant PRG, as well as
17

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 18 of 36 Page ID #:569
1 70. Defendants, individually and in concert, directly and indirectly, by the
2 use of means or instrumentalities of interstate commerce and/or of the mails, engaged
3 and participated in a continuous course of conduct to misrepresent and conceal
4 material facts pertaining to the investment which Plaintiffs purchased from
5 Defendants. At least some of that conduct is described in Paragraphs 20 to 62 of this
6 Complaint.
7 71. The Defendants employed devices, schemes and artifices to defraud, and
8 engaged in acts practices and a course of conduct as alleged herein, in an effort to
9 assure Plaintiffs that, among other things:
10 (a) Plaintiffs' title to their residences in the Resort was assured;
11 (b) Defendants were working to obtain marketable title to Plaintiffs'
12 residences;
13 (c) Defendants would cause marketable title to Plaintiffs' residences
14 to be transferred to Plaintiffs;
15 (d) That a purchase of the securities offered in the First PPM (the
16 "Investment") would assist in the achievement of Defendants' promises to transfer
17 marketable title of their residences to Plaintiffs.
18 72. Defendants failed to disclose that:
19 (a) Their primary objective was to obtain full and complete ownership
20 of the entire Resort, and in particular, all of privately owned residences sold to
21 persons like Plaintiffs by PEPO;
individual residence
(b) That they had no intention of ever providing deeds to the
and particularly the owners of residences in Phase 2 of
That to the extent that individual H.l.v

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 21 of 36 Page ID #:572
1 83. In reliance on the false and misleading statements made by Defendants,
2 Plaintiffs purchased the Investment.
3 84. At the time of the misrepresentations and omissions, Plaintiffs were
4 ignorant of their falsity and believed them to be true. Had Plaintiffs known the truth
5 regarding the nature of Defendants scheme and the Investment, which was not
6 disclosed to them, they would not have purchased the Investment.
7 85. By virtue of the foregoing, Defendants have violated Section 20 of the
8 Exchange Act.
9 86. As a direct and proximate result of Defendant's wrongful conduCt,
10 Plaintiffs suffered damages in connection with their purchase of the Investment.
11
12
13
THIRD CLAIl\t1 FOR RELIEF
(Violation of Section 12(a)(2) of the Securities Act of 1933
14 On Behalf of The Plaintiff Class Against All Defendants)
15 87. Plaintiffs incorporate by reference the allegations contained m
16 Paragraphs 1 through 86 of this Complaint.
17 88. Section 12(a)(2) of the 1933 Act provides that:
18 (a) Any person who ... offers or sells a security ... [by use of interstate
19 commerce or the mails] by . . . means of a prospectus or oral
20 communication, which includes an untrue statement of a material fact or
21 omits to state a material fact necessary in order to make the statements,
in the light of the circumstances under which they were made, not
misleading (the purchaser not knowing of such untruth or omission), and
who not burden of proof that he did not know, and in
the of reasonable care could not have known, of such untruth
or omISSIOn, subsection of this
him, who sue law
21

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 23 of 36 Page ID #:574
1 participated in the fraudulent scheme alleged above. As such, they violated Section
2 25401. The Defendants made the false and misleading statements without exercising
3 reasonable care to determine the truth or falsity of the statements.
4 94. As a proximate and foreseeable result, Plaintiffs have suffered damages,
5 in an amount to be proven at trial.
6
7 FIFTH CLAIM FOR RELIEF
8 (Violation of Corporations Code §25504.1 By The Plaintiff Class
9 Against All Defendants Except PEHC)
10 95. Plaintiffs incorporate by reference the allegations contained m
11 Paragraphs 1 through 94 of this Complaint.
12 96. Section 25504.1 of the Corporations Code provides that any person who
13 "materially assists" in a violation of section 25401 of that Code, with intent to induce
14 a person to rely on a knowing misrepresentation or omission, is jointly and severally
15 liable with any other person liable for a violation of section 25401 of that Code.
16 97. The Insider Defendants, by the conduct alleged above, materially
17 assisted PEHC in selling the Investment to Plaintiffs by false and misleading
18 statements, including those alleged above, and particularly in Paragraphs 20 to 62 of
19 this Complaint. When they did so, they intended to induce Plaintiffs to rely on
20 representations known to be false or misleading.
21 98. As a proximate and foreseeable result, Plaintiffs have suffered damages,
22 including loss of much of their retirement funds, and other compensatory and
consequential damages, in an amount to be proven at triaL
SIXTH CLAIM FOR RELIEF
(Deceit By Intentionall\iisrepresentation Against Defendant
PEHC and The Insider Defendants By The Plaintiff Class)

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 25 of 36 Page ID #:576
1 malice was committed by one or more officers, directors, or managing agents of
2 Defendant PEHC who acted on behalf of Defendant PEHC; or
3 (b) The conduct described herein constituting oppression, fraud or
4 malice was authorized by one or more officers, directors, or managing agents of
5 Defendant PEHC; or
6 (c) One or more officers, directors, or managing agents of Defendant
7 PEHC knew of the conduct constituting malice, oppression, or fraud and adopted or
8 approved that conduct after it occurred.
9
10 SEVENTH CLAIlVI FOR RELIEF
11 (Deceit By Concealment Against Defendants Hankla and PEHC
12 By The Plaintiff Class)
13 107. Plaintiffs incorporate by reference the allegations contained III
14 Paragraphs 1 through 106 of this Complaint.
15 108. Defendant Hankla was in a fiduciary relationship with Plaintiffs, and so
16 admitted in his January 22, 2010 email to them and other homeowners in the Resort.
17 109. Defendant PEHC, and all DOES, among other things:
18 (a) Intentionally failed to disclose important facts to Plaintiffs.
19 Specifically, Defendants failed to disclose their intent to obtain ownership of all of
20 the Resort including Plaintiffs' residences, and failed to disclose that they had created
21 a fabricated promissory note that they planned to use as a vehicle to obtain such
ownership through the use of a fraudulent foreclosure;
(b) Disclosed some facts to Plaintiffs but intentionally failed to
other important the disclosures they did
Specifically, Defendants stated that while they planned to use foreclosure to obtain
ownership real in the Resort, failed
included Plaintiffs'

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 27 of 36 Page ID #:578
1 Defendant PEHC who acted on behalf of Defendant PEHC; or
2 (b) The conduct described herein constituting oppression, fraud or
3 malice was authorized by one or more officers, directors, or managing agents of
4 Defendant PEHC; or
5 (c) One or more officers, directors, or managing agents of Defendant
6 PEHC knew of the conduct constituting malice, oppression, or fraud and adopted or
7 approved that conduct after it occurred.
8
9
EIGHTH CLAIM FOR RELIEF
10
(Breach of Fiduciary Duty Against All Defendants
11
By The Plaintiff Class)
12 116. Plaintiffs incorporate by reference the allegations contained in
13 Paragraphs 1 through 115 of this Complaint.
14 117. By virtue of his position, conduct and representations in connection with
15 the Resort, and by his own admission, Hankla owed a fiduciary duty to Plaintiffs.
16 118. By the conduct described above, including in Paragraphs 20-62 of this
17 Complaint, Hankla breached his fiduciary duty to Plaintiffs.
18 119. Hankla's breach of fiduciary duty was a substantial factor in causing
19 Plaintiffs harm.
20 120. The conduct described herein constitutes "oppression, fraud or malice"
21 by Hankla as those terms are defined in Civil Code §3294, and Plaintiffs are therefore
entitled to punitive damages in an amount according to proof.
NINTH CLAIlVI FOR RELIEF
(Constructive Fraud Against All Defendants By The Plaintiff Class)
121. Plaintiffs incorporate
Paragraphs 1 through I of this Complaint.
the allegations

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 29 of 36 Page ID #:580
1 securing and protecting it.
2 129. Plaintiffs perfonned all covenants and conditions of the agreement which
3 they were required to perfonn.
4 130. As a result ofPEHC' s breach, Plaintiffs suffered damages in the amount
5 of their Investments and the loss of their properties.
6
7 ELEVENTH CLAIM FOR RELIEF
8 (Inducing Breach of Contract
9 Against All Defendants By The Plaintiff Class)
10 131. Plaintiffs incorporate by reference the allegations contained in
11 Paragraphs 1 through 130 of this Complaint.
12 132. Each member of the Plaintiff class had a contract with PEPO for the
13 purchase of a residence in the Resort.
14 133. Each of the Defendants knew of these contracts with PEPO.
15 134. Defendants intended to disrupt the perfonnance of these contracts by
16 engaging in at least the conduct described in Paragraphs 20 through 62 of this
17 Complaint.
18 135. Defendants' conduct described herein prevented perfonnance of the
19 contracts between PEPO and Plaintiffs and/or made performance of these contracts
20 more expensive or difficult.
21 136. Defendants' conduct was a substantial factor in causing Plaintiffs hann.
22 More specifically, the scheme described in Paragraphs 20 through 62 of this
23 Complaint, and the conduct in which Defendants engaged in furtherance of it, caused
Plaintiffs any they had in the had
from PEPO, as well as the money they had paid to PEPO for such residences.
I conduct described herein "oppression, fraud or malice"
as tenns are defined and Plaintiffs are entitled

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 30 of 36 Page ID #:581
1 to punitive damages in an amount according to proof.
2
3 TWELFTH CLAIl\t1 FOR RELIEF
4 (Intentional Interference \Vith Prospective Economic Advantage
5 Against All Defendants By The Plaintiff Class)
6 138. Plaintiffs incorporate by reference the allegations contained m
7 Paragraphs 1 through 137 of this Complaint.
8 139. Each member of the Plaintiff class was in an economic relationship with
9 PEPO that probably would have resulted in an economic benefit to Plaintiffs.
10 Specifically, Plaintiffs had entered into Purchase and Sales Agreements with PEPO,
11 paid PEPO funds in connection with those agreements, and had legal and/or equitable
12 interests in the land and/or residences that were the subject of those Purchase and
13 Sale Agreements.
14 140. Defendants knew of these relationships Plaintiffs had with PEPO.
15 141. Defendants intended to disrupt these relationships by foreclosing on the
16 land and/or residences of the Plaintiff class, and in particular, those residences located
17 in Phase 2 of the Resort.
18 142. As more fully pleaded herein, various Defendants engaged in wrongful
19 conduct through the claims pleaded against them in this Complaint:
20 (a) All Defendants violated the Securities Exchange Act of 1934, as
21 more funy pleaded in Plaintiffs' First Claim for Relief herein;
22 (b) PRO and the Insider Defendants violated the Securities Exchange
23 Act of 1934, as more fully pleaded in Plaintiffs' Second Claim for Relief herein;
All Defendants violated the Act of I , as more fully
pleaded in Plaintiffs' Third Claim for Relief herein;
(d) PEHC violated the California ,as more
fully pleaded in Plaintiffs' Fourth for Relief;

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 32 of 36 Page ID #:583
1
THIRTEENTH CLAIl\l FOR RELIEF
2
(Breach of Contract Against PRG, Hankla, and Emling
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By The Plaintiff Class)
4 147. Plaintiffs incorporate by reference the allegations contained III
5 Paragraphs 1 through 146 of this Complaint.
6 148. PRO and PH ("Homeowners"), a group which included plaintiffs,
7 entered into an agreement, entitled "Development Agreement" ("DA") whereby, inter
8 alia, PRO agreed to use best efforts to settle "title to the Units and [transfer] insurable
9 title to such Units to the respective owners." The homeowner Plaintiffs here went
1 0 along with the DA because, among other things, its stated purpose was to "secure for
11 the members of Homeowners clear legal title to their respective Units ... " Among the
12 promises made to Homeowners in the DA was a plan for securing legal title for
13 Plaintiffs, as part of PH, in their respective properties.
14 149. Plaintiffs, as members of PH, were the acknowledged and intended third
15 party beneficiaries of the DA. For example, in paragraph C of the DA, it states that
16 PH was "formed to represent the interests of persons owning individual dwelling
17 units" in the Resort. Plaintiff Nurock repeatedly has requested a signed copy of the
18 DA from the individual defendants, but their assurances that they would provide it
19 to him have gone unfulfilled.
20 150. PRO breached the DA by, among other things, undertaking the scheme
21 described above to deprive Plaintiffs and the Class of their horne ownership, as
opposed to securing and protecting title for them in their respective properties.
151. In addition, PRO, Hankla, and Emling, through their communications
with Plaintiffs leading up at time of the First Offering, promised Plaintiffs
and that if Plaintiffs invested in the First Offering, they would the deeds
to their rpC''''b'f units.
1 Defendants breached the

Case 2:11-cv-10284-JFW-PJW Document 22 Filed 04/09/12 Page 35 of 36 Page ID #:586
1 PROOF OF SERVICE
2 STATE OF CALIFORNIA
3 COUNTY OF LOS ANGELES }
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ss.
I am employed in the County of Los Angeles, State of California by Wilshire Palisades Law
Group, P.C. ("WPLG"). WPLG's business address is 1337 Ocean Avenue, Suite A, Santa Monica,
California 90401-1009. I am over 18 years of age and I am not a party to this action.
below:
On April 9, 2012 I transmitted from Santa Monica, California, the documents identified
PLAINTIFFS' FIRST AMENDED COMPLAINT
The foregoing document was addressed to the persons listed on the "Service List" which is
attached hereto and incorporated herein by reference. Those addresses are the last office addresses
given by those persons in the most recent document filed in this action and served upon WPLG.
X (BY U.S. MAIL) I placed a true copy in a sealed envelope addressed as indicated above on
the above-mentioned date. I am familiar with the firm's practice of collection and processing
correspondence for delivery by an overnight delivery carrier. Pursuant to that practice, envelopes
placed for collection at designated locations during designated hours are delivered with a fully
completed airway bill, under which all delivery charges are paid by Wilshire Palisades Law Group
that same day in the ordinary course of business.
X (BY E-MAIL) I personally e-mailed to each party indicated above a copy of the aforesaid
document.
I declare under penalty of perjury under the laws of the State of California that the above is
true and correct.
Executed on April 9, 2012 at Santa Monica, California.