One LLP v BENTON WILCOXON for Fraud - Fire Benton H. Wilcoxon

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Peter R. Afrasiabi, Esq. (Bar No. 193336)
email: pafrasiabi@onellp.com
Christopher W. Arledge, Esq. (Bar. No. 200767)
email: carledge@ onellp.com
ONELLP
4000 MacArthur Blvd.
West Tower, Suite 1100
Newport Beach, CA 92660
TeleJ?hone: (949) 502-2870
Facsimile: (949) 258-5081
ELECTRONICALLY FILED
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Clerk fl f the Sbl!"eriflr C!rlblrt
By Enri"Jble Velgz, Depblt y Clerk
6 Attorneys for Plaintiff
ONELLP
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SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF ORANGE
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ONE LLP, a limited liability partnership,
Plaintiff,
v.
BENTON WILCOXON, an individual,
Defendant.
Case No. 30·2011-00530102·CU-FR-CJC
COMPLAINT FOR:
(1) FRAUD; and
(2) NEGLIGENT
MISREPRESENTATION;
DEMAND FOR JURY TRIAL
Judge Unda Mar1

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4. Defendant Benton Wilcoxon is an individual residing in Orange County, California.
COMMON ALLEGATIONS
5. Defendant is Chairman of the Board of Directors and Chief Executive Officer of CTC
Cable Corporation ("CTC"), a Corporation organized and existing under the laws of the State of Delaware
and having its principal place of business at 2026 McGaw Avenue, Irvine, California. CTC manufactures
and produces composite rod for use in its patented ACCC® conductors, which are "high efficiency
conductors" for use in electrical transmission grid systems.
6. In or around April of 20 I 0, CTC retained Plaintiff to provide legal services for a federal
patent infringement action filed in the United States District Court for the Central District of California,
case no. SACV 09-261 DOC (MLGx). Shortly thereafter, CTC also retained Plaintiff to provide legal
services in a state action filed in the Superior Court of California for the County of Orange, case no. 30-
2008-0011 063 3.
7. CTC remunerated Plaintiff for legal services rendered from April through June of 2010, but
CTC did not pay Plaintiff for legal services rendered from July of 20 I 0 through April of 2011.
8. Starting in approximately August of2010, Plaintiff queried Defendant repeatedly about
CTC's outstanding invoices, only to receive empty promises of payment from Defendant. The following
communications exemplify the numerous false promises Defendant made regarding payment of Plaintiffs
outstanding invoices:
• January 11, 2011: "It is my understanding that the wire is in the process of being sent today
to our account. I will be checking later to confirm that it has been sent. I assume that we
will see the funds by tomorrow, Wednesday. I believe that we will be able to provide funds
to you at the latest on Thursday if the funds have to post overnight after arrival. I will keep
you posted."
January I3, 20I1 : "I am late to a meeting, but I have just seen the email from the
investment bank stating that the wires have been sent to our investor and that the SWIFT
confirmation will be sent to us in the morning. I will report more in the morning. This will
get done. Thank you for your patience."
'lO
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COMPLAINT

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• January 18, 2011 : "The call to the banker at repeated that the wires from
in Europe had been sent late last week and that per the email that our investor received, they
were sending by courier service copies of the SWIFT wire confirmations. They said that it
was still incoming and sometimes takes 3-5 days inbound to the US, and that they was
nothing to do but wait for its receipt and look for the courier that they thought should show
up today. Meanwhile, the other investor said that he is finalizing his arrangements for
delivery of either a wire or Certified Check to us by tomorrow, and possibly later today.
remain confident that the funds are coming in this week."
• February 15, 2011: Defendant sent Plaintiff a letter that he claimed to be from a banker
regarding the status of funding for CTC. Defendant stated: "Please read the attached letter
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that our investor received from an S.VP Private Banking at
in NYC main office.
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I believe that it explains things and affirms why I am confident that we are getting the funds
and that you are going to get paid. And why there has been a delay. I will hear from the
S.VP in the morning about the timing of the wire. Most likely it will be either Wednesday
or Thursday. Please feel free to call me. I will let you know in the morning what they say."
According to this letter, the investment money Defendant had been promising would be ·
imminently in CTC's hands had been slowed because the investor's funds had been frozen.
The letter stated that this happened because of a case of "mistaken identity" with one of the
defendants involved in the Enron criminal prosecution. Upon information and belief, this
letter is a complete fabrication and Defendant knew it to be so.
• February 24, 2011: "CTC has been shown bank statements indicating funds have been
wired. As of now, no funds have been credited to their account, but we are hopeful the
credits will appear on Monday. I'll keep you advised. Thank you for your continued support
and patience."
• March 9, 2011: "This is the Confidential update as we ended last week:
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informed
that their attorneys met again with the attorneys of
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the state (representing the interests of finding Enron funds) at the NY Court
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COMPLAINT

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and were told that they had arranged a meeting with the FBI on Tuesday as
the last step to verify the reports submitted by
and that upon that
meeting confirming that this had nothing to do with the funds of the
that they would issue the release order by the judge. As such I
stated that they expected to get the release by Tuesday afternoon in
NY. This would allow the release of the wire transfers already lodged,
which includes the ones for CTC.
2 Alex informed us that they received all of the documents late Friday that will
allow the closing of his transaction at in LA on Monday morning and
he expected to begin to transfer funds on Monday and certainly by Tuesday
he would have funds available to accomplish his commitment to CTC.
3 Monday at 1 Oarn sharp we have the decision meeting with the
as well as the billionaire behind the fund, who will be flying in his
jet to meet us in our offices for 4 hours. After that they will make their
investment decision and they should let us know the following day. They
can close at least part of the deal this week they stated.
4 Monday at 3pm we have a meeting with the decision makers of another large
fund,
and they stated that they are prepared to state the terms of
a deal by Tuesday as well, and to move quickly to finalize the transaction.
5 Monday sometime, we should hear the preliminary decision of the
investment committee of the fund run by as to what terms he would
invest/or loan to the company. He also can act as quickly as attorneys can
draft the docs. Will let you know on Monday after the meeting the status of
our financing. More news later today,"
March 29, 2011: "I heard from Mike Mcintosh last evening that your firm has quit. As
such we would like to substitute Craig Summers at Knobbe Martens. Please do not file
anything with the court as we will be sending the substitution paperwork shortly. I will
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COMPLAINT

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9.
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arrange payment due to your firm upon receiving your final bill, which should be marked to
my attention. Please call or accept at [sic] call from Craig Summers, who will be handling
our Patent case. We would appreciate your assistance in transferring information to
"
The above statements are but a few examples of Defendant's many false promises.
Defendant also met with attorneys from Plaintiff on several occasions from approximately
7 August of 20 10 through March of 2011 regarding the unpaid amounts owed to Plaintiff. During these
8 meetings, Defendant reiterated each time that CTC would be obtaining additional cash imminently and
9 that once it did, Plaintiff would be paid. Importantly, Defendant stated on several occasions that not only
10 would Plaintiff be paid once CTC received cash, but that Plaintiff would be paid first in front of other CTC
11 creditors. Defendant explained during these meetings that payment of Plaintiff was a top priority to him
12 and to CTC above other creditors because of the importance to CTC and to Defendant personally of the
13 patents at issue in the lawsuit being litigated by Plaintiff. According to Defendant, payment of One LLP
14 was essential because of the need to protect and enforce the CTC patents.
15 11. In at least one ofthese meetings in approximately December of2010, Defendant stated that
16 -if the promised funding was not received immediately:._ CTC would obtain what he characterized as a
17 "bridge loan" to pay the amount then owed to CTC. Defendant made similar promises to Plaintiff during
18 numerous telephone calls during this same time period.
19 12. Defendant continued to make numerous promises of imminent payment to Plaintiff until
20 March of 2011, when CTC received a significant influx of capital from an account that had previously
21 been held in escrow. Remarkably, neither Defendant nor anyone at CTC notified Plaintiff regarding
22 CTC's receipt of these funds. Immediately following this influx and again unbeknownst to Plaintiff,
23 Defendant directed CTC to make a host of payments to corporate insiders, including himself. As set forth
24 below, these payments totaled at least $1,387,991:
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Payor
Date
Insider
Payment
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CTC
03/29111
Benton H. Wilcoxon
$8,820.71
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CTC
03/29111
Benton H. Wilcoxon
$8,820.71
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COMPLAINT

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CTC
03/29111
Benton H. Wilcoxon $8,820.71
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CTC
04/06/ 11
Benton H. Wilcoxon $1 ,276.00
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CTC
03/30111
Glen Little $318,000.00
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CTC
03/30111
Kellogg $106,000.00
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CTC
03 /30/ 11
Libby $106,000.00
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CTC
03 /30/ 11
Lipworth $106,000.00
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CTC
04/07111
Dennis Carey $15,935.00
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CTC
03/29111
Domonic J. Carney $7,023.54
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CTC
03/29/11
Domonic J. Carney $7,023.54
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CTC
03/29111
Domonic J. Carney $7,023.54
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CTC
03 /30/11
Domonic J. Carney $55,262.58
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CTC
04/06/ 11
Domonic J. Carney $2,414.71
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')0
CTC
CTC
CTC
CTC
CTC
CTC
CTC
CTC
CTC
CTC
CTC
Cable
CTC
CTC
CTC
03/29/ 11
03/29/11
03/29/ 11
03 /31111
04/06/ 11
03/30111
03/29111
03/29/ 11
03/29/ 11
03 /30/ 11
Not provided
03/29111
03/29/11
03/29111
Marvin W. Sepe $7,634.64
Marvin W. Sepe $7,634.64
Marvin W. Sepe $7,634.64
Marvin W. Sepe $12,867.34
Marvin W. Sepe $2,372.00
Mike Lee $15,935.00
Stewart M . Ramsay $7,760.62
Stewart M. Ramsay $7,760.62
Stewart M. Ramsay $7,760.62
Stewart M. Ramsay $163,869.17
Technology Management $29,819.10
Advisors LLC
The Mcintosh Group $116,666.68
The Mcintosh Group $83,333.32
The Mcintosh Group $133,000.00
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COMPLAINT

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CTC 04/07/11 The Mcintosh Group $25,521.97
TOTAL: $1,387,991.40
At this same time and again with notifying Plaintiff, Defendant directed CTC to make a
4 host of payments to certain creditors. These payments included at least the following:
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Payor Date Transferee Payment
CTC 03/30/11 Fairfield and Woods PC $300,000.00
CTC 04/04/11 Fairfield and Woods PC $148,089.98
CTC 03/30/11 Marsh Fischmann & $118,500.00
Breyfogle
CTC Not provided University of Southern $120,000.00
California
CTC 04/04/11 Richard Stother $53,ooo.oo 1
CTC 04/04/11 Robert Corby $53,000.00
CTC Moreno Ruffinelli $35,000.00
04/01111
Cable
Asociadas
14. Notably, contrary to Defendant's repeated and explicit promises, CTC made no payments
whatsoever to Plaintiff. And neither Defendant nor anyone at CTC ever informed Plaintiff regarding any
of these payments or that CTC had received a portion of the long-promised funding. It was only after CTC
filed for bankruptcy that Plaintiff learned this information and realized the full extent of Defendant's
duplicity and false promises.
15. In late March of2010, attorneys for Plaintiff had a call with CTC's CFO, D.J. Carney. It
was during this call that it started to become clear Defendant had no intention of paying Plaintiff and that
Defendant had orchestrated an elaborate and untrue tale for the express purpose of persuading Plaintiff to
continue to provide services to Defendant and to CTC without any possibility of payment. Specifically,
when questioned about the several pending investments Defendant had repeatedly stated would be a source
of funding for CTC (and repayment of Plaintiff), Mr. Carney hastily distanced himself. According to Mr.
Carney, he had "nothing to do" with these supposed investments, stating that they were "Benton's deal."
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COMPLAINT

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On information and belief, Mr. Carney had previously referred to these investments as "Benton's
'Sisyphus's rock,"' referring to the mythological Greek king forced to push a boulder up a great hill for
eternity, only to have it roll down the other side. At the same time as this call with Mr. Carney, Plaintiff
also learned that- rather than honor his promises to pay Plaintiff- Defendant's real intention was to force
CTC into filing for bankruptcy protection.
16. Upon learning the above facts, Plaintiff immediately initiated proceedings to withdraw as
CTC's counsel. Pursuant to his true plan and contrary to his explicit promises, Defendant did not cause
CTC to pay any portion of the $338,745.25 Plaintiff was owed, but instead initiated Chapter 11
proceedings in the United States Bankruptcy Court for the Central District of California, Santa Ana
Division, case no. 8:11-bk-15058-TA, jointly administered with case no. 8:11-bk-15059-TA and 8:11-bk-
15065-TA.
17. As a direct result of and in reliance on Defendant's false promises and statements regarding
13 repayment of the Plaintiffs unpaid invoices, Plaintiff was not only persuaded delay withdrawing and
14 immediately pursuing legal remedies to obtain repayment of its invoices, but Defendant also persuaded
15 Plaintiff to continue representing CTC and to continue to invest an enormous amount of additional time
16 and expense on Defendant's and CTC's behalf. This reliance by Plaintiff thus not only precluded it from
17 obtaining recovery on its unpaid invoices, but also greatly increased the amount it was ultimately owed.
18 18. Defendant's plan ultimately inured to his considerable benefit. As a result of Plaintiffs
19 continued reliance and efforts on behalf of CTC, Defendant was able to sell his company to a third-party
20 purchaser for a price much greater than would otherwise have been possible.
21 FIRST CAUSE OF ACTION
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FRAUD
19. Plaintiff incorporates by reference the allegations in the paragraphs above as if restated
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herein.
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20. Upon information and belief, Defendant intentionally concealed and misrepresented (a) his
company's ability to pay Plaintifffor rendering legal services and (b) his intention to pay Plaintiff even
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COMPLAINT

once his company had the ability to do so. These statements were made despite Defendant knowing that
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his company's was unlikely to be able to pay Plaintiff and that- even if it was- it did not intend to do so ..
21 . Defendant repeated these false promises to Plaintiff from approximately August of 2010
through April of 2011.
22. Defendant acted with the intent to defraud Plaintiff, that is, Defendant intended to induce
Plaintiffs reliance on Defendant's statements promising payment and promising that Plaintiff would be
paid first. Defendant's intent was to induce Plaintiff to remain as CTC's legal counsel.
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Plaintiff justifiably relied upon these false statements by Defendant.
Plaintiff suffered $338,745 .25 in damages as a result ofDefendant's false statements.
Defendant's conduct was fraudulent, malicious and oppressive, and Plaintiff is therefore
11 entitled to punitive damages in an amount to be proven at trial.
12 SECOND CAUSE OF ACTION
13 NEGLIGENT MISREPRESENTATION
14 26. Plaintiff incorporates by reference the allegations in the paragraphs above as if restated
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16 27. Upon information and belief, Defendant misrepresented an existing material fact, that is,
17 Defendant misrepresented (a) his company's ability to pay Plaintiff for rendering legal services and (b) his
18 intention to pay Plaintiff even once his company had the ability to do so.
19 28. Upon information and belief, Defendant had no reasonable grounds for believing either
20 representation to Plaintiff was in fact true. As Defendant's emails indicate, it was pure speculation that
21 CTC would receive funding from potential investors. Likewise, despite promising Plaintiff that it would
22 be among the first to be repaid once CTC received funding, Defendant instead paid himself, corporate
23 insiders, and numerous other creditors, rather than honor his explicit promise to Plaintiff.
24 29. Defendant acted with intent to induce Plaintiffs reliance on his misrepresentations of fact
25 for the purposes of ensuring that Defendant and CTC would have legal representation in its then-pending
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COMPLAINT

1 30. Plaintiffs reliance on Defendant' s misrepresentations was justifiable because Plaintiff had
2 no other means of ascertaining the true nature ofCTC's cash situation or ofDefendant' s intentions with
3 respect to repayment of Plaintiffs outstanding invoices.
4 31. Plaintiff suffered $338,745.25 in damages as a result ofDefendant's false statements.
5 PRAYER FOR RELIEF
6 Wherefore, Plaintiff requests judgment against Defendant and prays for relief as follows:
7 1. For compensatory damages in an amount to be proven at trial but believed to be greater
8 than the jurisdictional minimum of this Court;
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For punitive damages;
For interest at the maximum legal rate;
For reasonable attorneys' fees;
For costs of the suit;
For injunctive relief as may be appropriate; and
For all such other relief as this Court may deem just and proper.
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Dated: December (j_, 2011
::E~ (/#_
Christopher W. Arledge
Attorneys for Plaintiff, One LLP
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COMPLAINT