JDK LLC et al v. Hodge et al Doc 1 filed 09 Mar 15.pdf

8/20/2019 JDK LLC et al v. Hodge et al Doc 1 filed 09 Mar 15.pdf

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

Civil Action No. 15-cv-00494

JDK LLC, a Colorado limited liability company,DEBORAH KOLASSA, JERRY KOLASSA,and S. MARK SPOONE,

Plaintiffs,

vs.

RONALD K. HODGE, GREGG K. HODGE,

PAUL A. TALBOT, THOMAS J. GILHOOLY,FRANK O. HOFMEISTER, JAMES E. SYLVESTER,MAX 1 FINANCIAL LLC, a Colorado limited liability companyand BROOKE TALBOT.

Defendants.

COMPLAINT AND JURY DEMAND

COME NOW the Plaintiffs, JDK LLC, Deborah Kolassa, Jerry Kolassa and S. Mark

Spoone, by and through their attorneys, Brown & Kannady, LLC, and state as follows:

JURISDICTION

1. This is an action for, among other claims, Civil Racketeer Influenced and Corrupt

Organizations (RICO) arising under 18 U.S.C. §§1961-1968, concerning a comprehensive

fraudulent scheme perpetuated by the Defendants that have defrauded the Plaintiffs and others out

of many millions of dollars. The Court has subject matter jurisdiction over this case and the parties

pursuant to 28 U.S.C. §§1331 and 1367(a). The Court has personal jurisdiction over Defendants

pursuant to Fed. R. Civ. P. 4(k)(1) and/or the Colorado Long Arm Statute, C.R.S. § 13-1-124, in

Case 1:15-cv-00494-PAB-NYW Document 1 Filed 03/09/15 USDC Colorado Page 1 of 37


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that the Defendants conduct business in Colorado and have perpetuated their fraudulent scheme in

Colorado upon Colorado residents. This complaint includes common law claims over which this

Court has jurisdiction under 18 U.S.C. §1964, in that said claims are joined with substantial and

related claims under the Civil RICO laws.

VENUE

2. Venue is proper in the United States District Court for the District of Colorado

pursuant to 28 U.S.C. §§1391, on the grounds that the wrongful acts giving rise to these claims

occurred in this judicial district, and on the grounds that the Defendants and their agents at all

times material hereto have done business within this judicial district, specifically in the State of

Colorado.

PARTIES

3. Plaintiff JDK LLC (“JDK ”) is a Colorado limited liability company with its

principal office located at 6 Greenridge Road, Greenwood Village, Colorado.

4. Plaintiff Deborah Kolassa (“Deborah”) is an individual who has a residential

address of 6 Greenridge Road, Greenwood Village, Colorado.

5. Plaintiff Jerry Kolassa (“Jerry”) is an individual who has a residential address of 6

Greenridge Road, Greenwood Village, Colorado.

6. Plaintiff S. Mark Spoone (“Spoone”) is an individual who has a residential address

of 4833 Front Street, Ste. B405, Castle Rock, Colorado.

7. Defendant Ronald K. Hodge (“Ronald”) is an individual who, upon information

and belief, has or recently had a residential address of 820 E. Gettysburg Ave., Fresno, California,

and who, at all times relevant to this Complaint, has acted as the Chairman, President and Chief



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Executive Officer of General Payment Systems, Inc. a Colorado corporation d/b/a EZ Card &

Kiosk, f/k/a Continental Prison Systems, Inc. (collectively, “GPSI-Colorado”), as well as General

Payment Systems, Inc., a publicly-traded Nevada corporation (“GPSI- Nevada”) d/b/a EZ Card &

Kiosk, f/k/a Continental Prison Systems, Inc. The principal office of GPSI-Colorado and GPSI-

Nevada is located at 15375 Barranca Parkway, Ste. C102, Irvine, California, and a satellite office

is located at 125 Main St. #105, Dillon, Colorado (GPSI-Colorado and GPSI-Nevada are

collectively referred to herein as “GPSI”).

8.

Defendant Gregg K. Hodge (“Gregg”) is an individual who, upon information and

belief, has a residential address of 62 Audrey Circle, Breckenridge, Colorado, and who has acted

as Vice President of Marketing and Sales of GPSI and the direct supervisor of Paul Talbot at all

times relevant to this Complaint.

9. Defendant Paul A. Talbot (“Talbot”) is an individual who, upon information and

belief, has or recently had a residential address of 5335 Mesa Drive, Castle Rock, Colorado, and

who at all times relevant to this Complaint has acted as a managing partner and/or a sales and/or

operational agent on behalf of GPSI, as well as the President of Municipal Holdings Solutions

Corp., a Colorado corporation doing business under the name of EZ Pay Corporate ( “EZ Pay

Corporate”), an entity that is affiliated with GPSI.

10. Defendant Thomas J. Gilhooly (“Gilhooly”) is an individual who, upon information

and belief, has a residential address of 2216 Grape St., Denver, Colorado, and who at all times

relevant to this Complaint has acted as a sales agent for GPSI and the Vice President of EZ Pay

Corporate.



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11. Defendant Frank O. Hofmeister (“Hofmeister”) is an individual who, upon

information and belief, has a residential address of 400 S. Lafayette St., Apt. 706, Denver,

Colorado, and who acted as a founder and President of GPSI between January 2010 and January

2013.

12. Defendant James E. Sylvester (“Sylvester”) is an individual who, upon information

and belief, has a residential address of 1162 Mokapu, Kailua, Hawaii, and who has acted as the

Chief Financial Officer of GPSI at all times relevant to this Complaint.

13.

Defendant Max 1 Financial LLC (“Max 1 Financial”) is a Colorado limited liability

company with its principal office located at 5335 Mesa Drive, Castle Rock, Colorado.

14. Defendant Brooke Talbot (“Brooke”) is an individual who, upon information and

belief, has or recently had a residential address of 5335 Mesa Drive, Castle Rock, Colorado and

who at all times relevant to this Complaint has been the wife of Talbot, a sales agent and employee

of EZ Pay Corporate, and the President of Max I Financial.

GENERAL ALLEGATIONS

A. Pertinent Background Facts

15. The Defendants own, operate and/or are employed by or affiliated with numerous

related payment processing entities that provide jails and municipalities with proprietary hardware

and cloud-based software technology used to electronically collect payments from the general

public through kiosks and secure websites in the form of cash, debit and credit, for such items as

licenses, parking tickets, municipal bills, child support, real estate and school taxes, court fines

and fees. These automated systems deliver payment acceptance, real-time accounting and

payment risk-mitigation services. These entities operate under the brand, trademark and logo “EZ



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Card & Kiosk,” “EZ Pay Corporate,” as well as numerous iterations of “EZ” payment systems

(collectively, the “EZ Pay System”).

16. Since 2006, the Defendants, first through a Nevada corporation called Continental

Prison Systems, Inc. d/b/a EZ Card and Kiosk (“CPSI”) and later through GPSI and/or through a

Colorado Corporation called Municipal Holdings Solutions Corp., have provided such payment

services directly to jails and prisons, and have also licensed this system to third parties. The EZ

Pay System earns revenue through transaction fees, which are paid by the general public at a kiosk

at the time of the transaction, similar to ATM fees.

17. In approximately 2009 GPSI began offering the same payment services to

municipalities under the EZ Pay System.

18. Talbot was or has been employed and/or affiliated with GPSI, Ronald and Gregg

since approximately 2006. He has acted in a sales capacity for GPSI, and has helped to grow

GPSI’s business by recruiting licensees, and by pursuing business opportunities on the jail and

municipal side. Talbot generated over $7 million in GPSI licensing fees rights through sales to

investors such as JDK and Spoone.

B. The Pennsylvania Municipal License

19. On or about July 12, 2011 JDK and GPSI-Colorado entered into a written Licensing

Agreement (the “Pennsylvania License”) pursuant to which JDK was granted an exclusive license

to develop, market, distribute, sell, lease or otherwise transfer GPSI’s payment processing services

and technology to municipal court systems, probation departments and police departments within

the State of Pennsylvania, using GPSI’s brand, trademarks and logos. Sylvester executed the

Pennsylvania License on behalf of GPSI-Colorado.



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20. In exchange for the rights granted to JDK pursuant to the Pennsylvania License,

JDK was required to pay to GPSI a license fee in the initial amount of $640,000, with an additional

$710,000 in license fees that would become due to GPSI, contingent upon JDK’s achievement of

various gross revenue thresholds. On behalf of GPSI, Hofmeister (the mastermind of the GPSI

municipal licensing scheme, as set forth infra) received the $640,000 in funds paid by JDK

pursuant to the Pennsylvania License.

21. Pursuant to the Pennsylvania License, as well as through the actions of GPSI’s

agent, Talbot, GPSI maintained significant control over JDK’s business and/or provided

significant assistance (albeit counterproductive) to JDK in the operation of the subject business.

For example, while engaging in contract negotiations with prospective municipal clients in

Pennsylvania, Talbot refused to keep Deborah or Jerry apprised of same, and refused to disclose

any information regarding the negotiations.

22. JDK invested the initial $640,000 in license fees, as well as $360,000 for kiosks,

labor and other equipment for the Pennsylvania License.

23. The Defendants sold the municipal business to JDK on the aggressive premise that

JDK would passively earn a twenty percent (20%) return on its investment, with Talbot serving as

both the operational and sales side of the business, and that he would be utilizing his extensive

experience and familiarity with GPSI’s business, as well as his business contacts and knowledge

of the Pennsylvania market, to provide substantial ongoing support to the business.

24. The Defendants represented to Deborah and Jerry that JDK’s primary r ole in this

arrangement, following its initial investment, would be to simply sit back and collect checks on

the successful operations that Talbot would be running in Pennsylvania.



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25. JDK, Deborah and Jerry were led by the Defendants to believe that their only

material contributions other than the initial investment in GPSI would be to cover the cost of travel

and equipment.

26. On repeated occasions prior to the execution of the Pennsylvania License, Talbot

made false and highly misleading oral and written Financial Performance Representations

(“FPR’s”) to Deborah and Jerry. Certain of these FPR’s were transmitted by Daniel Cook

(“Cook”), who was then a GPSI licensee in Ohio and a close friend of Talbot’s, with Talbot’s

knowledge, assent and/or direction.

27. In communicating with Deborah and Jerry regarding the GPSI investment

opportunity, Talbot failed to disclose and/or fraudulently withheld material information from

Deborah and Jerry, including but not limited to: information regarding Pennsylvania state money

transmitter laws, the Unified Judicial System of Pennsylvania/APOC (which effectively has a

monopoly on the payment software for all courts and related departments throughout the state),

GPSI’s corporate business plan, financial information, information concerning GPSI’s competitors

in the municipal space in Pennsylvania (many of which offer the same services for less than the

cost of doing business under the EZ Pay System), credit card and banking expenses, the limitations

of GPSI’s software, GPSI’s inability and/or unwillingness to meaningfully support the business

and/or to provide critical documentation as required, and the absence of a successful or proven

business model on the municipal side.

28. On June 14, 2011 Cook forwarded by e-mail to Leanna Carette Cox (“Cox”), who

is Deborah’s sister, a news article about GPSI along with e-mail comments from Talbot boasting

that, through a single county in Michigan, GPSI would be generating “over 200K every two



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weeks,” and that the same county was going to exclusively accept child support payments through

GPSI’s kiosks, which would generate “75 million annually.”

29. On June 14, 2011 Cook also forwarded by e-mail to Cox a pro forma containing

various projected gross revenues in Ohio over a five-year period, including projected gross

revenues of $2,436,480 during the first year of operations, along with an e-mail from Talbot

asserting that “the jail side is small” compared to what GPSI was doing on the municipal payment

side of things.

30.

On June 26, 2011 Talbot and Cook met face-to-face with Cox, Deborah and Jerry

to discuss the investment opportunity being offered by GPSI in the State of Pennsylvania. Both

Talbot and Cook acted as representatives or sales agents of GPSI in this regard, and with the direct

knowledge and/or approval of Ronald, Gregg, Sylvester and/or Hofmeister.

31. On June 27, 2011 Talbot e-mailed Cox, Deborah and Jerry with additional

information about the investment opportunity, and furnished a list of five names, including Cook,

for them to contact “to ask if the company and I have done everything as promised.”

32. On or about June 27, 2011 Talbot furnished Cox, Deborah and Jerry with a

spreadsheet, which he proceeded to discuss in detail, which projected that, by 2012, the municipal

business in Pennsylvania would generate gross revenue of approximately $86 million through

approximately 270,000 transactions.

33.

On June 28, 2011 Talbot e-mailed Cox, Deborah and Jerry and included monthly

revenue figures for four jails ranging between $66,894.40 and $267,577.73, explaining that they

should “keep in mind” that these figures represent “a fraction of what we would do [on the



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municipal side] because the number of people in the facilities is so small and they only take 3

payments as we will take over 50+ payments and our customer base is 100+ times more!”

34. On June 30, 2011 Talbot e-mailed to Cox and Jerry a spreadsheet dated January 1,

2011 that was entitled “3-Year Market Universe Revenue Projections.” This spreadsheet stated

that GPSI licensees could expect to collect a fee of $4.00 per transaction. It stated that $4.00 per

transaction was, in fact, a "conservative average" and provided information showing that the

"actual" average would be more than $6.50 per transaction. The spreadsheet also stated that, for

payments to municipal police departments, a conservative fee estimate was $10.50 per transaction,

but the "actual" average fee would be approximately $13.60.

35. Upon information and belief, the Defendants were aware at or prior to the date that

the Pennsylvania License was executed that JDK’s investment in the Pennsylvania License was

highly likely to fail.

C. The Ohio Municipal License

36. Approximately six weeks before JDK signed the Pennsylvania License, on or about

June 1, 2011, GPSI-Colorado had entered into a written Licensing Agreement (the “Ohio License”)

with C & T Holdings, LLC (“C&T”), a Colorado limited liability company formed by Cook and

Talbot in 2009, pursuant to which C&T was granted an exclusive license to develop, market,

distribute, sell, lease or otherwise transfer GPSI’s payment processing services and technology to

municipal court systems, probation departments and police departments within the State of Ohio,

using GPSI’s brand, trademarks and logos. Cook and Talbot each owned 50 percent of the shares

of C&T.



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37. In exchange for the rights granted to C&T pursuant to the Ohio License, C&T was

required to pay to GPSI a license fee in the initial amount of $540,000, with an additional $710,000

in license fees that would become due to GPSI, contingent upon C&T’s achievement of various

gross revenue thresholds.

38. Pursuant to the Ohio License, as well as through the actions of GPSI’s agent,

Talbot, GPSI maintained significant control over C&T’s business and/or provided significant

assistance (albeit counterproductive) to C&T in the operation of the subject business. For example,

Talbot furnished a dwindling amount of information to Spoone concerning the customer leads that

Talbot and his team were pursuing.

39. In early 2012 Talbot and Gilhooly, on behalf of GPSI, began soliciting Spoone to

invest in the EZ Pay System. Over the course of several months, Talbot and Gilhooly repeatedly

furnished Spoone with oral and written FPR’s and told Spoone about the over-the-top success and

returns in excess of 20 percent that Talbot and the other investors in the EZ Pay System were

enjoying.

40. In approximately February 2012 Spoone met with Talbot and Gregg, who was

Talbot’s direct supervisor at GPSI, at Talbot’s home. Both Talbot and Gregg expanded upon the

FPR’s furnished by Talbot and discussed in detail the business model, the growth of the EZ Pay

System growth and its lucrative returns.

41.

Talbot and Gilhooly continued to entice Spoone into investing in the EZ Pay

System by furnishing various “insider” reports from GPSI and showing Spoone documents and

data reflecting the returns in excess of 20 percent that they claimed that Talbot, Gregg and the EZ

Pay investors supposedly were enjoying.



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42. During the months that followed, Talbot arranged for numerous follow-up meetings

with Spoone during which Talbot and Gilhooly shared online and paper reports of what Talbot

claimed were GPSI’s revenues from various jails across the country. The reports and information

that were shared with Spoone did not delineate between jail and municipal revenues, and Talbot

assured Spoone that the municipal business was really taking off. Talbot also progressively

intimated that the “really big money” was not even in the jails, but on the municipal side of the

business, because there were so many more opportunities for revenue, such as using the EZ Pay

System for items such as parking and traffic tickets, child support, court fees and

permitting. Talbot represented to Spoone that Talbot had been instrumental in the designing and

crafting of the municipal solution and that GPSI was already seeing even faster growth on the

municipal side than with the jail business.

43. Talbot invited Spoone to his office in Colorado on numerous occasions to witness

Talbot’s team in action. Part of Talbot’s regular sales pitch to Spoone, JDK and others was the

fact that he had equity interests in a number of GPSI state licenses and kiosk leases and that Talbot

had assembled an entire team whose full time job was to call on various counties, jails and courts

across the list of states that he had interests in and close deals. Talbot claimed to have closed

several large deals and regularly pulled up the GPSI web site to show to Spoone the various

payments that Talbot claimed were being processed and collected.

44.

Talbot made numerous promises and commitments to Spoone that his role and full

time focus was solely upon developing and closing new opportunities in the states that his team

was calling on. Talbot further assured Spoone that since Talbot had a larger equity stake in Ohio

than any other state that Talbot would be highly focused on creating revenue in Ohio, Talbot



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represented that his operations and sales were the value that he would be bringing to the table in

exchange for his equity interest in the business, in order to create the promised return well in excess

of 20 percent. Talbot repeatedly conveyed to Spoone that this would be an “armchair” style

investment for Spoone while Talbot leveraged his existing team to close big deals and create sales.

45. In the spring of 2012 Talbot and Gilhooly told Spoone about a list of “huge”

opportunities that were pending in Ohio – both on the jail and municipal side - with Talbot’s then

partner, Cook. Talbot related that Cook had another big project that he wanted to focus on and

that Cook had put his sister’s money into the venture and that she needed it back right away for a

family emergency. Along with Cook, Talbot and Gilhooly proceeded to solicit Spoone to purchase

Cook’s interest in the Ohio License.

46. Gilhooly, along with Talbot and Cook, told Spoone on several occasions that GPSI

had “a ton of great leads” that they supposedly were “really close to getting done” and that they

would be “closing deals within just a few weeks.” Gilhooly represented to Spoone that they were

“on the verge” of closing deals in Canton, Ohio, Lucas County, Ohio and Cuyahoga County, Ohio,

as well as with the administrator of the statewide child support program for the State of Ohio, as

well as with San Antonio, Texas, which Gilhooly told Spoone essentially was “a done deal.” They

showed him a lengthy list of leads on the SUGAR database system in Talbot’s EZ Pay Corporate

office. As it turned out, none of these deals ever closed.

47.

Gilhooly, along with Talbot, boasted to Spoone on several occasions about the

success that GPSI had enjoyed in areas such as Broward and Dade Counties in Florida, Orange

County, California, the Rik er’s Island penitentiary in New York, Eagle County, Colorado, the

Aurora, Colorado Detention Center, the Boulder County Jail in Colorado, as well as Pueblo



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County, Colorado. They represented to Spoone that the tremendous success in those counties

would pale in comparison to the amount of revenue that the state of Ohio offered. They showed

Spoone live, real-time updates of the amount of money that they indicated was pouring in from all

over the country through GPSI kiosks and suggested that Spoone would enjoy comparable

revenues in Ohio. They told Spoone that he would soon be generating $80,000 in monthly

revenues through each municipality, and that this would soon be generating statewide revenues in

excess of $1,000,000 per month.

48.

Gilhooly, acting in conjunction with GPSI, Talbot and others, made FPR’s to

Spoone on at least three separate occasions, FPR’s that Gilhooly either knew to be false, or

recklessly made without reasonable substantiation, knowing and intending that Spoone would rely

upon Gilhooly’s representations to decide to invest in the Ohio License. These FPR’s included

data revealed to Spoone by Gilhooly through a customer relations management system called

SUGAR.

49. During the course of their solicitations, the Defendants furnished Spoone with a

s preadsheet that had been created by Hofmeister entitled “License Fee Schedule – All States.” The

spreadsheet identified a “market universe” for each state, based on its population and counties, and

specifically listed Ohio as having a market universe in the amount of $243,648,000.

50. In addition to the License Fee Schedule, during the course of their solicitations,

Talbot and others shared with Spoone FPR’s that were substantially similar or identical to the pre-

sale FPR’s that the Defendants furnished to Deborah and Jerry, as detailed in Paragraphs 28

through 34, infra. Typically, Talbot would present such written FPR’s for Spoone’s in-person

perusal, then take the documents back into Talbot’s possession while promising to furnish copies



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to Spoone at a later date. Talbot also presented data on his personal computer that Talbot claimed

was data accessed through GPSI internal databases.

51. Upon information and belief, the Defendants were aware during the period that

Spoone was solicited about the GPSI investment opportunity in Ohio that the actual reason behind

Cook’s desire to sell his interest in the Ohio License was that GPSI did not have a profitable

business plan on the municipal side.

52. On repeated occasions prior to the execution of the Buy-Sell Agreement referenced

below, Talbot and Gilhooly, acting as franchise agents or brokers for GPSI and/or otherwise acting

on GPSI’s behalf , made false and highly misleading oral and written FPR’s to Spoone. Certain of

these FPR’s were furnished to Spoone by Cook with the knowledge, assent and/or direction of

Talbot, Ronald and/or Gregg.

53. Acting at the direction of Talbot, Ronald and/or Gregg, Cook furnished FPR’s and

made numerous material misrepresentations to Spoone regarding the Ohio License and his reasons

for wanting to exit the business, including the representation that his sister was a judge in Ohio

and that she was on board with the EZ Pay system and would be supporting the efforts to ensure

the establishment of several kiosks in counties in Ohio.

54. In April 2012 Cook, Talbot and Spoone reached an agreement (the “Buy-Sell

Agreement”) for Spoone to purchase Cook’s 50 percent share of the Ohio License held by C&T

for $540,000. Of this amount, Spoone paid $200,000 up front and made one subsequent payment

to Cook in the amount of $25,000.

55. During the April 2012 meeting (arranged by Talbot) in which the Buy-Sell

Agreement was finalized, Talbot assured Spoone that he would soon thereafter be providing



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Spoone with a copy of the Ohio License and other reports, as we ll as Talbot’s list of customer

leads. Spoone understood from representations made by Talbot, Cook and Gilhooly that the Ohio

License in which he was investing included both the jail and municipal sides in the State of Ohio.

56. As it turned out, other than the license agreement, Talbot failed to furnish Spoone

with any of the information that he had promised.

57. During various meetings, Talbot claimed to have a “huge” deal pending with the

county Treasurer of Lucas County, Ohio, Wade Kapszukiewicz, and Talbot represented that he

had already received verbal approval from Kapszukiewicz to begin placing kiosks for the

collection of property taxes. Talbot claimed that he had secured that deal though an attorney in

Chicago who is close friends with Kapszukiewicz. As it turned out, no such deal in Lucas County

was ever finalized.

58. When Spoone was finally furnished with a copy of the Ohio License a few weeks

later, he discovered that the license agreement was solely for the municipal side of the business in

Ohio and had no rights to the jail side. Spoone further discovered that the Ohio License called for

the mandatory payment of ongoing royalties to GPSI as well as an additional license fee, and

contained mandatory minimum performance requirements and events of default that could

invalidate the license.

59. Talbot, Ronald, Gregg, Hofmeister and/or Sylvester were made aware of, and

consented to, the Buy-Sell Agreement. In fact, the Defendants actively took steps to facilitate the

Buy-Sell Agreement.



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60. Upon information and belief, the Defendants were aware at or prior to the date that

the Buy-Sell Agreement was executed that Spoone’s investment in the Ohio License was highly

likely to fail.

D. Actual Performance of the Pennsylvania Municipal Investment

61. Far from the seven-figure first-year and eight-figure second-year gross revenues

forecast by the Defendants, JDK generated negative gross revenue in 2011 and 2012, only $25,408

in 2013 gross revenue and only $77,425 in 2014 gross revenue, through less than 13,000 total

transactions for the two years combined.

62. Even after operating under the Pennsylvania License for almost four years, JDK

still has not generated enough profit to cover the $360,000 expended by JDK on kiosks,

installations and other operating expenses (such as accompanying labor). JDK has received no

return on its substantial investment.

63. It has become apparent that the Defendants do not have, and never had to begin

with, a profitable business plan for JDK’s investments in Pennsylvania on the municipal side.

64. Contrary to how the GPSI investment opportunity was presented and sold to them,

JDK has been profoundly impacted in a negative fashion in Pennsylvania by numerous undisclosed

surprises, including but not limited to:

a. The existence of Pennsylvania state Money Transmitter regulations, which imposesubstantial barriers on the operation of JDK’s business;

b. The effective monopoly held by the Unified Judicial System of Pennsylvania/AOPCthrough its proprietary payment software for all courts and related departments throughoutthe state, which prevents any opportunity for JDK to process court payments;

c. The competitive disadvantage faced by JDK, as GPSI’s primary competitors offer the sameservices for less than JDK’s cost of doing business under the EZ Pay System;



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d. The existence of a previous investigation and substantial administrative fine levied againstGPSI by the State of Pennsylvania as a result of a finding by the state that GPSI had violatedMoney Transmitting Laws;

e. That GPSI’s cyber insurance policy does not cover JDK or other Licensees, all of whichare completely dependent on GPSI for software;

f. That the Defendants’ software was deficient in numerous material respects, including butnot limited to the software’s inability to determine licensee profitability; and

g. That GPSI executives would be unresponsive and unsupportive, even regarding keyoperational requests (such as a letter requested by the City of Harrisburg in July 2014supporting an internal auditing and service report) despite repeated verbal and writtenrequests from JDK.

65. Talbot’s participation in the JDK’s business turned out to be disastrous, culminating

with Talbot’s abandonment of his operational and sales roles for JDK on or about February 24,

2014.

66.

As a direct result of Talbot’s abandonment of all operations, JDK, thr ough Deborah

and Jerry, has been forced to expend substantial time and resources procuring and supporting the

business, despite having explicitly been told by Talbot and Cook that this would not be required.

67. Notwithstanding his pre-investment FPR’s (made on behalf of GPSI and with the

knowledge and authorization of GPSI, Ronald, Gregg, Hofmeister and/or Sylvester), Talbot failed

to deliver results to JDK on the municipal side that came anywhere close to those projections.

68. Talbot also engaged in numerous instances of post-investment misconduct,

including but not limited to knowingly making false representations of material fact to JDK in

connection with a dubious self-dealing arrangement that Talbot unilaterally finalized with

Brooke’s credit card company, Max 1 Financial, an arrangement that Talbot and Brooke falsely

assured JDK would result in significant cost savings to JDK.



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69. Without JDK’s consent or authorization, and without making proper disclosures,

Talbot and Brooke signed both the City of Harrisburg and Montgomery County as merchants of

record for the accounts, and then proceeded to covertly deduct excessive charges from JDK’s bank

account, also without approval from or disclosure to JDK.

70. After withholding critical credit card information from JDK for five months, in

December 2013, Talbot and Brooke finally revealed to JDK that the credit card processing fees

that Max 1 Financial was charging to JDK were over 6% of gross revenues during that five-month

period, rather than the 3.8% rate that Talbot and Brooke had promised to JDK.

71. At that time, Max 1 Financial was controlling all fee revenue that JDK was

generating through the City of Harrisburg and Montgomery County.

72. When JDK requested additional information documenting the establishment of the

subject credit card accounts, Talbot and Brooke refused, claiming that Harrisburg and

Montgomery Counties in Pennsylvania were the merchants of record, and that JDK would receive

no further disclosures.

73. JDK has also been saddled with unprofitable contracts in Pennsylvania that were

negotiated by one or more of the Defendants without JDK’s approval or consultation. Acting

unilaterally and without authority, Talbot also entered into a contract with Montgomery County as

the purported “President” of JDK, again without any review, disclosure or consent from JDK.

74.

In March 2013, as JDK’s investment on the Municipal side continued to flounder,

Talbot approached Deborah and Jerry on behalf of GPSI with a second business opportunity: the

Jail side. Talbot offered them the opportunity to invest in a License Agreement with GPSI for the

Pennsylvania jails, an opportunity that he assured them would assist with JDK’s substantial cash-



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flow deficit resulting from its Municipal investment. Talbot’s offer included two established jail

contracts in Pennsylvania, and he guaranteed that Deborah and Jerry would earn at least a 20%

return on their investment.

75. Talbot represented to Deborah and Jerry that Talbot would serve as both the

operational and sales side of the jail business, and that he would be utilizing his extensive

experience and familiarity with GPSI’s jail business, as well as his business contacts and

knowledge of the Pennsylvania market, to provide substantial ongoing support to the jail business

in which Deborah and Jerry would be investing.

76. Talbot further proposed that he, Deborah and Jerry would become business partners

on the jail side of the business and that the parties would “split the revenues” from any jail kiosks

located in the Westmoreland and Butler County jails in Pennsylvania in proportion to the parties’

respective funds invested in the business.

77. On or about April 30, 2013, a Colorado limited liability company formed by

Deborah, Jerry and Talbot, JDP LLC (“JDP”), entered into a written Licensing Agreement (the

“Jail Agreement”) with CPSI, pursuant to which JDP was granted an exclusive license to develop,

market, distribute, sell, lease or otherwise transfer GPSI’s payment processing services and

technology to jails within the State of Pennsylvania, using GPSI’s brand, trademarks and logos.

78. In exchange for the rights granted to JDP pursuant to the Jail Agreement, JDP was

required to pay to CPSI a license fee in the initial amount of $310,000.

79. Per their agreement with Talbot, Deborah and Jerry were to pay to CPSI $217,000

of the $310,000 license fee, and Talbot was to pay $93,000. In order to become entitled to an



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ownership interest in the Jail License, Talbot was obligated to pay $93,000 to CPSI as Talbot’s

capital contribution.

80. Although Deborah and Jerry paid their $217,000 to CPSI, it was later disclosed that

Talbot never paid anything to CPSI for the license fee, and, on information and belief, Talbot never

had any intention to pay $93,000 to CPSI.

81. The Agreement further requires the payment by JDP to GPSI of a monthly royalty

fee of fifteen percent (15%) of net revenue throughout the term of the Jail Agreement, other than

for two established jails in Butler and Westmoreland Counties.

82. Pursuant to the Jail Agreement, as well as through the actions of GPSI’s agent,

Talbot, GPSI maintained significant control over JDP’s business and/or provided significant

assistance (albeit counterproductive) to JDP in the operation of the subject business. For example,

while engaging in contract negotiations with prospective jail clients in Pennsylvania, Talbot

refused to keep Deborah or Jerry apprised of same, and refused to disclose any information

regarding the negotiations, and instead merely submitted invoices that he demanded that Deborah

and Jerry pay.

83. As it turned out, in addition to discovering that Talbot had never made the initial

capital contribution to JDP, Deborah and Jerry discovered that the Defendants had failed to

disclose numerous pieces of material information concerning the investment opportunity,

including but not limited to the existence of a “kick back” arrangement between GPSI and the jails,

through which the jails receive fifty cents per transaction in exchange for allowing GPSI to install

its kiosks there, as well as the significant degree to which banking and credit card fees impact the



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profitability of the jail business, depending on how often money is wired to the facility and the rate

that is paid.

84. Talbot’s participation in the JDP’s business turned out to be disastrous, culminating

with Talbot’s abandonment of his operational and sales roles for JDP on or about February 24,

2014.

E. Actual Performance of the Ohio Municipal Investment

85. Notwithstanding the Defendants’ constant pre-sale representations that numerous

“huge deals” in Ohio were bound to close within a few weeks, and that Talbot would soon be

making money at a rate exponentially higher than many of the existing GPSI jail deals, the

Defendants failed to deliver to Spoone or C&T even a single account – municipal or jail – in the

State of Ohio. Spoone is out every penny of his $225,000 investment.

86. During the months and years that followed Spoone’s execution of the Buy-Sell

Agreement, Talbot furnished a diminishing amount of information regarding the investment.

Talbot periodically repeated the same assertions to Spoone as before - that Talbot and his team

were, yet again, “onto a big one” that was bound to close, but invariably, something always went

wrong.

87.

On December 27, 2014, in response to Spoone’s Complaint for answers and

information as to the progress of the investment to which Talbot had been ignoring for months,

Talbot demanded that Spoone cease all communications with him and instead communicate solely

through Talbot’s attorney.

F. The Defendants’ Fraudulent Scheme



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88. Hofmeister claims to have generated GPSI’s business model and performed the

initial “due-diligence, organization, business plan,” as well as launched and assembled GPSI’s

management team, on the municipal side of GPSI’s business. This is the same fraudulent scheme

through which the Defendants have deceived JDK, Deborah, Jerry, Spoone and other GPSI

licensees into investing millions of dollars.

89. As part of this scheme, Talbot, acting at the direction of Ronald, Gregg, Hofmeister

and/or Sylvester, falsely represented to JDK, Deborah, Jerry and Spoone, as well as other GPSI

licensees and prospective licensees, that the investment would be passive, in that Talbot would, at

no further cost to the investor, furnish the sales team and operational staff necessary to operate the

businesses, in exchange for receiving a percentage of revenue or ownership in the business.

90. Upon information and belief, Ronald, Gregg, Talbot, Sylvester and/or Hofmeister

prepared, participated or materially aided in the preparation of one or more of the FPR’s furnished

by the Defendants to JDK, Deborah, Jerry, Spoone and other GPSI licensees and prospective

licensees.


prepared, participated or materially aided in the preparation of the FPR’s furnished to JDK,

Deborah, Jerry and Spoone with the knowledge that the information contained therein was false

and/or materially misleading.

92.

Upon information and belief, Ronald, Gregg, Sylvester and/or Hofmeister, acting

through Talbot, Cook and/or others under their direction, furnished or authorized to be furnished

to JDK, Deborah, Jerry and Spoone all or material portions of FPR’s that were false and

misleading.



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93. Upon information and belief, at the time that Ronald, Gregg, Talbot, Sylvester

and/or Hofmeister authorized such FPR’s to be furnished to JDK, Deborah, Jerry and/or Spoone,

they knew that those representations contained untrue statements of a material fact and/or that they

omitted to state a material fact necessary to, in order to make the statements made, in light of the

circumstances under which they were made, not misleading.


actively participated in the compilation of some or all of the FPR’s identified in Paragraphs 23

through 57 of the Complaint, and furnished or modified financial information that they knew to be

false or misleading for inclusion in same and for distribution to JDK, Deborah, Jerry and/or

Spoone.

95. Upon information and belief, in connection with the FPR’s made to JDK, Deborah,

Jerry and Spoone regarding the GPSI investment opportunity, Ronald, Gregg, Talbot, Sylvester

and/or Hofmeister engaged in one or more acts, practices or course of business which operated as

a fraud or deceit upon JDK, Deborah, Jerry and/or Spoone, or would operate as a fraud or deceit

upon any person.

96. Upon information and belief, Ronald, Gregg, Sylvester and Hofmeister each have

played and/or currently played a central role in GPSI’s operations and either directly or indirectly

participated in the fraudulent scheme perpetrated against the Plaintiffs and others or conspired with

or was complicit in this scheme.

97. At no time did any of the Defendants furnish JDK, Deborah, Jerry or Spoone with

any prospectus or Franchise Disclosure Document.



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98. The Defendants did not furnish JDK, Deborah, Jerry or Spoone with complete or

accurate information regarding the GPSI investment opportunity, and did not place them in a

position to make an informed decision as to whether or not to invest or to be able to evaluate the

potential risks and benefits of investing in GPSI.

99. Just as they have repeatedly done with other investors and potential investors, the

Defendants furnished projected sales volumes to JDK, Deborah, Jerry and Spoone that the

Defendants knew or should have known were unattainable.

100.

Cook, who is a longtime friend of Talbot, played an integral role in the Defendants’

solicitation of both JDK and Spoone, furnishing sales projections and other representations in

conjunction with Talbot.

101. The Defendants falsely represented to JDK that Cook would work with Talbot to

ensure the success of JDK’s operations in Pennsylvania.

102. Upon information and belief, Talbot received compensation from GPSI in

connection with JDK’s investment in the Pennsylvania License.

103. Upon information and belief, both Talbot and Gilhooly received compensation

from GPSI in connection with Spoone’s investment in the Ohio License.

104. Upon information and belief, Ronald, Gregg, Sylvester and/or Hofmeister received

compensation or directly benefitted from JDK’s investment in the Pennsylvania License and/or

from Spoone’s investment in the Ohio License.

105. Talbot and Gregg also concealed from Spoone their knowledge that GPSI did not

have a profitable business plan on the municipal side, and, on information and belief, encouraged



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Cook to conceal this fact from Spoone even though Cook played an integral role in the Defendants’

solicitation of Spoone.

106. Brooke, acting in conjunction with Talbot, GPSI and others, knowingly participated

in the fraud perpetuated upon JDK through its use of Max 1 Financial, and was fully aware that

Max 1 Financial had no intention of ever delivering the rates promised to JDK.

107. Upon information and belief, through her participation and/or employment with EZ

Pay Corporate, Brooke has been actively and directly involved in the solicitation, implementation

and/or attempted solicitation or implementation of the GPSI fraudulent scheme.

G. Damages

108. In addition to their original $640,000 investment in the Pennsylvania License fee,

Deborah and Jerry, through JDK, have invested $360,000 in expenses related to the Pennsylvania

License, purchasing and installing seven kiosks along with travel, advertising and marketing costs

to promote the business, all without turning a profit or recouping any of JDK’s investment.

Through JDP, Deborah and Jerry have also invested an additional $230,525.91 in the Pennsylvania

Jail License, including expenses.

109. Spoone invested $225,000 in the Ohio Municipal License, all without turning a

profit or recouping any of his investment.

First Claim For Relief

Civil RICO – All Defendants

110. Plaintiffs restate and incorporate herein by this reference all above-stated

paragraphs as if fully set forth herein.

111. The Defendants were employed by or associated with one or more affiliated

enterprises that were engaged in or affected interstate or foreign commerce, including but not



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limited to GPSI-Colorado, GPSI-Nevada, CPSI, Municipal Holdings Solutions Corp. and/or EZ

Pay Corporate.

112. During the period 2011 through 2014, each of the Defendants directly or indirectly

conducted or participated in the conduct of the affairs of the enterprise(s), and did so through a

pattern of racketeering activity which included the numerous fraudulent misrepresentations and

material omissions directed to the Plaintiffs, as set forth infra, as well as other investors and

prospective investors in at least 11 different states.

113.

The Defendants, working in concert with one another, knowingly carried out and

participated in the fraudulent scheme that, on information and belief, was crafted by Hofmeister.

114. The Defendants carried out, participated in, furthered and perpetuated their

fraudulent scheme through the use of the mail and wires and did so across many different state

lines, and by repeatedly promising to perform acts in the future which, at the time of making the

promises, they had no intention of ever performing.

115. As a direct and proximate result of the Defendants’ racketeering activity, the

Plaintiffs were damages in an amount to be determined at trial.

Second Claim For Relief

Breach of Fiduciary Duties - Talbot



117. Talbot is a fiduciary of Deborah, Jerry and Spoone. Talbot’s fiduciary duties arise

directly through JDP and C&T, and further apply to his actions relative to JDK. As such, Talbot

owes Deborah, Jerry and Spoone the highest duties of loyalty, care, candor and good faith and fair

dealing.



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118. Talbot breached his fiduciary duties to Deborah, Jerry and Spoone, including but

not limited to the following acts and omissions:

a. Knowingly misrepresenting the GPSI investment opportunity in connection with JDK, JDPand C&T;

b. Knowingly misrepresenting that Talbot had contributed to GPSI his portion of therespective licensing fees pertaining to JDP and C&T;

c. Failing to furnish any consideration for his ownership interest in JDP or C&T;

d. Upon information and belief, spending or diverting funds belonging to JDK, JDP or C&Tto or for the benefit of Talbot’s family members;

e. Entering into contractual arrangements on behalf of JDK, without the knowledge ofDeborah or Jerry, by misrepresenting his authority;

f. Engaging in irregularities in the keeping of corporate books and records belonging to JDPand C&T;

g.

Entering into unapproved transactions involving JDK, JDP and C&T, where Talbot profited at the expense of Deborah, Jerry and/or Spoone;

h. Promoting Talbot’s personal interest at the expense of the corporate interests of JDK, JDP

and C&T;

i. Abandoning his operational and sales duties for JDK, JDP and C&T;

j. Refusing to provide copies of pertinent documents and information pertaining to JDK, JDPor C&T; and

k. Unreasonably refusing to enter into a signed operating agreement for JDP or C&T.

119. In contemplating, planning, and/or carrying out the foregoing conduct, Talbot has

breached his fiduciary duties to Deborah, Jerry and Spoone and has failed to act in good faith.

120. As a direct and proximate result of Talbot’s material breach of his fiduciary duties,

Deborah, Jerry and Spoone have sustained damages in an amount to be proven at trial.

Third Claim For Relief

Fraudulent Inducement – All Defendants Except Max 1 Financial and Brooke



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122. The Defendants fraudulently induced the Plaintiffs to invest in GPSI through the

Pennsylvania License, the Jail License and the Buy-Sell Agreement.

123. As specifically set forth, infra, the Defendants, by and through their authorized

representatives, furnished written and oral financial performance representations, projections,

profit forecasts and other statements (the “Misrepresentations”) to the Plaintiffs which were false

or materially misleading, contained material misrepresentations of past or existing facts, were

made without a reasonable basis or written substantiation, and/or which omitted one or more

material facts necessary in order to make the statements made, in the light of the circumstances

under which they were made, not misleading.

124. At the time the Defendants, by and through their authorized representatives, made

the Misrepresentations, they knew the information contained therein to be false, or they made such

Misrepresentations with reckless ignorance of their false or misleading nature.

125. The Defendants, by and through their authorized representatives, made the

Misrepresentations with the intent that the Plaintiffs would rely on them, and with the intent that

the Misrepresentations would cause the Plaintiffs to invest in the GPSI system.

126. The Plaintiffs reasonably relied upon the Misrepresentations by entering into the

Pennsylvania License, the Jail License and the Buy-Sell Agreement, and by investing significant

sums of money into GPSI and particularly into the ongoing operation and development and

operation of the business in Pennsylvania and Ohio, to the Plaintiff s’ substantial detriment and

damage.



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127. But for the Misrepresentations, the Plaintiffs would not have entered into the

Pennsylvania License, the Jail License and the Buy-Sell Agreement.

128. The Plaintiffs have been damaged by the Misrepresentations made by the

Defendants in an amount to be determined at trial.

129. The damages incurred by the Plaintiffs were proximately caused by the Defendants’

Misrepresentations.

Fourth Claim For Relief

Fraud – All Defendants Except Max 1 Financial and Brooke



131. The Defendants, by and through their authorized representatives and agents,

engaged in fraudulent conduct in connection with the Pennsylvania License, the Jail License and

the Buy-Sell Agreement.

132.

In particular, as described above, the Defendants, acting in concert with one

another, implemented and executed a scheme through which the Defendants sold the Plaintiffs on

what amounts to a Ponzi Scheme, doing so through the use of numerous illegal FPR’s and other

misrepresentations, as well as through the concealment of critical facts. The Defendants used the

Plaintiffs as a “bank” to fund their fraudulent activities, and ultimately to put money in their own

pockets at the Plaintiff s’ expense.

133. The Defendants carried out this fraudulent scheme through a series of

misrepresentations and material omissions made to the Plaintiffs concerning the Pennsylvania

License, the Jail License and the Buy-Sell Agreement over a four-year period, including but not

limited to the acts and omissions set forth in Paragraphs 23 through 58 of the Complaint.



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134. As described above, Ronald, Gregg, Hofmeister, Sylvester, Talbot and Gilhooly

personally participated and furthered the fraud described herein by, among other things,

conceiving of a plan to execute the fraud and participating in the execution thereof, personally

authorizing the fraud, approving and sanctioning the fraud, and directly interfacing with the

Plaintiffs.

135. Ronald, Gregg, Hofmeister, Sylvester, Talbot and Gilhooly knew or reasonably

should have known that the Misrepresentations were false and that they were concealing critical

facts. They were aware that the Plaintiffs were relying upon the Defendants’ representations.

136. The Plaintiffs reasonably relied upon the Misrepresentations to their substantial

detriment.

137. As a direct and proximate result of the Defendants’ Misrepresentations and

fraudulent non-disclosure, the Plaintiffs have suffered damages in amount to be proven at trial.

Fifth Claim For Relief

Fraud – Max 1 Financial, Brooke and Talbot



139. Max 1 Financial, Brooke and Talbot, acting in concert with one another and with

GPSI, engaged in fraudulent conduct through their solicitation of JDK to utilize Max 1 Financial

in connection with the Pennsylvania License.

140. In particular, Max 1 Financial, Brooke and Talbot, acting in concert with one

another and with GPSI, implemented a fraudulent scheme through which they convinced JDK,

through Deborah and Jerry, to allow Max 1 Financial to process credit card transactions for JDK

for the City of Harrisburg and Montgomery County.



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141. Upon information and belief, Brooke and Talbot carried out this fraudulent scheme

through a series of misrepresentations and material omissions made to JDK, Deborah and Jerry

concerning Max 1 Financial over approximately a nine-month period, including but not limited to

the acts and omissions set forth in Paragraphs 68 through 72 of the Complaint.

142. Talbot and Brooke knew or reasonably should have known that their

representations to JDK, Deborah and Jerry regarding Max 1 Financial were false. They were aware

that the JDK, Deborah and Jerry were relying upon these representations.

143.

JDK, Deborah and Jerry reasonably relied upon these misrepresentations to their

substantial detriment.

144. As a direct and proximate result of the fraudulent conduct of Max 1 Financial,

Brooke and Talbot, JDK, Deborah and Jerry have suffered damages in amount to be proven at

trial.

Sixth Claim For Relief

Violation of Colorado Consumer Protection Act – All Defendants



146. The Defendants violated the Colorado Consumer Protection Act, §6-1-101 et seq.

(the “CCPA”) by engaging in an unfair or deceptive trade practice when they made the

representations detailed above and by concealing facts as detailed above, and by selling a franchise

to Plaintiff without providing an FDD as required by the Federal Trade Commission’s Franchise

Rule, 16 C.F.R. §436 et seq.

147. Ronald, Gregg, Hofmeister, Sylvester and Talbot participated in violations of the

CCPA described herein by, among other things, personally conceiving of and/or orchestrating the



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fraudulent or unfair trade practices and then participating in the execution thereof, by personally

authorizing the fraudulent and unfair trade practices, and approving and sanctioning the fraudulent

and unfair trade practices.

148. Brooke and Gilhooly participated in violations of the CCPA described herein by,

among other things, personally participating in the execution of the fraudulent or unfair trade

practices.

149. The Defendants made the above-referenced misrepresentations in the course of the

EZ Pay System, for the purpose of inducing the Plaintiffs to invest in GPSI through the

Pennsylvania License, the Jail License and/or the Buy-Sell Agreement, as well as to utilize Max 1

Financial in connection with the operation of JDK’s business. The Defendants’ unfair and

deceptive trade practices were fraudulent, willful, knowing and intentional.

150. The Defendants’ unfair and deceptive trade practices significantly impact the public

as actual or potential consumers, and their methods have a tendency and capacity to attract

customers.

151. As a direct and proximate result of the Defendants’ violations of the CCPA, the

Plaintiffs have suffered injuries in fact to legally protected interests.

152. The Plaintiffs have been damaged by the Defendants’ violations of the CCPA in an

amount to be determined at trial, but believed to be in excess of $1,600,000.00.

Seventh Claim For Relief Civil Theft/Conversion – All Defendants Except Max 1 Financial and Brooke





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154. Ronald, Gregg, Hofmeister, Sylvester, Talbot and/or Gilhooly, acting directly, in

concert, and/or through their representatives, employees and/or agents, have knowingly retained,

obtained and/or exercised control over funds belonging to JDK, JDP, Deborah, Jerry and Spoone

without authorization.

155. In particular, one or more of these Defendants obtained funds from Deborah and

Jerry in connection with JDK or the Pennsylvania License or with JDP or the Jail License, and/or

from Spoone in connection with C&T or the Ohio License, being fully aware that the Plaintiffs

would receive no consideration for their investments, and being fully aware that the investments

would fail.

156. Working in concert, one or more of these Defendants obtained possession of the

Plaintiff s’ funds by fraud or deception.

157. As a result of the utter absence of any consideration furnished by the Defendants to

the Plaintiffs in return for their investment in the Pennsylvania, Jail and Ohio Licenses, rightful

ownership of these funds continues to belong to the Plaintiffs.

158. Upon information and belief, one or more of these Defendants intended to

permanently deprive the Plaintiffs of the use or benefit of these funds.

159. As a direct and proximate result of the actions of one or more of these Defendants,

the Plaintiffs have suffered and/or will suffer damages in an amount to be determined at trial.

Eighth Claim For Relief Civil Theft/Conversion – Talbot, Max 1 Financial and Brooke





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161. Talbot, Max 1 Financial and/or Brooke, acting directly, in concert, and/or through

their representatives, employees and/or agents, have knowingly retained, obtained and/or exercised

control over funds belonging to JDK, Deborah and/or Jerry without authorization.

162. In particular, one or more of these Defendants obtained funds from Deborah and

Jerry in connection with JDK or the Pennsylvania License, being fully aware that the Plaintiffs

would receive no consideration for same, and being fully aware that Max 1 Financial had no

intention of ever honoring the rates promised by the Defendants to JDK, Deborah and/or Jerry.

163.

Working in concert, one or more of these Defendants obtained possession of the

Plaintiff s’ funds by fraud or deception.

164. As a result of the utter absence of any consideration furnished by the Defendants to

JDK, Deborah and/or Jerry in return for their use of Max 1 Financial, rightful ownership of these

funds continues to belong to JDK, Deborah and/or Jerry.

165. Upon information and belief, one or more of these Defendants intended to

permanently deprive JDK, Deborah and/or Jerry of the use or benefit of these funds.

166. As a direct and proximate result of the actions of one or more of these Defendants,

JDK, Deborah and/or Jerry have suffered and/or will suffer damages in an amount to be determined

at trial.

Ninth Claim For Relief

For Constructive Trust – All Defendants





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168. All revenue and profits that the Defendants have wrongfully and unjustly obtained

as a result of their acts of infringement are subject to an equitable lien and constructive trust for

the benefit of the Plaintiffs.

169. The Plaintiffs therefore request that the Court impose a constructive trust on the

proceeds from the use of any infringing acts or products, wrongfully in the hands of the

Defendants, as well as the portion thereof which are in the hands of others, whether or not the

Defendants herein, in order to preserve said proceeds for the Plaintiffs.

Tenth Claim For ReliefAccounting – Max 1 Financial, Talbot and Brooke

170. Plaintiffs re-allege and incorporate by reference each and every allegation

contained in the previous paragraphs, as though fully set forth herein.

171. The actions of Max 1 Financial, Talbot and Brooke, which include the unauthorized

taking and/or redirecting of funds belonging to JDK and other accounting irregularities, have

resulted in improper profits, revenues, and other financial gains to Max 1 Financial, Talbot and

Brooke for which JDK, in equity and good conscience, is rightfully entitled to reimbursement.

172. JDK does not know the amount of revenue and profits wrongfully realized by Max

1 Financial, Talbot and Brooke, which information is uniquely within the knowledge of Max 1

Financial, Talbot and Brooke. JDK is, therefore, entitled to an accounting, at the expense of Talbot

and Brooke, to determine the amount of revenue and profits that Talbot and Brooke have unjustly

obtained through their wrongful acts.

173. JDK accordingly Complaints a full and complete forensic accounting of the books

and records of Max 1 Financial, Talbot and Brooke, as well as the books and records of any other

entity under their collective ownership or control, dating back to July 1, 2011.



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Additional Claims For Relief

174. Plaintiffs reserve the right to add additional claims during or following discovery.

IV. PRAYER FOR RELIEF

WHEREFORE, the Plaintiffs respectfully request that the Court enter an Award in their

favor, and against the Defendants, jointly and severally, for the following relief:

a. Damages in the amount of $1,600,000, trebled pursuant to 18 U.S.C. §1964(c) and/orC.R.S. §18-4-405, together with pre- and post- judgment interest, attorney’s fees, costs,expert witness fees and all other expenses of trial;

b.

Disgorgement of all profits generated by the Defendants in connection with thePennsylvania License, the Buy-Sell Agreement, the Ohio License, and the Jail License;

c. An order requiring an immediate accounting of all of the respective revenues and profits derived by Max 1 Financial, Talbot and Brooke, through their wrongfulactivities set forth herein, at the expense of those Defendants;

d.

An order imposing a constructive trust on all revenues and profits from the Defendants’wrongful activities and conduct;

e. Any other equitable relief that the Court deems just and proper to prevent and restrain

the Defendants’ Civil RICO violations pursuant to 18 U.S.C. §§1961-1968; and

f. For such other relief as the Court deems just and proper.

JURY DEMAND

The Plaintiffs hereby demand trial by jury on all issues so triable.

Respectfully submitted this 9th day of March 2015.



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BROWN & KANNADY, LLC

/s/ David J. Meretta .

Scott T. Kannady, No. 29995David J. Meretta, No. 44409BROWN & KANNADY, LLC2000 South Colorado Blvd., Suite 2-610Denver, CO 80222Phone: (303) 757-3800Fax: (303) 757-3815E-mail: [email protected]: [email protected]

ATTORNEYS FOR PLAINTIFFS


JDK LLC et al v. Hodge et al Doc 1 filed 09 Mar 15.pdf

Documents

Transcript of JDK LLC et al v. Hodge et al Doc 1 filed 09 Mar 15.pdf