Defaulted Business Contract (Inc. Fraud)

[lamaren]

What is the name of your state (only U.S. law)? Texas

A few years ago I made an investment into a company in return for secured assets and a guaranteed return. The owner (who is a disbarred contract attorney due to forging his signature on his client's checks and stealing the money, as well as embezzlement -- I found this out after) bounced me around for over a year after this point, never making a single promised payment. I ended up looking into whether or not others were caught up in this, and found four others who had invested as well (one was around a year after me). One of these people were even given the same listing of "secured assets" I was, of which as far as we're understanding none of the assets even actually exist.

We got an attorney involved on a contigency basis, and he was able to get the person to agree to pay back what he owed. We signed a new contract in court, agreed to it, etc. The other party has now broken that contract as well, with a 6+ month lapse in payments, before making another payment. At this point, I'd like to see what we can do in regards to this situation, since our current attorney is basically telling us that we can do nothing but ask him to follow through with his agreement and it makes no sense to me that the guy can keep breaking contracts with no recourse.

I'd also like to point out that the owner of the business (the disbarred contract attorney) is the one who wrote up our originally business contract. He then twisted things around saying that what we agreed to was "usurious" in nature, and hinted that he would counter-sue under that. None of us who went into business with him knew these laws. Being that *he's* the attorney, we assumed he'd know the laws. Apparently he purposely added things into the contract to protect himself in case we ever went after him. He also purposely altered some of the contracts so he can add in false information (ie. numbering the pages 1, (blank), 3 so that he can replace the second page with whatever he wants). The entire thing has been shady. In regards to things being usurious, what he stated when we were making the deal is that we are making an INVESTMENT into his business with a guaranteed return. He then said when we got an attorney that this is considered as INTEREST and not an INVESTMENT and that's what makes it usurious...

What I'd like to look at now is what options we truly have available. We've already lost half of our money (even if he *did* actually follow through in the past) due to our contingency with our attorney, but what bothers me more is letting this guy keep walking all over us while we just sit around and let him do what he wants, when he wants.

I can answer any questions there are about this, so fire away.

Thanks!

Edit: in case it matters, the amount of money he took from investors (at least those I personally know about) is around $80k. I'm sure there are more though.

Edit 2: the business we went into the contract with doesn't "exist." When he registered his company with the state, the check bounced so it was never actually registered... he is running the business though and has a physical location (the same one we invested in).

 

[FlyingRon]

You appear to have a lawyer, why not listen to him. Frankly, the whole proposition "Secured assets -- Guaranteed return" sets off alarm bells. Propositions like that are paying hardly ANY interest these days. Anybody alleging rates over a couple of percent is lying.

Do *NOT* listen to the criminal who has already taken you. Asset-backed security payments are NOT interest. Says right in the Texas finance code and hence is not subject to Usury. Just because an investment promised more than 10% doesn't make it usurious.

More than this we can not tell you without reading the specific contract. Most likely his thing is not only fraudulent but probably also has a number of regulatory violations that are designed to keep criminals from attempting such scams.

 

[lamaren]

You appear to have a lawyer, why not listen to him. Frankly, the whole proposition "Secured assets -- Guaranteed return" sets off alarm bells. Propositions like that are paying hardly ANY interest these days. Anybody alleging rates over a couple of percent is lying.

Do *NOT* listen to the criminal who has already taken you. Asset-backed security payments are NOT interest. Says right in the Texas finance code and hence is not subject to Usury. Just because an investment promised more than 10% doesn't make it usurious.

More than this we can not tell you without reading the specific contract. Most likely his thing is not only fraudulent but probably also has a number of regulatory violations that are designed to keep criminals from attempting such scams.

My problem is our attorney (that has gotten a pretty large payment so far) isn't willing to push anything. He wants to just let the guy pay what he wants when he wants and let everything go. Our attorney is also the one who advised against pushing things because the guaranteed return means it *is* interest and therefore it *is* usurious and he said we could lose everything by pushing it.

This is why I'm really hoping for second/third opinions. I'm really not sure what I can do about having paid this attorney a massive amount and him not pursuing what we agreed to, but after this situation I'm a bit wary of trusting another attorney with money, too...

Here's one of the contracts: https://drive.google.com/file/d/0B9nM9eWo_k3rQ3NqaWcxY1Q0T0k/edit?usp=sharing

I have another that is similar but was for equity share (in his new location). He didn't open that new location and refused to pay anything back on that either. As for how he justifies the high interest:

We are a gaming/entertainment business located in X, TX. We are expanding to 2 additional locations and
must either purchase or lease the equipment/games we need. It is more cost-effective for us to pay you a return of
10% per month than to pay the 40% lease rate. For example, let's say you invest $10,000. We will purchase 10
machines with your investment. We will pay you $1,000 per month, regardless of machine or location performance.
If we were to lease the same machines, we would pay approximately $3,000 per month. Based on average income
of $50 per machine per day which equals $15,000 for the month. We would pay 40% of the “machine net”
(approximately 50% of income) which would be $7,500 x 40% = $3,000.

I have an agreement that I can send you for your review. As a retired attorney, I am able to draft my own
agreements without incurring legal fees. I will be happy to meet with you and show you our current business and
provide you with additional information. I look forward to meeting you.

And yes, he does classify himself as a retired attorney (though he was disbarred for fraud). When I called him out on that he said that retired simply means no longer working in that sector anymore.

For what it's worth, he also gave me legal help in the form of a business contract for a separate deal (between me and another business) I had going on (he read over it, edited it, gave advice, etc.) which I'm hearing is also illegal due to the situation.

 

[FlyingRon]

The sad truth is this is one of those too good to be true things that should have set off alarm bells right off, it's even worse than I expected after reading the contract.

The sad truth is that with only $10,000 in play, you are right, you're going to be swamped with legal bills trying to recover the principal. If there are others victims, you might try pooling your resources. Another effort is to be talking to the state attorney's office as well as the State Securities Board. Despite the disclaimer that this isn't a security, if these offers were made public, they are still likely to be subject to regulation.

 

[lamaren]

The sad truth is this is one of those too good to be true things that should have set off alarm bells right off, it's even worse than I expected after reading the contract.

The sad truth is that with only $10,000 in play, you are right, you're going to be swamped with legal bills trying to recover the principal. If there are others victims, you might try pooling your resources. Another effort is to be talking to the state attorney's office as well as the State Securities Board. Despite the disclaimer that this isn't a security, if these offers were made public, they are still likely to be subject to regulation.

That contract isn't the one we signed. The amount given was much larger than 10k (I was actually investing in both that contract and a separate equity agreement for a new location, both of which he neglected to follow through on).

Also, my issue with "pooling resources" now is that our current attorney has been paid ~30k and gets half of anything we collect. With him not being willing to even follow through with what we agreed to, I'm not even sure where to go from here. We've essentially paid a pretty massive amount for representation that we apparently aren't going to get (as he just wants to let everything go and move on with life instead of pursuing other possible routes)...

The entire situation has just gotten really sticky and I have no idea where to even start. I'm afraid to throw more money at this when we've already paid 30k or so to our current attorney and still aren't getting anywhere (aside from getting a new contract signed by the business owner that still isn't being followed through on). The entire point of offering such a massive amount to our attorney was so that he'd take care of representing us. Not so that we'd have to go find another attorney. And based on what our current attorney says, he's not willing to pursue this because the court will just make the defendant pay what he still owes (despite breaking another contract and all the legality surrounding this) so he feels it'd be worthless to do anything.

Also, in re: the offers being made public, they were. He had posted on multiple different investment sites looking for investors to his ventures (including Craigslist and some others). In all of them he said the same thing. Here's a copy of the message:

We are a DFW business that is offering a return of 10% each month. Invest $10,000 with us and you will receive $1,000 each month. If you're looking for a significant return on your money, this may be for you. We are using this money to expand to additional locations. How do we offer this return? It is more cost-effective for us to pay you 10% monthly than to lease the equipment we require.This is a passive income opportunity. You do not work in the business. The monthly return of 10% is paid to you each month regardless of business performance. Your investment is secured by free and clear assets. Email for further information

And, as stated, his "secured by free and clear assets" means he "secured" multiple people with the same assets (which don't appear to exist regardless, after some research).

For what it's worth, here's my other contract with him (this one's purely about equity, rather than guaranteed returns, but he never opened the other location and refused to return that money either).

https://drive.google.com/file/d/0B9nM9eWo_k3rZjVISEgwdXk1NFE/edit?usp=sharing

Something I didn't know to pay attention to in the beginning was the footers as well. If you notice, on our signed page the footer is all on the same line (left-align and right-align). On the two that actually deal with our legal agreement, he altered the footer (which I was told is possibly so he can swap out those pages and claim our agreement was different than it really was). Luckily (or unluckily) everyone else involved's documents are drawn up the same way.

Also, his business is still up and running and it's doing well as far as I can tell. He's getting the cash income on a daily basis in person still.

 

[lamaren]

I've attached our agreement we made in court as well, here: https://drive.google.com/file/d/0B9nM9eWo_k3rWmlMZzZldTRScUU/edit?usp=sharing

Hopefully that helps better understand things... my current attorney is still not giving any information on what we can do about the situation, other than allow the defendant to pay if and when he feels like it. I figured the 6+ months of getting no payments at all would help things, but he's still not wanting to push anything.