ADDendL Xn‐ Bl ClvlI CNSE INFORMATION STATEMENT (crs) Use for initial Law Division Civil Part pleadings (not motions) under Rure 4:5-1 Pleading will be rejected for filing, under Rure 1 :5-6(c), if information above the black bar is not completed or attorney's signature is not affixed PAYMENTTYPE □ CК □ CG□ CA CHci/cK No. AMoUNT: OVERPAYMENT: BATCH NUMBER: AπORNEY′ PRO SE NAME PAUL」 DILLON,ESQ TELEPHONE NUMBER (973)758‐ 0900 COuNTY OF VENUE Ocean FIRM NAME(r applcablo) BL00M&D:LLON,PC REC[|∵ こ〕&FILEE 四 | KttW列 才 l樹物Ψ OFFICE ADDRESS 70 SOUTH ORANGE AVENUE SUITE 240 LIVINGSTON,N」 07039 r i 1 1 1 1 1 1 ‥ DEC -2 a141 DOC CC JMENTI/PE V` MPLAINT 」 UR DEMAND E Yes ENo NAME OF PARTY(eO,」 。 hn Doe,PlainuD ELAUT USA,lNC,PLAINTIFF 卜 L CASE TYPE NUMBER ISee reverse sldefor‖ sung) 699 HURR!CANE SANDY RELATED? □ YES tt N0 lS THlS A PROFESS10NAL MALPRACTlCE CASE? □ YES tt NO IFYOU HAVE CHECKED γES,"SEE 7Vユ SA 2A 53A‐ 27 AND APPLiCABLE CASE LAW RECARDING YOUR OBL10AT10N TO FlLE AN AFFIDAVlT OF MERIT RELATED CASES PENDING? 図 YES □ No IF YES.LIST DOCκ ET NUMBERS L‐002327‐ 14 DO YOU ANTICIPATE ADDING ANY PARTlES (a‖ Sing out of same transacuon Or Occurence)? □ YES tt No NAME OF DEFENDANT'S PRIMARYINSuRANCE COMPANY(rknom) □ 図 NONE UNKNOWN CASE CHARACTERiSTlCS FOR PURPOSES OF DETERMlNING IF CASEISハ PPROPRIATE FOR MEDIAT10N DO PARTIES HAVEA CuRRENT,PAST OR RECuRRENT RELAT10NSH:P? 図 YES □ NO IF YESJS THAT RELATIONSHIP: E EMPLoYER/EMPLOYEE E FAI L|AL E FRIENo/NEIGHBOR E OTHER (EXPIAIN) El BusrNEss DOESTHE STATUTE GOVERNING THIS CASE PROVIDE FOR PAYMENT OF FEES BYTHE LOSING PARTY? El YEs I No uSETHISSPACETOALERTTHECOURTTOANYSPECIALCASECHARACTERISTICSTHATMAYWARRANTINDIVIDUALMANACEMENTOR ACCELERATED DlSPOSIT10N :そ:「 F~ :∫ (lせ ゛ R YOuR CuE‖ ]N景量 :ANY uSABL「 Y ACCOMMODArЮ NS? IFYES,PLEASElDENTIFV THE REQUESTED ACCOMMODAT10N WILL AN!NIERPRETER BE NEEDED? □ YES tt N0 IF YES, FOR WHAT LANGUAGE? I certify that confldential peEonal idontifiers have been rodact€ d from documents now submitted to the court, and will be redacted from all documenG submltted in tho futuro in accord8nca with Rure 1:38-7(b). コ =■ ′ グ Effective O● 19‐2013,CN 10517‐Eng“ sh page 1of2 10R USE 3V CLEFく S OIIICE OヽlLY THEINFORMAT:ON PROViDED ON THlS FORM CANNOT BE:NTRODUCEDINTO EVIDENCE
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ADDendL Xn‐Bl
ClvlI CNSE INFORMATION STATEMENT(crs)
Use for initial Law DivisionCivil Part pleadings (not motions) under Rure 4:5-1
Pleading will be rejected for filing, under Rure 1 :5-6(c),if information above the black bar is not completed
KttW列才l樹物ΨOFFICE ADDRESS70 SOUTH ORANGE AVENUESUITE 240LIVINGSTON,N」 07039
ri111111‥
DEC -2 a141
DOCCCJMENTI/PE V`MPLAINT
」UR DEMAND E Yes ENoNAME OF PARTY(eO,」 。hn Doe,PlainuD
ELAUT USA,lNC,PLAINTIFF 卜L
CASE TYPE NUMBERISee reverse sldefor‖ sung)
699
HURR!CANE SANDYRELATED?□ YES tt N0
lS THlS A PROFESS10NAL MALPRACTlCE CASE? □ YES tt NOIFYOU HAVE CHECKED γES,"SEE 7Vユ SA 2A 53A‐ 27 AND APPLiCABLE CASE LAWRECARDING YOUR OBL10AT10N TO FlLE AN AFFIDAVlT OF MERIT
RELATED CASES PENDING?図 YES □ No
IF YES.LIST DOCκ ET NUMBERSL‐002327‐ 14
DO YOU ANTICIPATE ADDING ANY PARTlES(a‖Sing out of same transacuon Or Occurence)?
□ YES tt No
NAME OF DEFENDANT'S PRIMARYINSuRANCE COMPANY(rknom)□図NONEUNKNOWN
CASE CHARACTERiSTlCS FOR PURPOSES OF DETERMlNING IF CASEISハ PPROPRIATE FOR MEDIAT10NDO PARTIES HAVEA CuRRENT,PAST ORRECuRRENT RELAT10NSH:P?
図 YES □ NO
IF YESJS THAT RELATIONSHIP:E EMPLoYER/EMPLOYEE
E FAI L|ALE FRIENo/NEIGHBOR E OTHER (EXPIAIN)
El BusrNEss
DOESTHE STATUTE GOVERNING THIS CASE PROVIDE FOR PAYMENT OF FEES BYTHE LOSING PARTY? El YEs I No
]N景量:ANY uSABL「Y ACCOMMODArЮ NS? IFYES,PLEASElDENTIFV THE REQUESTED ACCOMMODAT10N
WILL AN!NIERPRETER BE NEEDED?□ YES tt N0
IF YES, FOR WHAT LANGUAGE?
I certify that confldential peEonal idontifiers have been rodact€d from documents now submitted to the court, and will beredacted from all documenG submltted in tho futuro in accord8nca with Rure 1:38-7(b).
THEINFORMAT:ON PROViDED ON THlS FORM CANNOT BE:NTRODUCEDINTO EVIDENCE
CIVIL CASE INFORMAT10N SttATEMENTuseぉ百雨 J倒。adngsRR温 。祠 undtt RJre 4由
CASE TYPES(ChOOSe One and enter number of case type in approp‖ ate space on the reverse side)Track: ‐ 150 daysi discovery151 NAME CHANGE175 FORFEITURE302 TENANCY器::轟祠 (階盤出鳴:縫駅l場∝C°ndemmm■ ∽m口α∞mme商詢∞“mmm:舘 呂甜 利 営ヨ盤
NCE C臥IM“nCluang dedarato″ 担dgmen adbn●
]♀ 脇8V8f譜鵬 留献 3耀群記it]緞馴c¬。N:::錨翼器器糧朧 席∫蝸辟““哺
Track:! ‐ 300 days'discovery305 CONSTRUCT10N:::認:寵断だl棚:麗腐撫紫RしN603N AuTO NECLIGENCE― PERSONALlN」 URY(non‐Verbai ulreshOd)603Y AUTO NECL!GENCE― PERSONALIN」URY lvetalthreshold)605 PERSONALIN」 URY610 AuTO NEGLIGENCE― PROPERTY DAMAGE:::ギ器」‰躍M md“es bodw tturyl
with a new finn, Kreischer Miller, which did not have atry ties to Elaut's previous executives,
nor with Elaut's parent company.
C. Guarnieri Steals From Elaut By Diverting RevenuesFrom Cash Sales To Pav His Personal Expenses
20. After replacing competent Elaut financial staff and outside accounting
professionals with family members, friends, and cronies who were unlikely to question him, and
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often did not have the financial expertise to do so, Guamieri drarnatically ramped up his thefts
from Elaut.
Zl. As Chief Executive Offrcer, Guarnieri was authorized to wire tansfer
Elaut,s funds. He began transferring funds from Elaut's operating account to subsidiary JGSC
so that JGSC could purchase coin operated amusement games. Guamieri would then resell the
games. For cash sales, Guamieri diverted the sales proceeds into various bank and Paypal
accounts he controlled, or even more directly to various banks and retail credit card companies to
pay his personal debts.
22. To prevent Elaut from learning about this scheme, Guamieri enlisted his
hand-picked Chief Financial Officer, Carle. The two worked together to hide the thefts in a
number of ways. First, Carle wrote down the amor:nt of reported inventory on Elaut's books.
23. Second, Carle wrote down hundreds of thousands of dollars in accounts
receivable that were diverted to Guamieri's personal use, or placed in the accounts of JGSC for
Guarnieri's use.
24. Because of the significant amounts of money Guarnieri was stealing from
Elaut, he and Carle ultimately had to come up with additional ways for Elaut to document the
lost revenues. In 2009 and 2010, Carle booked inter-company loans between Elaut and JGSC,
but rather than have JGSC repay the loans when equipment was sold, Guarnieri paid his personal
expenses with the proceeds. Then in late 2010, Carle booked the purported loans as impaired.
25. Making this maneuver even more brazen, JGSC did not have any
operating expenses. Rather, all of its costs, from payroll to insurance to rent to day-to-day
operating expenses were expensed to Elaut. Hence, JGSC owed Elaut even more.
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26. Each ycar duHng Ottlien's reign,Elaut's new aud五 ng flm au董ted
Elaut's hancial statements and opined that the mancial statements were not misstated or
inaccurate. Carle prepared the mancial statenlents for the auditors'review,and Gumderi and
Carle pЮ宙ded a representation letter to the auditing f― in support of the fmancial statetrlents
ave―g,力mOng other things,that they“had no knowledge of Lud or suspected iaud affecting
EElautl''and that all matenal transactions had been propedy recorded in the company's
accounting records.
27 0n infomation and beliet Guamioi and Carle knew that Guamien's
hand‐plcked auditors were not ven″ hg or even spot checking park assets or park mventory.
D. Guarnieri Leaves Elaut,Taling lts 14oney,JGSC,AndMost OfThe Emplovees Ⅱe Brought With Him
28. Bei″een 2009 and 2011,Elaut underperfO.Ш ed expectations. Its audited
mancial statelrlents showed■ 逍tin 2008,Elaut had approxlmately S500,000 in net inconle“ m
S9,000,000 in revenuc.h2009,however,Elaut lo威 approximttely S200,000 on revenues of
ahostSn,00o,ooo.h2010 and 2011,Elaut was again pro■ table,but barely.
29. h or about March 2011,Elaut and Guamieri agreed to end Guamie」 's
employment with Elaut.
30 To document Guamen's deparlure ttom Elaut, Elaut and Guamid
entered mto the Exchange Agreement and Plan of Reorgatllzation,dated as of March 31,2011
cthe“Exchange Agreemer')
31. h the Exchange Agreement,Elaut and Guamieri agreed that Elaut would
take back shares of Elaut it had transferred to Guamie五 , and GuamieH would take back
ownership ofJGSC.
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32. Guamieri also made a nurnber of representations in the Exchange
Agreement conceming Elaut's and JGSC's financial status that survive execution of the
agreement, including:
. The unaudited balance sheets and income statements for year-end 2010and the quarter ending March 31, 2011 were prepared in accordance withGAAP @xchange Agreement'lf 4'6(a)-O)); and
The unaudited balance sheets for year-end 2010 and the quarter endingMarch 3 1, 201 1 "fairly present the respective financial position and resultsof operations of' Elaut and JGSC @xchange Agreement ![ 4.6(c)).
33. Both ofthese representations were false.
34. The Exchange Agreement also provides for the parties to indemnifu one
another agafuEt any 'liability, claims, losses, damages or e.xpenses, including reasonable
attorneys' fees, incurred or required to be paid by such other parties resulting from, related to or
arising out of any breach or failure of observance or performance of any representation . . ."
@xchange Ageement t[ 6(a).
E. Elaut Learns Of Guarnieri's And Carle's MisconductOnlv After Guarnieri and His Cronies Leave Elaut
35. On inforrration and belief, shortly before Elaut detemrined to terminate
Guamieri, Guarnieri incorporated Jersey Jack Pinball.
36. On information and belief, Guamieri rolled the assets of JGSC, as well as
other flmds he had misappropriated from Elaut, into Jersey Jack Pinball.
37. Soon after Guamieri gave back his Elaut shares as part of his separation
from Elaut and founded Jersey Jack Pinball, Guamieri hted many of the people he had hired at
Elaut to work with him at Jemey Jack Pinball. Carle, however, remained at Elaut as its CFO
through September 28, 2072.
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38 New staff at Elaut began to discover inancial irregularities and began
asking questions As one d七ect result of Guarmeri'S thens,Elaut was fOrced to restate certain
revenues,and tO pay additional SaleS and use tax,plus penalties and herett for late repo■ing
39. On infOmatiOn and beliet Carle waS passing idumatiOn conCeming
Elaut starinq―es about Guamleri On to Guamle五 .
40 Elaut te―ated Carle on September 28,2012.
41. With Carle gone,Guamid's scheme was revealed
FIRST COIINTcraud Against GuanieriD
42. Elaut repeats and realleges the preceて 血lg allegatiOns in ttis COmplamt as
ifmly set fon herein.
43. OMコde五 made n1lmerous false statements to Elaut,mcldhg but not
o utilizing inter―company loans for Guarmenis beneflt;
o prepanng fmancial records fbr I〕 laut that confnined false info....ation;and
O certitting false fmancid infomation and making false representations tobe used in and as a basis for Elaut's audited fmancial statements。
56。 As a result of Carle's actions,Elaut has been damaged in an amomtto be
deteHnined at trial,but believed to exceed$1,600,000.
THIRD COUNTCreaCh OfFiduciary Duty Against Guamieri and Carle)
57。 Elaut repeats and realleges the preceding allegations in this Complaint as
iffully Set fb」吐l herein.
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58 As Elaut's President/ChiefExecutive Omcer and ChiefFinancia1 0rlceL
respectively,Gw口 ien and Carle owed the highest iduciary duties of loyalty,good faith,and
fair dealing to Elaut.
59. Gに旧コde五 breached his iduciay obligations to Elaut by, among other
things:
purchasing gaming equipment with Elaut's fimds, but then diverting thesale proceeds of those games into accotmts he personally controlled,which not only cost Elaut the direct revenues, but also ultimately causedElaut to incur costs and penalties for under-reporting sales and use tax;
purchasing gaming equipment with Elaut's flmds, but then diverting thesale proceeds of those games to pay for his and his family's personalexpenses;
diverting corporate opportunities for his personal use and benefit;
diverting flmds and assets from Elaut to JGSC for his personal bernefit;
writing down inventory, accounts receivable, and other corporate debtsand assets to hide his misappropriation of corporate assets;
utili;ng inter-company loans to hide his misappropriation of corporateassets;
falsely stating that inter-company loans were impaired and writing offthose loans to hide his misappropriation of corporate assets;
preparing fi::ancial records and statements for Elaut that contained falseinfomration; and
certifying false financial infomration and making false representations tobe used in and as a basis for Elaut's audited financial statements.
Carle breached his fiduciary obligations to Elaut by, among other things:
allowing Guamieri to divert corporate firnds, assets, and opportunities forhis personal use;
writing down inventory, accounts receivable, and other corporate debtsand assets to hide Guanrieri's misappropriation of corporate assets, which
60.
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not only cost Elaut the direct revenues, but also ultimately caused Elaut toincur costs and penalties for under-reporting sales and use tax;
. utilizing inter-company loans to hide Guamieri's misappropriation ofcorporate assets;
. falsely stating that inter-company loans were impaired and writing offthose loans to hide Guamieri's misappropriation of corporate assets;
. preparing financial records for Elaut that contained false information; and
. certifying false financial information and making false representations tobe used in and as a basis for Elaut's audited financial statements'
61. As a result of these breaches, Elaut has been damaged in an amount to be
determined at trial, but believed to exceed $1,600,000.
FOURTII COI]NT(Aiding and Abetting Breach of Fiduciary Duty Against Carle)
62. Elaut repeats and realleges the preceding allegations in this Complaint as
if firlly set forth herein.
63. Elaut's formpr President and Chief Executive Officer, Jack Guamieri,
breached his fiduciary duties to Elaut, as described above.
64. Carle knew of Guarnieri's breaches ofhis fiduciary duties to Elaut.
65. Carle knowingly and substantially assisted Guamieri in breaching his
fiduciary obtigations to Elaut by, among other *Iings:
. allowing Guamieri to divert corporate funds, assets, and opportunitibs iorhis personal use;
. writing down inventory, accounts receivable, and other corporate debtsand assets to hide Guamieri's misappropriation of corporate assets, whichnot only cost Elaut the direct revenues, but also ultimately caused Elaut toincur costs and penalties for under-reporting sales and use tax;
. utilizing inter-company loans to hide Guamieri's misappropriation ofcorporate assets;
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. falsely stating that the inter-company loans were impaired and writing offthose loans to hide Guamieri's misappropriation of corporate assets;
. preparing financial records for Elaut that contained false inforrnation; and
. certiffing false financial inforrration and making false representations tobe used in and as a basis for Elaut's audited financial statements.
66. As a result ofCarle's actions, Elaut has been damaged in an amount to be
determined at tial, but believed to exceed $ 1 ,600,000.
rIF-TH COI]NT(Conversion Against Guarnieri)
67. Elaut repeats and realleges the preceding allegations in this Complaint as
if fully set forth herein.
68. At all relevant times, Elaut was entitled to the firll amount of sales
revenues for products purchased with its money.
69. By purchasing gaming equipment with Elaut's firnds and then diverting
the sales revenues for that equipment to accounts under his personal control and to pay his
personal expenses, Guamieri wrongfirlly exercised dominion and control over Elaut's property.
70. By charging JGSC's costs and expenses to Elaut, and then repuchasing
JGSC ftom Elaut Guarnieri further wrongfully exercised dominion and contol over Elaut's
property.
71. Guamieri's actions were taken without authorization.
72. Guamieri's actions were inconsistent with and to the exclusion of Elaut's
rights as title holder to its property.
73. Elaut has been damaged by Guamieri's actions in an amount to be
determined at trial, but believed to exceed $1,600,000.
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SIXTII COT]NT(Aiding and Abetting Conversion Against Carle)
74. Elaut repeats and realleges the preceding allegations in this Complaint as
if fully set forth herein.
75. At all relevant times, Elaut was entifled to the fulI amount of revenues for
products purchased with its money.
76. As described above, Guanrieri wrongfully exercised dominion and control
over Elaut's property, and converted Elaut's property for his personal use.
77. Carle knew of Guarnieri's wrongful and tortious conduct.
78. Carle knowingly and substantially participated in Guarnieri's conversion
of Elaut's assets. Among other things, Carle:
faited to file appropriate sales and use tares from 2009-2012that causedthe Company to pay back tares, penalties and interest in an effort to hidetheir misconduct;
overstated revenues resulting in unexpected tar liabilities;
allowed Guarnieri to divert corporate funds, assets, and opportunities forhis personal use;
wrote down inventory, accounts receivable, and other corporate debts andassets to hide Guamieri's misappropriation of corporate assets;
utilized inter-company loans to hide Guarnieri's misappropriation ofcorporate assets;
falsely stated that inter-company loans were impaired and wrote offthoseloans to hide Guarnieri's misappropriation of corporate assets;
prepared financial records for Elaut that contained false information; and
certified false financial information and made false representations to beused in and as a basis for Elaut's audited financial statements.
#5389316v31024225k0001 15
79. Elaut has been da:naged by Carle's actions in an amount to be determined
at trial, but believed to exceed $1,600,000.
SEYENTH COI]NT(Negligent Misrepresentation Against Carle)
80. Elaut repeats and realleges the preceding allegations in this Complaint as
if fully set forth herein.
81. As Elaut's Chief Financial Ofticer, Carle owed the highest fiduciary duties
of loyalty, good faith, and fair dealing to Elaut.
82. Carle made false statements to Elaut, including but not limited to averring
that Elaut's financial statements accurately represented Elaut's financial condition, he was not
aware of fraud or suspected fraud impacting the company, Elaut's financial statements properly
recorded and disclosed all transactions and related accounts receivable or payable, and there
were no material transactions that had not been properly recorded in the company's accounting
records. Carle made these statements both orally and in writing, including in a representation
letter dated September 15, 2010, to Elaut for its annual audit.
83. In addition, Carle failed to inforrr Elaut about Guamieri's unauthorized
diversion of corporate funds for personal uses and his personal uses of corporate funds and
opportunities. Carle further failed to inform Elaut that he and Guarnieri were, improperly writing
down inventory and accounts receivable, and utilizing inter-company loans and preparing
inaccurate financial records to hide Guanrieri's thefts.
84. Carle's statements and omissions were negligently made.
85. Elaut juiffiably relied on statements by Carle, its Chief Financial Officer,
that its financial statements were accurate, and that he did not have knowledge of any fraud or
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suspeded taud areding the company Elaut dso justinably relied on Carle's麟 lure to repo■
Guamieri's taud.
86. Elaut has beell dmaged by Carle's actions in an amOuntto be dete― ed
at t■al,but believed to exceed Sl,600,000.
EIGⅡTH COUNTCreaCh OfCOntract Against GuamierD
87 Elaut repeats and realleges the precedng allegatiollls in this Complaint as
ifttly set forth hereh.
88. Elaut and GuarmeH entered mto the Exchange Agreement,Wm iS dated
as OfMarch 31,2011.
89 Elaut has performed all ofis obligttions under the Exchange Agreement.
90. h the Exchange Agrecment,G田コderi made numerous representatios to
Elaut.Among other■ ●gs,Guameri represented:
o The unaudited balance sheets ofElaut and JGSC and related incomestatements for the calendar yeaJledhg Dece血 ber 31,2010 were preparedh accordance With GAAP・
o T騰 1lnЯudited balance sheets ofElaut and JGSC and related incomestatements for the for the interim quarter endhg March 31,201l wereprepared in accordance with GAAP;and
o Except as Set fo山 in the notes to the above inancial statements,thefmancial statements``fairly present the respective mancial pOs五 on andresults ofoperations of'Elaut and」 GSC
91 Each of these representtdons was false when made, as Guamen had
misappro"ated Haut'sf団 s to is pasonal use,and then had faldied]aut's recorお and
fmancial statements(wiCh mcluded JGSC)to bide his the鑓 .Guamie五 thus materially
breached is contractl obligations to Elaut
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92. Elaut has been damaged as a direct result of Guarnieri's breaches of the
Exchange Agreement in an amount to be determined at trial, but berieved to exceed $1,600,000'
NINTH COI]NT(IndemnitY Against Guarnieri)
93. Elaut repeats and realleges the preceding allegations in this Complaint as
if fully set forth herein.
94. Elaut and Guarnieri entered into ttre Exchange Agreement, which is dated
as of March 31,2011.
95. Elaut has performed all of its obligations under the Exchange Agreement'
96. The Exchange Agreement contains an indemnity provision requiring
Guarnieri to indemnify Elaut against any "liability, claims, losses, damages or expenses'
including reasonable attorneys' fees, incurred or required to be paid by such other parties
resulting from, rerated to or arising out of any breach or failure of observance or performance of
any representation. . ."
97. As described above, several of Guamieri's representations in the
Exchange Agreement rerating to the finances and financiar statements of Elaut and JGSC were
farse when made, and Guamieri thus has breached his representations. By reason of these
breaches, Eraut has been damaged in an amount exceeding $1,600,000.