PROFESSIONS CODE § 17200, › 2012 › 08 › ... · Both RE Loans and MF08 were hard money lenders who used funds obtained from investors to make real estate development loans,

SECOND AMENDED AND CONSOLIDATED COMPLAINT

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EMANUELE on behalf of themselves and

those similarly situated,

Plaintiffs,

vs.

GREENBERG TRAURIG, LLP, a New

York limited liability partnership; WELLS

FARGO CAPITAL FINANCE, INC. f/k/a

WELLS FARGO FOOTHILL, LLC, a

California corporation; and DOES 1-30,

Defendants.

DAVID D. NOLAN, on behalf himself

and all others similarly situated,

Plaintiffs,

vs.

WELLS FARGO CAPITAL FINANCE,

INC., a California corporation formerly

known and doing business as WELLS

FARGO FOOTHILL, LLC;

GREENBERG TRAURIG, LLP, a New

York limited liability partnership; and

DOES 1-30,

Defendants.

Case No.: RG11603095

CLASS ACTION

SECOND CONSOLIDATED AND

AMENDED COMPLAINT FOR

BREACH OF FIDUCIARY DUTY,

AIDING AND ABETTING BREACH

OF FIDUCIARY DUTY, SECURITIES

FRAUD IN VIOLATION OF CAL.

CORP. CODE § 25401, ET SEQ.,

SECONDARY LIABILITY FOR

SECURITIES FRAUD AND

COMMON LAW FRAUD, FRAUD –

CONCEALMENT AND

SUPPRESSION OF FACT,

NEGLIGENT

MISREPRESENTATION, AIDING

AND ABETTING FRAUD,

VIOLATION OF UNFAIR

COMPETITION LAW BUSINESS &

PROFESSIONS CODE § 17200, ET

SEQ.,

Unlimited Civil Case

JURY TRIAL DEMANDED


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Plaintiffs Gordon Noble, Arlene Dea Deeley, Fredric C. Mendes, Nancy Rapp,

Phillip Cantor, John Emanuele and David D. Nolan, (collectively, “Plaintiffs”), on

behalf of themselves and all others similarly situated, bring direct claims against

Greenberg Traurig, LLP (“Greenberg” or “Greenberg Traurig”) and Wells Fargo Capital

Finance, Inc. f/k/a Wells Fargo Foothill, LLC (“Wells Fargo”) (collectively,

“Defendants”) for actions that stripped Plaintiffs of their rights as equity shareholders in

RE Loans and decimated their investments. Plaintiffs Deeley and Emanuele also

invested in MF08, which the managers operated in a Ponzi scheme to funnel money to

RE Loans. For their First Consolidated and Amended Complaint (“Complaint”),

Plaintiffs allege as follows:

NATURE OF THE CASE

1. Plaintiffs bring this case to recover on behalf of over 1400 people who

invested in RE Loans, LLC (“RE Loans”) and over 600 who invested in Mortgage

Fund ’08 (“MF08”). These investors lost over $700 million dollars as victims of an

unlawful scheme carried out by the managers of the companies acting in concert with

Greenberg Traurig, LLP, the attorneys for RE Loans and MF08, and Wells Fargo

Foothills, LLC, an opportunistic lender that made an unauthorized line of credit loan to

RE Loans.

2. Both RE Loans and MF08 were hard money lenders who used funds

obtained from investors to make real estate development loans, returning profits from

these loans to the investors. Investors in RE Loans became members of the company in

return for their investments, and are referred to as “Members” in this Complaint. MF08

purportedly employed the same hard money lending business model as RE Loans.

MF08 gave investors promissory notes in return for their investment instead of making

them members of the company. Plaintiffs Deeley and Emanuele and the other investors

in MF08 also are referenced as the “Noteholders” throughout this Complaint.

3. The same individuals managed both RE Loans and MF08. They were

Walter Ng, Kelly Ng, Bruce Horwitz and Barney Ng. These individuals managed RE


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Loans and MF08 through two affiliated companies, B-4 Partners, LLC and Bar-K, Inc.

They managed MF08 through The Mortgage Fund, LLC and Bar-K. In this Complaint,

they collectively are referred to as “Managers.”

4. Beginning in mid-2007, the Managers, Greenberg and Wells Fargo

concocted and carried out a scheme through which the Managers, with Greenberg’s and

Wells Fargo’s knowing assistance, took a series of unfair and unlawful actions against

RE Loans Members and MF08 Noteholders. These actions inflicted significant harm on

the RE Loans Members by stripping them of their ownership interests in and rights of

control over RE Loans, and by changing the nature of their investments. The actions

harmed MF08 Noteholders by inducing them to invest in a shell Ponzi scheme

company that, instead of using their funds to make profitable portfolio loans, funneled

money to RE Loans.

5. RE Loans apparently prospered from its inception in 2002 through 2006.

The Managers induced thousands of investors – many of them near or at retirement age

– to place their money with RE Loans by promising them that their money would be

safe, and that they could withdraw it at any time. The Managers were successful

solicitors. By the end of 2006, RE Loans had grown to over 1400 Members. The

Managers reaped substantial financial benefits by paying themselves commissions, loan

servicing fees and fund management fees. Unknown to the Members, RE Loans had

been violating securities laws since commencing operations in 2002. Auditors had

previously warned the Managers and in March 2007 lawyers advised the Managers that

RE Loans potentially faced substantial civil penalties for continuing to violate the

securities laws. They warned them to immediately stop soliciting or accepting any

future investor contributions to avoid knowing violations of California and federal

securities laws.

6. From 2002 through 2006, RE Loans’ supply of operating cash fluctuated,

but was always sufficient to fund its portfolio loan commitments and pay those

Members who wanted to make capital withdrawals. But in mid 2007, the RE Loans


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Managers faced a severe cash liquidity shortage that left them unable to fund existing

portfolio loan commitments, investment returns or pay those Members who wished to

withdraw some or all of their investment. They had no source of operating cash

because past securities violations had required them to close RE Loans to further

investments. The liquidity problem posed a significant problem for the Managers

because, for years, they had been assuring the Members that their investments were

both secure and liquid.

7. The RE Loans Managers knew they were bound by their fiduciary duties

to the Members to disclose the past securities violations and cash liquidity problem, as

this information was clearly relevant to the Members’ investment interests. But

disclosure of this information ran the risk that the Members would take steps to protect

themselves, and might seek to withdraw their investments from RE Loans.

8. Rather than disclose the problems to the Members, the Managers elected

to hide their past securities violations and RE Loans’ cash shortage. Together with

Greenberg and Wells Fargo, they developed and carried out a plan intended to keep RE

Loans alive by hiding the past securities violations and existing liquidity problem, at

the expense of the RE Loans Members and MF08 Noteholders

9. The Managers had retained Greenberg, a prominent national law firm, for

legal assistance with their securities violations problems. Greenberg decided to help

the Managers with their cash liquidity problem as well. Greenberg brought in Wells

Fargo, one of its other clients, for the purpose of lending money to RE Loans to enable

the Managers in maintaining the illusion that the company was liquid.

10. There were obstacles with this course of action which could be overcome

by misleading and harming the Members’ interests. The Managers, Greenberg and

Wells Fargo knew that RE Loans lacked authority to borrow operating cash from a

third party lender and encumber RE Loans assets as collateral without approval of the

Members. Moreover, Wells Fargo demanded that the Managers collateralize the $50

million line of credit loan with all of RE Loans’ assets – an amount in excess of $700


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million, and demanded that its security interest take priority over any security interests

held by the Members. Wells Fargo also required that RE Loans endorse and deliver

over $250 million of notes receivables to Wells Fargo. Finally, Wells Fargo and the

Managers faced the problem of how RE loans – which could not take new investment

capital – would repay the line of credit loan.

11. Together, the Managers, Greenberg and Wells Fargo implemented a plan

to circumvent these impediments. With Greenberg acting as loan counsel for RE

Loans, Wells Fargo and RE Loans entered the unauthorized line of credit transaction in

secret, with the requirement that Wells Fargo’s security interest be primary and an

arrangement through which the Managers would later manipulate the Members into

acquiescing to the unauthorized transaction. Greenberg masterminded an “exchange

transaction” designed to obtain the Members’ after-the-fact approval of the Wells

Fargo loan and to transform the Members from equity shareholders in RE Loans into

creditors with security interests junior to Wells Fargo’s. To accomplish this, Greenberg

and the Managers prepared and disseminated a number of misleading documents that

misrepresented the loan, the nature of the exchange offering and its ramifications for

the Members.

12. The loan repayment issue was handled by forming a new investment

company – MF08 – to solicit funds from investors and funnel them to RE Loans. This

Ponzi scheme arrangement enabled the Managers to continue the operation of RE

Loans. The Managers and Greenberg created misleading offering documents to induce

investors to invest in MF08. Wells Fargo knew about and assisted the Ponzi scheme

operation of MF08 to facilitate repayment of its loan.

13. The scheme orchestrated by the Managers, Greenberg and Wells Fargo

ultimately came to light. RE Loans defaulted on the line of credit loan, and ultimately

defaulted on the promissory notes it had issued to the Members. MF08 also defaulted

on its obligations to its Noteholders. RE Loans, MF08, Barney Ng, Kelly Ng, Bruce

Horwitz, Walter Ng and B-4 Partners are engaged in bankruptcy proceedings in


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California and Texas.

14. As alleged below, the Managers’ conduct breached fiduciary duties they

owed directly to the RE Loans Members and MF08 Noteholders. Their

misrepresentations to investors in both companies constitute both securities and

common law fraud. Greenberg and Wells Fargo participated in the unlawful scheme to

further their own financial interests, knowing that the Managers’ actions breached

fiduciary duties owed to the Members and Noteholders, and constituted securities fraud

under California law. Wells Fargo and Greenberg aided and abetted the Managers’

breaches of fiduciary duties and securities fraud. Greenberg’s actions not only aided

and abetted the Managers’ wrongful conduct, but constituted common law fraud and

negligent misrepresentation as well.

15. The financial harms suffered by Plaintiffs and the class are tragic. The

Managers targeted individuals who were retired or approaching retirement. They

convinced many to invest all of their retirement funds and others their entire life

savings. Some were convinced to mortgage their homes and invest the proceeds. As a

result of Defendants’ unlawful conduct, many of the RE Loans Members and MF08

Noteholders lost their retirement funds and life savings and many of them are now

destitute. Others have lost their homes because they were induced to take out

mortgages and pay the proceeds to RE Loans and MF08.

16. Through this lawsuit, Plaintiffs and class members seek redress for the

financially devastating harm they suffered at the hands of Defendants. Their claims are

direct, not derivative, because the wrongs were directed toward and injured them, not

the companies. Proceeding directly against the Defendants likely is the only chance

Plaintiffs and class members have for any recovery at all.

JURISDICTION

17. Jurisdiction is proper in this Superior Court under California Code of

Civil Procedure (“C.C.P.”) § 410.10 and the California Constitution, Article VI §10.

This Court, and not the United States District Court, has jurisdiction of this class action


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because Plaintiffs’ claims fall within the provisions of 29 U.S.C. § 1332(d)(4)(A) (a

subdivision of the Class Action Fairness Act) for the following reasons:

• More than two-thirds of the members of the proposed classes are

citizens of the State of California;

• Wells Fargo is a defendant (i) from whom significant relief is

sought by members of the proposed classes, (ii) whose alleged conduct

forms a significant basis for the claims asserted by the proposed classes,

and (iii) who is a citizen of the State of California;

• The principal injuries resulting from the alleged conduct or any

related conduct of each Defendant were incurred in the State of California;

and

• During the 3-year period preceding the filing of this class action, no

other class actions have been filed asserting the same or similar factual

allegations against any of these Defendants on behalf of the same or other

person.

This Court also has jurisdiction of this class action under 29 U.S.C. § 1332(d)(4)(B)

because two-thirds or more of the members of all proposed plaintiff classes in the

aggregate, and a primary Defendant, Wells Fargo, is a citizen of the State of California.

18. The Securities Litigation Uniform Standards Act of 2001 ("SLUSA"),15

U.S.C. §§77p, 77v, 77z-1, 78-4 and 78bb (2000), does not apply to mandate the

bringing of this Class Action in federal court because:

• The securities or promissory notes that are the subject matter of this

action are not "covered" securities as defined by sections 18(b)(1) and

18(b)(2) of the Securities Act of 1933.

• The securities or promissory notes that are subject matter of this

action are not listed, or authorized for listing, on the New York Stock

Exchange or the American Stock Exchange, or listed, or authorized for

listing, on the National Market System of the Nasdaq Stock Market (or any

successor to such entities).


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action are not listed, or authorized for listing, on a national securities

exchange (or tier or segment thereof) that has listing standards that the

commission determines by rule (on its own initiative or on the basis of a

petition) are substantially similar to the listing standards of the New York

Stock Exchange, American Stock Exchange or NASDAQ (or any

successor entity).


action was not issued by an investment company that is registered, or that

filed a registration statement, under the Investment Company Act of 1840.

• The claims asserted herein are made by purchasers and holders of

the promissory notes/securities from their issuers.

19. The claims asserted herein are direct claims for monetary damages and

relief that belong to Plaintiffs and the Class respecting their investments in RE Loans

and/or MF08. These claims are not asserted against any entity that has filed a pending

action in federal court seeking protection under or pursuant to the bankruptcy laws or

statutes of the United States. The claims are not derivative in nature and are not

asserted against assets of a bankrupt debtor.

20. Venue is proper in the County of Alameda pursuant to C.C.P. §§ 395,

395.2, and 395.5 for the following reasons:

• Because Greenberg does business in the State of California and has

not designated with the California Secretary of State a principal place of

business within the State of California pursuant to Corporations Code §

2105(a)(3). Hence, it may be sued in any county in the State of California,

including Alameda County.

• Plaintiffs Arlene Dea Deeley, Phillip Cantor, John Emanuele and

absent Class members reside in Alameda County.

THE PARTIES

The Individual Plaintiffs


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21. Plaintiff GORDON NOBLE is a resident of Marin County, California and

a RE Loans’ Member.

22. Plaintiff ARLENE DEA DEELEY is a resident of Alameda County,

California, and a RE Loans Member and MF08 Noteholder.

23. Plaintiff FREDRIC C. MENDES is a resident of the County of San

Francisco, California and a RE Loans Member.

24. Plaintiff NANCY RAPP is a resident of the County of San Mateo,

California and a RE Loans Member.

25. Plaintiff PHILLIP CANTOR is a resident of the County of Alameda,

California and a RE Loans Member.

26. Plaintiff JOHN EMANUELE is a resident of the County of Alameda,

California and a RE Loans Member and MF08 Noteholder.

27. Plaintiff DAVID D. NOLAN is a resident of the County of Alameda,

California and a RE Loans Member and MF08 Noteholder.

The Defendants

28. Defendant GREENBERG TRAURIG, LLP is a limited liability

partnership organized under the laws of New York with its principal place of business

in Florida, and does business at 153 Townsend Street, 8th Floor, San Francisco,

California, 94107. Beginning in June 2007, Greenberg served as general legal counsel

for RE Loans, Bar-K, B-4 Partners and MF08.

29. Defendant WELLS FARGO CAPITAL FINANCE, INC. f/k/a WELLS

FARGO FOOTHILL, LLC, a subsidiary of Wells Fargo & Company, is incorporated in

the State of California with its principal place in Santa Monica, California.

30. Defendant DOES 1-30 are corporations, limited liability companies and

individuals whose true names, identities, and relationships are not yet known to

Plaintiffs. Plaintiffs are informed and believe, and on that basis allege, that each of the

fictitiously named Defendants is responsible in some manner for the matters and

damages alleged herein, and that their actions were authorized by, ratified by, and


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known to the named Defendants. At all times mentioned here, each Defendant,

including the DOE Defendants, was acting as the agent of each of the other Defendants

and was acting within the course and scope of such agency, and Defendants are,

therefore, jointly and severally liable to Plaintiffs for the damages alleged herein.

Plaintiffs will amend this Complaint, or request leave to do so if required, if and when

the identities of the fictitiously-named Defendants become known.

Additional Relevant Non-Parties

31. RE Loans is a California limited liability company organized on January

1, 2002, having its principal place of business at 201 Lafayette Circle, Lafayette,

California 94549. RE Loans is managed by B-4 Partners, LLC. Upon information and

belief, RE Loans is not authorized by California to offer or sell securities. RE Loans is

not a named defendant in this action because it filed for bankruptcy protection on

September 13, 2011 in the United States Bankruptcy Court for the Northern District of

Texas, Case No. 11-35865.

32. Mortgage Fund ’08, LLC (MF08) is a California limited liability

company spin-off from RE Loans that is operated by Bruce Horwitz and Walter Ng and

Kelly Ng through The Mortgage Fund. MF08 operates out of the same office space as

RE Loans. Upon information and belief, MF08 is not authorized by California to offer

or sell securities. MF08 is not a named defendant in this action because an involuntary

petition for Chapter 7 bankruptcy was filed in its name on September 12, 2011 in the

United States Bankruptcy Court for the Northern District of California, Case No. 11-

46803.

33. B-4 Partners, LLC (“B-4 Partners”) is a California limited liability

company that manages RE Loans. B-4 Partners is an affiliate of RE Loans and Bar-K,

Inc., and as the manager, has the power and authority to act for and bind RE Loans.

The members of B-4 Partners are Walter Ng, Bruce Horwitz, Kelly Ng and Barney Ng.

B-4 Partners is managed by Bruce Horwitz. B-4 Partners operates out of the same

office space as RE Loans. As of November 1, 2007, B-4 Partners became a member of


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RE Loans. Upon information and belief, B-4 Partners is not authorized by California to

offer or sell securities. B-4 Partners is not a named defendant in this action because of

the bankruptcy filing on December 8, 2011 in the United States Bankruptcy Court for

the Northern District of California, Case No. 11-72837.

34. Bar-K, Inc. (“Bar-K”) is a corporation incorporated under the laws of the

State of California. Bar-K also originated and services loans for MF08. Bar-K is an

affiliate of RE Loans and B-4 Partners. Bar-K was organized in 1975 by Walter Ng

and is owned by his sons, Barney Ng and Kelly Ng, who each own 50% of the

corporation’s shares. Bar-K operates out of the same office space as RE Loans. As of

November 1, 2007, Bar-K became a member of RE Loans. Upon information and

belief, Bar-K is not authorized by California to offer or sell securities.

35. The Mortgage Fund, LLC is a California limited liability company that

serves as the manager and sole member of MF08. The members of The Mortgage

Fund, LLC are Walter Ng and Kelly Ng. The Mortgage Fund operates out of the same

office space as RE Loans.

36. Walter Ng resides in Contra Costa County, California and is a managing

member of RE Loans, B-4 Partners and MF08. He is the founder and chairman of Bar-

K and a real estate broker. He purports to have been engaged in the business of

arranging and managing trust deed investments since 1958. Neither Walter nor

Maribel Ng is named defendants in this action because they filed for bankruptcy

protection on May 11, 2011 in the United States Bankruptcy Court for the Northern

District of California, Case No. 11-45175.

37. Bruce Horwitz, M.D. resides in Alameda County, California, and is a

managing member of RE Loans and B-4 Partners. He has been a managing member of

B-4 Partners since 1985. He also held himself out as and acted as a manager of MF08.

Upon information and belief, Bruce Horwitz is not authorized by California to offer or

sell securities. Bruce Horwitz is not named as a defendant in this action because of the

bankruptcy filing on December 15, 2011 in the United States Bankruptcy Court for the


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Northern District of California, Case No. 11- 73058.

38. Barney Ng is a citizen of California, Walter Ng’s son and a member of B-

4 Partners and Bar-K. He is or was President of Bar-K and a real estate broker. Barney

Ng joined Bar-K in 1975. He acted as a manager of RE Loans and MF08. Barney Ng

also owned the Siena Hotel Spa and Casino in Reno, Nevada. Barney Ng is not named

as a defendant in this action because of the bankruptcy filing on December 15, 2011 in

the United States Bankruptcy Court for the Northern District of California, Case No.

11- 73061.

39. Kelly Ng is a resident of California, Walter Ng’s son and a member of B-

4 Partners and Bar-K. Kelly Ng is or was Vice-President of Bar-K and a real estate

broker. He acted as a manager of both Re Loans and MF08. Upon information and

belief, Kelly Ng is not authorized by California to offer or sell securities. Kelly Ng is

not named as a defendant in this action because of the bankruptcy filing on December

15, 2011 in the United States Bankruptcy Court for the Northern District of California,

Case No. 11- 73059.

FACTUAL ALLEGATIONS COMMON TO ALL CLAIMS

I. BACKGROUND AND STRUCTURE OF RE LOANS AND MF08

A. RE Loans

40. RE Loans was formed in 2002 by Walter Ng and Bruce Horwitz. RE

Loans operated as a private hard money lender in California, making secured loans to

high-end residential and commercial real estate developers, among others. The projects

on which developer loans were made included single family homes, apartment

buildings, and undeveloped land in a number of states. Many of the developer loans

originated by RE Loans involved delayed funding commitments requiring RE Loans to

advance loan proceeds in increments over time. In exchange for originating loans, RE

Loans received promissory notes from the developers that were typically secured by

first deeds of trust.

41. RE Loans was managed by four individuals – Bruce Horwitz, Walter Ng,


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Barney Ng, and Kelly Ng. Bruce Horwitz and Walter Ng, along with Walter Ng’s two

sons, Barney and Kelly Ng, managed RE Loans through their alter ego company, B-4

Partners. Barney and Kelly Ng also operated RE Loans through another alter-ego

company called Bar-K, which acted as the servicing agent for the portfolio loans of

which they were the sole members. Barney Ng served as Bar-K’s President and Kelly

Ng served as Bar-K’s Vice-President. On or about November 2007 and pursuant to the

November 1, 2007 Exchange Agreement (the “Exchange Agreement”), discussed infra,

Bar-K became a member of RE Loans.

42. RE Loans raised the money to fund the developer loans by selling

unregistered securities to Plaintiffs and thousands of other private investors in

California and other states. Investors became Members of RE Loans by purchasing

shares costing $1.00 apiece, with a minimum subscription of $20,000 (20,000 shares).

43. As the front men for the RE Loans Managers, Walter Ng and Bruce

Horwitz actively solicited investors to invest monies with RE Loans. They targeted

individuals who were retired or approaching retirement. Many invested all of their

retirement funds. Some invested their entire life savings. The Managers convinced

many investors to mortgage their homes and invest the loan proceeds in RE Loans.

44. The Managers’ message to potential investors was twofold: (1) an

investment with RE Loans was safe and profitable; and (2) Members had access to their

money and could withdraw some or all of their investment.

45. From the beginning, Walter Ng and Bruce Horwitz promised to pay the

Members periodic interest payments on their investments – monthly, quarterly, or

semi-annually. The governing operating agreement did not provide a clear method or

protocol explaining how these promised periodic interest payments would be

determined.

46. RE Loans’ website was replete with slogans about the safety of an RE

Loans investment, telling potential investors that “Safety is our cornerstone,” and “The

first objective of our business is safety and that is the one concept we will not change.”


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The Managers continually reassured Members that their investments were secure,

claiming they “have never suffered a loss of principal on any mortgage loan

investment” and had “provided investors with investment returns that have always been

between 7.5% and 12.5% per annum . . . .”

47. The website also assured investors that their investment was liquid,

stating that “After your account is open, funds may be added or withdrawn at any

time.” The website stated: “A fixed regular amount can be scheduled and sent to you

on a monthly, quarterly, semi-annual or annual basis. If you need a check during the

month, one will be cut and mailed on the Thursday following your request.”

48. The ability of RE Loans Members to withdraw some or all of their capital

was a major feature and selling point. Through fund updates, the Managers repeatedly

assured Members that “[Y]ou may add to or withdraw from your account at any time.”

They told Members: “Currently, we offer an option to make scheduled withdrawals

monthly, quarterly, semi-annually, or yearly, or you may make an unscheduled

withdrawal at any time.”

49. Under the governing operating agreement, RE Loans Members had some

control rights. For instance, Members holding a majority of interest (more than 50% of

all RE Loans shares) could remove the Managers and designate a replacement. A

majority interest of Members could vote to dissolve RE Loans, or (with limited

exceptions) amend the operating agreement. Members were also entitled to withdraw

all or a portion of their investment, upon written notice to the Managers.

50. The Managers arranged RE Loans so that they were paid handsomely.

For example, the Managers were paid brokerage fees, determined on a “case-by-case

basis,” for developer loans they sold to RE Loans. To service the developer loans, the

Managers received 1% per annum of the outstanding principal on the loans. The

Managers paid themselves a management fee of 1.05% (per annum) of the total value

of RE Loans’ total loan portfolio. The continued operation of RE Loans was a

tremendous financial boon to the Managers.


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B. MF08

51. MF08 was formed in late 2007 by the RE Loans Managers. Like RE

Loans, MF08 was a limited liability company that took investors’ funds, ostensibly to

invest in developer real estate loans. MF08 differed from RE Loans in two significant

respects. First, MF08 gave investors promissory notes in return for their money instead

of an equity membership in the company. Second, although advertised as an

investment opportunity, MF08 existed primarily to take investor money and funnel it to

RE Loans in a Ponzi scheme arrangement. Many, but not all of the investors in MF08

were investors in RE Loans.

52. Under California law, the Managers owed the RE Loans Members and

MF08 Noteholders’ fiduciary duties. These duties include, but are not limited to: (a)

the duty of undivided loyalty and the duty to refrain from engaging in transactions

which are unfair or inequitable to RE Loan Members and MF08 Noteholders; (b) the

duty to fully disclose all material facts germane to the fiduciary duty; and (c) the duty

to act in the highest good faith to the RE Loans Members and the MF08 Noteholders

and to refrain from obtaining or accepting any advantage over them.

II. RE LOANS’ OPERATIONS 2002 - 2006

53. RE Loans grew rapidly from 2002 through 2006. According to reports by

the Managers, the number of portfolio loans increased from 13 (December 2002) to 68

(June 30, 2006) and were performing well, providing Members with an average

annualized yield of over 8%. By early 2007, the Managers had raised more than $700

million from approximately 1400 Members, and RE Loans had more than $55 million

in cash on hand. During this time period, the amount of RE Loans’ operating cash

fluctuated, but was always sufficient to fund portfolio loan commitments, pay returns to

the Members and capital withdrawals, and pay the Management their lucrative fees and

commissions.

54. Although RE Loans appeared to be prospering, there was a looming

problem. From 2002 through 2006, the Managers had violated state and federal


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securities laws in the sales of RE Loans memberships. Although the membership

interests constituted securities, the offerings were not registered with the Securities and

Exchange Commission (“SEC”). Instead, RE Loans membership interests were sold as

unregistered offerings under California Corporations Code § 25113(b)(1) and certain

SEC exemptions that restricted the Company’s business to qualified California

residents. These violations gave the Members the right to rescind.

55. The Managers violated the operative securities regulatory requirements in

four ways: (i) they actively solicited and sold to investors residing outside of

California; (ii) they lent money on properties located outside of California (including

Texas, Florida, Wyoming, Washington, South Carolina, and Nevada); (iii) they sold

membership interests to more than 800 investors; and (iv) RE Loans had more than $10

million in total assets.

III. THE MANAGERS, GREENBERG AND WELLS FARGO CONCOCT

AND IMPLEMENT AN UNLAWFUL SCHEME

56. By early 2007, the Managers had raised more than $700 million from

approximately 1400 Members, and RE Loans had more than $55 million in cash on

hand.

57. But as 2007 progressed, RE Loans began experiencing a cash liquidity

problem. The burden of funding loan commitments to developers and paying

distributions to the Members surpassed RE Loans’ fundraising capacity. The cash

shortage was exacerbated when, in April 2007, the Managers were told to stop taking

investments in RE Loans because their selling of shares in RE Loans was violating

state and federal securities laws.

58. As alleged above, the Managers had been violating state and federal

securities laws in their sales of RE Loans membership interests since 2002. In March

2007, lawyers from the law firm of Morgan Miller Blair told the Managers that RE

Loans had been violating securities laws since commencing operations in 2002. They

advised the Managers that RE Loans potentially faced substantial civil penalties for


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violating the securities laws. They warned them to immediately stop soliciting or

accepting any future investor contributions to avoid knowing violations of California

and federal securities laws.

59. As of June 2007, RE Loans owed approximately $20 million in portfolio

loan commitments, but had only a little over $1 million in operating cash. Not only

could RE Loans not meet its portfolio loan commitments, it lacked the liquidity to pay

capital withdrawals requested by the Members. Because RE Loans was closed to

further investment, the Managers had no way to raise operating cash and restore the

company’s liquidity.

60. Plaintiffs’ claims are not based on the liquidity problems RE Loans

experienced. Rather, they allege that the Managers, with knowing assistance from

Greenberg and Wells Fargo, pursued a scheme designed to hide RE Loans’ illiquidity,

as well as hide its past securities violations. In doing so, the Managers, Greenberg and

Wells Fargo inflicted devastating harm on the RE Loans Members by stripping them of

their ownership interests in and rights of control over RE Loans, and by devaluing their

investments.

61. The RE Loans Managers knew they were bound as fiduciaries to disclose

to the Members the past securities violations and the existing shortage of operating

cash and address the issues with the Members’ involvement. But disclosing the

information ran the risk that the Members would lose confidence in the Managers and

the safety of their investments. At worst, disclosure of the problems could prompt the

Members to exercise their control rights against the Managers, possibly ending their

ability to continue reaping financial benefits from operating RE Loans.

62. The Managers therefore elected to hide the liquidity and securities

problems. They retained Greenberg to handle the securities violations problem so they

could resume soliciting investment capital. Upon learning of RE Loans’ liquidity

problem, Greenberg attorneys made arrangements with Wells Fargo to provide a line of

credit loan, thus helping the Managers hide the company’s liquidity problem. Upon


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information and belief, Greenberg represented Wells Fargo as a client of the law firm

in July 2007 and had represented Wells Fargo and certain of its affiliates in the past.

63. Together, the Managers, Greenberg and Wells Fargo hatched and

implemented a scheme designed to hide RE Loans’ securities problems and give the

company the illusion of liquidity. The plan involved obtaining a loan from Wells

Fargo, orchestrating a process to trick RE Loans’ Members and thereby obtain

approval of the loan after the fact and ensure that Wells Fargo obtained a primary

security interest in RE Loans assets, and establishing a mechanism for repaying the line

of credit loan.

64. The initial step in the scheme was the line of credit loan from Wells

Fargo to RE Loans. Upon information and belief, Greenberg represented RE Loans

and the Managers in arranging and negotiating the loan transaction.

65. The terms of the line of credit loan – dictated by Wells Fargo – were

draconian. As security for the loan, the Managers acceded to Wells Fargo’s exorbitant

demand for an assignment of all of RE Loans’ assets as security – an amount in excess

of $700 million and – an astounding collateral-to-debt ratio. Wells Fargo required that

RE Loans endorse and deliver $250 million in notes receivables. Upon information

and belief, Wells Fargo demanded and the Managers granted it a first position security

interest in all of RE Loans’ inventory, equipment, chattel paper, books, records, and

trade fixtures, together with all additions, substitutions, replacements, improvements

and repairs to the same.

66. The line of credit loan was a suspicious transaction. The loan was

negotiated, documented and closed within 45 to 60 days, an abnormally expedited

timetable within the commercial lending industry for a $50 million loan. This was

especially true in July 2007. The over $700 million in collateral demanded for a $50

million loan was irregular and excessive.

67. The Managers, Greenberg and Wells Fargo knew that RE Loans lacked

authority to borrow from a third party lender and encumber company assets without


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approval of the Members. The operating agreement did not authorize such an action.

To the contrary, the agreement authorized the raising of operating capital only through

cash subscriptions from new investors, existing portfolio developer loans and mergers

with existing partnerships or LLCs. The operating agreement neither authorized nor

permitted the Managers to assign or pledge the Fund’s assets or any portion of the

Fund’s loan portfolio as security for third-party borrowings.

68. Moreover, the Managers repeatedly promised the Members that RE

Loans would not raise capital through borrowing from third party lenders. For

example, in RE Loans’ first offering circular (the “Initial Offering Circular”), the

Managers told the Members that RE Loans would be capitalized solely from monies

deposited by investors and the proceeds of the Fund’s portfolio loans, not from banks.

The language of the Initial Offering Circular makes this clear; the “Summary of the

Offering” section expressly specified that “the Funds capitalization may be derived

from three sources: (1) cash subscriptions from new investors; (2) contributions of

whole or fractional interests in existing mortgage loans . . . and (3) mergers with

existing limited partnerships and limited liability companies affiliated with the

manager, whose sole assets are qualifying mortgage loans.” The Initial Offering

Circular expressly stated that RE Loans would not seek operating capital from

institutional lenders. In a section entitled “FEDERAL INCOME TAX

CONSEQUENCES,” the Initial Offering Circular assured potential investors that their

investment would not result in unrelated business taxable income, which would accrue

with third-party financing. The Managers stated: “Since the Fund will not utilize

borrowed funds for the purpose of making or investing in loans, interest earned on

Fund loans should not constitute unrelated business taxable income. ...”

69. Between 2002 and the end of 2006, the Managers issued three additional

offering circulars. Each circular contained the same representations and promises as

the Initial Offering Circular. Each disclaimed borrowing money from a third-party

lender, and described a business plan that anticipated adequate amounts of cash in the


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operation of the mortgage pool so to obviate the need of any loans or lines of credit

from a third-party lender. And each affirmatively told the Members that “the Fund will

not utilize borrowed funds for the purpose of making or investing in loans . . . .”

70. Like the RE Loans Managers, Greenberg knew the line of credit loan was

an unauthorized transaction. Upon being retained, Greenberg sent two of its Boston

attorneys to RE Loans’ California headquarters to perform an audit of the internal

compliance and review of RE Loans financial operations and structures. Greenberg

was thus aware that the operating agreement provided no authority for borrowing from

third party lenders, and that the offering circulars expressly stated that the Managers

would not do so.

71. Wells Fargo also knew that the loan was unauthorized. The line of credit

loan agreement states that, as part of its due diligence, Wells Fargo comprehensively

reviewed RE Loans business documents. Wells Fargo was undoubtedly aware of the

RE Loans’ operating agreement and the Managers’ offering circulars.

72. Moreover, upon information and belief, the loan covenants (i)

acknowledged the existence of the Members and their rights with respect to RE Loan

assets pledged to secure the Line of Credit, (ii) required the Members’ interests to be

subordinate to Wells Fargo’s interest in the Line of Credit collateral and (iii)

contemplated the implementation of the Exchange Agreement and the formation of a

new fund to facilitate loan repayment by raising capital from investors.

73. Thus, Wells Fargo knew and understood RE Loans’ structure, the

Managers’ fiduciary duties owed to the Members and that the Managers were acting in

a fashion inconsistent with those duties to the prejudice of the Members’ interests.

74. Nevertheless, the Managers, Greenberg and Wells Fargo decided to

proceed with the line of credit loan in secret. They came up with a process – an

exchange agreement – to try to legitimize the unauthorized loan by obtaining the

Members’ after-the-fact approval.

75. Upon information and belief, Wells Fargo required an after-the-fact


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process to obtain loan approval to avoid potential legal problems or conflicts with the

Members over an unauthorized loan.

76. The exchange offering was designed to accomplish more than securing

approval for the unauthorized Wells Fargo loan. A condition of the line of credit loan

was that Wells Fargo’s security interest be primary over any security interests held by

the Members. Consequently, the exchange offering was designed to eliminate the

Members’ equity shares in RE Loans and replace them with promissory notes with

security interests junior to that held by Wells Fargo.

77. In the exchange offering, RE Loans Members exchanged their equity

membership shares for promissory notes secured by RE Loans’ portfolio loan assets.

The Managers attempted to portray the exchange offering as a legitimate

“restructuring” of RE Loans. But the exchange was in reality a subterfuge to: (i)

persuade the Members to unwittingly agree post-facto to the unauthorized line of credit

loan; (ii) cover up legitimize the Managers’ past undisclosed securities violations; and

(iii) divest the Members of their interests and control rights as members of RE Loans.

78. The Managers and Greenberg made numerous false and misleading

statements of material fact to convince the Members to agree to the exchange offering.

Greenberg drafted the documents related to the exchange offering, and was therefore

fully aware that many of the statements were false or misleading. Through these

misrepresentations, the Managers with Greenberg’s knowing help breached fiduciary

duties to the Members. Moreover, by making these false statements to the Members,

the Managers and Greenberg knowingly committed securities fraud, negligent

misrepresentation and common law fraud.

79. Upon information and belief, Wells Fargo also was aware of the

misleading and false statements contained in the exchange offering documents. Wells

Fargo knew that the representations in the exchange offering documents were false and

misleading as it had full knowledge of the true state of the financial condition of RE

Loans and that the Managers did not have authority to obtain third-party financing or


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pledge assets of RE Loans as collateral to Wells Fargo. Wells Fargo required the

process to secure approval of the secret loan, to divest Members of any rights of control

of RE Loans (and therefore any ability to object to or challenge the loan), and to

cement its position as the primary secured party with respect to RE Loans assets.

80. Together, the Managers and Greenberg drafted a misleading “Fund

Update,” dated August 31, 2007, that the Managers distributed to the Members in

September of 2007 (“Fund Update”). The Fund Update, which was designed to

“reassure” the Members, falsely represented that the funds loan portfolio was

performing well and that the “growth of the Fund requires us to reorganize the Fund

and the structure of your investment to achieve regulatory and operating efficiencies.”

The Fund Update also represented that RE Loans “entered into a line of credit with . . .

Wells Fargo . . . to facilitate liquidity to meet additional cash flow needs” and that the

“use of the line of credit by the Fund is not expected to adversely affect the Fund’s

over-all financial returns.”

81. These representations were materially false and misleading. In reality,

the exchange offering did not result from the “growth of the Fund” nor was it “to

achieve regulatory and operating efficiencies.” Instead, the transaction was

orchestrated to conceal and paper over RE Loans’ longstanding intentional and

undisclosed violations of federal and state securities laws.

82. The Fund Update also represented that the promissory notes would be

secured by all the assets of RE Loans. This was materially false, as it failed to disclose

that the Managers had already pledged substantial RE Loans assets to Wells Fargo in

the line of credit loan transaction.

83. Three months after the Line of Credit was established and depleted –

Greenberg and the Managers sent the investors an October 8, 2007 letter (“October 8

Letter”) explaining the exchange offering, urging Members to convert their equity

membership interests in RE Loans to promissory notes. The letter was drafted by

Greenberg.


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84. The October 8 Letter was accompanied by a “Confidential

Memorandum” entitled “R.E. LOANS, LLC, REORGANIZATION PLAN AND

NOTE PROGRAM” (the “Confidential Memorandum”). Greenberg also prepared the

Confidential Memorandum and the related offering documents, including a proposed

exchange agreement and new operating agreement. Greenberg intended for the

Members to rely upon those documents in their consideration of the exchange

transaction: “This Memorandum is intended to present a general outline of the process

and terms of the reorganization of the Company and the restructuring of the current

Members’ equity investment interests in the Company as debt investment interests.”

85. The Confidential Memorandum falsely represented that the exchange

transaction was being proposed for the purpose of “meeting certain regulatory

requirements” without disclosing that RE Loans had been raising funds through the

illegal sale of securities in violation of federal and state securities laws and that the

Members therefore had the right to rescind their investments as an illegal sale of

securities.

86. The Confidential Memorandum also falsely represented that the Wells

Fargo line of credit would “provide liquidity and facilitate the Fund’s lending capacity

during and after the Reorganization.” This material representation was false because

the Managers had substantially exhausted the Wells Fargo Line of Credit immediately

after it was established months earlier.

87. The Confidential Memorandum further falsely represented that the Wells

Fargo Line of Credit was secured by a senior lien that was “typical for such lines of

credit” when, in reality, the Managers had encumbered all of the Fund’s assets to Wells

Fargo at a grossly excessive and atypical ratio, and endorsed and delivered $250

million in notes receivables to secure the $50 million Line of Credit. The Confidential

Memorandum failed to disclose the amount of collateral already assigned to Wells

Fargo or the disproportionate and unfavorable collateral-to-debt ratio. By failing to

disclose the extent of collateral already pledged to Wells Fargo, the Memorandum


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deprived the RE Loans Members of the ability to make informed decisions.

88. The Confidential Memorandum falsely assured the investors that all was

well with RE Loans through misleading statements that “[t]he Loan Portfolio continues

to perform well,” the properties securing those loans “is adequate in value to preserve

the Fund’s economic interests,” it was “likely . . . that the Fund will be able to pay

principal and interest on” the investor notes, the investor notes would be secured by a

priority lien on RE Loans’ assets (without disclosing that Wells Fargo had a senior lien

encumbering 30% of those assets) and that the investors would be better off after the

proposed reorganization. This was absolutely false as RE Loans was in the midst of a

liquidity crisis and facing insolvency.

89. One of the falsehoods in the Confidential Memorandum was the claim

that RE Loans had always been authorized to borrow from third-party lenders and

encumber company assets in the process. The Confidential Memorandum stated: “The

Fund has authority to borrow capital from third party lenders. As noted in [the] Initial

Offering Circular, [repeated phrase omitted] it is likely that most or all of the Fund’s

loan portfolio would be assigned to such lender as security for the loan(s).”

90. In reality, the Initial Offering subsequent offerings provided that RE

Loans would not incur third-party debt and did not authorize the Managers to assign all

or any of the loan portfolio to a third-party lender. The language quoted in the

Confidential Memorandum is found only in an uncirculated December 2006 offering

circular that was never circulated to the Members.

91. The false and misleading representations disseminated by the Managers

and Greenberg had their intended effect. On or about November 1, 2007, the exchange

offering was approved.

92. The unauthorized line credit loan and exchange offering provided RE

Loans with some operating cash. The Managers used some of the line of credit money

to pay capital distributions to Members, thus perpetuating the illusion that RE Loans

was liquid. The money also enabled the Managers to continue the existence of the


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company from which they had been reaping significant financial gains.

93. But these transactions had a devastating effect on the rights and interests

of the RE Loans Members. The Managers’ decision to pledge previously

unencumbered assets to Wells Fargo materially impaired the interests and rights of the

Members by stripping them of any recourse to RE Loans’ assets. As a result of the

assignment, the Members were placed in a subordinate position to Wells Fargo.

94. The decision to raise money through borrowing from a third party lender

fundamentally altered the nature of the company in which the Members had invested.

By entering the loan in secret, the Managers breached their duty of disclosure to the

Members. Moreover, the Managers breached their duty of fair treatment by unilaterally

– and without notice – encumbering the asset base that existed to back the Members’

investments.

95. In sum, the Exchange Agreement turned the Members into holders of

promissory notes with security interests second to that held by Wells Fargo. In one

transaction orchestrated by the Managers, Greenberg and Wells Fargo, the Members

lost all rights they had as equity shareholders in RE Loans and were relegated to

second-tier creditors with junior security interests.

96. Through deceit and non-disclosure, Defendants disenfranchised the

Members, encumbered the assets upon which the Members’ investments were based,

and kept them in the dark about RE Loans’ continuing liquidity problems. The

Managers retained all ownership and control of RE Loans, and were able to continue

benefitting themselves through the payment of commissions, servicing and

management fees.

IV. THE PONZI SCHEME WITH MF08

97. As part of their scheme, the Managers, Greenberg and Wells Fargo

agreed to the formation of a new investment company – MF08 – that would solicit

investor capital and funnel it to RE Loans to enable RE Loans to repay the loan and

perpetuate the illusion of the company’s liquidity.


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98. The formation of MF08 was envisioned from the beginning. The

Managers, Greenberg and Wells Fargo knew that RE Loans was closed to new

investments and therefore knew that RE Loans would need another source of income

with which to repay the loan. Indeed, the line of credit agreement acknowledged that

RE Loans was no longer accepting new investor contributions and that the Fund

Managers intended to set up a new feeder fund, MF08, to funnel new investor funds

from it to capitalize RE Loans and to service the debt created by the Line of Credit.

99. Soon after the exchange offering, the Managers formed MF08, which was

managed by the same individuals and entities who managed RE Loans. The Managers

solicited new and existing RE Loan investors to invest in MF08 and began raising tens

of millions of dollars from them.

100. Knowing that RE Loans’ investors were unaware of its liquidity problems

and could no longer invest in that company, the Managers targeted them to invest in

their new company, MF08. Their efforts were successful. In a short period of time,

MF08 had raised tens of millions of dollars from these investors.

101. Ironically, the Managers enticed MF08 investors with the same “safe

investment” approach they used with RE Loans. They highlighted the fact that MF08

was “sponsored by the principals of RE Loans.” The Managers failed to mention,

however, that RE Loans already had been illiquid for several months. Nor did they

mention anything about the unauthorized borrowing from Wells Fargo or the unfair

exchange offering. A number of RE Loans Members, still unaware of their unfair

treatment as investors in RE Loans and misled by the Managers’ continued

misrepresentations, also invested in MF08.

102. From the beginning, the MFO8 Managers operated MF08 in a Ponzi

scheme arrangement, using MF08 to funnel cash to the now-closed RE Loans. The

purpose of creating MF08 was not as represented to investors but rather was to be a

quick source of money for RE Loans to pay distributions and other expenses of RE

Loans, including its loan obligations to Wells Fargo.


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103. The Managers and Greenberg committed negligent misrepresentation,

securities and common law fraud a second time by creating and giving potential MF08

investors solicitation materials that contained false or misleading statements of material

fact. In the Fall of 2007, Greenberg once again prepared these materials. As alleged

above, Greenberg knew that MF08 was a Ponzi-scheme company set up to funnel funds

from investors to RE Loans. The Managers and Greenberg therefore knew that the

representations about MF08 as a legitimate investment company established to make

legitimate portfolio loans were materially false. They knew that the representations

about MF08 being a safe investment vehicle were false. Greenberg created and

disseminated these materials with intent that investors rely on them and invest their

money with MF08.

104. The MF08 Offering Memorandum emphasized the safety of the

investment by stating that the portfolio loans for which it was spending the investors’

money would “be secured by liens against real property and associated personal

property.” But soon after its formation, MF08 transferred approximately $40 million to

RE Loans without any security.

105. The MF08 offering memorandum (entitled “Mortgage Fund ’08 Note

Program”), prepared by Greenberg and given to potential investors, stated that MF08

was being formed for the purpose of lending capital to borrowers to finance real estate

projects. In reality, while MF08 may have made some legitimate portfolio loans, its

true purpose was to channel money raised from MF08 investors to RE Loans and

potentially to Wells Fargo for repayment of the Loan.

106. The MF08 offering circular states that that the principals of the company

(who are also principals of RE Loans) have a “proven lending record” of sponsoring

investments that “produce solid returns to their investors,” and that “[t]o date, no

investor has experienced a loss of investment principal through investment vehicles

sponsored by the Principals or their affiliates.” In reality, RE Loans was at the time

experiencing a liquidity crisis that prevented the Members from making capital


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withdrawals from their accounts.

107. The Managers operated RE Loans and MF08 in tandem as a Ponzi

scheme. Funds raised from the MF08 investors were loaned to RE Loans to pay

distributions and other expenses of RE Loans. Bruce Horwitz described it under oath

as follows:

Q. Was it true that there was a $40 million transfer from

Mortgage Fund ‘08 into RE Loans?

A. I don’t know the exact numbers, but what happened was we

were winding the Fund [RE Loans] down and we needed

more money for investors [in] the fund.

108. The Managers’ accounting of these transfers from MF08 to RE Loans, to

which Wells Fargo was undoubtedly privy, is also telling. Instead of recording the

$40,129,801.42 as a straight liability owed by RE Loans to MF08, transfers were listed

in the RE Loan’s books as investors purchasing membership shares in the RE Loans.

The transfers, which started in December 2007 and continued through March 2008, and

RE Loans’ accounting of them, were made to make the RE Loans appear liquid.

109. Wells Fargo knew about and assisted the Ponzi scheme operation of

MF08. Wells Fargo wanted to be repaid for its line of credit loan, but knew that RE

Loans was closed to new investments and therefore unlikely to be able to generate

sufficient funds for loan repayment. Wells Fargo was aware of the plan to create a new

fund because it is included in the loan agreement provisions. As RE Loans began

having difficulties making loan payments, Wells Fargo repeatedly amended the

operative Loan documents, imposing penalties, higher interest rates and more onerous

collateral requirements. Through this process, Wells Fargo kept a close eye on RE

Loans business and was fully aware that RE Loans was improperly taking monies from

MF08.

110. Wells Fargo assisted in covering up the Ponzi scheme relationship

between RE Loans and MF08. When MF08 transferred $40 million to RE Loans


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without any accompanying security agreement in favor of MF08, Wells Fargo

intervened, instructing the RE Loans Managers to disguise the Ponzi scheme

transaction and re-characterize the MF08 transfer as a “sale” of properties from RE

Loans to MF08. To facilitate this, Wells Fargo allowed the Managers to select three

properties RE Loans had previously assigned to Wells Fargo as security for the line of

credit, and assign them instead to MF08. Wells Fargo executed a series of collateral

assignments and reassignments that were made “effective” as of earlier dates.

111. The Managers solicited investors with the false and misleading MF08

Offering Memorandum from the Fall of 2007 until at least June 20, 2009.

112. The incestuous commingling of tens of millions of dollars of funds

between RE Loans and MF08, ultimately rendered MF08 insolvent. MF08 promissory

notes are worthless.

113. Within months after the exchange transaction, RE Loans defaulted on the

Wells Fargo Line of Credit. On January 15, 2009, Development Specialists, Inc., the

designated collateral agent under the Members promissory notes security agreement,

declared that RE Loans had defaulted on the promissory notes held by the Members.

MF08 also is in default and has failed to make payments as required by its notes to

investors.

114. Wells Fargo has exercised its rights as secured creditor with respect to the

collateral assigned by RE Loans and is in the process of liquidating the underlying

properties. RE Loans, MF08, Bruce Horwitz, Barney Ng, Kelly Ng, Walter Ng and B-

4 Partners have all filed (voluntarily or involuntarily) for bankruptcy protection.

V. THE UNLAWFUL SCHEME HARMED THE RE LOANS MEMBERS

115. The RE Loans Managers’ decision to engage in the secret and deceitful

plan with Greenberg and Wells Fargo ultimately caused the decimation of the

Members’ investments. In June 2007, when RE Loans’ operating cash shortage became

severe, RE Loans’ portfolio loans upon which the Members’ investments were based

apparently were performing satisfactorily. Had the Managers disclosed the information


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to the Members about the past securities violations and existing liquidity problem – as

their fiduciary duty required – the ensuing secret and fraudulent plan with Greenberg

and Wells Fargo that stripped the Members of their equity rights and undermined their

investments would not have been carried out. Had the Managers honored their

fiduciary duty of loyalty and told the Members the truth, the Members would have at

least had the option to take steps to save at least some of their initial investments. The

actions of the Managers, Greenberg and Wells Fargo effectively prevented the

Members from protecting themselves.

APPLICATION OF THE DISCOVERY RULE

116. Plaintiffs and the Class did not and could not reasonably have discovered

the alleged breaches of fiduciary duties, misrepresentations and corresponding

securities violations and fraud until on or after April 2010, when Bruce Horwitz and

Walter Ng for the first time disclosed (in unrelated litigation) copies of two certified

letters, both from Barney Ng, one addressed to B-4 Partners and the other to the

Company. These letters set forth in detail the misconduct of the Managers. Plaintiffs

and the Class could not have reasonably discovered this proprietary, insider

information any sooner than April 2010. Indeed, the only parties who have access and

control of this information – Greenberg, Wells Fargo, and the individual defendants

and their entities – all have obvious incentives to keep this information secret and out

of the public domain. Even looking beyond its self-interest, Greenberg will not and

cannot divulge client confidences. Similarly, Wells Fargo has denied at least one, and

likely several, Noteholders’ requests for this information on the basis of confidentiality.

There is simply no other possible avenue Plaintiffs or the Class could have pursued to

obtain this highly individualized and specific insider information. Nor is there any

other entity willing to produce it.

117. The Barney Ng letters, which are dated December 30, 2009, were

disclosed in the midst of litigation in an unrelated case. They are not everyday public

records. Nor are they available or readily accessible to the everyday reasonable


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investor. Instead, the information in the letters is pure insider, off-the-books

information that for the first time triggered storm warnings indicative of Defendants’

several breaches of fiduciary duties and material misstatements of facts made in

conjunction with the exchange offering.

118. The RE Loans Members and MF08 Noteholders could not reasonably

have discovered the wrongdoing earlier due to Defendants’ active concealment of the

facts. For example, on December 19, 2008, the Managers sent a letter to all investors

regarding the missed interest payments in which they gave assurances to the investors

explaining that they had “finally reached an agreement with the bank wherein the Fund

would be permitted to draw against the line of credit for purposes of (1) paying interest

to Noteholders and (2) advancing construction monies pursuant to the Fund’s current

portfolio loan obligations.”

119. Plaintiffs and the Class aver that despite their reasonable efforts, the

causes of action alleged herein could not have accrued until at the very earliest April

2010.

ALLEGATIONS CONCERNING THE PLAINTIFFS

I. Plaintiff Gordon Noble

120. Plaintiff Gordon Noble started investing in RE Loans in or about May

2002.

121. Mr. Noble thereafter met with Bruce Horwitz at RE Loans’ Lafayette,

California headquarters. At that meeting, Bruce Horwitz explained the history of RE

Loans and provided a general description of its operations and business model to Mr.

Noble.

122. Mr. Noble thereafter opened an account, RE Loans’ account number

1NOB015. This investment was made in the name of the Gordon Noble IRA, # N0067.

123. From May 2002 forward, RE Loans sent Mr. Noble various documents

including the offering circulars, the operating agreement and letters soliciting

additional investments and assuring him that his investment was safe and would remain


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safe going forward. RE Loans sent these types of letters to Mr. Noble through the end

of 2007 and he continued to rely upon them in keeping his investment with RE Loans.

124. In 2007, Mr. Noble received the written exchange offering materials and

relied upon them in voting for the Exchange Agreement.

125. On or about November 1, 2007, Mr. Noble received a “Secured

Promissory Note” from the Managers in exchange for his membership interest, which

had increased in value since May 2002 due to the reinvestment of interest.

126. As of December 31, 2010, Mr. Noble’s account totaled $543,016.

127. To date, RE Loans has not made any payments on the promissory note

held by Mr. Noble.

128. Had Mr. Noble known about the Wells Fargo Line of Credit, the pledging

of RE Loans’ assets for that credit, its operating cash problems, or that RE Loans was

engaged in ongoing and systematic SEC violations, he would not have continued to

invest in RE Loans, voted for the Exchange Agreement, or kept his money invested

with the Company.

129. As a direct result of the conduct alleged herein, Plaintiff Gordon Noble

has been damaged in an approximate amount of $543,016.

II. Plaintiff Arlene Dea Deeley

130. In August 2005, Plaintiff Arlene Dea Deeley inherited one of her

mother’s investments with RE Loans with a then-value of approximately $76,896.71.

Prior to her mother’s death, Ms. Deeley had joined her mother at one of RE Loan’s

investor appreciation dinners at the Silver Dragon Restaurant in Alameda County and

heard the Managers’ message about the safety of investing in its Fund.

131. With her inheritance, Ms. Deeley replaced her mother as a Member in RE

Loans, holding approximately 76,900 units.

132. The Managers continued to send Ms. Deeley letters soliciting additional

investments and assuring that her existing investment was safe and would remain safe

going forward. They sent these types of letters to Ms. Deeley through the end of 2007.


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133. In considering the proposed Exchange Agreement, Ms. Deeley relied

upon the written information sent to her by the Managers which assured her that the

new promissory notes would be secured by all of RE Loans’ assets.

134. On or about November 1, 2007, Ms. Deeley received a “Secured

Promissory Note” in the amount of $92,052.07 from the Managers in exchange for her

membership interest, which represented an increase in value (due to reinvestment of

interest) since she inherited her mother’s units in 2005.

135. That same month, Ms. Deeley began receiving materials from the

Managers touting their new investment vehicle, MF08. The solicitations began with a

November 2007 form letter from Walter Ng and Kelly Ng for The Mortgage Fund

announcing the MF08 fund and asking for her consideration of the enclosed materials.

Enclosed with the letter were MF08’s Confidential Offering Memorandum, a

Subscription Booklet, a form of Security Agreement, and closing instructions.

136. The Managers’ solicitations continued. For example, a February 18,

2008 letter from the RE Loans Managers advertised MF08.

137. Through these solicitations, the Managers made the same assurances

about MF08 that they made about RE Loans – that investments were safe and that

MF08 would take a conservative approach to lending.

138. Ms. Deeley believed the Managers’ representations. In May 2008, in

reliance on the Managers’ representations, she invested $120,000 in MF08 in exchange

for another purportedly “secured” promissory note.

139. The balance as of January 1, 2010 of Ms. Dea Deeley’s RE Loans

Company account is $99,025.84 and her MF08 Company account is $130,862.47.

140. To date, neither RE Loans nor MF08 has made any payments on the

promissory notes held by Ms. Deeley.

141. Ms. Deeley did not know until recently, and was not advised by the

Managers that RE Loans established a line of credit with a third-party lender.

142. Nor did the Managers ever ask Ms. Dea Deeley, as a member, to pre-


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approve the establishment of the Line of Credit.

143. Ms. Deeley also did not know until recently, and was not advised by the

Managers that the Company had pledged its assets as security for that Line of Credit.

144. Had Ms. Deeley known about the Line of Credit, the pledging of RE

Loans’ assets for that credit, the company’s operating cash problems, or that RE Loans

was engaged in ongoing and systematic SEC violations, she would not have continued

to invest in RE Loans, would have voted against the Exchange Agreement, or

withdrawn her money invested with RE Loans.

145. Ms. Deeley did not know until recently, and was not advised by the

Managers, that contrary to the Managers’ representations that MF08 would be using the

investors’ funds to make loans secured by liens against real property, MF08 was

instead establish to serve as a feeder fund for RE Loans and to service RE Loans’ line

of credit loan debt. Had Ms. Deeley known about the true purpose of MF08, she would

not have invested her money in MF08 and would have withdrawn her investment in RE

Loans.

146. As a direct result of the conduct alleged herein, Plaintiff Arlene Dea

Deeley has been damaged in an approximate amount of $229,888.31.

III. Plaintiff Fredric C. Mendes

147. Plaintiff Fredric Mendes started investing in RE Loans in or about 2005.

148. Mr. Mendes thereafter opened three accounts: (1) RE Loans account

number MEN027, in the name of the IRA Service Custodian for the benefit of Fredric

S. Mendes’ IRA account number 015945; (2) RE Loans account number MEN025, in

the name of Fredric S. Mendes, Trustee of Fredric S. Mendes Revocable Trust; and (3)

RE Loans account number MEN026, in the name of Fredric S Mendes or Nora

Mendes. From 2006 forward, RE Loans sent Mr. Mendes various documents including

the offering circulars, the operating agreement and letters soliciting additional

investments and assuring him that his investment was safe and would remain safe

going forward. RE Loans sent these types of letter to Mr. Mendes through the end of


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2008 and he continued to rely upon them in keeping his investment with RE Loans.

149. In September of 2007, Mr. Mendes received the written exchange

offering materials and relied upon them in voting for the Exchange Agreement.

150. On or about November 1, 2008, Mr. Mendes received a “Secured

Promissory Note” from the Managers in exchange for his membership interest, which

had increased in value since 2005 due to the reinvestment of interest.

151. As of September 2, 2011, Mr. Mendes’ accounts totaled (1)

$1,173,293.00, (2) $180,528.00, (3) $5,906.00.


held by Mr. Mendes.

153. Had Mr. Mendes known about the Wells Fargo Line of Credit, the

pledging of RE Loans’ assets for that credit, its operating cash problems, or that RE

Loans was engaged in ongoing and systematic SEC violations, he would not have

continued to invest in RE Loans, voted for the Exchange Agreement, or kept his money

invested with the Company.

154. As a direct result of the conduct alleged herein, Plaintiff Fredric Mendes

has been damaged in an approximate amount of $1,359,727.00.

IV. Plaintiff Nancy Rapp

155. Plaintiff Nancy Rapp started investing in RE Loans in or about January

2002.

156. Ms. Rapp thereafter opened RE Loans’ account number RAP015. The

investment was made in the name of the Nancy Lee Rapp Trustee, Nancy Lee Rapp

Living Trust.

157. From 2002 forward, RE Loans sent Ms. Rapp various documents


additional investments and assuring Ms. Rapp that her investment was safe and would

remain safe going forward. RE Loans sent these types of letter to Ms. Rapp through

the end of 2008 and she continued to rely upon them in keeping her investment with


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RE Loans.

158. In September 2007, Ms. Rapp received the written exchange offering

materials and relied upon them in voting for the Exchange Agreement.

159. On or about November 1, 2007, Ms. Rapp received a “Secured

Promissory Note” from the Managers in exchange for her membership interest, which

had increased in value due to the reinvestment of interest.

160. As of September 1, 2001, Ms. Rapp’s account totaled $1,932,918.00.


held by Ms. Rapp.

162. Had Ms. Rapp known about the Wells Fargo Line of Credit, the pledging


engaged in ongoing and systematic SEC violations, she would not have continued to

invest in RE Loans, voted for the Exchange Agreement, or kept her money invested

with the Company.

163. As a direct result of the conduct alleged herein, Plaintiff Nancy Rapp has

been damaged in an approximate amount of $1,932,918.00.

V. Plaintiff Phillip Cantor

164. Plaintiff Philip Cantor started investing in RE Loans in or about July 3,

2003.

165. Mr. Cantor thereafter opened RE Loans’ account number CAN015. The

investment was made in the name of the Philip T. Cantor, Philip T. Cantor Living

Trust.

166. From 2003 forward, RE Loans sent Mr. Cantor various documents


additional investments and assuring him that his investment was safe and would remain

safe going forward. RE Loans sent these types of letter to Mr. Cantor through the end

of 2008 and he continued to rely upon them in keeping his investment with RE Loans.

167. In September 2007, Mr. Cantor received the written exchange offering


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168. On or about November 2007, Mr. Cantor received a “Secured Promissory

Note” from the Managers in exchange for his membership interest, which had

increased in value since due to the reinvestment of interest.

169. As of September 2011, Mr. Cantor’s account totaled $2,346,625.00.


held by Mr. Cantor.

171. Had Mr. Cantor known about the Wells Fargo Line of Credit, the



continued to invest in RE Loans, voted for the Exchange Agreement, or kept his money


172. As a direct result of the conduct alleged herein, Plaintiff Phillip Cantor

has been damaged in an approximate amount of $2,346,625.00.

VI. Plaintiff John Emanuele

173. Plaintiff John Emanuele started investing in RE Loans in or about

January 2002.

174. Mr. Emanuele thereafter opened RE Loans’ account number EMA010.

The investment was made in the name of John Emanuele. The investment was made in

the name of the John Emanuele.

175. From 2005 forward, RE Loans sent Mr. Emanuele various documents


additional investments and assuring Mr. Emanuele his investment was safe and would

remain safe going forward. RE Loans sent these types of letter to Mr. Emanuele

through the end of 2008 and he continued to rely upon them in keeping his investment

with RE Loans and Mortgage Fund 08.

176. In January 2002, Mr. Emanuele opened RE Loans’ account number

EMA010. The investment was made in the name of the John Emanuele Trustee of the


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John Emanuele 1984 Trust.

177. In 2008, Mr. Emanuele thereafter opened an account, Mortgage Fund 08’

account number 08EMA00. He invested $25,000. The investment was made in the

name of the John Emanuele Trustee of the John Emanuele 1984 Trust.

178. Mr. Emanuele received the written RE Loans exchange offering materials

and relied upon them in voting for the Exchange Agreement.

179. Mr. Emanuele received the written Mortgage Fund 08 offering materials

and relied upon them in investing $25,000.00 in Mortgage Fund 08.

180. On or about November 1, 2007 Mr. Emanuele, received a “Secured

Promissory Note” from the Managers in exchange for her membership interest in RE

Loans, which had increased in value due to the reinvestment of interest.

181. As of October 2, 2008, RE Loans account Mr. Emanuele account totaled

$183,215.00.

182. As of March 31, 2009, the MF08 account Mr. Emanuele account totaled

$25,930.

183. To date, RE Loans and MF08 have not made any payments on the

promissory notes held by Mr. Emanuele.

184. Had Mr. Emanuele known about the Wells Fargo Line of Credit, the



continued to invest in RE Loans, voted for the Exchange Agreement, or kept her money


185. Had Mr. Emanuele known about the purchase of RE Loans assets by

MF08, the Wells Fargo Line of Credit the pledging of RE Loans’ assets for that credit,

its operating cash problems, or that RE Loans was engaged in ongoing and systematic

SEC violations, he would not have continued to invest in MF08 and would not have

kept his money invested with either company.


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As a direct result of the conduct alleged herein, Plaintiff, Mr. Emanuele has been

damaged in an approximate amount of $234,145.00.

VII. Plaintiff David D. Nolan

186. Plaintiff David D. Nolan started investing in RE Loans on or about April

23, 2004.

187. Mr. Nolan thereafter opened an RE Loans’ account. The investment was

made in the name of David D. Nolan.

188. From 2004 forward, RE Loans sent Mr. Nolan various documents


additional investments and assuring Mr. Nolan his investment was safe and would

remain safe going forward. RE Loans sent these types of letter to Mr. Nolan through

the end of 2008 and he continued to rely upon them in keeping his investment with RE

Loans.

189. In 2007, Mr. Nolan received the written RE Loans exchange offering


190. In 2007, Mr. Nolan received a “Secured Promissory Note” from the

Managers in exchange for his membership in interest in RE Loans, which had increased

in value due to the reinvestment of interest.


held by Mr. Nolan.

192. Had Mr. Nolan known about the Wells Fargo Line of Credit, the pledging


engaged in ongoing and systematic SEC violations, he would not have continued to

invest in RE Loans, voted for the Exchange Agreement, or kept his money invested

with the Company.

193. As a direct result of the conduct alleged herein, Plaintiff David D. Nolan

has been damaged in the approximate amount of $664,816.00.

CLASS ALLEGATIONS


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194. Plaintiffs bring this action on behalf of the following investor classes (the

“Classes” or the “Class”):

• All persons who (a) purchased or held a membership interest in R.E.

Loans, LLC and (b) received a promissory note(s) from R.E. Loans on

or after November 1, 2007, that have not been fully repaid (“the RE

Loans Class”).

• All persons who purchased or held a promissory note(s) issued by

Mortgage Fund ’08 that have not been fully repaid (“the Mortgage

Fund ‘08 Class”).

195. Excluded from the Class are: (a) The Managers, the Defendants, and (b)

members of their families, their estates, any entity in which they have a controlling

interest or which is a parent, subsidiary or affiliate of or is or was controlled by RE

Loans, MF08, Walter Ng Investments, Bar-K, B-4 Partners, The Mortgage Fund and

their officers, directors, managers, employees, affiliates, agents, legal representatives,

heirs, predecessors, successors, and assigns.

196. Membership in the Class is so numerous that joinder of all members is

impracticable. The disposition of their claims in a class action will provide substantial

benefits to the parties, Class members, and the Court. Although the number of Class

Members and their names are presently unknown, this information can be readily

determined from RE Loans’ and MF08’s records. Upon information and belief, the

Class includes thousands of investors, most of whom are California citizens.

197. There is a well-defined community of interest in the questions of law and

fact involved in this case. Questions of law and fact common to the members of the

Classes that predominate over questions that may affect only individual members of the

Classes include:

• Whether Defendants violated and are liable for violations of the

California Securities Act;

• Whether Defendants may invoke any statutory or common law

defense to liability under the California Securities Act;


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• Whether Defendants have aided and abetted others in breaching

fiduciary duties owed to the Class;

• Whether Defendants made false misrepresentations and/or omitted

to disclose material information to Plaintiffs and the Class and/or aided

and abetted others, and whether Plaintiffs and the Class have sustained

injury by reason of Defendants’ actions, misrepresentations and

omissions;

• Whether Defendants are jointly and severally liable for their

actions, misrepresentations and omissions;

• Whether Plaintiffs and the other members of the Class are entitled

to equitable relief; and

• Whether Plaintiffs and the other members of the Class are entitled

to recover damages and the amount of damages that members of the

Class are entitled to recover.

198. Plaintiffs’ claims are typical of the Class members’ claims, and are based

on and arise out of uniform misrepresentations, omissions and breaches as described

above. If litigated individually, the claims of each Class member would require proof

of the same material and substantive facts, rely upon the same remedial theories, and

seek the same relief. Then, once Defendants’ liability is established, the Court and a

jury can determine the claims of each member of the Class on the uniform basis of the

value and date of their investments. There will also be no difficulty in the management

of this litigation as a class action.

199. Plaintiffs have retained counsel competent and experienced in class

action, securities fraud, and Ponzi scheme litigation. Plaintiffs have no interests

antagonistic to or in conflict with those of the Class, will fairly and adequately protect

the interests of the Class members, and are committed to the vigorous prosecution of

this action.

200. A class action is superior to other available methods for the fair and


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efficient adjudication of this controversy since joinder of all members of the Class is

impracticable. Proceeding as a class action will permit an orderly and expeditious

administration of the Classes’ claims, will foster economies of time, effort and expense

and will ensure uniformity of decisions.

LEGAL CLAIMS RELATING TO MEMBERSHIP IN RE LOANS

FIRST CAUSE OF ACTION

AIDING AND ABETTING BREACH OF FIDUCIARY DUTIES

(Defendants Greenberg and Wells Fargo)

201. Plaintiffs hereby incorporate by reference each of the preceding

paragraphs as though fully set forth herein.

202. At all times relevant hereto, B-4 Partners, Bar-K, Walter Ng, Bruce

Horwitz, Barney Ng and Kelly Ng acted and failed to act as Managers of RE Loans. In

their capacity as the Company’s Managers, they owed certain fiduciary obligations to

Plaintiffs and the Class, including but not limited to those duties prescribed under the

RE Loans’ Operating Agreement and the several published Offering Circulars under

which Plaintiffs and the Class purchased their membership units.

203. The Managers also owed Plaintiffs and the Class the following fiduciary

obligations under Cal. Civ. Code § 17153 and by its reference § 16404(a):

a. The duty of undivided loyalty and the duty to refrain from

engaging in unfair transactions with Members;

b. The duty to fully disclose all material facts germane to the

fiduciary relationship;

c. The duty to refrain from acting on behalf of any party having an

interest adverse to the Members interests; and/or

d. The duty to act in the highest good faith to the Members and to

refrain from obtaining or accepting any advantage over them in the

Company’s affairs by the slightest misrepresentation or

concealment.

204. Additionally, Plaintiffs and the Class reposed trust and confidence in the


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Managers to handle their investments. And in turn, the Managers accepted that trust

and confidence, thereby creating a fiduciary relationship.

205. The Managers breached their fiduciary obligations to Plaintiffs and the

Class and caused damages to Plaintiffs and the Class in an amount to be proven at trial

through their specific actions and inaction as alleged in ¶¶ 55-114, 119-85, supra.

206. Defendant Wells Fargo acted with complicity and knowledge of those

breaches, as alleged in ¶¶ 59, 61-76, 78, 94-97, 107-09, supra.

207. Defendant Greenberg acted with complicity and knowledge of those

breaches, as alleged in ¶¶ 59, 61-66, 69, 77-89, 96-97, 102-05, supra.

208. Defendant Greenberg aided and abetted, encouraged, and rendered

substantial assistance to B-4 Partners, Bar-K, Walter Ng, Bruce Horwitz, Barney Ng

and Kelly Ng in breaching their fiduciary duties to Plaintiffs and the Class, as alleged

in ¶¶ 59, 61-66, 69, 73, 77-90, 94-97, supra.

209. Defendant Wells Fargo aided and abetted, encouraged, and rendered

substantial assistance to B-4 Partners, Bar-K, Walter Ng, Bruce Horwitz, Barney Ng

and Kelly Ng in breaching their fiduciary duties to Plaintiffs and the Class, as alleged

in ¶¶ 59, 61-65, 70-75, 78, 94-98, 101, 107-09, supra.

210. Defendants Greenberg and Wells Fargo realized and intended that their

conduct would substantially assist the accomplishment of the wrongful conduct and

scheme alleged herein at ¶¶ 59, 61-65, 70-74, 77-90, 96-98, 102-05, 108-09, supra.

211. As a result of the substantial assistance of Defendants Greenberg and

Wells Fargo, Plaintiffs and the Class have suffered and continue to suffer monetary

losses, all in an amount to be determined according to proof at trial.

212. Defendants Greenberg’s and Wells Fargo’s individual and collective acts

and omissions were substantial contributing factors and causes of violations of the

duties as set forth in this Count and to Plaintiffs’ and the Class’ indivisible harm and

damages, rendering Defendants jointly and severally liable to Plaintiffs and the Class.

SECOND CAUSE OF ACTION


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SECONDARY LIABILITY FOR SECURITIES FRAUD




214. RE Loans investment units were sold to Plaintiffs and the Class. Those

units, as described under the several published Offering Circulars conveying

membership interests, were securities under Cal. Corp. Code § 25019.

215. The November 1, 2007 exchange of Plaintiffs’ and the Class members’

membership interest securities for promissory notes created a debt interest security,

which is still a security under Cal. Corp. Code § 25019.

216. RE Loans’ securities were sold in, within or from California.

217. In connection with the offer and sale of securities, RE Loans directly and

indirectly made untrue statements of material fact and omitted to state material facts

necessary to make the statements made, in light of the circumstances under which they

were made, not misleading, in violation of under Cal. Corp. Code § 25401, including

but not limited to the misrepresentations and omissions set forth in ¶¶ 77-89, supra.

218. B-4 Partners, Bar-K, Bruce Horwitz, Walter Ng, Kelly Ng and Barney Ng

knowingly and substantially assisted the Company’s securities law violations in the

manner and for the reasons set forth in ¶¶ 57, 62, 73-89, supra. B-4 Partners, Bar-K,

Bruce Horwitz, Walter Ng, Kelly Ng and Barney Ng’s actions were done with the

intent to induce the investors’ reliance on knowing misrepresentations or omissions,

and such actions and misrepresentations materially assisted in the securities fraud.

219. Greenberg knowingly and substantially assisted the Company’s securities

law violations in the manner and for the reasons set forth in ¶¶ 57, 73-89, supra.

Greenberg’s actions were done with the intent to induce the investors’ reliance on

knowing misrepresentations or omissions, and such actions and misrepresentations

materially assisted in the securities fraud.

220. Wells Fargo knowingly and substantially assisted the Company’s

securities law violations in the manner and for the reasons set forth in ¶¶ 67-78, 107-09,


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supra. Wells Fargo’s actions were done with the intent to induce the investors’

reliance on knowing misrepresentations or omissions, and such actions and

misrepresentations materially assisted in the securities fraud.

221. Accordingly, pursuant to Cal. Corp. Code § 25504.1, Greenberg and

Wells Fargo are jointly and severally liable to Plaintiffs and the Class for rescessionary

damages, monetary restitution and pre- and post-judgment interest at the legal rate,

costs, and any additional relief as this Court may deem appropriate under the

circumstances.

THIRD CAUSE OF ACTION

FRAUD BY MISREPRESENTATION

(Defendant Greenberg)

222. Plaintiffs incorporate by reference each of the preceding paragraphs as

though fully set forth herein

223. Greenberg and the Managers made material misrepresentations to

Plaintiffs and the Class as alleged in ¶¶ 77-90, supra.

224. As described in ¶¶ 69, 77, 79, supra, Greenberg and the Managers knew

that these statements to Plaintiffs and the Class were false.

225. Greenberg and the Managers made these statements with the intent to

defraud Plaintiffs and the Class of their equity interests and rights through the

Exchange Agreement, as set forth in ¶¶ 61-66, 69-75, 77, 83, 87, 94-95, supra.

226. Greenberg’s and the Managers’ misrepresentations were conveyed

through uniform writings mailed to each Member, including Plaintiff and the Class, as

set forth in ¶¶ 76-77, 78-88, supra.

227. Plaintiffs and the Class believed the representations made by Greenberg

and the Managers were true or were ignorant of their falsity.

228. In reliance on Greenberg’s and the Managers’ misrepresentations,

Plaintiffs and Class Members were induced to, and did, accept the Exchange Offering.

Had Plaintiffs or the Class known the true facts, they would not have taken such action.


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229. Plaintiffs’ and the Class’ reliance upon Greenberg’s and the Managers’

representations were reasonable and justified.

230. As a proximate result, Plaintiffs and the Class Members have been

injured by Greenberg’s and the Managers’ fraudulent actions.

231. According to Cal. Civil Code § 1709, Greenberg is liable for Plaintiffs’

and the Class Members’ damages.

232. The actions of Greenberg as alleged herein, constitute oppression, fraud,

or malice, as those terms are defined in California Civil Code § 3294, entitling

Plaintiffs, and each of them, to an award of punitive damages.

FOURTH CAUSE OF ACTION

FRAUD BY CONCEALMENT & SUPPRESSION OF FACTS




234. The Managers concealed and suppressed material facts from the

Members. They had a duty to disclose these facts because: (1) a fiduciary relationship

existed between themselves and Plaintiffs and the Class as RE Loans’ Members, and

(2) they communicated information that was misleading in light of the facts concealed

and suppressed.

235. The Managers concealed and suppressed facts from the Members as set

forth in ¶¶ 56-101, 107, 114, supra.

236. As described in ¶¶ 56-101, 107, 114, supra, the Managers knew that these

facts were necessary to make material statements made not misleading.

237. The Managers made misrepresentations and, concealed and suppressed

facts with the intent to defraud Members of their equity interests and rights in RE

Loans through the Exchange Agreement, as set forth in ¶¶ 56-101, 107, 114, supra.

238. Greenberg also concealed and suppressed facts from Plaintiffs and the

Class as alleged in ¶¶ 61-66, 69, 73, 76-77, 79-90, supra.


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239. As described in ¶¶ 61-66, 69, 73, 77, 80, supra, Greenberg knew that

these statements to Plaintiffs and the Class were false and that additional statements

needed to be included in the documents it drafted to make its material statements not

misleading.

240. Greenberg concealed and suppressed these facts with the intent to defraud

Plaintiffs and the Class of their equity interests and rights through the Exchange

Agreement, as set forth in ¶¶ 61-63, 75-77, 79-80, 82-90, supra.

241. Greenberg was under a duty to disclose the facts it suppressed and

concealed because Greenberg: (1) actively concealed material facts from Plaintiffs and

the Class by preparing documents that purported to disclose and explain those facts, as

alleged in ¶¶ 79-88, supra, and (2) made partial representations about the Wells Fargo

Line of Credit, the Exchange Agreement, and RE Loans’ business operations and

financial condition, but suppressed crucial facts while making those representations, as

alleged in ¶¶ 79-88, supra, and elsewhere herein.

242. The Managers and Greenberg withheld the concealed and suppressed

these facts from uniform writings given to each Member, including Plaintiffs and the

Class.

243. Plaintiffs and the Class believed that the representations made were true

or were ignorant of their falsity or misleading nature.

244. In reliance on these misrepresentations, which concealed and suppressed

material facts, Plaintiffs and the Class were induced to, and did, participate in the

Exchange Agreement and continue their investment in RE Loans.

245. If Plaintiffs had known the actual facts, they would not have exchanged

their ownership interests for promissory notes or taken other actions which were

injurious to their interests.

246. Plaintiffs’ and the Class’ reliance upon these representations, which

concealed and suppressed material facts, was reasonable and justified.

247. As a proximate result, Plaintiffs and the Class have been injured by the


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Defendants’ fraudulent actions.


and the Class’ damages.



Plaintiffs and the Class, and each of them, to an award of punitive damages.

FIFTH CAUSE OF ACTION

AIDING AND BETTING FRAUD




251. As alleged in ¶¶ 55-114, supra, B-4 Partners, Bar-K, Walter Ng, Bruce

Horwitz, Barney Ng and Kelly Ng made fraudulent misrepresentations to and

concealed and suppressed facts from Plaintiffs and the Class through their alleged

actions and inactions.

252. Greenberg acted with complicity and knowledge of the fraud, as alleged

in ¶¶ 59, 62, 65-66, 69, 77, 94, supra.

253. Greenberg aided and abetted, encouraged, and rendered substantial

assistance to the Managers in making fraudulent misrepresentations to and in

concealing and suppressing facts from Plaintiffs and the Class, as alleged in ¶¶ 61-63,

73, 77, 79-90, 94, supra.

254. Greenberg realized and intended that their conduct would substantially

assist the accomplishment of the wrongful conduct and scheme alleged herein at ¶¶ 61-

63, 75-77, 79-80, 82-90, supra.

255. As a result of the substantial assistance of Greenberg, Plaintiffs and the

Class have suffered and continue to suffer monetary losses, all in an amount to be

determined according to proof at trial.

256. Greenberg’s individual and collective acts and omissions were substantial


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contributing factors and causes of the fraudulent conduct as set forth in this Count and

to Plaintiffs’ and the Class’ harm and damages, rendering Defendants jointly and

severally liable to Plaintiffs and the Class.




SIXTH CAUSE OF ACTION

VIOLATION OF UNFAIR COMPETITION LAW

BUSINESS & PROFESSIONS CODE § 17200, et seq.




259. California’s Unfair Competition Law, Business & Professions Code §§

17200 et seq. (the “UCL”) prohibits acts of unlawful and unfair competition, including

any “unlawful, unfair or fraudulent business act or practice,” any “unfair, deceptive,

untrue or misleading advertising” and any act prohibited by Business & Profession

Code §17500.

260. Greenberg and Wells Fargo have committed business acts and practices

that violate the UCL by aiding, abetting, and participating in breaches of fiduciary

duties and by committing fraud in the manner and for the reasons set forth in the six

Causes of Action listed above.

261. Greenberg’s and Wells Fargo’s conduct, as alleged above, also

constitutes unfair competition and fraudulent business practices in that, for the reasons

set forth above, the acts and practices offend public policy and are unethical,

oppressive, and unscrupulous, and are substantially injurious to the public.

262. Additionally, Greenberg’s conduct in advising the Managers in unlawful

activities, as alleged above, further violated the California Rules of Professional

Conduct, Rule 3-210, which provides that “[A] member shall not advise the violation

of any law … unless the member believes in good faith that such law … is invalid.”


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263. Greenberg’s and Wells Fargo’s conduct was a proximate cause of

Plaintiffs’ and the Class’ damages herein, and it caused and continues to cause

substantial injury to Plaintiffs and the Class. Such conduct therefore should be

enjoined.

SEVENTH CAUSE OF ACTION

NEGLIGENT MISREPRESENTATION




265. As alleged in ¶¶ 59, 61-63, 65, 66, 69, 73, 77, 79-90, 94, supra,

Greenberg made multiple assertions of past or existing material facts that were false

and for which Greenberg had no reasonable grounds for believing to be true.

266. Greenberg intended that its misrepresentations as alleged herein would

induce the reliance of Plaintiffs and the Class denying them of their equity interests and

rights through the Exchange Agreement, as set forth in ¶¶ 61-63, 75-77, 79-80, 82-90,

supra.

267. Moreover, aside from its intent to induce Plaintiffs’ and the Class’

reliance, Greenberg had access to extensive non-public information from RE Loans that

disconfirmed the misrepresentations contained in the communications it prepared, and

Greenberg therefore played more than a “secondary role” in preparing those

communications, as alleged in ¶¶ 63, 69, supra.

268. In reliance on these misrepresentations, Plaintiffs and the Class were

induced to, and did, participate in the Exchange Agreement and continue their

investment in RE Loans.

269. Under the circumstances as alleged in ¶¶ 55-114, supra, Plaintiffs and the

Class’ reliance on Greenberg’s representations was reasonable and justified.

270. As a proximate result, Plaintiffs and the Class have been injured by

Greenberg’s negligent misrepresentation.


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LEGAL CLAIMS RELATING TO INVESTMENTS IN MF08

EIGHTH CAUSE OF ACTION

SECONDARY LIABILITY FOR SECURITIES FRAUD




272. Investment units in MF08 were sold to Plaintiffs and Class members.

Those units, as described in the MF08 Note Program, conveyed noteholder interests

and were securities under Cal. Corp. Code § 25019.

273. MF08’ securities were sold in, within or from California.

274. In connection with the offer and sale of securities, MF08 directly and

indirectly made untrue statements of material fact and omitted to state material facts

necessary to make the statements made, in light of the circumstances under which they

were made, not misleading, in violation of under Cal. Corp. Code § 25401, including

but not limited to the misrepresentations and omissions set forth in ¶¶ 102-05, supra.

275. The Mortgage Fund, B-4 Partners, Bar-K, Bruce Horwitz, Kelly Ng,

Walter Ng and Barney Ng are MF08 control persons under Cal. Corp. Code § 25504.1,

as they were Managers of MF08 and had control over MF08. They caused the

representations to be made and knew that the representations made to Plaintiffs and the

Class were false or, alternatively, required the disclosure of additional facts to make

them not misleading.

276. Kelly Ng, Bruce Horwitz, B-4 Partners, Walter Ng, Barney Ng, The

Mortgage Fund, and Bar-K knowingly and substantially assisted MF08 securities law

violations in the manner and for the reasons set forth in ¶¶ 96-110, supra. Their actions

were done with the intent to induce the investors’ reliance on knowing

misrepresentations or omissions, and such actions and misrepresentations materially

assisted in securing investors, including Plaintiffs and the Class in MF08.

277. Greenberg knowingly and substantially assisted MF08 securities law


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violations in the manner and for the reasons set forth in ¶¶ 96-97, 102-06, supra.

Greenberg’s actions were done with the intent to induce the investors’ reliance on

knowing misrepresentations or omissions, and such actions and misrepresentations

materially assisted in securing investors, including Plaintiffs and the Class.

278. Accordingly, pursuant to Cal. Corp. Code § 25504.1, Greenberg is

severally liable for restitution and the monetary losses caused by the statutory securities

fraud violations set forth in Count nine, supra.

NINTH CAUSE OF ACTION

FRAUD BY MISREPRESENTATION




280. The Mortgage Fund, B-4 Partners, Bar-K, Bruce Horwitz, Kelly Ng,

Barney Ng and Walter Ng made material misrepresentations to the Noteholders as set

forth in ¶¶ 102-05, supra.

281. As described in ¶¶ 96-107, supra, the Managers knew that these

representations were false.

282. The Managers made these statements with the intent to defraud Plaintiffs

and the Class, as set forth in ¶ 102, supra.

283. Greenberg also made material misrepresentations as alleged in ¶¶ 102-05,

supra.

284. As described in ¶ 96-105, supra, Greenberg knew that these

representations to Plaintiffs and the Class were false.

285. Greenberg made these statements with the intent to defraud Plaintiffs and

the Class, as set forth in ¶ 102, supra.

286. The Mortgage Fund’s, B-4 Partners’, Bar-K’s, Bruce Horwitz’s, Barney

Ng’s, Walter Ng’s, Kelly Ng’s, and Greenberg’s misrepresentations were conveyed

through uniform writings given to each Noteholder, including Plaintiffs and the Class,


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as set forth in ¶¶ 102-05, supra.

287. Plaintiffs and the Class believed that these representations were true or

were ignorant of their falsity.


induced to, and did, invest funds with MF08 in the form of secured promissory notes.


289. Plaintiffs’ and the Class’ reliance upon these representations was

reasonable and justified.








TENTH CAUSE OF ACTION

FRAUD BY CONCEALMENT & SUPPRESSION OF FACTS




294. The Managers concealed and suppressed facts from the Noteholders as

set forth in ¶¶ 102-05, supra.

295. As described in ¶¶ 96-105, supra, the Managers knew that these facts

were necessary to make material statements made not misleading.

296. The Managers made these statements with the intent to defraud Plaintiffs

and the Class, as set forth in ¶ 102, supra.

297. Greenberg also concealed and suppressed facts from Plaintiffs and the

Class as alleged in ¶¶ 102-05, supra.


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298. As described in ¶ 96-105, supra, Greenberg knew that these facts were

necessary to make material statements made not misleading.

299. Greenberg was under a duty to disclose the facts it suppressed and

concealed because Greenberg: (1) actively concealed material facts from Plaintiffs and

the Class by preparing documents that purported to disclose and explain those facts, as

alleged in ¶¶ 102-05, supra, and (2) made partial representations about MF08’s

business operations and purpose, but suppressed crucial facts while making those

representations as alleged in ¶¶ 102-05, supra, and elsewhere herein.

300. Greenberg concealed and suppressed these facts with the intent to defraud

Plaintiffs and the Class, as set forth in ¶ 102, supra.

301. The Managers and Greenberg withheld the concealed and suppressed

facts from uniform writings given to each Noteholder, including Plaintiffs and the

Class.

302. Plaintiffs and the Class believed that the representations made were true

or were ignorant of their falsity or misleading nature.

303. In reliance on these misrepresentations, which concealed and suppressed

material facts, Plaintiffs and the Class were induced to, and did, invest funds with

MF08 in the form of secured promissory notes. Had Plaintiffs or the Class known the

true facts, they would not have taken such action.

304. Plaintiffs’ and the Class’ reliance upon these representations, which

concealed and suppressed facts, was reasonable and justified.









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ELEVENTH CAUSE OF ACTION

AIDING AND BETTING FRAUD




309. As alleged in ¶¶ 102-05, supra, The Mortgage Fund, B-4 Partners, Bar-K,

Walter Ng, Bruce Horwitz, Barney Ng and Kelly Ng made fraudulent

misrepresentations to and concealed and suppressed facts from Plaintiffs and the Class

through their alleged actions and inactions.

310. Greenberg acted with complicity and knowledge of the fraud, as alleged

in ¶¶ 96-105, supra.


assistance to B-4 Partners, Bar-K, Walter Ng, Bruce Horwitz, Barney Ng and Kelly Ng

in making fraudulent misrepresentations to Plaintiffs and the Class, as alleged in ¶¶ 96-

105, supra.

312. Greenberg realized and intended that their conduct would substantially

assist the accomplishment of the wrongful conduct and scheme alleged herein at ¶¶ 96-

105, supra.

313. As a result of the substantial assistance of Greenberg, Plaintiffs and the

Class have suffered and continue to suffer monetary losses, all in an amount to be

determined according to proof at trial.

314. Greenberg’s individual and collective acts and omissions were substantial

contributing factors and causes of the fraudulent conduct as set forth in this Count and

to Plaintiffs’ and the Class’ indivisible harm and damages, rendering Defendants jointly

and severally liable to Plaintiffs and the Class.





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TWELFTH CAUSE OF ACTION

AIDING AND ABETTING BREACH OF FIDUCIARY DUTY

(Defendant Greenberg and Wells Fargo)



317. At all relevant times, The Mortgage Fund, B-4 Partners, Bar-K, Walter

Ng, Bruce Horwitz, Barney Ng and Kelly Ng held themselves out and represented

themselves to be the Managers of MF08.

318. As alleged in ¶¶ 96, 98-100, 103-05, supra, these MF08 Managers

solicited investments in MF08 by targeting existing RE Loan investors with whom they

had pre-existing, and often long-term, relationships and emphasizing that MF08 was a

safe investment because it would be run by RE Loans’ Managers.

319. At this time, the MF08 Managers had not disclosed any of RE Loans’

financial problems, as alleged in ¶ 99, supra.

320. The MF08 Confidential Private Offering Memorandum states that the

MF08 Managers had a confidential relationship of trust with the Noteholders. The

Private Offering Memorandum states that Noteholders must rely on the good faith and

integrity of the MF08 Manager to comply with the laws, rules and regulations

governing the offering of the Notes for purchase, the Company’s relationship with the

Noteholder, and to cause the Company to meet its obligations under the Note Purchase

Agreement, the Notes, and the Securities Agreement.

321. Information concerning RE Loans’ true financial status and the real

purpose for the MF08 Managers’ creation of MF08 was held exclusively by the

Managers and the Defendants.

322. The MF08 Managers’ preexisting relationship and confidential

relationship of trust with the Noteholders imposed upon them fiduciary duties on behalf

of the Noteholders.

323. The MF08 Managers owed Plaintiffs and the MF08 Class a fiduciary

obligation under California law, including a duty to act with the utmost good faith for


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the benefit of the Noteholders.

324. Unaware of RE Loans’ financial problems, that they likely had already

lost much of their investments in RE Loans, or that MF08 was created to serve as a

feeder fund to satisfy RE Loans’ financial obligations, Plaintiffs and the MF08 Class

placed their trust and confidence in the MF08 Managers to handle their investments

and collectively gave the MF08 Managers millions of dollars to invest in MF08.

325. As alleged in ¶¶ 96-111, supra, the MF08 Managers breached their

fiduciary obligations to Plaintiffs and the MF08 Class.

326. As alleged in ¶¶ 96-97, 100-05, supra, Greenberg knew and participated

in a scheme of fraud with the MF08 Managers and knew that the Managers were

violating their fiduciary duties to Plaintiffs and the MF08 Class.


assistance to the MF08 Managers in breaching their fiduciary duties to Plaintiffs and

the MF08 Class by intentionally drafting the MF08 Offering Memorandum, which they

knew would be provided to Plaintiffs and the MF08 Class, that, among other things:

• misrepresented the investment in MF08 as having “a conservative risk

profile,” when it knew and failed to disclose that the investment was in

reality a high-risk and illegal Ponzi scheme;

• misrepresented that investments in MF08 would be used to fund loans to

real estate developers that were secured by liens against the real property

at issue, when it knew and failed to disclose that MF08 was created

primarily to serve as a feeder fund for RE Loans by using investments in

MF08 to pay down the Wells Fargo Line of Credit and pay RE Loans’

other obligations; and

• misrepresented that MF08 was a good investment because it was going to

be managed by RE Loans’ Managers, when it knew and failed to disclose

that RE Loans was insolvent.

328. As alleged in ¶¶ 96, 97, 107-09, supra, Wells Fargo knew and

participated in the Managers’ breach of fiduciary duty.


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329. Defendants Greenberg and Wells Fargo knew and intended that their

conduct would substantially assist the accomplishment of the wrongful conduct and

scheme alleged herein.

330. As a result of Defendants Greenberg’s and Wells Fargo’s substantial

assistance to the MF08 Managers in breaching their fiduciary duties, Plaintiffs and the

MF08 Class have been damaged in an amount to be proven at trial.

331. Greenberg’s and Wells Fargo’s individual and collective acts and

omissions were substantial contributing factors and causes of the MF08 Managers’

violations of their fiduciary duties to Plaintiffs and the Class, resulting in indivisible

harm and damages, and rendering Greenberg jointly and severally liable with the MF08

Managers to Plaintiffs and the MF08 Class.

332. The wrongful acts of Greenberg and Wells Fargo were done maliciously,

oppressively, and/or with the intent to mislead and defraud, thereby entitling Plaintiffs

and the MF08 Class to punitive and exemplary damages to be ascertained according to

proof, which is appropriate to punish and make an example of Defendants, pursuant to

Cal. Civ. Code § 3294.

THIRTEENTH CAUSE OF ACTION

NEGLIGENT MISREPRESENTATION




334. As alleged in ¶¶ 96-97, 102-05, supra, Greenberg made multiple

assertions of past or existing material facts that were false and for which Greenberg had

no reasonable grounds for believing to be true.

335. Greenberg intended that its misrepresentations as alleged herein would

induce the reliance of Plaintiffs and the Class in investing in MF08, as set forth in ¶¶

96-105, supra.

336. Moreover, aside from its intent to induce Plaintiffs’ and the Class’


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reliance, Greenberg had access to extensive non-public information from MF08 and RE

Loans that disconfirmed the misrepresentations contained in the communications it

prepared, and Greenberg therefore played more than a “secondary role” in preparing

those communications as alleged in ¶¶ 66, 96-97, 102, supra.


induced to, and did, invest funds with MF08 in the form of secured promissory notes.


338. Under the circumstances as alleged in ¶¶ 55-114, supra, Plaintiffs and the

Class’ reliance on Greenberg’s representations was reasonable and justified.

339. As a proximate result, Plaintiffs and the Class have been injured by

Greenberg’s negligent misrepresentation.

FOURTEENTH CAUSE OF ACTION

VIOLATION OF UNFAIR COMPETITION LAW

BUSINESS & PROFESSIONS CODE § 17200, et seq.




341. California’s Unfair Competition Law, Business & Professions Code §§

17200 et seq. (the “UCL”) prohibits acts of unlawful and unfair competition, including

any “unlawful, unfair or fraudulent business act or practice,” any “unfair, deceptive,

untrue or misleading advertising” and any act prohibited by Business & Profession

Code §17500.

342. Greenberg and Wells Fargo have committed business acts and practices

that violate the UCL by aiding and abetting the breach fiduciary duties, committing

fraud in the manner and for the reasons set forth above. Their conduct as alleged above

constitutes unlawful competition in that, for the reasons set forth above, said acts and

practices violate the Corporations Code.

343. The conduct of Greenberg and Wells Fargo as alleged above also

constitutes unfair competition in that, for the reasons set forth above, the acts and


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practices offends public policy and are unethical, oppressive, and unscrupulous, and are

substantially injurious to the public.

344. Additionally, Greenberg’s conduct in advising the Managers in unlawful

activities, as alleged above, further violated the California Rules of Professional

Conduct, Rule 3-210, which provides that “[A] member shall not advise the violation

of any law … unless the member believes in good faith that such law … is invalid.”

345. Defendants’ conduct was a proximate cause of Plaintiffs’ damages

herein, and it caused and continues to cause substantial injury to Plaintiffs and the

Class.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs, individually and on behalf of the Class, pray for an order

and judgment against Defendants and in their favor as follows:

A. Certifying the Classes as set forth in this Complaint, and appointing

Plaintiffs as Class representative for these Classes;

B. Awarding Plaintiffs and the Classes restitution with interest at the legal

rate;

C. Awarding Plaintiffs and the Classes rescission;

D. Awarding Plaintiffs and the Classes monetary damages and interest at the

legal rate;

E. Enjoining Defendants from further violations of their legal and fiduciary

duties;

F. Awarding Plaintiffs and the Classes the costs and disbursements of this

action, including reasonable counsel fees, costs and expenses in amounts to be

determined by the Court;

G. Awarding pre- and post-judgment interest; and

H. Granting such other and further relief as is just and proper.

PROOF OF SERVICE

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PROOF OF SERVICE

(C.C.P. §1013a(3)) STATE OF CALIFORNIA ) ) ss. COUNTY OF MARIN ) I am employed in the County of Marin, State of California. I am over the age of 18 years and not a party to the within action; my business address is Chavez & Gertler LLP, 42 Miller Avenue, Mill Valley, CA 94941. On March 22, 2012, I served the foregoing documents:

SECOND CONSOLIDATED AND AMENDED COMPLAINT FOR BREACH

OF FIDUCIARY DUTY, AIDING AND ABETTING BREACH OF

FIDUCIARY DUTY, SECURITIES FRAUD IN VIOLATION OF CAL.

CORP. CODE § 25401, ET SEQ., SECONDARY LIABILITY FOR

SECURITIES FRAUD AND COMMON LAW FRAUD, FRAUD –

CONCEALMENT AND SUPPRESSION OF FACT, NEGLIGENT

MISREPRESENTATION, AIDING AND ABETTING FRAUD, VIOLATION

OF UNFAIR COMPETITION LAW BUSINESS & PROFESSIONS CODE §

17200, ET SEQ.

on the interested parties in this action below by placing a true copy thereof enclosed in a sealed envelope addressed to each as follows: Matthew G. Ball K&L GATES LLP 4 Embarcadero Center, Suite 1200 San Francisco, CA 94111 Attorneys for Defendant Wells Fargo

John Garda David Weitman K&L GATES LLP 1717 Main Street, Suite 2800 Dallas, TX 75201

Jay Pomerantz Fenwick & West LLP 801 California Street Mountain View, CA 94041

Attorneys for Defendant Greenberg

Traurig, LLP

Attorneys for Defendant Wells Fargo

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[X] BY MAIL: I am readily familiar with the business' practice for collection and processing of correspondence for mailing with the United States Postal Service. I know that the correspondence is deposited with the United States Postal Service on the same day this declaration was executed in the ordinary course of business. I know that the envelope was sealed and, with postage thereon fully prepaid, placed for collection and mailing on this date, following ordinary business practices, in the United States mail at Mill Valley, California. Executed on March 22, 2012 at Mill Valley, California. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. I declare that I am employed in the office of a member of the bar of this court at whose direction the service was made. Amanda Randall

amanda

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amanda

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PROOF OF SERVICE

amanda

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PROFESSIONS CODE § 17200, › 2012 › 08 › ... · Both RE Loans and MF08 were hard money lenders who used funds obtained from investors to make real estate development loans,

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