WEST PALM BEACH (CN) – In a battle over settlement money generated in class actions, a Florida man is suing an agency that recruits investors who suffered big losses in the 2001 market meltdown and submits settlement fund claims on their behalf.
Class Action Services LLC and the four men who run it have “systematically defrauded the federal government and federal regulators overseeing class action fund distributions, stolen money from contracted referral agents, and breached numerous contracts, among a laundry list of other illicit activities,” according to a multimillion-dollar RICO claim in Federal Court.
Defendants Mark Zinn, Mark Donaldson, Jonathan Wade and Jeff Gushe founded Class Action Services (CAS) in California in May 2002, after the 2001 market meltdown, the complaint states.
“CAS recruited investors who had lost substantial amounts of money in the 2001 crash through the help of commissioned, contracted for referral agents who sought out these investors,” the complaint states. “CAS worked through the mire of trading records from these investors to ultimately submit claims for reimbursement of their sustained losses through federal government administered settlements and/or through private class action administrators comprising, collectively, a multi-billion dollar settlement fund for multiple cases from multiple sources (which for purposes of this case will be collectively referred to as ‘the Fund.’) The goal was to recover millions of dollars for some of Wall Street’s biggest investors hit hardest in the 2001 crash, as the result of fraudulent and deceitful activities of large investment firms and large public companies.
However, CAS began modifying losses and submitting claims to the court-appointed administrator of the federal government settlement fund for amounts much larger than those losses actually taken up by CAS’ investor clients. The sheer volume of claims submitted by CAS to the Fund, made it nearly impossible for the courts’ appointed administrator firms, which is many cases was either Gallardi or Garden City Group, to verify the calculations being provided by CAS for reimbursement to the Fund.
“In furtherance of this scheme, Defendants, inter alia, made an agreement with an individual on the inside of Gallardi and/or Garden City Group, to ensure that the purposefully deceiving calculations provided by CAS would not be verified by Gallardi and/or Garden City Group or the court and that deadlines could be missed in making filings, and yet settlement funds were still received.
“By their unlawful conduct, Defendants have committed civil RICO violations, perpetrated fraud on a mass scale, breached contracts with referral agents, and took actions in violation of a right to an accounting, entitling Plaintiffs to compensatory and punitive damages,” the complaint states.
Zinn works out of Fort Lauderdale, Donaldson, Wade and Gushe out of Sausalito, Calif., the complaint states.
The complaint claims the defendants submitted fraudulent claims for $173 million in losses in AOL Time Warner stock, $18.5 million in losses in Global Research Analyst stock, and $24.5 million in claimed losses in Enron-Citigroup stock.
Plaintiffs Jeff Doria, Infinity Financial Partners, and Century Trading Group LLC are represented by David Feingold with Feingold & Kam of Palm Beach Gardens. Also named as a defendant in Cypress Financial Research LLC.
Doria, of Delray Beach, Fla., apparently feels he was cheated for referring clients to CAS.
The complaint states, “Doria confronted Zinn to inquire how he was suddenly making millions of dollars, while Doria had received very little in the way of commissions for all of the clients he had referred to CAS. Zinn eluded Doria’s inquiry by stating that the money had had recently come into was from clients not referred to CAS by Doria, however, he proceeded that (sic) Doria would soon be making the millions of dollars he had been promised, when Doria’s clients started to receive their settlements. When Doria only received $500,000 from CAS in 2007, he again approached Zinn and advised him that the commission he had received did not make any sense.”
This 19-page filing has 47 attached pages of exhibits.