Investor’s Balloon Ride Cross-Claim Expands

LOS ANGELES (CN) - A federal judge allowed an investor to sue two additional people he claims were involved in a scheme to embezzle thousands of dollars from a Las Vegas balloon ride venture.

Dr. Alexander Kotler filed a petition to amend his cross-claim against former business partner and lawyer James Henderson Jr., who allegedly approached Kotler in 2008 seeking funding for Cloud Nine.

Kotler claims Cloud Nine's business plan was to install a helium-filled balloon ride in Las Vegas. He says Henderson Jr. assured Kotler that a "principal investor" had already invested $2.4 million in the project.

Kotler's $600,000 investment was pooled with the investments of Alexsandra Pilavskaya and (nonparty) Ron Sacco.

Ten months after the ride opened in 2009, a "wind accident ... virtually destroyed the balloon," U.S. District Judge Christina Snyder explained in the ruling. The unnamed principal investor decided to buy a new balloon with the insurance money, but most of those funds were never seen by investors, according to Kotler.

Instead, Kotler claims Cloud Nine's marketing manager, Anita O'Connor, forged his signature on a check for $316,000 and gave the money to Henderson Jr. and James Henderson Sr., who were members of Cloud Nine's board of directors but not investors.

Kotler claims he tried to write a check for the remaining $211,000, intending to disburse it to Cloud Nine investors, but the check bounced. Kotler says the balance had also been embezzled "via internet transfers, forged checks, and withdrawal slips," according to the ruling.

This May, Kotler claims he learned that a man named Bert Rhine admitted to having misappropriated $33,000 of company money for his own use.

Pilavskaya had sued Henderson Jr. and Kotler last May, claiming she was "fraudulently induced" into investing in the project. Kotler responded with a similar cross-claim against Henderson Jr.

Last month, after learning the scope of the alleged scheme, Kotler asked Judge Snyder for leave to amend the scheduling order and add Henderson Sr. and Rhine as defendants in his cross-claim.

Snyder granted the motions, saying Kotler "acted diligently" by filing his requests shortly after discovering Henderson Sr. and Rhine's alleged involvement.

Snyder said the proposed amendment is not futile; it merely seeks to add new defendants, not new claims.

"The allegations at the heart of this case - that Cloud Nine's funds were misappropriated - remain unchanged," she wrote. "The proposed amended changes have no impact on the factual issues underlying the case, the group affected, or the relief sought."

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