(CN) - A North Carolina man is accused of duping an investor for a $500,000 "loan" by claiming to run a sports management firm that represents several NFL players. Plaintiffs Algernon Alston and Algie Management say Gregory Williams and VSM Sports misappropriated $500,000 and refuse to pay it back.
According to the complaint in Wake County Court, N.C., Williams asked Alston to invest in VSM in March 2008. Alston says Williams claimed to be a certified agent with the National Football League with a number of contracts with NFL players. And he claims Williams spoke of expanding his business to represent players in the National Basketball Association.
Williams sought an initial capital investment of $500,000, which he said would be paid back in 2 years, with a "guaranteed" rate of return of 15 to 20 percent.
Alston was to get the first $100,000 of revenue each year for the first two years, and the contract included an opt-out clause, according to the complaint.
Alston says Williams assured him that the investment would be a "cash reserve" and would not be placed at risk. It would merely give VSM a "strong cash position" that would allow the company to acquire "low rate lines of credit," the complaint states.
Williams produced copies of several player contracts to show his company's cash flow, according to the complaint.
Based on these conversations, Alston says he bought a purported 16 percent interest in VSM. But he says he never received any evidence of ownership, such as stock certificates or a memorandum of ownership.
Alston says he subsequently learned that the VSM did not even exist as a corporation when he ponied up the money - it was not formed until more than a month after the stock purchase agreement was consummated, Alston says. Therefore it could not have represented NFL players, because it did not yet exist.
Alston claims Williams subsequently lost his license to represent NFL players, but never informed him. Instead, in July 2009, he sought an additional infusion of cash, according to the complaint.
On Sept. 1, Alston exercised the opt-out clause, demanding return of his investment, plus the promised 20 percent. But he says Williams told him that he was not in a position to honor the opt-out clause; in fact, he was on the brink of bankruptcy.
Williams' primary source of collateral at that point was his home in Wake Forest, N.C., which he was trying to sell and was on the brink of foreclosure, Alston says.
In a last attempt to get Alston to pour more money into the venture, Williams told him the home was appraised at $4.6 million, according to the complaint. But Alston says he learned that two substantial mortgages and two lines of credit were secured against it, so that even if it were sold for 100 percent of its alleged value, there would not be enough money left to repay him.
Alston seeks damages for fraud, unfair and deceptive trade practices, civil conversion and breach of contract.
He is represented by Bryan Wardell with Wardell & Associates in Raleigh, N.C.