LOS ANGELES (CN) - A San Fernando Valley metals company claims in court that it was scammed for $2.7 million by a software company whose "internal motto" is: "We sell what we don't have to people who do not know what they want."
Norman Industrial Materials dba Industrial Metal Supply sued ASA International, Khameleon Software, three LLCs and three people in Federal Court, on RICO charges.
The ASA defendants are based in New Hampshire, and Khameleon in Tampa, Fla.
The company claims defendants Alfred Angelone and Christopher Crane defrauded it by selling it a software package called Integrated Metals ERP, which it knew it could not deliver.
Angelone and Crane own several "interrelated firms," including defendants ASA Automotive Systems and two other ASA defendants, Khameleon Software, Speen Street LLC, and nonparty Verticent, a division of ASA, according to the complaint.
Defendant Terence McCarthy is CFO of the companies, the complaint states.
Industrial Metal accuses Angelone and Crane and the other defendants of "shuffling money among entities with the ultimate goal of funding the companies' operations and enriching many of the individual defendants."
Angelone and Crane used Verticent to scam companies by pretending that they had developed and could implement the Integrated Metal ERP software package for the metals industry, according to the complaint.
"Contrary to Verticent's public face and claims, it did not possess a documented and workable Integrated Metals ERP software package, and all employees knew this to be true," the complaint states. "Verticent's internal motto was, 'We sell what we don't have to people who do not know what they want.' In order to give effect to that motto, Verticent regularly engaged in fraudulent schemes intended to persuade companies in the metals industry to hire and pay it, even though it had no ability or intent of delivering."
Industrial Metal claims the defendants victimized it in the summer of 2007 in a deal with Verticent, which offered a customized version of the software package to handle wholesale and retail metal sales. Verticent promised that it would have the software package up and running within six months, Industrial Metal claims.
"During the same time period, it [Verticent] claimed that Verticent's Integrated Metals ERP software package could, inter alia, provide retail functions such as credit card processing, integrate financial reporting, operate seamlessly across locations, and account for sales tax reporting. All of those claims were false, Verticent knew they were false when they were made, and the defendants knew of and consented to - or even directed Verticent's misrepresentations," the complaint states.
Five months later, in late 2007, the software was still not up running, Industrial Metal says. It claims Verticent told it it needed another 7½ months and $80,000 to implement the software.
"This revised target was just part of the defendants' and Verticent's plan to continue to milk IMS [Industrial Metal Supply] for as much as possible. Consistent with that goal, Verticent did not meet that revised target, and, on information and belief, it could not and had no intention of meeting it," the complaint states.
Industrial Metal claims the defendants strung it along for two more years, and all the while, Verticent charged consulting and maintenance fees for a software package the firm says never worked as promised.
In 2011, Verticent allegedly offered it a nonexistent software product called "Dimensions," the plaintiff says. When it asked for a demo of the product, Verticent claimed it was developing the new software for a mid-2012 release.
Verticent charged Industrial Metal $48,000 for a review, resulting in a proposal in which Verticent admitted it "did not have the capability" to provide the Integrated Metals ERP package, according to the complaint.
But Verticent offered to develop such a package for $406,900, Industrial Metal says.
"To date, IMS has paid Verticent interim billings totaling $1,723,082, has incurred consulting fees of $527,225.23, and has incurred external costs in the sum of $449,586.16, none of which includes IMS's internal staff time or the operating inefficiencies and lost business caused by Verticent's false representations about the capabilities of its software," Industrial Metal says in the complaint. "On information and belief, the funds paid to Verticent by IMS were used by defendants to payoff claims by other Verticent customers for similar misrepresentations and to enrich the defendants at the expense of IMS while delivering nothing of value."
Industrial Metal seeks treble damages and costs. It is represented by James Jones with Jones & Lester of Oxnard.
ASA International did not immediately respond to an emailed inquiry for comment made after business hours on Thursday.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.