Henry Iurman, et al. v. Pension Fund of America L.C., et al. 05-CV...

Case 1 : 05-cv-21 101 -KMM Document 1 Entered on FLSD Docket 04/22/2005 Page 1 ofNIGHT BOX

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UNITED STATES DISTRICT COURTCAPR 2 12005

SOUTHERN DISTRICT OF FLORIDA- CLARENCE MADOO`

CLIW4 USOC1SOFT!NAIF

CASE NO.:

HENRY IURMAN

V.

Plaintiff,

PENSION FUND OF AMERICA L.C.,PFA ASSURANCE GROUP, LTD.,PFA INTERNATIONAL, LTD.,CLAREN TPA, LLC.,LUIS M. CORNIDE, ROBERT DE LA RIVA,and HSBC BANK U.S.A.

Defendants.

O 5•2 :

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CLASS ACTION COMPLAINT

1. Plaintiff, Henry Iurman, on his own behalf and on behalf of all class members similarly

situated , by his undersigned attorneys , bring this action against Pension Fund of America L.C.

(" Pension Fund"), PFA Assurance Group, Ltd. ('`PFA Assurance"). PFA International, Ltd.

("PFA International"), Claren TPA, LLC ("Claren"), ("collectively the "PFA Defendants"); Luis

M. Cornide ("Cornide"), Robert de la Riva ("de la Riva")(collectively the "Insider Defendants");

and HSBC Bank U.S.A. ("HSBC") (collectively "Defendants") for violating federal and state

securities laws. and common law , by deliberately misrepresenting and omitting material

information in connection with the sale of purported "retirement plans" that combine life

insurance and investments in mutual funds issued by well-known U.S. mutual fund companies.

Since at least at least 1999 to the present, PFA Defendants and the Insider Defendants have

LAW OFFICES KOZYAK TROPIN & THROCKMORTON, P.A.

2525 PONCE DE LEON, 9TH FLOOR. CORAL GABLES, FLORIDA 3 3 1 3 4-603 7 • TEL. 1305) 372- 1800

Case 1 : 05-cv-21 101 -KMM Document 1 Entered on FLSD Docket 04/22/2005 Page 2 of

raised approximately $127 million from over three thousand investors. Contrary to assurances

from the PFA, Insider and HSBC Defendants that the investors' money would be used to

purchase mutual funds for retirement, the PFA and Insider Defendants, with the willful and

direct assistance of HSBC, have misappropriated almost all of their clients' investments.

2. Specifically, the Defendants: 1) failed to disclose that they were using as much as 90%

of investor funds to pay exorbitant commissions to sales agents, administrative fees and other

costs of Pension Fund and PFA Assurance; 2) failed to disclose pertinent mutual fund fees; 3)

misrepresented their relationships with major financial institutions and broker dealers and the

nature and value of the life insurance policies; and 4) misappropriated investor funds.

PARTIES

3. Plaintiff Henry lurman is a Venezuelan citizen who invested approximately $6.500 the

Liberty Trust retirement plan issued and managed by Defendant Pension Fund and/or PFA

Assurance.

4. Defendant Pension Fund is a Florida limited liability company formed in June 1999,

with its principal offices in Coral Gables, Florida. Pension Fund issues retirement plans and also

advises and manages the plans.

5. Defendant PFA Assurance is a Cayman Islands corporation formed in 2002, with is

principal place of business in Coral Gables, Florida. Since early 2003. PFA Assurance has

issued the assurance component of the retirement trust plans, and recently assumed the role of

issuer , adviser and manager of the plans.

6. Defendant PFA International is a Cayman Islands corporation, with is principal place of

business in Coral Gables, Florida. PFA is a shell company Pension Fund and PFA Assurance

use to pay their sales agents.

2LAW OFFICES KOZYAK TROPIN & THROCKMORTON. P.A.

2525 PONCE DE LEON, 9TH FLOOR, CORAL GABLES. FLORIDA 33134-6037 • TEL. (3051 372- Lann


7. Defendant Claren is a Florida limited liability corporation formed in April 2004, with its

principal place of business in Coral Gables, Florida. Claren purportedly serves as third-party

administrator for the investment plans Pension Fund and PFA Assurance issue.

8. Defendant Cornide is the President of Pension Fund and PFA Assurance. He manages

Claren and is the Chairman of PFA International . Cornide resides in Coral Gables, Florida.

9. Defendant de la Riva is the Senior Vice President of Pension Fund and also serves as

manager of Claren. He is a director of PFA Assurance and Secretary of PFA International.

10. Defendant HSBC is national bank and financial services company with offices located

throughout the United States and Florida, including local offices in Miami, Florida. HSBC is

touted in PFA Defendants ' solicitation and marketing materials as a "Trustee" and "Trustee

Bank" for investor funds.

JURISDICTION AND VENUE

11. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d) and 22(a)

of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. §§ 77t(b), 77t(d) and 77v(a). Sections

21(d), 21(e), and 27 of the Securities Exchange Act of 1934 ("Exchange Act"). 15 U.S.C. §§

78u(d ), 78u(e) and 78aa; Section 214 of the Investment Advisers Act of 1940 ("Advisers Act"),

15 U.S.C. § 80b-14 ; Fla. Stat . § 517.301; and common law.

12. This Court has personal jurisdiction over the Defendants and venue is proper in the

Southern District of Florida because many of the Defendants' acts and transactions constituting

violations of the Securities Act, the Exchange Act, the Advisers Act, and Florida law occurred in

the Southern District of Florida. In addition, the principal places of business and/or residences of

the Defendants are in the Southern District of Florida.

LAW OFFICES KOZYAK TROPIN & THROCKMORTON. P.A.

2525 PONCE DE LEON, 9TH FLOOR. CORAL GABLES. FLORIDA 3 3 1 34-60 3 7 • TF1 1'3[05) 37n_ lRn0


13. The Defendants, directly and indirectly, have made use of the means and

instrumentalities of interstate commerce, the means and instruments of transportation and

communication in interstate commerce , and the mail, in connection with the acts, practices, and

courses of business set forth in this Complaint.

CLASS ALLEGATIONS

14. Plaintiff brings this action as a class action against all Defendants pursuant to Rule 23(a)

and (b)(3) of the Federal Rules of Civil Procedure on behalf of a class (the "Class") consisting of

all persons who purchased and/or contributed to retirement trust plans or who otherwise invested

in or through Pension Fund or PFA Assurance during the period commencing January 1999

through the present ("Class Period"). Excluded from the Class are Pension Fund, PFA

Assurance, PFA International, Claren, Luis Cornide, Robert de la Riva and all of the Defendants'

alter-ego entities, all employees or agents of Defendants' and agents of the Defendants' alter ego

entities, the Defendants, all subsidiaries and affiliates of the Defendants, the Defendants'

officers, agents, and employees, any agents or brokers (and their immediate family members)

who sold or solicited the sale of investments in Pension Fund or PFA Assurance. members of the

immediate family of each Defendant , heirs, successors or assigns of any of the Defendants.

15. While many members of the Class reside in Florida, members of the Class are so

numerous and geographically dispersed throughout the United States and abroad that joinder of

all Class Members is impracticable.

16. Plaintiff will fairly and adequately protect the interests of all Class Members and has

retained counsel competent and experienced in class and commercial fraud litigation.

4LAW OFFICES KOZYAK TROPIN & THROCKMORTON, P.A.

2525 PONCE DE LEON, 9TH FLOOR, CORAL GABLES, FLORIDA 33134-6037 • TEL. ( 305) 372- 1800

Case 1: 05-cv-21 101 -KMM Document 1 Entered on FLSD Docket 04/22/2005 Page 5 of

17. Plaintiff's claims are typical of the claims of the Class Members and all Class Members

sustained damages arising out of the Defendants' wrongful conduct in violation of federal and

state laws complained of herein.

18. There are questions of law and fact common to the Class that predominate over any

questions solely affecting individual Class Members. Among the questions of law and fact

common to all Class Members are:

a. Whether the offering materials, Investor Application and/or the Guide to Plan

Provisions made false and misleading statements and omitted material

information regarding the retirement trust plans issued and managed by Pension

Fund and PFA Assurance;

b. Whether the Defendants acted knowingly and willfully, or with reckless disregard

for the truth, in their activities which constituted and perpetuated the fraud;

c. Whether the Defendants violated federal securities laws, Florida securities laws,

and/or Florida common law; and

d. Whether the Class has sustained damages, and, if so, what is the proper measure

of damages.

19. A class action is superior to other available methods for the fair and efficient

adjudication of this controversy because joinder of the approximately 3,400 Class Members is

impracticable. Furthermore, the expense and burden of individual litigation make it impossible

for the Class Members to individually redress the wrongs done to them.

FACTUAL ALLEGATIONS

20. Since at least 1999, Pension Fund has offered investment plans that purport to have both

investment and insurance components. Through sales materials and oral presentations. Pension

5LAW OFFICES KOZYAK TROPIN IN THROCKMORTON, P.A.

2525 PONCE DE LEON. 9TH FLOOR, CORAL GABLES, FLORIDA 33134-6037 • TEL. 1305, 372-1800


Fund and later PFA Assurance have promoted their investment products as retirement trusts and

described them as safer investments and more profitable than similar products because the

Defendants invest their clients' money through U.S. banks and broker-dealers that purportedly

serve as trustees or custodians for the investors' funds.

21. Through their network of more than 500 sales agents, Pension Fund and PFA Assurance

solicit investors, who primarily reside in Central or South America. Defendants Cornide and de

la Riva travel throughout Latin America to train sales agents and the "regional directors" that

supervise the agents in their respective countries. Defendant Cornide and de la Riva also meet

with prospective investors abroad and in Miami, Florida, and participate in drafting sales and

offering materials. Cornide and de la Riva created PFA International in 2003, purportedly to

operate the plans' sales and marketing operations.

22. From 1999 until 2003. Pension Fund served as the issuer of and adviser to its

investments plans. It also hired, trained and compensated its network of sales agents. In 2002,

Cornide and de la Riva formed PFA Assurance, a Cayman Islands shell company with no

employees, which became the issuer of the insurance component of Pension Fund's retirement

plans in early 2003.

The Investment Plans

23. Pension Fund and PFA Assurance offer two retirement trust plans: The Liberty Trust,

which is a monthly or annual contribution plan, and The Capital Trust, a one-time contribution

plan. Approximately 85% of all investors choose The Liberty Trust. The Liberty Trust requires

annual contributions of between $1,000 and $20,000 for ten to fifteen years, and imposes

significant early withdrawal penalties - for example, 100% for the first two years and declining

thereafter for the entire term of the plan. The Capital Trust is a ten-year plan that requires a


2525 PONCE DE LEON , 9TH FLOOR , CORAL GABLES . FLORIDA 33134 -6037 • TEL. (3n51 372_ iann


minimum one-time contribution of $10,000. The investment component of both plans provides

investors with a choice of eight mutual funds offered by well-known U.S. mutual fund

companies , such as Fidelity, Legg Mason, Janus, and Goldman Sachs.

24. Pension Fund and PFA Assurance, at the direction of Cornide and de la Riva, select the

mutual funds used in the investment plans. They provide minimal information to prospective

investors about the mutual funds, and no information about fund costs or load fees. Neither the

two companies nor the financial institutions and broker-dealers with which they have been

purportedly affiliated, provide investors with fund prospectuses.

25. Both plans also include a minimum of $15,000 of fixed-term life insurance for a fifteen-

year term. Until the incorporation of PFA Assurance , Pension Fund used several offshore

companies to issue the life insurance that was bundled with the investments. Beginning in 2003.

PFA Assurance has been the sole insurance issuer.

26. Since at least 1999 , Pension Fund and later PFA Assurance have purportedly affiliated

themselves with several U.S. banks and broker-dealers in connection with the investment

component of their plans, including SunTrust Bank, Lehman Brothers, Merrill Lynch, Raymond

James Financial Services and HSBC Bank USA. Pension Fund touts its relationship with these

financial institutions as one of the main selling points for its plans and includes information

about these companies in presentations and marketing materials to prospective investors.

Offering Materials

27. The only documents describing the investment plans that potential investors receive

from the Defendants before purchasing the plans are brochures, available in Spanish and

Portuguese, generally describing the products, and an "Investor Application."


2525 PONCE DE LEON . 9TH FLOOR . CORAL GABLES. FLORIDA 33134-6037 • TEL. (305) 372- i8OO


28. The brochures promote the two plans as "retirement trust plans" administered by

trustees at U.S. banks and broker-dealers. Current versions of the brochures contain HSBC's

logo, pictures of HSBC's corporate headquarters and corporate information, and statements such

as "Your money will be in the best of hands: HSBC Bank , USA." The documents also describe

HSBC as the Trustee Bank for the investors' funds. The Liberty Trust offering materials also

tout the security of the investment plans.

29. The Investor Application includes a list of eight funds for the investor to choose from.

Previous versions of the document contained a section, complete with checkmark boxes, for

investors to select which financial institution they prefer to serve as trustee or custodian for their

investment. Investors who decide to invest in one of the plans complete and sign the Investor

Application and mail , or personally deliver, the Application with a check or credit card payment.

30. On March 28, 2005, the Securities and Exchange Commission ("SEC") commenced an

action in United States District Court for the Southern District of Florida, Case No. 05-20863-

CIV-Moore by filing a Complaint for Injunctive and Other Relief. The SEC's complaint alleges

the PFA Defendants and Insider Defendants engaged in a massive investment fraud in violation

of multiple provisions of the federal securities laws.

31. On March 28, 2005, the Court in the SEC action entered a Temporary Restraining Order

and Other Emergency Relief ("TRO"). The TRO provides that the SEC "has made a sufficient

and proper showing in support of the relief granted herein by presenting a prima facie case of

securities laws violations by the Defendants, and by showing a reasonable likelihood that the

Defendants will harm the investing public by continuing to violate the federal securities laws if

they are not enjoined." The TRO also enjoins the PFA Defendants and Insider Defendants from

continuing to violate federal securities laws and freezes their assets.


2525 PONCE DE LEON, 9TH FLOOR. CORAL GABLES. FLORIDA 33134-6037 • TEL. (305) 372- 1800


32. Also on March 28, 2005, the Court in the SEC action entered an Order Appointing

Receiver, which appointed Thomas Schultz, Esq. of Ferrel Schultz as the receiver over the PFA

Defendants.

Misrepresentations and Omissions Relating to the Investment Plans

1. Undisclosed Commission , Fees and Costs

33. The Defendants have failed to disclose to investors that their entire investment program

is a sham designed to enrich themselves and their sales agents. Instead of investing money as

promised, the Defendants' used as much as 90% of investors' funds to pay sales agents'

commission, administrative fees, and other costs.

34. For example, Pension Fund and PFA Assurance charged Liberty Trust investors average

fees and costs of 80% on first-year investments, leaving only about ten percent of investors'

funds actually used to purchase mutual funds and nine percent for insurance. In some cases, the

Defendants invested nothing, instead using 100% of investors' funds to pay sales agents'

commission and other fees and costs. The Defendants use PFA International to pay the sales

agents the excessive commissions.

35. Likewise, investors in the Capital Plan are charged average fees of 30% on each

investment - 15% as commission and 15% net profit to Pension Fund or PFA Assurance.

36. Neither the brochures nor the Investor Application disclose these outrageous

commissions, fees and costs. After investors complete and execute the Investor Application and

send in their first payment , they receive a "Guide to Plan Provisions " ("Guide"). The Guide

contains more information about the retirement trust plans' investment and insurance

components. but in contrast to the pre-purchase marketing materials, this publication is in


2525 PONCE DE LEON , 9TM FLOOR . CORAL GABLES . FLORIDA 33134-6037 • TEL. (305) 372- IBOf


English. Although more detailed than the Investor Application, there is no disclosure of a

specific amount of fees or commission that will be charged to investors.

37. Previous versions of this section state that the Defendants will use up to 80% of an

investors ' initial contribution - depending on the plan chosen - to purchase insurance and to pay

various plan expenses . However , none of the versions of the Guide specifically disclose the

excessive amount of commission or the administrative expenses the Defendants charge investors.

Nor have any versions of the Guide provided a specific breakdown of other costs.

38. The Defendants also trick investors into making subsequent plan contributions. By

creating and mailing false annual statements that purportedly show the investor' s total

investment amount or final balance. While the annual statements show an investor's "final

balance" or "total contribution," these figures only reflect the total initial investment . without

subtracting the fees or commissions that the Defendants in fact never invested. By not disclosing

the deducted commissions , fees, and costs in the annual statements, the Defendants are vastly

overstating the actual amounts of investors' holdings.

2. The Role ofHSBC

39. Pension Fund and PFA Assurance touted its affiliations with numerous banks and

brokerage houses, specifically including its close relationship HSBC Bank , USA. who undertook

to act as trustee of investors' funds.

40. As Trustee, HSBC had the affirmative duty to segregate the investors funds into

separate sub accounts. Specifically, under the terms of the Master Trust Agreement ("MTA")

executed between Pension Fund , PFA Assurance and HSBC, HSBC was to: a) place each

investors' funds in a separate sub-account and b) title the sub account in the name of each

investor. Paragraph 1.6 of the Guide contained a similar provision, mandating that HSBC place


2525 PONCE DE LEON, 9TH FLOOR. CORAL GABLES, FLORIDA 33134-6037 - TEL. (305) 372- 1800


each of the investors' funds in a separate account titled in the name of the investor. Instead.

HSBC permitted the funds to be deposited in a single account . Further, HSBC has the

affirmative duty to Plaintiffs to insure that their funds were being invested in the manner

represented in the offering materials and solicitation documents . Further, HSBC had a duty to

Plaintiff to disclose that Plaintiff, and the Class Members, were being charged exorbitant fees on

their investments. HSBC also had a duty to investors to disclose to investors that their periodic

account summary statements, which listed an investor's "final balance" or "total contribution",

but fail to disclose the enormous fees charged, were false and misleading. Instead, in a series of

letters sent directly to the mutual fund companies in 2004, HSBC affirmatively undertook to

insure that investors were charged the maximum "load" for all mutual fund investments over

which HSBC acted as trustee. In so doing, HSBC insured that it would receive the largest

possible fees from investors. Notwithstanding HSBC's role as trustee and its affirmative duty to

Plaintiff and the Class , HSBC knowingly failed to disclose the amount of fees that it and PFA

were deducting from Plaintiffs investments. HSBC knew, or was grossly reckless in not

knowing, that PFA was purposefully concealing such fees from its investors.

41. HSBC authorized PFA to use its trademarks in solicitation materials in order to induce

Plaintiff and the Class to invest with PFA. Statements in solicitation and marketing materials

include the following: "HSBC Group is the second largest commercial bank in the world''.

`HSBC is a bank that has been in existence for more than 100 years", and that "PFA and HSBC

Bank USA have created the Capital Trust Plan with which you can create a fund: Under a trust

administered by HSBC Bank USA". These statements were made with HSBC's knowledge and

were designed to give, and in fact gave, PFA a patina of credibility.


2525 PONCE DE LEON, 9TH FLOOR, CORAL GABLES. FLORIDA 3 3 1 34-60 3 7 • TEL. (305) 372- 1800


42. The fact that the investment vehicle is a "trust" with HSBC acting as "trustee" is

important to investors because it suggests their money is safe and that a major financial

institution backs their investments . These statements were designed to fool, and in fact did fool,

Plaintiff and the Class into believing their investments with PFA, in trust with HSBC, were safe.

Once the investments were made , the Defendants, with HSBC's knowledge, continued to

mislead investors by sending investors official-looking certificates stating "HSBC Bank, USA as

trustee."

Omissions about Mutual Fund Fees

43. The Defendants, including HSBC, fail to disclose to investors that the banks and broker-

dealers charge undisclosed front-end load fees of up to 6.5% per mutual fund. Defendants,

including HSBC, also fail to disclose that investors had a choice in obtaining lower cost no

load" mutual funds compared to the high-commission mutual fund shares that the Defendants

purchased on the investors' behalf.

4. Misrepresentations about Life Insurance Policies

44. The PFA and Insider Defendants also market term life insurance polices as a component

of their plans. Regardless of representations, or lack thereof, made by Defendants, the insurance

benefit significantly declines over the life of the plan. The longer the investment is held, the

lower the insurance benefit. The offering materials and the Investor Application only reflect the

overall insurance benefit and do not disclose the fact that this amount of coverage will decline

over time. Moreover, the Defendants do not provide investors with a copy of the individual

insurance policies.


2525 PONCE DE LEON , 9TH FLOOR , CORAL GABLES , FLORIDA 3 3 1 3 4 -603 7 • TEL. (305) 372- 1800


5. Cornide and de la Riva's Misappropriation and Misuse ofInvestor Funds

45. From 1999 to the present, Cornide and de la Riva received payment from Pension Fund

and PFA Assurance totaling $15 million - 35% of the $43 million in revenue the companies

reported for the same period.

46. Through their pilfering , Cornide and de la Riva acquired substantial real estate holdings.

Between 2001 and 2004, Cornide purchased three homes in Coral Gables, and one home in the

Florida Keys, valued at $3 million . De la Riva purchased two homes in Coral Gables valued at

$2 million. Cornide and de la Riva also purchased Pension Fund's Coral Gables office building

in the name of Shadowcreek Investments , LLC, an entity Cornide and de la Riva own.

CLAIMS FOR RELIEF

COUNT I

Fraud in Violation of Section 17(a)(1) of the Securities Act

47. Plaintiff realleges and incorporates by reference paragraphs 1-46 of this Complaint.

48. The Defendants have directly and indirectly, by use of the means or instruments of

transportation or communication in interstate commerce and by the use of the mail, in the offer

or sale of securities, as described in this Complaint, knowingly, willfully or recklessly employed

devices, schemes or artifices to defraud.

49. By reason of the foregoing, the Defendants, directly and indirectly, have violated

Section 17 ( a)(1) of the Securities Act, 15 U.S.C. § 77q(a).

COUNT II

Fraud in Violation of Sections 17(a)(2) and 17(a)(3) of the Securities Act



2525 PONCE DE LEON , 9TH FLOOR, CORAL GABLES. FLORIDA 33134-6037 • TEL. 13051 372- IA()C1


51. The Defendants, directly and indirectly, by use of the means or instruments of

transportation or communication in interstate commerce and by the use of the mail, in the offer

or sale of securities, as described in this Complaint, have: ( a) obtained money or property by

means of untrue statements of material facts and failed to state material facts necessary to make

the statements made, in the light of the circumstances under which they were made, not

misleading; and/or (b) engaged in transactions, practices and courses of business which operate

as a fraud or deceit upon purchasers and prospective purchasers of such securities.

52. By reason of the foregoing, the Defendants, directly and indirectly, have violated

Sections 17(a)(2) and 17 (a)(3) of the Securities Act, 15 U.S.C. § 77q(a)(2) and 77q(a)(3).

COUNT III

Fraud in Violation of Section 10(b) of the Exchange Act andRule 10b-5 Promulgated Thereunder


54. The Defendants have directly and indirectly, by use of the means and instrumentality of

interstate commerce, and of the snail in connection with the purchase or sale of the securities, as

described in this Complaint, knowingly, willfully or recklessly: (a) employed devices, schemes

or artifices to defraud; (b) made untrue statements of material facts and omitted material facts

necessary in order to make the statements made, in light of the circumstances under which they

were made, not misleading; and/or (c) engaged in acts, practices and courses of business which

have operated as a fraud upon the purchasers of such securities.

55. By reason of the foregoing, the Defendants have directly or indirectly violated Section

10(b) of the Exchange Act, 15 U.S.C. § 78j( b), and Rule lOb-5. 17 C.F.R. § 240.


2525 PONCE DE LEON , 9TH FLOOR , CORAL GABLES , FLORIDA 33 1 34-603 7 • TEL . (305) 372- 1800


COUNT V

Fraud in Violation of Sections 206(1 ) and 206(2) of the Advisers Act


57. Defendants Pension Fund, PFA Assurance, Cornide, and de la Riva, as investment

advisers, directly or indirectly, by the use of the mail or any means or instrumentality of

interstate commerce: (a) employed devices, schemes, artifices to defraud clients or prospective

clients; and (b) engaged in transactions, practices or courses of business which operated as a

fraud or deceit upon Plaintiff and the Class.

58. Defendants Pension Fund, PFA Assurance, Cornide, and de la Riva violated Section

206(1) and ( 2) of the Advisers Act, 15 U.S. C. §§80b-6(1) and 80b-6(2).

COUNT VI

Violation of Fla. Stat. & 517.301


60. The investments sold to Plaintiff and the Class are securities within the definition of

Fla. Stat. § 517.02( 19) and/or an investment within the definition of Fla. Stat. § 517.301(2).

These investments were offered and sold within Florida and Plaintiff and the Class are

purchasers of these investments.

61. The Defendants issued and actively participated in the issuance of the offering

materials, Investor Application and the Guide, which misrepresented and/or omitted material

information as set forth in paragraphs 26-40 of this Complaint.

62. The Defendants' acts and omissions as set forth herein constituted a plan, scheme and

unlawful course of conduct which operated as a fraud and deceit on Plaintiff and the Class, the


2525 PONCE DE LEON, 9TH FLOOR, CORAL GABLES. FLORIDA 33134-6037 • TEL. (305) 372- IBOO


purpose and effect of which was to induce Plaintiff and the Class to invest in Pension Fund or

PFA Assurance and to enable the Defendants to personally profit thereby.

63. By reason of the foregoing, the Defendants, directly and indirectly, violated Fla. Stat. §

517.301 in that that they : ( a) employed devices, schemes , artifices to defraud clients or

prospective clients; (b) omitted and/or misrepresented material facts in the offering materials.

Investor Application and the Guide in order to make those documents. in light of the

circumstances under which they were made, not misleading; and (c) engaged in transactions,

practices or courses of business which operated as a fraud or deceit upon Plaintiff and the Class.

64. By reason of the conduct alleged herein, the Defendants are liable for violation of Fla.

Stat. § 517.301. As a direct and proximate result of those violations , Plaintiff and the Class have

been damaged in connection with their investments with Pension Fund and PFA Assurance.

COUNT VII

Common Law Fraud


66. Defendants issued or caused the issuance of the offering materials, the Investor

Application and the Guide , which omitted or misrepresented material information as set forth in

paragraphs 26 - 40.

67. The Defendants knew or were reckless in not knowing of the material omissions and/or

misrepresentations referred to herein. Had this information been truthfully and completely

disclosed. Plaintiff and the Class would not have invested in Pension Fund and PFA Assurance.

68. Defendants' acts and omissions as set forth herein constituted a plan, scheme and

unlawful course of conduct which operated as a fraud and deceit on Plaintiff and the Class, the


2525 PONCE DE LEON , 9TH FLOOR , CORAL GABLES , FLORIDA 3 3 1 3 4 - 603 7 • TEL. (305) 372- IRnn


purpose and effect of which was to induce Plaintiff and the Class to invest in Pension Fund or

PFA Assurance and to enable the Defendants to personally profit thereby.

69. By reason of the foregoing, the Defendants, directly and indirectly, committed

common law fraud in that they: (a) employed devices, schemes, artifices to defraud clients or

prospective clients; (b) omitted and/or misrepresented material facts in the Investor Application

and Guide to Plan Provisions in order to make those documents, in light of the circumstances

under which they were made, not misleading; and (c) engaged in transactions, practices or

courses of business which operated as a fraud or deceit upon Plaintiff and the Class. As a direct

and proximate result of those violations, Plaintiff and the Class have been damaged in

connection with their investments with Pension Fund and PFA Assurance.

COUNT XIII

Common Law Breach of Fiduciary Duty


71. Plaintiff and the Class placed their trust in Defendants and the Defendants willingly

accepted the duties and responsibilities associated with the placement of such trust.

72. The Defendants owed the Class a fiduciary duty to act in the best interests and for the

benefit of the Class. The Defendants breached their fiduciary duty obligations by participating in

and facilitating a fraud on the Class.

73. As a result of the Defendants' breach of their fiduciary responsibilities , the Class

invested at least $127 million into Pension Fund and PFA Assurance.

Aiding and Abetting Breach of Fiduciary Duty (HSBCI

70. Plaintiff realleges and incorporates by reference paragraphs 1 - 46 of this Complaint.


2525 PONCE DE LEON, 9TH FLOOR, CORAL GABLES, FLORIDA 3 3 1 3 4-603 7 • TEL. (305) 372- 1800


71. The Insiders owed a fiduciary duty to Plaintiff and the Class to invest their monies in

the manner described in the offering and solicitation materials. The Insiders breached this duty

when they fraudulently transferred investor monies for their personal use, instead of purchasing

shares in the mutual funds and insurance policies in the amounts represented in their solicitation

materials and periodic statements. The Insiders had a duty to disclose that as much as 90% of

the investors initial investment was being siphoned away from investors and paid to the Insiders

and "trustee".

72. HSBC knew that the Insiders owed a fiduciary duty to Plaintiff and the Class. HSBC

also knew that the Insiders were breaching their fiduciary duty to Plaintiff and the Class by

fraudulently diverting money which was deposited for investment by Plaintiffs.

73. HSBC aided and abetted the Insider Defendants to breach their fiduciary duty by:

(A) Allowing the Insider Defendants to loot PFA Defendants by diverting

funds for their personal use;

(B) Failing to properly segregate the investors funds into separate sub

accounts;

(C) permitting the Insiders to charge exorbitant fees, and collecting for itself

exorbitant fees, without disclosing to the Plaintiffs the fact that as much

as 90% of the Plaintiffs initial investments were being transferred to the

insiders' where the funds would otherwise be available to investors;

(D) not disclosing the deducted commissions, fees and costs in the annual

statements after the investments were made ; thereby vastly overstating

the actual amounts of investors' holdings and encouraging investors to

invest more.


2525 PONCE DE LEON, 9TH FLOOR, CORAL GABLES, FLORIDA 33134-6037 • TEL. (305) 372- 1800


RELIEF REQUESTED

WHEREFORE , Plaintiff, on his own behalf and on behalf of the Class. respectfully

request that this Court:

a) Certify this action as a class action under Fed. R . Civ. P. 23;

b) Award Plaintiff and the Class their damages , including pre-judgment interest , under each

of the counts of this complaint;

c) Award Plaintiff and the Class punitive damages;

d) Award Plaintiff and the Class their attorneys fees, costs and expenses under each of the

counts of this complaint; and

e) Award Plaintiff and the Class such further relief as is appropriate in the interests of

justice.

f) Demand for Jury Trial . Plaintiff requests a jury trial on any and all counts for which a

trial by jury is permitted by law.

KOZYAK TROPIN & THROCKMORTON, P.A.Counselfor the Class2525 Ponce de Leon9`h FloorCoral Gables , Florida 33134Telephone: -1800Telecopier • ( 305) 372- 508

By:Harle in, F : 24 5Davi . Milian, FB : 844Thomas A. Tucker Ronzetti , FBN: 965723Christopher F. Branch , FBN: 941751


2525 PONCE DE LEON, 9TH FLOOR, CORAL GABLES, FLORIDA 3 3 1 34-603 7 • TEL. (305) 372- 1800

Case 1 : 05-cv-21 101 -KMM Document 1 Entered on FLSD Docket 04/22/2005

JS 44 R_ 2 1(Rev. 12196) CIVIL COVER SHEETThe JS-44 civil cover sheet and the information contained herein neither replanby law, except as provided by local rules of court. This form, approved by the Juof the Clerk of Court for the purpose of initiating the civil docket sheet (SEE INS

1. (a) PLAINTIFFS

T1LNIy JC 1L(,'} v

(b) COUNTY OF RESIDENCE OF FIRST LISTEC PLAINTIFF UL< r*7 V E LA

(EXCEPT IN U.S. PLAINTIFF CASES)

(C) ATTOPNEYS ( FIRM NAME ADDRESS . AND TELEPHONE NUMBER ) I C6) 72-/^.+r ^•

Fiw(f^ 5. 7^...^ ^c Ct^: rCc it Trr

ICS Âcj ^c!_: t «'^r r !^c(Q7 L r A.

1115 rc•r.te -J' Ltc.N / rn 1. ,. G,.r'xL, i c jjlj^NIGHT BOX

FRLIEO

nor supplement the filing and service of pleadings or other papers as required

dicial Conference of the United States in September 1974, is requ'ed ter the useTRUCTIONS ON THE REVERSE OF^GTA M.)

DEFENDANTS , IL m. NG.

C Uk Ii e- L Cl /t1 A, v C, /L L•b[/`T a

4v) hf5,3C- l34'i (, s 417+1J]ECOUNTY CF RESIDENCE OF FIRST LISTED DEFENDANT

(IN U.S. PLAINTIFF CASES ONLY)OTE. iN LAND CONDEON T N CASES USE THE LOCATION OF THE

1 , TRACT OF L AND'tN D.

ATTORNEYS IF KNOWNI

(d) CIRCLE COUNTY WHERE ACTION AROSE(am.) MONROE . BROWARD, PALM BEACH . MARTIN , 5T LUCIE . I-qQN(( R' \JKEECHOBEE HIGHLANDS

II. BASIS OF JURISDICTION (PLACE AN X INONE BOX ONLY)

C • US. Government p(3 Federal QuestionPlaintiff (U.S. Government Not a Party)

q 2 U.S. Government q 4 DiversityDefendant ( Indicate Citizenship of Parties

in Item III)

III. CITIZENSHIP OF PRIN!q IPAJ(For Diversity Cases Only)

PTF DEF

Citizen of This State C 1 q 1

Citizen of Another State q 2 q 2

Citizen or Subject of a o 3 q 3

Page 20 of 20r]

101

166 4s -jr^^NE BOX FOR PLAINTIFF

AND ONE BOX FO DEFENDANT)

PTF DWq 4

8^^

q 6

MIAIncorporated and Principal Plate 135

of Business In Another Stateq 5

Foreign Nation q 6 06

IV. ORIGIN (PLACE AN "X" IN ONE BOX ONLY) Appeal to District

Transferred from Judge from

1 Original p 2 Removed from q 3 Remanded from D 4 Reinstated or q s another district q 6 Multidisri ct q z Magis•trntProceeding State Court Appellate Court Reopened (specify) Litigation tJudgme

V. NATURE OF SUIT (PLACE AN "X" IN ONE BOX ONLY)

A CONTRACT A TORTS FORFEITURE,/PENALTY A BANKRUPTCY A OTHER STATUTES

110 Irsura•ICe PERSONAL INJURY PERSONAL INJURY

I

B^ 610 Agriculture q 422 Appeal 28 USC 158 q 400 Slate Reappon-onment

' -` 120 Marme q 310 Ai rplane C 362 Pe sonat Ii.1 ry - 620 Other Food 3 D'ug q 410 Ant trust

C 130 Mli of Act O 315 Airplane Product Med Maloraclr e 625 Drug Related Seizure q 423 Wrtndrawai q 430 Banks and Banking

q 140 Negd,able lnstt,ynent JaDIliry C 365 Femoral In1 of Property 21 USC $81 28 USC 157 460 CommelpllCC Ra16ileIC

o 150 Recovery of Overpayment 0t 320 Assault . Libel a ProduCt baS'".y 60 630 L,quor Laws q 400 Deportation

A Enforcement of J.agmert Slander C 366 Asoestos Pesonat Bp 640 R R & Trunk A PROPERTY RIGHTS C 470 Packgteer Influenced and

151 Medicare Act p 330 Federal Errpoyers Injury Pro uCt L abliuy 13[] 650 Airline Regsq 620 Copyrights

Corrupt Organizations

BG 152 Recovery of Defaulted Liability BO 660 OCcupationatEl 630 Patern

o 610 Selective ServiceStudent Loans

IE. 340 Nanne PERSONAL PROPERTY Safe! Meal: h

y T'

bmodltfee!tiX 60

c.ci veterans1- 345 Var•.ne Product C 370 Other Ftaua

I690 Omer

acemarrq 440 ngeE

y p rmer4B O 153 ' ec:r+eror O.ei a _'ab'I' N C 371 T,tr a Ler-omo q 675 Customer Cnallense

of veteran s Uerehts C 350 Motor vehicle :1 360 Diner Personal A LABOR B SOCIAL SECURITY 12 USC 3410C 160 StockhoiQels So's r- 355 Motor Venicre Napery Carnage I q 661 Agricultural Acts

_, 190 Ore : Ccn;-au Product Lability ] 395 Prooery Damage C 710 Pail La' ' Standa•o' G $41 HIA .''.95F. q 642 Economic SlaDil,iauan act

C 195 Contâu Fr,Uu=1 L,aC'IlIy C 360 Otne' Personal Irlui) Proajct Liability Act C 662 Black Lung 923, rC 692 Environmental Matrens

q 720 Lauc Mgml Relatrons q 663 DIVVC UMW uDS(gl 0 604 Energy Anocanor Ac:

A REAL PROPERTY A CIVIL RIGHTS PRISONER PETITIONS E) $64 SSID Title XVI I $95 Freedom ofq 730 ,abor:Mgmr Reporting q 665 RSI 14051g'l Inrymahon Act

210 -an-7 Condemns ,ten 441 Vohngq ' B510 MOllans rc V3c010 8 Disclosure Act eq 600 eai FagBC 220 FoIeclos.ne q 442 Employment Sentence

HABEAS CORPUS C 740 Ra,l.•+ay Laoor AC FEDERAL TAX SUITSto JustustUrnder Equal

Ac:cessass toC 230 Rem Lease S Ejectme,l C-) 443 Housing, .

BC] S30 Genera L, 650 Constn.nionallry or240 Tors to Lana

245 Tor Froauct Lab. qty

Accommoaatrons

C Ma WeiAC) `535 Dearh Penalty q 790 Otner Labor Litigator }Q 670 Taxes (U S Plaintiff S^ Statutes

260 All Other Real Property q 440 Otne: Civil RgnrsBE) 540 Maâmus A OtherB q SSO CMI Rgn15 791 EmpI Ret Inc

a' Defendant)

A Third P rtIR67

q t60 Other Statutory Actions

A OR B

S55 Prison Condition SecurityAcep y1 aS -

2E USC 7679

VI. CAUSE OF ACTION (CITE THE U S CML STATUTE UNDER WHICH YOU ARE FILING AND WRITE BRIEF STATEMEN" OF CAUSE

DO NOT CITE JURISDICTIONAL STATUTES UNLESS DVERSITY)

Gau S. ^',§ •!C/J UU^. 1J u.6

LENGTH OF TRIAL+N days es :ima l ed ( f or both tides to try entire case)

VII. REQUESTED IN CHECK IF THIS IS A CLASS ACTIONDEMAND $ CHECK YES only if demanded in complaint!

COMPLAINT. UNDER FR.C.P 23 JURY DEMAND :)(

YES q NC

VIII. RELATED CASE(S) (See instructions).IF ANY JUDGE ^. Jyu(^ftiEL UL k^ DOCKET NUMBER f3 - L1/'_086%^

DATE SIGNATURE OF ATTORNEY OF RECORD

FOR OFFICE USE ONLY ry

),v Q I -RECEIPT /rAMOUNT ^PPLYING i=P JUDGE MAG JUDGE

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