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LLC v. Albertelli

United States District Court, M.D. Florida, Fort Myers Division

June 11, 2018


          OPINION AND ORDER [1]

          Sheri Polster Chappell, Judge

         This matter comes before the Court on motions to dismiss filed by Defendants David Albertelli (“David”) and Albertelli Construction, Inc. (“ACI”) (Doc. 130), George Albertelli (“George”) (Doc. 135), Amy Butler (“Butler”) (Doc. 136), Kevin Burke (“Burke”), Foundation Management, LLC (“Foundation”), Kerry Heltzel (“Heltzel”), KMM Construction, LLC (“KMM”), Brook Kozlowski (“Kozlowski”), National Framing, LLC (“National”), John Salat (“Salat”), Team CCR, LLC, U.S. Construction Trust, Westcore Construction, LLC (“Westcore I”), and Westcore Construction L.L.C. (“Westcore II”) (Doc. 137), and a Motion for Joinder filed by David and ACI (Doc. 138). Plaintiffs responded in opposition on May 9, 2018. (Doc. 143). This matter is ripe for review.


         A. Substantive Background

         This case concerns an alleged pattern of fraud committed by a group of interrelated individuals and corporations on apartment construction projects around the country. Plaintiffs are funds created to bankroll the apartment construction projects. (Doc. 117 at ¶¶ 16(a)-(h)). They are managed by Continental Properties (“Continental”). (Doc. 117 at ¶¶ 3, 17). Defendants George Albertelli and his son David Albertelli (collectively, the “Albertellis”)[2] own ACI, which is a commercial construction company. (Doc. 117 at ¶ 1, 18). George also has an ownership interest in MFDC, a shell company. (Doc. 117 at ¶ 19, 24). David controls or owns

• Foundation, a shell company;
• KMM, a subcontracting company;
• National, a subcontracting company;
• Team CCR, LLC, a subcontractor;
• Westcore I, a general contractor; and
• Westcore II, a shell company.

(Doc. 117 at ¶ 820, 121, 134-35, 153). David is also the trustee and beneficiary of U.S. Construction, which owns part of Westcore I. (Doc. 117 at ¶ 20).

         Brooke Kozlowski is an officer and owner of ACI, Foundation, Westcore I, and Westcore II. (Doc. 117 at ¶ 21). Amy Butler was or is ACI's accounting manager. (Doc. 117 at ¶ 26). Kevin Burke is the Chief Financial Officer and agent of Foundation, and an agent of MFDC and Westcore II. (Doc. 117 ¶ at 27). Kerry Heltzel was or is an accountant for ACI, Westcore I, Westcore II, and Foundation. (Doc. 117 at ¶ 29). John Salat was or is an officer of Westcore I, has represented that he is Westcore I's owner, and is an owner of Westcore II. (Doc. 117 at ¶ 28). Angelo Eguizabal (“Eguizabal”) is the former Vice President of Construction at Continental, and the creator and owner of Bravo 21, LLC (“Bravo 21”), a shell corporation. (Doc. 117 at ¶¶ 34-35).

         From 2011 to 2017, Albertelli-affiliated companies were awarded over $200, 000, 000.00 in apartment construction contracts, including:

• An August 22, 2013, contract between Plaintiff Continental 245 Fund LLC (the “Lexington Fund”) and ACI for a project in Lexington, Kentucky (the “Lexington Project”);
• On April 25, 2014, contract between Plaintiff Continental 298 Fund LLC (the “Savage Fund”) and ACI for a project in Savage, Minnesota (the “Savage Project”);
• A November 21, 2014, contract between Plaintiff Continental 306 Fund LLC (the “New Braunfels Fund”) and ACI for a project in New Braunfels, Texas (the “New Braunfels Project”);
• A February 20, 2015, contract between Plaintiff Continental 332 Fund, LLC (the “Fort Myers Fund”) and ACI for a project in Fort Myers, Florida (the “Fort Myers Project”);
• A June 23, 2015, contract between Plaintiff Continental 326 Fund LLC (the “Rochester Fund”) and ACI for a project in Rochester, Minnesota (the “Rochester Project”);
• A January 19, 2016, contract between Plaintiff Continental 355 Fund LLC (the “Bryan Fund”) and Westcore I for a project in Bryan, Texas (the “Bryan Project”);
• A February 19, 2016, contract between Plaintiff Continental 347 Fund LLC (the “Waco Fund”) and Wesctore I for a project in Waco, Texas (the “Waco Project”); and
• A July 16, 2016 contract between Plaintiff Continental 342 Fund LLC (the “Longmont Fund”) and Westcore I for a project in Longmont, Colorado (the “Longmont Project”)).

(Doc. 117 at ¶¶ 14, 44(a)-(h)). Each Project was allegedly completed defectively. (Doc. 117 at ¶¶ 44(a)-(h)).

         While securing and undertaking the Projects, Defendants allegedly engaged in a wide swath of intentionally fraudulent activity (the “Scheme”) “designed to extract as much money as [they] could, as quickly as [they] could, without regard to contractual performance or any lawful right to payment.” (Doc. 117 at ¶ 52-53). Because it is alleged the Scheme was carried out by a bevy of Defendants, on eight Projects, and over the course of six years, the Court summarizes the facts according to the type of actions alleged.

         1. Bribery

         Beginning in 2014, the Albertellis purportedly paid Eguizabal to provide them with internal Continental information and to persuade Continental to award construction contracts to Albertelli-affiliated entities. (Doc. 117 at ¶¶ 14, 75, 80). From May 2013 to May 2014, the Albertellis used a third-party company to transfer at least thirteen payments totaling $244, 724.20 to Eguizabal's bank account. (Doc. 117 at 66). During this time, the Lexington and Savage Projects were awarded to ACI. (Doc. 117 at ¶¶ 44(a)-(b)).

         Then, from July 2014 to August 2016, the Albertellis, Burke, and Kozlowski formed MFDC as a shell company, and the Albertellis and ACI used it to funnel at least $669, 302.00 to Eguizabal. (Doc. 117 at ¶¶ 67-8). During this stretch, Continental awarded the New Braunfels, Fort Myers, Rochester, Bryan, Waco and Longmont Projects to ACI and Westcore I. (Doc. 117 at ¶¶ 44(c)-(h)). In May 2016, Eguizabal also formed his own company, Bravo21, to receive payments. (Doc. 117 at 69). The Albertellis, ACI, MFDC, Burke and Kozlowski then occasionally sent Eguizabal's payments to Bravo21, amounting to at least $50, 000.00. (Doc. 117 at 69).

         Eventually, the payments became so commonplace that David, Kozlowski and Salat included a line item for Eguizabal on the Waco, Bryan and Longmont Projects. (Doc. 117 at 69-70). In total, over $1, 464, 735.00 was funneled to Eguizabal from 2011 to 2017, which was financed through misrepresentation of costs on the Projects, including amounts due to subcontractors. (Doc. 117 at ¶¶ 14, 75, 78).

         2. Other Albertelli Entities

         a. Westcore I

         After ACI entered into a number of contracts with Continental, it performed its duties poorly and deliver Projects late. (Doc. 117 at ¶¶ 7, 44(a)-(e)). As a result, Continental internally decided to avoid awarding future contracts to ACI. (Doc. 117 at ¶ 7). To continue seeking Continental contracts, David convinced his acquaintance Gregory Hilz to form a general contracting company called Westcore I. (Doc. 117 at ¶¶ 8, 22, 89, 91). David and Hilz agreed to joint ownership of Westcore I, but David concealed his ownership and control. (Doc. 117 at ¶¶ 86-87, 89). David later stated that Westcore I would be funded by including an extra $240, 000.00 in the price of the Fort Myers Project. (Doc. 117 at ¶ 88).

         David then invented a fictitious business history for Westcore I to bolster its chances of securing additional Continental contracts. (Doc. 117 at ¶¶ 8, 92). This included falsifying a sworn qualification statement with Hilz and Kozlowski, which was submitted in November 2015. (Doc. 117 at ¶¶ 8, 93, 101). Among the allegedly false representations, were

• A statement in the Qualification Statement that Westcore I was formed in 1992, even though it was formed in February 2015;
• A statement in the Qualification Statement that Westcore I performed an average of $376, 196, 476 worth of work over the previous five years, even though it had existed for less than two months at the time;
• A certification by Westcore I's Chief Financial Officer, Michael Breaton, that the facts in the Qualification Statement were true, even though Michael Breaton does not exist;
• A financial statement representing Westcore I had total assets of more than $69, 000, 000.00;
• A letter from a surety representing Westcore I had a bonding capacity of $325, 000, 000.

(Doc. 117 at ¶¶ 85, 97-99). Westcore I was then granted the Bryan, Waco and Longmont Projects. (Doc. 117 at ¶¶ 44(f)-(h)).

         b. Westcore II

         After Westcore I began to secure construction contracts, David, Salat, Kozlowski, Burke, and Foundation formed Westcore II. (Doc. 117 at ¶¶ 138-39). Westcore II (Westcore Construction, L.L.C.) is very similar in name to Westcore I (Westcore Construction, LLC). (Doc. 117 at 5). Plaintiffs allege David, Salat, Kozlowski, Burke, Heltzel, and Foundation used the nearly identical names to mislead Continental and direct it to make payments to Westcore II (instead of Westcore I) for the Waco, Bryan, and Longmont Projects. (Doc. 117 at ¶¶ 140-144). The diversion of payments from Westcore I eventually resulted in subcontractors imposing more than $8, 000, 000.00 in liens on the Projects. (Doc. 117 at ¶¶ 145-46).

         3. Fraud

         a. ACI's Savage Project Change Order

         In early 2015, the Savage Project fell behind schedule and ACI was subjected to contractually-mandated liquidated damages. (Doc. 117 at ¶ 113). The parties then agreed to a change order where ACI accepted responsibility for $401, 780.00 in liquidated damages in return for an extension of the deadlines to turn over some buildings and continued progress payments. (Doc. 117 at ¶ 114). Despite this agreement, David, Kozlowski, and ACI later demanded that the Savage Fund pay for ACI's alleged costs due to the delays that ACI itself had caused. (Doc. 117 at ¶ 116). David, Kozlowski, and ACI then attempted to leverage Savage Fund by slowing the already-delayed Project and threatening not to complete the work. (Doc. 117 at ¶ 117). ACI also filed a lien on the property that included the delay-related damages ACI had previously accepted as its responsibility. (Doc. 117 at ¶ 118). The entire process allowed ACI to obtain extended construction deadlines and to receive payments it would not have otherwise have received, while the Savage Fund was forced to defend itself against the lien claim. (Doc. 117 at ¶ 120).

         b. ACI's Involvement with National Framing on the Fort Myers Project

         In November 2016, David, on behalf of ACI, executed a payment application for $1, 072, 397.64 for work done on the Fort Myers Project. (Doc. 117 at ¶¶ 121, 124). Part of the application represented National Framing was due a $60, 673.14 payment for subcontracting services, and thereafter the balance due to it would be $364, 783.75. (Doc. 117 at ¶ 122). Notably, David owns both ACI and, through Foundation Management, National Framing. (Doc. 117 at ¶¶ 18, 20, 31-32). The Fort Myers Fund then relied on the application and paid ACI $1, 072, 397.64, with the requested $60, 673.14 earmarked for National Framing. (Doc. 117 at ¶ 124). Four months after that, George signed a Claim of Lien and an Affidavit representing National Framing was due $581, 470.90, which was $216, ...

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