Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 1 of 36 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN

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1 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 1 of 36 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN John Does 1-114, Plaintiffs, on behalf of themselves and all others similarly situated, Case No. 10 Hon. v. Demand for Jury Trial Abdzhra Shalushi, Ahmed Alabadi, Hussein Alsaedi, Kathum Al-aumary, Abdul Kareem Fradi, Majed Fradi, Khalid Amen, Abdulkarim Alkenany, Mohsin Aljebory, Abdulkhaliq Almahanna, Nazar Tajaldeen, Fadhil Abbas Badir Alzuad, Ali Zwein, Hameed Alzeyady, Ali Abbas Badir Alzuad, Hassan Zwein, Mohsen Aljabiri, Hussein Aljebori, Ali Abbas Alghanemy, Mohammed Albiraihy, individuals, and Fatima International, Inc., an Illinois corporation, Adam Trade, Group, a Michigan corporation, and Fedek Group, Inc., a Michigan corporation, Defendants. / MANTESE HONIGMAN ROSSMAN AND WILLIAMSON, P.C. Attorneys for Plaintiffs Dave Honigman (33146) dhonigman@gmail.com Gerard Mantese (P34424) gmantese@manteselaw.com David Hansma (P71056) dhansma@manteselaw.com 1361 E. Big Beaver Road Troy, MI (248) /

2 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 2 of 36 There is no other pending or resolved civil action arising out of the transactions or occurrences alleged in this complaint. CLASS ACTION COMPLAINT AND DEMAND FOR JURY TRIAL Plaintiffs, 1 by their attorneys, Mantese Honigman Rossman and Williamson, P.C., and for their Class Action Complaint, state as follows: OVERVIEW OF THE CASE 1. This is a class action under the Racketeer Influenced and Corrupt Organizations Act ( RICO or the Act ), and also for state law claims of fraud, silent fraud, statutory embezzlement/conversion, common law conversion, civil conspiracy, unjust enrichment, constructive trust, accounting, aiding and abetting, fraudulent conveyance, and a request for appointment of a receiver. 18 U.S.C et seq. 2. This action arises out of the scheme of two criminal masterminds, Abdzhra Shalushi and Ahmed Alabadi, to obtain money from Iraqi-Americans for an illegal Ponzi scheme. The two masterminds preyed upon the Iraqi-American community in Southeast Michigan, and throughout the United States and other countries, by recruiting trusted individuals to act as Agents for their affinity fraud. 3. Defendants took advantage of cultural and religious concepts of honor and fairness to cloak their promises and their Agents promises with credibility. 4. The masterminds, posing as altruistic, religious and civic-minded dogooders, employed trusted individuals to solicit investments from their community. The 1 For their own protection, Plaintiffs desire not to be identified on public record filings in this case. Plaintiffs intend to bring a motion for a protective order under Fed. R. Civ. P. 5.2(e) to allow for the redaction of their names from papers filed in this matter. 2

3 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 3 of 36 masterminds, and their Agents, exploited cultural taboos forbidding dishonesty and financial self-dealing when dealing with tribal brothers and sisters, as well as the Arab custom of doing business with cash and a handshake, to dupe thousands of Iraqi- Americans into investing in Iraqi and middle-eastern projects. 5. The Ponzi schemers promised, in writing and orally, to repay the victims at an annualized rate of interest ranging from 80% to more than 100%, and to refund principal in eight to twelve months. 6. Defendants used newly solicited funds to enrich themselves or to repay previous creditors/investors. 7. Thousands of people who entrusted money to Defendants have not been repaid. Many of them have made efforts to contact the defendants and obtain repayment. These efforts have been unsuccessful. The Conduct of the Ponzi Schemes 8. This case arises from the operation of two distinct but interconnected Ponzi schemes operated by Defendants Abdzahra Shalushi and Ahmed Alabadi (the Principal Defendants ). 9. Defendant Alabadi began his illegal Ponzi scheme in 1998 and continued his scheme until Defendant Shalushi began his scheme in 2006 and continued his scheme until Both Ponzi schemes operated in similar ways by soliciting funds for projects in the Middle East with promises of quick repayment of principal (usually less 3

4 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 4 of 36 than a year), and guarantees of a large return on investment. The Shalushi/Fatima Ponzi Scheme 12. Defendant Shalushi operated his Ponzi scheme under the name of his company, Defendant Fatima International, Inc. 13. Defendant Shalushi relied upon a General Manager, Defendant Hussein Alsaedi (a/k/a Abu Noor), to run the Ponzi scheme. 14. Defendant Alsaedi recruited individuals known as Agents to solicit money for the Ponzi scheme. Alsaedi recruited Agents within the Iraqi-American community in Southeast Michigan and elsewhere, exploiting his contacts with Arabic mosques, churches, community organizations, family and friends. 15. Defendant Alsaedi told Agents that Defendants Shalushi and/or Fatima were soliciting money to invest in projects in Iraq. Alsaedi recruited Agents both to invest their own money in the Ponzi scheme and to solicit their friends, family and neighbors to invest in the Ponzi scheme. 16. In exchange for promises of a commission, the Agents solicited money from others to invest in the Ponzi scheme. 17. In addition to their commissions, the Agents routinely skimmed money for themselves from the money entrusted to them, and failed to disclose to Plaintiffs and the class members that they were enriching themselves with the skimmed money. 18. Everyone who invested in the Shalushi/Fatima Ponzi scheme was promised repayment of their principal. Defendants also guaranteed their victims that they would be paid substantial interest/return on investment on their 4

5 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 5 of 36 principal/investment, including promises of interest/return on investment as high as 100% per year or more. 19. The Agents collected money from the victims. Agents took investments that victims made in cash to money wire service providers, who wired the cash at the direction of the General Manager, Alsaedi. 20. Plaintiffs and class members who provided money by check were instructed to make their checks payable to Adam Trade, Inc. Adam Trade, Inc. is owned by Abdul Kareem Fradi, the brother of Majed Fradi, one of Shalushi s Agents. 21. Upon information and belief, Adam Trade, Inc. is a shell company with no legitimate business. Adam Trade, Inc. is the alter ego for Abdul and Majed Fradi. 22. Adam Trade, Inc. forwarded money to Shalushi/Fatima or otherwise used the money as directed by Shalushi and/or Alsaedi. 23. In approximately July 2008, Fatima opened a bank account with Bank of America and began to directly receive checks. 24. When the Ponzi scheme victims entrusted their money to the Agents and/or Alsaedi, they were given receipts. The receipts state the amount entrusted by the victim along with the terms of repayment. The receipts also repeat the promises of repayment of principal along with substantial interest/return on investment. 25. Despite Defendants promises, as well as these receipts, Defendants had no intention to repay their victims. 26. Defendant Shalushi did have some business dealings in Iraq. Specifically, Shalushi s company, Defendant Fatima, did business as an importer, importing goods 5

6 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 6 of 36 into Iraq. 27. On information and belief, in 2008 or 2009, Defendant Shalushi and/or Fatima received a check from the Central Bank of Iraq for approximately $160 million. 28. Defendants Shalushi and Fatima did not use the Iraq Central Bank funds to repay Plaintiffs and the class members. Instead, General Manager Alsaedi directed the Agents to use the money they collected from new investors/creditors to pay off earlier investors/creditors who demanded repayment of part or all of their principal and/or interest/return on investment. The scheme required the relentless collection of money from new creditors/investors to repay previous creditors/investors. 29. The very nature of the scheme was fraudulent and could not fulfill its promises to all of its victims. 30. Through the repetition of this fraud, the Shalushi/Fatima Ponzi scheme has taken in tens of millions of dollars. The Alabadi/Fedek Ponzi Scheme 31. Defendant Alabadi operated a Ponzi scheme that was very similar to the Ponzi scheme operated by Shalushi. Alabadi operated his Ponzi scheme through his company, Fedek Group, Inc. 32. The Alabadi/Fedek Ponzi scheme has operated for much longer than the Shalushi/Fatima Ponzi scheme. 33. Like the Shalushi/Fatima Ponzi scheme, Alabadi relied upon a General Manager Kathem Al-Aumary. 34. The General Manager recruited Agents within the Iraqi-American 6

7 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 7 of 36 community. The Agents solicited money from friends, neighbors and acquaintances. Once again, the Ponzi schemers told the victims that their money would be invested in projects in the Middle East. The victims were promised repayment of principal along with substantial rates of interest/return on investment. 35. The victims were also provided with receipts from the Agents and/or Al - Aumary. 36. As with the Shalushi/Fatima scheme, the money entrusted to Alabadi/Fedek was not used for legitimate money-making activities. Instead, newlysolicited money was used to repay creditors/investors who had earlier "loaned" or invested their money with Alabadi/Fedek. 37. In exchange for promises of a commission, the Agents solicited money to invest in the Ponzi scheme. 38. Like the Agents in the Shalushi Scheme, the Agents representing Alabadi/Fedek enriched themselves by skimming entrusted monies and failed to disclose this fact to the victims. 39. Hundreds, if not thousands, of individuals who entrusted money to Alabadi and/or Fedek have not been repaid. 40. While the Shalushi/Fatima and Alabadi/Fedek Ponzi schemes operated separately to some degree, they were also interconnected in part. 41. Defendant Alsaedi, the General Manager for the Shalushi/Fatima Ponzi scheme also occasionally performed General Manager duties for the Alabadi/Fedek Ponzi scheme. Further, from time to time, Alsaedi directed the Agents of the 7

8 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 8 of 36 Shalushi/Fatima scheme to transfer money to Alabadi and/or participants in the Alabadi/Fedeck scheme 42. The General Managers worked directly for Alabadi and Shalushi. The General Managers administered the structure and operations of these two schemes. The General Managers recruited the Agents and instructed the Agents with respect to soliciting funds, handling of entrusted monies and payments to victims. 43. The Agents, in return for their services, were promised a 1% - 3% commission. These Agents also wrongfully retained entrusted monies for themselves. 44. As a result of Defendants unlawful conduct, Plaintiffs and the class members have sustained enormous monetary damages. The investments of individual Iraqi-American families in these Ponzi schemes range from a couple of thousand dollars to several million dollars. As a result of the fraudulent Ponzi schemes, many families have lost their homes, businesses, cars, and personal possessions, their opportunity for an education, their peace of mind, there hopes for a secure and happy life in America, and even their marriages. Investors run the gamut from high school students to housewives to blue-collar tradesmen to multimillionaire businessmen. The geographic scope of the Ponzi scheme spans the globe, perhaps leading even to the highest levels of the emerging Iraqi state. It has shattered the social and economic fabric of the Iraqi- American community, especially in Dearborn, Michigan--the center of the Arab Diaspora in the United States. 45. As set forth below, Defendants have perpetrated their unlawful conduct through the establishment of a series of criminal enterprises which have engaged in a 8

9 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 9 of 36 pattern of racketeering activities in violation of 18 U.S.C. 1961, et seq. JURISDICTIONAL ALLEGATIONS 46. This Court has jurisdiction over this matter pursuant to 28 U.S.C. 1331, because the claim brought under the RICO statute invokes a federal question. 47. Venue is properly established in this Court pursuant to 28 U.S.C. 1391(b) (2), because the events giving rise to this claim occurred in the Eastern District of Michigan. THE PARTIES AND RICO ENTERPRISES The Plaintiffs 48. The Plaintiffs are Michigan residents residing in Southeast Michigan, predominately Dearborn, Michigan. Plaintiffs are all Iraqi-Americans who were induced to participate in Defendants Ponzi schemes by guarantees of rapid repayment of principal plus huge rates of interest/return on investment. 49. The absent class members are likewise Iraqi-Americans who were induced to participate in Defendants Ponzi schemes by guarantees of rapid repayment of principal plus huge rates of interest/return on investment. The Defendants and Their RICO Enterprises 50. The Defendants in this action are various individuals and entities who have, together and in combinations, conspired to and perpetrated multiple violations of RICO, and engaged in several frauds, including active fraud, mail and wire fraud, constructive fraud, and fraudulent concealment of material facts. Defendants also committed statutory and common law conversion, and aided and abetted the other 9

10 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 10 of 36 Defendants unlawful conduct. 51. Defendants Abdzahra Shalushi and Ahmed Alabadi ( Principal Defendants ) are the leaders of the fraudulent enterprises. The two masterminds created the two interrelated Ponzi schemes described above. 52. Defendants Fatima and Fedek are companies owned and controlled by the Principal Defendants and were used to conduct the Ponzi schemes. 53. Defendants Kathem Al-Aumary and Hussein Alsaedi ( General Managers ), were agents of the Principal Defendants and were known as General Managers of the fraudulent schemes. 54. Defendants Majed Fradi, Khalid Amen, Mohsen Aljabiri, Abdulkarim Alkenany, Abdulkhaliq Almahanna, Nazar Tajaldeen, Fadhil Abbas Badir Alzuad, Mohsin Aljebory, Ali Zwein, Hassan Zwein, Ali Abbas Alghanemy, Hameed Alzeyady, Ali Abbas Badir Alzuad, Hussein Aljebori, and Mohammed Albiraihy, are or were Agents of the Principal Defendants and General Managers, and were referred to as Agents by both the victims and the perpetrators. 55. Defendant Majed Fradi (an Agent) and his brother, Abdul Kareem Fradi, used Adam Trade, Inc., a company owned by Abdul Kareem Fradi, to transfer money to Fatima. 56. The Principal Defendants and General Managers are liable for all wrongful acts committed by their Agents. 57. As stated above, Defendants unlawful conduct was carried out in furtherance of a fraudulent scheme or artifice to obtain money from Plaintiffs and the 10

11 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 11 of 36 class members based on explicit guarantees of repayment of that money along with substantial interest/return on investment. Defendants representations and guarantees were false, because Defendants used the victims money to enrich themselves and to pay other creditors/investors in an illegal Ponzi scheme, and did not intend to invest the creditors'/investors money for the benefit of the creditors/investors. 58. Specifically, Defendants affirmatively represented to Plaintiffs that they would invest Plaintiffs money in projects in the Middle-East. Defendants further represented that these projects would be profitable and generate substantial revenue. Defendants guaranteed the victims that they would receive repayment of their principal plus substantial interest/return on investment. The victims and agents interviewed by Plaintiffs counsel report with near unanimity that the Ponzi schemers repeatedly used the word guarantee and language synonymous with it. 59. Defendants made these representations to hundreds, if not thousands, of Iraqi-Americans in Southeast Michigan and throughout the United States. 60. Some individuals that became involved in Defendants scheme early on were repaid, along with substantial interest/return on investment. These early creditors/investors were repaid with money entrusted to Defendants by new creditors/investors. The Individual Defendants 61. Defendant Abdzahara Shalushi is a Michigan resident who resides in this district. 62. Defendant Abdzahara Shalushi is a RICO person as defined by 18 11

12 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 12 of 36 U.S.C. 1961(3). 63. Defendant Shalushi is distinct from all of the RICO enterprises defined herein, and he participates in the affairs of all of the RICO enterprises defined herein. 64. Defendant Shalushi is the president and an agent of Defendant Fatima International, Inc., an Illinois corporation. Fatima International is the alter ego of Defendant Shalushi, and all of its frauds and wrongful acts are attributable to Shalushi. 65. Defendant Ahmed Alabadi is a Michigan resident who resides in this district. 66. Defendant Ahmed Alabadi is a RICO person as defined by 18 U.S.C. 1961(3). 67. Defendant Ahmed Alabadi is distinct from all of the RICO enterprises defined herein, and he participates in the affairs of all of the RICO enterprises defined herein. 68. Defendant Alabadi is the president and an agent of Fedek Group, a Michigan corporation. Fedek Group is the alter ego of Defendant Alabadi, and all of its frauds and wrongful acts are attributable to Alabadi. 69. Defendant Hussein Alsaedi is a Michigan resident who resides in this district. 70. Defendant Hussein Alsaedi is a RICO person as defined by 18 U.S.C. 1961(3). 71. Defendant Hussein Alsaedi is distinct from all of the RICO enterprises defined herein, and he participates in the affairs of all of the RICO enterprises defined 12

13 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 13 of 36 herein. 72. Defendant Hussein Alsaedi served as the General Manager for the Shalushi/Fatima Ponzi scheme. 73. Defendant Hussein Alsaedi is an agent of Defendants Shalushi, Alabadi, Fatima and/or Fedek, and is the General Manager of the Shalushi/Fatima Ponzi scheme. 74. Defendant Kathem Al-Aumary is a Michigan resident who resides in this district. 75. Defendant Kathem Al-Aumary is a RICO person as defined by 18 U.S.C. 1961(3). 76. Defendant Kathem Al-Aumary is distinct from all of the RICO enterprises defined herein, and he participates in the affairs of all of the RICO enterprises defined herein. 77. Defendant Kathem Al-Aumary served as the General Manager for the Alabadi/Fedek Ponzi scheme. 78. Defendant Kathem Al-Aumary is an agent of Defendants Shalushi, Alabadi, Fatima and/or Fedek and is the General Manager of the Alabadi/Fedek Ponzi scheme. 79. Defendants Majed Fradi, Abdul Kareem Fradi, and Khalid Amen are Agents for the Shalushi Ponzi Scheme. They are all Michigan residents. They are all RICO persons. They are all distinct from all of the RICO enterprises defined herein. They all participated in the affairs of the Fatima Enterprises and Fatima-Fedek 13

14 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 14 of 36 Enterprises (described below). 80. Mohsen Aljabiri, Abdulkarim Alkenany, Abdulkhaliq Almahanna, Nazar Tajaldeen, Fadhil Abbas Badir Alzuad, Mohsin Aljebory, Ali Zwein, Hassan Zwein, Ali Abbas Alghanemy, Hameed Alzeyady, Ali Abbas Badir Alzuad, Hussein Aljebori, and Mohammed Albiraihy, are all Michigan residents. They are all RICO persons. They are all distinct from all of the RICO enterprises defined herein. They all participated in the affairs of the Fedek Enterprises and Fatima-Fedek Enterprises (described below). 81. In the hierarchy of the RICO enterprises discussed herein, the Principal Defendants rank at the top, as they have at all times controlled, and control at the present time, the purposes and operations of the enterprises as well as the receipt, flow, use and transfer of money from the Plaintiffs and class members through a pattern of criminally unlawful racketeering activity. 82. In the hierarchy of the RICO enterprises discussed herein, the General Managers rank below the Principal Defendants. The General Managers operate as a liaison between the Principal Defendants and the Agents. Among other things, the General Managers collect money from the Agents, pass this money along to the Principal Defendants and/or Fatima and/or Fedek, and direct the actions of the Agents on behalf of the Principal Defendants. 83. In the hierarchy of the RICO enterprises discussed herein, the Agents rank below the General Managers. The Agents solicit and collect money from the victims, pass this money along to the General Managers, Principal Defendants and/or Fatima and/or Fedek, and wrongfully retain some of the money for themselves. 14

15 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 15 of 36 The Fatima Enterprise 84. Defendant Fatima is a dissolved Illinois corporation with its registered office located at 3207 W. Lawrence, Chicago, Il Defendant Fatima is a person as defined by 18 U.S.C. 1961(3). 86. Defendant Fatima is distinct from all of the RICO enterprises defined herein, and it participates in the affairs of the Fatima Enterprise and the Fatima-Fedek Enterprise, as defined below. 87. Defendants Shalushi, Alsaedi, Abdul Kareem Fradi, Majed Fradi, Khalid Amen, Adam Trade, Inc., and Fatima ( Fatima Enterprise Defendants ) have combined through an association in fact and formed a RICO enterprise ( Fatima Enterprise ), as defined by 18 U.S.C. 1961(4). 88. The goals and purposes, separate and distinct from the predicate RICO acts discussed herein, of the Fatima Enterprise was to obtain funding for projects in Iraq and elsewhere in the Middle East. 89. The enterprise exists separate and apart from the pattern of racketeering activity in which its participants have engaged. 90. As discussed above, the Fatima Enterprise operated through Agents who were recruited by General Manager Alsaedi. 91. These Agents solicited money from the victims based on promises of rapid repayment of principal with substantial interest/return on investment. 92. The Agents received a commission for their efforts and took directions from Alsaedi. 15

16 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 16 of The Agents kept substantial amounts of the victims money for themselves, both as commissions and skimmed money. 94. The money that was not skimmed by the Agents was passed along to Alsaedi, Shalushi, and previous creditors/investors, or otherwise as Shalushi or Alsaedi directed. 95. During the time period relevant to this Complaint, the Fatima Enterprise Defendants received substantial amounts of money at the expense of the victims. 96. In furtherance of their fraudulent scheme to misappropriate and convert money from Plaintiffs and the class members, the Fatima Enterprise Defendants, through the Fatima Enterprise, engaged in a pattern of racketeering activity as defined in 18 U.S.C. 1961(1), through the perpetration of hundreds of instances of mail fraud and wire fraud within the last 10 years, in violation of 18 U.S.C and Specifically, and among other things, the Fatima Enterprise Defendants caused to be transmitted, on a regular basis, through the United States mails and/or United States wires, hundreds of separate documents and communications containing false or misleading information pertaining to the solicitations of funds. 98. These documents contained false and misleading information, because (a) they misrepresented the uses to which Plaintiffs and the class members money would be put; (b) they failed to disclose that Plaintiffs and the class members money would be used to pay off previous creditors/investors and/or participants in the Ponzi scheme; (c) they failed to disclose that the money would not be invested in any revenue-producing activity for the benefit of the victims; and (d) they misrepresented 16

17 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 17 of 36 Shalushi s and/or Fatima s ability, willingness and intention to repay the money. 99. The Fatima Enterprise Defendants, and/or their agents, also communicated such false information over the telephone and internet The transmission of these documents and the making of these communications through the United States mails and interstate wires was for the purpose of, among other things, inducing Plaintiffs and the class members to entrust their money to the Fatima Enterprise Defendants and/or to assuage the fears of the Plaintiffs and class members, thereby securing their continued cooperation and participation. Thus, the communications were made in connection with and for the purpose of executing a scheme to defraud Plaintiffs and the class members and to conceal from Plaintiffs and the class members the truth regarding the Fatima Enterprise Defendants activities and the subject transactions The fraudulent documents and communications misrepresented and omitted material information, and were calculated to deceive persons of ordinary prudence and comprehension. The Fedek Enterprise 102. Defendant Fedek Group, Inc. ( Fedek ) is a Michigan corporation with its registered office located at 5876 Centralia St, Dearborn Heights, MI Defendant Fedek is a person as defined by 18 U.S.C. 1961(3) Defendant Fedek is distinct from all of the RICO enterprises defined herein, and it participates in the affairs of the Fedek Enterprise and Fatima-Fedek Enterprise, as defined below. 17

18 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 18 of Defendants Alabadi, Al-Aumary, Mohsen Aljabiri, Abdulkarim Alkennany, Abdulkhaliq Almahanna, Mohsin Aljebory, Ali Zwein, Hassan Zwein, Nazar Tajaldeen, Ali Abbas Alghanemy, Hameed Alzeyady, Fadhil Abbas Badir Alzuad, Ali Abbas Badir Alzuad, Hussein Aljebori, Mohammed Albiraihy, and Fedek ( Fedek Enterprise Defendants ) have combined through an association in fact and formed a RICO enterprise ( Fedek Enterprise ) as defined by 18 U.S.C. 1961(4) The goals and purposes, separate and distinct from the predicate RICO acts discussed herein, of the Fedek Enterprise were to obtain funding for projects in Iraq and elsewhere in the Middle East The enterprise exists separate and apart from the pattern of racketeering activity in which its participants have engaged As discussed above, the Fatima Enterprise operated through Agents recruited by General Manager Al-Aumary The Agents solicited money from Plaintiffs and the class members based on promises of rapid repayment of principal with substantial interest/return on investment The Agents received a commission for their efforts and take directions from Al-Aumary The Agents keep substantial amounts of money for themselves The money that was not skimmed by the Agents was passed along to Alaumary, Alabadi, previous creditors/investors, or otherwise as Al-aumary directed on behalf of Alabadi. 18

19 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 19 of During the time period relevant to this Complaint, the Fedek Enterprise Defendants received substantial amounts of money at the expense of the Plaintiffs and the class members 114. In furtherance of their fraudulent scheme to misappropriate and convert money from Plaintiffs and the class members, the Fedek Enterprise Defendants, through the Fedek Enterprise, engaged in a pattern of racketeering activity as defined in 18 U.S.C. 1961(1) through the perpetration of hundreds, if not thousands, of instances of mail fraud and wire fraud, in violation of 18 U.S.C and Specifically, and among other things, the Fedek Enterprise Defendants caused to be transmitted, on a regular basis, through the United States mails and/or United States wires, hundreds, if not thousands, of separate documents containing false and misleading information pertaining to the transactions These documents contained false and/or misleading information because (a) they misrepresented the uses to which Plaintiffs and the class members money would be put; (b) they failed to disclose that Plaintiffs and the class members money would be used to pay off previous creditors and/or participants in the Ponzi scheme; (c) they failed to disclose that the money would not be used or invested in any actual revenue-producing activity; and (d) they misrepresented Alabadi s and/or Fedek s ability, willingness and intention to repay the money The Fedek Enterprise Defendants, and/or their agents, also communicated such false information over the telephone and internet The transmission of these documents and the making of these 19

20 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 20 of 36 communications through the United States mails and interstate wires was for the purpose of, among other things, inducing Plaintiffs and the class members to entrust their money to the Fedek Enterprise Defendants and/or to assuage the fears of the Plaintiffs and class members, thereby securing their continued cooperation and/or participation. Thus, the communications were made in connection with and for the purpose of executing a scheme to defraud Plaintiffs and the class members and to conceal from Plaintiffs and the class members the truth regarding the Fatima Enterprise Defendants activities and the subject transactions The fraudulent documents and communications contained misrepresentations and omissions which were reasonably calculated to deceive persons of ordinary prudence and comprehension. The Fatima-Fedek Enterprise 120. In addition to the RICO Enterprises described above, Defendants have also perpetrated a pattern of racketeering through an association-in-fact enterprise consisting of all of the Defendants together These defendants constituted an over-arching enterprise (the Fatima- Fedek Enterprise ) for the purposes of conducing two separate but interconnected Ponzi schemes, as described above Each of the Defendants has engaged in a pattern of racketeering activities through this enterprise. CLASS ACTION ALLEGATIONS 123. Plaintiffs bring this action as a class action against Defendants pursuant to 20

21 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 21 of 36 Rule 23 of the Federal Rule of Civil Procedure, individually and on behalf of a class consisting of all persons who entrusted money to either the Shalushi/Fatima or Alabadi/Fedek Ponzi schemes Plaintiffs are members of the class and will fairly and adequately assert and protect the interests of the class 125. The interests of the Plaintiffs are consistent with, and not antagonistic to, those of the other members of the class Plaintiffs have retained attorneys who are experienced in class action litigation, and who will provide adequate representation Members of the class are so numerous that joinder of all members of the class is impracticable Upon information and belief, there are thousands of members of the class whose identities can be ascertained from the records and files of Defendants and from other sources Common questions of law and fact regarding the violations by Defendants of RICO and state law that have caused and will continue to cause harm to the class predominate over any questions affecting only individual members of the class 130. The prosecution of separate actions by individual members of the class would create a risk of, among the other things, the following: 1. Inconsistent or varying adjudications with respect to individual members of the class; and 2. Adjudication with respect to individual members of the class which 21

22 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 22 of 36 would, as a practical matter, be dispositive of the interests of other members not parties to the adjudication or substantially impair or impede their ability to protect their interests The claims of the lead Plaintiffs are typical of the claims of the class, and the class action method is appropriate for the fair and adequate prosecution of this action Individual litigation of claims which might be commenced by all class members would produce a multiplicity of cases such that the judicial system having jurisdiction of the claims would remain congested for years Class treatment, by contrast, provides manageable judicial treatment calculated to bring a rapid conclusion to all litigation of all claims arising out of the conduct of Defendants The certification of a class would allow litigation of claims that, in view of the expense of litigation, may be insufficient in amount to support separate claims Accordingly, Plaintiff brings this action on behalf of himself and on behalf of all other members of the class defined as follows: COUNT I VIOLATION OF RICO, 18 U.S.C. 1962(B), (C), & (D) 136. Plaintiffs reallege all preceding allegations. RICO Persons 137. The culpable RICO persons are Defendants Abdzahra Shalushi, Ahmed Alabadi, Hussein Alsaedi (a/k/a Abu Noor), Abdul Kareem Fradi, Majed Fradi, Khalid Amen, Kathem Al-Aumary, Mohsen Aljabiri, Abdulkarim Alkenany, Abdulkhaliq 22

23 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 23 of 36 Almahanna, Mohsin Aljebory, Ali Zwein, Hassan Zwein, Nazar Tajaldeen, Ali Abbas Alghanemy, Hameed Alzeyady, Fadhil Abbas Badir Alzuad, Ali Abbas Badir Alzuad, Hussein Aljebori, Mohammed Albiraihy, Adam Trade, Inc., Fatima and Fedek The above named individuals and entities are all persons capable of holding a legal or beneficial interest in property, within the meaning of 18 U.S.C. 1961(3) and 1962(b), (c), and (d). RICO Enterprises 139. Plaintiffs herein allege at least three separate and distinct enterprises within the meaning of 18 U.S.C. 1961(4) and 1962(b), (c), and (d), constituting an enterprise, an association in fact, or a de facto association within the meaning of 18 U.S.C. 1961(4) The named Defendants in this cause of action are and/or were employed by, or associated with the enterprises The aforementioned enterprises exist independently of the above named persons named herein The aforementioned enterprises exist independently of the pattern of unlawful racketeering activity described herein The aforementioned enterprises engage in activities that affect interstate or foreign commerce. Pattern of Racketeering Activities 144. As described above, Defendants directly and indirectly conducted and participated in the conduct of the enterprise through a pattern of racketeering activity in 23

24 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 24 of 36 violation of 18 U.S.C. 1962(b), (c), and (d) Defendants hundreds, if not thousands, of instances of racketeering activity have continued for a number of years During the course of the racketeering activity, Defendants employed a scheme to extract funds from the Plaintiffs, as well as potentially thousands of class members. This racketeering activity involved defrauding the Plaintiffs and class members into participating in what Defendants knew to be illegal and fraudulent Ponzi schemes Pursuant to and in furtherance of each the fraudulent schemes, Defendants intentionally and/or with actual knowledge, committed related predicate acts, as defined by 18 U.S.C. 1961(1)(B) and (5), including: a. Multiple instances of mail fraud in violation of 18 U.S.C. 1341; and b. Multiple instances of wire fraud in violation of 18 U.S.C As described above, the Defendants, through their enterprises, knowingly, willfully, and intentionally communicated through wires and mails false and misleading information to Plaintiffs and the class members Specifically, through telephone calls, s and letters, Defendants repeated their claims that the money entrusted to them would be invested in projects in the Middle East and that the Plaintiffs and class members principal would be rapidly repaid with substantial interest/return on investment, within definite periods of time, generally less than a year These calls, s and letters were also fraudulent to the extent that they 24

25 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 25 of 36 concealed and/or failed to disclose that (a) Defendants did not have the ability and/or intention of repaying the Plaintiffs and class members; (b) the money entrusted to Defendants was not invested in projects in the Middle East; and (c) the money entrusted to Defendants was being retained by or paid to the Principal Defendants, the General Managers, the Agents or previous creditors/investors for their personal benefit and was never invested for the benefit of the victims These documents and communications were transmitted to hundreds, if not thousands, of Plaintiffs and class members Defendants and/or their agents conveyed and communicated false and misleading information relating to their fraudulent scheme through the use of cellular and land-line telephones, constituting further wire frauds Defendants benefitted directly from their racketeering activity, because they enriched themselves through the operation of the enterprise The allegations set forth herein sufficiently apprise the Defendants of the Plaintiffs claims. Further, because the fraudulent scheme carried out by Defendants occurred on a continuous basis over an extended period of time, the Plaintiffs need not allege in detail the facts of each fraudulent statement or omission, or of each transaction of the fraudulent scheme. Injury and Damages 155. Plaintiffs and the class members are persons capable of holding a legal or beneficial interest in property, within the meaning of 18 U.S.C. 1961(3) and 1964(c) Defendants wrongful racketeering activities directly and proximately 25

26 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 26 of 36 caused significant financial and economic damages to the Plaintiffs and the class members property, including among other things, loss of money, loss of profits, loss of value, and other compensatory and financial damage, as well as pain and suffering, emotional distress, and broken families and friendships Accordingly, Plaintiffs and the class members are entitled to an award of actual damages, in addition to treble damages and attorney fees under 18 U.S.C. 1964(c) Tolling 158. Plaintiffs and the class members are entitled to a tolling of the RICO claim, because Defendants, through their conduct and the conduct of their agents, have affirmatively misrepresented to and/or concealed from the Plaintiffs material facts concerning the transactions, as described above. COUNT II FRAUD 159. Plaintiffs reallege all preceding allegations Defendants, acting in concert with one another, as well as with others, tricked and defrauded Plaintiffs and the class members into entrusting their money to Defendants Defendants, acting in concert with one another, as well as with others, defrauded Plaintiffs and the class members into believing, among other things, that their money would be invested in projects in Iraq and that the Plaintiffs and class members principal would be repaid along with substantial interest/return on the investments. Defendants expressly "guaranteed" that the Plaintiffs and class members would be 26

27 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 27 of 36 repaid and that they would receive substantial interest or a substantial return on the investment of their principal Defendants, together and through their agents, made materially similar representations to all of the Plaintiffs and class members Defendants used their positions within the Iraqi-American community, and took advantage of the distinctive culture of the Iraqi-American community, to gain the confidence and trust of Plaintiffs and the class members Defendants betrayed the confidence and trust placed in them by, among other things, misrepresenting the nature of the transactions and the uses to which the money entrusted to Defendants would be put Defendants took Plaintiffs and the class members money as part of two distinct--but interconnected--ponzi schemes in which Defendants continuously used later-acquired money to pay off earlier creditors/investors Defendants did not try to employ Plaintiffs or the class members money to produce revenue and profits for the benefit of the creditors/investors. When Defendants paid individual creditors/investors, they used funds raised from other creditors/investors Defendants knew that their various representations regarding the transactions were false when they were made and/or made them recklessly, without knowing whether they were true Defendants intended that Plaintiffs and the class members would rely on their false representations and that Plaintiffs would be induced to provide money to 27

28 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 28 of 36 Defendants Proof of Defendants Ponzi scheme establishes their intent to defraud as a matter of law Plaintiffs and the class members reasonably relied upon Defendants representations and provided Defendants with money As a direct and proximate result of Defendants intentional, malicious, wanton and reckless actions, Plaintiffs and the class members have suffered in excess of $ 1 billion in damages, including actual, consequential and exemplary damages. COUNT III SILENT FRAUD 172. Plaintiffs reallege all preceding allegations Defendants repeatedly suppressed and failed to disclose material facts relating to transactions including, among other things, that (1) the Plaintiffs and the class members money would not be invested for the benefit of the Plaintiffs and class members; (2) the Defendants intended to use the creditors'/investors money exclusively to enrich themselves; and (3) Defendants intended to operate, and did operate, an illegal Ponzi scheme Defendants had actual knowledge of these facts before and after Plaintiffs and the class members entrusted their money to Defendants Defendants failure to disclose these facts gave Plaintiffs and the class members a false understanding regarding the character and motives of Defendants, a false understanding regarding the nature of Defendants business and operations, a false understanding regarding the likelihood that Plaintiffs and the class members would 28

29 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 29 of 36 be repaid and/or receive a return, and a false understanding regarding the amount of interest/return on investment that Plaintiffs and the class members would receive Defendants knew that their deliberate suppression and concealment of all material facts relating to the transactions would give Plaintiffs and the class members a false understanding and Defendants intended that Plaintiffs and the class members, in reliance on that false understanding, provide money to Defendants Plaintiffs and the class members did in fact rely upon the false understanding by, among other things, providing money to Defendants with the expectation of receiving rapid repayment of principal plus substantial interest/return on investment As a direct and proximate result of Defendants intentional and malicious suppression and concealment of material facts, Plaintiffs and the class members have suffered in excess of $1 billion in damages, including actual, consequential and exemplary damages. COUNT IV STATUTORY EMBEZZLEMENT OR CONVERSION 179. Plaintiff realleges all preceding allegations As set forth above, Defendants embezzled and appropriated for their own use monies rightfully belonging to Plaintiffs and the class members Such embezzlement and misappropriation includes, but is not limited to, unauthorized use of Plaintiffs and the class members money for Defendants personal use and benefit, and the diversion of those monies to Defendants and/or others for their personal benefit and not for the benefit of the victims. 29

30 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 30 of As a direct and proximate result of Defendants intentional, malicious, wanton and reckless actions, including their misappropriation of Plaintiffs and the class members money, Plaintiffs and the class members have suffered in excess of $1 billion in damages, including actual, consequential and exemplary damages Pursuant to MCL a, Plaintiffs and the class members are entitled to treble damages, plus costs and reasonable attorneys fees. COUNT V COMMON LAW CONVERSION 184. Plaintiffs reallege all preceding allegations Defendants embezzled and converted for their own use monies rightfully belonging to Plaintiffs and the class members Such embezzlement and conversion includes, but is not limited to, the unauthorized use of Plaintiffs and the class members money for Defendants personal use and benefit, and the diversion of those monies to Defendants and/or others for their personal benefit and not for the benefit of the creditors/investors As a direct and proximate result of Defendants intentional, malicious, wanton and reckless actions, including their misappropriation of the money, Plaintiffs and the class members have suffered in excess of $1 billion in damages, including actual, consequential and exemplary damages. COUNT VI CIVIL CONSPIRACY 188. Plaintiffs reallege all preceding allegations At all material times, Defendants acted in concert with one another and/or others in furtherance of a deliberate and intentional scheme to unlawfully defraud 30

31 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 31 of 36 Plaintiffs and the class members and to commit other tortious acts against Plaintiffs and the class members As a direct and proximate result of the concerted actions and Defendants wrongful and tortious acts and omissions in furtherance of the conspiracy, Plaintiffs and the class members have suffered in excess of $1 billion in damages, including actual, consequential and exemplary damages. COUNTY VII UNJUST ENRICHMENT 191. Plaintiffs reallege all preceding allegations Plaintiffs and the class members entrusted Defendants with their money based on the promise, expectation and "guarantee" of rapid repayment with substantial interest/return on investment Retention of the entrusted money by Defendants would be unjust and inequitable as Defendants, acting in concert with one another and/or others, have obtained and maintained control of the entrusted money by fraud and bad faith, and have failed to repay Plaintiffs and the class members all that they were promised 194. Defendants should be required to disgorge all of the monies and benefits that they received from Plaintiffs and the class members through their illegal, improper and inequitable conduct and other breaches of duty Defendants have unjustly enriched themselves and have unjustly retained substantial benefits to the detriment of Plaintiffs and the class members, and the retention of the benefits by Defendants violates fundamental principles of justice, equity, and good conscience. 31

32 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 32 of As a direct and proximate cause of Defendants intentional, malicious, wanton and reckless retention of the monies and benefits that properly belong to Plaintiffs and the class members, Plaintiffs and the class members have suffered damages in excess of $1 billion, including actual, consequential and exemplary damages. COUNT VIII CONSTRUCTIVE TRUST 197. Plaintiffs restate all preceding allegations Defendants obtained money from Plaintiffs and the class members through a scheme of fraud, concealment, misrepresentation and unfair dealing Plaintiffs entrusted the money to Defendants because of the deliberate and intentional scheme of Defendants to unlawfully deceive Plaintiffs and the class members and defraud them of their money It would be unfair, inequitable and unconscionable for Defendants to retain and enjoy the benefits of the monies Defendants obtained from Plaintiffs and the class members The imposition of a constructive trust is necessary and proper to preserve the status quo and will ensure that Defendants do not otherwise acquire, transfer, encumber, squander, secrete, or dispose of Plaintiffs and the class members money, or any interests or profits derived from Plaintiffs and the class members money without the prior approval of Plaintiffs and this Court A constructive trust should be imposed over all money Defendants obtained from Plaintiffs and the class members, as well as over all interest or profits 32

33 Case 2:10-cv DML-RSW Document 1 Filed 05/06/10 Page 33 of 36 Defendants have obtained from those monies The imposition of a constructive trust is necessary and proper and in the interest of justice to do equity and to prevent unjust enrichment. COUNT IX ACCOUNTING 204. Plaintiffs reallege all preceding allegations Based on the actions and inactions of Defendants including, without limitations, the actions identified in this Complaint, the monies entrusted by Plaintiffs and the class members to Defendants were not used for the purposes for which they were entrusted and have been diverted, misused and squandered by Defendants Plaintiffs and the class members, therefore, seek and are entitled to a full and complete accounting from Defendants of all the monies that were entrusted by Plaintiffs and the class members to Defendants and all other assets that were and/or are in the possession, custody and/or control of Defendants. COUNT X APPOINTMENT OF A RECEIVER 207. Plaintiffs reallege all preceding allegations Unless a receiver is appointed immediately by this Court to take possession and control of all money and assets entrusted to Defendants, Plaintiffs and the class members have no effective and/or efficient means to recover the entrusted money and assets Plaintiffs and the class members will suffer irreparable harm unless a receiver is appointed, because they cannot otherwise preserve and protect the money and assets. 33