r= >)=R~G Monkton, Maryland 21111

Transcription

1 IN THE CIRCUIT COURT FOR BALTIMORE COUNTY MY PROFESSIONAL ADVICE, INC. 300 East Joppa Road, Suite 300 Towson, Maryland LEGAL ADVICE LINE, INC. 300 East Joppa Road, Suite 300 Towson, Maryland PlaintifT's Case No. NEIL J. RUTHER 1915 Monkton Road r= >)=R~G Monkton, Maryland PERSELS & ASSOCIATES, LLC 29 W. Suquehanna Ave. Serve on: Neil J. Ruther, Resident Agent and Managing Member 29 W. Susquehanna Ave., Suite 400 JOANN N. RUTHER 1915 Monkton Road Monkton, Maryland G. ADAM RUTHER 24 Courthouse Square, Apt. 408 Rockville, Maryland

2 WMS PARTNERS, LLC 305 Washington Avenue Serve on: Timothy Case, Resident Agent WMS Partners 305 Washington Avenue WMS Partners 305 Washington Avenue Serve on: Timothy Case, Partner WMS Partners 305 Washington Avenue SILO POINT HOLDING LLC 1700 Beason Street Baltimore, Maryland Serve on: Neil J. Ruther, Resident Agent 29 W. Susquehanna Ave., Suite 610 or on Patrick W. Turner, Managing Member 1700 Beason Street Baltimore, Maryland SILO POINT LLC 2711 Centerville Road, Suite 400 Wilmington, Delaware III66551

3 Serve on: Neil J. Ruther, Resident Agent 29 W. Susquehanna Ave., Suite 6)0 PATRICK W. TURNER 1700 Beason Street Baltimore, Maryland MARK SAPPERSTEIN 15 Evan Way Baltimore, Maryland WESTPORT PROPERTY HOLDINGS, LLC 1700 Beason Street Baltimore, Maryland Serve on: Neil J. Ruther, Resident Agent 29 W. Susquehanna Ave., Suite 610 RUTHER INNER HARBOR, LLC 29 W. Susquehanna Ave., Suite 610 Serve on: Neil J. Ruther, Resident Agent 29 W. Susquehanna Ave., Suite 610 Defendants. ¹6655l

4 COMPLAINT Legal Advice Line, Inc. and M y P rofessional Advice, Inc., by t heir undersigned attorneys, sue Neil J. Ruther, Persels & Associates, LLC, JoAnn N. Ruther, G. Adam Ruther, WMS Partners, LLC, WMS Partners, Silo Point Holding LLC, Silo Point LLC, Patrick W. Turner, Mark Sapperstein, Westport Property Holdings, LLC and Ruther Inner Harbor LLC, and, in support thereof, aver as follows: 1. Thi s is an action under the Maryland Uniform Fraudulent Conveyance Act, Md. Commercial Law II Article, $ et seq. ("MUFCA") and under Family Law Article, $4-301, for declaratory judgment, for setting aside fraudulent conveyances by Defendants Neil J. Ruther (" Neil Ruther") and Persels & Associates, LLC ("P&A"), for the appointment of a receiver and for other relief. Defendants Neil Ruther and P&A are collectively indebted to Plaintiffs in the total amount of $17,000,000, but, after having fraudulently conveyed more than $5,230,000 to the other Defendants, they have failed and refused to make payments to the Plaintiffs on their indebtedness and have asserted that they are without funds to make such payment. 2. Pla i n tiff My Professional Advice, Inc. ("MPA") was incorporated in Maryland in Its principal place of business is in Baltimore County, Maryland. Prior to 2010, MPA was engaged with Defendants Neil J. Ruther and Persels & Associates, LLC in providing debt relief and ancillary services to the consuming public. 3. Pla i ntiff Legal Advice Line, Inc. was incorporated in Maryland in Its principal place of business is in Baltimore County, Maryland. Prior to 2010, Legal Advice Line, lnc. was engaged with Defendants Neil J. Ruther and Persels & Associates, LLC in providing debt relief and ancillary services to the consuming public I

5 Defendant Neil J. Ruther (" Neil Ruther") is a citizen of the State of Maryland, a member of the Maryland Bar and a resident of Baltimore County, Maryland. He carries on a regular business and habitually engages in a vocation in Baltimore County Defendant-Persels & Associates, LLC ("P&A") is a Maryland limited liability company. It was formed in 2004 as Griffith & Ruther, LLC; it changed its name in 2006 to Ruther & Associates, LLC; and it again changed its name in 2008 to Persels & Associates, LLC. Its principal place of business is in Baltimore County, Maryland. Defendant Neil Ruther is its managing member. At all times relevant, P&A has operated as a law firm and carries on a regular business in Baltimore City. 6. Def endant JoAnn N. Ruther ("JoAnn Ruther") is a citizen of Maryland and a resident of Baltimore County, Maryland. Defendant Neil Ruther. At all t imes relevant, she has been married to 7. Def e ndant G. Adam Ruther ("Adam Ruther") is a citizen of Maryland, a member of the Maryland Bar and a resident of Montgomery County, Maryland. He is the son of Neil Ruther and JoAnn Ruther. 8. Def e ndant WMS Partners, LLC, is a Maryland limited liability company with its principal place of business in Baltimore County, Maryland. WMS Partners, LLC carries on a regular business in Baltimore County, Maryland. 9. Def e ndant WMS Partners is a Maryland partnership with its principal place of business in Baltimore County, Maryland. WMS Partners carries on a regular business in Baltimore County, Maryland. D efendants WMS Partners, LLC and WMS Partners are collectively referred to herein as "WMS."

6 10. D e f endant Silo Point Holding LLC (" Silo Point Holding" ) is a Maryland limited liability company with its principal place of business in Baltimore City. It is the Managing Member of Silo Point LLC. It carries on a regular business in Baltimore City. 11. D e fendant Silo-Point LLC (" Silo Point" ) is a Delaware limited liability company with its principal place of business in Baltimore City. It carries on a regular business in Baltimore City. 12. D e f endant Patrick W. Turner (" Turner" ) is a citizen of Maryland and a resident of Baltimore County, Maryland. He carries on a regular business and habitually engages in a vocation in Baltimore City. 13. D e f endant Mark Sapperstein is a citizen of Maryland and a resident of Baltimore County, Maryland. He carries on a regular business and habitually engages in a vocation in Baltimore County, Maryland. 14. D e f endant Westport Property Holdings LLC (" Westport Property Holdings" ) is a Maryland limited liability company with its principal place of business in Baltimore City. It carries on a regular business in Baltimore City. 15. D e fendant Ruther Inner Harbor, LLC ("Ruther Inner Harbor" ) is a Maryland limited liability company with its principal place of business in Baltimore County. It carries on a regular business in Baltimore City and in Baltimore County. JURISDICTION AN9 VENUE 16. T h i s Court has subject matter jurisdiction of this case. 17. B a ltimore County is a proper venue for this action pursuant to Md. Code Ann. Cts. and Jud. Proc. $201(b) because there is no single venue applicable to all Defendants and, as averred above, most of the Defendants could be sued in Baltimore County pursuant to $6-201(a). N66551

7 Baltimore County is also a proper venue for the fraudulent conveyance action against Neil Ruther and JoAnn Ruther pursuant to $6-203(b). PACTS COM M O N TO ALL COUNTS 18. I n 2009, Plaintiffs brought a series of actions in the Circuit Court for Baltimore City against Defendants Neil Ruther and P&A. In their first Complaint, filed on July 28, 2009, in Case No. 24-C , the Plaintiffs sued P&A, and, in their second Complaint, filed on December 7, 2009, in Case No. 24-C , the Plaintiffs sued Ruther. The cases were specially assigned to Hon. Evelyn Omega Cannon and later consolidated by Judge Cannon as Case No. 24-C T h e Complaints alleged, and the evidence confirmed, that Neil Ruther, who had been Plaintiffs' general counsel for more than a decade, wrongfully exploited his position of trust and confidence, and, with the assistance of confederates, stole tens of millions of dollars &om Plaintiffs for his own benefit and for the benefit of P&A. The Complaints set forth causes of action for fraud, breach of fiduciary duty, conversion (misappropriation) and unjust enrichment. The Plaintiffs sought both compensatory and punitive damages. 20. F o u r highly regarded experts, who evaluated the conduct of Neil Ruther that gave rise to the consolidated lawsuits, determined that Ruther (i) engaged in intentional and negligent misconduct that violated professional standards applicable to Maryland lawyers, (ii) grossly abused his fiduciary obligations and (iii) engaged in conduct amounting to thea of his clients' revenue stream, business and business opportunities. 21. T h e evidence also established that, in defending the actions that had been brought against him, Neil Ruther compounded the egregiousness of his tortious misconduct by making false statements under oath to conceal the actions that he had taken to the detriment of the ¹66551

8 Plaintiffs (who were his clients) and by devising a scheme, that included backdating documents, to conceal the fact that he had all along been the principal beneficiary of the ill-gotten gains generated by his misconduct. 22. Fr o m January 9, 2009 to the end of that year, Neil Ruther and his confederates diverted approximately $8,463,165 in profits &om the Plaintiffs to P&A. A s a result, as of December 31, 2009, P&A held approximately $ 9,168,000 in unrestricted cash that Neil Ruther and his confederates had stolen from the Plaintiffs and that the Plaintiffs claimed as their own. 23. O n or about December 23, 2009, Neil Ruther dropped the pretense that he was not the person who controlled P&A, and, within six weeks, he undertook a series of transactions by which he fraudulently conveyed approximately $5,230,000 of P&A's stolen funds. Among other things: (A). O n February 4, 2010, P&A wired $500,000 to a law firm to be used for a capital contribution by Defendant Silo Point-Holding to Defendant Silo Point and for the release of Defendants Neil Ruther, Turner and Sapperstein from obligations under a cost overrun guaranty for the condominium project in Baltimore City known as Silo Point. (B). O n May 11, 2010, P&A transferred $180,000 to an entity that owned an airplane for Ruther to obtain an interest in the entity. (C). O n June 20, 2010, P&A wired $40,000 to Defendant Adam Ruther as a gift. (D). O n June 30, 2010, Defendant Neil Ruther opened an investment account with WMS in his name and in the name of Defendant JoAnn Ruther, as

9 tenants by the entireties, and, on July 9 and 14, 2010, P&A made three transfers to that account totaling $4,400,000. (E). In 2010 and 2011, Defendant Neil Ruther fraudulently transferred large amounts of fimds from- the WMS account to and/or for the benefit of himself and Defendants Turner, Sapperstein, Westport Property Holdings and Ruther Inner Harbor. (F). I n 2 011, P&A transferred large amounts of funds to and/or on behalf of Defendants Westport Property Holdings and Ruther Inner Harbor. (G). In 2011, P&A transferred approximately $100,000 to Defendant Sapperstein as a loan for use in connection with the real estate development by Westport Property Holdings. 24. Each of the conveyances described in the preceding paragraph was a fraudulent conveyance as to each of the Plaintiffs. Among other things: (A). Neil Ruther and P&A made each conveyance without f air consideration when each was and would be rendered insolvent by it, in violation of MUFCA $$ and (B). Neil Ruther and P&A made each conveyance without fair consideration when Ruther and P&A were each engaged in the business of P&A for which the property remaining in the hands of each after the conveyance was an unreasonably small capital, in violation of MUFCA $ (C). Neil Ruther and P&A made each conveyance without fair consideration when each intended and believed that each would incur debts beyond the ability of each to pay as they mature, in violation of MUFCA $ ¹66551

10 (D). Ne i l Ruther and P&A made each conveyance with actual intent to hinder, delay and defraud present and future creditors, in violation of MUFCA $ (E). Neil Ruther made each transfer to- himself- and JoAnn Ruther as tenants by the entireties in prejudice of the rights of Neil Ruther's creditors, in violation of Family Law Art. $4-301(d)(2). (F). None of the conveyances was made for an antecedent debt of P &A, and P &A received no consideration in exchange for any of them. (G). Each of the Defendants had knowledge of the &aud at the time of each conveyance and none acted in good faith in connection with the conveyance. The Defendants other than Ruther and P&A were intimates and close business associates of Defendant Neil Ruther and each knew about the claims that the Plaintiffs had made against Defendants Neil Ruther and P&A. 25. Tr i a l of the consolidated cases against P&A and Neil Ruther was scheduled to begin on May 3, On May 2", on the eve of the trial, Neil Ruther and P&A entered into a binding and enforceable Memorandum of Settlement with the Plaintifs, and, im mediately upon execution, the settlement was put on the record before Judge Cannon. Under the terms of the Memorandum of Settlement, Neil Ruther and P&A obtained the Plaintiffs' agreement to dismiss the lawsuits by promising to pay $9 milhon unconditionally and promising to pay an additional $9 million upon the occurrence of a condition that has not yet taken place, for a total of $18 million

11 26. Ru t her caused P&A to pay only the first $1 million, which was required to be paid at the time of the execution of the Memorandum of Settlement. Once the Plaintiffs had dismissed their cases against Ruther and P&A, however, Ruther and P&A chose not to honor their contractual obligations. Eight weeks aaer the execution of the Memorandum of Settlement, Neil Ruther and P&A were required to make a $1 million quarterly payinent, but, claiming that they were without funds, they failed and refused to make the required payment, thereby accelerating the entire $8 million that is unconditionally owed. Ruther and P&A have now committed a substantial and material payment default, once again showing their contempt for their legal obligations. 27. At t he times of the &audulent conveyances averred herein, the Plaintiffs were creditors of Ruther and P&A within the meaning of MUFCA $15-201(d), and, no later than June 30, 2011, the Plaintiffs' claims matured, within the meaning of MUFCA $ As a result, these fraudulent conveyances are subject to being set aside to satisfy the Plaintiffs' claim. Wherefore, Plaintiffs pray the Court to enter judgment against Defendants as fohows: (A). D eclaring that each conveyance averred above in paragraph 23 is fraudulent as to Plaintiffs; (B}. S e tting aside each conveyance to satisfy Plaintiffs' claims against Defendants Neil Ruther and P&A; (C). A w arding Plaintiffs interest from the date of each conveyance and the costs of these proceedings; (D). A p pointing a receiver to take charge of the fraudulently conveyed funds and property and to satisfy Plaintiffs' claims against Defendants Neil Ruther and P&A; and ¹66551

12 (E). case require. Granting such other and further relief as the circumstances of the Respe fully ubmitted, Arno. einer B. Gogel Jef&ey E. Nusinov Law Offices of Arnold M. %einer 2002 Clipper Park Road, Suite 108 Baltimore, Maryland (410) Attorneys for Plaintiffs 066SSI 12