All I’ve got to say is WOW this makes for an interesting read. Grab a favorite beverage and take a look at the allegations made against debt relief industry famous name — Thomas Lynch. You may recognize his name from Legal Helpers Debt Resolution. I first wrote about Lynch in 2011 in this post.
Clearly, the Plaintiff’s became irritated with incidents that happened. OC West, Liberty Financial USA, and Liberty Debt Solution are, well, pissed.
Probably the most movie script like allegation in the complaint is this section:
“On or around December 15, 2017, after being released from the hospital, Defendant approached Plaintiffs’ representative Brian Roche (“Roche”) in tears begging to borrow money in order to pay for a purported root canal and that he was in “excruciating pain.” Roche, a successful businessman, philanthropist, and 7-year ex-NFL football player with the San Diego Chargers, Kansas City Chiefs, and Dallas Cowboys gave him $2,000.00 in cash, out of the kindness of his heart, as a loan on behalf of Plaintiffs to help him have the root canal obtaining money from Roche under false pretenses and false representations. Defendant took that money and the very next day, knowing that Plaintiffs’ other company Liberty USA had a seasoned history of being in business for over 16 years, formed Liberty Financial USA, LLC in California on December 18, 2017 using his “root canal” money to pay for it in order to fraudulently operate under the same name – in blatant violation of the Non-Compete Agreement.
The same day, December 18, 2017 , again using his “root canal” money, Defendant also formed Phoenix Financial Solutions, LLC in California with the sole purpose of copying Plaintiff and its business and in direct violation of the Non-Competition provisions of the Agreements with “Liquidated Damages, and not a penalty, of no less than Five Million Dollars ($5,000,000.00).” Defendant maliciously created URLs for both entities including www.libertyfinancialusallc.com that mimic and are identical to Plaintiff Liberty USA’s website (www.libertyfinancialusa.com) in order to further perpetuate his fraud.”
A big chunk of the complaint is posted below but you can read the full complaint sent to me, here.
But let me be clear, this is one side of the story, these are allegations until proven, and if I had a clue how to get in touch with Thomas Lynch I’d gladly give him a chance to post his side of the story.
Baruch C. Cohen, Esq. (SBN 159455)
LAW OFFICE OF BARUCH C. COHEN
A Professional Law Corporation 4929 Wilshire Boulevard, Suite 940 Los Angeles, California 90010 (323) 937-4501 Fax (888) 316-6107 e-mail: [email protected],baruchcohenesq.com
Attorneys For Plaintiffs OC WEST, LLC, a Montana Limited Liability Company; LIBERTY FINANCIAL USA, LLC, a Delaware Limited Liability Company; and LIBERTY DEBT SOLUTION, LLC, a Nevada Limited Liability Company
THOMAS JOSEPH LYNCH, Debtor
5. Plaintiff OC WEST, LLC, is a Montana Limited Liability Company.
6. Plaintiff LIBERTY FINANCIAL USA, LLC, is a Delaware Limited Liability Company.
7. Plaintiff LIBERTY DEBT SOLUTION, LLC, is a Nevada Limited Liability Company.
8. Defendant THOMAS JOSEPH LYNCH (“Lynch” or “Defendant”) is an individual residing in Huntington Beach, California and is an owner and principal of APHEX PROCESSING CENTER, INC., a Wyoming Corporation registered to conduct business in California (“Aphex”); BRIDGELINK INSURANCE AND FINANCIAL SERVICES, INC., a California Corporation (“Bridgelink”); BROCATO ENTERPRISES, INC., a California Corporation (“Brocato”); CAFE DE LA MONTANA, LLC, a California Limited Liability Company (“Cafe”); COLOMBIA DIRECT GROUP S.A.S., A COLOMBIAN CORPORATION (“CDG”); COLOMBIA DIRECT GROUP, LLC, a company of unknown legal standing (“CDG LLC”); CONSUMER AFFAIRS LAW CENTER, INC. a California Corporation (“CALC”); CONSUMER AFFAIRS PROCESSING CENTER, INC., a California Corporation (“CAPC”); FINANCIAL SOLUTIONS, INC., a Florida Corporation (“FS”);FINANCIAL SOLUTIONS SERVICE CENTER, LLC, a California Limited Liability Company (“FSSC”); FINANCIAL SOLUTIONS CONSUMER CENTER, LLC, a company of unknown legal standing (“FSCC”); LEGAL CONSUMER CREDIT INSTITUTE, LLC, a California Limited Liability Company (“LCCI”); LEGAL SERVICES SUPPORT GROUP, LLC, a Nevada Limited Liability Company (“LSSG”); LIBERTY FINANCIAL USA, LLC, a California Limited Liability Company (“Liberty CA”), LYNCH FINANCIAL SOLUTIONS, INC., a Florida Corporation (“Lynch FS”); PHOENIX FINANCIAL SOLUTIONS, LLC, a California Limited Liability Company (“Phoenix”), and WYNN AND LYNCH HOLDINGS, LLC, a California Limited Liability Company (“Lynch Holdings”) companies that all relevant times had its principal place of business in and has engaged in business in Orange County, California.
9. Upon information and belief, Plaintiffs allege that, at all relevant times, there existed a unity of interest and ownership between Aphex, Bridgelink, Brocato, Cafe, CDG, CDG LLC, CALC, FS, FSSC, LCCI, LSSG, Liberty CA, Lynch FS, Phoenix, and Lynch Holdings on the one hand (collectively “Lynch Entities”), and the Defendant on the other, such that any individuality and separateness between them has ceased. The Lynch Entities are a mere shell through which the Debtor carried on business and exercised complete control of the Lynch Entities so that any individuality and separateness of the Lynch Entities on the one hand, and the Defendant on the other, has ceased. Plaintiffs therefore contend that the Lynch Entities were operated by and for the benefit of the Defendant as his alter ego and that, in the interest of justice, any alleged corporate form of the Lynch Entities should be disregarded and the Lynch Entities’ obligations and assets be treated as obligations and assets of the Defendant. Defendant, with the assistance of counsel, filed a voluntary petition for relief under Chapter 7 of Title 11 of the United States Code on 1-15-2019.
FACTUAL ALLEGATIONS AGAINST DEFENDANT
10. Defendant, who also goes by the undisclosed aliases THOMAS J. HUMPHREYS, TOM LYNCH JR, THOMAS J. LYNCH, THOMAS J. LYNCH JR, THOMAS J. LYNNCH, TOM BRADLEY, THOMAS BRADLEY, and CHERYL SCOTT, is a serial contract breacher and fraudster whose modus operandi is to solicit investments from parties like Plaintiffs with no intention of ever honoring those deals, breaching contracts and stealing through conspiracy and fraud. The Defendant is bankrupt financially and morally.
11. For background purposes, Defendant attempted numerous times to get Plaintiffs to invest in Defendant’s coffee business. In furtherance of this scheme, and at all times relevant, Defendant represented that he was a successful businessman and owner of several domestic and international companies related to the debt settlement industry and coffee industry, among other things.
12. Regarding coffee, in order to try to induce Plaintiffs into entering into a deal with him, he represented that he was, among other things:
a. owner and Chief Operating Officer of CDG and CDG LLC, with headquarters in Orange County, California and Medellin, Columbia and one of the oldest coffee growing families in Colombia for over 120 years and whose father was President of the Colombian Coffee Federation (FNC) of Antioquia and whose Grandfather was the President of the Senate of the Republic of Colombia;
b. owner and Chief Operating Officer of Cafe, an international coffee wholesaler responsible for selling containers of coffee valued at millions of dollars to Royal Coffee in San Francisco CA one of the nations largest coffee distributors and just one of the many distributors Defendant conducted business with; &
c. owned equipment valued at millions of dollars including a “cutting-edge 5-tier UV protected Drying Canopy, Wet Mill, Dry Mill, family coffee farms located in “coffee central” shipping out containers of coffee daily, and property owned outside of Medellin including a “house close to the airport that sits on top of a mountain with a wonderful view overlooking a big plain referred to as the Beverly Hills of Colombia.”
13. Although Plaintiffs declined to invest in Defendant’s purported coffee empire, Defendant continued to send unsolicited emails for years boasting about his successes in the coffee business, the millions of dollars of containers he was wholesaling to Royal Coffee and others, all while piggybacking his family’s 120-year history in the business. Although Plaintiffs are still trying to ascertain what assets he actually owns under his name or any entity he is affiliated with in Colombia subject to his bankruptcy petition and divorce proceeding, what is confirmed is that Defendant never conducted any business with Royal Coffee, not then or ever. Even the pictures of him and his wife on horseback he personally provided to Plaintiff were taken during a family vacation and tour of another company’s coffee plantation that he was fraudulently representing for years was his.
14. Beginning on November 28, 2016, in order to induce Plaintiffs to invest in his debt relief business, Defendant sent Plaintiffs his professional CV which made various representations about his debt relief and consumer protection experience and business acumen, with immaculate credit, claiming that Defendant was an instrumental player, owner, Chief Executive Officer, Chief Operating Officer, Executive Director, President, and/or Vice-President of the following successful debt relief businesses:
a. HOMELAND FINANCIAL SERVICES, INC., involved in the start-up and day-to-day operations of the original and largest debt relief company in the nation;
c. LYNCH FINANCIAL SOLUTIONS, INC. which is the manager and member of LSSG among other Lynch Entities, developing a marketing/sales strategy referring 3,600 new clients per month generating $260M of revenue and proudly boasting that he personally negotiated over $1 Billion of debt for individuals and businesses;
d. CONSUMER ADVICE CENTER, INC. serving as President;
e. CONSUMER AFFAIRS LAW CENTER, INC. serving as Chief Executive Officer;
f. APHEX PROCESSING CENTER, INC., serving as President and Chief Financial Officer;
g. BROCATO ENTERPRISES, INC., serving as Chief Operating Officer;
h. MY TRUE CLOUD, serving as Vice-President.
15. Defendant re-affirmed these representations by sending an updated version of his CV to Plaintiffs on January 11, 2018.
16. However, unknown to Plaintiffs at the time, Defendant conveniently never once disclosed that almost every single company Defendant was involved in faced civil and criminal charges for defrauding consumers in the same way he has done with Plaintiffs, including, but not An limited to:
a. An enforcement action filed by the Illinois Attorney General’s office against Defendant on March 2, 2011 in the State of Illinois Circuit Court of the Seventh Judicial Circuit, Sangamon County, The People of the State of Illinois v.v. Legal Helpers Debt Resolution, LLC, et al., Case No.: 2011CH00286 in which Defendant ultimately agreed to cease soliciting and enrolling consumers in debt settlement and in which he paid $2.1 million in partial restitution to Illinois consumers and $150,000 to the State of Illinois;
b. A class action civil suit against several Lynch Entities in the Superior Court of New Jersey, Dawn Guidotti vs. Lynch Financial Solutions, Inc. et. al.. Docket No.: BUR-L-338-11, citing an unlawful plan or scheme is in violation of the New Jersey Debt Adjustment and Credit Counseling Act, N.J.S.A. 17:16G-1, et seq. since these services are performed by for profit entities or persons not permitted to operate such business in New Jersey under the Act. Such debt adjustment activity further constitutes the unauthorized practice of law in the State of New Jersey. Both violations constitute crimes under New Jersey law and are in violation of the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1, et seq., the New Jersey Racketeer Influenced and Corrupt Organizations Act, N.J.S.A. 2C:41-1, et seq., and other State laws;
c. Named as a defendant by a Chapter 7 Trustee in an Adversary Proceeding in United States Bankruptcy Court, Southern District of California, In re: Steven Laird Shipley, Case No.: 12-14621-LT7, Debtor Complaint for Avoidance and Recovery of Preferential Transfer and Fraudulent Relief;
d. Named as a defendant in an Adversary Proceeding in United States Bankruptcy Court, Central District of California, In re: Melanie Barry, Case No. 12-50383;
e. Named as a defendant in a Chapter 13 Adversary Proceeding in United States Bankruptcy Court, Easter District of North Carolina, Raleigh Division, In re: Julie Bell, Case No.: 09-09375-8-JRL, seeking to avoid pre-petition transfer of property and for damages arising out of the restrictions imposed on debt relief agents under section 526 of the Bankruptcy Code, and for damages and violations of the North Carolina Unfair and Deceptive Trade Practices Act;
f. Named as a defendant in complaint with the Office of Consumer Affairs (OCA) in the Commonwealth of Virginia, Department of Agriculture and Consumer Services, In re: Roijo E. Ellis, Case No.: 907218, for fraud among other criminal and civil causes of action;
g. Named as a Defendant in Mansfield Municipal Court, Mansfield, Ohio, Case No.: 2016-CVF-02393 and Chapter 13 Bankruptcy Petition in the Western District of Oklahoma, In re: Alan P. Gibson, Case No.: 19-10024;
h. Named as a defendant by a Chapter 7 Trustee Albert A. Riederer in an Adversary Proceeding in the United States Bankruptcy Court, District of Kansas, Kansas City Division, In: re: Brooke Corporation, et al., Case No.: 08-22786-DLS, pursuant to recovery of monies under 11 U.S.C. § 548 and K.S.A. § 33-205 in which United States Bankruptcy Judge Dale L. Somers Granted an Order For Default Judgment against Defendant in the amount of $13,124.42;
17. Beginning in 2013 and continuing throughout 2017, in furtherance of his unrelenting efforts to induce Plaintiffs to invest in his debt relief business, Defendant continually represented that he owned a custom Customer Relationship Management (“CRM”) hardware system as one of his valuable assets that he spent “approximately $1M on” and software system that he spent another $1M “creating.” He represented to Plaintiffs that he owned a list of hardware, servers, and phone systems which operated the ISO 27001 highest type of security available and that it had other modules in addition to debt settlement that he also represented he spent another $500,000.00 developing. (He bragged about the $1M CRM and $500K extra he “spent” building the ISO 27001 hardware, servers, phone, etc.). He further represented to Plaintiffs that “other CRMs available in the industry such as National Data Systems (NDS), Lead Trac, DebtPayPro, Prime Debt Soft, and Credit Soft “merely make orange juice where my CRM makes the entire breakfast.” He also provided Plaintiffs with a letter verifying his ownership of the software and source code without any liens, and that Defendant owned them free and clear individually and under his company Consumer Affair Processing Center. However, unknown to Plaintiffs at the time, said representations were all false.
18. In reliance of Defendant’s representations, on December 12, 2016, Plaintiff OC West entered into a Patent and Technology Perpetual License Agreement (“CRM Agreement”) with Defendant, Lynch FS, and FSSC whereby Plaintiff was to receive the source code for this One Million Dollar ($1,000,000) CRM system including “worldwide, royalty-free, right and license” in exchange for money acknowledged received by Defendant.
19. Per the terms of the CRM Agreement, and based on his representations that Defendant owned the above rights and assets, Defendant promised (yet failed) to:
a. Grant Plaintiff a “royalty-free, perpetual, non-exclusive assignable, sub-licensable right and license to that certain CRM;”
b. Provide Plaintiff with the source code version of the CRM valued at over $1,000,000.00 and related documentation including: list of all open source software components utilized, list of third party software utilized, CRM documentation fixed used to install and maintain the source code on any computer, and will update it all not less than an annual basis to reflect changes and additions reflecting modifications, upgrades, and improvements; &
c. Give the source code materials to Plaintiff to internally use, modify, enhance, improve, and copy for itself, its affiliates, and its subcontractors) worldwide, among other things.
20. Defendant breached terms of the CRM Agreement even before the ink was dry and to date Plaintiff still has never received what it supposedly purchased. It was clear, that at the time Defendant promised to perform the December 12, 2016 CRM Agreement, he had no intention of ever performing.
21. Furthermore, during Defendant’s 341 exam conducted on April 3, 2019 by US Trustee Karen Naylor, Defendant testified under oath, and revealed, that in fact the CRM was “non-operational” and that it would cost “a lot of money” and in excess of “$10,000.00 for hardware to get it operational and in excess of $80,000.00 to pay programers just to program it.”
22. On or about April 11, 2017, Defendant and FSSC executed loan agreements with Jon Paul Sanchez (“JP”) and Jesse Cavett (“Jesse”) representing and warrantying in writing that:
a. JP and Jesse are given a security interest and collateral in the form of “100% of the assets and property of FSSC now owned, after acquired or derived, including but not limited to all receivables, all assets all fixtures, all software, all hardware and all intellectual property owned by FSSC;”
b. that Defendant and FSSC are prohibited from issuing, selling, or diluting FSSC in any way; and
c. as of the signing of the JP and Jesse loan agreements, JP owns 140,000 membership interests in FSSC and Jesse owns 90,000 membership interests.
23. In furtherance of the loan agreements with JP and Jesse, Defendant and FSSC agreed in writing to the issuance of a UCC-1 Lien to perfect this security which was filed with the California Secretary of State on June 16, 2017, Filing Number: 17-7590904547. Within months, as usual, the Jesse and JP agreements were breached by Defendant and FSSC for failure to pay, and fraud in which all rights, title and interest were ultimately assigned to Plaintiff OC West.
24. Then, in furtherance of the on-going fraud perpetrated by Defendant, just a few months later on August 17, 2017, Defendant and FSSC executed written agreements with Plaintiff OC West outlining the development and operation of a debt settlement business utilizing Plaintiffs’ capital and Defendant’s experience called Liberty Debt Solution, LLC. These documents consisted of a Partnership Agreement and other Secured Loan Documents in order to document Plaintiffs’ investment, consisting of a Convertible Promissory Note (“Note”), Security Agreement (“Security Agreement”), Pledge Agreement (“Pledge Agreement”), Guaranty Agreement (“Guaranty Agreement”), and Assignment Agreement (“Assignment”) all personally executed, initialed on each page, and guaranteed by Defendant (collectively the “Loan Agreements”).
25. Defendant represented in the Loan Agreements that: “Thomas Lynch is the owner and operator of FSSC and shall be employed as a 1099 Independent Contractor with Liberty” and that Plaintiff “will be investing money into Liberty and Lynch shall be personally guaranteeing said amounts.” The Loan Agreements executed and initialed on each page by Defendant provided for a First Secured priority interest and lien in Defendant individually and all of FSSC’s assets, payment proceeds, goods, inventory, rights and clients, among other things, however as pled herein. A UCC-1 Financing Statement was filed with the California Secretary of State against Defendant and Lynch Entities on February 1, 2018, Filing Number: 18-7631643726.
26. Defendant further represented in the Loan Agreements (a Non-Competition provision) stating: “Lynch shall not, directly or indirectly, individually or with any other person or entity(ies): negotiate, consummate, contact directly or engage in any business in direct competition with Liberty as a debt settlement company or other services Liberty offers; attempt to bypass, interfere with, avoid (“Circumvent”), or permit to cause any affiliates to Circumvent or interfere with any relationship of Liberty” among other obligations that were breached within weeks of signing.
27. Most importantly, the Loan Agreements specifically provided for a Liquidated Damages provision for violation of any section of the Agreement clearly stating: “Therefore as allowed under Nevada Law, Lynch hereby agrees that Liberty shall be entitled to Liquidated Damages, and not a penalty, of no less than Five Million Dollars ($5,000,000.00).”
28. Through the execution of a separate Assignment Agreement as part of the Loan Agreements, Plaintiff was to own all membership interest in FSSC, or any related entity acquired by Defendant thereafter including Phoenix, and including, but not limited to: all proceeds from any assets, payment proceeds, rights, inventory, goods, accounts receivable, and client funds, stating: a) “Assigns all rights, title and interests, including membership interests, in FSSC and all subsequently acquired interests in this or related entities”: b) “This Assignment is intended to convey to Assignee all rights, title and interest”; c) “rights as a member to vote and participate in the management of the business, property, and affairs”; d) “exercise all rights of a member without restriction”; and e) “will not give, sell, assign, transfer, or in any way or manner pledge, hypothecate, encumber, use as collateral, or give or permit a lein <sic> which will or might conflict or impair the rights herein granted.”
29. The Loan Agreements executed by Defendant in favor of Plaintiff were a complete fraud, enticing Plaintiff to loan Defendant and invest in excess of $500,000.00.00 and directly contradicting the Jesse and JP Agreements he executed just four (4) months prior in which he represented to Plaintiff that:
a. Defendant is the 100% owner of all membership interests in FSSC (he was not);
b. Defendant and FSSC grant a first priority security interest and lien in FSSC to Plaintiff which was already granted;
c. Defendant owns all interests in FSSC free and clear of all liens, claims, and encumbrances which was a lie subject to the Jesse and JP Agreements; and
d. Defendant is assigning through the Assignment all rights, title and interest, including membership interests, in FSSC and that they have not been sold or assigned to any other party, which was also a lie subject to the Jesse and JP Agreements. Defendant agreed in writing to $5 million liquidated damages provision for breach of any provision of the Loan Agreements.
30. The Loan Agreements further provided for an Indemnity Provision and Attorneys’ and other Fees and Costs Guaranty, in which Defendant individually and along with FSSC agreed to “indemnify and hold [Plaintiffs] Liberty Debt and OC West and their owners, manager, employees, and other affiliates, harmless from and against any and all liabilities, losses, damages, claims, cost, and expenses of any kind whatsoever relating to or arising directly or indirectly out of consequential damages, legal fees, and other costs and expenses defending claims or controversies.” Additionally, Defendant individually and on behalf of FSSC promised to “pay all costs, expenses, and attorney’s fees incurred by Liberty or OC West in the defense of any civil matters including civil suits” and regarding the “operations of Liberty including probate, bankruptcy, or other proceeding” personally guaranteeing and indemnifying Plaintiff Liberty Debt for the very business he would be operating.
31. In further perpetuation of Defendant’s on-going fraud, this time against the State of California Employment Development Department (“EDD”), Defendant filed for Unemployment Benefits on April 2, 2018 and was promptly denied by the EDD due to his Independent Contractor status that he agreed to in writing pursuant to § 623 CUIC and § 926 CUIC. Defendant, unrelenting on gaming the California unemployment system through fraud, filed an appeal on May 2, 2018 with an entirely separate California governmental agency, the California Unemployment Insurance Appeals Board, Orange County Office of Appeals, Case No.: 6142165, in which an appeal was heard without any notice, due process, or opportunity for Plaintiff to appear to oppose it. Defendant prevailed on appeal without any objection by Plaintiff during the hearing and has received in excess of $10,000.00 from the EDD as represented in his Chapter 7 Bankruptcy Petition and based on the very acts he guaranteed to protect Plaintiff against since he was operating the business and employing himself. Defendant is currently under criminal investigation by several state and federal agencies in California related to this fraudulent EDD matter.
32. As a coup de grace related to his wage status and further fraud on the California unemployment system, on September 5, 2018, Defendant filed a lawsuit in the Superior Court of California, County of Orange entitled Thomas Lynch v.v. Liberty Debt Solution, LLC and Brian Roche, Case No: 30-2018-01016550-CU-OE-CJC (“Wage Complaint”) for various causes of action relating to his purported employment from August 11,2017 – January 15, 2018 citing misclassification as a 1099 worker instead of a W2, failure to pay wages, overtime, breaks, and other causes of action again for the very business he was supposed to be operating and the very type of civil labor claim he indemnified Plaintiffs from under the Loan Agreements.
33. On October 2, 2017 less than three (3) weeks into the launch of Plaintiffs’ business, the business he was supposed to be operating, Defendant suffered a heart attack and underwent open heart surgery. He was unable to return to return to work per his doctor’s orders yet still filed the Wage Complaint stating that he “worked at least 10 hours a day, Monday through Friday (and sometimes on Saturday) six days a week between August 11, 2017-January 15, 2018” and wasn’t provided proper meal periods and rest periods. Defendant made these judicial admissions despite being in the hospital from October 2, 2017 on, during this relevant period, under the knife for open heart surgery for which he could not possibly have worked any hours in any day, and despite the fact that he was supposed to be running Plaintiffs’ business and overseeing himself. All despite his agreement throughout the Loan Agreements that he is only a “1099 Independent Contractor” for which he received a 1099 from Plaintiff for 2017. Plaintiff has now been forced to hire the services of an Employment Attorney and to re-open the case on Appeal costing Plaintiff thousands of dollars in legal fees and further exposing Plaintiff to tens of thousands of dollars in damages to the State of California despite Defendant agreeing in writing to indemnify Plaintiff against just that.
34. On or around December 15, 2017, after being released from the hospital, Defendant approached Plaintiffs’ representative Brian Roche (“Roche”) in tears begging to borrow money in order to pay for a purported root canal and that he was in “excruciating pain.” Roche, a successful businessman, philanthropist, and 7-year ex-NFL football player with the San Diego Chargers, Kansas City Chiefs, and Dallas Cowboys gave him $2,000.00 in cash, out of the kindness of his heart, as a loan on behalf of Plaintiffs to help him have the root canal obtaining money from Roche under false pretenses and false representations. Defendant took that money and the very next day, knowing that Plaintiffs’ other company Liberty USA had a seasoned history of being in business for over 16 years, formed Liberty Financial USA, LLC in California on December 18, 2017 using his “root canal” money to pay for it in order to fraudulently operate under the same name – in blatant violation of the Non-Compete Agreement.
35. The same day, December 18, 2017 , again using his “root canal” money, Defendant also formed Phoenix Financial Solutions, LLC in California with the sole purpose of copying Plaintiff and its business and in direct violation of the Non-Competition provisions of the Agreements with “Liquidated Damages, and not a penalty, of no less than Five Million Dollars ($5,000,000.00).” Defendant maliciously created URLs for both entities including www.libertyfmancialusallc.com that mimic and are identical to Plaintiff Liberty USA’s website (www.libertyfinancialusa.com) in order to further perpetuate his fraud.
36. This fraudulent scheme of operating FSSC, Phoenix, and Liberty CA was in direct violation of the Non-Compete provision of the Loan Agreements and was specifically done in order to defraud Plaintiffs. Defendant even executed a Partnership Agreement for Phoenix outlining the partnership, contributions, ownership interest, roles, responsibilities of each, circulated among them in December, 2017, and listing Defendant’s ownership interest as 28% in which he would serve as “President and Manager” among other job responsibilities again in direct violation of the Non-Compete provision of Plaintiffs’ Loan Agreements.
37. Knowing no bounds and in furtherance of his civil and criminal fraud, Defendant then obtained an Employment Identification Number for each entity, Liberty CA EIN: 47-2430031 and Phoenix EIN: 82-3854036 and opened bank accounts for each entity at Wells Fargo located at 19081 Goldenwest St, Huntington Beach, CA 92648 and Chase Bank located at 19461 Main St Ste 102, Huntington Beach, CA 92648 none of which were even listed any of the Defendant’s petition filings.
38. On or about January 10, 2018, Defendant emailed Kim Stratford at Secure Account Service (“SAS”), Plaintiffs’ payment processor, with the Subject line: “Updated Application Documents for name Change to Liberty Financial USA” including a signature with the name “Thomas Lynch” and stating if you “have any questions you may call me on my cell at 714-321-6971.” Later the same day, Defendant sent a second email to Kim Stratford at SAS the subject line “Updated Banking Info for Liberty Financial USA” and included a copy of the new Liberty Financial USA bank account that Defendant opened in his name as signatory.
39. On or about February 10, 2018 after over a month, Plaintiffs contacted SAS and inquired about its clients fees that had not deposited into its bank accounts and was told that on January 10, 2018, a month prior, Defendant had provided SAS with new banking information for Plaintiffs’ company and that the client fees were depositing into that account of the same name. Plaintiffs had no idea Defendant had formed a new California entity using his company name he has had since 2001 with the only purpose of being able to embezzle funds. Defendant was not entitled to any client funds of Plaintiffs and was merely a 1099 Independent Contractor and only by fraudulently impersonating Plaintiffs was he able to convert Plaintiffs’ client funds for his personal use by diverting and stealing Plaintiffs’ client funds by impersonating Plaintiff Liberty USA to Plaintiffs’ processor SAS.
40. On or around January 29, 2018, when SAS tried to reverse the funds that were fraudulently converted and embezzled, the account came back NSF and Defendant has been in possession of those funds since. Defendant is now the subject of on-going criminal investigation by several state and federal agencies in California and Arizona where SAS is located related to this matter of stealing Plaintiffs’ client fees through fraud, impersonation, and other illegal means.
41. On April 2, 2018 Plaintiff OC West filed a Complaint in the Superior Court of California, County of Orange, OC West, LLC vs. Thomas J. Lynch, Case No.: 30-2018-00983118-CU-CL-CJC for breach of contract related to the assigned JP and Jesse claims. A Motion to Compel and Answers Deemed Admitted All Facts Referenced Herein was granted by the Court in that action, and hearing for terminating sanctions scheduled against FSSC in May 2019 was stayed as to Defendant as a result of the Bankruptcy filing.
42. On August 27, 2018, Liberty Debt filed a lawsuit in District Court of Clark County, Nevada against Defendant, FSSC, and Phoenix for fraud, conversion, and various other causes of action relating to the breach of the Loan Agreements and operating competing companies from his house in direct violation of the covenants not to compete, Liberty Debt Solution, LLC vs. Thomas Joseph Lynch, et. al.. Case No.: A-18-78005-C.
43. At all times relevant, Defendant represented to Plaintiff he owned millions of dollars in assets, properties domestically and internationally in Colombia, flourishing businesses making millions of dollars a year, with perfect credit, all while offering to put up the titles to various automobiles he owned as security and collateral, including, but not limited to:
a. A “one of a kind” 1974 Porsche Carrera RSRIROC, VIN: 9114400309 (“Porsche”) titled in his name and valued at over $100,000;
b. A 1981 Harley Davidson FLH, Police Special, VIN: 1HD1AAK188Y047910 titled in his name and valued at over $50,000.00;
c. A 2009 Cadillac Escalade Hybrid, VIN: 1GYFC43539R114710, titled in his name and valued at over $75,000, and d) 2010 Dodge Challenger 2 Door Custom Coup, VIN: 2B3CJDW5AH219133, titled in his name and valued at over $60,000, among other assets.