Preview
MICHAEL K. JEANES
Clerk of the Superior Court
Ey kin uhitson, Deruty
| | Christopher M. Goodman (#023231) porto es Tine ee nt
KERCSMAR & FELTUS PLLC ~-~—-—— PASEH (02013-053288 -—--—— _
2 | 6263 N. Scottsdale Road, Suite 320 CIVIL NEW CORFLATNT 319.0
3 | Scottsdale, Arizona 85250 TOTAL aMOUET 4
Telephone: (480) 421-1001 eee A ecointh Sem?
4 | Facsimile: (480) 421-1002
5 cmg@kflawaz.com
6 | Attorneys for Plaintiff
7 IN THE SUPERIOR COURT OF THE STATE OF ARIZONA
8 IN AND FOR THE COUNTY OF MARICOPA
9
10 | MLB-2010, L.L.C., an Arizona Limited Case No.
Ul Liability Company, : ‘
bo Plaintiff, CV2013-053288
3 v. COMPLAINT
WIITA MINING, LLC, a Nevada Limited
14 | Liability Company; MIDDLECAMP
RESOURCES L.L.C., a Nevada Limited
15 || Liability Company; VENCAP (Breach of Contract, Fraud,
MINERALS, Pie's Nevada Limited Negligent Misrepresentation,
16 | Liability Company; CRAIG WIITA and Accounting, Securities Fraud, Sale of
JENNIFER WIITA, individually and as a Unregistered Securities)
17 | married couple; WILLIAM SCOTT
MARSHALL and JANE DOE
18 | MARSHALL, individually and as a
married couple; DAVID M. NAYLOR and
19 | JANE DOE NAYLOR, individually and as
a married couple,
20
Defendants.
21 :
22 NATURE OF ACTION
23 This is a breach of contract, fraud, accounting, and securities action arising out of|
24 | an Arizona mining investment sold by Defendants to Plaintiff. Plaintiff alleges that
25 | Defendants made misrepresentations regarding the investment and their own ability to
26 | deliver on their promises, had no intent to fulfill the terms of the investment agreement at
27 | the time it was made, and ultimately absconded with Plaintiffs entire investment.
28 | Plaintiff further alleges that Defendants failed to account for the project, even after] | repeated demands by Plaintiff, and Plaintiff requests the Court order an accounting to
2 || determine the location of Plaintiff's funds as well as tax implications for all involved.
3 PARTIES, JURISDICTION, AND VENUE
4 1. Plaintiff MLB 2010 L.L.C. (“MLB”) is an Arizona Limited Liability Company
5 with its principal place of business within Maricopa County, Arizona. As to this
6 case, MLB was engaged in an investment in a mining claim located within La Paz
7 County, Arizona.
8 2. Defendant Middlecamp Resources, L.L.C. (“Middlecamp”) is a Nevada Limited
9 Liability Company authorized to do business within Arizona. Middlecamp’s
10 manager is Craig Wiita. As to this case, Middlecamp entered into an agreement
il permitting a mining operation on a mining claim that it represented it owned
12 located within La Paz County, Arizona.
13 3. Defendant Wiita Mining, L.L.C. “(“Wiita Mining”) is a Nevada Limited Liability
14 Company authorized to do business within Arizona. Wiita Mining’s manager is
15 Craig Wiita. As to this case, Wiita Mining entered into an agreement to conduct a
16 mining operation at a mining claim in La Paz County, Arizona.
17 4. Defendant VenCap Minerals, L.L.C. (“VenCap™) is a Nevada Limited Liability
18 Company authorized to do business within Arizona. VenCap’s Managers are
19 David Naylor and William Marshall. Craig Wiita is a member of VenCap. As to
20 this case, VenCap entered into an agreement to administrate an investment in a
21 mining operation at a mining claim within La Paz County, Arizona.
22 5. Defendants Craig Wiita and Jennifer Wiita (“Wiita”) are married individuals and
23 California residents. As to this case, Craig Wiita is the manager of both
24 Middlecamp and Wiita Mining, and as manager of those companies made
25 representations and undertook acts related to an investment in a mining claim
26 within La Paz County, Arizona.
27 6. Defendants William Scott Marshall and Jane Doe Marshall (“Marshall”) are
28 married individuals and Arizona residents. As to this case, William Marshall is the
2I manager of VenCap, and as manager of VenCap made representations and
2 undertook acts related to an investment in a mining claim within La Paz County,
3 Arizona.
4 7. Defendants David M. Naylor and Jane Doe Naylor (“Naylor) are married
5 individuals and Arizona residents. As to this case, David Naylor is the manager of|
6 VenCap, and as manager of VenCap made representations and undertook acts
7 related to an investment in a mining claim within La Paz County, Arizona.
8 8. The events described in this Complaint occurred in either Maricopa County or La
9 Paz County, Arizona, and concern an investment in a mining operation at a mining
10 claim located in La Paz County, Arizona.
It 9. The investment agreement forming the basis of this action, executed by MLB,
12 Middlecamp, Wiita Mining, VenCap and signed by MLB representatives as well as
13 Wiita and Naylor, contained a choice of law provision stating that “this agreement
14 shall be governed by and construed in accordance with the laws of the State of|
15 Arizona and the laws of the United States of America applicable therein.”
ozs 16 10. Jurisdiction with the Superior Court of the State of Arizona is proper.
& 17 11. Venue within Maricopa County is proper.
18 ALLEGATIONS COMMON TO ALL COUNTS
19 12. In late 2012, MLB explored the possibility of a gold mining investment within the
20 state of Arizona.
21 13.MLB was referred to Wiita by Mike Snyder, who understood Wiita held several
22 claims within the state. Wiita had represented himself to Mr. Snyder as someone
23 who owned several mining claims and had experience in gold production.
24 14. Wiita represented to MLB that he had extensive experience in gold production
25 operations at Arizona mining claims. Among these representations were that Wiita
26 owned several claims that produced large nuggets of gold. Wiita presented these
27 nuggets to MLB as a representation of the mineral wealth of Wiita’s claims.
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15. Wiita represented to MLB that he owned a claim known as “Payload 5 & 8,”
located in La Paz County, Arizona. Wiita represented that he had performed testing
upon Payload 5 & 8, and the claim produced ore rich with gold that justified
significant investment for its extraction and processing.
16. Wiita offered to lease or sell the Payload 5 & 8 mining claim to MLB, as well as
offered to conduct the extraction and processing of materials on that claim.
17.MLB and Wiita entered into an agreement for a mining operation on the Payload 5
& 8 claim whereby MLB would lease to own the claim for a total price of|
$500,000.00, paying Wiita a percentage to assist in processing ore on the claim.
18. After entering into the agreement but prior to the first payment, MLB discovered
that the road to the Payload 5 & 8 claim was insufficient to supply equipment to the
site. Wiita offered to widen the road for a significant additional investment. MLB
declined to pay Wiita for additional work, and the parties agreed to cancel the
Payload 5 & 8 lease-to-own agreement.
19. Later, after the parties had entered into the agreement that is the subject of this
lawsuit, MLB became aware that Wiita did not own the Payload 5 & 8 claim, had
not perfected his interest in the claim, and had not received permission from the
proper authorities to commence testing upon that claim.
20. After the cancellation of the Payload 5 & 8 agreement, Wiita represented to MLB
that he had another claim, known as White Cross 2, upon which he had performed
testing and projected a per-ton gold yield that justified significant investment in
order to undertake a bulk sampling project.
21. Wiita represented that Middlecamp, an entity of which he is the manager, had
perfected its ownership of the White Cross 2 claim and had permission to engage in
mining operations.
22. Like with Payload 5 & 8, Wiita represented that White Cross 2 produced ore rich
with gold that justified significant investment to facilitate its extraction.Ker
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23. Wiita represented to MLB that he had “paid off his house” with gold produced
from the areas at or near the White Cross 2 claim.
24. It was at this time that Wiita introduced MLB to Marshall and Naylor, represented
to be Wiita’s partners in mining and exploration.
25.In January 2013, Wiita and Marshall presented to MLB a document titled “South
White Cross Bulk Sample Project,” a pro forma for the potential investment by
MLB in a mining operation on White Cross 2, hereinafter called the “Project.”
(Exhibit 1, attached hereto.)
26.The pro forma made a number of representations regarding the viability of the|
Project and the investment the Defendants sought from MLB. These
representations were designed to induce MLB’s investment into the Project.
27. Among the representations made in the pro forma was the potential yield of the
Project. It stated “for conservatism this report provides a proforma (sic) presenting
the most obtainable grade scenario of 4 grams per ton...” (Exhibit 1.) The
document then made projections based upon that yield.
28. Wiita and Marshall represented to MLB that testing they had performed on the
White Cross 2 claim supported the 4 gram per ton yield listed in the pro forma.
29. Among the projections based upon the 4 gram per ton yield was that, at the end of|
the 90-day sampling Project that would process 4,000 tons of ore—producing some
16,000 grams of gold—the Project would return $848,780.00 in gross proceeds.
30. These projections also represented that Wiita Mining, as the operator of the Project,
had the experience and the capacity to process 4,000 tons of ore in a period of 90
days.
31. The pro forma included a schedule for processing by Wiita Mining. Once the
Project was underway—after payments from MLB totaling $150,000.00—Wiita
Mining would be processing 500 tons of ore every two weeks.
32. The pro forma sought a $300,000.00 investment from MLB in return for 75% of
the gross proceeds from the Project.oO mI RH FF WN
33. According to the projections in the pro forma, MLB “receives 75% of the gross
proceeds or $636,585, ending the 90 days with a surplus of $336,585.”
34. The pro forma further projected that the White Cross 2 claim had over 1 million
tons of materials available for processing, and using the “conservative” estimate of}
4 grams per ton, the value at current prices was over $212 million.
35. At the time the pro forma was presented to MLB, both Wiita and Marshall made
representations to MLB about the viability of the Project and the projections in the
pro forma that were designed to induce MLB’s investment.
36.These representations included specific representations that Middlecamp had
perfected its interest in White Cross 2, that the project could proceed as scheduled
even with government permitting requirements, and that acquisition of government
permits for the Project were merely a formality.
37. These representations included specific representations that testing had been
performed on the White Cross 2 claim that would support the “conservative” 4
gram per ton projections contained in the pro forma.
38. These representations included specific representations that Wiita and Wiita
Mining had sufficient experience in extraction and processing that it could meet the
schedule contemplated by the pro forma.
39. These representations included that the Project would be professionally
administrated by VenCap, who was represented to have experience managing such
projects and would sell all minerals extracted, as well as account for all expenses
and income.
40. Based upon and in reliance of both the representations in the pro forma and the
various representations made by Wiita, Marshall, and Naylor, MLB agreed to
invest in the Project.
41.On February 13, 2013, MLB, Middlecamp, Wiita Mining, and VenCap entered into
an Agreement titled “Agreement Regarding Investment, Operations & Distribution(480) 421-1001
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of Proceeds from the South White Cross Bulk Sampling Project,” hereinafter
known as the “Agreement.” (Exhibit 2, attached hereto.)
42. The Agreement attached the pro forma as an exhibit.
43.The Agreement called for an investment by MLB in the amount of $300,000.00,
payable in six installments of $50,000.00, the first being due upon execution of the
Agreement and the last due no later than April 15. Payment would be made to
Middlecamp, who would then pay Wiita Mining to operate the Project. VenCap
would act as administrator for the Project, and handle the accounting as well as the
sale and distribution of proceeds. VenCap would pay for permitting and bonding
the Project, but it was unclear from the Agreement how or when VenCap would be
paid.
44. In return for its investment, MLB would receive 75% of the gross proceeds from
the sale of gold extracted from White Cross 2 during the course of the Project.
45, The other three parties to the Agreement, Middlecamp, Wiita Mining, and VenCap,
would split the remaining 25% of the gross proceeds under a formula that was not
delineated by the Agreement.
46.In the Agreement, Middlecamp represented that it had perfected its interest in
White Cross 2, and that all permits for the Project had either been obtained or were
in the process of being obtained.
47.In the Agreement, Wiita Mining represented that “he has the expertise and will be
able to meet the terms of the Bulk Sampling Project and process 4,000 tons of
alluvial materials within 90 days or prior to June 30, 2013.”
48.In the Agreement, VenCap represented that “the accounting, compliance, selling
and banking functions will be done in an accurate, timely and transparent manner
and will allow for any of the participants to audit records if requested.”
49.The Agreement included not only the schedule in the pro forma but also a
document titled “Time Line & Milestones” that set forth the major events of the
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50. The Time Line & Milestones stated that the first event in the Project would be the
confirmation of the projection of 4 grams per ton, which was confirmable by hand-
panning concentrate found near the surface, long before significant excavation
began. Prior to MLB entering into the Agreement, Wiita and Marshall represented
to MLB that they had already performed this testing, and that even without
significant excavation materials would yield at least the “conservative” 4 gram per
ton projections.
51.Both the pro forma and the Time Line & Milestones anticipated that full scale
processing at 33-50 tons per day would begin on March 1, after $150,000.00 of;
investment had been received from MLB.
52.Before MLB made its first payment under the Agreement, Wiita and Marshall
hosted MLB representatives at the White Cross 2 site. Wiita and Marshall
purported to “test” alluvial material prior to significant excavation, and asserted
that the test confirmed the 4 gram per ton projections in the pro forma.
53.MLB made four $50,000.00 payments. At the direction of Defendants, specifically,
Naylor, payments were made via wire transfers to an account MLB understood was
held by Wiita personally. These payments totaled $200,000.00. MLB made
additional payments for equipment purchases at the request of Wiita and others,
totaling roughly $6,000.00. All told, MLB invested roughly $206,000.00 into the
Project.
54.MLB understood that using these funds, all permits would be secured and Wiita
Mining would commence operations at the production levels contemplated by the
pro forma and the Time Line & Milestones.
55. Using MLB’s investment, Wiita Mining acquired equipment to operate the Project,
including using $50,000.00 to purchase a Case 580 backhoe.
56. Despite the optimism of the pro forma, the representations by Wiita and Marshall
about the testing and projected yield, the representations that all parties made about!COU m NH DH Bh WH NY
the conduct of the Project and their own expertise, the Project began to hit various
roadblocks shortly after MLB made its investment payments.
57, Wiita and Marshall informed MLB that, despite the testing they claimed to have
performed on materials near the surface confirming the 4 gram per ton projection,
after production began the yield on these materials was far lower, near 0.7 grams
per ton.
58. Wiita and Marshall informed MLB that the materials with the higher yield were
located below a layer of hard sediment—materials which could not have been
tested previously—and additional equipment and significant investment were
necessary to extract those materials:
59. Wiita and Marshall informed MLB that there were issues with the permits with the
Bureau of Land Management that were causing delays in the Project.
60. Wiita Mining was slow to ramp up production to the levels contemplated by the
pro forma and the Timeline in the Agreement, despite sufficient investment by
MLB as contemplated by the pro forma and the Timeline.
61. Wiita Mining was ultimately unable to process materials at a rate anywhere near
the projections in the pro forma and the Agreement’s Timeline.
62. In fact, considering the potential for delays in the permitting process that MLB now
knows from communications with the Bureau of Land Management, the timeline in
the pro forma and the Agreement was entirely unrealistic.
63. Wiita Mining repeatedly demonstrated that it did not have the experience nor
expertise to undertake a project like the one contemplated by the Agreement. This
included communications Wiita had with mining experts engaged by MLB to
evaluate Wiita Mining’s performance and production, showing that Wiita did not
have the capacity or necessary equipment to perform the Project.
64.To MLB’s knowledge, VenCap did not provide any administrative nor accounting
services, and never made any payments to MLB for its share in the Project.“
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65. Despite Wiita reporting that gold was extracted from processed materials—though
at a far lower yield than projected—to MLB’s knowledge no gold was sold by
VenCap as contemplated by the Agreement.
66. MLB received no payments for gold or other materials extracted and sold from the
Project.
67. In tight of the many issues with the Project, constituting breach by the other parties
to the Agreement, MLB ceased further investment and withheld the final two
$50,000.00 payments contemplated by the Agreement.
68. Beginning in May 2013, MLB made efforts to communicate with all parties to the
Agreement, attempting to.find a way to resolve the many issues that would allow
the Project to get back on track.
69. The Defendants made no effort to resolve or even address the many issues with the
Project.
70. The Defendants instéad claimed that MLB needed to make significant additional
investment in order for the Project to become profitable for MLB.
71.At this time, considering the many issues with the Project that arose almost
immediately after it had made significant investment, MLB began to suspect the
entire Project had been a fabrication designed to bilk MLB of its entire investment.
72.In June, July, and August, 2013, MLB tried to engage the other parties to the
Agreement in an effort to determine the financial aspects of the Project and
possibly work out a resolution that would return some of MLB’s investment to it.
The other parties would not respond to these efforts.
73.In August, 2013, MLB engaged counsel to evaluate the matter and MLB’s legal
options. MLB, through counsel, attempted to resolve the matter but the parties
either did not respond or presented entirely unreasonable proposals.
74.On August 20, MLB, through counsel, requested that Wiita and Marshall provide
an accounting of the Project. Wiita produced a single-page Word document
purporting to be the expenses incurred on the Project. (Exhibit 3.) This single-
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page document purported to show that MLB’s entire investment had been spent in
furtherance of the Project. No further records were provided.
75.On August 28, MLB, through counsel, requested that VenCap provide an
accounting of the project and allow records to be inspected and audited as Recital F
of the Agreement contemplates. MLB provided ten days to comply with the
request.
76. VenCap did not respond to MLB’s request for an accounting, nor has any party
provided any response to MLB’s inquiries, requests, and demands for accounting
other than the single page provided by Wiita.
77.On or about August 29, 2013, MLB became aware that Wiita had sold to a third
party the Case 580 backhoe purchased with $50,000.00 of MLB’s funds for the fire
sale price of $21,500.00. Neither the equipment nor the sale proceeds were
provided to MLB despite its demand.
78.MLB has learned that after it made its investment, Wiita made a number of|
extravagant personal purchases, including vehicles, accessories, and meals.
79. To date, no payments have been made nor any investment funds returned to MLB.
80. MLB now believes that the entire Project was a fraud perpetrated upon MLB.
81. Wiita currently maintains a web site, www.wiitaminingandexploration.com , that
continues to offer this investment “opportunity” on the White Cross 2 claim.
82. At the time that Wiita, Marshall, and Naylor made their representations about their
experience, their expertise, the projected yield, the ownership, the permitting, and
their capacity to fulfill the terms of the Agreement, they knew or should have
known that these representations were false.
83. Wiita, Marshall, and Naylor made these false representations specifically to induce
MLB to invest hundreds of thousands of dollars into a Project they knew would
never produce the returns contemplated by their own representations, the pro forma
or the Agreement.
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84. Wiita, Marshall, and Naylor all knew at the time they signed the Agreement they
never had the intent to fulfill their obligations thereunder.
85. At the very least, Wiita, Marshall, and Naylor made representations to MLB that
they either should have known were inaccurate, or they failed to investigate the
accuracy of the representations they made.
86. In reasonable reliance upon these false representations, MLB invested $206,000.00
into the Project.
COUNT ONE: BREACH OF CONTRACT
(Wiita Mining, Middlecamp, VenCap)
87. The preceding paragraphs are incorporated by reference as though stated herein.
88.MLB, Wiita Mining, Middlecamp, and VenCap entered into a valid and binding
Agreement for MLB’s investment in gold production at the White Cross 2 mining
claim.
89. Among the duties of the parties under the Agreement were for Wiita Mining to
operate the Project professionally and in accordance with the promises made by
Wiita Mining in the pro forma and the Timeline attached to the Agreement, as well
as to purchase and use equipment with MLB's investment that would be used to
further the development of the Project.
90. Also among the duties of the parties under the Agreement were for Middlecamp to
obtain all necessary rights and permits for the operation of the Project.
91. Also among the duties of the parties under the Agreement was for VenCap to
professionally administer the Project, including providing accounting services, and
allowing the parties to audit the accounting records upon their request.
92, Foremost among the duties of Wiita Mining, Middlecamp, and VenCap under the
Agreement was to produce gold from the White Cross 2 claim, sell ail gold
produced, and return to MLB 75% of all proceeds from gold sales.
93. Wiita Mining failed to operate the Project professionally and in accordance with
the promises in the pro forma and the Timeline attached to the Agreement. Wiita
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Mining also took and sold equipment purchased with MLB’s funds, without return
of either the equipment or these funds to MLB despite repeated demand. These
failures constitute a breach of the Agreement.
94. Middlecamp failed to obtain the necessary rights and permits for operation of the
Project. This failure constitutes a breach of the Agreement.
95. VenCap failed to perform the promised accounting services and failed to provide
MLB the opportunity to audit the accounting records. This failure constitutes a
breach of the Agreement.
96. Wiita Mining, Middlecamp, and VenCap all failed to produce gold from the White
Cross 2 claim and/or failed to sell any gold produced and distribute the proceeds
pursuant to the percentages listed in the Agreement. This failure constitutes a
breach of the Agreement.
97. With their actions and/or inaction, Wiita Mining, Middlecamp, and VenCap
breached the implied covenant of good faith and fair dealing inherent in every
contract.
98.MLB has suffered damages as a result of these breaches of the Agreement. These
damages include the apparent loss of MLB’s entire investment of roughly
$206,000.00, with no return on the investment whatsoever, much less the returns
contemplated by the pro forma.
99.MLB is entitled to recover from Wiita Mining, Middlecamp, and VenCap for their
breach of the Agreement.
WHEREFORE, MLB prays for relief and judgment against Wiita Mining, Middlecamp,
and VenCap as follows:
A. — Awarding MLB its damages sustained due to Defendants’ breaches of the
Agreement and the covenants of good faith and fair dealing inherent in the Agreement,
including but not limited to the return of MLB’s entire investment of $206,000.00;
B. Awarding MLB its costs associated with bringing this action, including
pre- and post-judgment interest, pursuant to A.R.S. § 12-341;
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Cc. Awarding MLB its reasonable attorney’s fees pursuant to A.R.S. § 12-
341.01; and,
D. For such other and further relief as this Court deems necessary, just and
proper under the circumstances.
COUNT TWO: FRAUD
(Wiita, Marshall, Naylor)
100. The preceding paragraphs are incorporated by reference as though stated
herein.
101. Wiita, Marshall, and Naylor each made representations to MLB that they
‘knew at the time were false, but were made in an effort to induce MLB to make an
investment.
102. These representations included specific representations about the mineral
wealth of the White Cross 2 claim, including that Wiita had *paid off his house”
with gold from at or near the claim site, that Wiita and Marshall had tested the
claim and ore near the surface was producing gold at or near a yield of 4 grams per
ton, that Wiita and Marshall represented that all rights and permits had been
obtained, that Wiita, Marshall, and Naylor all represented that they had the
experience necessary to fulfill and administer a project like the White Cross 2
Project, that Wiita Mining had the experience and ability to process ore at the rates
necessary to make the Project viable, and that Wiita, Marshall, and Naylor had
experience in marketing and selling minerals produced from operations like the
Project.
103. These representations also included those contained in the pro forma for the
Project, including the Project schedule, the “conservative” estimate of yield at 4
grams per ton, and the projections of gross proceeds for gold produced from the
Project.
104. At the time Wiita, Marshall, and Naylor made these representations, the
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105. These representations were material to MLB’s decision to invest in the
Project.
106. Wiita, Marshall, and Naylor knew these representations were false at the
time they were made.
107. Wiita, Marshall, and Naylor intended that MLB would act upon these
representations by investing in the Project.
108. MLB did not know these representations were false.
109. In reliance upon these representations, MLB made an investment in the
Project. ,
110. MLB's reliance upon these representations was reasonable and justified
under the circumstances.
Hl. As a result, MLB was damaged as it lost its entire investment of
$206,000.00.
WHEREFORE, MLB prays for relief and judgment against Wiita, Marshall, and
Naylor, and their marital communities (if any) as follows:
A. Awarding MLB its damages sustained due to their fraud, including but
not limited to the return of MLB’s entire investment of $206,000.00;
B. Awarding MLB exemplary damages in an amount sufficient to deter
Wiita, Marshall, and Naylor perpetrating such fraud on other investors;
C. Awarding MLB its costs associated with bringing this action, including
pre- and post-judgment interest;
D. Awarding MLB its reasonable attorney’s fees; and,
E. For such other and further relief as this Court deems necessary, just and
proper under the circumstances.
COUNT THREE: NEGLIGENT MISREPRESE
(Wiita, Marshall, Naylor)
TION
112. The preceding paragraphs are incorporated by reference as though stated
herein.
15I 113. Wiita, Marshall, and Naylor provided MLB with false or incorrect
“2 information about their qualifications, their experience, the prospects of the
3 Project, and other matters material to MLB’s decision to invest in the Project.
4 114. Wiita, Marshall, and Naylor omitted information about the Project that
5 would have been material to MLB’s decision to invest in the Project.
6 115. Wiita, Marshall, and Naylor provided the information for the purpose of|
7 influencing MLB’s decision to make the investment in the Project. ,
8 116. Wiita, Marshall, and Naylor failed to exercise reasonable care in obtaining
9 correct information and communicating that information to MLB.
10 117. MLB relied on that information in making its decision to invest in the
ll Project. MLB’s reliance was justified.
& 12 1L8. As a result of its reliance on the information provided by Wiita, Marshall,
: 38 13 and Naylor, MLB suffered damages in the form of the loss of its entire investment.
a \4 WHEREFORE, MLB prays for relief and judgment against Wiita, Marshall, and
& g 15 Naylor, and their marital communities (if any) as follows:
% é a 16 A. Awarding MLB its damages sustained due to their negligent
< M7 misrepresentation, including but not limited to the return of MLB’s entire investment of
18 $206,000.00;
1g B. Awarding MLB its costs associated with bringing this action, including
20 pre- and post-judgment interest;
2 C. Awarding MLB its reasonable attorey’s fees; and,
22 D. For such other and further relief as this Court deems necessary, just and
23 proper under the circumstances.
24 COUNT FOUR: DECLARATORY JUDGMENT, ACCOUNTING
25 (All Defendants)
26 119. The preceding paragraphs are incorporated by reference as though stated
27 herein.
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120. At all times relevant to the allegations in this Complaint, Wiita, Marshall,
and Naylor owed MLB duties as their partners in the Project.
121. In Recital F of the Agreement, Wiita Mining, Middlecamp, and VenCap
agreed that the Project would be subject to accounting using Generally Accepted
Accounting Principles. Specifically, VenCap agreed to administer the Project, and
to produce all accounting records for audit by any party to the Agreement at their
request.
122. On multiple occasions, MLB requested the accounting records of the
Project, and requested access to the records for audit.
123. Despite MLB’s multiple requests, neither VenCap nor any other Defendant
provided accounting records for the Project. Only Wiita produced a document
purporting to be an accounting, which was simply a one-page documents listing
purported expenses on the Project, with no backup or source documentation. This
was unacceptable.
124. It is MLB’s right under the Agreement to have access to the accounting
records of the Project, and to be able to audit those accounting records.
WHEREFORE, MLB prays for relief and judgment against all Defendants as follows:
A, A declaratory judgment requiring the Defendants, or VenCap in
particular, to produce an accounting of the Project and provide to MLB all records
necessary for MLB to audit the Project;
B. Awarding MLB its costs associated with bringing this action, including
pre- and post-judgment interest;
Cc. Awarding MLB its reasonable attorney’s fees; and,
D. For such other and further relief as this Court deems necessary, just and
proper under the circumstances.1 COUNT FIVE: SECURITIES FRAUD
2 (All Defendants)
3 125. The preceding paragraphs are incorporated by reference as though stated
4 herein.
5 126. Wiita, Marshall, and Naylor contacted MLB and made material
6 misrepresentations and omissions regarding the value of a fractional mining
7 interest in the White Cross 2 mining claim.
8 127. Wiita, Marshall, and Naylor made these material misrepresentations and
° omissions regarding the value of the interest in order to induce MLB’s investment
10 in the White Cross 2 claim in return for 75% of gross proceeds.
MN 128. On the basis of these misrepresentations and omissions, MLB invested
Q $206,000.00 in the Project in return for a fractional interest in the gross proceeds.
3B 129. The fractional interest sold by Defendants to MLB is a security within the
‘4 meaning of A.R.S. §44-1801(26).
5 130. Defendants violated A.R.S. §44-1991(A) by: (1) employing a device,
16 scheme or artifice of fraud in connection with the sale of a security; (2) making
M7 untrue statements of material fact and omitting to state material facts necessary in
18 order to make the statements not misleading; and (3) engaging in a transaction or
19 course of business that operated as a fraud or deceit.
20 131. As a direct and proximate result of Defendants’ securities fraud, MLB made
2 invested $206,000.00 for a fractional mining interest, which was substantially
22 higher than its fair market value, and therefore has been damaged.
3 132. Upon information and belief, defendants acted maliciously and with an
24 actual intent to cause economic harm to plaintiff, thereby justifying an award of
25 punitive damages.
26 WHEREFORE, MLB prays for relief and judgment against the Defendants as follows:
27 A. Awarding MLB its damages sustained due to their securities fraud,
28 including but not limited to the return of MLB’s entire investment of $206,000.00;
18WwW
Co Oo ON RH HR WwW
B. Awarding MLB exemplary damages in an amount sufficient to deter
Wiita, Marshall, and Naylor perpetrating such fraud on other investors;
Cc. Awarding MLB its costs associated with bringing this action, including
pre- and post-judgment interest;
Dz. Awarding MLB its reasonable attorney’s fees; and,
E. For such other and further relief as this Court deems necessary, just and
proper under the circumstances.
COUNT SIX: VIOLATION OF A.R.S. 13-2301 et seg.
(All Defendants)
133. The preceding paragraphs are incorporated by reference as though stated
herein.
134. The fractional mining interests sold by Wiita, Marshall, and Naylor as an
investment to MLB are securities within the meaning of A.R.S. § 44-1801(26), and
are required by Arizona law to be registered in accordance with Arizona law.
135. On information and belief, the fractional mining investments were, at all
relevant times, not registered in accordance with Arizona law.
136. The Defendants engaged in a pattern of unlawful activity by developing,
coordinating, and/or participating in investment programs through which the
Defendants intentionally or recklessly sold unregistered securities in violation of|
A.R.S. § 44-1841.
137. The Defendants developed, coordinated, and/or participated in the unlawful
investment programs for financial gain.
138. The Defendants’ sales of unregistered securities targeted MLB, involved
similar purposes, were carried out through similar methods of commission, and
achieved similar results.
139, On information and belief, the defendants’ sale of unregistered securities
occurred on multiple occasions, continues to occur, and/or poses a threat of
continued unlawful activity.
196263 N
5
a
oC DU eH DH WH BF WY
140. As a direct and proximate result of the Defendants’ unlawful activity, MLB
has been damaged because it purchased a fractional mining interest for a price that
was substantially higher than the units’ fair market value.
141. MLB’s damages were a reasonably foreseeable result of the Defendants’
pattern of unlawful activity.
WHEREFORE, MLB prays for relief and judgment against the Defendants as follows:
A. Awarding MLB its damages sustained due to their sale of unregistered
securities, including but not limited to the return of MLB’s entire investment of
$206,000.00;
B. Awarding MLB exemplary damages in an amount sufficient to deter from
the continued sale of unregistered securities;
Cc. Awarding MLB its costs associated with bringing this action, including
pre- and post-judgment interest;
D. Awarding MLB its reasonable attorney’s fees; and,
E. For such other and further relief as this Court deems necessary, just and
proper under the circumstances.
DATED this do! day of September, 2013.
KERCSMAR & FELTUS PLLC
(A —
Christopher M. Goodman
6263 North Scottsdale Road, Suite320
Scottsdale, Arizona 85250
Attorneys for Plaintiff
20EXHIBIT 1SOUTH WHITE CROSS BULK SAMPLE PROJECT 20 1 3
NORTHERN MIDDLECAMP MINING DISTRICT - LA PAZ COUNTY, ARIZONA
BULK SAMPLE PROJECT
SOUTH WHITE CROSS PLACER MINE
NORTHERN MIDDLECAMP MINING DISTRICT
LA PAZ COUNTY, ARIZONA
1] PageSGUTH WHITE CROSS BULK SAMPLE PROJECT 2013
NORTHERN MIDDLECAMP MINING DISTRICT - LA PAZ COUNTY, ARIZONA
SOUTH WHITE CROSS BULK SAMPLING PROJECT:
introduction: This excerpt report is for the South White Cross 20 acre Bulk Sampling Project consisting
of three trenches with 3,000 cubie yards or approximately 4,000 tons to be processed. This is
scheduled to begin on Feb 15, 2013 for 90 days and will precede the full scale mining operations. The
prefiminary business pian for gold production has already been prepared to discuss the economic gold
potentiat and operational capital requirements for immediate and long term alluvial/placer gold
production at the White Cross Gold Mine - South, located in La Paz County Arizona. A business
arrangement has been completed with the mineral rights owner, Middlecamp Resources LLC that owns
100% rights to the contained ounces under the placer leases. This co-venture.and profit sharing
arrangement includes initially, a 20 acre lease within the Walker Lane Gold Trend, some 20 miles narth
of Biythe California and just to the west of Quartzite, AZ from the No. 10 Hwy.
Grade Potential; For conservatism this report provides a proforma presenting the most obtainable
gtade-scenario of.4 grams per ton for the Bulk Sampling Project.
Reserves: The Bulk Sampling Program is for 3 trenches and 3,000 cubic yards or 4,000 tons. The results
of the Bulk Sampling program will to a large extent when extrapolated over the 20 acres of South White
Cross, confirm the reserves as follows;
The 20 acre section, including the initial 5'acre area of. operations of South White Cross is estimated to
have 1 millién tons of.readily available alluvial. material for extraction and processing. Using assumptions
of $1,650 USD per ounce and 4 grams or 0.129 ozt over the 1 million ounces the gross reserve value of
the 20 acres would be: $212.8 million USD. The insitu of the 20 acres with 3 25% valuation of the gross
Time Line of Bulk Sampling Program &Life of Mine: Full sampling operations will begin on March 1,
2013 and run for approximately 90 days until June 30, 2013. For the South White Cross 20 acre section
using 300 hundred production days annually with a processing capacity of S00 tons per day, the time to
deplete the 1 million tons of alluvial deposits is 6.67 years. Allowing for the startup time in 2013 the 20
acres section should be depleted by the end of 2019.
Bulk Sampling Project Areas of Participation / Responsibility:
Investor: MLB 2010 LLC is required to fund an. amount of $300,000 USD with payments of $50,000
every two weeks’commencing on the signing of the Exploration Contract no later than January 31, 2013.
Owner: Middlecamp Resources LLC is to provide ownership and permitting for the White Cross — South
20 acre partial section.
Operator: Wiita Mining LLC is to run the placer mining operations on the 20 acre partial section known
as White Cross - South. Wiita Mining LLC will effectively manage grade and achieve a production rate of
500 tons of alluvial material processed each day.
Administrator: VenCap Minerals LLC will administer the office, accounting and selling and banking for
the White Cross — South placer mining operation.
Working Interest Payment for Investor's Gross Revenue Interest: The total to be paid by MLB 2010
LLC excluding permitting and bond costs is $300,000 USD. Total permitting and bond costs of $37,500
are to be paid by VenCap Minerals LLC. This will provide to MLB'2010 LLC 75% of the gross proceeds
from the three trench 3;000 cubic yard /-4,000 ton; approximately 90 day Bulk: Sampling project.
2|Pageé‘SOUTH WHITE CROSS BULK SAMPLE PROJECT 2 01 3
NORTHERN MIDDLECAMP MINING DISTRICT - LA PAZ COUNTY, ARIZONA
2013 Proforma & Timeline:
South White Cross - Bulk Sampling Program
Contact signed VenCap Min ULC 2nd pmtof $50K 3rdpmtof$50K 4th pmt of SS0K, Sth pmiof §50K. Sth prnt of $50K VenCap pays Approx 500 tons Approx 500 tons Approx 500 ‘ons Approx 300 tons
& tstPmt — pays $12.5K tor & buk sampling’ & bik sampling Approx 200 ons Approx 500tons Approx S00 fons $25K mine fee processed processed processed —proc’d. Increase
EVENT: of $50K -samping permit praparafions are project or 1/20 of 4,000 processed processed Approx 500 Prod’ fot full
bond underway. commences ton goal proc’d tons processed mining phase.
(iT a Joni Feb? Fabia tae We prt Apis Moy! ——=SMaytS dunt jon 45 on 39 |
[Amounts pald by investor: == SSCSOROOSSSCS*C*C~«i ‘“CS*«é GO CS ee
Cumulative amounts pald by Investor: = § = 5,000 § 50,000 $ © 100,000 $ 150,000 $ = 200,000. $ 250,000 §° = 300,000 $= 300,000 § = 00,000 § = 300,000 - 300,000 § = 300,000
|No. oftons prod; nner” x 865 BQ 0B x 300 0
OO eee 20 706. 1,200 1700 2,200 2,700 3200 4700 we 4,000,
Return back to Investor (Procd > Pts: § = (50,000) § - § (50,000) § = (43,171) $ 2,573 § wsIs § Ban $ 19,573 § A$ RIB $ 73573
| Cumulative return back to investor: 5 (50,000) $ (50,000) $ — (100,000) § (148,174) $ (88,598) § (93,025) $ (29,451) $50,122 §
ASSUMPTIONS:
Geade:Grams per ton:-
Price received per Troy Ounce: $1,650
Number of oparating days per two weeks: 1
Number of tons per day In 1s! two weeks: ,
No. of tons per day after first two weeke: 50
11 Tray Ounce (oxt }= 39.1034763 grams: ¥.104)
JPorentage of Gross Proceeds to investor: 5
HIGHLIGHTS:
~ {fvestor contributes $300,000 for Bulk Sampling Program.
Total Gross:proceeds are $848,780 from 4,000.tons processed with a grade of 4 grams per ton @ $1,650 ozt for the 90 days from March ito June 30.
% Investor receives 75% of the gross proceeds or $636,585, ending the 90days with a surplus of $336,585.EXHIBIT 2AGREEMENT
REGARDING INVESTMENT, OPERATIONS & DISTRIBUTION OF PROCEEDS
__ FROM THE
SOUTH WHITE CROSS BULK SAMPLING PROJECT
_MIDDLECAMP MINING DISTRICT LA PAZ COUNTY, ARIZONA
Letter of Intent / Agreement (the “Agreement)” is entered into as of February 13th, 2013 (the-“Effective Date”).
BETWEEN:
Middlecamp Resources, LLC
9441 Double Diamond Pkwy., Suite 11 Reno, NV 89521
(The “Mine Owner & or Participant(s)")
AND:
Wiita Mining, LLC
9441 Double Diamond Pkwy., Suite 11 Reno, NV 89521
(The “Mine Operator & or Participant(s)”)
AND:
YenCap Minerals LLC
6619 N Scottsdale Rd Scottsdale, AZ 85250, (The “Administrator & or Participant(s)”)
AND:
MLB 2010, LLC
(The “Investor &-or Participant(s)”)
1. RECITALS:
A. WHEREAS: The Mine Owner, Mine Operator , Administrator & Investor representing all of the Participants
wish to enter into an Agreement regarding the terms of initial investment, operations and distribution of
proceeds of the South’ Whité Cross Bulk Sampling Project at the Middlecamp Mining District in La Paz
County, Arizona. See Appendix A on Page 5 of 5
B: WHEREAS: The Participants all agree that the duration of this‘agreement is from date of signing until June
30,2013 or until the Bulk Sampling Project has processed 4,000 tons of alluvial materials on the South White
Cross 20 acres.
C. | WHEREAS: The Participants all agree that the property referred to in this agreement is the 20 acre lease
within the Walker Lane Gold Trend, some 20 miles north of Blythe California, which is the White Cross
South Bulk Sampling Project at the Middlecamp Mining District in La Paz County, Arizona.
D. WHEREAS: The Mine Owner represents that he has secured and legally perfected-his ownership of the
mine claims at of the South Whité Cross Bulk Sampling Project at the Middlecamp Mining District in La PazCounty, Arizona. The Mine Owner also represents that all permits are secured and or are in the process of
being secured to commence mining operations.
WHEREAS: The Mine Operator represents that he has the expertise and will be able to meet the terms of
the Bulk Sampling Project and process 4,000 tons of alluvial materials within 90 days or prior to June 30,
2033.
WHEREAS: The Administrator represents that the accounting , compliance, selling and banking functions
will be done in an accurate, timely and transparent manner and will allow for any of the participants to audit
records if requested.
WHEREAS: Thé Investor represents that he has secured the funding required to compete the Bulk
Sampling Project in the amount of $300,000 USD (Three hundred thousand United States Dollars), $50,000
USD (Fifty thousand United States Dollars) are to be paid immediately followed by five more payments of
$50,000 USD (Fifty thousand Uriited States Dollars) every two weeks and payments for permitting and bonds
will be paid timely when instructed by the Mine‘Owner. The sixth and final payment-of $50,000 USD (Fifty
thousand United States Dollars) will be paid no.later than April 15,2013.
WHEREAS: All of the Participants acknowledge that the gencra} duties and responsibilities will be
delineated as follows: The Mine Owner is to secure the mine feases and mine permitting. The Mine Operator
is to operate the Bulk Sampling Project and be responsible for all costs. The-Investor is to provide funding as
detailed in F). The Mine Operator and Administrator are responsible with the Investor for the security,
selfing and Administration costs.
WHEREAS; VenCap Minerals LLC will be responsible for all permit and bonds costs for the Bulk
Sampling Program. These costs are a total‘of $12,500 USD (Twelve thousand five hundred United States
Dollars) and are to be paid immediately upon signing of this agreement. ‘VenCap Minerals LLC will also pay
$25,000 USD (Twenty five thousand United States Dollars) for the Mine permit and bond wtien due.
‘WHEREAS: The-Mine Operator will invoice the Mine Owner for all costs of operating the Placer Gold Mine
and the Misc Owner is solely responsible fo pay the Mine Operator for a}l invoiced costs regarding the mine
‘operations.
WHEREAS: All of the Participants agree that total gross proceeds before production, refining and
administration costs, meaning the gross amount of revenue received from buyer of the gold for the gold
concentrate delivered to the buyer of the gold will be disbursed between the Investor, Mine Owner, Mine
Operator and Administrator with the Investor receiving 75% of the gross proceeds and the balance of 25%
being distributed to the Mine Owner, Mine Opcrator and Administrator..
WHEREAS: The Participants all agree in regards to ah Area of Mutual Interest (AMI) that:
Firstly: All of the Participants being the Mine Owner, Mine Operator and the Investor agree that there wil! be
an Area of Mutual Interest (AMI) that extends within a Ten (10) mile radio of the initial 20 acre lease within
the Walker Lane Gold Trend, some 20 miles north of Blythe California, which is the White Cross Bulk
Sampling Project at the Middlecamp Mining District im La Paz County, Arizona. All the Participants agree
that for any further activity within this AMI, each of the Participants will give the other Participant the first
right.of refusal for participation within the same scope of activity as listed'in this agreement.
initiats: VS Cha) odd,Secondly: All of the Participants further agree that any other agreements entered into by the Mine Owner
and or the Mine Operator with other Parties at a date prior to the signing of this agreement are exempt from
specifically section: J) Firstly - AMI.
NOW THEREFORE in consideration of the premises, covenants and agreements contained in this Agreement and
other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
participants hereto agree as follows:
2. REPRESENTATIONS AND WARRANTIES
24 The Mine Owner, ‘The Mine Operator and the Investor being all of the Participants represents and warrants
to each other that:,
(a) Respective performance and obligations will be performed as represented regarding al! work and
duties performed in the best interests of each party-to this agreement and to the safe operation and.
profitability of the South White Cross Placer Gold Mine.
(b) the Earning / Proceeds to be distributed under this agreement are free and clear of-all mortgages,
‘ debentures, charges, hypothecations, pledges, liens, or other security interests or encumbrances of
whatever kind or nature, regardless of form and whether consensual ‘orarising-by law, statutory or
otherwise, that secures the paythent of any indebtedness or the performance of any obligation or
‘creates in favor of of grants to any person.any proprietary right.
3. GENERAL PROVISIONS
3.1 No alteration or amendment to this Agreement shall take effect unless it is in writing duly executed by the
parties hereto,
3.2 Time shall be of the essence of this Agreefnent,
3.3 The parties to this Agreement covenant and agree to execute and deliver all such further docume
Preview
MICHAEL K. JEANES Clerk of the Superior Court Ey kin uhitson, Deruty | | Christopher M. Goodman (#023231) porto es Tine ee nt KERCSMAR & FELTUS PLLC ~-~—-—— PASEH (02013-053288 -—--—— _ 2 | 6263 N. Scottsdale Road, Suite 320 CIVIL NEW CORFLATNT 319.0 3 | Scottsdale, Arizona 85250 TOTAL aMOUET 4 Telephone: (480) 421-1001 eee A ecointh Sem? 4 | Facsimile: (480) 421-1002 5 cmg@kflawaz.com 6 | Attorneys for Plaintiff 7 IN THE SUPERIOR COURT OF THE STATE OF ARIZONA 8 IN AND FOR THE COUNTY OF MARICOPA 9 10 | MLB-2010, L.L.C., an Arizona Limited Case No. Ul Liability Company, : ‘ bo Plaintiff, CV2013-053288 3 v. COMPLAINT WIITA MINING, LLC, a Nevada Limited 14 | Liability Company; MIDDLECAMP RESOURCES L.L.C., a Nevada Limited 15 || Liability Company; VENCAP (Breach of Contract, Fraud, MINERALS, Pie's Nevada Limited Negligent Misrepresentation, 16 | Liability Company; CRAIG WIITA and Accounting, Securities Fraud, Sale of JENNIFER WIITA, individually and as a Unregistered Securities) 17 | married couple; WILLIAM SCOTT MARSHALL and JANE DOE 18 | MARSHALL, individually and as a married couple; DAVID M. NAYLOR and 19 | JANE DOE NAYLOR, individually and as a married couple, 20 Defendants. 21 : 22 NATURE OF ACTION 23 This is a breach of contract, fraud, accounting, and securities action arising out of| 24 | an Arizona mining investment sold by Defendants to Plaintiff. Plaintiff alleges that 25 | Defendants made misrepresentations regarding the investment and their own ability to 26 | deliver on their promises, had no intent to fulfill the terms of the investment agreement at 27 | the time it was made, and ultimately absconded with Plaintiffs entire investment. 28 | Plaintiff further alleges that Defendants failed to account for the project, even after] | repeated demands by Plaintiff, and Plaintiff requests the Court order an accounting to 2 || determine the location of Plaintiff's funds as well as tax implications for all involved. 3 PARTIES, JURISDICTION, AND VENUE 4 1. Plaintiff MLB 2010 L.L.C. (“MLB”) is an Arizona Limited Liability Company 5 with its principal place of business within Maricopa County, Arizona. As to this 6 case, MLB was engaged in an investment in a mining claim located within La Paz 7 County, Arizona. 8 2. Defendant Middlecamp Resources, L.L.C. (“Middlecamp”) is a Nevada Limited 9 Liability Company authorized to do business within Arizona. Middlecamp’s 10 manager is Craig Wiita. As to this case, Middlecamp entered into an agreement il permitting a mining operation on a mining claim that it represented it owned 12 located within La Paz County, Arizona. 13 3. Defendant Wiita Mining, L.L.C. “(“Wiita Mining”) is a Nevada Limited Liability 14 Company authorized to do business within Arizona. Wiita Mining’s manager is 15 Craig Wiita. As to this case, Wiita Mining entered into an agreement to conduct a 16 mining operation at a mining claim in La Paz County, Arizona. 17 4. Defendant VenCap Minerals, L.L.C. (“VenCap™) is a Nevada Limited Liability 18 Company authorized to do business within Arizona. VenCap’s Managers are 19 David Naylor and William Marshall. Craig Wiita is a member of VenCap. As to 20 this case, VenCap entered into an agreement to administrate an investment in a 21 mining operation at a mining claim within La Paz County, Arizona. 22 5. Defendants Craig Wiita and Jennifer Wiita (“Wiita”) are married individuals and 23 California residents. As to this case, Craig Wiita is the manager of both 24 Middlecamp and Wiita Mining, and as manager of those companies made 25 representations and undertook acts related to an investment in a mining claim 26 within La Paz County, Arizona. 27 6. Defendants William Scott Marshall and Jane Doe Marshall (“Marshall”) are 28 married individuals and Arizona residents. As to this case, William Marshall is the 2I manager of VenCap, and as manager of VenCap made representations and 2 undertook acts related to an investment in a mining claim within La Paz County, 3 Arizona. 4 7. Defendants David M. Naylor and Jane Doe Naylor (“Naylor) are married 5 individuals and Arizona residents. As to this case, David Naylor is the manager of| 6 VenCap, and as manager of VenCap made representations and undertook acts 7 related to an investment in a mining claim within La Paz County, Arizona. 8 8. The events described in this Complaint occurred in either Maricopa County or La 9 Paz County, Arizona, and concern an investment in a mining operation at a mining 10 claim located in La Paz County, Arizona. It 9. The investment agreement forming the basis of this action, executed by MLB, 12 Middlecamp, Wiita Mining, VenCap and signed by MLB representatives as well as 13 Wiita and Naylor, contained a choice of law provision stating that “this agreement 14 shall be governed by and construed in accordance with the laws of the State of| 15 Arizona and the laws of the United States of America applicable therein.” ozs 16 10. Jurisdiction with the Superior Court of the State of Arizona is proper. & 17 11. Venue within Maricopa County is proper. 18 ALLEGATIONS COMMON TO ALL COUNTS 19 12. In late 2012, MLB explored the possibility of a gold mining investment within the 20 state of Arizona. 21 13.MLB was referred to Wiita by Mike Snyder, who understood Wiita held several 22 claims within the state. Wiita had represented himself to Mr. Snyder as someone 23 who owned several mining claims and had experience in gold production. 24 14. Wiita represented to MLB that he had extensive experience in gold production 25 operations at Arizona mining claims. Among these representations were that Wiita 26 owned several claims that produced large nuggets of gold. Wiita presented these 27 nuggets to MLB as a representation of the mineral wealth of Wiita’s claims. 28 3co Om NY DN A BR Be Be = Al 15. Wiita represented to MLB that he owned a claim known as “Payload 5 & 8,” located in La Paz County, Arizona. Wiita represented that he had performed testing upon Payload 5 & 8, and the claim produced ore rich with gold that justified significant investment for its extraction and processing. 16. Wiita offered to lease or sell the Payload 5 & 8 mining claim to MLB, as well as offered to conduct the extraction and processing of materials on that claim. 17.MLB and Wiita entered into an agreement for a mining operation on the Payload 5 & 8 claim whereby MLB would lease to own the claim for a total price of| $500,000.00, paying Wiita a percentage to assist in processing ore on the claim. 18. After entering into the agreement but prior to the first payment, MLB discovered that the road to the Payload 5 & 8 claim was insufficient to supply equipment to the site. Wiita offered to widen the road for a significant additional investment. MLB declined to pay Wiita for additional work, and the parties agreed to cancel the Payload 5 & 8 lease-to-own agreement. 19. Later, after the parties had entered into the agreement that is the subject of this lawsuit, MLB became aware that Wiita did not own the Payload 5 & 8 claim, had not perfected his interest in the claim, and had not received permission from the proper authorities to commence testing upon that claim. 20. After the cancellation of the Payload 5 & 8 agreement, Wiita represented to MLB that he had another claim, known as White Cross 2, upon which he had performed testing and projected a per-ton gold yield that justified significant investment in order to undertake a bulk sampling project. 21. Wiita represented that Middlecamp, an entity of which he is the manager, had perfected its ownership of the White Cross 2 claim and had permission to engage in mining operations. 22. Like with Payload 5 & 8, Wiita represented that White Cross 2 produced ore rich with gold that justified significant investment to facilitate its extraction.Ker 6263 N. Se (480) 42 1- coco wm NI DH BR WY 23. Wiita represented to MLB that he had “paid off his house” with gold produced from the areas at or near the White Cross 2 claim. 24. It was at this time that Wiita introduced MLB to Marshall and Naylor, represented to be Wiita’s partners in mining and exploration. 25.In January 2013, Wiita and Marshall presented to MLB a document titled “South White Cross Bulk Sample Project,” a pro forma for the potential investment by MLB in a mining operation on White Cross 2, hereinafter called the “Project.” (Exhibit 1, attached hereto.) 26.The pro forma made a number of representations regarding the viability of the| Project and the investment the Defendants sought from MLB. These representations were designed to induce MLB’s investment into the Project. 27. Among the representations made in the pro forma was the potential yield of the Project. It stated “for conservatism this report provides a proforma (sic) presenting the most obtainable grade scenario of 4 grams per ton...” (Exhibit 1.) The document then made projections based upon that yield. 28. Wiita and Marshall represented to MLB that testing they had performed on the White Cross 2 claim supported the 4 gram per ton yield listed in the pro forma. 29. Among the projections based upon the 4 gram per ton yield was that, at the end of| the 90-day sampling Project that would process 4,000 tons of ore—producing some 16,000 grams of gold—the Project would return $848,780.00 in gross proceeds. 30. These projections also represented that Wiita Mining, as the operator of the Project, had the experience and the capacity to process 4,000 tons of ore in a period of 90 days. 31. The pro forma included a schedule for processing by Wiita Mining. Once the Project was underway—after payments from MLB totaling $150,000.00—Wiita Mining would be processing 500 tons of ore every two weeks. 32. The pro forma sought a $300,000.00 investment from MLB in return for 75% of the gross proceeds from the Project.oO mI RH FF WN 33. According to the projections in the pro forma, MLB “receives 75% of the gross proceeds or $636,585, ending the 90 days with a surplus of $336,585.” 34. The pro forma further projected that the White Cross 2 claim had over 1 million tons of materials available for processing, and using the “conservative” estimate of} 4 grams per ton, the value at current prices was over $212 million. 35. At the time the pro forma was presented to MLB, both Wiita and Marshall made representations to MLB about the viability of the Project and the projections in the pro forma that were designed to induce MLB’s investment. 36.These representations included specific representations that Middlecamp had perfected its interest in White Cross 2, that the project could proceed as scheduled even with government permitting requirements, and that acquisition of government permits for the Project were merely a formality. 37. These representations included specific representations that testing had been performed on the White Cross 2 claim that would support the “conservative” 4 gram per ton projections contained in the pro forma. 38. These representations included specific representations that Wiita and Wiita Mining had sufficient experience in extraction and processing that it could meet the schedule contemplated by the pro forma. 39. These representations included that the Project would be professionally administrated by VenCap, who was represented to have experience managing such projects and would sell all minerals extracted, as well as account for all expenses and income. 40. Based upon and in reliance of both the representations in the pro forma and the various representations made by Wiita, Marshall, and Naylor, MLB agreed to invest in the Project. 41.On February 13, 2013, MLB, Middlecamp, Wiita Mining, and VenCap entered into an Agreement titled “Agreement Regarding Investment, Operations & Distribution(480) 421-1001 oC oO ON DH FF WwW WY of Proceeds from the South White Cross Bulk Sampling Project,” hereinafter known as the “Agreement.” (Exhibit 2, attached hereto.) 42. The Agreement attached the pro forma as an exhibit. 43.The Agreement called for an investment by MLB in the amount of $300,000.00, payable in six installments of $50,000.00, the first being due upon execution of the Agreement and the last due no later than April 15. Payment would be made to Middlecamp, who would then pay Wiita Mining to operate the Project. VenCap would act as administrator for the Project, and handle the accounting as well as the sale and distribution of proceeds. VenCap would pay for permitting and bonding the Project, but it was unclear from the Agreement how or when VenCap would be paid. 44. In return for its investment, MLB would receive 75% of the gross proceeds from the sale of gold extracted from White Cross 2 during the course of the Project. 45, The other three parties to the Agreement, Middlecamp, Wiita Mining, and VenCap, would split the remaining 25% of the gross proceeds under a formula that was not delineated by the Agreement. 46.In the Agreement, Middlecamp represented that it had perfected its interest in White Cross 2, and that all permits for the Project had either been obtained or were in the process of being obtained. 47.In the Agreement, Wiita Mining represented that “he has the expertise and will be able to meet the terms of the Bulk Sampling Project and process 4,000 tons of alluvial materials within 90 days or prior to June 30, 2013.” 48.In the Agreement, VenCap represented that “the accounting, compliance, selling and banking functions will be done in an accurate, timely and transparent manner and will allow for any of the participants to audit records if requested.” 49.The Agreement included not only the schedule in the pro forma but also a document titled “Time Line & Milestones” that set forth the major events of the Project.LLC \d, Suite 3 (480) 421- co Oo ON DN HD RB WB LY 50. The Time Line & Milestones stated that the first event in the Project would be the confirmation of the projection of 4 grams per ton, which was confirmable by hand- panning concentrate found near the surface, long before significant excavation began. Prior to MLB entering into the Agreement, Wiita and Marshall represented to MLB that they had already performed this testing, and that even without significant excavation materials would yield at least the “conservative” 4 gram per ton projections. 51.Both the pro forma and the Time Line & Milestones anticipated that full scale processing at 33-50 tons per day would begin on March 1, after $150,000.00 of; investment had been received from MLB. 52.Before MLB made its first payment under the Agreement, Wiita and Marshall hosted MLB representatives at the White Cross 2 site. Wiita and Marshall purported to “test” alluvial material prior to significant excavation, and asserted that the test confirmed the 4 gram per ton projections in the pro forma. 53.MLB made four $50,000.00 payments. At the direction of Defendants, specifically, Naylor, payments were made via wire transfers to an account MLB understood was held by Wiita personally. These payments totaled $200,000.00. MLB made additional payments for equipment purchases at the request of Wiita and others, totaling roughly $6,000.00. All told, MLB invested roughly $206,000.00 into the Project. 54.MLB understood that using these funds, all permits would be secured and Wiita Mining would commence operations at the production levels contemplated by the pro forma and the Time Line & Milestones. 55. Using MLB’s investment, Wiita Mining acquired equipment to operate the Project, including using $50,000.00 to purchase a Case 580 backhoe. 56. Despite the optimism of the pro forma, the representations by Wiita and Marshall about the testing and projected yield, the representations that all parties made about!COU m NH DH Bh WH NY the conduct of the Project and their own expertise, the Project began to hit various roadblocks shortly after MLB made its investment payments. 57, Wiita and Marshall informed MLB that, despite the testing they claimed to have performed on materials near the surface confirming the 4 gram per ton projection, after production began the yield on these materials was far lower, near 0.7 grams per ton. 58. Wiita and Marshall informed MLB that the materials with the higher yield were located below a layer of hard sediment—materials which could not have been tested previously—and additional equipment and significant investment were necessary to extract those materials: 59. Wiita and Marshall informed MLB that there were issues with the permits with the Bureau of Land Management that were causing delays in the Project. 60. Wiita Mining was slow to ramp up production to the levels contemplated by the pro forma and the Timeline in the Agreement, despite sufficient investment by MLB as contemplated by the pro forma and the Timeline. 61. Wiita Mining was ultimately unable to process materials at a rate anywhere near the projections in the pro forma and the Agreement’s Timeline. 62. In fact, considering the potential for delays in the permitting process that MLB now knows from communications with the Bureau of Land Management, the timeline in the pro forma and the Agreement was entirely unrealistic. 63. Wiita Mining repeatedly demonstrated that it did not have the experience nor expertise to undertake a project like the one contemplated by the Agreement. This included communications Wiita had with mining experts engaged by MLB to evaluate Wiita Mining’s performance and production, showing that Wiita did not have the capacity or necessary equipment to perform the Project. 64.To MLB’s knowledge, VenCap did not provide any administrative nor accounting services, and never made any payments to MLB for its share in the Project.“ : g 5 x le Road, Suite 320 6263 N. Sc COU we NI KR WH BRB YW WY 65. Despite Wiita reporting that gold was extracted from processed materials—though at a far lower yield than projected—to MLB’s knowledge no gold was sold by VenCap as contemplated by the Agreement. 66. MLB received no payments for gold or other materials extracted and sold from the Project. 67. In tight of the many issues with the Project, constituting breach by the other parties to the Agreement, MLB ceased further investment and withheld the final two $50,000.00 payments contemplated by the Agreement. 68. Beginning in May 2013, MLB made efforts to communicate with all parties to the Agreement, attempting to.find a way to resolve the many issues that would allow the Project to get back on track. 69. The Defendants made no effort to resolve or even address the many issues with the Project. 70. The Defendants instéad claimed that MLB needed to make significant additional investment in order for the Project to become profitable for MLB. 71.At this time, considering the many issues with the Project that arose almost immediately after it had made significant investment, MLB began to suspect the entire Project had been a fabrication designed to bilk MLB of its entire investment. 72.In June, July, and August, 2013, MLB tried to engage the other parties to the Agreement in an effort to determine the financial aspects of the Project and possibly work out a resolution that would return some of MLB’s investment to it. The other parties would not respond to these efforts. 73.In August, 2013, MLB engaged counsel to evaluate the matter and MLB’s legal options. MLB, through counsel, attempted to resolve the matter but the parties either did not respond or presented entirely unreasonable proposals. 74.On August 20, MLB, through counsel, requested that Wiita and Marshall provide an accounting of the Project. Wiita produced a single-page Word document purporting to be the expenses incurred on the Project. (Exhibit 3.) This single- 10PLLC oad, Suite 320 $5250 1) 421-1001 B35 “ea Zz g a Ss w Co CO ONY NOH Ee OW page document purported to show that MLB’s entire investment had been spent in furtherance of the Project. No further records were provided. 75.On August 28, MLB, through counsel, requested that VenCap provide an accounting of the project and allow records to be inspected and audited as Recital F of the Agreement contemplates. MLB provided ten days to comply with the request. 76. VenCap did not respond to MLB’s request for an accounting, nor has any party provided any response to MLB’s inquiries, requests, and demands for accounting other than the single page provided by Wiita. 77.On or about August 29, 2013, MLB became aware that Wiita had sold to a third party the Case 580 backhoe purchased with $50,000.00 of MLB’s funds for the fire sale price of $21,500.00. Neither the equipment nor the sale proceeds were provided to MLB despite its demand. 78.MLB has learned that after it made its investment, Wiita made a number of| extravagant personal purchases, including vehicles, accessories, and meals. 79. To date, no payments have been made nor any investment funds returned to MLB. 80. MLB now believes that the entire Project was a fraud perpetrated upon MLB. 81. Wiita currently maintains a web site, www.wiitaminingandexploration.com , that continues to offer this investment “opportunity” on the White Cross 2 claim. 82. At the time that Wiita, Marshall, and Naylor made their representations about their experience, their expertise, the projected yield, the ownership, the permitting, and their capacity to fulfill the terms of the Agreement, they knew or should have known that these representations were false. 83. Wiita, Marshall, and Naylor made these false representations specifically to induce MLB to invest hundreds of thousands of dollars into a Project they knew would never produce the returns contemplated by their own representations, the pro forma or the Agreement. 11Keresmar & Fi 6263 N. COU mH DN RF WYN 84. Wiita, Marshall, and Naylor all knew at the time they signed the Agreement they never had the intent to fulfill their obligations thereunder. 85. At the very least, Wiita, Marshall, and Naylor made representations to MLB that they either should have known were inaccurate, or they failed to investigate the accuracy of the representations they made. 86. In reasonable reliance upon these false representations, MLB invested $206,000.00 into the Project. COUNT ONE: BREACH OF CONTRACT (Wiita Mining, Middlecamp, VenCap) 87. The preceding paragraphs are incorporated by reference as though stated herein. 88.MLB, Wiita Mining, Middlecamp, and VenCap entered into a valid and binding Agreement for MLB’s investment in gold production at the White Cross 2 mining claim. 89. Among the duties of the parties under the Agreement were for Wiita Mining to operate the Project professionally and in accordance with the promises made by Wiita Mining in the pro forma and the Timeline attached to the Agreement, as well as to purchase and use equipment with MLB's investment that would be used to further the development of the Project. 90. Also among the duties of the parties under the Agreement were for Middlecamp to obtain all necessary rights and permits for the operation of the Project. 91. Also among the duties of the parties under the Agreement was for VenCap to professionally administer the Project, including providing accounting services, and allowing the parties to audit the accounting records upon their request. 92, Foremost among the duties of Wiita Mining, Middlecamp, and VenCap under the Agreement was to produce gold from the White Cross 2 claim, sell ail gold produced, and return to MLB 75% of all proceeds from gold sales. 93. Wiita Mining failed to operate the Project professionally and in accordance with the promises in the pro forma and the Timeline attached to the Agreement. Wiita 126263 N, Se Sce sdale, (480) 421-1001 vu co OU Om HYD AH BR Ow Mining also took and sold equipment purchased with MLB’s funds, without return of either the equipment or these funds to MLB despite repeated demand. These failures constitute a breach of the Agreement. 94. Middlecamp failed to obtain the necessary rights and permits for operation of the Project. This failure constitutes a breach of the Agreement. 95. VenCap failed to perform the promised accounting services and failed to provide MLB the opportunity to audit the accounting records. This failure constitutes a breach of the Agreement. 96. Wiita Mining, Middlecamp, and VenCap all failed to produce gold from the White Cross 2 claim and/or failed to sell any gold produced and distribute the proceeds pursuant to the percentages listed in the Agreement. This failure constitutes a breach of the Agreement. 97. With their actions and/or inaction, Wiita Mining, Middlecamp, and VenCap breached the implied covenant of good faith and fair dealing inherent in every contract. 98.MLB has suffered damages as a result of these breaches of the Agreement. These damages include the apparent loss of MLB’s entire investment of roughly $206,000.00, with no return on the investment whatsoever, much less the returns contemplated by the pro forma. 99.MLB is entitled to recover from Wiita Mining, Middlecamp, and VenCap for their breach of the Agreement. WHEREFORE, MLB prays for relief and judgment against Wiita Mining, Middlecamp, and VenCap as follows: A. — Awarding MLB its damages sustained due to Defendants’ breaches of the Agreement and the covenants of good faith and fair dealing inherent in the Agreement, including but not limited to the return of MLB’s entire investment of $206,000.00; B. Awarding MLB its costs associated with bringing this action, including pre- and post-judgment interest, pursuant to A.R.S. § 12-341; 13Vv a a Keresmar & Fel SD mI DH NH BR WON Cc. Awarding MLB its reasonable attorney’s fees pursuant to A.R.S. § 12- 341.01; and, D. For such other and further relief as this Court deems necessary, just and proper under the circumstances. COUNT TWO: FRAUD (Wiita, Marshall, Naylor) 100. The preceding paragraphs are incorporated by reference as though stated herein. 101. Wiita, Marshall, and Naylor each made representations to MLB that they ‘knew at the time were false, but were made in an effort to induce MLB to make an investment. 102. These representations included specific representations about the mineral wealth of the White Cross 2 claim, including that Wiita had *paid off his house” with gold from at or near the claim site, that Wiita and Marshall had tested the claim and ore near the surface was producing gold at or near a yield of 4 grams per ton, that Wiita and Marshall represented that all rights and permits had been obtained, that Wiita, Marshall, and Naylor all represented that they had the experience necessary to fulfill and administer a project like the White Cross 2 Project, that Wiita Mining had the experience and ability to process ore at the rates necessary to make the Project viable, and that Wiita, Marshall, and Naylor had experience in marketing and selling minerals produced from operations like the Project. 103. These representations also included those contained in the pro forma for the Project, including the Project schedule, the “conservative” estimate of yield at 4 grams per ton, and the projections of gross proceeds for gold produced from the Project. 104. At the time Wiita, Marshall, and Naylor made these representations, the representations were false.(480) 421-1001 oD Oo wm IND HW PB wD 105. These representations were material to MLB’s decision to invest in the Project. 106. Wiita, Marshall, and Naylor knew these representations were false at the time they were made. 107. Wiita, Marshall, and Naylor intended that MLB would act upon these representations by investing in the Project. 108. MLB did not know these representations were false. 109. In reliance upon these representations, MLB made an investment in the Project. , 110. MLB's reliance upon these representations was reasonable and justified under the circumstances. Hl. As a result, MLB was damaged as it lost its entire investment of $206,000.00. WHEREFORE, MLB prays for relief and judgment against Wiita, Marshall, and Naylor, and their marital communities (if any) as follows: A. Awarding MLB its damages sustained due to their fraud, including but not limited to the return of MLB’s entire investment of $206,000.00; B. Awarding MLB exemplary damages in an amount sufficient to deter Wiita, Marshall, and Naylor perpetrating such fraud on other investors; C. Awarding MLB its costs associated with bringing this action, including pre- and post-judgment interest; D. Awarding MLB its reasonable attorney’s fees; and, E. For such other and further relief as this Court deems necessary, just and proper under the circumstances. COUNT THREE: NEGLIGENT MISREPRESE (Wiita, Marshall, Naylor) TION 112. The preceding paragraphs are incorporated by reference as though stated herein. 15I 113. Wiita, Marshall, and Naylor provided MLB with false or incorrect “2 information about their qualifications, their experience, the prospects of the 3 Project, and other matters material to MLB’s decision to invest in the Project. 4 114. Wiita, Marshall, and Naylor omitted information about the Project that 5 would have been material to MLB’s decision to invest in the Project. 6 115. Wiita, Marshall, and Naylor provided the information for the purpose of| 7 influencing MLB’s decision to make the investment in the Project. , 8 116. Wiita, Marshall, and Naylor failed to exercise reasonable care in obtaining 9 correct information and communicating that information to MLB. 10 117. MLB relied on that information in making its decision to invest in the ll Project. MLB’s reliance was justified. & 12 1L8. As a result of its reliance on the information provided by Wiita, Marshall, : 38 13 and Naylor, MLB suffered damages in the form of the loss of its entire investment. a \4 WHEREFORE, MLB prays for relief and judgment against Wiita, Marshall, and & g 15 Naylor, and their marital communities (if any) as follows: % é a 16 A. Awarding MLB its damages sustained due to their negligent < M7 misrepresentation, including but not limited to the return of MLB’s entire investment of 18 $206,000.00; 1g B. Awarding MLB its costs associated with bringing this action, including 20 pre- and post-judgment interest; 2 C. Awarding MLB its reasonable attorey’s fees; and, 22 D. For such other and further relief as this Court deems necessary, just and 23 proper under the circumstances. 24 COUNT FOUR: DECLARATORY JUDGMENT, ACCOUNTING 25 (All Defendants) 26 119. The preceding paragraphs are incorporated by reference as though stated 27 herein. 28 16Zz & S 5 a (480) 42 oc OU em KR OH BR WY DY 11 120. At all times relevant to the allegations in this Complaint, Wiita, Marshall, and Naylor owed MLB duties as their partners in the Project. 121. In Recital F of the Agreement, Wiita Mining, Middlecamp, and VenCap agreed that the Project would be subject to accounting using Generally Accepted Accounting Principles. Specifically, VenCap agreed to administer the Project, and to produce all accounting records for audit by any party to the Agreement at their request. 122. On multiple occasions, MLB requested the accounting records of the Project, and requested access to the records for audit. 123. Despite MLB’s multiple requests, neither VenCap nor any other Defendant provided accounting records for the Project. Only Wiita produced a document purporting to be an accounting, which was simply a one-page documents listing purported expenses on the Project, with no backup or source documentation. This was unacceptable. 124. It is MLB’s right under the Agreement to have access to the accounting records of the Project, and to be able to audit those accounting records. WHEREFORE, MLB prays for relief and judgment against all Defendants as follows: A, A declaratory judgment requiring the Defendants, or VenCap in particular, to produce an accounting of the Project and provide to MLB all records necessary for MLB to audit the Project; B. Awarding MLB its costs associated with bringing this action, including pre- and post-judgment interest; Cc. Awarding MLB its reasonable attorney’s fees; and, D. For such other and further relief as this Court deems necessary, just and proper under the circumstances.1 COUNT FIVE: SECURITIES FRAUD 2 (All Defendants) 3 125. The preceding paragraphs are incorporated by reference as though stated 4 herein. 5 126. Wiita, Marshall, and Naylor contacted MLB and made material 6 misrepresentations and omissions regarding the value of a fractional mining 7 interest in the White Cross 2 mining claim. 8 127. Wiita, Marshall, and Naylor made these material misrepresentations and ° omissions regarding the value of the interest in order to induce MLB’s investment 10 in the White Cross 2 claim in return for 75% of gross proceeds. MN 128. On the basis of these misrepresentations and omissions, MLB invested Q $206,000.00 in the Project in return for a fractional interest in the gross proceeds. 3B 129. The fractional interest sold by Defendants to MLB is a security within the ‘4 meaning of A.R.S. §44-1801(26). 5 130. Defendants violated A.R.S. §44-1991(A) by: (1) employing a device, 16 scheme or artifice of fraud in connection with the sale of a security; (2) making M7 untrue statements of material fact and omitting to state material facts necessary in 18 order to make the statements not misleading; and (3) engaging in a transaction or 19 course of business that operated as a fraud or deceit. 20 131. As a direct and proximate result of Defendants’ securities fraud, MLB made 2 invested $206,000.00 for a fractional mining interest, which was substantially 22 higher than its fair market value, and therefore has been damaged. 3 132. Upon information and belief, defendants acted maliciously and with an 24 actual intent to cause economic harm to plaintiff, thereby justifying an award of 25 punitive damages. 26 WHEREFORE, MLB prays for relief and judgment against the Defendants as follows: 27 A. Awarding MLB its damages sustained due to their securities fraud, 28 including but not limited to the return of MLB’s entire investment of $206,000.00; 18WwW Co Oo ON RH HR WwW B. Awarding MLB exemplary damages in an amount sufficient to deter Wiita, Marshall, and Naylor perpetrating such fraud on other investors; Cc. Awarding MLB its costs associated with bringing this action, including pre- and post-judgment interest; Dz. Awarding MLB its reasonable attorney’s fees; and, E. For such other and further relief as this Court deems necessary, just and proper under the circumstances. COUNT SIX: VIOLATION OF A.R.S. 13-2301 et seg. (All Defendants) 133. The preceding paragraphs are incorporated by reference as though stated herein. 134. The fractional mining interests sold by Wiita, Marshall, and Naylor as an investment to MLB are securities within the meaning of A.R.S. § 44-1801(26), and are required by Arizona law to be registered in accordance with Arizona law. 135. On information and belief, the fractional mining investments were, at all relevant times, not registered in accordance with Arizona law. 136. The Defendants engaged in a pattern of unlawful activity by developing, coordinating, and/or participating in investment programs through which the Defendants intentionally or recklessly sold unregistered securities in violation of| A.R.S. § 44-1841. 137. The Defendants developed, coordinated, and/or participated in the unlawful investment programs for financial gain. 138. The Defendants’ sales of unregistered securities targeted MLB, involved similar purposes, were carried out through similar methods of commission, and achieved similar results. 139, On information and belief, the defendants’ sale of unregistered securities occurred on multiple occasions, continues to occur, and/or poses a threat of continued unlawful activity. 196263 N 5 a oC DU eH DH WH BF WY 140. As a direct and proximate result of the Defendants’ unlawful activity, MLB has been damaged because it purchased a fractional mining interest for a price that was substantially higher than the units’ fair market value. 141. MLB’s damages were a reasonably foreseeable result of the Defendants’ pattern of unlawful activity. WHEREFORE, MLB prays for relief and judgment against the Defendants as follows: A. Awarding MLB its damages sustained due to their sale of unregistered securities, including but not limited to the return of MLB’s entire investment of $206,000.00; B. Awarding MLB exemplary damages in an amount sufficient to deter from the continued sale of unregistered securities; Cc. Awarding MLB its costs associated with bringing this action, including pre- and post-judgment interest; D. Awarding MLB its reasonable attorney’s fees; and, E. For such other and further relief as this Court deems necessary, just and proper under the circumstances. DATED this do! day of September, 2013. KERCSMAR & FELTUS PLLC (A — Christopher M. Goodman 6263 North Scottsdale Road, Suite320 Scottsdale, Arizona 85250 Attorneys for Plaintiff 20EXHIBIT 1SOUTH WHITE CROSS BULK SAMPLE PROJECT 20 1 3 NORTHERN MIDDLECAMP MINING DISTRICT - LA PAZ COUNTY, ARIZONA BULK SAMPLE PROJECT SOUTH WHITE CROSS PLACER MINE NORTHERN MIDDLECAMP MINING DISTRICT LA PAZ COUNTY, ARIZONA 1] PageSGUTH WHITE CROSS BULK SAMPLE PROJECT 2013 NORTHERN MIDDLECAMP MINING DISTRICT - LA PAZ COUNTY, ARIZONA SOUTH WHITE CROSS BULK SAMPLING PROJECT: introduction: This excerpt report is for the South White Cross 20 acre Bulk Sampling Project consisting of three trenches with 3,000 cubie yards or approximately 4,000 tons to be processed. This is scheduled to begin on Feb 15, 2013 for 90 days and will precede the full scale mining operations. The prefiminary business pian for gold production has already been prepared to discuss the economic gold potentiat and operational capital requirements for immediate and long term alluvial/placer gold production at the White Cross Gold Mine - South, located in La Paz County Arizona. A business arrangement has been completed with the mineral rights owner, Middlecamp Resources LLC that owns 100% rights to the contained ounces under the placer leases. This co-venture.and profit sharing arrangement includes initially, a 20 acre lease within the Walker Lane Gold Trend, some 20 miles narth of Biythe California and just to the west of Quartzite, AZ from the No. 10 Hwy. Grade Potential; For conservatism this report provides a proforma presenting the most obtainable gtade-scenario of.4 grams per ton for the Bulk Sampling Project. Reserves: The Bulk Sampling Program is for 3 trenches and 3,000 cubic yards or 4,000 tons. The results of the Bulk Sampling program will to a large extent when extrapolated over the 20 acres of South White Cross, confirm the reserves as follows; The 20 acre section, including the initial 5'acre area of. operations of South White Cross is estimated to have 1 millién tons of.readily available alluvial. material for extraction and processing. Using assumptions of $1,650 USD per ounce and 4 grams or 0.129 ozt over the 1 million ounces the gross reserve value of the 20 acres would be: $212.8 million USD. The insitu of the 20 acres with 3 25% valuation of the gross Time Line of Bulk Sampling Program &Life of Mine: Full sampling operations will begin on March 1, 2013 and run for approximately 90 days until June 30, 2013. For the South White Cross 20 acre section using 300 hundred production days annually with a processing capacity of S00 tons per day, the time to deplete the 1 million tons of alluvial deposits is 6.67 years. Allowing for the startup time in 2013 the 20 acres section should be depleted by the end of 2019. Bulk Sampling Project Areas of Participation / Responsibility: Investor: MLB 2010 LLC is required to fund an. amount of $300,000 USD with payments of $50,000 every two weeks’commencing on the signing of the Exploration Contract no later than January 31, 2013. Owner: Middlecamp Resources LLC is to provide ownership and permitting for the White Cross — South 20 acre partial section. Operator: Wiita Mining LLC is to run the placer mining operations on the 20 acre partial section known as White Cross - South. Wiita Mining LLC will effectively manage grade and achieve a production rate of 500 tons of alluvial material processed each day. Administrator: VenCap Minerals LLC will administer the office, accounting and selling and banking for the White Cross — South placer mining operation. Working Interest Payment for Investor's Gross Revenue Interest: The total to be paid by MLB 2010 LLC excluding permitting and bond costs is $300,000 USD. Total permitting and bond costs of $37,500 are to be paid by VenCap Minerals LLC. This will provide to MLB'2010 LLC 75% of the gross proceeds from the three trench 3;000 cubic yard /-4,000 ton; approximately 90 day Bulk: Sampling project. 2|Pageé‘SOUTH WHITE CROSS BULK SAMPLE PROJECT 2 01 3 NORTHERN MIDDLECAMP MINING DISTRICT - LA PAZ COUNTY, ARIZONA 2013 Proforma & Timeline: South White Cross - Bulk Sampling Program Contact signed VenCap Min ULC 2nd pmtof $50K 3rdpmtof$50K 4th pmt of SS0K, Sth pmiof §50K. Sth prnt of $50K VenCap pays Approx 500 tons Approx 500 tons Approx 500 ‘ons Approx 300 tons & tstPmt — pays $12.5K tor & buk sampling’ & bik sampling Approx 200 ons Approx 500tons Approx S00 fons $25K mine fee processed processed processed —proc’d. Increase EVENT: of $50K -samping permit praparafions are project or 1/20 of 4,000 processed processed Approx 500 Prod’ fot full bond underway. commences ton goal proc’d tons processed mining phase. (iT a Joni Feb? Fabia tae We prt Apis Moy! ——=SMaytS dunt jon 45 on 39 | [Amounts pald by investor: == SSCSOROOSSSCS*C*C~«i ‘“CS*«é GO CS ee Cumulative amounts pald by Investor: = § = 5,000 § 50,000 $ © 100,000 $ 150,000 $ = 200,000. $ 250,000 §° = 300,000 $= 300,000 § = 00,000 § = 300,000 - 300,000 § = 300,000 |No. oftons prod; nner” x 865 BQ 0B x 300 0 OO eee 20 706. 1,200 1700 2,200 2,700 3200 4700 we 4,000, Return back to Investor (Procd > Pts: § = (50,000) § - § (50,000) § = (43,171) $ 2,573 § wsIs § Ban $ 19,573 § A$ RIB $ 73573 | Cumulative return back to investor: 5 (50,000) $ (50,000) $ — (100,000) § (148,174) $ (88,598) § (93,025) $ (29,451) $50,122 § ASSUMPTIONS: Geade:Grams per ton:- Price received per Troy Ounce: $1,650 Number of oparating days per two weeks: 1 Number of tons per day In 1s! two weeks: , No. of tons per day after first two weeke: 50 11 Tray Ounce (oxt }= 39.1034763 grams: ¥.104) JPorentage of Gross Proceeds to investor: 5 HIGHLIGHTS: ~ {fvestor contributes $300,000 for Bulk Sampling Program. Total Gross:proceeds are $848,780 from 4,000.tons processed with a grade of 4 grams per ton @ $1,650 ozt for the 90 days from March ito June 30. % Investor receives 75% of the gross proceeds or $636,585, ending the 90days with a surplus of $336,585.EXHIBIT 2AGREEMENT REGARDING INVESTMENT, OPERATIONS & DISTRIBUTION OF PROCEEDS __ FROM THE SOUTH WHITE CROSS BULK SAMPLING PROJECT _MIDDLECAMP MINING DISTRICT LA PAZ COUNTY, ARIZONA Letter of Intent / Agreement (the “Agreement)” is entered into as of February 13th, 2013 (the-“Effective Date”). BETWEEN: Middlecamp Resources, LLC 9441 Double Diamond Pkwy., Suite 11 Reno, NV 89521 (The “Mine Owner & or Participant(s)") AND: Wiita Mining, LLC 9441 Double Diamond Pkwy., Suite 11 Reno, NV 89521 (The “Mine Operator & or Participant(s)”) AND: YenCap Minerals LLC 6619 N Scottsdale Rd Scottsdale, AZ 85250, (The “Administrator & or Participant(s)”) AND: MLB 2010, LLC (The “Investor &-or Participant(s)”) 1. RECITALS: A. WHEREAS: The Mine Owner, Mine Operator , Administrator & Investor representing all of the Participants wish to enter into an Agreement regarding the terms of initial investment, operations and distribution of proceeds of the South’ Whité Cross Bulk Sampling Project at the Middlecamp Mining District in La Paz County, Arizona. See Appendix A on Page 5 of 5 B: WHEREAS: The Participants all agree that the duration of this‘agreement is from date of signing until June 30,2013 or until the Bulk Sampling Project has processed 4,000 tons of alluvial materials on the South White Cross 20 acres. C. | WHEREAS: The Participants all agree that the property referred to in this agreement is the 20 acre lease within the Walker Lane Gold Trend, some 20 miles north of Blythe California, which is the White Cross South Bulk Sampling Project at the Middlecamp Mining District in La Paz County, Arizona. D. WHEREAS: The Mine Owner represents that he has secured and legally perfected-his ownership of the mine claims at of the South Whité Cross Bulk Sampling Project at the Middlecamp Mining District in La PazCounty, Arizona. The Mine Owner also represents that all permits are secured and or are in the process of being secured to commence mining operations. WHEREAS: The Mine Operator represents that he has the expertise and will be able to meet the terms of the Bulk Sampling Project and process 4,000 tons of alluvial materials within 90 days or prior to June 30, 2033. WHEREAS: The Administrator represents that the accounting , compliance, selling and banking functions will be done in an accurate, timely and transparent manner and will allow for any of the participants to audit records if requested. WHEREAS: Thé Investor represents that he has secured the funding required to compete the Bulk Sampling Project in the amount of $300,000 USD (Three hundred thousand United States Dollars), $50,000 USD (Fifty thousand United States Dollars) are to be paid immediately followed by five more payments of $50,000 USD (Fifty thousand Uriited States Dollars) every two weeks and payments for permitting and bonds will be paid timely when instructed by the Mine‘Owner. The sixth and final payment-of $50,000 USD (Fifty thousand United States Dollars) will be paid no.later than April 15,2013. WHEREAS: All of the Participants acknowledge that the gencra} duties and responsibilities will be delineated as follows: The Mine Owner is to secure the mine feases and mine permitting. The Mine Operator is to operate the Bulk Sampling Project and be responsible for all costs. The-Investor is to provide funding as detailed in F). The Mine Operator and Administrator are responsible with the Investor for the security, selfing and Administration costs. WHEREAS; VenCap Minerals LLC will be responsible for all permit and bonds costs for the Bulk Sampling Program. These costs are a total‘of $12,500 USD (Twelve thousand five hundred United States Dollars) and are to be paid immediately upon signing of this agreement. ‘VenCap Minerals LLC will also pay $25,000 USD (Twenty five thousand United States Dollars) for the Mine permit and bond wtien due. ‘WHEREAS: The-Mine Operator will invoice the Mine Owner for all costs of operating the Placer Gold Mine and the Misc Owner is solely responsible fo pay the Mine Operator for a}l invoiced costs regarding the mine ‘operations. WHEREAS: All of the Participants agree that total gross proceeds before production, refining and administration costs, meaning the gross amount of revenue received from buyer of the gold for the gold concentrate delivered to the buyer of the gold will be disbursed between the Investor, Mine Owner, Mine Operator and Administrator with the Investor receiving 75% of the gross proceeds and the balance of 25% being distributed to the Mine Owner, Mine Opcrator and Administrator.. WHEREAS: The Participants all agree in regards to ah Area of Mutual Interest (AMI) that: Firstly: All of the Participants being the Mine Owner, Mine Operator and the Investor agree that there wil! be an Area of Mutual Interest (AMI) that extends within a Ten (10) mile radio of the initial 20 acre lease within the Walker Lane Gold Trend, some 20 miles north of Blythe California, which is the White Cross Bulk Sampling Project at the Middlecamp Mining District im La Paz County, Arizona. All the Participants agree that for any further activity within this AMI, each of the Participants will give the other Participant the first right.of refusal for participation within the same scope of activity as listed'in this agreement. initiats: VS Cha) odd,Secondly: All of the Participants further agree that any other agreements entered into by the Mine Owner and or the Mine Operator with other Parties at a date prior to the signing of this agreement are exempt from specifically section: J) Firstly - AMI. NOW THEREFORE in consideration of the premises, covenants and agreements contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the participants hereto agree as follows: 2. REPRESENTATIONS AND WARRANTIES 24 The Mine Owner, ‘The Mine Operator and the Investor being all of the Participants represents and warrants to each other that:, (a) Respective performance and obligations will be performed as represented regarding al! work and duties performed in the best interests of each party-to this agreement and to the safe operation and. profitability of the South White Cross Placer Gold Mine. (b) the Earning / Proceeds to be distributed under this agreement are free and clear of-all mortgages, ‘ debentures, charges, hypothecations, pledges, liens, or other security interests or encumbrances of whatever kind or nature, regardless of form and whether consensual ‘orarising-by law, statutory or otherwise, that secures the paythent of any indebtedness or the performance of any obligation or ‘creates in favor of of grants to any person.any proprietary right. 3. GENERAL PROVISIONS 3.1 No alteration or amendment to this Agreement shall take effect unless it is in writing duly executed by the parties hereto, 3.2 Time shall be of the essence of this Agreefnent, 3.3 The parties to this Agreement covenant and agree to execute and deliver all such further docume