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FILED: SUFFOLK COUNTY CLERK 04/29/2022 01:09 PM INDEX NO. 620566/2021
NYSCEF DOC. NO. 7 RECEIVED NYSCEF: 04/29/2022
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF SUFFOLK
______________________________ x
NATURAL ORGANICS, INC., GLOBAL HEALTH
LABORATORIES, LLC, NATURAL ORGANICS
LABORATORIES, INC., INTEGRATED VERIFIED
PUBLISHING, INC., 2500 GRAND AVENUE COMPLAINT
CORP., EXECUTIVE BOULEVARD LLC, CBS
DEVELOPMENT, LLC, MY STAR
ENTERTAINMENT II, INC., CIRCLE K RANCH Index No.
CORP., 620566/2021
Plaintiff, Date Filed:
April 29, 2022
-against-
JAMES GIBBONS, ISLERO GROUP, LLC,
MINOTAUR MANAGEMENT GROUP, LLC,
Defendant.
______________________________ x
Plaintiffs Natural Organics, Inc. ("NOI"), Global Health Laboratories,
("Global"
LLC and together with NOI, "Natural Organics"); Integrated
Publishing, Inc. ("Integrated"), 2500 Grand Avenue Corp. ("2500 Grand Ave."),
Executive Blvd., LLC ("Exec. Blvd."), CBS Development, LLC ("CBS"), My Star
K"
Entertainment II, Inc. ("My Star"), and Circle K Ranch Corp. ("Circle and
collectively with Integrated, 2500 Grand Ave., Exec. Blvd., CBS and My Star,
the "Management Companies"), by their attorney, Ruskin Moscou Faltischek,
P.C., as and for their complaint against defendants James Gibbons, Islero
Group, LLC, ("Islero"), and Minotaur Management Group, LLC ("Minotaur"),
hereby allege upon information and belief, as follows:
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NATURE OF THE ACTION
1. Plaintiffs bring this action against defendants for claims arising
plaintiffs'
from the misappropriation and misuse of funds by defendant
Gibbons, who was the President of Natural Organics from 2005 until February
28, 2020, and at all relevant times was an officer of the plaintiff Management
Companies.
Gibbons'
2. As a result of positions and the discretion he exercised
over plaintiffs, Gibbons owed to plaintiffs an utmost duty of undivided and
unqualified loyalty, obligating Gibbons to act at all times in good faith and in
plaintiffs'
best interests.
Gibbons'
3. textbook obligations owed to plaintiffs as their President
plaintiffs'
prohibited him from taking or paying to himself, without knowing
plaintiffs'
and explicit authorization, any of funds, property or resources.
4. Despite these widely understood and elemental fiduciary
prohibitions against any sort of self-dealing, for five years from 2015 to 2020
after his immediate supervisor died, Gibbons did exactly what he was not
allowed to do - from plaintiffs and to himself millions of dollars
taking paying
in cash, cars, artwork and unrepaid loans, with no corporate authorization.
Gibbons'
5. epic and systematic course of corporate malfeasance
ended only when he at last was caught and terminated.
2
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6. Gibbons testified concerning these events in a separate New York
State Supreme Court action on December 20, 2021. Under oath and subject to
plaintiffs'
the penalty of perjury, Gibbons brazenly admitted to treating
businesses, funds and resources as his own, and admitted to the core facts of
his malfeasance alleged herein, including that he took, paid or disbursed to
plaintiffs' plaintiffs'
himself millions of dollars in funds without authorization
plaintiffs'
or consent, all while serving as President.
Gibbons'
7. The uncontrovertible documents and own incriminating
Organics'
testimony show that after the death of Natural founder and Chief
Executive Officer Gerald Kessler in 2015, Gibbons systematically and
repeatedly breached his manifold duties owed to plaintiffs, by exploiting his
authority over the Natural Organics staff to divert, abuse and ultimately steal
plaintiffs' -
funds and resources for his own selfish and personal purposes in
stark violation of basic principles of fiduciary law.
8. Under oath and subject to the penalty of perjury, Gibbons has
admitted to the key facts establishing his culpability.
Gibbons'
9. Defendant serial episodes of corporate malfeasance while
serving at the helm of Natural Organics and the plaintiff Management
Companies and while he controlled their day-to-day operations included:
a. Diverting approximately $627,000 of funds belonging to
Natural Organics Laboratories, Inc., which entity together with all of its
3
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assets, rights and claims was merged into and became owned and
controlled by NOI on December 26, 2021 ("NOLI"), under an
unauthorized loan from NOLI to himself, to subsidize the purchase and
Gibbons'
renovation of TriBeCa apartment - funds which Gibbons
luxury
to this day has never repaid;
b. Unilaterally increasing his own compensation and
ultimately taking approximately $609,162.92 in unauthorized
"commissions"
to which Gibbons was never entitled;
Organics'
c. Directing Natural accounting office to expend
$690,194.32 for the purchase of four exotic cars, and to take on a loan in
the additional amount of $298,082.89 for one of those four cars, which
included a 2014 Aston Martin, 2016 Lamborghini Huracán, 2019
Lamborghini Huracán and a 2019 Aston Martin DBS Coupe, each of
which was used exclusively by Gibbons personally, and not for any
legitimate Natural Organics business.
d. Paying a Utah artist, with whom Gibbons upon information
and belief had a personal relationship, purported commissions of
approximately $43,909.10 for sales with which she had no involvement;
"management"
e. Directing and taking unauthorized payments
Gibbons'
totaling approximately $384,000 to company, defendant
Minotaur;
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f. Leasing a storage facility, which Gibbons used to house
certain personal automobiles and related personal equipment and office
furnishings - resulting in unreimbursed costs incurred by plaintiff CBS
totaling approximately $82,150.77;
g. Directing Natural Organics to reimburse Gibbons for
personal expenses, including personal travel and entertainment
expenses, of approximately $99,175.19; and
h. Directing Natural Organics to expend approximately
$223,200 to purchase modern art selected by Gibbons to decorate his own
home and otherwise for his personal use and benefit.
10. As a result of these acts of self-dealing, Gibbons is liable to the
plaintiffs for compensatory damages known to exceed $3 million, together with
punitive damages under New York law, and Gibbons also must be compelled
to disgorge to plaintiffs the substantial additional sums paid to him during the
long-running course of his faithless conduct.
THE PARTIES
Plaintiffs'
The Plaintiffs and Relevant Merged Entity
11. NOI is a corporation organized and doing business under the laws
of the State of New York, with its principal office or place of business at 548
Broadhollow Road, Melville, New York. NOI produces and markets nutritional
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supplements, vitamins, herbs, and health products, primarily under the brand
"NaturesPlus."
name
12. NOLI at all relevant times prior to its merger into NOI on
December 26, 2021 was a corporation organized and doing business under the
laws of the State of New York, with its principal office or place of business at
9500 New Horizons Boulevard, Amityville, New York. NOLI was the
manufacturing division for NOI's and Global's products.
13. Global is a New York limited liability company wholly owned by,
and a subsidiary of, NOI, with its principal office or place of business at 9500
New Horizons Boulevard, Amityville, New York. Global is involved in the
private label manufacturing of certain vitamin and supplement products.
14. Integrated is a corporation organized and doing business under the
laws of the State of New York, with its principal office or place of business at
548 Broadhollow Road, Melville, New York. Integrated is involved in the
publishing of magazines and was formerly known as Energy Times, Inc.
15. 2500 Grand Avenue is a corporation organized and doing business
under the laws of the State of Delaware, with its principal office or place of
business at 548 Broadhollow Road, Melville, New York. 2500 Grand Avenue
is involved in the real estate business.
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16. Exec. Blvd. is a limited liability company organized and doing
business under the laws of the State of New York, Exec. Blvd. is involved in
the real estate business.
17. CBS is a limited liability company organized and doing business
under the laws of the State of New York, with its principal place of business at
548 Broadhollow Road, Melville, New York. CBS is involved in the real estate
business.
18. My Star is a corporation organized and doing business under the
laws of the State of Delaware, with its principal place of business at 548
Broadhollow Road, Melville, New York. My Star is involved in film production.
19. Circle K is a corporation organized and doing business under the
laws of the State of Delaware, with its principal place of business at 548
Broadhollow Road, Melville, New York. Circle K is involved in the
management of a ranch and ownership of certain ranch properties.
20. NOI employees, including but not limited to employees in the
finance office, at all relevant times were agents of NOLI and Global in that
they managed the finances and accounts of, and had the authority to pay bills
and other amounts due and owing by, NOLI and Global.
21. NOI employees, including but not limited to employees in the
finance office, at all relevant times were agents of the Management Companies
in that they managed the finances and accounts of, and had the authority to
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pay bills and other amounts due and owing by, the Management Companies.
The Management Companies other than Circle K did not have employees of
their own, and relied on NOI employees to conduct their financial business.
The Defendants
22. Upon information and belief, Gibbons is an individual residing at
7 Nadia Court, Smithtown, New York. Gibbons began his employment at
Natural Organics in or around January 1987. In or around 2005, Gibbons was
Organics'
named Natural President, a position he held until his termination
on or about February 28, 2020.
23. Gibbons exercised substantial discretionary authority in fulfilling
his responsibilities as President of Natural Organics, which included making
business decisions, signing contracts and checks on behalf of Natural Organics,
and directing Natural Organic's senior management team, including the
finance department.
Gibbons'
24. Indeed, because of long tenure and by the force of his
Organics'
personality and heavy-handed management style, Natural
Gibbons'
employees followed and complied with directions often under great
duress.
25. In truth and in fact, it was common knowledge throughout
Gibbons'
Natural Organics that an employee's failure to comply with directions
could easily result in that employee's abrupt termination.
8
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26. As part of his duties for Natural Organics, Gibbons was expected
to perform services for the Management Companies, and he was also installed
as one of their corporate officers.
27. Specifically, Gibbons was President of Integrated, Exec. Blvd., My
Star, and CBS.
28. Gibbons served as the Secretary of 2500 Grand Ave. and Circle K.
29. As a result of the duties he performed for the Management
Companies, Gibbons exercised control over their business, and the
Gibbons'
Management Companies relied on advice and knowledge in making
business decisions.
Gibbons'
30. authority, however, was not without limitations. Gibbons
had legal duties to plaintiffs, including to act in good faith and in their best
interests; he owed plaintiffs undivided and unqualified loyalty and was
obligated not to act in any manner contrary to their interests; and he had a
duty to refrain from self-dealing in all of his dealings with these entities.
Organics'
31. At all relevant times, Natural approval has been
plaintiffs'
required for any significant expenditure of funds, including most
relevant for purposes of the claims in this action, any expenditure that would
inure to the personal benefit of Gibbons.
32. Gibbons through his own sworn testimony given on December 20,
2021 has admitted under oath that he never sought nor obtained the necessary
9
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authorization from plaintiffs, neither from Natural Organics nor the
Management Companies, before he executed the numerous transactions
between plaintiffs and himself designed for his own benefit -
solely including
for example the hefty raises, commission payments, six-figure
Preview
FILED: SUFFOLK COUNTY CLERK 04/29/2022 01:09 PM INDEX NO. 620566/2021 NYSCEF DOC. NO. 7 RECEIVED NYSCEF: 04/29/2022 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF SUFFOLK ______________________________ x NATURAL ORGANICS, INC., GLOBAL HEALTH LABORATORIES, LLC, NATURAL ORGANICS LABORATORIES, INC., INTEGRATED VERIFIED PUBLISHING, INC., 2500 GRAND AVENUE COMPLAINT CORP., EXECUTIVE BOULEVARD LLC, CBS DEVELOPMENT, LLC, MY STAR ENTERTAINMENT II, INC., CIRCLE K RANCH Index No. CORP., 620566/2021 Plaintiff, Date Filed: April 29, 2022 -against- JAMES GIBBONS, ISLERO GROUP, LLC, MINOTAUR MANAGEMENT GROUP, LLC, Defendant. ______________________________ x Plaintiffs Natural Organics, Inc. ("NOI"), Global Health Laboratories, ("Global" LLC and together with NOI, "Natural Organics"); Integrated Publishing, Inc. ("Integrated"), 2500 Grand Avenue Corp. ("2500 Grand Ave."), Executive Blvd., LLC ("Exec. Blvd."), CBS Development, LLC ("CBS"), My Star K" Entertainment II, Inc. ("My Star"), and Circle K Ranch Corp. ("Circle and collectively with Integrated, 2500 Grand Ave., Exec. Blvd., CBS and My Star, the "Management Companies"), by their attorney, Ruskin Moscou Faltischek, P.C., as and for their complaint against defendants James Gibbons, Islero Group, LLC, ("Islero"), and Minotaur Management Group, LLC ("Minotaur"), hereby allege upon information and belief, as follows: 1 of 57 FILED: SUFFOLK COUNTY CLERK 04/29/2022 01:09 PM INDEX NO. 620566/2021 NYSCEF DOC. NO. 7 RECEIVED NYSCEF: 04/29/2022 NATURE OF THE ACTION 1. Plaintiffs bring this action against defendants for claims arising plaintiffs' from the misappropriation and misuse of funds by defendant Gibbons, who was the President of Natural Organics from 2005 until February 28, 2020, and at all relevant times was an officer of the plaintiff Management Companies. Gibbons' 2. As a result of positions and the discretion he exercised over plaintiffs, Gibbons owed to plaintiffs an utmost duty of undivided and unqualified loyalty, obligating Gibbons to act at all times in good faith and in plaintiffs' best interests. Gibbons' 3. textbook obligations owed to plaintiffs as their President plaintiffs' prohibited him from taking or paying to himself, without knowing plaintiffs' and explicit authorization, any of funds, property or resources. 4. Despite these widely understood and elemental fiduciary prohibitions against any sort of self-dealing, for five years from 2015 to 2020 after his immediate supervisor died, Gibbons did exactly what he was not allowed to do - from plaintiffs and to himself millions of dollars taking paying in cash, cars, artwork and unrepaid loans, with no corporate authorization. Gibbons' 5. epic and systematic course of corporate malfeasance ended only when he at last was caught and terminated. 2 2 of 57 FILED: SUFFOLK COUNTY CLERK 04/29/2022 01:09 PM INDEX NO. 620566/2021 NYSCEF DOC. NO. 7 RECEIVED NYSCEF: 04/29/2022 6. Gibbons testified concerning these events in a separate New York State Supreme Court action on December 20, 2021. Under oath and subject to plaintiffs' the penalty of perjury, Gibbons brazenly admitted to treating businesses, funds and resources as his own, and admitted to the core facts of his malfeasance alleged herein, including that he took, paid or disbursed to plaintiffs' plaintiffs' himself millions of dollars in funds without authorization plaintiffs' or consent, all while serving as President. Gibbons' 7. The uncontrovertible documents and own incriminating Organics' testimony show that after the death of Natural founder and Chief Executive Officer Gerald Kessler in 2015, Gibbons systematically and repeatedly breached his manifold duties owed to plaintiffs, by exploiting his authority over the Natural Organics staff to divert, abuse and ultimately steal plaintiffs' - funds and resources for his own selfish and personal purposes in stark violation of basic principles of fiduciary law. 8. Under oath and subject to the penalty of perjury, Gibbons has admitted to the key facts establishing his culpability. Gibbons' 9. Defendant serial episodes of corporate malfeasance while serving at the helm of Natural Organics and the plaintiff Management Companies and while he controlled their day-to-day operations included: a. Diverting approximately $627,000 of funds belonging to Natural Organics Laboratories, Inc., which entity together with all of its 3 3 of 57 FILED: SUFFOLK COUNTY CLERK 04/29/2022 01:09 PM INDEX NO. 620566/2021 NYSCEF DOC. NO. 7 RECEIVED NYSCEF: 04/29/2022 assets, rights and claims was merged into and became owned and controlled by NOI on December 26, 2021 ("NOLI"), under an unauthorized loan from NOLI to himself, to subsidize the purchase and Gibbons' renovation of TriBeCa apartment - funds which Gibbons luxury to this day has never repaid; b. Unilaterally increasing his own compensation and ultimately taking approximately $609,162.92 in unauthorized "commissions" to which Gibbons was never entitled; Organics' c. Directing Natural accounting office to expend $690,194.32 for the purchase of four exotic cars, and to take on a loan in the additional amount of $298,082.89 for one of those four cars, which included a 2014 Aston Martin, 2016 Lamborghini Huracán, 2019 Lamborghini Huracán and a 2019 Aston Martin DBS Coupe, each of which was used exclusively by Gibbons personally, and not for any legitimate Natural Organics business. d. Paying a Utah artist, with whom Gibbons upon information and belief had a personal relationship, purported commissions of approximately $43,909.10 for sales with which she had no involvement; "management" e. Directing and taking unauthorized payments Gibbons' totaling approximately $384,000 to company, defendant Minotaur; 4 4 of 57 FILED: SUFFOLK COUNTY CLERK 04/29/2022 01:09 PM INDEX NO. 620566/2021 NYSCEF DOC. NO. 7 RECEIVED NYSCEF: 04/29/2022 f. Leasing a storage facility, which Gibbons used to house certain personal automobiles and related personal equipment and office furnishings - resulting in unreimbursed costs incurred by plaintiff CBS totaling approximately $82,150.77; g. Directing Natural Organics to reimburse Gibbons for personal expenses, including personal travel and entertainment expenses, of approximately $99,175.19; and h. Directing Natural Organics to expend approximately $223,200 to purchase modern art selected by Gibbons to decorate his own home and otherwise for his personal use and benefit. 10. As a result of these acts of self-dealing, Gibbons is liable to the plaintiffs for compensatory damages known to exceed $3 million, together with punitive damages under New York law, and Gibbons also must be compelled to disgorge to plaintiffs the substantial additional sums paid to him during the long-running course of his faithless conduct. THE PARTIES Plaintiffs' The Plaintiffs and Relevant Merged Entity 11. NOI is a corporation organized and doing business under the laws of the State of New York, with its principal office or place of business at 548 Broadhollow Road, Melville, New York. NOI produces and markets nutritional 5 5 of 57 FILED: SUFFOLK COUNTY CLERK 04/29/2022 01:09 PM INDEX NO. 620566/2021 NYSCEF DOC. NO. 7 RECEIVED NYSCEF: 04/29/2022 supplements, vitamins, herbs, and health products, primarily under the brand "NaturesPlus." name 12. NOLI at all relevant times prior to its merger into NOI on December 26, 2021 was a corporation organized and doing business under the laws of the State of New York, with its principal office or place of business at 9500 New Horizons Boulevard, Amityville, New York. NOLI was the manufacturing division for NOI's and Global's products. 13. Global is a New York limited liability company wholly owned by, and a subsidiary of, NOI, with its principal office or place of business at 9500 New Horizons Boulevard, Amityville, New York. Global is involved in the private label manufacturing of certain vitamin and supplement products. 14. Integrated is a corporation organized and doing business under the laws of the State of New York, with its principal office or place of business at 548 Broadhollow Road, Melville, New York. Integrated is involved in the publishing of magazines and was formerly known as Energy Times, Inc. 15. 2500 Grand Avenue is a corporation organized and doing business under the laws of the State of Delaware, with its principal office or place of business at 548 Broadhollow Road, Melville, New York. 2500 Grand Avenue is involved in the real estate business. 6 6 of 57 FILED: SUFFOLK COUNTY CLERK 04/29/2022 01:09 PM INDEX NO. 620566/2021 NYSCEF DOC. NO. 7 RECEIVED NYSCEF: 04/29/2022 16. Exec. Blvd. is a limited liability company organized and doing business under the laws of the State of New York, Exec. Blvd. is involved in the real estate business. 17. CBS is a limited liability company organized and doing business under the laws of the State of New York, with its principal place of business at 548 Broadhollow Road, Melville, New York. CBS is involved in the real estate business. 18. My Star is a corporation organized and doing business under the laws of the State of Delaware, with its principal place of business at 548 Broadhollow Road, Melville, New York. My Star is involved in film production. 19. Circle K is a corporation organized and doing business under the laws of the State of Delaware, with its principal place of business at 548 Broadhollow Road, Melville, New York. Circle K is involved in the management of a ranch and ownership of certain ranch properties. 20. NOI employees, including but not limited to employees in the finance office, at all relevant times were agents of NOLI and Global in that they managed the finances and accounts of, and had the authority to pay bills and other amounts due and owing by, NOLI and Global. 21. NOI employees, including but not limited to employees in the finance office, at all relevant times were agents of the Management Companies in that they managed the finances and accounts of, and had the authority to 7 7 of 57 FILED: SUFFOLK COUNTY CLERK 04/29/2022 01:09 PM INDEX NO. 620566/2021 NYSCEF DOC. NO. 7 RECEIVED NYSCEF: 04/29/2022 pay bills and other amounts due and owing by, the Management Companies. The Management Companies other than Circle K did not have employees of their own, and relied on NOI employees to conduct their financial business. The Defendants 22. Upon information and belief, Gibbons is an individual residing at 7 Nadia Court, Smithtown, New York. Gibbons began his employment at Natural Organics in or around January 1987. In or around 2005, Gibbons was Organics' named Natural President, a position he held until his termination on or about February 28, 2020. 23. Gibbons exercised substantial discretionary authority in fulfilling his responsibilities as President of Natural Organics, which included making business decisions, signing contracts and checks on behalf of Natural Organics, and directing Natural Organic's senior management team, including the finance department. Gibbons' 24. Indeed, because of long tenure and by the force of his Organics' personality and heavy-handed management style, Natural Gibbons' employees followed and complied with directions often under great duress. 25. In truth and in fact, it was common knowledge throughout Gibbons' Natural Organics that an employee's failure to comply with directions could easily result in that employee's abrupt termination. 8 8 of 57 FILED: SUFFOLK COUNTY CLERK 04/29/2022 01:09 PM INDEX NO. 620566/2021 NYSCEF DOC. NO. 7 RECEIVED NYSCEF: 04/29/2022 26. As part of his duties for Natural Organics, Gibbons was expected to perform services for the Management Companies, and he was also installed as one of their corporate officers. 27. Specifically, Gibbons was President of Integrated, Exec. Blvd., My Star, and CBS. 28. Gibbons served as the Secretary of 2500 Grand Ave. and Circle K. 29. As a result of the duties he performed for the Management Companies, Gibbons exercised control over their business, and the Gibbons' Management Companies relied on advice and knowledge in making business decisions. Gibbons' 30. authority, however, was not without limitations. Gibbons had legal duties to plaintiffs, including to act in good faith and in their best interests; he owed plaintiffs undivided and unqualified loyalty and was obligated not to act in any manner contrary to their interests; and he had a duty to refrain from self-dealing in all of his dealings with these entities. Organics' 31. At all relevant times, Natural approval has been plaintiffs' required for any significant expenditure of funds, including most relevant for purposes of the claims in this action, any expenditure that would inure to the personal benefit of Gibbons. 32. Gibbons through his own sworn testimony given on December 20, 2021 has admitted under oath that he never sought nor obtained the necessary 9 9 of 57 FILED: SUFFOLK COUNTY CLERK 04/29/2022 01:09 PM INDEX NO. 620566/2021 NYSCEF DOC. NO. 7 RECEIVED NYSCEF: 04/29/2022 authorization from plaintiffs, neither from Natural Organics nor the Management Companies, before he executed the numerous transactions between plaintiffs and himself designed for his own benefit - solely including for example the hefty raises, commission payments, six-figure