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1 Edward S. Zusman (SBN 154366)
Rick Smith (SBN 298556)
2 MARKUN ZUSMAN & COMPTON LLP
465 California Street, Suite 401
3 San Francisco, California 94104
Telephone: (415) 438-4515
4 Facsimile: (415) 434-4505
5 Attorneys for Plaintiff
6
SUPERIOR COURT OF CALIFORNIA
7
8 IN AND FOR THE COUNTY OF MONTEREY
9
INDEPENDENT FINANCIAL GROUP, Case No.: 21CV001264
10 LLC, on its own behalf and as assignee of
Adolfo Artalejo; Rod Belton and Nancy DECLARATION OF RICK SMITH IN
11 Belton; James Cornelius and June Cornelius; SUPPORT OF PLAINTIFF’S NOTICE OF
John Favero and Philayna Favero; Ray MOTION AND MOTION TO
12 Moncada and Vinnie Moncada; Sheryl Peck; CONSOLIDATE
Juanita Stoddard; Ron Taylor and Hazel
13 Taylor; Jane Beery; Joy Chandler; John Day;
Sim Granoff and Virginia Lott; Gretchen Date: March 24, 2023
14 Jackson; William Miller and Sharon Miller; Time: 8:30am
Darryl Prudden; Carolyn Rice; John Romero Dept.: 14
15 and Sandy Romero; Bennie Hill and Lynda
Hill; Ellen Koskinen; George Lynch and Complaint Filed: April 15, 2021
16 Helen Lynch; Mathew Panziera and Jamie
Panziera; and Tom Sgheiza and Mary Trial Date: None Set
17 Sgheiza,
18 Plaintiff,
19 v.
20 FP TRANSITIONS, LLC and DOES 1-50,
INCLUSIVE,
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Defendants.
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FP TRANSITIONS, LLC,
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Cross-Complainant,
24 v.
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INDEPENDENT FINANCIAL GROUP,
26 LLC, David Marshall, Marshall Wealth
Management Group and ROES 1-25,
27 inclusive,
28 Cross-Defendants.
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PLAINTIFF’S MOTION TO CONSOLIDATE
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INDEPENDENT FINANCIAL GROUP, Case No.: 22CV001149
3 LLC, on its own behalf and as assignee of
Gene Kondo, Complaint Filed: April 26, 2022
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Plaintiff, Trial Date: None Set
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v.
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FP TRANSITIONS, LLC and DOES 1-50,
7 INCLUSIVE,
8 Defendants.
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SMITH DECLARATION - MOTION TO CONSOLIDATE
1 I, Rick Smith, declare as follows:
2 1. I am an attorney duly licensed to practice law before all courts of the State of
3 California. My law firm, Markun Zusman & Compton, LLP, is counsel for Plaintiff Independent
4 Financial Group, LLC in Independent Financial Group, LLC v. FP Transitions, LLC et al., Case
5 No. 21CV001264, and Independent Financial Group, LLC v. FP Transitions, LLC et al., Case
6 No. 22CV001149. This declaration is submitted in support of Plaintiff’s motion to consolidate
7 the two actions. The following facts are within my personal knowledge and based on my review
8 of the records referenced in this declaration and, if called as a witness herein, I could and would
9 testify thereto.
10 2. Attached hereto as Exhibit A is a true and correct copy of the operative Complaint in
11 Independent Financial Group, LLC v. FP Transitions, LLC et al., Case No. 21CV001264.
12 3. Attached hereto as Exhibit A is a true and correct copy of the operative Complaint in
13 Independdent Financial Group, LLC v. FP Transitions, LLC et al., Case No. 22CV001149.
14 4. Counsel of Record for Defendant FP Transitions, LLC in both matters is Bryan L.
15 Saalfeld and Thomas F. Mazzucco, Murphy, Pearson, Bradley & Feeney, 580 California Street,
16 Suite 1100, San Francisco, CA 94104-1001.
17 5. Cross-Defendant David Marshall has not yet appeared in Independent Financial Group,
18 LLC v. FP Transitions, LLC et al., Case No. 21CV001264.
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Dated: January 31, 2023 By: _______________________________
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Rick Smith
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SMITH DECLARATION - MOTION TO CONSOLIDATE
Exhibit A
ELECTRONICALLY FILED BY
Superior Court of California,
County of Monterey
1 Edward S. Zusman (SBN 154366) On 11/18/2021 9:14 PM
Rick Smith (SBN 298556) By: Kristen DeMers, Deputy
2 MARKUN ZUSMAN FRENIERE & COMPTON LLP
465 California Street, Suite 401
3 San Francisco, California 94104
Telephone: (415) 438-4515
4 Facsimile: (415) 434-4505
5 Attorneys for Plaintiff
6
SUPERIOR COURT OF CALIFORNIA
7
8 IN AND FOR THE COUNTY OF MONTEREY
9
INDEPENDENT FINANCIAL GROUP, Case No.: 21CV001264
10 LLC, on its own behalf and as assignee of
Adolfo Artalejo; Rod Belton and Nancy SECOND AMENDED COMPLAINT FOR
11 Belton; James Cornelius and June Cornelius; (1) EQUITABLE INDEMNITY; (2)
John Favero and Philayna Favero; Ray EQUITABLE CONTRIBUTION; (3)
12 Moncada and Vinnie Moncada; Sheryl Peck; BREACH OF CONTRACT THIRD
Juanita Stoddard; Ron Taylor and Hazel PARTY BENEFICIARY; (4) NEGLIGENT
13 Taylor; Jane Beery; Joy Chandler; John Day; MISREPRESENTATION; (5)
Sim Granoff and Virginia Lott; Gretchen PROFESSIONAL NEGLIGENCE; (6)
14 Jackson; William Miller and Sharon Miller; NEGLIGENCE
Darryl Prudden; Carolyn Rice; John Romero
15 and Sandy Romero; Bennie Hill and Lynda
Hill; Ellen Koskinen; George Lynch and DEMAND FOR JURY TRIAL
16 Helen Lynch; Mathew Panziera and Jamie
Panziera; Tom Sgheiza and Mary Sgheiza;
17 and Gene Kondo,
18 Plaintiff,
19 v.
20 FP TRANSITIONS, LLC and DOES 1-50,
INCLUSIVE,
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Defendants.
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1
PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES
1 PARTIES AND RELATED INDIVIDUALS
2 1. Independent Financial Group, LLC (“IFG”) is an SEC registered FINRA-member
3 broker-dealer firm headquartered in San Diego, California. IFG currently has over 600 advisors
4 throughout the United States.
5 2. FP Transitions, LLC (“FP Transitions”) is, and at all times was, a limited liability
6 corporation existing under the laws of the State of Oregon, with its principal place of business in
7 Lake Oswego, Oregon. FP Transitions purports to be the nation’s leading business consulting
8 firm dedicated to independent wealth advisory businesses and claims to have completed more
9 financial services transactions than any investment banker or business broker in the country since
10 1999. Upon information and belief, FP Transitions is authorized to conduct business in the State
11 of California.
12 3. David Marshall (“Marshall”) was a Registered Representative of IFG responsible
13 for the accounts of the Assignors prior to the sale his financial services business, Marshall Wealth
14 Management Group (“MWMG”) to Perry Santillo based on the recommendation of FP
15 Transitions.
16 4. Perry Santillo (“Santillo”) owned or controlled various entities including: First
17 Nationle Solution, LLC; United RL Capital; Percipience Global Corporation; and Middlebury
18 Development. These entities sold notes to investors as part of a Ponzi scheme that fraudulently
19 netted over $115 million nationwide. Santillo has pled guilty to felony charges and admitted to
20 defrauding investors around the country.
21 5. Adolfo Artalejo resides in Salinas, California and is 76 years old and a retired
22 postal worker. In or about November 2016, Mr. Artalejo liquidated an annuity he held at
23 Delaware Life and invested all of the proceeds in a promissory note issued by First Nationle. Mr.
24 Artalejo’s investment losses total approximately $188,000. Mr. Artalejo assigned his claims
25 against FP Transitions to IFG by a valid assignment of claims.
26 6. Rod and Nancy Belton reside in Salinas, California. Mr. Belton is 73 years old
27 and retired as a telecommunications executive. Ms. Belton is 71 years old and works as a human
28 resources professional. In or about November 2016 and continuing through at least April 2017,
PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES
1 Mr. and Ms. Belton closed an IRA account as well as annuities held at Transamerica and invested
2 all of the proceeds in seven promissory notes issued by First Nationle, United RL, Percipience,
3 and NextMed. Mr. and Ms. Belton’s investment losses total approximately $457,000. Mr. and
4 Ms. Belton assigned their claims against FP Transitions to IFG by a valid assignment of claims.
5 7. James and June Cornelius reside in Salinas, California. Mr. Cornelius is 74 years
6 old and retired as an Associate Distribution Engineer for Pacific Gas & Electric Company. Mrs.
7 Cornelius is 70 years old and also retired from Pacific Gas & Electric Company. In or about
8 December 2016 and January 2017, Mr. and Mrs. Cornelius liquidated annuities held at Delaware
9 Life and invested all of the proceeds from these investments in five promissory notes issued by
10 First Nationle and United RL. Mr. and Mrs. Cornelius’ investment losses total approximately
11 $360,000. Mr. and Ms. Cornelius assigned their claims against FP Transitions to IFG by a valid
12 assignment of claims.
13 8. John and Philayna Favero reside in Salinas, California. Mr. Favero is 70 years old
14 and a retired teacher and principal. Mrs. Favero is 69 years old and a retired elementary school
15 teacher. In or about November and December 2016, Mr. and Mrs. Favero closed two IRA
16 accounts and invested all of the proceeds in six promissory notes issued by First Nationle and
17 United RL. Mr. and Mrs. Favero’s investment losses total approximately $380,000. Mr. and Ms.
18 Favero assigned their claims against FP Transitions to IFG by a valid assignment of claims.
19 9. Ray and Vinnie Moncada reside in Salinas, California. Mr. Moncada is 76 years
20 old. He retired as an equipment manager several years ago, but has recently gone back to work as
21 a result of the investment losses at issue in this case. Mrs. Moncada is 74 years old and works as
22 a risk manager for an insurance broker. In or about April and May 2017, Mr. and Mrs. Moncada
23 closed IRA accounts and invested all of the proceeds in promissory notes issued by First
24 Nationle. Mr. and Mrs. Moncada’s investment losses total approximately $290,000. Mr. and Ms.
25 Moncada assigned their claims against FP Transitions to IFG by a valid assignment of claims.
26 10. Sheryl Peck resides in Salinas, California and is 71 years old and a retired
27 accountant. In or about October 2016, Ms. Peck liquidated an annuity held at Transamerica and
28 invested part of the proceeds in a promissory note issued by First Nationle. When surrendering
PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES
1 the annuity, Ms. Peck incurred surrender fees and taxes totaling approximately $70,000. Ms.
2 Peck’s investment losses total approximately $350,000. Ms. Peck assigned their claims against
3 FP Transitions to IFG by a valid assignment of claims.
4 11. Juanita Stoddard resides in Salinas, California and is 73 years old and a retired
5 elementary school teacher. In or about September and December 2016, Ms. Stoddard liquidated
6 an annuity held at Transamerica and invested all of the proceeds in a promissory note issued by
7 First Nationle. Ms. Stoddard’s investment losses total approximately $126,000. Ms. Stoddard
8 assigned her claims against FP Transitions to IFG by a valid assignment of claims..
9 12. Ron and Hazel Taylor reside in Salinas, California. Mr. Taylor, age 77, is a retired
10 auto parts store owner. Mrs. Taylor, age 72, is a retired office manager. From about September
11 2016 through March 2017, Mr. and Mrs. Taylor surrendered five annuities held at Delaware Life
12 and Transamerica and invested all of the proceeds in five promissory notes issued by First
13 Nationle. When surrendering the annuities, Mr. and Mrs. Taylor incurred surrender fees and
14 taxes totaling approximately $14,000. Mr. and Mrs. Taylor’s investment losses total
15 approximately $648,000. Mr. and Ms. Taylor assigned their claims against FP Transitions to IFG
16 by a valid assignment of claims.
17 13. Jane Beery resides in Salinas, California and is 77 years old and retired as the
18 manager of a wine tasting room. In or about September 2016, Ms. Beery liquidated an annuity
19 she held at Lincoln Financial and invested all of the proceeds in a promissory note issued by First
20 Nationle. Ms. Beery’s investment losses total approximately $192,000. Ms. Beery assigned her
21 claims against FP Transitions to IFG by a valid assignment of claims.
22 14. Joy Chandler resides in Salinas, California and is 71 years old and a retired
23 teacher. In or about November 2016, Mrs. Chandler liquidated the investments in her two IRA
24 accounts and invested all of the proceeds in two promissory notes issued by First Nationle. In the
25 months that followed, Mrs. Chandler made additional investments in notes issued by First
26 Nationle and United RL. These investments were funded from annuity proceeds previously held
27 at Pacific Life, Jackson Life, Guardian Life, and Delaware Life, as well as proceeds held in Mrs.
28 Chandler’s bank account. Mrs. Chandler incurred surrender fees and taxes of approximately
PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES
1 $60,000. Mrs. Chandler’s investment losses total approximately $840,000. Ms. Chandler
2 assigned her claims against FP Transitions to IFG by a valid assignment of claims.
3 15. John Day resides in Salinas, California and is 76 years old and retired as a self-
4 employed mobile home dealer. In or about September 2016, Mr. Day liquidated an annuity and
5 invested all of the proceeds in a promissory a note issued by First Nationle. Mr. Day’s
6 investment losses total approximately $121,000. Mr. Day assigned his claims against FP
7 Transitions to IFG by a valid assignment of claims.
8 16. Sim Granoff and Virginia Lott are domestic partners and reside in Salinas,
9 California. Mr. Granoff is 71 years old. He retired as a clinical psychologist for the Corrections
10 Division of the State of Hawaii Department of Safety. Ms. Lott is 72 years old. She retired as a
11 therapist for Child & Family Service, a Hawaii non-profit organization, where she worked with
12 women who had been released out of prison. In about September 2016, Mr. Granoff liquidated an
13 annuity held at Lincoln Life and invested all of the proceeds of approximately $91,000 in a
14 promissory note issued by First Nationle. At about the same time, Ms. Lott liquidated an annuity
15 held at Lincoln Life and invested all of the proceeds of approximately $461,000 in a promissory
16 note issued by First Nationle. Thereafter, it Ms. Lott made subsequent investments in additional
17 promissory notes of approximately $250,000. Mr. Granoff and Ms. Lott’s investment losses total
18 approximately $802,000. Mr. Granoff and Ms. Lott assigned their claims against FP Transitions
19 to IFG by a valid assignment of claims.
20 17. Gretchen Jackson resides in Salinas, California and is 65 years old and widowed.
21 In or about September and November 2016, Mrs. Jackson liquidated annuities and invested all of
22 the proceeds in two promissory notes issued by First Nationle. In February 2017, Mrs. Jackson
23 was sold a separate promissory note issued by United RL. Mrs. Jackson’s investment losses total
24 approximately $640,000. Mrs. Jackson assigned her claims against FP Transitions to IFG by a
25 valid assignment of claims.
26 18. William and Sharon Miller reside in Salinas, California. They are both 69 years
27 old. Mr. Miller is a retired electrician. Mrs. Miller is a retired administrative assistant. In or
28 about October 2016, Mr. Miller liquidated his IRA, liquidated an annuity, and invested all of the
PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES
1 proceeds from these investments in two promissory notes issued by First Nationle and United RL.
2 In February 2017, Mrs. Miller liquidated another annuity and invested the proceeds into separate
3 promissory notes issued by First Nationle. Mr. and Mrs. Miller’s investment losses total
4 approximately $720,000. Mr. and Ms. Miller assigned their claims against FP Transitions to IFG
5 by a valid assignment of claims.
6 19. Darryl Prudden resides in Salinas, California and is 74 years old and retired from
7 the railroad. In or about September 2016, Mr. Prudden liquidated an annuity and invested all of
8 the proceeds in to a promissory note issued by First Nationle. Mr. Day’s investment losses
9 total approximately $82,000. Mr. Prudden assigned his claims against FP Transitions to IFG by a
10 valid assignment of claims.
11 20. Carolyn Rice resides in Salinas, California and is 75 years old and a retired clerical
12 worker. In or about September and December 2016, Mrs. Rice liquidated annuities and invested
13 all of the proceeds in two promissory notes issued by First Nationle. Ms. Rice’s investment
14 losses total approximately $100,000. Ms. Rice assigned her claims against FP Transitions to IFG
15 by a valid assignment of claims.
16 21. John and Sandy Romero in Salinas, California. Mr. Romero, age 74, is a retired
17 high school teacher. Mrs. Romero, age 75, is a retired elementary school teacher. In or about
18 September 2016, Mr. and Mrs. Romero closed three annuities and invested all of the proceeds in
19 three promissory notes issued by First Nationle. Mr. and Mrs. Romero’s investment losses total
20 approximately $312,000. Mr. and Ms. Romero assigned their claims against FP Transitions to
21 IFG by a valid assignment of claims.
22 22. Bennie Hill and Lynda Hill reside in Salinas, California. Mr. Hill is 75 years old
23 and retired. He worked as an operations manager. Mrs. Hill is 70 years old and retired. She
24 worked as an office manager. In or about December 2016 and February 2017, Mr. and Mrs. Hill
25 closed two IRAs and liquidated an annuity held at Transamerica and invested all of the proceeds
26 from these investments in seven promissory notes issued by First Nationle, United RL, and
27 Percipience. Mr. and Mrs. Hill’s investment losses total approximately $810,000. Mr. and Ms.
28 Hill assigned their claims against FP Transitions to IFG by a valid assignment of claims.
PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES
1 23. Ellen Koskinen resides in Salinas, California and is 66 years old and a retired
2 clerical worker. In or about December 2016 and January 2017, Ms. Koskinen closed an IRA and
3 a trust account and invested all of the proceeds from these investments in three promissory notes
4 issued by First Nationle and United RL. Ms. Koskinen’s investment losses total approximately
5 $394,000. Ms. Koskinen assigned her claims against FP Transitions to IFG by a valid assignment
6 of claims.
7 24. George Lynch and Helen Lynch reside in Salinas, California. Mr. Lynch is 85
8 years old and a retired teacher. Mrs. Lynch is 76 years old and a retired secretary. In or about
9 November 2016, Mr. and Mrs. Lynch surrendered three annuities held at Transamerica and
10 invested all of the proceeds from these investments in promissory notes issued by First Nationle.
11 Mr. and Mrs. Lynch’s investment losses total approximately $92,000. Mr. and Ms. Lynch
12 assigned their claims against FP Transitions to IFG by a valid assignment of claims.
13 25. Matthew Panziera and Jamie Panziera reside in Salinas, California. Mr. Panziera
14 is 44 years old and a farmer. Ms. Panziera is 41 years old and a teacher. They have three
15 children. In or about February and March 2017, Mr. and Ms. Panziera closed two IRA accounts.
16 They also transferred money from a 401(k) and closed a Hartford annuity. All of the proceeds
17 from these investments were invested in promissory notes issued by First Nationle. Mr. and Ms.
18 Panziera’s investment losses total approximately $187,000. Mr. and Ms. Panziera assigned their
19 claims against FP Transitions to IFG by a valid assignment of claims.
20 26. Tom Sgheiza and Mary Sgheiza reside in Salinas, California. Mr. Sgheiza is 68
21 years old and a retired business owner. Mrs. Sgheiza is 70 years old and a retired teacher and
22 principal. In or about November 2016, Mr. and Mrs. Sgheiza surrendered two annuities held at
23 Transamerica and invested all of the proceeds from the annuities in promissory notes issued
24 by First Nationle. Mr. and Mrs. Sgheiza’s investment losses total approximately $200,000. Mr.
25 and Ms. Sgheiza assigned their claims against FP Transitions to IFG by a valid assignment of
26 claims.
27 27. Mr. Kondo resides in Salinas, California. He is 70 years old and works as an
28 equipment manager. From about December 2016 through May 2017, Mr. Kondo invested in
PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES
1 promissory notes issued by First Nationle, United RL, Middlebury Development, and Nexus Lab.
2 Mr. Kondo’s investment losses total approximately $2,400,000. Mr. Kondo assigned his claims
3 against FP Transitions to IFG by a valid assignment of claims.
4 28. Collectively, Adolfo Artalejo, Rod and Nancy Belton, James and June Cornelius,
5 John and Philayna Favero, Ray and Vinnie Moncada, Sheryl Peck, Juanita Stoddard, Ron and
6 Hazel Taylor, Jane Beery, Joy Chandler, John Day, Gretchen Jackson, William and Sharon
7 Miller, Darryl Prudden, Carolyn Rice, John and Sandy Romero, Bennie Hill and Lynda Hill,
8 Ellen Koskinen, George Lynch and Helen Lynch, Jamie Panziera, Tom Sgheiza and Mary
9 Sgheiza, and Gene Kondo are referred to herein as the “Assignors”.
10 29. DOES 1-50 are fictitious names being used to sue any unidentified individuals or
11 entities who may be in some manner responsible for the unlawful acts, omissions, events,
12 occurrences, and happenings alleged herein, and who are the direct or proximate cause of
13 Plaintiff’s injuries. Plaintiff is ignorant of the true name of the defendant and when the true name
14 is ascertained, the complaint will be amended to substitute that name.
15 VENUE AND JURISDICTION
16 30. This Court has subject matter jurisdiction over this action because the amount in
17 controversy exceeds the jurisdictional minimum.
18 31. Venue is appropriate in Monterey County because the Assignors reside in
19 Monterey County, California and the events giving rise to IFG’s and the Assignor’s claims
20 occurred in Monterey County.
21 32. Venue is also appropriate in Monterey County because Defendant conducted
22 substantial business in the Monterey County during the relevant time period.
23 FACTUAL ALLEGATIONS
24 33. On or about March 2016, Marshall, a Registered Representative of IFG, entered
25 into a contract with FP Transitions for the purposes of selling his financial services business,
26 Marshall Wealth Management Group (“MWMG”).
27 34. Marshall intended to retire, and sought to sell his business, clients of which
28 included the Assignors, and engaged FP Transitions to select qualified, trustworthy, and capable
PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES
1 buyers. FP Transitions held themselves out as experts in the field of financial service business
2 sales coordination.
3 35. FP Transitions provided its assurances to Marshall and IFG that, based upon its
4 expertise in financial business sales transactions, it would source a qualified, trustworthy buyer.
5 36. FP Transitions identified and endorsed Santillo as a qualified, trustworthy, and
6 experienced buyer.
7 37. Based on FP Transitions’s representations to IFG and Marshall that Perry Santillo
8 was the best, most reputable, and most thoroughly vetted candidate, Marshall executed a contract
9 with Santillo, drafted by FP Transitions, for the sale of MWMG.
10 38. Despite FP Transitions’s repeated assurances and endorsements of Santillo as a
11 trustworthy, experienced financial services professional, he turned out to be the ringleader of a
12 large scale Ponzi-scheme, which, to date, has defrauded investors nationwide of over $100
13 million.
14 39. Assignors, clients of MWMG who were defrauded by Santillo, brought claims
15 against IFG through FINRA to recover their misappropriated monies pilfered by Santillo.
16 Assignors contended, among other things, that IFG was negligent in failing to properly vet
17 Santillo prior to the sale of MWMG to Santillo by Marshall.
18 40. Based on the foregoing, Assignors have alleged claims against IFG, including
19 professional negligence. Those claims against IFG have been settled in exchange for valuable
20 consideration.
21 41. IFG is informed and believes, and thereon alleges, that FP Transitions,
22 intentionally omitted material facts regarding Santillo in its discussions with Marshall and IFG of
23 the sale of MWMG to Santillo, negligently misrepresented Santillo’s qualifications to Marshall
24 and IFG and/or otherwise improperly influenced Marshall to sell MWMG to Santillo and thereby
25 caused damages to Assignors and IFG.
26 42. In the summer of 2016, FP Transitions held themselves out as experts in the field
27 of financial service business sales coordination to Marshall and IFG. FP Transitions knew that
28 Marshall and IFG were relying on their expertise. In proposing Santillo as a buyer, FP
PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES
1 Transitions was offering a professional opinion on his suitability as a buyer that amounted to a
2 representation of fact. FP Transitions managed the entire transaction between Marshall and
3 Santillo. FP Transitions not only proposed Santillo as a buyer, but also drafted the transaction
4 agreements and aided in the pricing of the deal. All of these functions that FP Transitions carried
5 out with respect to the transaction amounted to representations relied upon by IFG and Marshall
6 that, based upon FP Transitions’ expertise in financial business sales transactions, Santillo was a
7 qualified, trustworthy buyer. Those representations were false.
8
9 CLAIMS FOR RELIEF
10
11 FIRST CLAIM FOR RELIEF – EQUITABLE INDEMNITY
12 43. IFG re-allege paragraphs 1 through 42, inclusive, as if set forth fully herein.
13 44. IFG’s liability for Assignor’s claims is based solely on a derivative form of
14 liability not resulting from its conduct, but only from an obligation imposed by law based on the
15 direct and primary acts or omissions of FP Transitions, who is obligated to indemnify IFG for
16 attorneys’ fees and costs incurred in defending the Assignors’ claims and/or for any sum which
17 IFG paid to Assignors in settlement of Assignors’ claim.
18 45. IFG further alleges it is entitled to total (and if not total, then partial) equitable
19 indemnity from FP Transitions, in the amount proportionate to FP Transitions’s share of liability
20 in connection with the settlement payments to the Assignors.
21
22 SECOND CLAIM FOR RELIEF – EQUITABLE CONTRIBUTION
23 46. IFG re-allege paragraphs 1 through 45, inclusive, as if set forth fully herein.
24 47. In the alternative, should the Court determine that IFG is directly liable to
25 Assignors, which liability IFG denies, IFG seeks an equitable allocation of fault between IFG
26 and FP Transitions.
27 48. IFG alleges that FP Transitions is obligated to reimburse IFG in an amount equal
28 to FP Transitions’s proportionate and equitable share of fault.
PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES
1
2 THIRD CLAIM FOR RELIEF – BREACH OF CONTRACT THIRD PARTY
3 BENEFICIARY
4 49. IFG re-alleges paragraphs 1 through 48, inclusive, as if set forth fully herein.
5 50. IFG is informed and believes, and on that basis alleges, that Marshall entered
6 into a written agreement with FP Transitions whereby FP Transitions agreed and contracted to
7 bind itself to indemnify Marshall and MWMG for any and all liability, claims, demands, loss,
8 damages, costs, and expense whatsoever with respect to the underlying sale.
9 51. IFG is informed and believes, and on that basis alleges, that Marshall and FP
10 Transitions both understood and intended that IFG was an intended beneficiary of the written
11 indemnity agreement.
12 52. FP Transitions has breached the contractual indemnity agreement by failing to
13 adhere to the express representations, acknowledgments and agreements as set forth in the written
14 indemnity agreement and by failing to defend and indemnify IFG from any and all liability,
15 claims, demands, loss, damages, costs, and expense whatsoever arising out of or connected in any
16 manner with respect to the underlying sale.
17 53. Marshall and MWMG have performed all covenants, conditions, and obligations
18 placed upon them and based thereon, IFG is entitled to full contractual indemnity from FP
19 Transitions with respect to the Assignors’ claims against IFG.
20 54. Moreover, the contract between Marshall and FP Transitions, of which IFG is an
21 intended beneficiary, contains a valid arbitration provision. IFG is entitled to the benefit of that
22 arbitration provision and expressly reserves and does not waive its right to enforce that arbitration
23 provision.
24
25 FOURTH CLAIM FOR RELIEF – NEGLIGENT MISREPRESENTATION
26 55. IFG re-alleges paragraphs 1 through 54, inclusive, as if set forth fully herein.
27 56. IFG is informed and believes and thereon alleges that the Assignors’ losses and
28 IFG’s liability to the Assignors for their losses was solely and exclusively due to
PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES
1 misrepresentations made by FP Transitions to Marshall and MWMG and IFG, which were made
2 negligently and with reckless disregard for the truth or falsity of the representations.
3 57. FP Transitions made representations regarding Santillo to Marshall and MWMG
4 and IFG that FP Transitions knew IFG and the Assignors were going to rely on. The
5 representations were false and were made negligently and with reckless disregard for the truth or
6 falsity of the representations.
7 58. IFG and the Assignors justifiably relied on FP Transition’s false representations to
8 their detriment.
9 59. FP Transitions knew that IFG and the Assignors were relying on the
10 representations made by FP Transitions regarding the underlying sale.
11 60. With respect to IFG, FP Transition knew and intended that its representations
12 would influence IFG’s approval of the underlying sale.
13 61. With respect to the Assignors, FP Transitions knew and intended that its
14 representations would influence the Assignors’ decision to do business with Santillo.
15 62. As a direct and proximate result of FP Transitions’s negligent and/or reckless
16 misrepresentations noted above, which Marshall and MWMG, IFG and the Assignors justifiably
17 relied upon, IFG and the Assignors have been damaged in amounts that are not precisely known
18 and that will be determined at the time of trial.
19
20 FIFTH CLAIM FOR RELIEF – PROFESSIONAL NEGLIGENCE
21 63. IFG re-alleges paragraphs 1 through 62, inclusive, as if set forth fully herein.
22 64. FP Transitions made representations regarding Santillo to Marshall and MWMG
23 and IFG that FP Transitions knew IFG and the Assignors were going to rely on and thereby
24 undertook a duty of care with respect to IFG and the Assignors.
25 65. FP Transitions further represented to Marshall, IFG and the public that it was an
26 expert in the brokerage of financial services businesses and that it had completed more financial
27 services transactions than any investment banker or business broker in the country.
28
PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES
1 66. IFG and the Assignors justifiably relied on FP Transition’s false representations to
2 their detriment.
3 67. FP Transitions knew that IFG and the Assignors were relying on the
4 representations made by FP Transitions regarding the underlying sale.
5 68. With respect to IFG, FP Transition knew and intended that its representations
6 would influence IFG’s approval of the underlying sale.
7 69. With respect to the Assignors, FP Transitions knew and intended that its
8 representations would influence the Assignors’ decision to do business with Santillo.
9 70. As the broker of the underlying sale, FP Transitions assumed and owed IFG and
10 Assignors a duty of due care to not make misrepresentations regarding Santillo and to take the
11 steps required to ensure that Santillo was a legitimate financial services professional and not a
12 repeated fraudster.
13 71. FP Transitions breached its duty to Marshall, IFG and the Assignors when it failed
14 to make any meaningful steps to verify that Santillo was a legitimate financial services
15 professional and when it allowed IFG and the Assignors to rely on FP Transition’s false
16 representations regarding Santillo thereby exposing the Assignors and IFG to the predations of a
17 repeated fraudster in the form of Santillo.
18 72. As a proximate result of the negligence of FP Transitions in its promotion of and
19 misrepresentations regarding the sale of MWMG to Santillo, IFG and the Assignors have suffered
20 damages, including consequential damages in the form of attorneys’ fees.
21
22 SIXTH CLAIM FOR RELIEF –NEGLIGENCE
23 73. IFG re-alleges paragraphs 1 through 72, inclusive, as if set forth fully herein.
24 74. FP Transitions made representations regarding Santillo to Marshall and MWMG
25 and IFG that FP Transitions knew IFG and the Assignors were going to rely on and thereby
26 undertook a duty of care with respect to IFG and the Assignors.
27
28
PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES
1 75. FP Transitions further represented to Marshall, IFG and the public that it was an
2 expert in the brokerage of financial services businesses and that it had completed more financial
3 services transactions than any investment banker or business broker in the country.
4 76. IFG and the Assignors justifiably relied on FP Transition’s false representations to
5 their detriment.
6 77. FP Transitions knew that IFG and the Assignors were relying on the
7 representations made by FP Transitions regarding the underlying sale.
8 78. With respect to IFG, FP Transition knew and intended that its representations
9 would influence IFG’s approval of the underlying sale.
10 79. With respect to the Assignors, FP Transitions knew and intended that its
11 representations would influence the Assignors’ decision to do business with Santillo.
12 80. As the broker of the underlying sale, FP Transitions assumed and ow
Preview
1 Edward S. Zusman (SBN 154366) Rick Smith (SBN 298556) 2 MARKUN ZUSMAN & COMPTON LLP 465 California Street, Suite 401 3 San Francisco, California 94104 Telephone: (415) 438-4515 4 Facsimile: (415) 434-4505 5 Attorneys for Plaintiff 6 SUPERIOR COURT OF CALIFORNIA 7 8 IN AND FOR THE COUNTY OF MONTEREY 9 INDEPENDENT FINANCIAL GROUP, Case No.: 21CV001264 10 LLC, on its own behalf and as assignee of Adolfo Artalejo; Rod Belton and Nancy DECLARATION OF RICK SMITH IN 11 Belton; James Cornelius and June Cornelius; SUPPORT OF PLAINTIFF’S NOTICE OF John Favero and Philayna Favero; Ray MOTION AND MOTION TO 12 Moncada and Vinnie Moncada; Sheryl Peck; CONSOLIDATE Juanita Stoddard; Ron Taylor and Hazel 13 Taylor; Jane Beery; Joy Chandler; John Day; Sim Granoff and Virginia Lott; Gretchen Date: March 24, 2023 14 Jackson; William Miller and Sharon Miller; Time: 8:30am Darryl Prudden; Carolyn Rice; John Romero Dept.: 14 15 and Sandy Romero; Bennie Hill and Lynda Hill; Ellen Koskinen; George Lynch and Complaint Filed: April 15, 2021 16 Helen Lynch; Mathew Panziera and Jamie Panziera; and Tom Sgheiza and Mary Trial Date: None Set 17 Sgheiza, 18 Plaintiff, 19 v. 20 FP TRANSITIONS, LLC and DOES 1-50, INCLUSIVE, 21 Defendants. 22 FP TRANSITIONS, LLC, 23 Cross-Complainant, 24 v. 25 INDEPENDENT FINANCIAL GROUP, 26 LLC, David Marshall, Marshall Wealth Management Group and ROES 1-25, 27 inclusive, 28 Cross-Defendants. 1 PLAINTIFF’S MOTION TO CONSOLIDATE 1 2 INDEPENDENT FINANCIAL GROUP, Case No.: 22CV001149 3 LLC, on its own behalf and as assignee of Gene Kondo, Complaint Filed: April 26, 2022 4 Plaintiff, Trial Date: None Set 5 v. 6 FP TRANSITIONS, LLC and DOES 1-50, 7 INCLUSIVE, 8 Defendants. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SMITH DECLARATION - MOTION TO CONSOLIDATE 1 I, Rick Smith, declare as follows: 2 1. I am an attorney duly licensed to practice law before all courts of the State of 3 California. My law firm, Markun Zusman & Compton, LLP, is counsel for Plaintiff Independent 4 Financial Group, LLC in Independent Financial Group, LLC v. FP Transitions, LLC et al., Case 5 No. 21CV001264, and Independent Financial Group, LLC v. FP Transitions, LLC et al., Case 6 No. 22CV001149. This declaration is submitted in support of Plaintiff’s motion to consolidate 7 the two actions. The following facts are within my personal knowledge and based on my review 8 of the records referenced in this declaration and, if called as a witness herein, I could and would 9 testify thereto. 10 2. Attached hereto as Exhibit A is a true and correct copy of the operative Complaint in 11 Independent Financial Group, LLC v. FP Transitions, LLC et al., Case No. 21CV001264. 12 3. Attached hereto as Exhibit A is a true and correct copy of the operative Complaint in 13 Independdent Financial Group, LLC v. FP Transitions, LLC et al., Case No. 22CV001149. 14 4. Counsel of Record for Defendant FP Transitions, LLC in both matters is Bryan L. 15 Saalfeld and Thomas F. Mazzucco, Murphy, Pearson, Bradley & Feeney, 580 California Street, 16 Suite 1100, San Francisco, CA 94104-1001. 17 5. Cross-Defendant David Marshall has not yet appeared in Independent Financial Group, 18 LLC v. FP Transitions, LLC et al., Case No. 21CV001264. 19 20 21 22 Dated: January 31, 2023 By: _______________________________ 23 24 Rick Smith 25 26 27 28 SMITH DECLARATION - MOTION TO CONSOLIDATE Exhibit A ELECTRONICALLY FILED BY Superior Court of California, County of Monterey 1 Edward S. Zusman (SBN 154366) On 11/18/2021 9:14 PM Rick Smith (SBN 298556) By: Kristen DeMers, Deputy 2 MARKUN ZUSMAN FRENIERE & COMPTON LLP 465 California Street, Suite 401 3 San Francisco, California 94104 Telephone: (415) 438-4515 4 Facsimile: (415) 434-4505 5 Attorneys for Plaintiff 6 SUPERIOR COURT OF CALIFORNIA 7 8 IN AND FOR THE COUNTY OF MONTEREY 9 INDEPENDENT FINANCIAL GROUP, Case No.: 21CV001264 10 LLC, on its own behalf and as assignee of Adolfo Artalejo; Rod Belton and Nancy SECOND AMENDED COMPLAINT FOR 11 Belton; James Cornelius and June Cornelius; (1) EQUITABLE INDEMNITY; (2) John Favero and Philayna Favero; Ray EQUITABLE CONTRIBUTION; (3) 12 Moncada and Vinnie Moncada; Sheryl Peck; BREACH OF CONTRACT THIRD Juanita Stoddard; Ron Taylor and Hazel PARTY BENEFICIARY; (4) NEGLIGENT 13 Taylor; Jane Beery; Joy Chandler; John Day; MISREPRESENTATION; (5) Sim Granoff and Virginia Lott; Gretchen PROFESSIONAL NEGLIGENCE; (6) 14 Jackson; William Miller and Sharon Miller; NEGLIGENCE Darryl Prudden; Carolyn Rice; John Romero 15 and Sandy Romero; Bennie Hill and Lynda Hill; Ellen Koskinen; George Lynch and DEMAND FOR JURY TRIAL 16 Helen Lynch; Mathew Panziera and Jamie Panziera; Tom Sgheiza and Mary Sgheiza; 17 and Gene Kondo, 18 Plaintiff, 19 v. 20 FP TRANSITIONS, LLC and DOES 1-50, INCLUSIVE, 21 Defendants. 22 23 24 25 26 27 28 1 PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES 1 PARTIES AND RELATED INDIVIDUALS 2 1. Independent Financial Group, LLC (“IFG”) is an SEC registered FINRA-member 3 broker-dealer firm headquartered in San Diego, California. IFG currently has over 600 advisors 4 throughout the United States. 5 2. FP Transitions, LLC (“FP Transitions”) is, and at all times was, a limited liability 6 corporation existing under the laws of the State of Oregon, with its principal place of business in 7 Lake Oswego, Oregon. FP Transitions purports to be the nation’s leading business consulting 8 firm dedicated to independent wealth advisory businesses and claims to have completed more 9 financial services transactions than any investment banker or business broker in the country since 10 1999. Upon information and belief, FP Transitions is authorized to conduct business in the State 11 of California. 12 3. David Marshall (“Marshall”) was a Registered Representative of IFG responsible 13 for the accounts of the Assignors prior to the sale his financial services business, Marshall Wealth 14 Management Group (“MWMG”) to Perry Santillo based on the recommendation of FP 15 Transitions. 16 4. Perry Santillo (“Santillo”) owned or controlled various entities including: First 17 Nationle Solution, LLC; United RL Capital; Percipience Global Corporation; and Middlebury 18 Development. These entities sold notes to investors as part of a Ponzi scheme that fraudulently 19 netted over $115 million nationwide. Santillo has pled guilty to felony charges and admitted to 20 defrauding investors around the country. 21 5. Adolfo Artalejo resides in Salinas, California and is 76 years old and a retired 22 postal worker. In or about November 2016, Mr. Artalejo liquidated an annuity he held at 23 Delaware Life and invested all of the proceeds in a promissory note issued by First Nationle. Mr. 24 Artalejo’s investment losses total approximately $188,000. Mr. Artalejo assigned his claims 25 against FP Transitions to IFG by a valid assignment of claims. 26 6. Rod and Nancy Belton reside in Salinas, California. Mr. Belton is 73 years old 27 and retired as a telecommunications executive. Ms. Belton is 71 years old and works as a human 28 resources professional. In or about November 2016 and continuing through at least April 2017, PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES 1 Mr. and Ms. Belton closed an IRA account as well as annuities held at Transamerica and invested 2 all of the proceeds in seven promissory notes issued by First Nationle, United RL, Percipience, 3 and NextMed. Mr. and Ms. Belton’s investment losses total approximately $457,000. Mr. and 4 Ms. Belton assigned their claims against FP Transitions to IFG by a valid assignment of claims. 5 7. James and June Cornelius reside in Salinas, California. Mr. Cornelius is 74 years 6 old and retired as an Associate Distribution Engineer for Pacific Gas & Electric Company. Mrs. 7 Cornelius is 70 years old and also retired from Pacific Gas & Electric Company. In or about 8 December 2016 and January 2017, Mr. and Mrs. Cornelius liquidated annuities held at Delaware 9 Life and invested all of the proceeds from these investments in five promissory notes issued by 10 First Nationle and United RL. Mr. and Mrs. Cornelius’ investment losses total approximately 11 $360,000. Mr. and Ms. Cornelius assigned their claims against FP Transitions to IFG by a valid 12 assignment of claims. 13 8. John and Philayna Favero reside in Salinas, California. Mr. Favero is 70 years old 14 and a retired teacher and principal. Mrs. Favero is 69 years old and a retired elementary school 15 teacher. In or about November and December 2016, Mr. and Mrs. Favero closed two IRA 16 accounts and invested all of the proceeds in six promissory notes issued by First Nationle and 17 United RL. Mr. and Mrs. Favero’s investment losses total approximately $380,000. Mr. and Ms. 18 Favero assigned their claims against FP Transitions to IFG by a valid assignment of claims. 19 9. Ray and Vinnie Moncada reside in Salinas, California. Mr. Moncada is 76 years 20 old. He retired as an equipment manager several years ago, but has recently gone back to work as 21 a result of the investment losses at issue in this case. Mrs. Moncada is 74 years old and works as 22 a risk manager for an insurance broker. In or about April and May 2017, Mr. and Mrs. Moncada 23 closed IRA accounts and invested all of the proceeds in promissory notes issued by First 24 Nationle. Mr. and Mrs. Moncada’s investment losses total approximately $290,000. Mr. and Ms. 25 Moncada assigned their claims against FP Transitions to IFG by a valid assignment of claims. 26 10. Sheryl Peck resides in Salinas, California and is 71 years old and a retired 27 accountant. In or about October 2016, Ms. Peck liquidated an annuity held at Transamerica and 28 invested part of the proceeds in a promissory note issued by First Nationle. When surrendering PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES 1 the annuity, Ms. Peck incurred surrender fees and taxes totaling approximately $70,000. Ms. 2 Peck’s investment losses total approximately $350,000. Ms. Peck assigned their claims against 3 FP Transitions to IFG by a valid assignment of claims. 4 11. Juanita Stoddard resides in Salinas, California and is 73 years old and a retired 5 elementary school teacher. In or about September and December 2016, Ms. Stoddard liquidated 6 an annuity held at Transamerica and invested all of the proceeds in a promissory note issued by 7 First Nationle. Ms. Stoddard’s investment losses total approximately $126,000. Ms. Stoddard 8 assigned her claims against FP Transitions to IFG by a valid assignment of claims.. 9 12. Ron and Hazel Taylor reside in Salinas, California. Mr. Taylor, age 77, is a retired 10 auto parts store owner. Mrs. Taylor, age 72, is a retired office manager. From about September 11 2016 through March 2017, Mr. and Mrs. Taylor surrendered five annuities held at Delaware Life 12 and Transamerica and invested all of the proceeds in five promissory notes issued by First 13 Nationle. When surrendering the annuities, Mr. and Mrs. Taylor incurred surrender fees and 14 taxes totaling approximately $14,000. Mr. and Mrs. Taylor’s investment losses total 15 approximately $648,000. Mr. and Ms. Taylor assigned their claims against FP Transitions to IFG 16 by a valid assignment of claims. 17 13. Jane Beery resides in Salinas, California and is 77 years old and retired as the 18 manager of a wine tasting room. In or about September 2016, Ms. Beery liquidated an annuity 19 she held at Lincoln Financial and invested all of the proceeds in a promissory note issued by First 20 Nationle. Ms. Beery’s investment losses total approximately $192,000. Ms. Beery assigned her 21 claims against FP Transitions to IFG by a valid assignment of claims. 22 14. Joy Chandler resides in Salinas, California and is 71 years old and a retired 23 teacher. In or about November 2016, Mrs. Chandler liquidated the investments in her two IRA 24 accounts and invested all of the proceeds in two promissory notes issued by First Nationle. In the 25 months that followed, Mrs. Chandler made additional investments in notes issued by First 26 Nationle and United RL. These investments were funded from annuity proceeds previously held 27 at Pacific Life, Jackson Life, Guardian Life, and Delaware Life, as well as proceeds held in Mrs. 28 Chandler’s bank account. Mrs. Chandler incurred surrender fees and taxes of approximately PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES 1 $60,000. Mrs. Chandler’s investment losses total approximately $840,000. Ms. Chandler 2 assigned her claims against FP Transitions to IFG by a valid assignment of claims. 3 15. John Day resides in Salinas, California and is 76 years old and retired as a self- 4 employed mobile home dealer. In or about September 2016, Mr. Day liquidated an annuity and 5 invested all of the proceeds in a promissory a note issued by First Nationle. Mr. Day’s 6 investment losses total approximately $121,000. Mr. Day assigned his claims against FP 7 Transitions to IFG by a valid assignment of claims. 8 16. Sim Granoff and Virginia Lott are domestic partners and reside in Salinas, 9 California. Mr. Granoff is 71 years old. He retired as a clinical psychologist for the Corrections 10 Division of the State of Hawaii Department of Safety. Ms. Lott is 72 years old. She retired as a 11 therapist for Child & Family Service, a Hawaii non-profit organization, where she worked with 12 women who had been released out of prison. In about September 2016, Mr. Granoff liquidated an 13 annuity held at Lincoln Life and invested all of the proceeds of approximately $91,000 in a 14 promissory note issued by First Nationle. At about the same time, Ms. Lott liquidated an annuity 15 held at Lincoln Life and invested all of the proceeds of approximately $461,000 in a promissory 16 note issued by First Nationle. Thereafter, it Ms. Lott made subsequent investments in additional 17 promissory notes of approximately $250,000. Mr. Granoff and Ms. Lott’s investment losses total 18 approximately $802,000. Mr. Granoff and Ms. Lott assigned their claims against FP Transitions 19 to IFG by a valid assignment of claims. 20 17. Gretchen Jackson resides in Salinas, California and is 65 years old and widowed. 21 In or about September and November 2016, Mrs. Jackson liquidated annuities and invested all of 22 the proceeds in two promissory notes issued by First Nationle. In February 2017, Mrs. Jackson 23 was sold a separate promissory note issued by United RL. Mrs. Jackson’s investment losses total 24 approximately $640,000. Mrs. Jackson assigned her claims against FP Transitions to IFG by a 25 valid assignment of claims. 26 18. William and Sharon Miller reside in Salinas, California. They are both 69 years 27 old. Mr. Miller is a retired electrician. Mrs. Miller is a retired administrative assistant. In or 28 about October 2016, Mr. Miller liquidated his IRA, liquidated an annuity, and invested all of the PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES 1 proceeds from these investments in two promissory notes issued by First Nationle and United RL. 2 In February 2017, Mrs. Miller liquidated another annuity and invested the proceeds into separate 3 promissory notes issued by First Nationle. Mr. and Mrs. Miller’s investment losses total 4 approximately $720,000. Mr. and Ms. Miller assigned their claims against FP Transitions to IFG 5 by a valid assignment of claims. 6 19. Darryl Prudden resides in Salinas, California and is 74 years old and retired from 7 the railroad. In or about September 2016, Mr. Prudden liquidated an annuity and invested all of 8 the proceeds in to a promissory note issued by First Nationle. Mr. Day’s investment losses 9 total approximately $82,000. Mr. Prudden assigned his claims against FP Transitions to IFG by a 10 valid assignment of claims. 11 20. Carolyn Rice resides in Salinas, California and is 75 years old and a retired clerical 12 worker. In or about September and December 2016, Mrs. Rice liquidated annuities and invested 13 all of the proceeds in two promissory notes issued by First Nationle. Ms. Rice’s investment 14 losses total approximately $100,000. Ms. Rice assigned her claims against FP Transitions to IFG 15 by a valid assignment of claims. 16 21. John and Sandy Romero in Salinas, California. Mr. Romero, age 74, is a retired 17 high school teacher. Mrs. Romero, age 75, is a retired elementary school teacher. In or about 18 September 2016, Mr. and Mrs. Romero closed three annuities and invested all of the proceeds in 19 three promissory notes issued by First Nationle. Mr. and Mrs. Romero’s investment losses total 20 approximately $312,000. Mr. and Ms. Romero assigned their claims against FP Transitions to 21 IFG by a valid assignment of claims. 22 22. Bennie Hill and Lynda Hill reside in Salinas, California. Mr. Hill is 75 years old 23 and retired. He worked as an operations manager. Mrs. Hill is 70 years old and retired. She 24 worked as an office manager. In or about December 2016 and February 2017, Mr. and Mrs. Hill 25 closed two IRAs and liquidated an annuity held at Transamerica and invested all of the proceeds 26 from these investments in seven promissory notes issued by First Nationle, United RL, and 27 Percipience. Mr. and Mrs. Hill’s investment losses total approximately $810,000. Mr. and Ms. 28 Hill assigned their claims against FP Transitions to IFG by a valid assignment of claims. PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES 1 23. Ellen Koskinen resides in Salinas, California and is 66 years old and a retired 2 clerical worker. In or about December 2016 and January 2017, Ms. Koskinen closed an IRA and 3 a trust account and invested all of the proceeds from these investments in three promissory notes 4 issued by First Nationle and United RL. Ms. Koskinen’s investment losses total approximately 5 $394,000. Ms. Koskinen assigned her claims against FP Transitions to IFG by a valid assignment 6 of claims. 7 24. George Lynch and Helen Lynch reside in Salinas, California. Mr. Lynch is 85 8 years old and a retired teacher. Mrs. Lynch is 76 years old and a retired secretary. In or about 9 November 2016, Mr. and Mrs. Lynch surrendered three annuities held at Transamerica and 10 invested all of the proceeds from these investments in promissory notes issued by First Nationle. 11 Mr. and Mrs. Lynch’s investment losses total approximately $92,000. Mr. and Ms. Lynch 12 assigned their claims against FP Transitions to IFG by a valid assignment of claims. 13 25. Matthew Panziera and Jamie Panziera reside in Salinas, California. Mr. Panziera 14 is 44 years old and a farmer. Ms. Panziera is 41 years old and a teacher. They have three 15 children. In or about February and March 2017, Mr. and Ms. Panziera closed two IRA accounts. 16 They also transferred money from a 401(k) and closed a Hartford annuity. All of the proceeds 17 from these investments were invested in promissory notes issued by First Nationle. Mr. and Ms. 18 Panziera’s investment losses total approximately $187,000. Mr. and Ms. Panziera assigned their 19 claims against FP Transitions to IFG by a valid assignment of claims. 20 26. Tom Sgheiza and Mary Sgheiza reside in Salinas, California. Mr. Sgheiza is 68 21 years old and a retired business owner. Mrs. Sgheiza is 70 years old and a retired teacher and 22 principal. In or about November 2016, Mr. and Mrs. Sgheiza surrendered two annuities held at 23 Transamerica and invested all of the proceeds from the annuities in promissory notes issued 24 by First Nationle. Mr. and Mrs. Sgheiza’s investment losses total approximately $200,000. Mr. 25 and Ms. Sgheiza assigned their claims against FP Transitions to IFG by a valid assignment of 26 claims. 27 27. Mr. Kondo resides in Salinas, California. He is 70 years old and works as an 28 equipment manager. From about December 2016 through May 2017, Mr. Kondo invested in PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES 1 promissory notes issued by First Nationle, United RL, Middlebury Development, and Nexus Lab. 2 Mr. Kondo’s investment losses total approximately $2,400,000. Mr. Kondo assigned his claims 3 against FP Transitions to IFG by a valid assignment of claims. 4 28. Collectively, Adolfo Artalejo, Rod and Nancy Belton, James and June Cornelius, 5 John and Philayna Favero, Ray and Vinnie Moncada, Sheryl Peck, Juanita Stoddard, Ron and 6 Hazel Taylor, Jane Beery, Joy Chandler, John Day, Gretchen Jackson, William and Sharon 7 Miller, Darryl Prudden, Carolyn Rice, John and Sandy Romero, Bennie Hill and Lynda Hill, 8 Ellen Koskinen, George Lynch and Helen Lynch, Jamie Panziera, Tom Sgheiza and Mary 9 Sgheiza, and Gene Kondo are referred to herein as the “Assignors”. 10 29. DOES 1-50 are fictitious names being used to sue any unidentified individuals or 11 entities who may be in some manner responsible for the unlawful acts, omissions, events, 12 occurrences, and happenings alleged herein, and who are the direct or proximate cause of 13 Plaintiff’s injuries. Plaintiff is ignorant of the true name of the defendant and when the true name 14 is ascertained, the complaint will be amended to substitute that name. 15 VENUE AND JURISDICTION 16 30. This Court has subject matter jurisdiction over this action because the amount in 17 controversy exceeds the jurisdictional minimum. 18 31. Venue is appropriate in Monterey County because the Assignors reside in 19 Monterey County, California and the events giving rise to IFG’s and the Assignor’s claims 20 occurred in Monterey County. 21 32. Venue is also appropriate in Monterey County because Defendant conducted 22 substantial business in the Monterey County during the relevant time period. 23 FACTUAL ALLEGATIONS 24 33. On or about March 2016, Marshall, a Registered Representative of IFG, entered 25 into a contract with FP Transitions for the purposes of selling his financial services business, 26 Marshall Wealth Management Group (“MWMG”). 27 34. Marshall intended to retire, and sought to sell his business, clients of which 28 included the Assignors, and engaged FP Transitions to select qualified, trustworthy, and capable PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES 1 buyers. FP Transitions held themselves out as experts in the field of financial service business 2 sales coordination. 3 35. FP Transitions provided its assurances to Marshall and IFG that, based upon its 4 expertise in financial business sales transactions, it would source a qualified, trustworthy buyer. 5 36. FP Transitions identified and endorsed Santillo as a qualified, trustworthy, and 6 experienced buyer. 7 37. Based on FP Transitions’s representations to IFG and Marshall that Perry Santillo 8 was the best, most reputable, and most thoroughly vetted candidate, Marshall executed a contract 9 with Santillo, drafted by FP Transitions, for the sale of MWMG. 10 38. Despite FP Transitions’s repeated assurances and endorsements of Santillo as a 11 trustworthy, experienced financial services professional, he turned out to be the ringleader of a 12 large scale Ponzi-scheme, which, to date, has defrauded investors nationwide of over $100 13 million. 14 39. Assignors, clients of MWMG who were defrauded by Santillo, brought claims 15 against IFG through FINRA to recover their misappropriated monies pilfered by Santillo. 16 Assignors contended, among other things, that IFG was negligent in failing to properly vet 17 Santillo prior to the sale of MWMG to Santillo by Marshall. 18 40. Based on the foregoing, Assignors have alleged claims against IFG, including 19 professional negligence. Those claims against IFG have been settled in exchange for valuable 20 consideration. 21 41. IFG is informed and believes, and thereon alleges, that FP Transitions, 22 intentionally omitted material facts regarding Santillo in its discussions with Marshall and IFG of 23 the sale of MWMG to Santillo, negligently misrepresented Santillo’s qualifications to Marshall 24 and IFG and/or otherwise improperly influenced Marshall to sell MWMG to Santillo and thereby 25 caused damages to Assignors and IFG. 26 42. In the summer of 2016, FP Transitions held themselves out as experts in the field 27 of financial service business sales coordination to Marshall and IFG. FP Transitions knew that 28 Marshall and IFG were relying on their expertise. In proposing Santillo as a buyer, FP PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES 1 Transitions was offering a professional opinion on his suitability as a buyer that amounted to a 2 representation of fact. FP Transitions managed the entire transaction between Marshall and 3 Santillo. FP Transitions not only proposed Santillo as a buyer, but also drafted the transaction 4 agreements and aided in the pricing of the deal. All of these functions that FP Transitions carried 5 out with respect to the transaction amounted to representations relied upon by IFG and Marshall 6 that, based upon FP Transitions’ expertise in financial business sales transactions, Santillo was a 7 qualified, trustworthy buyer. Those representations were false. 8 9 CLAIMS FOR RELIEF 10 11 FIRST CLAIM FOR RELIEF – EQUITABLE INDEMNITY 12 43. IFG re-allege paragraphs 1 through 42, inclusive, as if set forth fully herein. 13 44. IFG’s liability for Assignor’s claims is based solely on a derivative form of 14 liability not resulting from its conduct, but only from an obligation imposed by law based on the 15 direct and primary acts or omissions of FP Transitions, who is obligated to indemnify IFG for 16 attorneys’ fees and costs incurred in defending the Assignors’ claims and/or for any sum which 17 IFG paid to Assignors in settlement of Assignors’ claim. 18 45. IFG further alleges it is entitled to total (and if not total, then partial) equitable 19 indemnity from FP Transitions, in the amount proportionate to FP Transitions’s share of liability 20 in connection with the settlement payments to the Assignors. 21 22 SECOND CLAIM FOR RELIEF – EQUITABLE CONTRIBUTION 23 46. IFG re-allege paragraphs 1 through 45, inclusive, as if set forth fully herein. 24 47. In the alternative, should the Court determine that IFG is directly liable to 25 Assignors, which liability IFG denies, IFG seeks an equitable allocation of fault between IFG 26 and FP Transitions. 27 48. IFG alleges that FP Transitions is obligated to reimburse IFG in an amount equal 28 to FP Transitions’s proportionate and equitable share of fault. PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES 1 2 THIRD CLAIM FOR RELIEF – BREACH OF CONTRACT THIRD PARTY 3 BENEFICIARY 4 49. IFG re-alleges paragraphs 1 through 48, inclusive, as if set forth fully herein. 5 50. IFG is informed and believes, and on that basis alleges, that Marshall entered 6 into a written agreement with FP Transitions whereby FP Transitions agreed and contracted to 7 bind itself to indemnify Marshall and MWMG for any and all liability, claims, demands, loss, 8 damages, costs, and expense whatsoever with respect to the underlying sale. 9 51. IFG is informed and believes, and on that basis alleges, that Marshall and FP 10 Transitions both understood and intended that IFG was an intended beneficiary of the written 11 indemnity agreement. 12 52. FP Transitions has breached the contractual indemnity agreement by failing to 13 adhere to the express representations, acknowledgments and agreements as set forth in the written 14 indemnity agreement and by failing to defend and indemnify IFG from any and all liability, 15 claims, demands, loss, damages, costs, and expense whatsoever arising out of or connected in any 16 manner with respect to the underlying sale. 17 53. Marshall and MWMG have performed all covenants, conditions, and obligations 18 placed upon them and based thereon, IFG is entitled to full contractual indemnity from FP 19 Transitions with respect to the Assignors’ claims against IFG. 20 54. Moreover, the contract between Marshall and FP Transitions, of which IFG is an 21 intended beneficiary, contains a valid arbitration provision. IFG is entitled to the benefit of that 22 arbitration provision and expressly reserves and does not waive its right to enforce that arbitration 23 provision. 24 25 FOURTH CLAIM FOR RELIEF – NEGLIGENT MISREPRESENTATION 26 55. IFG re-alleges paragraphs 1 through 54, inclusive, as if set forth fully herein. 27 56. IFG is informed and believes and thereon alleges that the Assignors’ losses and 28 IFG’s liability to the Assignors for their losses was solely and exclusively due to PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES 1 misrepresentations made by FP Transitions to Marshall and MWMG and IFG, which were made 2 negligently and with reckless disregard for the truth or falsity of the representations. 3 57. FP Transitions made representations regarding Santillo to Marshall and MWMG 4 and IFG that FP Transitions knew IFG and the Assignors were going to rely on. The 5 representations were false and were made negligently and with reckless disregard for the truth or 6 falsity of the representations. 7 58. IFG and the Assignors justifiably relied on FP Transition’s false representations to 8 their detriment. 9 59. FP Transitions knew that IFG and the Assignors were relying on the 10 representations made by FP Transitions regarding the underlying sale. 11 60. With respect to IFG, FP Transition knew and intended that its representations 12 would influence IFG’s approval of the underlying sale. 13 61. With respect to the Assignors, FP Transitions knew and intended that its 14 representations would influence the Assignors’ decision to do business with Santillo. 15 62. As a direct and proximate result of FP Transitions’s negligent and/or reckless 16 misrepresentations noted above, which Marshall and MWMG, IFG and the Assignors justifiably 17 relied upon, IFG and the Assignors have been damaged in amounts that are not precisely known 18 and that will be determined at the time of trial. 19 20 FIFTH CLAIM FOR RELIEF – PROFESSIONAL NEGLIGENCE 21 63. IFG re-alleges paragraphs 1 through 62, inclusive, as if set forth fully herein. 22 64. FP Transitions made representations regarding Santillo to Marshall and MWMG 23 and IFG that FP Transitions knew IFG and the Assignors were going to rely on and thereby 24 undertook a duty of care with respect to IFG and the Assignors. 25 65. FP Transitions further represented to Marshall, IFG and the public that it was an 26 expert in the brokerage of financial services businesses and that it had completed more financial 27 services transactions than any investment banker or business broker in the country. 28 PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES 1 66. IFG and the Assignors justifiably relied on FP Transition’s false representations to 2 their detriment. 3 67. FP Transitions knew that IFG and the Assignors were relying on the 4 representations made by FP Transitions regarding the underlying sale. 5 68. With respect to IFG, FP Transition knew and intended that its representations 6 would influence IFG’s approval of the underlying sale. 7 69. With respect to the Assignors, FP Transitions knew and intended that its 8 representations would influence the Assignors’ decision to do business with Santillo. 9 70. As the broker of the underlying sale, FP Transitions assumed and owed IFG and 10 Assignors a duty of due care to not make misrepresentations regarding Santillo and to take the 11 steps required to ensure that Santillo was a legitimate financial services professional and not a 12 repeated fraudster. 13 71. FP Transitions breached its duty to Marshall, IFG and the Assignors when it failed 14 to make any meaningful steps to verify that Santillo was a legitimate financial services 15 professional and when it allowed IFG and the Assignors to rely on FP Transition’s false 16 representations regarding Santillo thereby exposing the Assignors and IFG to the predations of a 17 repeated fraudster in the form of Santillo. 18 72. As a proximate result of the negligence of FP Transitions in its promotion of and 19 misrepresentations regarding the sale of MWMG to Santillo, IFG and the Assignors have suffered 20 damages, including consequential damages in the form of attorneys’ fees. 21 22 SIXTH CLAIM FOR RELIEF –NEGLIGENCE 23 73. IFG re-alleges paragraphs 1 through 72, inclusive, as if set forth fully herein. 24 74. FP Transitions made representations regarding Santillo to Marshall and MWMG 25 and IFG that FP Transitions knew IFG and the Assignors were going to rely on and thereby 26 undertook a duty of care with respect to IFG and the Assignors. 27 28 PLAINTIFF’S SECOND AMENDED COMPLAINT FOR DAMAGES 1 75. FP Transitions further represented to Marshall, IFG and the public that it was an 2 expert in the brokerage of financial services businesses and that it had completed more financial 3 services transactions than any investment banker or business broker in the country. 4 76. IFG and the Assignors justifiably relied on FP Transition’s false representations to 5 their detriment. 6 77. FP Transitions knew that IFG and the Assignors were relying on the 7 representations made by FP Transitions regarding the underlying sale. 8 78. With respect to IFG, FP Transition knew and intended that its representations 9 would influence IFG’s approval of the underlying sale. 10 79. With respect to the Assignors, FP Transitions knew and intended that its 11 representations would influence the Assignors’ decision to do business with Santillo. 12 80. As the broker of the underlying sale, FP Transitions assumed and ow