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FILED
DALLAS COUNTY
9/30/2016 2:56:00 PM
FELICIA PITRE
DISTRICT CLERK
CAUSE NO. DC-16-00007
SUNIL RAMNANI, § IN THE DISTRICT COURT
MUKHTIAR GREWAL §
and HARDEEP GREWAL, §
§
Plaintiffs, §
§
v. § 95th JUDICIAL DISTRICT COURT
§
ZAYA YOUNAN, YOUNAN §
PROPERTIES, INC., YOUNAN §
INVESTMENT PROPERTIES, L.P., §
BRIAN HENNESSEY, NARBEH §
TATEVOSSIAN, AND QUENTIN §
THOMPSON §
§ DALLAS , COUNTY, TEXAS
Defendants.
PLAINTIFFS’ THIRD AMENDED PETITION
COME NOW, Plaintiffs, Sunil Ramnani (“Ramnani”) and Mukhtiar “Steve” Grewal and
Hardeep “Deepi” Grewal (the “Grewals”) (collectively “Plaintiffs”), by and through their
attorneys of record, for their Complaint against Defendants, Zaya Younan, Younan Properties,
Inc. (“YPI”) and Younan Investment Properties L.P. (“YIP LP”) (collectively “Younan”), Brian
Hennessey (“Hennessey”), Narbeh “Nick” Tatevossian (“Tatevossian), and Quentin Thompson
(“Thompson”) (collectively “Defendants”), hereby allege as follows:
I.
INTRODUCTION
1.01 Younan promotes, develops, manages and sells class “A” commercial property
investments primarily through the formation and operation of numerous “Partnerships” and
“LLCs” (the “Partnerships”). 1 Plaintiffs acquired non-managing interests in the Partnerships.
1
“The Partnerships” refer collectively to YPI Thanksgiving Tower Fund, LLC (“Thanksgiving Tower”); YPI Park
Central Holding, L.P. (“Park Central”); YPI Embassy Plaza, LLC (“Embassy”); YPI One North Arlington, LLC
(“North Arlington”); YPI 4851 LBJ Fund, L.P. (“Galleria Plaza”); and YPI Norfolk Tower, Partners L.P.
(“Norfolk”).
PLAINTIFFS’ THIRD AMENDED PETITION PAGE 1
1.02 The Partnerships acquire commercial real estate touted by Younan as high-rise,
“trophy” office buildings throughout the country. Several of these properties are located in
Dallas County, Texas.
1.03 In connection with these commercial property acquisitions, substantial
undisclosed fees were paid to companies owned and controlled by Tatevossian and Hennessey.
These undisclosed fees were hidden from Plaintiffs through Younan’s inflation of the purchase
prices for the real estate. Upon receipt of these undisclosed fees, Tatevossian and Hennessy
would then kickback a substantial portion to Zaya Younan’s personal bank account.
1.04 Also unbeknownst to Plaintiffs, Defendants were self-dealing. Substantial fees
were paid to “third parties” who purported to render valuable services to the Partnerships in
connection with the Partnerships’ acquisition of real estate. In reality though, these were not
“third parties” at all, and no compensable services were actually rendered to the Partnerships by
these purported “third-parties.” In fact, Younan either had a long lasting and close relationship
with these “third parties” or they were actually officers and/or directors of YPI.
1.05 For example, on several transactions Younan would secretly charge investors an
“advisory fee” or a commission which would supposedly be paid to a “third party” vendor.
However, unbeknownst to Plaintiffs, these vendors were actually owned by either Hennessey or
Tatevossian and each held the title of Senior Vice President of Acquisitions and Dispositions of
YPI. Then, without disclosure to any of the investors, Tatevossian and Hennessey would
kickback the majority of these fees to Zaya Younan’s personal bank account. Further, the work
that these “third parties” were supposedly doing was work that Younan was representing that
Younan was doing and work for which Younan was already charging a substantial fee to the
investors.
PLAINTIFFS’ THIRD AMENDED PETITION PAGE 2
1.06 In addition to stealing Plaintiffs’ money, Zaya Younan used the stolen money as a
purported “investment” of his own money into each of the Partnerships. By purporting to invest
his own money in the Partnerships, Zaya Younan was able to bolster Plaintiffs’ trust in him
because he appeared to be backing up his representations regarding the likely success of the
Partnerships with his own money. However, it was really just more of Plaintiffs’ money being
funneled back to the Partnerships so Zaya Younan could claim an ownership interest therein.
1.07 For years, Defendants were careful to conceal this activity from all outside
parties. These “kickbacks” were not disclosed in the closing documents. They were not
disclosed in the audited financials presented by Deloitte. They were also concealed from the
banks that financed each of these transactions. In reality, millions of dollars were being secretly
funneled back to Zaya Younan solely through “handshake” deals done entirely behind closed
doors.
1.08 Zaya Younan has been able to perpetrate this fraud because he has complete
control over every aspect of the investment scheme. Zaya Younan serves as the CEO and
Chairman of YPI and is in charge of all operational aspects of these real estate investment
projects, including but not limited to, the vetting, acquiring, promoting, managing and carrying
out the disposition of each investment. Zaya Younan created and operates YPI to act as the
Member/General Partner for YIP LP. Zaya Younan and his wife are the sole owners of YIP LP.
Zaya Younan appoints his company, YIP LP, as the sole Managing Member for the Partnerships.
In other words, Zaya Younan had, and still has, complete control over the Partnerships and the
expenditure of the investors’ funds therein.
1.09 In addition, Younan would make personal guarantees to each Plaintiff that they
would receive significant returns on all their investments. Younan touted prior returns on
PLAINTIFFS’ THIRD AMENDED PETITION PAGE 3
investments as an indication of future potential, yet these prior “successes” were also tainted
with Younan’s fraud and the kickback of undisclosed fees. The failure to disclose fees in a
frothy real estate market could easily be hidden from investors, but when the real estate market
staggered, the inflated purchase prices used to disguise many of the fees, and the use of investor
money to pay unnecessary and trumped up fees, all took its toll and resulted in serious cash flow
problems for the Partnerships. As a result, the Partnerships have all been sold for a fraction of
the investors’ initial contributions, foreclosed upon or are currently operating at a loss. Without
a doubt, Defendants’ fraud undeniably contributed to the failure of these investments and caused
Plaintiffs’ considerable losses.
II.
DISCOVERY CONTROL PLAN
2.01 Plaintiffs hereby request that discovery be conducted under Level 3, pursuant to
Texas Rule of Civil Procedure 190.4.
III.
PARTIES
3.01 Plaintiff Sunil Ramnani (“Ramnani”) is an individual residing in Orange County,
California.
3.02 Plaintiffs Mukhtiar “Steve” Grewal and Hardeep “Deepi” Grewal (the “Grewals”)
are individuals residing in Johnson County, Kansas.
3.03 Defendant, Zaya Younan, is a resident and citizen of Los Angeles County,
California who has made an appearance herein through his counsel of record and is thus being
served herewith pursuant to TRCP 21a.
PLAINTIFFS’ THIRD AMENDED PETITION PAGE 4
3.04 Defendant, Younan Properties Inc. (General Partner of Younan Investment
Properties, L.P.), is a Delaware corporation which has made an appearance herein through its
counsel of record and is thus being served herewith pursuant to TRCP 21a.
3.05 Defendant, Younan Investment Properties L.P., is a Texas limited partnership
which has made an appearance herein through its counsel of record and is thus being served
herewith pursuant to TRCP 21a.
3.06 Defendant, Brian Hennessey, is an individual residing in California who has made
an appearance herein through his counsel of record and is thus being served herewith pursuant to
TRCP 21a.
3.07 Defendant, Narbeh “Nick” Tatevossian, is an individual residing in California
who has made an appearance herein through his counsel of record and is thus being served
herewith pursuant to TRCP 21a.
3.08 Defendant, Quentin Thompson, is an individual residing in Harris County, Texas
that may be served at:
Quentin Thompson
2502 Alan Lake Lane
Spring, Texas 77388
IV.
AGENCY
4.01 Zaya Younan was acting as the agent of Younan Properties Inc. and Younan
Investment Properties L.P., with the express or implied authority to engage in the acts
complained of, and Younan Properties Inc. and Younan Investment Properties L.P. subsequently
benefited financially from those acts and ratified the conduct.
4.02 Unless otherwise stated herein, whenever it is alleged in this pleading that
Younan Properties Inc. and/or Younan Investment Properties L.P. committed an act, made a
PLAINTIFFS’ THIRD AMENDED PETITION PAGE 5
representation or statement, failed to perform an act, or failed to make a statement, it means that
Defendants, Younan Properties, Inc. and Younan Investment Properties L.P., were acting or
failing to act through its authorized agents, partners, employees, and/or Defendant Zaya Younan,
who were acting with either express, implied, apparent and/or ostensible authority, and that
Defendants, Younan Properties Inc. and Younan Investment Properties L.P., subsequently
ratified and benefited financially from these acts, failures to act, representations, statements or
conduct.
V.
JURISDICTION AND VENUE
5.01 Subject matter jurisdiction is properly vested in this Court.
5.02 This Court also has personal jurisdiction, both general and specific, over all of the
Defendants. Several of the commercial real estate investments that are the subject matter of
Plaintiffs’ claims are located in Dallas County, Texas. Younan Properties, Inc. has its principal
office for business in Texas in Dallas, Texas. Younan Investment Properties, L.P. is a Texas
limited partnership. Hennessey and Tatevossian received improper fees and paid kickbacks to
Zaya Younan in connection with the closing of real estate transactions in Texas and have
therefore committed torts in Texas giving rise to Plaintiffs’ complaints herein. Therefore, this
lawsuit has been properly filed in Texas state court in Dallas County.
5.03 All Defendants have purposefully availed themselves of the privileges and
benefits of conducting business in Texas, have entered into contracts with Texas residents
relating to the transactions at issue in this case, have engaged in substantial business transactions
with Texas residents in connection with the Partnerships and as such, are subject to personal
jurisdiction in Texas. All Defendants have: a) contracted by mail or otherwise with Texas
residents or entities to secure real estate investments located in Texas; (b) committed torts, which
PLAINTIFFS’ THIRD AMENDED PETITION PAGE 6
are the subject of this action, in whole or in part in Texas; and (c) otherwise transacted business
in Texas.
5.04 Venue is proper in Dallas County, Texas as to all Defendants pursuant to CPRC
Section 15.005 because venue is proper in Dallas County Texas as to at least one Defendant and
all claims and actions arise out of the same series of transactions and occurrences. Venue is also
proper in Dallas, County Texas because Younan Properties Inc. has its principal office for
business in Texas located in Dallas County, Texas. Finally, venue is proper in Dallas County,
Texas because a substantial part of the facts relating to at least one claim occurred in Dallas
County, Texas in connection with the acquisition of real estate located in Dallas County, Texas.
5.05 Damages sought by Plaintiffs are within the jurisdictional limits of the court.
Plaintiffs seek monetary relief over $1,000,000.
VI.
FACTUAL BACKGROUND
6.01 In or around 2005 through 2007, Younan solicited Plaintiffs to invest in
commercial real estate partnerships and LLCs by guaranteeing significant investment returns,
both through quarterly distributions and upon the disposition of the commercial assets. These
entities included: YPI Thanksgiving Tower Fund, LLC (“Thanksgiving Tower”); YPI Park
Central Holding, L.P. (“Park Central”); YPI Embassy Plaza, LLC (“Embassy”); YPI One North
Arlington, LLC (“North Arlington”); YPI 4851 LBJ Fund, L.P. (“Galleria Plaza”); and YPI
Norfolk Tower, Partners L.P. (“Norfolk”) (collectively, the “Partnerships”).
6.02 Zaya Younan serves as the CEO, Chairman and 100% Shareholder of YPI and is
in charge of all operational aspects of the real estate investment projects, including but not
limited to, the vetting, acquiring, promoting, managing and carrying out the disposition of each
investment. Zaya Younan created and operates YPI to act as the Member/General Partner for
PLAINTIFFS’ THIRD AMENDED PETITION PAGE 7
YIP LP. Zaya Younan and his wife are sole owners of YIP LP. Zaya Younan appoints YIP LP
to serve as the sole Managing Member for the Partnerships.
6.03 For the period of 2005 through 2007, Younan pitched several commercial real
estate investment opportunities to Plaintiffs, several of which were located in Dallas, Texas.
According to Younan, the nature of these investments generally consisted of “high rise” or
“trophy” office buildings. Younan represented that these properties would be purchased at an
extremely low price and, after a quick turnaround through Younan’s propriety management
initiatives, they would be sold for major profit. According to Younan, the investment properties
would yield both significant quarterly distributions and then, upon the sale of each property, each
partner would receive substantial returns of their initial capital contribution.
6.04 A key element to Younan’s promotion of these investments was the purported
successful experience that Younan had in turning around large commercial real estate to make
them highly profitable. Zaya Younan held himself, YPI and YIP LP as unrivaled experts in
acquiring, managing and selling these types of commercial assets. In order to induce substantial
contributions from investors, including Plaintiffs, Younan would make personal guarantees that
the investors would receive significant returns on all their investments.
6.05 Some of these investments were also being promoted in or around the time period
when this country was on the brink of recession. However, Younan countered any stresses
Plaintiffs had with more representations and guarantees that the Partnerships were failsafe and
that they were in the safest of hands. In fact, Younan represented that the downturn in the
economy would actually benefit their investments. At all relevant times, Plaintiffs relied on
Younan’s representations.
PLAINTIFFS’ THIRD AMENDED PETITION PAGE 8
6.06 However, unbeknownst to Plaintiffs, they were being defrauded. Younan was
soliciting Plaintiffs’ contributions in order to steal from Plaintiffs. Over the next several years,
Plaintiffs would invest substantial amounts into the Partnerships based on Younan’s fraudulent
representations. During that time, Defendants concealed their fraud, both through oral
representations and by producing false statements, documents and reports. Moreover, despite the
initial representations and ongoing promises, most of the Partnerships would be sold at a loss or
foreclosed.
THE CREATION OF THE PARTNERSHIPS
A. The Park Central Partnership
6.07 In October 2005, Younan formed Park Central. Younan, YPI and and/or YIP LP
caused Park Central to purchase two properties located at 12222 Merit Drive and 12377 Merit
Drive in Dallas, Texas.
6.08 In reliance upon the various promises and representations made by Younan,
Ramnani became a limited partner in Park Central. In reliance upon Younan’s various
representations, including the guaranteed success of these investments, Ramnani invested
substantial sums of money with Younan. In reliance upon Younan’s various representations
Ramnani invested $200,000 cash in Park Central.
B. The Embassy Partnership
6.09 In December of 2005, Younan formed Embassy. Younan, YPI and and/or YIP LP
caused Embassy to purchase a property located at 1933 North Meacham Road in Schaumburg,
Illinois.
6.10 In reliance upon the various promises and representations made by Younan,
including the guaranteed success of this investment, both the Grewals and Ramnani became
PLAINTIFFS’ THIRD AMENDED PETITION PAGE 9
limited partners in Embassy by investing substantial sums of money with Younan. In reliance
upon Younan’s various representations, Plaintiffs, collectively, invested $200,000 cash in
Embassy.
C. The Norfolk Partnership
6.11 In February of 2006, Younan formed Norfolk. Younan, YPI and and/or YIP LP
caused Norfolk to purchase a property located at 2211 Norfolk Street, Houston, Texas. In
reliance upon the various promises and representations made by Younan, the Grewals became
limited partners in Norfolk. In reliance upon Younan’s various representations, including the
guaranteed success of this investment, the Grewals invested substantial sums of money with
Younan. In reliance upon Younan’s various representations, the Grewals invested $250,000 cash
in Norfolk.
D. The North Arlington Partnership
6.12 Also in 2006, Defendants formed North Arlington. Younan, YPI and and/or YIP
LP caused North Arlington to purchase a property located at 1500 W. Shure Drive, Arlington
Heights, Illinois.
6.13 In reliance upon the various promises and representations made by Younan, both
the Grewals and Ramnani became limited partners in North Arlington. In reliance upon
Younan’s various representations, including the guaranteed success of this investment, Plaintiffs
invested substantial sums of money with Younan. In reliance upon Younan’s various
representations, Plaintiffs, collectively, invested $600,000 cash in North Arlington.
E. The Galleria Plaza Partnership
6.14 Also in 2006, Younan formed Galleria Plaza. Younan, YPI and and/or YIP LP
caused Galleria Plaza to purchase a property located at 4851 LBJ Freeway, Dallas, Texas.
PLAINTIFFS’ THIRD AMENDED PETITION PAGE 10
6.15 In reliance upon the various promises and representations made by Younan, the
Grewals became a limited partner in Galleria Plaza. In reliance upon Younan’s various
representations, including the guaranteed success of this investment, the Grewals invested
substantial sums of money with Younan. In reliance upon Younan’s various representations, the
Grewals invested $200,000.00 cash in Galleria Plaza.
F. The Thanksgiving Partnership
6.16 In February 2007, Younan formed Thanksgiving. Younan, YPI and and/or YIP
LP caused Thanksgiving to purchase one building located at 1601 Elm Street, in Dallas, Texas.
6.17 In reliance upon the various promises and representations made by Younan, the
Grewals became limited partners in Thanksgiving. In reliance upon Younan’s various
representations, including the guaranteed success of these investments, Plaintiffs invested
substantial sums of money with Younan. In reliance upon Younan’s various representations, the
Grewals invested $250,000 cash in Thanksgiving.
YOUNAN’S FRAUD IN 2005
6.18 Beginning in 2005, Younan used multiple schemes to defraud Plaintiffs. One
scheme involved an agreement to launder Plaintiffs’ money through a cycle of entities, in some
cases disguising them as “advisory fees,” and then kicking them back to his personal bank
accounts. These schemes were implemented on each of the Partnerships.
6.19 Starting in 2005, Younan and the seller of the commercial real estate concerning
the Park Central and Embassy partnerships agreed to inflate the purchase price on each of the
respective transactions with phony “advisor fees” and “commissions.” On receipt of these fees,
the seller would then transfer the entire inflated amount to a real estate broker who was acting as
either a “third party advisor” or broker. And then, based solely on a handshake agreement, these
PLAINTIFFS’ THIRD AMENDED PETITION PAGE 11
real estate brokers would then turn around and kickback nearly the entire inflated portion to
Younan’s bank account. Unbeknownst and undisclosed to anyone, these individuals either had a
close working relationship with YPI or were working for YPI. Even worse, the “advisors” and
brokers were all real estate brokers who were not properly licensed in Texas. So, as payment for
being made part of these transactions, they would agree to share with Younan the inflated
commission. Also, because these brokers weren’t properly licensed, on some of the transactions
Younan and YPI had to call these broker commissions “advisory fees” in various documents.
6.20 Younan was careful to conceal these agreements and these transfers not just from
investors, but from the world. These “kickbacks” were not disclosed in the closing documents.
They were not disclosed in the audited financials presented by Deloitte. They were also
concealed from the banks that financed each of these transactions. In the end, millions of dollars
were being secretly funneled back to Younan solely through “handshake” deals done entirely
behind closed doors.
6.21 Defendants also defrauded investors, including Plaintiffs, by inflating the loan
broker fee. Younan funded roughly ninety (90) percent of the purchase price of all the
Partnerships by financing through a loan broker. Again, like he did with the real estate brokers,
Younan had an undisclosed agreement with the loan broker to inflate the brokerage fee for each
of these partnerships. The loan broker in each instance would then kickback a large portion of
the broker commission to Younan personally. Again, these transfers were never disclosed to any
investors or anyone not involved in this scheme. Similar to the “advisory fees,” millions of
dollars were being funneled back to Younan based on “handshake” deals done behind closed
doors.
PLAINTIFFS’ THIRD AMENDED PETITION PAGE 12
6.22 It is also Younan’s practice to give different versions of the same document to
different parties to a transaction. For example, Younan would give different parties to a real
estate transaction different copies of the buyer’s closing statement and the seller’s closing
statement, and each would show different entries being charged to the buyer. And in all cases,
neither the seller’s nor the buyer’s statement disclosed these kickbacks that were going back to
Younan.
The Kickbacks in 2005
A. Kickbacks via “Advisory Fees” on Park Central
6.23 The inflated amount for Park Central was a $750,000 fee paid to Westridge Realty
Investments, Incorporated, a California corporation located in Oak Park, California
(“Westridge”). Westridge was controlled by a real estate broker, Defendant Brian Hennessey
(“Hennessey”). However, Hennessey actually worked for YPI. In fact, at that time he was the
Senior Vice President of Acquisitions and Disposition for YPI and had that title from 2003 to
2006. He also became the Vice President of Leasing in 2010. Immediately after closing and
based solely on the verbal agreement between Hennessey and Younan, Westridge, at the
direction of Hennessey and Younan, transferred not less than $700,000 of this fee to Younan’s
personal bank account.
B. Kickbacks via Commissions on Embassy
6.24 The inflated amount for Embassy was a $300,000 “commission” paid to Real
Estate Pros (“REP”). REP was controlled by a real estate broker, Defendant Narbeh “Nick”
Tatevossian (“Tatevossian”). However, unbeknownst to any party to the transaction, Tatevossian
actually worked for and had a close relationship with YPI. In fact, Tatevossian served as the
Senior Vice President of Acquisition and Disposition of YPI from 2006 to 2010. Then,
PLAINTIFFS’ THIRD AMENDED PETITION PAGE 13
immediately after closing and based solely on a “handshake deal” between Tatevossian and
Younan, REP, at the direction of Tatevossian and Younan, transferred not less than $250,000 of
this $300,000 commission to Younan’s personal bank account.
C. Kickbacks via “loan broker fees” on Park Central
6.25 The inflated loan broker fee on Park Central was $487,500. This was paid to
Northmarq Capital (“Northmarq”). The person at Northmarq negotiating this fee with Younan
was Richard Scandaliato (“Scandaliato”). As it turns out, Scandaliato had a close working
relationship with Younan and had been involved in similar transactions with Younan in the past.
Then, immediately after closing and based solely on a “handshake deal” between Scandaliato
and Younan, not less than $241,250 of the $487,500 was transferred back to Younan’s personal
bank account.
D. Kickbacks via “loan broker fees” on Embassy
6.26 Investors also paid an inflated loan broker fee on Embassy. This amount was
approximately $106,000. This was paid to the brokerage firm Promark Capital (“Promark”)
owned by Gregory Zack (“Zack”). Then, immediately after closing and based solely on a
“handshake deal” between Zack and Younan, some or all of the loan brokerage fee was
transferred back to Younan’s personal bank account.
DELOITTE’S INITIAL AUDIT DOES NOT DISCOVER YOUNAN’S FRAUD
6.27 Deloitte’s audit opinion played a critical role in Younan’s fraudulent scheme. As
previously stated, Younan funded roughly ninety (90) percent of the purchase price of all the
Partnerships, including Park Central, through financing. Thus, in 2005, prior to issuing the loan
on Park Central, the lending bank required an auditor’s approval of the Park Central financial
statements.
PLAINTIFFS’ THIRD AMENDED PETITION PAGE 14
6.28 In 2005, the limited partners of Park Central, including Plaintiffs, paid Deloitte to
audit the consolidated statement of assets, liabilities, and partners’ capital of Park Central.
6.29 Deloitte was paid $40,000 by the limited partners of Park Central, including
Plaintiffs, as payment for their services.
6.30 On April 28, 2006, Deloitte issued its Independent Auditors’ Reports (the “Audit
Opinion”) concerning Park Central.
6.31 In the Audit Opinion, Deloitte concluded that the consolidated financial statements
of Park Central fairly presented the assets, liabilities, and partners’ capital as of December 31, 2005
in all material respects. In the Audit Opinion, Deloitte further concluded that the consolidated
financial statements of Park Central accurately presented the revenues and expenses, changes in
partners’ capital, and cash flows for the period from September 27, 2005 to December 31, 2005 in
all material respects.
6.32 Thus, based on Deloitte’s opinion, the financial statements for Park Central were
verified, the bank financed the transaction, and closing of the partnership was complete.
YOUNAN’S FRAUD IN 2006 AND SCHEME TO CONCEAL THE SAME
6.33 In 2006, Younan’s now former CFO, Quentin Thompson (“Thompson”) had
personal knowledge of several acts of malfeasance on the part of Younan. Among other things,
he knew that Younan was receiving these illegal kickbacks. He confronted Younan regarding
these bad acts but was immediately terminated. It turns out Thompson was also an investor in
several of the same partnerships as the Plaintiffs, specifically Embassy and Park Central, and so
he sued Younan for several things including fraud, tax evasion and wrongful termination (the
“2006 Lawsuit”). The 2006 Lawsuit was also filed as a putative class action on behalf of the
investors in Embassy and Park Central, which therefore included Plaintiffs. As such, Thompson
PLAINTIFFS’ THIRD AMENDED PETITION PAGE 15
assumed a fiduciary duty to Plaintiffs to fully inform them of the facts of which he was aware
and to protect their interests in the lawsuit.
6.34 Instead of disclosing these allegations to his investors, Younan quickly got out in
front of them. Defendants represented to investors, including Plaintiffs, that there was a
frivolous lawsuit being brought by a “disgruntled” employee against Younan and YPI for
wrongful termination. Itwas also represented to investors that this CFO’s intent was to “hurt”
Plaintiffs’ investments. Defendants then represented, as a cursory note, that because this
investor’s damages were so minimal and because he happened to also be a very small investor in
some of Younan’s properties, that he was bringing a claim for “unfair business practices” solely
to raise his damages.
6.35 This was all a blatantly false representation. As it turns out, this former employee
was actually the Chief Financial Officer of YPI who had invested over $150,000.00 with Younan.
Furthermore, he was only “disgruntled” because he was fired from YPI as soon as he confronted
Younan with what he knew about his theft and fraud.
6.36 Instead of telling investors, like Plaintiffs, the truth, Younan used their trust and his
role as their fiduciary as a way to conceal his fraud. In addition, as hereinafter explained, Younan
also agreed to pay Thompson a substantial amount of “hush money” in exchange for Thompson’s
agreement to shirk his fiduciary duty as a putative class representative and to dismiss his suit
without telling the Court or the other class members that he was receiving a substantial sum from
Younan to help conceal the truth.
YOUNAN’S CFO, QUENTIN THOMPSON, FILES A CLASS ACTION SUIT AGAINST YOUNAN
THEN WRONGFULLY SETTLES WITH YOUNAN WITHOUT NOTIFYING THE CLASS
6.36 The 2006 Lawsuit, filed by Thompson, was also brought on behalf of the class of
other Younan investors, including Plaintiffs. Specifically, Thompson’s lawsuit asserted, among
PLAINTIFFS’ THIRD AMENDED PETITION PAGE 16
other things, a Representative Claim for Violation of Business and Professions Code §17200 et.
seq. “on behalf of himself and other investors to obtain restitution of the funds that Younan stole
from Plaintiff and the other investors.”
6.37 Thompson not only had personal knowledge of Younan’s fraud in his capacity as
CFO, but given his unique position, he also had prime access to all investor information,
including investor names, their locations and the amount of their respective investments.
Accordingly, he asserted himself as the representative on behalf of the alleged class and
voluntarily accepted a fiduciary obligation towards the members of the class, including Plaintiffs.
6.38 However, despite filing a complaint asserting class allegations, Thompson has
never made any attempt to communicate to any Plaintiff regarding any of the facts alleged in his
complaint. In reality, Thompson only alleged he was acting for the class to enhance his own
bargaining power against Younan. On information and belief, during the interim between the
filing of the 2006 Lawsuit and before any determination by the court to certify the investor class,
Thompson secured a substantial and excessive private settlement to the detriment of the
remaining class, including Plaintiffs.
6.39 In this instance, both court approval and notice were mandatory on dismissal or
compromise of the class suit. Not only did Thompson fail to seek Court approval before
dismissing his suit, Thompson failed to give notice of the proposed dismissal to any members of
the investor class.
6.40 Instead, in breach of his fiduciary obligations to Plaintiffs, on information and
belief Thompson reached a sizeable compromise and provided himself a major windfall at the
expense of the Plaintiffs who did not receive any part of the settlement. Moreover, without any
notice or knowledge of Younan’s fraudulent and nefarious conduct, Plaintiffs would
PLAINTIFFS’ THIRD AMENDED PETITION PAGE 17
unfortunately continue to invest with Younan for several more years which would only increase
their already significant damages. All of these losses could have been avoided if Thompson had
not shirked his fiduciary duties to the class.
DELOITTE DISCOVERS YOUNAN’S FRAUD
6.41 Subsequent to the lawsuit brought by Younan’s former CFO, Deloitte conducted its
own independent investigation into Younan’s financial statements and the undisclosed kickbacks.
Deloitte then discovered, among other things, that after the closing of Park Central, the “advisory
fee” from Hennessey had been paid back to Younan without disclosure.
6.42 Now, with actual knowledge of Younan’s fraud, Deloitte withdrew its previously
issued Audit Opinion and informed Younan and YPI that the audited financial statements could no
longer be relied upon. Deloitte then instructed Younan and YPI to contact all persons, including
Plaintiffs, and inform them the financial statements could not be relied upon. Unfortunately for
Plaintiffs, Younan and YPI refused to do so.
THE KICKBACKS IN 2006
6.43 From 2006 onward, Younan continued to charge investors these inflated
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FILED DALLAS COUNTY 9/30/2016 2:56:00 PM FELICIA PITRE DISTRICT CLERK CAUSE NO. DC-16-00007 SUNIL RAMNANI, § IN THE DISTRICT COURT MUKHTIAR GREWAL § and HARDEEP GREWAL, § § Plaintiffs, § § v. § 95th JUDICIAL DISTRICT COURT § ZAYA YOUNAN, YOUNAN § PROPERTIES, INC., YOUNAN § INVESTMENT PROPERTIES, L.P., § BRIAN HENNESSEY, NARBEH § TATEVOSSIAN, AND QUENTIN § THOMPSON § § DALLAS , COUNTY, TEXAS Defendants. PLAINTIFFS’ THIRD AMENDED PETITION COME NOW, Plaintiffs, Sunil Ramnani (“Ramnani”) and Mukhtiar “Steve” Grewal and Hardeep “Deepi” Grewal (the “Grewals”) (collectively “Plaintiffs”), by and through their attorneys of record, for their Complaint against Defendants, Zaya Younan, Younan Properties, Inc. (“YPI”) and Younan Investment Properties L.P. (“YIP LP”) (collectively “Younan”), Brian Hennessey (“Hennessey”), Narbeh “Nick” Tatevossian (“Tatevossian), and Quentin Thompson (“Thompson”) (collectively “Defendants”), hereby allege as follows: I. INTRODUCTION 1.01 Younan promotes, develops, manages and sells class “A” commercial property investments primarily through the formation and operation of numerous “Partnerships” and “LLCs” (the “Partnerships”). 1 Plaintiffs acquired non-managing interests in the Partnerships. 1 “The Partnerships” refer collectively to YPI Thanksgiving Tower Fund, LLC (“Thanksgiving Tower”); YPI Park Central Holding, L.P. (“Park Central”); YPI Embassy Plaza, LLC (“Embassy”); YPI One North Arlington, LLC (“North Arlington”); YPI 4851 LBJ Fund, L.P. (“Galleria Plaza”); and YPI Norfolk Tower, Partners L.P. (“Norfolk”). PLAINTIFFS’ THIRD AMENDED PETITION PAGE 1 1.02 The Partnerships acquire commercial real estate touted by Younan as high-rise, “trophy” office buildings throughout the country. Several of these properties are located in Dallas County, Texas. 1.03 In connection with these commercial property acquisitions, substantial undisclosed fees were paid to companies owned and controlled by Tatevossian and Hennessey. These undisclosed fees were hidden from Plaintiffs through Younan’s inflation of the purchase prices for the real estate. Upon receipt of these undisclosed fees, Tatevossian and Hennessy would then kickback a substantial portion to Zaya Younan’s personal bank account. 1.04 Also unbeknownst to Plaintiffs, Defendants were self-dealing. Substantial fees were paid to “third parties” who purported to render valuable services to the Partnerships in connection with the Partnerships’ acquisition of real estate. In reality though, these were not “third parties” at all, and no compensable services were actually rendered to the Partnerships by these purported “third-parties.” In fact, Younan either had a long lasting and close relationship with these “third parties” or they were actually officers and/or directors of YPI. 1.05 For example, on several transactions Younan would secretly charge investors an “advisory fee” or a commission which would supposedly be paid to a “third party” vendor. However, unbeknownst to Plaintiffs, these vendors were actually owned by either Hennessey or Tatevossian and each held the title of Senior Vice President of Acquisitions and Dispositions of YPI. Then, without disclosure to any of the investors, Tatevossian and Hennessey would kickback the majority of these fees to Zaya Younan’s personal bank account. Further, the work that these “third parties” were supposedly doing was work that Younan was representing that Younan was doing and work for which Younan was already charging a substantial fee to the investors. PLAINTIFFS’ THIRD AMENDED PETITION PAGE 2 1.06 In addition to stealing Plaintiffs’ money, Zaya Younan used the stolen money as a purported “investment” of his own money into each of the Partnerships. By purporting to invest his own money in the Partnerships, Zaya Younan was able to bolster Plaintiffs’ trust in him because he appeared to be backing up his representations regarding the likely success of the Partnerships with his own money. However, it was really just more of Plaintiffs’ money being funneled back to the Partnerships so Zaya Younan could claim an ownership interest therein. 1.07 For years, Defendants were careful to conceal this activity from all outside parties. These “kickbacks” were not disclosed in the closing documents. They were not disclosed in the audited financials presented by Deloitte. They were also concealed from the banks that financed each of these transactions. In reality, millions of dollars were being secretly funneled back to Zaya Younan solely through “handshake” deals done entirely behind closed doors. 1.08 Zaya Younan has been able to perpetrate this fraud because he has complete control over every aspect of the investment scheme. Zaya Younan serves as the CEO and Chairman of YPI and is in charge of all operational aspects of these real estate investment projects, including but not limited to, the vetting, acquiring, promoting, managing and carrying out the disposition of each investment. Zaya Younan created and operates YPI to act as the Member/General Partner for YIP LP. Zaya Younan and his wife are the sole owners of YIP LP. Zaya Younan appoints his company, YIP LP, as the sole Managing Member for the Partnerships. In other words, Zaya Younan had, and still has, complete control over the Partnerships and the expenditure of the investors’ funds therein. 1.09 In addition, Younan would make personal guarantees to each Plaintiff that they would receive significant returns on all their investments. Younan touted prior returns on PLAINTIFFS’ THIRD AMENDED PETITION PAGE 3 investments as an indication of future potential, yet these prior “successes” were also tainted with Younan’s fraud and the kickback of undisclosed fees. The failure to disclose fees in a frothy real estate market could easily be hidden from investors, but when the real estate market staggered, the inflated purchase prices used to disguise many of the fees, and the use of investor money to pay unnecessary and trumped up fees, all took its toll and resulted in serious cash flow problems for the Partnerships. As a result, the Partnerships have all been sold for a fraction of the investors’ initial contributions, foreclosed upon or are currently operating at a loss. Without a doubt, Defendants’ fraud undeniably contributed to the failure of these investments and caused Plaintiffs’ considerable losses. II. DISCOVERY CONTROL PLAN 2.01 Plaintiffs hereby request that discovery be conducted under Level 3, pursuant to Texas Rule of Civil Procedure 190.4. III. PARTIES 3.01 Plaintiff Sunil Ramnani (“Ramnani”) is an individual residing in Orange County, California. 3.02 Plaintiffs Mukhtiar “Steve” Grewal and Hardeep “Deepi” Grewal (the “Grewals”) are individuals residing in Johnson County, Kansas. 3.03 Defendant, Zaya Younan, is a resident and citizen of Los Angeles County, California who has made an appearance herein through his counsel of record and is thus being served herewith pursuant to TRCP 21a. PLAINTIFFS’ THIRD AMENDED PETITION PAGE 4 3.04 Defendant, Younan Properties Inc. (General Partner of Younan Investment Properties, L.P.), is a Delaware corporation which has made an appearance herein through its counsel of record and is thus being served herewith pursuant to TRCP 21a. 3.05 Defendant, Younan Investment Properties L.P., is a Texas limited partnership which has made an appearance herein through its counsel of record and is thus being served herewith pursuant to TRCP 21a. 3.06 Defendant, Brian Hennessey, is an individual residing in California who has made an appearance herein through his counsel of record and is thus being served herewith pursuant to TRCP 21a. 3.07 Defendant, Narbeh “Nick” Tatevossian, is an individual residing in California who has made an appearance herein through his counsel of record and is thus being served herewith pursuant to TRCP 21a. 3.08 Defendant, Quentin Thompson, is an individual residing in Harris County, Texas that may be served at: Quentin Thompson 2502 Alan Lake Lane Spring, Texas 77388 IV. AGENCY 4.01 Zaya Younan was acting as the agent of Younan Properties Inc. and Younan Investment Properties L.P., with the express or implied authority to engage in the acts complained of, and Younan Properties Inc. and Younan Investment Properties L.P. subsequently benefited financially from those acts and ratified the conduct. 4.02 Unless otherwise stated herein, whenever it is alleged in this pleading that Younan Properties Inc. and/or Younan Investment Properties L.P. committed an act, made a PLAINTIFFS’ THIRD AMENDED PETITION PAGE 5 representation or statement, failed to perform an act, or failed to make a statement, it means that Defendants, Younan Properties, Inc. and Younan Investment Properties L.P., were acting or failing to act through its authorized agents, partners, employees, and/or Defendant Zaya Younan, who were acting with either express, implied, apparent and/or ostensible authority, and that Defendants, Younan Properties Inc. and Younan Investment Properties L.P., subsequently ratified and benefited financially from these acts, failures to act, representations, statements or conduct. V. JURISDICTION AND VENUE 5.01 Subject matter jurisdiction is properly vested in this Court. 5.02 This Court also has personal jurisdiction, both general and specific, over all of the Defendants. Several of the commercial real estate investments that are the subject matter of Plaintiffs’ claims are located in Dallas County, Texas. Younan Properties, Inc. has its principal office for business in Texas in Dallas, Texas. Younan Investment Properties, L.P. is a Texas limited partnership. Hennessey and Tatevossian received improper fees and paid kickbacks to Zaya Younan in connection with the closing of real estate transactions in Texas and have therefore committed torts in Texas giving rise to Plaintiffs’ complaints herein. Therefore, this lawsuit has been properly filed in Texas state court in Dallas County. 5.03 All Defendants have purposefully availed themselves of the privileges and benefits of conducting business in Texas, have entered into contracts with Texas residents relating to the transactions at issue in this case, have engaged in substantial business transactions with Texas residents in connection with the Partnerships and as such, are subject to personal jurisdiction in Texas. All Defendants have: a) contracted by mail or otherwise with Texas residents or entities to secure real estate investments located in Texas; (b) committed torts, which PLAINTIFFS’ THIRD AMENDED PETITION PAGE 6 are the subject of this action, in whole or in part in Texas; and (c) otherwise transacted business in Texas. 5.04 Venue is proper in Dallas County, Texas as to all Defendants pursuant to CPRC Section 15.005 because venue is proper in Dallas County Texas as to at least one Defendant and all claims and actions arise out of the same series of transactions and occurrences. Venue is also proper in Dallas, County Texas because Younan Properties Inc. has its principal office for business in Texas located in Dallas County, Texas. Finally, venue is proper in Dallas County, Texas because a substantial part of the facts relating to at least one claim occurred in Dallas County, Texas in connection with the acquisition of real estate located in Dallas County, Texas. 5.05 Damages sought by Plaintiffs are within the jurisdictional limits of the court. Plaintiffs seek monetary relief over $1,000,000. VI. FACTUAL BACKGROUND 6.01 In or around 2005 through 2007, Younan solicited Plaintiffs to invest in commercial real estate partnerships and LLCs by guaranteeing significant investment returns, both through quarterly distributions and upon the disposition of the commercial assets. These entities included: YPI Thanksgiving Tower Fund, LLC (“Thanksgiving Tower”); YPI Park Central Holding, L.P. (“Park Central”); YPI Embassy Plaza, LLC (“Embassy”); YPI One North Arlington, LLC (“North Arlington”); YPI 4851 LBJ Fund, L.P. (“Galleria Plaza”); and YPI Norfolk Tower, Partners L.P. (“Norfolk”) (collectively, the “Partnerships”). 6.02 Zaya Younan serves as the CEO, Chairman and 100% Shareholder of YPI and is in charge of all operational aspects of the real estate investment projects, including but not limited to, the vetting, acquiring, promoting, managing and carrying out the disposition of each investment. Zaya Younan created and operates YPI to act as the Member/General Partner for PLAINTIFFS’ THIRD AMENDED PETITION PAGE 7 YIP LP. Zaya Younan and his wife are sole owners of YIP LP. Zaya Younan appoints YIP LP to serve as the sole Managing Member for the Partnerships. 6.03 For the period of 2005 through 2007, Younan pitched several commercial real estate investment opportunities to Plaintiffs, several of which were located in Dallas, Texas. According to Younan, the nature of these investments generally consisted of “high rise” or “trophy” office buildings. Younan represented that these properties would be purchased at an extremely low price and, after a quick turnaround through Younan’s propriety management initiatives, they would be sold for major profit. According to Younan, the investment properties would yield both significant quarterly distributions and then, upon the sale of each property, each partner would receive substantial returns of their initial capital contribution. 6.04 A key element to Younan’s promotion of these investments was the purported successful experience that Younan had in turning around large commercial real estate to make them highly profitable. Zaya Younan held himself, YPI and YIP LP as unrivaled experts in acquiring, managing and selling these types of commercial assets. In order to induce substantial contributions from investors, including Plaintiffs, Younan would make personal guarantees that the investors would receive significant returns on all their investments. 6.05 Some of these investments were also being promoted in or around the time period when this country was on the brink of recession. However, Younan countered any stresses Plaintiffs had with more representations and guarantees that the Partnerships were failsafe and that they were in the safest of hands. In fact, Younan represented that the downturn in the economy would actually benefit their investments. At all relevant times, Plaintiffs relied on Younan’s representations. PLAINTIFFS’ THIRD AMENDED PETITION PAGE 8 6.06 However, unbeknownst to Plaintiffs, they were being defrauded. Younan was soliciting Plaintiffs’ contributions in order to steal from Plaintiffs. Over the next several years, Plaintiffs would invest substantial amounts into the Partnerships based on Younan’s fraudulent representations. During that time, Defendants concealed their fraud, both through oral representations and by producing false statements, documents and reports. Moreover, despite the initial representations and ongoing promises, most of the Partnerships would be sold at a loss or foreclosed. THE CREATION OF THE PARTNERSHIPS A. The Park Central Partnership 6.07 In October 2005, Younan formed Park Central. Younan, YPI and and/or YIP LP caused Park Central to purchase two properties located at 12222 Merit Drive and 12377 Merit Drive in Dallas, Texas. 6.08 In reliance upon the various promises and representations made by Younan, Ramnani became a limited partner in Park Central. In reliance upon Younan’s various representations, including the guaranteed success of these investments, Ramnani invested substantial sums of money with Younan. In reliance upon Younan’s various representations Ramnani invested $200,000 cash in Park Central. B. The Embassy Partnership 6.09 In December of 2005, Younan formed Embassy. Younan, YPI and and/or YIP LP caused Embassy to purchase a property located at 1933 North Meacham Road in Schaumburg, Illinois. 6.10 In reliance upon the various promises and representations made by Younan, including the guaranteed success of this investment, both the Grewals and Ramnani became PLAINTIFFS’ THIRD AMENDED PETITION PAGE 9 limited partners in Embassy by investing substantial sums of money with Younan. In reliance upon Younan’s various representations, Plaintiffs, collectively, invested $200,000 cash in Embassy. C. The Norfolk Partnership 6.11 In February of 2006, Younan formed Norfolk. Younan, YPI and and/or YIP LP caused Norfolk to purchase a property located at 2211 Norfolk Street, Houston, Texas. In reliance upon the various promises and representations made by Younan, the Grewals became limited partners in Norfolk. In reliance upon Younan’s various representations, including the guaranteed success of this investment, the Grewals invested substantial sums of money with Younan. In reliance upon Younan’s various representations, the Grewals invested $250,000 cash in Norfolk. D. The North Arlington Partnership 6.12 Also in 2006, Defendants formed North Arlington. Younan, YPI and and/or YIP LP caused North Arlington to purchase a property located at 1500 W. Shure Drive, Arlington Heights, Illinois. 6.13 In reliance upon the various promises and representations made by Younan, both the Grewals and Ramnani became limited partners in North Arlington. In reliance upon Younan’s various representations, including the guaranteed success of this investment, Plaintiffs invested substantial sums of money with Younan. In reliance upon Younan’s various representations, Plaintiffs, collectively, invested $600,000 cash in North Arlington. E. The Galleria Plaza Partnership 6.14 Also in 2006, Younan formed Galleria Plaza. Younan, YPI and and/or YIP LP caused Galleria Plaza to purchase a property located at 4851 LBJ Freeway, Dallas, Texas. PLAINTIFFS’ THIRD AMENDED PETITION PAGE 10 6.15 In reliance upon the various promises and representations made by Younan, the Grewals became a limited partner in Galleria Plaza. In reliance upon Younan’s various representations, including the guaranteed success of this investment, the Grewals invested substantial sums of money with Younan. In reliance upon Younan’s various representations, the Grewals invested $200,000.00 cash in Galleria Plaza. F. The Thanksgiving Partnership 6.16 In February 2007, Younan formed Thanksgiving. Younan, YPI and and/or YIP LP caused Thanksgiving to purchase one building located at 1601 Elm Street, in Dallas, Texas. 6.17 In reliance upon the various promises and representations made by Younan, the Grewals became limited partners in Thanksgiving. In reliance upon Younan’s various representations, including the guaranteed success of these investments, Plaintiffs invested substantial sums of money with Younan. In reliance upon Younan’s various representations, the Grewals invested $250,000 cash in Thanksgiving. YOUNAN’S FRAUD IN 2005 6.18 Beginning in 2005, Younan used multiple schemes to defraud Plaintiffs. One scheme involved an agreement to launder Plaintiffs’ money through a cycle of entities, in some cases disguising them as “advisory fees,” and then kicking them back to his personal bank accounts. These schemes were implemented on each of the Partnerships. 6.19 Starting in 2005, Younan and the seller of the commercial real estate concerning the Park Central and Embassy partnerships agreed to inflate the purchase price on each of the respective transactions with phony “advisor fees” and “commissions.” On receipt of these fees, the seller would then transfer the entire inflated amount to a real estate broker who was acting as either a “third party advisor” or broker. And then, based solely on a handshake agreement, these PLAINTIFFS’ THIRD AMENDED PETITION PAGE 11 real estate brokers would then turn around and kickback nearly the entire inflated portion to Younan’s bank account. Unbeknownst and undisclosed to anyone, these individuals either had a close working relationship with YPI or were working for YPI. Even worse, the “advisors” and brokers were all real estate brokers who were not properly licensed in Texas. So, as payment for being made part of these transactions, they would agree to share with Younan the inflated commission. Also, because these brokers weren’t properly licensed, on some of the transactions Younan and YPI had to call these broker commissions “advisory fees” in various documents. 6.20 Younan was careful to conceal these agreements and these transfers not just from investors, but from the world. These “kickbacks” were not disclosed in the closing documents. They were not disclosed in the audited financials presented by Deloitte. They were also concealed from the banks that financed each of these transactions. In the end, millions of dollars were being secretly funneled back to Younan solely through “handshake” deals done entirely behind closed doors. 6.21 Defendants also defrauded investors, including Plaintiffs, by inflating the loan broker fee. Younan funded roughly ninety (90) percent of the purchase price of all the Partnerships by financing through a loan broker. Again, like he did with the real estate brokers, Younan had an undisclosed agreement with the loan broker to inflate the brokerage fee for each of these partnerships. The loan broker in each instance would then kickback a large portion of the broker commission to Younan personally. Again, these transfers were never disclosed to any investors or anyone not involved in this scheme. Similar to the “advisory fees,” millions of dollars were being funneled back to Younan based on “handshake” deals done behind closed doors. PLAINTIFFS’ THIRD AMENDED PETITION PAGE 12 6.22 It is also Younan’s practice to give different versions of the same document to different parties to a transaction. For example, Younan would give different parties to a real estate transaction different copies of the buyer’s closing statement and the seller’s closing statement, and each would show different entries being charged to the buyer. And in all cases, neither the seller’s nor the buyer’s statement disclosed these kickbacks that were going back to Younan. The Kickbacks in 2005 A. Kickbacks via “Advisory Fees” on Park Central 6.23 The inflated amount for Park Central was a $750,000 fee paid to Westridge Realty Investments, Incorporated, a California corporation located in Oak Park, California (“Westridge”). Westridge was controlled by a real estate broker, Defendant Brian Hennessey (“Hennessey”). However, Hennessey actually worked for YPI. In fact, at that time he was the Senior Vice President of Acquisitions and Disposition for YPI and had that title from 2003 to 2006. He also became the Vice President of Leasing in 2010. Immediately after closing and based solely on the verbal agreement between Hennessey and Younan, Westridge, at the direction of Hennessey and Younan, transferred not less than $700,000 of this fee to Younan’s personal bank account. B. Kickbacks via Commissions on Embassy 6.24 The inflated amount for Embassy was a $300,000 “commission” paid to Real Estate Pros (“REP”). REP was controlled by a real estate broker, Defendant Narbeh “Nick” Tatevossian (“Tatevossian”). However, unbeknownst to any party to the transaction, Tatevossian actually worked for and had a close relationship with YPI. In fact, Tatevossian served as the Senior Vice President of Acquisition and Disposition of YPI from 2006 to 2010. Then, PLAINTIFFS’ THIRD AMENDED PETITION PAGE 13 immediately after closing and based solely on a “handshake deal” between Tatevossian and Younan, REP, at the direction of Tatevossian and Younan, transferred not less than $250,000 of this $300,000 commission to Younan’s personal bank account. C. Kickbacks via “loan broker fees” on Park Central 6.25 The inflated loan broker fee on Park Central was $487,500. This was paid to Northmarq Capital (“Northmarq”). The person at Northmarq negotiating this fee with Younan was Richard Scandaliato (“Scandaliato”). As it turns out, Scandaliato had a close working relationship with Younan and had been involved in similar transactions with Younan in the past. Then, immediately after closing and based solely on a “handshake deal” between Scandaliato and Younan, not less than $241,250 of the $487,500 was transferred back to Younan’s personal bank account. D. Kickbacks via “loan broker fees” on Embassy 6.26 Investors also paid an inflated loan broker fee on Embassy. This amount was approximately $106,000. This was paid to the brokerage firm Promark Capital (“Promark”) owned by Gregory Zack (“Zack”). Then, immediately after closing and based solely on a “handshake deal” between Zack and Younan, some or all of the loan brokerage fee was transferred back to Younan’s personal bank account. DELOITTE’S INITIAL AUDIT DOES NOT DISCOVER YOUNAN’S FRAUD 6.27 Deloitte’s audit opinion played a critical role in Younan’s fraudulent scheme. As previously stated, Younan funded roughly ninety (90) percent of the purchase price of all the Partnerships, including Park Central, through financing. Thus, in 2005, prior to issuing the loan on Park Central, the lending bank required an auditor’s approval of the Park Central financial statements. PLAINTIFFS’ THIRD AMENDED PETITION PAGE 14 6.28 In 2005, the limited partners of Park Central, including Plaintiffs, paid Deloitte to audit the consolidated statement of assets, liabilities, and partners’ capital of Park Central. 6.29 Deloitte was paid $40,000 by the limited partners of Park Central, including Plaintiffs, as payment for their services. 6.30 On April 28, 2006, Deloitte issued its Independent Auditors’ Reports (the “Audit Opinion”) concerning Park Central. 6.31 In the Audit Opinion, Deloitte concluded that the consolidated financial statements of Park Central fairly presented the assets, liabilities, and partners’ capital as of December 31, 2005 in all material respects. In the Audit Opinion, Deloitte further concluded that the consolidated financial statements of Park Central accurately presented the revenues and expenses, changes in partners’ capital, and cash flows for the period from September 27, 2005 to December 31, 2005 in all material respects. 6.32 Thus, based on Deloitte’s opinion, the financial statements for Park Central were verified, the bank financed the transaction, and closing of the partnership was complete. YOUNAN’S FRAUD IN 2006 AND SCHEME TO CONCEAL THE SAME 6.33 In 2006, Younan’s now former CFO, Quentin Thompson (“Thompson”) had personal knowledge of several acts of malfeasance on the part of Younan. Among other things, he knew that Younan was receiving these illegal kickbacks. He confronted Younan regarding these bad acts but was immediately terminated. It turns out Thompson was also an investor in several of the same partnerships as the Plaintiffs, specifically Embassy and Park Central, and so he sued Younan for several things including fraud, tax evasion and wrongful termination (the “2006 Lawsuit”). The 2006 Lawsuit was also filed as a putative class action on behalf of the investors in Embassy and Park Central, which therefore included Plaintiffs. As such, Thompson PLAINTIFFS’ THIRD AMENDED PETITION PAGE 15 assumed a fiduciary duty to Plaintiffs to fully inform them of the facts of which he was aware and to protect their interests in the lawsuit. 6.34 Instead of disclosing these allegations to his investors, Younan quickly got out in front of them. Defendants represented to investors, including Plaintiffs, that there was a frivolous lawsuit being brought by a “disgruntled” employee against Younan and YPI for wrongful termination. Itwas also represented to investors that this CFO’s intent was to “hurt” Plaintiffs’ investments. Defendants then represented, as a cursory note, that because this investor’s damages were so minimal and because he happened to also be a very small investor in some of Younan’s properties, that he was bringing a claim for “unfair business practices” solely to raise his damages. 6.35 This was all a blatantly false representation. As it turns out, this former employee was actually the Chief Financial Officer of YPI who had invested over $150,000.00 with Younan. Furthermore, he was only “disgruntled” because he was fired from YPI as soon as he confronted Younan with what he knew about his theft and fraud. 6.36 Instead of telling investors, like Plaintiffs, the truth, Younan used their trust and his role as their fiduciary as a way to conceal his fraud. In addition, as hereinafter explained, Younan also agreed to pay Thompson a substantial amount of “hush money” in exchange for Thompson’s agreement to shirk his fiduciary duty as a putative class representative and to dismiss his suit without telling the Court or the other class members that he was receiving a substantial sum from Younan to help conceal the truth. YOUNAN’S CFO, QUENTIN THOMPSON, FILES A CLASS ACTION SUIT AGAINST YOUNAN THEN WRONGFULLY SETTLES WITH YOUNAN WITHOUT NOTIFYING THE CLASS 6.36 The 2006 Lawsuit, filed by Thompson, was also brought on behalf of the class of other Younan investors, including Plaintiffs. Specifically, Thompson’s lawsuit asserted, among PLAINTIFFS’ THIRD AMENDED PETITION PAGE 16 other things, a Representative Claim for Violation of Business and Professions Code §17200 et. seq. “on behalf of himself and other investors to obtain restitution of the funds that Younan stole from Plaintiff and the other investors.” 6.37 Thompson not only had personal knowledge of Younan’s fraud in his capacity as CFO, but given his unique position, he also had prime access to all investor information, including investor names, their locations and the amount of their respective investments. Accordingly, he asserted himself as the representative on behalf of the alleged class and voluntarily accepted a fiduciary obligation towards the members of the class, including Plaintiffs. 6.38 However, despite filing a complaint asserting class allegations, Thompson has never made any attempt to communicate to any Plaintiff regarding any of the facts alleged in his complaint. In reality, Thompson only alleged he was acting for the class to enhance his own bargaining power against Younan. On information and belief, during the interim between the filing of the 2006 Lawsuit and before any determination by the court to certify the investor class, Thompson secured a substantial and excessive private settlement to the detriment of the remaining class, including Plaintiffs. 6.39 In this instance, both court approval and notice were mandatory on dismissal or compromise of the class suit. Not only did Thompson fail to seek Court approval before dismissing his suit, Thompson failed to give notice of the proposed dismissal to any members of the investor class. 6.40 Instead, in breach of his fiduciary obligations to Plaintiffs, on information and belief Thompson reached a sizeable compromise and provided himself a major windfall at the expense of the Plaintiffs who did not receive any part of the settlement. Moreover, without any notice or knowledge of Younan’s fraudulent and nefarious conduct, Plaintiffs would PLAINTIFFS’ THIRD AMENDED PETITION PAGE 17 unfortunately continue to invest with Younan for several more years which would only increase their already significant damages. All of these losses could have been avoided if Thompson had not shirked his fiduciary duties to the class. DELOITTE DISCOVERS YOUNAN’S FRAUD 6.41 Subsequent to the lawsuit brought by Younan’s former CFO, Deloitte conducted its own independent investigation into Younan’s financial statements and the undisclosed kickbacks. Deloitte then discovered, among other things, that after the closing of Park Central, the “advisory fee” from Hennessey had been paid back to Younan without disclosure. 6.42 Now, with actual knowledge of Younan’s fraud, Deloitte withdrew its previously issued Audit Opinion and informed Younan and YPI that the audited financial statements could no longer be relied upon. Deloitte then instructed Younan and YPI to contact all persons, including Plaintiffs, and inform them the financial statements could not be relied upon. Unfortunately for Plaintiffs, Younan and YPI refused to do so. THE KICKBACKS IN 2006 6.43 From 2006 onward, Younan continued to charge investors these inflated