Preview
FILED
DALLAS COUNTY
6-CITS/ATTY 12/1/2016 12:35:22 PM
FELICIA PITRE
DISTRICT CLERK
Tonya Pointer
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, QUENTIN THOMPSON, §
DELIOTTE AND TOUCHE, L.L.P., §
EQUITY OFFICE MANAGEMENT, § DALLAS , COUNTY, TEXAS
L.L.C., NORTHMARQ CAPITAL, LLC, §
PROMARK CAPITAL GROUP, RKM §
CAPITAL AND RICHARD §
SCADALIATO. §
Defendants.
PLAINTIFFS’ FOURTH 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), Quentin Thompson
(“Thompson”), Deloitte and Touche, L.L.P. (“Deloitte”), Equity Office Management, L.L.C.
(“Equity Office”), Northmarq Capital, LLC (“Northmarq”), Promark Capital Group
(“Promark”), RKM Capital (“RKM”), and Richard Scandaliato (“Scandaliato”), (collectively
“Defendants”), hereby alleging as follows:
PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 1
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.
1.02 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 third-party companies owned and controlled by Younan’s co-
conspirators identified herein. These undisclosed fees were hidden from Plaintiffs through
Younan’s inflation of the purchase prices for the real estate along with the inflation of certain
commissions and fees. Upon receipt of these undisclosed fees, these co-conspirators 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 broker commission which would supposedly be paid to a “third party”
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’ FOURTH AMENDED PETITION PAGE 2
vendor. However, unbeknownst to Plaintiffs, these vendors were actually owned by either
Defendants 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.
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
PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 3
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
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.
PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 4
3.02 Plaintiff 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.
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
and has made an appearance herein and is being served herewith pursuant to TRCP 21a.
3.09 Defendant Deloitte & Touche, L.L.P. (“Deloitte”) is a Delaware limited liability
partnership which has done business in, continues to do business in and has committed torts in
Texas, and which maintains its principal office in Texas in Dallas County, Texas and may be
served herein through its registered agent in Texas at its registered office in Texas as follows:
PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 5
Corporation Service Company
d/b/a CSC - Lawyers Incorporating Service Company
211 E. 7th Street
Suite 620
Austin, TX 78701-3218
3.10 Defendant Northmarq Capital, LLC, (“Northmarq”) is a Texas Limited-Liability
Company which has done business in, continues to do business in and has committed torts in
Texas and may be served herein through its registered agent in Texas as follows:
National Registered Agents, Inc.
1999 Bryan St., Ste. 900
Dallas, TX 75201
3.11 Defendant Richard Scandaliato is an individual residing in California and can be
served at:
Richard Scandaliato
23717 Hawthorne Blvd.
Suite 103
Torrance, California 90505
3.12 Defendant Equity Office Management, L.L.C. (“Equity Office”) is a Texas
Limited-Liability Company which has done business in, continues to do business in and has
committed torts in Texas and may be served herein through its registered in Texas as follows:
Lexis Document Services Inc.
211 E. 7th Street Suite 620
Austin, TX 78701
3.13 Defendant ProMark Capital Group (“Promark”) is a California Limited
Partnership which has done business in, continues to do business in and has committed torts in
Texas and may be served herein through its registered agent as follows:
Jeffrey F. Katzer
15250 Ventura Blvd #508
Sherman Oaks, CA 91403
PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 6
3.14 Defendant RKM Capital (“RKM”) is a California Corporation which has done
business in, continues to do business in and has committed torts in Texas and may be served
herein through its registered agent as follows:
Stacy L Sokol
2029 Century Park East
Suite 900
Los Angeles, CA 90067
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. Richard Scandaliato was acting as
the agent of Northmarq and RKM with the express or implied authority to engage in the acts
complained of, and Northmarq and RKM 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
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.
PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 7
4.03 Unless otherwise stated herein, whenever it is alleged in this pleading that
Northmarq committed an act, made a representation or statement, failed to perform an act, or
failed to make a statement, it means that Defendant Northmarq was acting or failing to act
through its authorized agents, partners, employees, and/or Defendant Richard Scandaliato, who
were acting with either express, implied, apparent and/or ostensible authority, and that Defendant
Northmarq subsequently ratified and benefited financially from these acts, failures to act,
representations, statements or conduct.
4.04 Unless otherwise stated herein, whenever it is alleged in this pleading that RKM
committed an act, made a representation or statement, failed to perform an act, or failed to make
a statement, it means that Defendant RKM was acting or failing to act through its authorized
agents, partners, employees, and/or Defendant Richard Scandaliato, who were acting with either
express, implied, apparent and/or ostensible authority, and that Defendant RKM subsequently
ratified and benefited financially from these acts, failures to act, representations, statements or
conduct.
4.05 Unless otherwise stated herein, whenever it is alleged in this pleading that
Promark committed an act, made a representation or statement, failed to perform an act, or failed
to make a statement, it means that Defendant Promark was acting or failing to act through its
authorized agents, partners, employees, and/or non-party Gregory Zack, who were acting with
either express, implied, apparent and/or ostensible authority, and that Defendant Promark
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.
PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 8
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. Equity Office is responsible for selling
some of the Texas commercial real estate investments at issue in this lawsuit and agreed to
participate in and facilitate Zaya Younan’s torts. Younan Properties, Inc. has its principal office
for business in Texas in Dallas, Texas. Younan Investment Properties L.P. is a Texas limited
partnership. Deloitte has its principal office for business in Texas in Dallas, Texas. Northmarq,
Promark, RKM, Scandaliato, Hennessey and Tatevossian received improper commissions and
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 and
Texas companies relating to the transactions at issue in this case, have engaged in substantial
business transactions with Texas residents and Texas companies in connection with the
Partnerships at issue 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 are the subject of this action, in whole
or in part in Texas; and (c) otherwise transacted business in Texas. All Defendants’ activities
have been directed to Texas and this ligation has resulted from the injuries that arise out of or
relate to these activities.
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
PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 9
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
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.
PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 10
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.
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
PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 11
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
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.
PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 12
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.
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
PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 13
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,
disguising them as “real estate broker fees” and “advisory fees,” and then kicking them back to
Younan’s 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 secretly inflate the purchase price of each
building to account for phony “advisory fees” and “real estate broker commissions” that would
be secretly charged to Plaintiffs. Then, on receipt of these fees and commissions, the seller
would then transfer the entire inflated amount to a real estate broker who was acting as an
independent third party. And then, based solely on a handshake agreement, these real estate
brokers would then turn around and kickback nearly the entire inflated portion to Younan’s bank
PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 14
account. Unbeknownst and undisclosed to anyone, these individuals either had a close working
relationship with YPI or were working for YPI. Even worse, these third parties who were
funneling kickbacks through “advisory fees” and “real estate broker commissions” 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 Another way Younan defrauded investors was by taking kickbacks from loan
broker fees. Specifically, 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 grossly inflate the
brokerage commission for each of these partnerships. In fact, the loan broker would create false
bills to make it appear as though it were charging the full amounts that were shown on the
closing statements for the Partnerships. But in each instance after closing, the loan broker would
immediately kickback approximately half of the loan broker commission to Younan personally.
Sometimes these kickbacks were made within twenty-four (24) hours after closing. Again, these
transfers were never disclosed to any investors or anyone not involved in this scheme. Similar to
the real estate broker kickback and the advisory fees kickbacks, millions of dollars were being
funneled back to Younan based on “handshake” deals done behind closed doors.
6.21 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
PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 15
were being secretly funneled back to Younan solely through “handshake” and undisclosed deals
done entirely behind closed doors.
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 seller of Park Central, Defendant Equity Office, secretly agreed to inflate the
price of Park Central by $750,000 for the express purpose of paying a $750,000 “advisory fee” 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. Equity Office paid
Hennessey in order to facilitate the subsequent kickback to Younan. 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.
PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 16
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, 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
Defendant Northmarq Capital (“Northmarq”). The person at Northmarq who agreed to
fraudulently inflate this fee was Defendant 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 Defendant Promark Capital
(“Promark”). The person at Promark who agreed to fraudulently inflate this fee was Gregory
Zack (“Zack”). As it turns out, Zack had a close working relationship with YPI and became the
VP of Capital Markets for YPI in 2010. Then, immediately after closing and based solely on a
PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 17
“handshake deal” between Promark 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.
6.28 In 2005, the limited partners of
Preview
FILED DALLAS COUNTY 6-CITS/ATTY 12/1/2016 12:35:22 PM FELICIA PITRE DISTRICT CLERK Tonya Pointer 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, QUENTIN THOMPSON, § DELIOTTE AND TOUCHE, L.L.P., § EQUITY OFFICE MANAGEMENT, § DALLAS , COUNTY, TEXAS L.L.C., NORTHMARQ CAPITAL, LLC, § PROMARK CAPITAL GROUP, RKM § CAPITAL AND RICHARD § SCADALIATO. § Defendants. PLAINTIFFS’ FOURTH 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), Quentin Thompson (“Thompson”), Deloitte and Touche, L.L.P. (“Deloitte”), Equity Office Management, L.L.C. (“Equity Office”), Northmarq Capital, LLC (“Northmarq”), Promark Capital Group (“Promark”), RKM Capital (“RKM”), and Richard Scandaliato (“Scandaliato”), (collectively “Defendants”), hereby alleging as follows: PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 1 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. 1.02 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 third-party companies owned and controlled by Younan’s co- conspirators identified herein. These undisclosed fees were hidden from Plaintiffs through Younan’s inflation of the purchase prices for the real estate along with the inflation of certain commissions and fees. Upon receipt of these undisclosed fees, these co-conspirators 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 broker commission which would supposedly be paid to a “third party” 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’ FOURTH AMENDED PETITION PAGE 2 vendor. However, unbeknownst to Plaintiffs, these vendors were actually owned by either Defendants 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. 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 PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 3 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 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. PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 4 3.02 Plaintiff 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. 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 and has made an appearance herein and is being served herewith pursuant to TRCP 21a. 3.09 Defendant Deloitte & Touche, L.L.P. (“Deloitte”) is a Delaware limited liability partnership which has done business in, continues to do business in and has committed torts in Texas, and which maintains its principal office in Texas in Dallas County, Texas and may be served herein through its registered agent in Texas at its registered office in Texas as follows: PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 5 Corporation Service Company d/b/a CSC - Lawyers Incorporating Service Company 211 E. 7th Street Suite 620 Austin, TX 78701-3218 3.10 Defendant Northmarq Capital, LLC, (“Northmarq”) is a Texas Limited-Liability Company which has done business in, continues to do business in and has committed torts in Texas and may be served herein through its registered agent in Texas as follows: National Registered Agents, Inc. 1999 Bryan St., Ste. 900 Dallas, TX 75201 3.11 Defendant Richard Scandaliato is an individual residing in California and can be served at: Richard Scandaliato 23717 Hawthorne Blvd. Suite 103 Torrance, California 90505 3.12 Defendant Equity Office Management, L.L.C. (“Equity Office”) is a Texas Limited-Liability Company which has done business in, continues to do business in and has committed torts in Texas and may be served herein through its registered in Texas as follows: Lexis Document Services Inc. 211 E. 7th Street Suite 620 Austin, TX 78701 3.13 Defendant ProMark Capital Group (“Promark”) is a California Limited Partnership which has done business in, continues to do business in and has committed torts in Texas and may be served herein through its registered agent as follows: Jeffrey F. Katzer 15250 Ventura Blvd #508 Sherman Oaks, CA 91403 PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 6 3.14 Defendant RKM Capital (“RKM”) is a California Corporation which has done business in, continues to do business in and has committed torts in Texas and may be served herein through its registered agent as follows: Stacy L Sokol 2029 Century Park East Suite 900 Los Angeles, CA 90067 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. Richard Scandaliato was acting as the agent of Northmarq and RKM with the express or implied authority to engage in the acts complained of, and Northmarq and RKM 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 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. PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 7 4.03 Unless otherwise stated herein, whenever it is alleged in this pleading that Northmarq committed an act, made a representation or statement, failed to perform an act, or failed to make a statement, it means that Defendant Northmarq was acting or failing to act through its authorized agents, partners, employees, and/or Defendant Richard Scandaliato, who were acting with either express, implied, apparent and/or ostensible authority, and that Defendant Northmarq subsequently ratified and benefited financially from these acts, failures to act, representations, statements or conduct. 4.04 Unless otherwise stated herein, whenever it is alleged in this pleading that RKM committed an act, made a representation or statement, failed to perform an act, or failed to make a statement, it means that Defendant RKM was acting or failing to act through its authorized agents, partners, employees, and/or Defendant Richard Scandaliato, who were acting with either express, implied, apparent and/or ostensible authority, and that Defendant RKM subsequently ratified and benefited financially from these acts, failures to act, representations, statements or conduct. 4.05 Unless otherwise stated herein, whenever it is alleged in this pleading that Promark committed an act, made a representation or statement, failed to perform an act, or failed to make a statement, it means that Defendant Promark was acting or failing to act through its authorized agents, partners, employees, and/or non-party Gregory Zack, who were acting with either express, implied, apparent and/or ostensible authority, and that Defendant Promark 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. PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 8 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. Equity Office is responsible for selling some of the Texas commercial real estate investments at issue in this lawsuit and agreed to participate in and facilitate Zaya Younan’s torts. Younan Properties, Inc. has its principal office for business in Texas in Dallas, Texas. Younan Investment Properties L.P. is a Texas limited partnership. Deloitte has its principal office for business in Texas in Dallas, Texas. Northmarq, Promark, RKM, Scandaliato, Hennessey and Tatevossian received improper commissions and 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 and Texas companies relating to the transactions at issue in this case, have engaged in substantial business transactions with Texas residents and Texas companies in connection with the Partnerships at issue 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 are the subject of this action, in whole or in part in Texas; and (c) otherwise transacted business in Texas. All Defendants’ activities have been directed to Texas and this ligation has resulted from the injuries that arise out of or relate to these activities. 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 PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 9 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 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. PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 10 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. 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 PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 11 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 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. PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 12 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. 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 PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 13 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, disguising them as “real estate broker fees” and “advisory fees,” and then kicking them back to Younan’s 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 secretly inflate the purchase price of each building to account for phony “advisory fees” and “real estate broker commissions” that would be secretly charged to Plaintiffs. Then, on receipt of these fees and commissions, the seller would then transfer the entire inflated amount to a real estate broker who was acting as an independent third party. And then, based solely on a handshake agreement, these real estate brokers would then turn around and kickback nearly the entire inflated portion to Younan’s bank PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 14 account. Unbeknownst and undisclosed to anyone, these individuals either had a close working relationship with YPI or were working for YPI. Even worse, these third parties who were funneling kickbacks through “advisory fees” and “real estate broker commissions” 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 Another way Younan defrauded investors was by taking kickbacks from loan broker fees. Specifically, 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 grossly inflate the brokerage commission for each of these partnerships. In fact, the loan broker would create false bills to make it appear as though it were charging the full amounts that were shown on the closing statements for the Partnerships. But in each instance after closing, the loan broker would immediately kickback approximately half of the loan broker commission to Younan personally. Sometimes these kickbacks were made within twenty-four (24) hours after closing. Again, these transfers were never disclosed to any investors or anyone not involved in this scheme. Similar to the real estate broker kickback and the advisory fees kickbacks, millions of dollars were being funneled back to Younan based on “handshake” deals done behind closed doors. 6.21 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 PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 15 were being secretly funneled back to Younan solely through “handshake” and undisclosed deals done entirely behind closed doors. 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 seller of Park Central, Defendant Equity Office, secretly agreed to inflate the price of Park Central by $750,000 for the express purpose of paying a $750,000 “advisory fee” 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. Equity Office paid Hennessey in order to facilitate the subsequent kickback to Younan. 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. PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 16 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, 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 Defendant Northmarq Capital (“Northmarq”). The person at Northmarq who agreed to fraudulently inflate this fee was Defendant 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 Defendant Promark Capital (“Promark”). The person at Promark who agreed to fraudulently inflate this fee was Gregory Zack (“Zack”). As it turns out, Zack had a close working relationship with YPI and became the VP of Capital Markets for YPI in 2010. Then, immediately after closing and based solely on a PLAINTIFFS’ FOURTH AMENDED PETITION PAGE 17 “handshake deal” between Promark 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. 6.28 In 2005, the limited partners of