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Note: Kenneth Baker (Fraudster) contacted Leon Frenkel (Investor) on behalf of others and himself regarding two lucrative investment opportunities in the sugar industry.

First, Investor invested USD 250,000 through an escrow account in which the funds were to be held for 72 hours and then returned to Investor. At the same time, the parties executed the escrow agreement and Fraudster also executed a promissory note to assure that the money would be returned with interest. Second, Investor paid another USD 250,000 to a company in California.

Investor entered both deals based on documents that Fraudster and others produced indicating that business contracts had been executed for sugar, that huge deposits would soon be received, and that Fraudster and others had access to a standby LC for USD 2,000,000,000. When the payments owed to Investor were not made on time, Investor began demanding the money owed. Fraudster repeatedly made representations that the money was to be paid soon, but it never was.

Investor then sued Fraudster and others for conversion, fraud, breach of contract, breach of fiduciary duty, unjust enrichment, and money had and received. Investor claimed that Fraudster had forged the contracts and other documents regarding the sugar investment to convince Investor to buy into the scheme. Investor also claimed that Fraudster made false representations about the truthfulness of the documents and the underlying deals.

Fraudster filed the answer after the deadline, and the other defendants failed to respond at all. Investor then moved for default judgment against all defendants.

The United States District Court for the Eastern District of Pennsylvania, Schiller, J., granted the motion in part of the non-answering defendants and denied in part of the Fraudster. The court found that while many causes of action were valid against many of the defendants, some allegations against some of the defendants did not state valid causes of action. Also, while Fraudster answer was late, it was still litigable; however, because the others did not answer, those cases were not litigable.

[JAH]

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This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.