not so only 51 m left cdvt with emed and the p r s were lies the old lawyer for p thompson suing the old ceo bill williams and malet for all kinds of fraud, stealing,etc etc. bill bought a leer jet and several homes and 5 cars with our money ,stripped out the working capital and did not pay rent vendors and lawsuit judgements. dela garza says chptr 11 soon. Case Style: Pamela Thompson v. George Paul, et al.
Case Number: 06-15515
Judge: William A. Fletcher
Court: United States Court of Appeals for the Ninth Circuit on appeal from the District of Arizona, Maricopa County
Plaintiff's Attorney: William M. Balin, Balin & Kotler, San Francisco, California, "James LaGanke", Phoenix, Arizona, and Charles Weller, La Jolla, California, for the appellant.
JAMES M. LAGANKE, ESQ. (SB # 006913)
JAMES M. LaGANKE, P.L.L.C.
13236 North 7th Street, Suite 4-257
Phoenix, Arizona 85022
Telephone: (602) 279-6399
Facsimile: (602) 993-5323
Email: jameslaganke@aol.com
ATTORNEY FOR PLAINTIFFS
UNITED STATES DISTRICT COURT
DISTRICT OF ARIZONA
MEDCOM USA INCORPORTED, a
Case No. 2:09-cv-00298
Delaware Corporation, and CARD
ACTIVATION TECHNOLOGIES, INC.,
a Delaware Corporation,
COMPLAINT
Plaintiffs,
V.
WILLIAM P. WILLIAMS, and EVA
WILLIAMS, husband and wife;
WILCOM, INC., a Texas Corporation;
W.P.W. AIRCRAFT, LLC, an Arizona
Limited Liability Company; and
AMERICAN NORTEL
COMMUNICATIONS, INC., a Nevada
Corporation,
Defendants.
Plaintiffs, MedCom USA Incorporated, a Delaware Corporation, and Card
Activation Technologies, Inc., a Delaware Corporation, by and through their
undersigned attorney, for their Complaint herein allege as follows:
1
THE PARTIES
The Plaintiffs
1.
Plaintiff, MedCom USA, Incorporated (“MedCom”), is a corporation
organized and existing under the laws of the State of Delaware with its principal place of
business in Scottsdale, Arizona. MedCom is a public company whose stock is traded
on the Over-the-Counter Bulletin Board exchange.
2.
Plaintiff, Card Activation Technologies, Inc.
(“Card Activation”), is a
corporation organized and existing under the laws of the State of Delaware with its
principal place of business in Scottsdale, Arizona. Card Activation is a public company
whose stock is traded on the Over-the-Counter Bulletin Board exchange.
The Defendants
3.
Defendants, William P. Williams and Eva Williams, are husband and wife
and residents of Maricopa County, Arizona.
4.
Defendant, Wilcom, Inc. (“Wilcom”), is a Texas corporation that upon
information and belief is owned and controlled by Defendants William P. Williams and
Eva Williams.
5.
Defendant, W.P.W. Aircraft LLC, is an Arizona Limited Liability Company
that upon information and belief is owned and controlled by Defendants William P.
Williams and Eva Williams.
6.
Defendant, American Nortel Communications, Inc., is a Nevada corporation
that upon information and belief is a public company traded on the pink sheet market
and is owned and controlled by William P. Williams and Eva Williams.
2
JURISDICTION AND VENUE
7.
This Court has jurisdiction over this matter pursuant to 28 U.S.C. §1331
(Federal Question), 28 U.S.C §1367(a) (Supplemental Jurisdiction), and 15 U.S.C.
§78j(b) of the Securities Exchange Act of 1934, as well as Section 10(b) and Rule 10b-5
thereunder.
8.
Venue is proper in this judicial district pursuant to 28 U.S.C. §1391(b),
because many of the acts, omissions, conduct, and combinations thereof occurred in
this judicial district, and, moreover, because all of the Defendants named herein are
residents of and/or do business within this judicial district.
9.
At all times mentioned in the Complaint, the Defendants, and each and
every one of them, in connection with the acts and conduct alleged herein, directly and
indirectly used the means and instrumentalities of interstate and foreign commerce,
including mail, wires, highway, internet, facsimile and/or telephone communication
systems.
NATURE OF THE ACTION
10.
In a time which spawned creatures like Bernie Madoff, Lehman Brothers,
AIG, the fictitious credit default swaps on Wall Street, and massive multi-billion dollar
bailouts, Defendants William P. Williams and Eva Williams used the Plaintiffs to bail
themselves out through looting both companies for what Plaintiffs believe is more than
ten million dollars ($10,000,000). The Plaintiffs are public companies traded on the
Over-the-Counter Bulletin Board exchange with a shareholder base of more then seven
hundred (700) people.
11. In a non-exhaustive list, Plaintiffs believe that Defendants Williams P.
Williams and Eva Williams have done the following:
3
a. Illegally issued stock in both companies to themselves, Wilcom,
American Nortel, and their two (2) children;
b. Purchased a Leer Jet with MedCom funds, and paid their personal
pilot one hundred and thirty six thousand dollars ($136,000) a year
again with company funds;
c. Paid himself a salary of four hundred fifty thousand dollars
($450,000) per year and in addition took two thousand ($2,000) per
week to pay personal credit card expenses from a company that may
be on the verge of Bankruptcy;
d. Paid himself nearly two hundred thousand dollars ($200,000) per
year in travel and entertainment expenses by using company funds;
e. Placed their son and daughter on salary for Plaintiffs MedCom and
Card Activation when they did no work at all;
f. Manipulated the stock value of both companies for their own benefit
and filed false and fraudulent 10Q’s and 10K’s with the Securities
and Exchange Commission;
g. Fired the entire Board of Directors and became the sole Board
Member of MedCom shortly after Defendant William P. Williams took
control in 2001;
h. Has paid management fees to a Texas Corporation named Wilcom
owned and controlled by Mr. Williams’ wife of more than four hundred
thousand dollars ($400,000) a year;
i.
Has failed to pay monthly bills including office rent and federal and
state taxes;
4
j.
Has refused to pay vendors because Mr. Williams claimed that the
companies had no money. As of this date, MedCom has not paid
the rent on the Scottsdale office for more than three (3) months;
k. Failed to disclose outstanding invoices to the SEC auditor and other
SEC consultants including more than four hundred thousand dollars
($400,000) owed to the State of New York for sales taxes resulting in
a civil arrest warrant being issued against MedCom, a bill from a law
firm in California that exceeds sixty thousand dollars ($60,000), a bill
from a law firm in Delaware that exceeds forty thousand dollars
($40,000), a bill for computer programmers of sixty five thousand
dollars ($65,000), and a bill for consulting services of more than two
hundred thousand dollars ($200,000);
l.
Had Plaintiff MedCom pay fees and monthly dues for three (3)
different local golf country clubs for Mr. and Mrs. Williams as well as
their season tickets for the Arizona Diamondbacks and Arizona
Cardinals;
m. Destroyed documents belonging to MedCom and paid his son four
thousand dollars ($4,000) to accomplish that task;
n. Made false and fraudulent statements to investors claiming that he
has invested his own personal funds in excess of twelve million
dollars ($12,000,000) when he has invested virtually nothing;
o. After Card Activation settled three (3) patent infringement lawsuits in
the quarter ending December 31, 2008, William P. Williams took
5
nearly two hundred and twenty thousand dollars ($220,000) from the
Plaintiffs’ accounts;
p. Defendants William P. Williams and Eva Williams conspired with
others to fraudulently factor licensing agreements that either did not
exist, or which had terms of one (1) year and factored those licensing
agreements as if they were forty-eight (48) month contracts. Mr. and
Mrs. Williams, upon information and belief, forged signatures of
purported hospital representatives that did not have contracts with
Plaintiff MedCom. These fraudulently factored licensing agreements
have caused the company to now have what Plaintiffs believe are
invalid obligations with LadCo Financing, Inc. and LeeCo Financial,
Inc. of more than 5 million dollars ($5,000,000); and,
q. Defendant William P. Williams and his wife issued themselves five
million (5,000,000) common shares in Card Activation without
consideration and without shareholder approval.
12. Defendant William P. Williams and Eva Williams were removed as the Chief
Executive Officer, President, Secretary, and Treasurer on September 8, 2008, and Mr.
Michael De La Garza was appointed as the Chief Executive Officer and President, and
since that time Mr. Williams has continued to cash checks from company accounts for
his benefit including as recently as Friday, January 30, 2009.
13. As a result of what they did with these public companies, Defendants
William P. Williams and Eva Williams acquired significant assets including:
a. A cabin in Pine Top, Arizona;
6
b. Their personal residence in an upscale neighborhood in Scottsdale,
Arizona;
c. A ranch in Texas that Mr. Williams claims borders on President
Bush’s ranch in Crawford, Texas;
d. Land in Telluride, Colorado, on a ski resort;
e. The aforementioned Leer Jet; and,
f. Five (5) expensive vehicles for themselves and their children, among
other things.
14. Plaintiffs believe that this is only a partial list of the assets the Defendants
acquired through their actions with respect to Plaintiffs MedCom and Card Activation.
Within sixty days of his termination, Defendant William P. Williams also took over two
hundred thousand dollars ($200,000) in cash from MedCom and Card Activation which
was in addition to his four hundred fifty thousand dollar ($450,000) salary, entitlements
for himself, his wife, and his children, and the payment of his credit card debt at the rate
of more than one hundred thousand dollars ($100,000) per year.
15. In this action, Plaintiffs seek compensatory and punitive damages, as
applicable, for securities fraud pursuant to the Securities Exchange Act of 1934, Section
10(b) thereunder, and Rule 10b-5; Federal and State Racketeering; Common Law
Fraud; Breach of Fiduciary Duty; and Conversion; among other state law causes of
action.
GENERAL ALLEGATIONS
16. MedCom is a publicly traded company on the Over-the-Counter Bulletin
Board exchange which was originally formed in 1991 under the name Sims
Communications, Inc. At the time of its formation, as Sims Communications, MedCom’s
7
primary business was providing telecommunications services.
In 1996 Sims
Communications entered into licensing agreements and changed its basic business
model from telecommunications to the business of processing medical information for
health care providers seeking compensation from insurance companies. At that time,
MedCom began to market what is now called the Med Card system.
17. In 1999, Sims Communications changed its name to MedCom USA,
Incorporated. The Med Card system confirms insurance eligibility, processes medical
claims, and monitors health care referrals.
18. Until 2001, MedCom had a Board of Directors and duly appointed officers
who managed and operated the company. In 2001, Defendants William P. Williams
engineered a reverse split of the common stock and became the single largest
shareholder. Shortly thereafter, Defendant William P. Williams took complete control of
MedCom by removing the Chief Executive Officer and the existing Board of Directors.
At the conclusion of these acts, which was in essence a coup, Defendant William P.
Williams became the Chief Executive Officer and the sole member of the Board of
Directors.
Until September of 2008, Defendant William P. Williams had complete
control over MedCom and utilized that control solely for his own benefit.
19. On or about the time Defendant Williams P. Williams took control over
MedCom, Plaintiff Card Activation was formed which is engaged in the business today
primarily of patent infringement litigation involving computer software for gift cards. At
the time he took control over MedCom, he also took control over Plaintiff Card
Activation through the issuance of stock to himself, his wife, and his children as well as
an affiliated entity named American Nortel Communications, Inc. American Nortel is a
8
public company with a shareholder base of six hundred and fifty (650) shareholders;
however, Mr. Williams also controls that company.
20. Despite the dire financial condition of MedCom over the last several years,
Williams has always taken his salary of four hundred and fifty thousand dollars
($450,000), payment of his personal credit card expenses of more than one hundred
thousand dollars ($100,000) per year, payments to his wife, Eva Williams, and
payments for his children of salaries without any explanation, and payment of purported
management fees to an affiliate he controls named Wilcom of more than four hundred
thousand dollars ($400,000) for years, among other things.
21. With a shareholder base of more than seven hundred (700) shareholders for
MedCom, Defendant William P. Williams has engaged in a pattern of self-dealing
including paying staff of American Nortel with MedCom funds, controlling completely the
flow of money between MedCom, Card Activation, and American Nortel, and by issuing
unauthorized shares in both Plaintiffs to himself, his family, and affiliated entities.
22. During the course of this pattern of fraud and self-dealing, Defendant
William P. Williams has grossly mismanaged these public companies and damaged
shareholders as well as the companies.
Defendant Williams has also filed SEC
required documents for reporting 1934 Act companies (i.e., 10Q’s and 10K’s) that bear
little resemblance to actual accounting records. Defendant William P. Williams withheld
and destroyed accounting records to mislead SEC auditors and consultants.
23. Defendants William P. Williams has also engaged in questionable leasing or
licensing agreements with companies named LeeCo Financial, Inc. and LadCo
Financing, Inc. running up invalid debts of millions of dollars. Assuming any amount is
actually owed to LeeCo and LadCo, to the best of Plaintiffs’ knowledge both debts are in
9
default at this time. Mr. Williams has also failed to pay debts of MedCom and Card
Activation such as office rent, and professional bills while he treated both companies as
if they were his personal checkbook. Mr. Williams also allowed default judgments to be
entered in litigation matters. Current management is now evaluating whether its only
option at this time, in addition to this litigation, is to file a Chapter 11 Bankruptcy case.
FIRST CAUSE OF ACTION
(Violations of Section 10(b) of the Securities Exchange Act of 1934
and Rule 10b-5)
24. Plaintiffs reallege and incorporate the allegations contained in paragraphs 1
through 23 of this Complaint as though fully contained herein.
25. As set forth herein, the Defendants treated the Plaintiffs, which are two (2)
public companies, as if they belonged to them, raised tens of millions of dollars based
on false and fraudulent representations, then converted those funds for their own use
and benefit. At the time new management secured control of the bank accounts for
MedCom and Card Activation, there were no funds in the Card Activation accounts and
a total of eight hundred and fifty dollars ($850) in the MedCom accounts.
26. The communications and representations of the Defendants were false,
deceitful, and manipulative statements of material fact as well as consisting of the
omission of other material facts needed for the communications and representations to
be truthful and not misleading.
27. The conduct of the Defendants in making such false communications and
representations constitute a fraudulent course of conduct by the Defendants in
connection with the purchase and sale of securities in violation of Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5.
10
28. The Defendants issued such communications and representations with
knowledge of their falsity and knowingly omitted or failed to disclose facts needed to
cause their representations and communications to be accurate and truthful.
29. Plaintiffs did not know of the falsity of the communications or
representations and did not know that material facts were omitted and, as a result,
relied upon the communications and representations of the Defendants, particularly
Defendants William P. Williams and Eva Williams.
30. As a direct and proximate result of these Defendants’ actions, Plaintiffs have
been damaged in an amount to be proven at trial.
SECOND CAUSE OF ACTION
(The Racketeer Influenced and Corrupt Organizations Act and the Arizona
Racketeering Statute)
31. Plaintiffs reallege and incorporate the allegations contained in paragraphs 1
through 30 of this Complaint as though fully contained herein.
32. These Defendants have engaged in a conspiracy to convert assets and in a
scheme or artifice to defraud the Plaintiffs and its shareholders through conversion of
corporate funds; mail fraud pursuant to 18 U.S.C. § 1341; and wire fraud pursuant to 18
U.S.C. § 1343.
33. The acts of these Defendants in knowingly and willfully converting assets,
and in executing their fraudulent scheme through the use of the United States mail and
wire services, constitute a continuing pattern of racketeering as defined in 18 U.S.C. §
1961, which embraced criminal acts having the same or similar purposes, results,
participants, victims, and methods of commission.
11
34. These Defendants were direct beneficiaries of this pattern of racketeering
activity.
35. The acts of the Defendants also constitute a violation of A.R.S. § 13-2301
(D)(4)(t), under the Arizona Racketeering Statute.
36. All of the foregoing acts were committed by these Defendants for financial
gain and are chargeable or indictable under the laws of the United States and
punishable by imprisonment for a period of not less than five (5) years, and under the
laws of the State of Arizona punishable by imprisonment for a period of not less than
one (1) year.
37. As a result of the foregoing, Plaintiffs are entitled to recover treble damages,
plus costs, and attorney's fees.
THIRD CAUSE OF ACTION
(Common Law Fraud)
38. Plaintiffs reallege and incorporate the allegations contained in paragraphs 1
through 37 of this Complaint as though fully contained herein.
39. As set forth herein, the representations of these Defendants were
fraudulent, inasmuch as they were false, material, known to be false, made with the
intent that Plaintiffs, and their shareholders, would act thereon while ignorant of their
falsity, and made in such manner as to cause Plaintiffs to rightfully rely thereon, thereby
resulting in direct and proximate damage to Plaintiffs in an amount to be proven at the
trial of this action.
40. The foregoing acts of these Defendants were fraudulent, willful, wanton,
intentional, malicious, and done with a reckless and conscious disregard for Plaintiffs’
12
rights, and therefore, warrant the assessment of exemplary or punitive damages in such
amount as is determined to be appropriate at the trial of this action.
FOURTH CAUSE OF ACTION
(Breach of Fiduciary Duty)
41. Plaintiffs reallege and incorporate the allegations contained in paragraphs 1
through 40 of this Complaint as though fully contained herein.
42. At all times material hereto, a fiduciary relationship existed between the
Plaintiffs and Defendants which imposed upon these Defendants an obligation of
loyalty, good faith, fairness, and honesty.
43. Defendants William P. Williams and Eva Williams breached their fiduciary
duties by the actions set forth in this Complaint, among other things, all of which has
resulted in direct and proximate damage to Plaintiffs in an amount to be proven at the
trial of this action.
44. The foregoing acts of those Defendants were willful, wanton, intentional,
malicious, and done with a reckless and conscious regard for Plaintiffs’ rights and
thereby warrant the assessment of exemplary or punitive damages in an amount
deemed to be appropriate at the trial of this action.
FIFTH CAUSE OF ACTION
(Conversion)
45. Plaintiffs reallege and incorporate the allegations contained in paragraphs 1
through 44 of this Complaint as though fully contained herein.
46. The Defendants conspired to and unlawfully converted Plaintiffs’ property
for their own use and benefit as set forth herein.
13
47. As a direct result of these Defendants' wrongful conversion of Plaintiffs’
property, Plaintiffs have suffered damages in an amount to be proven at the trial of this
action. Plaintiffs are also entitled to recover punitive damages in an amount sufficient to
deter such conduct in the future.
SIXTH CAUSE OF ACTION
(Breach of the Covenant of Good Faith and Fair Dealing)
48. Plaintiffs reallege and incorporate the allegations contained in paragraphs 1
through 47 of this Complaint as though fully contained herein.
49. There is implied in the agreements between the Plaintiffs and these
Defendants a covenant of good faith and fair dealing pursuant to which these
Defendants covenanted that they would in good faith, and in the exercise of fair dealing,
act fairly and honestly toward Plaintiffs, and do nothing to impair, interfere with, hinder,
or injure Plaintiffs.
50. These Defendants breached the covenant of good faith and fair dealing as
set forth herein, which has resulted in direct and proximate damage to Plaintiffs in an
amount to be proven at the trial of this action.
51. The foregoing acts of these Defendants were willful, wanton, intentional,
malicious, and done with a reckless and conscious disregard for Plaintiffs’ rights, and
thereby warrant the assessment of exemplary or punitive damages in an amount to be
determined at the trial of this action.
SEVENTH CAUSE OF ACTION
(Breach of Contract)
52.
Plaintiffs reallege and incorporate the allegations contained in paragraphs
1 through 51 of this Complaint as though fully contained herein.
14
53. As officers, directors, shareholders, and management personnel, these
Defendants had an obligation to Plaintiffs, and their shareholders, of loyalty and good
faith. As a direct, proximate, and foreseeable result of these Defendants' wrongful
breach contract, Plaintiffs have suffered damages consisting of lost profits and business
opportunities in an amount to be proven at the trial of this action.
54. Plaintiffs have incurred, and will continue to incur, in the prosecution of this
action reasonable attorney’s fees, which are recoverable under Arizona law.
EIGHTH CAUSE OF ACTION
(Injunctive Relief)
55.
Plaintiffs hereby repeats and reallege the allegation contained in
paragraphs 1 through 54 above, as if set forth herein again in full.
56. Unless these Defendants, and their agents, are restrained by this Court
from their continuing efforts to interfere with and damage Plaintiffs’ business, Plaintiffs
will suffer immediate and irreparable harm and injury for which recoverable damages
would be inadequate and for which there is no adequate remedy at law.
57. Accordingly, Plaintiffs request that this Court issue a Temporary Restraining
Order enjoining these Defendants, and their agents, from contacting any of Plaintiffs’
dealers or customers, or attempting to access Plaintiffs’ bank accounts.
NINTH CAUSE OF ACTION
(Disgorgement under Sarbanes – Oxley)
58.
Plaintiffs hereby repeat and reallege the allegation contained in
paragraphs 1 through 57 above, as if set forth herein again in full.
15
59. In managing MedCom, Defendants William P. Williams has engaged in
misconduct, if not criminal actions, which has resulted in material non-compliance with
SEC financial reporting requirements.
60. Specifically, Defendant William P. Williams caused MedCom to engage in
accounting irregularities which MedCom’s prior independent auditors uncovered at least
in part. The Clark Auditors detected a “material weakness” in MedCom’s financial
transactions which were consistently recorded based on funding documentation that
varied with the operating agreement terms. When the Clark Auditors recommended
that Defendant William P. Williams consult with counsel regarding restating financial
statements and taking other remedial actions, Mr. Williams fired the Clark Auditors and
hired new auditors and did not disclose this material weakness to the new auditors.
61. There is a substantial likelihood that MedCom will be required to restate its
financial statements as a result of these accounting irregularities as well as other
accounting irregularities.
62. Pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, Defendant
William P. Williams (as the sole officer and director until September of 2008) must
disgorge any bonuses, incentive-based compensation, or equity–based compensation
he received during the 12-month period following the first public issuance or filing of the
financial documents embodying the financial reporting requirement and any personal
profits he realized on the sale of company securities during that twelve (12) month
period.
RELIEF REQUESTED
WHEREFORE, Plaintiffs pray for relief as follows:
1. For compensatory damages;
16
2. For punitive damages;
3. For treble damages;
4. For injunctive Relief;
5. For disgorgement of personal profits and compensation realized by the
Defendants;
6. For Plaintiffs’ reasonable attorneys’ fees, costs and expenses; and,
7. For such other and further relief as the Court may deem just and proper in
the premises.
DATED THIS 13th day of FEBRUARY, 2009
JAMES M. LaGANKE, P.L.L.C.
/s/ James LaGanke
By:
_______________________________
JAME M. LaGANKE, ESQ.
13236 North 7th Street, Suite 4257
Phoenix, AZ 85022
Attorney for the Plaintiffs
DEMAND FOR JURY TRIAL
Plaintiffs hereby demand a trial by jury in this matter.
JAMES M. LaGANKE, P.L.L.C.
/s/ James LaGanke
By:
__________________________
JAMES M. LaGANKE, ESQ.
13236 North 7th Street, Suite 4257
Phoenix, AZ 85022
Attorney for the Plaintiffs
17
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7975 North Hayden Road
Suite D-333
Scottsdale, AZ 85258
Phone: 480-675-8865
Fax: 480-945-1909
Web Site: http://www.medcomusa.com
Sector: Technology
Industry: Business Software & Services
BUSINESS SUMMARY
MedCom USA, Inc. provides healthcare and financial transaction solutions for electronic processing transactions within the healthcare industry in the United States. It operates the MedCom System that is deployed through a point-of-sale terminal or Web portal offering electronic transaction processing, as well as insurance eligibility verification. The company provides a combination of services for the collection and approvals of credit/debit card payments along with the personal check guarantee from financial institutions. It also offers technology-based solutions for the healthcare industry that enable users to collect, use, analyze, and disseminate data from payers, healthcare providers, and patients. MedCom’s Web portal provides customers to process their medical claims through an online portal. The company was founded in 1991 as Sims Communications, Inc. and changed its name to MedCom USA, Inc. in 1999. MedCom is based in Scottsdale, Arizona.
