un 12 13 4 1s 16 17 18 19 20 2 2 23 4 25 26 27 28 David M. Bass (State Bar No. 117199) dbass@basslawla.com Janine F, Cohen (State Bar No. 203881) |jeohen@basslawla.com Michael D. Murphy (State Bar No. 224678) mmurphy@basslawla.com DAVID M. BASS & ASSOCIATES, INC. 1900 Avenue of the Stars, Suite 200 Los Angeles, CA 90067 Telephone: (310) 789-1152 Facsimile: (310) 789-1149 Attomeys for Plaintiff GILBERT J. ARENAS, JR. CONFORMED Ree Countvottos annem NOV 4 3 2015 oy, Exooutive Ott By: dud ara, Deputy Sherri R, SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES GILBERT J. ARENAS, JR., an individual, Plaintiff, vs. BOULEVARD MANAGEMENT, INC,, a California corporation; LESTER KNISPEL, an individual; ANDREW SURKIN, an individual; and DOES 1 through 20, Defendant wa vid vi WW ae vd vd Wat Wit ut BF 01199 Case No. COMPLAINT FOR: BREACH OF FIDUCIARY DUT" CONSTRUCTIVE FRAUD; NEGLIGENCE; BREACH OF CONTRACT; AND UNJUST ENRICHMENT yeepeul 12 3 14 15 16 17 18 19 20 a1 2 2B 4 25 26 27 28 For his Complaint (the “Complaint”) herein, Plaintiff Gilbert J. Arenas, Jt. (“Arenas”) alleges as follows: INTRODUCTION 1, Atissue in this Complaint is Boulevard Management, Inc. (“Boulevard”), @ corporation that is described in media reports as an “an accounting and business management firm to the stars.” Boulevard’s clients have included members of the Kardashian family, Rod Stewart, Shaquille O’Neal, the Eagles, Barbra Streisand, and Russell Brand 2. Boulevard’s most senior executive and primary shareholder is Defendant Lester Knispel (“Knispel”), a CPA who markets himself as a business manager specializing in the financial and business management of athletes, actors, and other celebrities with large incomes who require protection from theft, drainage, waste, mismanagement, and poor investment of the substantial income eared by his clients, Knispel and Boulevard proudly market themselves as business managers capable of protecting athletes and other celebrities from the mismanagement of their finances that can result from rapid access to fame and fortune. 3 Unfortunately, the attention, care, and diligence that Knispel publicly proclaims to offer Boulevard’s clients fall far short of that mark. In one interview Knispel gave to the Hollywood Reporter in 2011, Knispel congratulates himself on monitoring the cash, wealth and spending of his clients, including, for example, Shaquille O*Neal, with whom Knispel claimed to be working so as to actively protect O’Neal’s cash reserves and investments. 4, Inreality, Knispel and Boulevard fall well short of the standard of care that they publicly advertise. As alleged herein, not only has Boulevard, and its staff failed to actively counsel Arenas on his cash reserves and investments, but, even worse, Boulevard, Knispel and Defendant Andrew Surkin (“Surkin”) (collectively, “Defendants” or “Boulevard Defendants”) turned a blind eye to the outright theft of millions of dollars being stolen from Arenas, a theft that they could have easily caught had Boulevards practices matched Knispel’s congratulatory self-promotion in the media. With this Complaint, Arenas seeks to recover the many millions of dollars that Arenas has lost as the result of this serious disconnect between self-promotion, and actual practice,u 12 1B 14 16 17 18 19 20 21 2 2B 24 25 26 27 28 5. Arenas hired Boulevard in October 2006. From October 2006 until Boulevard was terminated by Arenas, effective November 30,2014, Arenas paid approximately $2.25 million to Boulevard in exchange for Boulevard and Knispel’s financial and business management, cash management, investment advice and accounting services. Boulevard acted as a fiduciary over income received by Arenas. 6. Boulevard, Knispel and the staff of Boulevard including Surkin— managed ‘Arenas’ finances with such absolute recklessness, negligence, and/or willful and intentional disregard that Arenas has lost millions of dollars, sustained damage to his credit, and suffered other serious financial injuries, all asthe direct result of Defendants’ tortious conduct. 7. Examples of Defendants’ mismanagement of Arenas’ affairs at issue herein are as follows: a, Defendants enabled and facilitated the theft of millions of dollars from ‘Arenas by his former personal assistant, John White (“White”) by approving wire transfers at White’s direction to another Arerias account that White illegally took control of, accessed, and stole from, all without Arenas’ approval. b, Despite being charged with managing Arenas’ accounts, Defendants failed to monitor these accounts, and permitted unauthorized persons to ‘manage and spend Arenas’ money without performing any due diligence or investigation of these unauthorized expenditures ©. Boulevard charged excessive fees to Arenas for Defendants’ careless, negligent, reckless, and imprudent supervision and deficient guidance of Arenas’ money and investments. 4. Defendants failed to perform one of their most central fimetions properly: the timely payment of Arenas’ bills. Wt ant ee COMPLATNT10 ul 12 2B 14 1s 16 v7 18 19 20 2 23 24 25 26 2 28 €. Defendants failed to guide Arenas and directly inform Arenas on cash ‘management, spending, investment, saving or other basic financial advice that Boulevard promotes as its expertise. f, Boulevard hired separate counsel for Arenas for the White matter, who nevertheless reported to Knispel, When the theft by White (assisted by Boulevard) became known, Boulevard and Arenas were in conflict. Nevertheless, Boulevard and Knispel benefited from this lawyer’s divided loyalty, resulting from his apparent joint representation of Boulevard and Arenas, in an effort to ensure that Arenas would not pursue claims against Boulevard. 8. In this action, Arenas sei a judgment awarding him full recovery from Boulevard of all the money stolen from Arenas by White, recovery of Boulevard’s ill-gotten gains, as well as damages for failing to properly manage Arenas’ funds and investments, and failing to advise, counsel and guide him into proper investments, THE PARTIES 9. Arenas is an individual residing in California who conducts business in the County of Los Angeles, California, Arenas is a former National Basketball Association NBA”) player. 10, Defendant Boulevard is a California corporation with its principal place of business in the County of Los Angeles. 11, Boulevard promotes itself as a nationally recognized, independent accounting and business management firm which provides specialized financial management services to entertainers, athletes and high net worth individuals, Boulevard’s website previously included the following statements promoting specialized care for its clients: We constantly hear stories about prominent professionals, entertainers or athletes who have encountered financial disasters. ‘These problems are usually attributable to unsound spending habits, poor management, or speculative financial advice 3 [cn =10 nl 12 13 14 — 16 17 18 19 20 21 2 2B 24 25 26 27 28 Our practice is based on aggressively avoiding such causes, and building for a prosperous future for our clients, We are dedicated to maximizing your wealth, 12. In May 2015, after being advised that this particular description of its services ‘was not followed in its handling of Arenas’ matters, Boulevard removed the false representation from its website. 13, Defendant Knispel is an individual residing in the County of Los Angeles, California, Knispel is the President of Boulevard and a Certified Public Accountant in the State of California [California License No. 18197] 14, — Surkin is an individual residing in the County of Los Angeles, California, Surkin is an employee of Boulevard, 15, Arenas does not know the true names and capacities of Defendants Does 1 through 26, inclusive, and therefore sues these “Doe Defendants” by such fictitious names pursuant to Section 474 of the California Code of Civil Procedure. Arenas will seek leave of Court to amend this Complaint when the true names and capacities of the Doe Defendants have been ascertained 16, Arenas is informed and believes and based thereon alleges that all of the Defendants named herein are in some manner responsible for the acts herein alleged, and that each was the agent, servant, representative, alter-ego, principal, employer or master of each other Defendant herein and, further, was acting within the scope of such agency, servitude, employment, representation or capacity and/or for the benefit of each other Defendant in doing the acts herein alleged. JURISDICTION & VENUE 17. This Court has jurisdiction over this lawsuit because the amount in controversy exceeds this Court’s minimum jurisdictional amount, exclusive of attorneys’ fees, interest and costs. ws18. Venue is proper in this Court because nearly all of the parties either reside or ‘maintain their principal place of business in the County of Los Angeles, California, 19. This Court has personal jurisdiction over each of the Defendants named herein, FACTS COMMON TO ALL C. OF ACTION Arenas Hires Boulevard as his Business Manager 20. In October 2006, Arenas was referred to Knispel and Boulevard because of their reputation for providing guidance to high pro! celebrities and professional athletes. Arenas met with Knispel and entered into an oral agreement with Knispel and Boulevard whereby Defendants would provide business and financial management services to Arenas, Boulevard agreed to provide Arenas the specialized services exactly as promoted in the press and its own website, including management of Arenas’ bank accounts; management of Arenas’ credit card accounts; payment of Arenas’ expenses; providing suflicient cash for Arenas to pay his personal expenses; management of investment and retirement accounts; management of real estate investments; and provision of advice regarding wealth and cash management, growth, income preservation, and wise investment strategies. Boulevard was also tasked with managing several ‘business entities formed by Arenas. 21, Starting in October 2006, Boulevard took control of all of Arenas” business and personal accounts, which Boulevard was hired to monitor and manage for Arenas, Boulevard agreed to monitor Arenas’ use of cash in order to protect Arenas” earnings to avoid the “financial disasters” that tend to flow from “unsound spending habits, poor management, or speculative financial advice” as once cautioned by Boulevard in its website. 22, When he hired Boulevard, Arenas believed and interided that Knispel would use a system of checks and balances to supervise and monitor an established top tier team of advisors, bookkeepers and managers who would closely and competently monitor Arenas’ financial affairs in order to protect his earnings. 23. _Knispel assigned Surkin to work as Arenas’ account manager, As Arenas’ account manager, Surkin was the primary person managing many millions of dollars of10 ul 12 B 14 15 16 7 18 19 20 2 2 23 24 25 26 27 28 earnings from 2006 through November 2014, Knispel was derelict in his duty to properly supervise Surkin, 24. By agreeing to provide these services, Defendants became fiduciaries of Arenas, Arenas conferred confidence in Defendants, and trusted Defendants to manage his affairs and finances diligently, carefully, faithfully, honestly, and with the kind of diligence that they would treat their own financial affairs 25. In this capacity as fiduciaries of Arenas, Defendants effectively became trustees of Arenas. 26. In providing services as fiduciaries of Arenas, Defendants were responsible to monitor and control all of Arenas’ earnings and bank accounts. Specifically, Defendants managed a primary bank account that received all of Arenas’ earnings. In managing that account, Defendants were responsible for making disbursements from that earings account for proper, lawful and approved expenses. 27. On July 13, 2008, Arenas signed a contract with the Washington Wizards that entitled him to receive a total salary of $111 million, Defendants were responsible for ‘managing the funds Arenas received from that contract. Arenas is informed and believes, and based thereon alleges, that Defendants were unaware, but should have been aware, of an amendment to the contract which extended the life of the contract and changed the economies of the contract and the way Arenas’ earnings should be managed. 28. With the supposed expertise promoted by Boulevard, those earnings should have ‘been directed to establishing a “prosperous future” for Arenas through standard investment management, savings plans and other regular management that a top tier firm should provide for a person with the earnings set forth in the NBA Contract. ‘Transfers to the Personal Bank of America Account 29, Throughout the time Defendants managed Arenas’ accounts, Arenas would call Surkin when he needed funds for his personal use. Only Arenas was permitted to direct the use of his funds, Ade COMPLAINT -ee a 10 u 12 13 14 15 16 7 18 19 20 21 22 23 24 25 26 21 28 30. Typically, Arenas’ requests to Defendants for additional money required Defendants to transfer money from Arenas’ NBA salary account at City National Bank (the “NBA Salary Account”) into Arenas’ personal account with Bank of America (the “B of A Account”). Defendants had the authority to make these transfers only upon the request of ‘Arenas and no one else. Arenas did not provide a power of attorney or any other instruction that permitted Boulevard to follow the instructions of any other person on uses of funds in any account that held assets owned by Arenas. That is, all records — and standard procedures ~ required that Arenas, and only Arenas, had the authority to direct the transfer of funds from, and to, any account, 31. Ifany person other than Arenas directed the use of any of Arenas’ funds, claimed access to any of Arenas’ accounts, or otherwise made demands regarding the use of any of ‘Arenas’ accounts or funds, Defendants were obligated to investigate the authority of that person, monitor and record each transaction and that person’s authority and uses of those funds, and keep Arenas fully informed as to each trans: tion involving that person, Boulevard had no authority to transfer Arenas’ funds to any account of any person without the express authority of Arenas, and only Arenas ~ not his employees, agents, family members or friends. 32, Defendants failed to satisfy this minimum standard of care in their role as, fiduciaries and trustees of Arenas, resulting in Arenas losing millions of dollars, Defendants Enabled White to Steal Millions of Dollars from Arenas 33. In January 2007, Arenas hired White, a friend from his childhood, to perform some personal chores and errands for him, White’s responsibilities were not regular, and were primarily defined on a month to month basis. Such responsibilities included house sitting, arranging for basketball tickets, other general errands, and household chores. White was essentially employed to be available to handle particular errands on an as needed basis. 34. Between January 2007 and February 2013, White requested that Boulevard transfer millions of dollars of funds from Arenas’ NBA Salary Account into the B of A Account. ‘These transfer requests by White were for large and irregular amounts, and were not made with Arenas’ knowledge, participation, or consent, Defendants should have investigated the purpose | COMPLAINT10 u 12 13 14 15 16 7 18 19 20 21 22 23 24 25 26 27 28 of each transfer, inquired from Arenas directly as to White’s authority to direct each transfer, and monitored White’s usage of and access to Arenas’ funds. 35. Although Boulevard was ired to monitor all of the Arenas’ accounts at all times, Defendants failed to do so, Defendants abdicated their responsibility for monitoring the B of AAccount, and failed to properly account for the activities of that account on tax returns, Boulevard further failed to inform Arenas that it did not monitor that account, 36. In or about 2007, Boulevard stopped receiving statements for the B of A Account, Defendants leamed that the address to which the bank statements were directed had been changed to an address provided by White, and that the statements were in White's exclusive possession, Defendants failed to investigate why the address change was made and if of the statements. ‘Arenas had approved it. Defendants simply asked White to send them copi White failed to do so, and Boulevard did nothing to obtain copies of those statements, despite Boulevard regularly funding that account and being obligated to account for all funds. Defendants remained in communication with White, who continually gave excuses for not forwarding the bank statements and repeatedly promised to do so. Defendants failed to follow up with White, investigate White’s conduct and the security of Arenas’ finances, or, at least, advise Arenas of the situation, Instead, Defendants continued to transfer money to the B of A Account on White’s request, without informing Arenas of the transfers, 37. When White realized Boulevard was no longer receiving statements for the B of AAccount, he took control of that account, Had Boulevard performed its management tasks, Boulevard would have noticed that White set up online banking access to the B of A Account without Arenas’ authorization. This allowed White the ability to withdraw funds for his own personal use without Arenas’ knowledge or permission, 38, Had Defendants exercised due care as fiduciaries and trustees, they would have discovered that White wrongfully, and without authority, took control of the very same accounts that Defendants were responsible for managing. 39. Asa proximate cause of Defendants’ recklessness, negligence, and wholesale failure to exercise due care in managing Arenas’ finances and accounts, White embezzled 8 ‘COMPLAINT10 W 12 B 4 15 16 7 18 19 20 21 22 23 24 25 26 27 28 millions of dollars from Arenas personal accounts. Arenas is still investigating the extent of White’s theft, and is informed and believes that the total may be much more. 40. Abandoning any sense of diligent management, instead of investigating how the transférs to the B-of A Account were used, Defendants further harmed Arenas by reporting the stolen funds on Arenas’ tax returns as a use of personal cash, Defendants made no effort to analyze, research or even communicate with Arenas before filing these tax retums. Criminal Trial of White 41, On April 9, 2015, White was indicted in the United States District Court, Middle District of Florida, Orlando Division for criminal fraud arising from the unauthorized access to the B of A Account and the transfers he received from Boulevard. White’s criminal trial took place between August 28, 2015 and September 2, 2015 (the “White Criminal Trial”) 42, At the White Criminal Trial, Surkin testified about his own participation in making transfers to White, He testified that he ceased receiving Arenas’ B of A Account statements just two months after taking over management of Arenas’ finances. Surkin further testified that White told him the statements were going to Arenas’ home, at Arenas’ instruction. Surkin also admitted at the White Criminal ‘Trial that he did not confirm with Arenas that Boulevard should no longer be receiving the statements. Surkin also admitted that once he stopped receiving the statements, he could no longer track the activity of the B of A Account the primary vehicle for White to complete his criminal fraud, Surkin further admitted that he asked White multiple times to change the address back, but it was never done. 43, Surkin further testified at the White Criminal Trial that he supplied White with ‘Arenas’ personal information (including his birthdate and Social Security number) “on more than one occasion” without permission from Arenas. With this information, White was able to gain access to the B of A Account and set up an online banking account from which he would withdraw and/or transfer money for his own personal use. Surkin also admitted under oath that his own lack of monitoring the B of A Account further contributed to the fraud by White. Specifically, Surkin testified that he was not aware that il 9 COMPLAINT10 u 12 13 4 15 16 7 18 19 20 2 22 23 24 25 26 27 28 White had added his name to the B of A Account, and that, if he had known, he would have contacted his supervisors and Arenas directly. 44, Surkin further testified that when White requested a transfer from the NBA Salary Account to the B of A Account, Surkin did not seek authorization from Arenas to do so, despite his admission that Arenas had not given Surkin authorization to transfer funds anywhere at the direction of White. 45, When asked why he did not verify the transfers with Arenas, Surkin testified “[t]hat wasn’t what I was told to do.” He simply made the transfers despite that admission that (a) he did not monitor the account, and (b) Arenas never authorized the transfers. 46. On September 2, 2015, White was convicted of all counts charged against him. White is currently awaiting sentencing, Efforts by Boulevard to Conceal its Wrongdoing through Hiring Counsel for Arenas 47, In 2013, Bulevard asked attorney Dennis Roach (“Roach”) to represent Arenas in the investigation of White's theft of Arenas’ finds 48, Arenas is informed and believes and thereon alleges that Roach is counsel for Boulevard and Knispel on numerous matters. Roach is also close personal friends with Knispel. 49. Roach failed to investigate all of the facts surrounding the theft of Arenas’ funds, ignored Defendants’ responsibility for the theft, and abdicated his ethical responsibility to zealously advocate for Arenas, and to give Arenas undivided loyalty in the pursuit of remedies arising from the theft of Arenas’ funds. 50. Instead, Roach focused entirely on protecting the Boulevard Defendants from their involvement in White's the, hiring attomeys in Florida to pursue potential civil claims against White (which were never filed), and communicating with the U.S. Attomeys investigating the matter. These tasks were a diversion from, and in lieu of, Roach’s ethical duty ‘to simultaneously pursue remedies against all culpable parties — including Boulevard, vt wt 10 COMPLAINT10 i 12 13 14 15 16 7 18 19 20 a 22 23 24 25 26 27 28 51, Notably, the Florida civil attorneys hired by Roach communicated with Roach and Boulevard — not Arena: in their pursuit of potential claims arising from the theft by White. 52, Neither Roach, nor the Florida civil attorneys hired by Roach, ever warned Arenas that Boulevard shared legal responsibility for the theft by John White, 53. Roach did not obtain a conflict waiver authorizing him to represent Arenas and Boulevard at the same time during Roach’s investigation of the circumstances surrounding the theft of Arenas’ funds. Given the actual conflict, no such waiver would have been effective 54, Arenas is informed and believes, and thereon alleges, that Boulevard and Knispel intentionally retained Roach to represent Arenas on the White matter, so as to ensure that Defendants would escape civil liability for their negligent and reckless role in White’s colossal theft from Arenas. Boulevard Charges Arenas and his Entities Millions of Dollars in Exorbitant and Unconscionable Fees 55. Over the period of its purported management of Arenas’ finances, Boulevard charged Arenas $2.25 million in management fees. This amount is excessive under any standard of faimess, particularly in light of the fact that Defendants presided over the diminishment of Arenas’ credit score, the theft of millions of dollars of Arenas’ funds, and the abdication of any responsibility for advising Arenas’ on cash flow, finances, and investment, 56, The Boulevard Defendants also managed several business and/or charitable entities for Arenas for which Boulevard received exorbitant, unfair, and unconscionable management fees, Boulevard’s Mismanagement of Arenas’ Bill Payments 57. Inaddition to facilitating, enabling, and allowing White to embezzle millions of dollars from Arenas, Defendants mismanaged Arenas’ funds in other ways. 58. In or around 2009, Defendants began making late payments on Arenas’ Bank of America line of credit and American Express credit card, even though there was always wt iM COMPLAINT10 u 12 1B 14 15 16 7 18 19 20 2 2 23 24 25 26 27 28 the accounts to make the payments, As a result of these late payments, Arenas incurred additional interest and late fees. 59, Defendants regularly paid many of Arenas’ other bills on an untimely basis as well Boulevard’s Failures With Respect to Arenas’ Investment Strategy and Financial Counseling 60. Arenas relied upon Defendants to provide him with prudent advice, consultation, monitoring, and management with respect to Arenas’ investment strategy, so that Arenas could develop a sensible investment portfolio for his long term financial health, 61, Ato time did Defendants provide any financial counseling or guidance to Arenas, Neither Knispel (who claims this is his specialty) nor anyone else at Boulevard ever asked Arenas to review his bank statements or cash flow reports, or provided any counseling or advice as to Arenas’ spending habits, or the spending habits of unauthorized thieves, such as White. 62. Defendants failed to monitor or provide any advice as to Arenas’ investment decisions, and effectively abdicated any role in Arenas’ financial planning, apparently doing little more than approving excessive expenditures (frequently from unauthorized third parties as alleged herein), and speculative ventures, This absolute disregard for Arenas’ wealth management contradicts Knispel’s public self-promotion as being aggressively dedicated to long-term financial well-being of Boulevard’s clients 63, As the result of Defendants’ failure to provide any meaningful advice, monitoring, or management of Arenas’ investment decisions, Arenas’ investment strategy was anemic, at best, and failed to yield the kind of results that Arenas trusted Defendants to help him achieve. The Boulevard Defendants failed to institute yvings plan, impose spending controls or preserve Arenas’ income, Arenas’ current retirement accounts are too small for Arenas’ short earnings period and massive income during that period. dit wit 12 COMPLAINT10 ul 12 13 4 15 16 7 18 19 20 au 22 23 24 25 26 27 28 Arenas’ Decision to Terminate Boulevard 64. In November 2014, Arenas and Surkin met with the prosecutor from the U.S. Attomeys’ Office in Los Angeles to discuss the prosecution of White, Surkin participated in portions of the meeting as a representative of Boulevard, who was working on trying to rectify the theft by White without acknowledging or explaining that it was Boulevard who unlawfully released the fiinds to White without proper authorization. 65. During the meeting, the U.S. Attorney asked Surkin to leave the room so he could speak with Arenas in private, The U.S. Attomey expressed his concern that Boulevard was advising Arenas on this matter and that Arenas should not only evaluate Boulevard’ joint responsibility, but also question how Boulevard was handling and dealing with White during the time that White stole millions of dollars. 66. This was advice that was never given to Arenas by Roach, Boulevard’s haind- picked counsel for Arenas on the matter. 67. At this time, Arenas began to consider transitioning his accounts to a new business manager. 68. After the meeting with the U.S, Attomey, Arenas contacted Regina Jones, a Boulevard employee who had been assigned by Boulevard to replace Surkin as Arenas’ account manager. Regina Jones arranged for a meeting with Knispel, Surkin and others at Boulevard. This meeting left Arenas with the impression that Boulevard would take some action to rectify the loss caused by White’s theft 69, Knispel arranged for a second meeting with Arenas, at which no other Boulevard employee would be in attendance, Knispel suggested to Arenas that Boulevard ight be able to provide some form of compensation to Arenas for White’s theft by making an insurance claim, Arenas left the meeting with the expectation that Boulevard would provide some compensation for the loss, Nevertheless, based on all of the facts regarding the theft by White, Arenas came to the conclusion that Boulevard was not looking out for his best interests, and that he would need to transition to a new business manager. air 13 ee COMMAINT —10 ul 12 14 15 16 W 18. 19 20 21 22 23 24 25 26 27 28 Arenas? Substantial Injuries 70. As aresult of Boulevard’ failure to properly manage his funds, Arenas incurred substantial damages resulting from, among other things: (i) Defendants’ failure to properly invest Arenas’ funds, (ii) inaccurate reporting of expenses on Arenas’ tax return, (iil) theft and conversion by White facilitated, aided, abetted, and assisted by Defendants, (iv) late fees and interest paid to Bank of America and American Express based on Defendants’ failure to pay bills in a timely manner, (v) expenses associated with the reduction in Arenas” credit score as a result of such late payments, and (vi) continued payment of White’s medical insurance premiums after his theft was reported to Boulevard, 71. Arenas did not discover Defendants’ mismanagement of his funds until 2014, 72. Arenas paid Boulevard approximately $2,250,000 between 2006 and 2014 for services performed by Defendants that were either not performed at all, or performed inadequately, negligently, recklessly, and without the due care required of the Boulevard Defendants acting as the fiduciary and trustee of Arenas, 73. The total damages owed to Arenas are at least $40,000,000. Arenas will not know the full extent of the damages suffered until he is certain he has received all documents pertaining to the services rendered to him by the Defendants. Arenas’ Demand for Payment of Damages and Delivery of Records 74. InMay 2015, after a preliminary investigation of the handling of Arenas’ funds and businesses by Boulevard, Arenas made a demand on Boulevard to compensate him for his losses, 75, Even prior to receiving a demand from Arenas, Boulevard secretly became aware of Arenas’ efforts to hire counsel by receiving confidential attomey client communications that were obtained by gaining illegal access to Arenas’ email account, Either Boulevard, or someone affiliated with or known by Boulevard, accessed Arenas’ email account and stole communications (one that included a draft Complaint) that was received and reviewed by Boulevard and its counsel. Boulevard’s receipt of that information was concealed and used uw 14 ‘COMPLAINT10 u 12 B 14 15 16 7 19 20 a 22 2B 24 25 26 27 28 by Boulevard and its counsel in violation of California law, Boulevard and Boulevard’s counsel have refused to disclose how they obtained the privileged and confidential email. 76, Subsequent to receiving the demand from Arenas for recovery of the damages sought herein, Boulevard, through its designated “counsel,” (Greenberg Traurig, LLP, which continues to possess unauthorized privileged materials of Arenas) made various and repeated threats, including threats to litigate “for years” — once threatening to appeal the expected loss without even knowing whether Boulevard would have a viable basis for an appeal Specifically, Boulevard stated: “It will take about 4 to 6 years to complete this case if you file a civil action, because Boulevard will litigate it, Then it will be appealed by one side regardless of outcome.” Boulevard repeated the threat that if Arenas asserted his rights against Boulevard, counsel for Boulevard would make the cost for him to prevail expensive, protracted and embarrassing statin “Obviously, you did no homework regarding me. I had to succeed against Time Wamer, Tumer Broadcasting, Coca Cola, Home Depot, Delta and Phillips Blectronios to have 6 of the top 12 seats at Phillips Arena [the NBA venue in Atlanta). It took many years to win, Actually, it took me a few decades to beat them all. So if you want to drag this case out for many years, please go right ahead. My clients can afford to pay me to litigate for many years.” 77. In response to demands made by counsel for Arenas and Arenas’ new business advisors, Boulevard slowly gathered records and files that it should have produced previously. It was not until November 2015, that Boulevard purportedly delivered all of the records requested, Those records should have been delivered as part of the transition to a new management firm. The records finally delivered from June through November 2015 confirm the errors and claims against Boulevard asserted herein. FIRST CAUSE OF ACTION FOR BREACH OF FIDUCIARY DUTY (Against all Defendants) 78. Arenas incorporates by reference and re-alleges each and every allegation contained above, as though fully set forth herein, 1510 ul 3 14 15 16 7 18 19 20 21 22 23 24 ra] 26 2 28 79. As financial and business managers and accountants to Arenas with broad authority over Arenas’ business and financial affairs, Arenas placed his total confidence and trust in Defendants, such that Defendants owed Arenas fiduciary duties to manage Arenas? affairs honestly, faithfully, diligently, and with sufficient due care so as to protect and serve the interests of Arenas. Defendants were obligated to act for Arenas’ benefit and in his best interests, without regard for their own self-interest, 80, Defendants breached their fiduciary duties to Arenas by managing his accounts negligently, and recklessly in the manner described herein, including permitting White to embezzle millions of dollars from Arenas, and providing White the information he needed to do 0. 81. Throughout the period of Defendants’ misconduct, Boulevard charged Arenas and his entities unconscionable management fees totaling more than $2.25 million. 82. Knispel further breached his fiduciary duties to Arenas by failing to supervise Surkin in the management of Arenas’ affairs. 83, Although Arenas became aware of White’s theft in January 2013, he did not become aware of Defendants’ other breaches of their fiduciary duties toward him until 2014 84, Asa direct and proximate result of Defendants’ breach of their fiduciary duties, Arenas has been damaged in an amount to be proven at trial, but in no event less than $40,000,000. 85, The mismanagement, concealment, and self-dealing by Defendants was fraudulent, malicious and oppressive, and done in reckless and conscious disregard of the rights, and interests of Arenas, constituting despicable conduct. Accordingly, Arenas is entitled to punitive damages. SECOND OF ACTION FOR CONSTRUCTIVE FRAUD (Against all Defendants) 86. Arenas incorporates by reference and re-alleges each and every allegation contained above, as though fully set forth herein. 16"1 2 B 14 15 16 7 18 19 20 2 22, 23 24 25 26 27 28 87. As the business and accounting advisors to Arenas, and with broad authority over Arenas’ business and financial affairs, Defendants owed fiduciary duties to act for Arenas’ benefit and in his best interests 88. Defendants breached their fiduciary duties to Arenas by mismanaging his account in the manner described herein, and by allowing the theft of Arenas’ money by White while being paid unconscionable fees by Arenas, 89, Knispel further breached his personal fiduciary duty to Arenas by failing to supervise Surkin in the management of Arenas’ affairs. 90. Asa result of Defendants’ breach of their fiduciary duties to Arenas, Arenas paid Boulevard for services it was not performing, 91. Arenas relied on Defendants’ representations that they were properly managing his business affairs when he agreed to let them continue acting as his business manager. 92. Although Arenas became aware of White’s theft in January 2013, he did not become aware of Defendants’ other breaches of their fiduciary duties toward him, and their failure to perform the services they were required to perform, until 2014, 93. Asa direct and proximate result of Defendants’ constructive fraud, Arenas has been damaged in an amount to be proven at trial, but in no event less than $40,000,000. 94. Defendants acted with oppression, fraud, malice and with the intent to injure Arenas and to deprive Arenas of legal rights or otherwise cause injury. Arenas is therefore entitled to punitive damages. THIRD CAUSE OF ACTION FOR NEGLIGENCE (Against all Defendants) 95, Arenas incorporates by reference and re-alleges each and every allegation contained above, as though fully set forth herein 96. Asa business and financial advisor to Arenas with broad authority over Arenas’ business and financial affairs, Defendants owed a legal duty to Arenas to act with the same skill and diligence as other members of the business management profession commonly exercise. 17 COMPLAINT ———10 u 2 B 4 15 16 7 19 20 a 2 2B m4 25 6 27 28 97. Defendants breached their duties to Arenas by their failure to exercise the proper degree of skill and diligence in managing Arenas’ accounts and other business affairs, and by facilitating White’s theft of Arenas’ funds, 98. Although Arenas became aware of White’s theft in January 2013, he did not become aware of Defendants’ other failures until 2014. 99, Asa direct and proximate result of Defendants’ negligence, Arenas has suffered and will continue to suffer damages in an amount to be determined at the time of trial, but in no event less than $40,000,000, in addition to other and as yet unascertainable damages. FOURTH CAUSE OF ACTION FOR BREACH OF CONTRACT (Against all Defendants) 100. Arenas incorporates by reference and re-alleges each and every allegation contained above, as though fully set forth herein, 101, Asset forth above, Arenas entered into an oral agreement with Defendants for Defendants to provide financial and business management services to Arenas for a fee. 102. Arenas performed all conditions required of him under the contract. 103. Defendants breached the contract by failing to provide competent servic Arenas, and facilitating White’s theft of Arenas’ funds in the manner set forth herein, 104. Asa proximate result of Defendants’ breach of the contract, Arenas has been damaged in an amount to be proven at trial, but in no event less than $40,000,000 plus prejudgment interest at the legal rate. 105, Arenas did not discover the breaches of contract at issue herein until 2014, given the concealment, constructive fraud, and breaches of fiduciary at issue herein, Boulevard shielded Arenas from learning about Defendants’ breaches such that his discovery of this claim was delayed. Ww fl a 18 COMPLAINT10 ul 12 13 14 15 16 7 18 19 20 21 2 23 24 25 26 27 28 FIFTH CAUSE OF ACTION FOR UNJUST ENRICHMENT (Against Boulevard and Knispel) 106. Arenas incorporates by reference and re-alleges each and every allegation contained above, as though fully set forth herein. 107. By their wrongful acts and omissions, Defendants were unjustly enriched at the expense of, and to the detriment to, Arenas. 108. This unjust enrichment includes the receipt of $2.25 million in management fees, collected by Defendants, while at the same time engaging in mismanagement and breaches of fiduciary duties that cost Arenas millions of dollars, damage to his credit score, and degradation of his financial well-being, 109, Arenas seeks restitution, as well as a constructive trust from Defendants, and each of them. PRAYER FOR RELIEF WHEREFORE, Arenas prays for judgment against Defendants as follows: ON THE FIRST CAUSE OF ACTION 1, For damages according to proof, but in no event less than $40,000,000; 2. For punitive damages; ON THE SECOND CAUSE OF ACTION 3. For damages according to proof, but in no event less than $40,000,000; 4. For punitive damages; ON THE THIRD OF A ION 5. For damages according to proof, but in no event less than $40,000,000; ON THE FOURTH CAUSE OF ACTION 6. For damages according to pro: f, but in no event less than $40,000,000; ON THE FOURTH CAUSE OF ACTION 7, For damages according to proof, but in no event less than $40,000,000; uy 19 ;OMPLAINT — —ON THE FIFTH CAUSE OF ACTION 8. For damages according to proof, but in no event less than $2,500,000; ON ALL CAUSES OF ACTION 1 For interest at the legal rate of 10% annum from the date of breach; 2. For costs of suit incurred herein, including attorneys’ fees; and 3. For such other and further relief as this Court may deem just and proper. Dated: November {3 2015 DAVID M. BASS & ASSOCIATES, INC. By: O-}-—— De |. Bass Attorneys for Plaintiff GILBERT J, ARENAS, JR. 20 COMPLAINT