From: Kelley Lynch <firstname.lastname@example.org>
Date: Fri, Jan 9, 2015 at 6:05 PM
To: IRS, FBI, DOJ cc: Multiple Recipients
Hi IRS, FBI and DOJ,
I've worked on this document a bit. I've removed what I believe to be self-serving and or gratuitous on Greenberg's part. As these allegations involve a California State Bar member, I will attach this to my State Bar Complaints. Perhaps Hess would like to explain what he thinks all of this means. LA Superior Court appears to really enjoy deranged fact patterns.
All the best,
DRAFT SCHEDULE – FINAL DOCUMENT WILL BE SIGNED.
FACTUAL ALLEGATIONS & STATEMENTS
NEAL GREENBERG AMENDED COMPLAINT
I, Kelley Lynch, agree with the following factual statements and was a witness to much of what was addressed in Neal Greenberg’s Amended Complaint (Denver District Court, Case No. Case 1:05-cv-01233-LTB). Therefore, Neal Greenberg and I are in agreement with respect to the following facts. See Neal Greenberg Amended Complaint & Exhibits attached hereto and made a part hereof. Kelley Lynch opposes all statements raised in Greenberg’s Complaint and not contained in the following excepts taken directly from the Amended Complaint. See Amended Complaint (2005 and 2006) attached hereto and made part hereof.
Dated: 09 January 2015
Neal Greenberg. Vs. [HEADING]
Denver District Court, Case No. Case 1:05-cv-01233-LTB
Judge Lewis Babcock
SECOND AMENDED COMPLAINT AND JURY DEMAND
NATURE OF THE ACTION
This action is brought by three Colorado registered investment advisors, a licensed broker-dealer, and a principal in each of these firms. Plaintiffs perform advisory and financial services, including the direction of investment strategies, on behalf of hundreds of clients, most of whom are citizens of Colorado.
By this action, Plaintiffs are compelled to seek legal recourse against a common client who, for wrongful purposes, has set out to besmirch and damage Plaintiffs’ hard-earned professional standing through the publication of knowingly false and highly damaging statements, and through the assertion of sham claims.
Defendant Leonard Cohen (“Cohen”), a noted recording artist, acting directly on his own behalf, and through his agent and attorney, Robert Kory (“Kory”), has threatened to take or has taken, improper and unlawful actions, including bribery and intimidation of a witness, subornation of perjury, defamation, disparagement …
These acts were not isolated, but all in furtherance of an improper and unlawful scheme to extort and recover from Plaintiffs and their insurers losses allegedly sustained by Cohen that, if they even occurred, were solely the result of Cohen’s own exorbitant spending, his own neglect and mismanagement of his financial, legal and personal affairs …
Although Cohen’s extortion scheme was eventually exposed by Lynch and ultimately frustrated …
Detailed allegations of Cohen’s scheme to commit extortion against Plaintiffs, his fraudulent statements and actions in furtherance of that scheme, and other tortious conduct, and Plaintiffs’ damages and prayer for relief flowing therefrom, are set forth below.
In addition, Cohen has made clear that he asserts rights over certain investment funds that belong to Traditional Holdings, LLC (“Traditional Holdings”), a dissolved Kentucky entity that was managed and 99.5% owned by Lynch and 0.5% owned by Cohen.
Cohen and Lynch
18. Cohen is a songwriter and singer who has been, and continues to be, a well known celebrity.
19. Lynch was Cohen's [personal] manager and agent for approximately 20 years, until late 2004.
20. Throughout this 20-year period, Lynch handled Cohen's business affairs and much of his personal affairs.
21. Throughout their 20-year relationship, Cohen repeatedly affirmed to the public and to those working on his business affairs (including, but not limited to, those working on his recordings, sales and investments) that Lynch handled … these affairs on his behalf, and that they were to treat Lynch as his exclusive agent and representative. He provided her with various special and durable powers of attorney to those ends.
22. Since at least 1995, and at least until late 2004, Cohen maintained … business addresses in Los Angeles, California. Cohen’s mailing address was 419 Larchmont, Los Angeles, California 90004 (the “Larchmont Address”). The Larchmont Address is a post office box only.
The First Sony Sale
24. As a result of Cohen's success as a songwriter and singer, and under Lynch’s management, Cohen generated millions of dollars worth of royalties and other intellectual property assets (together, “Cohen's IP” or “IP”).
25. From the early 1990s, impressed with a new strategy used by other Hollywood celebrities to cash in on their future revenue streams from IP rights and increase short-term income (called a "Pullman" or "Bowie" bond, after the artist David Bowie who first used it), Cohen … worked aggressively with advisors, including Greg McBowman, to auction off portions of his IP to the highest bidder.
26. In or about 1996, representing that certain of these IP interests were held by a shareholder corporation of his creation named Leonard Cohen Stranger Music, Inc. ("Stranger"), Cohen commenced negotiations to sell Stranger to Sony Music International (“Sony”) for $6.3
million (the “First Sony Sale”).
27. Cohen directed Lynch to be involved in … every aspect of the negotiations and proposed sale on Cohen’s behalf.
28. Anticipating the influx of funds from the First Sony Sale, [Cohen] sought investment advice … from TAS and others. However, neither TAS nor any other Plaintiff had any role in Cohen’s decision to effectuate the First Sony Sale, or in any other decision by Cohen to sell his IP.
TAS/Greenberg Discussions with Cohen
34. … Cohen [had a] first meeting with Greenberg in 1996 to discuss Cohen’s investment options for the proceeds from the anticipated First Sony Sale.
35. During this meeting, and at Cohen’s request, Greenberg suggested ways in which Cohen could structure the investment of his proceeds from the First Sony Sale so as to reduce tax consequences and generate substantial income.
36. Greenberg, however, is not an accountant or a tax lawyer. Rather, Cohen worked with, and began to be represented by, a creative tax attorney and law professor from the University of Kentucky [who was introduced to Cohen by Greenberg], Richard Westin (“Westin”). Cohen also had other advisors and consultants working with Lynch on his business, music and tax matters, including Greg McBowman … and Ken Cleveland, as well as Stuart Fried and other attorneys at the law firm of Grubman Indursky & Schindler, P.C.
Cohen’s Creation of the Charitable Remainder Trusts
37. Ultimately, Cohen decided to transfer some of the income from the First Sony Sale into charitable remainder trusts. On October 30, 1996, Cohen established [two charitable remainder] trusts: the Sabbath Day Charitable Trust (the "Sabbath Day Trust"), the Cohen Family Charitable Trust (the "Cohen Family Trust") …
38. Approximately $5 million of the proceeds from the First Sony Sale was transferred to [Leonard Cohen and the] Trusts. Cohen contracted with TAS to invest the Trusts’ [and Traditional Holdings, LLC] assets. Math doesn't appear to add up. Check figures in contracts - what amounts did Mt. Baldy Zen Center receive (approximately $500,000].
39. These Trusts [and Traditional Holdings, LLC] significantly decreased Cohen’s up-front tax exposure, and also enabled him to draw down considerable funds to maintain his extravagant "celebrity" lifestyle.
40. Cohen's consistent and prolific spending. Cohen … repeatedly withdrew large amounts of the Trusts’ [and Traditional Holdings, LLC] assets. On repeated occasions, TAS notified Cohen … that Cohen was spending more than recommended [IRS Warning Letters] ... On one such occasion, on April 13, 2001, Greenberg, on behalf of TAS, wrote to Cohen:
I am writing to you to discuss the income withdrawals you’ve received from your portfolio and to provide you with some helpful guidelines for the future. When we originally constructed your portfolio in 1997, you may remember that we had extensive conversations about how much you required for your annual living expenses. Accordingly, we budgeted for withdrawals of $300K/year.
[Kelley Lynch?] has assured me that much of this money went towards business investments that will provide you some return in the future. . . . At your current rate of withdrawals, you may continue to spend down your investments. . . . . Please feel free to contact me anytime at (303) 440-6500 should you have any additional questions or concerns.
41. Cohen … responded to these warnings with additional demands for money, or with complaints about the message. For example, during a telephone conversation with Greenberg in June 2000, Lynch asked that TAS “stop saying that Leonard is spending too much. Leonard would be really offended to hear this. Expenses are higher right now due to withholding of royalties and expenses associated with [the] new album.”
The Second Sony Sale
42. Cohen [continue to pursue] IP [sale/loan deals]. In 1999 [through 2001], Sony and Cohen … negotiated for a second sale of IP to Sony for about $8 million (the "Second Sony Sale"). The artist royalties to be sold were represented by Cohen as being held by another Cohen entity, Blue Mist Touring Co., Inc. ("Blue Mist"). Cohen was the Chairman, President, and majority shareholder of Blue Mist, owning 425 shares, while Lynch was the Assistant Secretary and minority shareholder of Blue Mist, owning 75 shares, or 15% of the company.
44. Cohen … asked Westin, and in the spring of 2000, Greenberg, to provide advice about how to invest the anticipated proceeds from the Second Sony Sale and minimize the sale’s tax burden.
45. In June 2000, Greenberg, on behalf of Greenberg & Associates, Inc. (Natural Wealth), prepared a memorandum to Cohen explaining certain tax avoidance issues and comparing different investment scenarios.
46. In the memorandum, Greenberg compared and contrasted the benefits and disadvantages of different investment options, including creation of additional charitable trusts and investment in government tax-free bonds.
Cohen and Lynch’s Creation of Traditional Holdings
47. Cohen rejected these options proposed by Greenberg on behalf of Greenberg & Associates, Inc. However, still seeking a means of avoiding personal income tax stemming from the sale, … Cohen’s tax attorney Westin [and others including Greenberg] investigated other tax-friendly business structures.
48. While Lynch [Cohen] or Westin would telephone Greenberg occasionally to “pick his brain” about these issues, and while … Cohen signed a letter affirming that Greenberg had been retained in connection with Westin’s legal services, such that he stood within any applicable attorney-client privilege …
49. While Westin advised Cohen that he could help save a few tax dollars at the margins with a conservative approach, he also presented Cohen with an idea for starting a company, with Lynch, that would become the counterparty to Sony for the IP sale, and would in turn owe a long-term annuity obligation to Cohen.
50. Cohen leapt at this opportunity to minimize his tax burden, just as he had explored all possible means of reducing his taxes in years past, such as by seeking a tax credit for donating his papers to a Canadian [library], and using artifices in dealing with Sony to avoid paying any Canadian taxes (as a Canadian citizen) on his royalty income earned in Canada.
51. According to Westin’s proposal, Cohen would not be involved in the IP sale personally and, therefore, would not owe taxes personally in the short-term, but would defer his tax obligations until the annuity payments started some years later. That way, he could sell off much of his songwriting credits and royalty rights up front for a hefty lump sum, yet pay lower taxes on a reasonable schedule, and at lower rates, years later.
52. Westin’s proposed plan had the following basic components: a limited liability company – which eventually became Traditional Holdings – would be created. Blue Mist would transfer certain IP assets to Traditional Holdings in exchange for a deferred annuity, to be paid to Cohen beginning in about 10 years. Traditional Holdings would then sell the assets it received from Blue Mist to Sony. The tax plan prevented Cohen, the annuitant, from owning more than a de minimis interest in Traditional Holdings. Therefore, Cohen would own less than 1%, and another person – who ultimately was Lynch – would own the remaining LLC interest (more than 99 percent).
53. Westin outlined this proposal to Cohen and Lynch both orally and in a series of letters and other written communications between October 2000 and December 2000. See, e.g., Exh. 1 attached.
54. In these written communications, Westin explicitly warned Cohen that since the annuity plan gave significant transactional control to Lynch, and also potentially placed tax and other burdens upon her as majority shareholder, the plan would work only if Cohen and Lynch maintained (as they had in the past) a long-term relationship of personal and professional trust which would secure their mutual obligations as manager of the obligor (Lynch) and annuitant (Cohen). See, e.g., Exh. 2 attached.
55. Cohen carefully reviewed, understood, and signed off on the ownership structure of Traditional Holdings – including the fact that Lynch would own 99 percent of Traditional Holdings’ membership interests, so as (among other reasons explained by Westin) to avoid any suggestion of self-dealing.
56. First, Cohen reviewed the Traditional Holdings Articles of Organization, and reviewed and executed the Traditional Holdings Operating Agreement, which set forth in detail the entity’s ownership structure and managerial procedures. See, Traditional Holdings Articles of Organization and Operating Agreement (Exh. 3 attached).
57. Second, Cohen participated, at his request, in conference calls with Westin and Lynch and … Greenberg during which the structure was carefully reviewed.
58. Third, Cohen talked about the structure of Traditional Holdings privately with Lynch, including when he forced her to discuss it with him while he took a bubble bath. Los Angeles City Attorney views this sexual harassment and indecent exposure as Lynch's "intent to annoy." Anything for a celebrity, evidently. Judge apparently agreed. Exceeding disturbing and dangerous culture.
59. Fourth, in addition to several explanatory faxes he received from Westin describing Traditional Holdings, Cohen communicated specific questions … relating to Traditional Holdings’ ownership and transactional structure, which questions Westin answered in a letter written directly to Cohen on December 4, 2000, and faxed (as with his prior memos) directly to Lynch and Cohen. See, Exh. 2.
60. Moreover, regardless of whether Lynch owned 1 percent or 100 percent of the shares of Traditional Holdings, Cohen knew or should have known that she had or came to have authority – through a durable power of attorney and pursuant to her role as Traditional Holdings’ manager – to act, and give directions, on Traditional Holdings’ and on his own behalf. See, e.g., Exh. 3.
61. Likewise, no matter who owned the majority of shares of Traditional Holdings, the obligation to fulfill a deferred annuity obligation to Cohen remained the same. Thus, Cohen's interests in the firm (the long term annuity payments) were identical, no matter how his purported ownership interest in the assets were held and invested in the interim.
62. In December 2000, Westin created Traditional Holdings as a Kentucky limited liability company. Lynch was named as the initial manager in the Articles of Organization, and both Cohen and Lynch were appointed as managers in the Operating Agreement. Id. Also in December 2000, Cohen signed a Private Annuity Agreement with Traditional Holdings which document sets forth Traditional Holdings’ annuity obligations to Cohen. See, Private Annuity Agreement (Dec. 7, 2000) (Exh. 4 attached). Lynch signed the Private Annuity Agreement on Traditional Holdings’ behalf. Westin maintained, and continues to maintain, that the company and its annuity contract with Cohen are legitimate under prevailing interpretations of the federal tax code.
63. To purchase her ownership interest in Traditional Holdings, Lynch was required to submit to Traditional Holdings a promissory note for $240,000. It was agreed that Lynch would receive a salary and/or distributions from Traditional Holdings sufficient to pay down the $240,000 promissory note and to cover tax liabilities. See, Exhs. 2 and 3.
64. As set forth in the Operating Agreement, Traditional Holdings was authorized to issue loans to its members, Cohen and Lynch, as long as the loans were paid back before the annuity obligations commenced [and, in Cohen’s case, per the Annuity Agreement, his loans/advances were to be repaid in 3 years]. See, Exh. 3.
66. Cohen … hired TAS for the purpose of investing the assets that Traditional Holdings would receive from the Second Sony Sale.
The Closing of the Second Sony Sale
67. Between December 2000 and April 2001, Traditional Holdings remained unfunded pending the closing of the Second Sony Sale. During that time period, Sony completed its due diligence and approved Traditional Holdings’ role in the Second Sony Sale.
68. In April 2001, the Second Sony Sale was completed. The gross proceeds of the Second Sony Sale were approximately $8 million, less certain identified costs, expenses, and holdbacks for undelivered work.
69. Of these proceeds, Cohen had already requested and received $1 million as an advance in November 1999. Cohen was well aware of this $1 million advance because it became the subject of a tax dispute with the Internal Revenue Service in 2002. However, Cohen’s accountants [Westin, and possibly others], including Ken Cleveland, managed to avoid the consequences of this tax dispute, by convincing Sony to withdraw and reissue its 1099 in the amount of $0.
70. Of the remaining proceeds of the Second Sony Sale, approximately $6.65 million was delivered to Traditional Holdings. Of this $6.65 million, the following amounts were paid to cover the costs involved in closing and negotiating the Second Sony Sale: CHECK FIGURES INCLUDING WHAT WAS NOT PAID AND WHAT MAY NOW HAVE BEEN PAID TO COHEN RE. ADDITIONAL DELIVERY REQUIREMENTS.
$350,000 Grubman Indursky & Schindler, P.C. (attorneys for Cohen)
$333,750 McBowman Consulting Group (consultants for Cohen)
$30,450 Epstein Backer & Green, P.C.
$1,101,250 Stranger Management
None of these listed expenses had anything to do with either the formation of the annuity plan or
with Traditional Holdings’ dealings with TAS or any other Plaintiff. Westin did receive a modest fee for his work on the Traditional Holdings documents, and for consulting with Sony on Cohen[‘s] behalf …
Investment of Traditional Holdings Assets
71. Pursuant to Cohen[‘s] … direction, Traditional Holdings’ assets, i.e., the remaining proceeds of the Second Sony Sale (less than $5.0 million), were initially allocated among different outside funds and accounts, some of which had the purpose of generating investment returns, and others of which were intended to maintain liquidity in the event Cohen required money to cover expenses.
72. On January 31, 2002, Cohen executed an extremely broad Durable General Power of Attorney that gave Lynch … the [authority] to: act in Cohen’s name and place; take full charge of and conduct all of Cohen’s affairs; have the broadest possible power over Cohen’s property; make, sign, execute, and deliver contracts and agreements; and transact business of any kind or class on behalf of Cohen. See Durable General Power of Attorney (Jan 31, 2002) (Exh. 5 attached).
Communications with Cohen and Lynch Regarding Traditional Holdings and the Trusts
75. [Following the 2001 close of the Traditional Holdings, LLC deal] Agile Group, LLC began … to send official monthly statements to Cohen … at the Larchmont Address (the record address for Traditional Holdings) setting forth the performance of the Traditional Holdings’ funds invested in the Agile Safety Fund. See, e.g., Exhibit 6 (example of monthly statements sent by independent outside administrator). In addition, Agile Group, LLC sent monthly [emails] to Cohen which, as a courtesy, summarized [the asset valuation of Traditional Holdings, LLC].
76. … TAS continued to send full monthly financial statements by first class mail to Cohen that included reports on all accounts in which he held an interest, direct or indirect, including the Trusts and Traditional Holdings. Id. (example of monthly financial statements sent by TAS) …
Cohen’s Continued Overspending
78. No sooner had Traditional Holdings been funded, however, than Cohen – just as he had done with the Trusts’ assets from the First Sony Sale, and notwithstanding Greenberg’s prior warnings about draining down investment money – began to dissipate the Traditional Holdings funds, jeopardizing his own long-term annuity interests, as well as the company’s legitimacy. Greenberg and others were immediately alarmed by Cohen's desire and tendency to treat this company like his own personal piggybank, out of which he could borrow or take distributions against his annuity benefits.
79. For example, almost immediately after the funding of Traditional Holdings, Cohen took out a loan for $50,000. This was followed, during 2001 and 2002 alone, by several loans to Cohen … to cover tax liabilities, houses for Cohen's son and his current girlfriend, and living expenses. These 2001-2002 loans to Cohen – amounting to over $1 million – were deposited directly into Cohen’s personal bank account at City National Bank in Beverly Hills, California.
80. In March 2002, on one of the few occasions when Greenberg [spoke] with Cohen directly by telephone, Cohen “admitted he was spending too much and seemed a little shaken when [Greenberg] reminded him how much he had just spent on gifts to friends."
81. Lynch repeatedly assured Agile Group, LLC and TAS that the loans from Traditional Holdings [should be or should have been] documented [by Cohen and his tax lawyer] Westin. Cohen’s tax attorney Westin also was aware of and in regular communication with [Cohen, Greenberg, Lynch, and possibly others] concerning the shareholder loans and other aspects of the affairs and management of Traditional Holdings.
82. The March 5, 2002 Traditional Holdings Board Meeting Minutes, prepared [by Westin], state “that the level of borrowing was undesirable and [the members] expressed their assent that further borrowing was discouraged, even though the borrower’s [Cohen’s] credit and collateral were good.”
83. Cohen, however, gave no sign that he had any intention of abating his spending habits. In an e-mail to Lynch dated March 4, 2002, Cohen thanked Lynch for “keeping [him] informed,” and instructed her to “give lots of money to everyone.”
88. Because these shareholder loans were to be repaid, and because it was necessary to protect the entity’s integrity for tax purposes, these shareholder loans were properly characterized, on Cohen’s tax attorney Westin’s [and Greenberg’s] advice, as Traditional Holdings assets when calculating the entity’s value.
Agile Group, LLC’s and Greenberg’s Continued IRS/COVER YOUR ASS LETTERS
In one of these [IRS] warning letters, dated January 16, 2004, Greenberg notified Cohen that: (a) Traditional Holdings had only $2.1 million in remaining capital; and (b) considering how quickly Cohen was spending money, "I think you should consider your situation quite desperate." The letter continued: [A]t the rate funds are being withdrawn, you will run out in a few years . . . .
If you spend all of the capital, you would be destitute except for the income from the charitable trusts and any income from your music. I URGE YOU TO CURB YOUR SPENDING. It is at a very dangerous level. See, Letter from N. Greenberg to L. Cohen (Jan. 16, 2004) (Exh. 7 attached).
92. Greenberg followed this letter with an e-mail to Lynch seeking to confirm that Cohen received and understood the letter, and requesting an opportunity to sit down with Cohen personally to discuss these issues. Lynch responded that the letter had been received and was understood by Cohen.
93. On June 25, 2004, Greenberg sent Cohen yet another letter, via Federal Express, that contained even more dire warnings. The letter against notified Cohen that his situation was “getting quite desperate.” The letter stated:
Since my last letter of January 16, 2004, you have taken additional withdrawals amounting to $1,170,000 from Traditional Holdings . . . I want to nag you once again about two issues you should be concerned about. One is your spending rate and how little capital is left remaining . . . . I AGAIN STRONGLY URGE YOU TO CURB YOUR SPENDING OR YOU WILL OUTLIVE YOUR MONEY. See, Letter from N. Greenberg to L. Cohen (June 25, 2004) (Exh. 8 attached). Greenberg [evidently so concerned actually stood Cohen up after confirming that he would fly into] Los Angeles to discuss Cohen's "quite desperate" situation with him personally. Id.
The Pending Third Sony Sale
95. Lynch [gave] assurances that [Cohen and Westin continuously advised her that they would document] all loans [with promissory notes] and assur[ed] that they would be paid off when Cohen received the money from another, upcoming Sony transaction [album delivery, tour, lithograph deal, etc.]
96. Indeed, beginning in 2003, Cohen (through Lynch) informed Plaintiffs of yet a third sale pending to Sony (the “Third Sony Sale”) …
97. According to [projected figures], the Third Sony Sale [should] result in upwards of $7.8 million …
98. As part of Cohen’s preparation to close the Third Sony Sale, … Westin prepared loan schedules for the payback of the Traditional Holdings loans from 2001 and 2002 and forwarded those schedules to Agile Group, LLC and TAS.
99. In October 2004, Cohen and Lynch had a major falling out, the details of which remain unknown to Plaintiffs. As a result of this falling out, the Third Sony Sale – which appeared to be on the verge of consummation – never happened.
100. On October 21, 2004, [according to Greenberg] Cohen personally contacted Greenberg by e-mail and informed him that Lynch was “busy with other aspects of [his] career,” and therefore, Cohen had “relieved her of all financial responsibilities.” Cohen further stated that Lynch “need not be copied on your statements or reports,” and that Cohen's new accountant would “be in touch.”
101. On October 22, 2004, Cohen sent another e-mail to Greenberg stating that Lynch “no longer represents me,” and directing Greenberg not to “respond to any of her instructions.” Cohen’s letter of termination [sent to Lynch after her lawyers’ letter was received by Westin and Cohen] to Lynch was, according to Lynch, backdated to precede the release of Cohen's most recent album, "Dear Heather."
102. On or about October 24, 2004 [according to Greenberg], Cohen again communicated directly with Greenberg by e-mail, stating that his business address was no longer the Larchmont Address or Lynch's Office address on Keniston... With allegations flying fast and furious from Cohen – and later Kory – that Lynch was acting without due authority from Cohen, remarkably, a request to change Cohen's record address was left on Plaintiffs’ general voice mailbox by Anjani Thomas. Only later did Plaintiffs learn the identity of Ms. Thomas – Cohen’s current girlfriend, and Kory’s ex-wife. Thus, Plaintiffs demanded an original signature from Cohen on a document verifying the new address.
103. … On October 24, 2004 [according to Greenberg], Agile Group, LLC communicated with Westin – Cohen's attorney who had created Traditional Holdings – and inquired: “Does Leonard in your view have equal authority over the accounts that we manage? What if there are contradicting directive on those accounts that we manage? For example if KL says 'take money out' and LC says don’t take money, what is your view . . . .” Westin confirmed that because Cohen held a membership interest in Traditional Holdings, Agile Group, LLC could share information with him about Traditional Holdings’ investments. Westin could not, however, answer the issue of conflicting directives, and instead referred Agile Group, LLC to Traditional Holdings' governing documents (drafted by Westin), which documents provided little, if any, guidance on the issue.
104. At or about this same time (October 22-24, 2004) [according to Greenberg], Cohen phoned Greenberg. Cohen said that he thought Lynch had been taking money from Traditional Holdings without Cohen's authorization. He claimed that Lynch was using the money to support a gigolo and to fund shopping sprees at Neiman Marcus, and suggested that Lynch and Westin may have colluded to defraud him. When Greenberg reminded Cohen that Westin had warned Cohen in 2000 that "the biggest risk" from Westin's tax avoidance plan "was that Lynch would own his assets and he would have lost control," Cohen stated that he recalled that initial warning.
105. Cohen [according to Greenberg] also represented to Greenberg for the first time that Cohen had never received any of Greenberg's written warnings about his excessive spending, and that Lynch "must be intercepting his mail." According to Lynch, however, Cohen regularly visited his management offices, often in Lynch’s presence, and reviewed and discussed his mail with her, all of which was kept on his desk to facilitate such review, including all correspondence, reports, and statements from the Agile Safety Fund’s independent, outside administrators, and from Plaintiffs.
Cohen Brings in Kory
106. Cohen then turned to his agent and attorney Kory to deal with Lynch, Westin, and Plaintiffs.
110. Based on these checks, Agile Group, LLC calculated that, of the loan money withdrawn from Traditional Holdings:
a. $2,084,518 had been deposited into Cohen’s own personal bank account;
d. Approximately $2.5 million in loans represented by Lynch as necessary to cover Cohen’s personal and business expenses had been transferred to a Traditional Holdings checking account, and then withdrawn using checks written by her and made out to: LIST WHO CHECKS WERE MADE OUT TO (GRUBMAN, MCBOWMAN, ETC.)
Funds"). REVIEW THE CHECK COPIES AND OTHER EVIDENCE. THE CHECKS, AS LYNCH RECALLS, WERE USED TO PAY COHEN'S PERSONAL EXPENSES PER HIS SIGNED FAX TO GREENBERG FOLLOWING THE CLOSE OF THE 2001 DEAL. IN RESPONSE TO COHEN'S FAX, GREENBERG PROVIDED A CHECKBOOK WITH WHICH TO PAY THESE EXPENSES ...
Cohen and Kory’s Scheme to Extort Money From Plaintiffs
111. [According to Greenberg] … late October 2004, Cohen wholly blamed Lynch for the depletion of the Traditional Holdings accounts … Kory also stated that “Cohen doesn’t deny he gave Lynch total authority to act on his behalf …
114. … [According to Greenberg] Cohen was … keenly aware that pursuing Lynch was a risky, and likely counterproductive, proposition. For example:
a. Her abrupt termination frustrated Lynch's ability to make good on any loans through her share of receipts from the Third Sony Sale, the "Dear Heather" album, a pending sale of original lithographs, or other sources, and left her in a precarious financial position;
c. In November 2004, Lynch was asked by [Cohen] to appear without the benefit of counsel at a meeting with Cohen … and Richard Cisneros of the [Greenberg, Glusker] law firm acting as legal counsel for Cohen, and to [according to Greenberg as Lynch was never told this] sign certain legal documents related, inter alia, to unwinding Traditional Holdings, on the spot. Lynch refused to do so without benefit of counsel, and [according to Greenberg but not Lynch] subsequently received advice from a variety of legal, accounting and tax professionals, including but not limited to Mike Taitelman, Dale Burgess, Dianne DiMascio, and an IRS officer named Betzer [Agent Bill Betzer … Lynch never discussed this matter with Agent Betzer from what she recalls], that she was wise not to sign, because such action could have been fraudulent.
According to Lynch, and upon information and belief, such possible improprieties included, but were not limited to, the retention by Blue Mist and other persons or entities of IP that should have passed through Traditional Holdings to Sony, the failure to reference or disclose the annuity obligation [extinguished, as Greenberg understood, from the 2003 federal TH tax return], loan obligations, and other important matters on Traditional Holdings’ corporate tax returns, and … Cohen’s failure properly to document Traditional Holdings’ transactions;
d. Lynch claimed that she had substantial [and provided Boies Schiller with substantial evidence to review proving these facts], unsatisfied interests in Cohen's business entities and/or intellectual property. [According to Greenberg] If Cohen were to attempt to recover money from Lynch, she would likely assert counterclaims alleging that Cohen owes her, and has never paid, substantial amounts of money; and
e. [According to Greenberg] Lynch had intimate knowledge of all of Cohen's legal, personal and financial affairs … that certain financial and personal improprieties would prove embarrassing to Cohen's carefully-cultivated public persona, and would become public knowledge should Cohen and Kory cause them to become at issue by pursuing her …
115. [According to Greenberg] Because any attempt to recover money from Lynch was likely to be both futile and treacherous, Cohen, Kory, and other unnamed co-conspirators (including Steve Lindsay, Betsy Superfon, and John Doe Nos. 1-25) … conspired …
119. [According to Greenberg] On November 5, 2004, Cohen began this campaign of extortion by asking Greenberg over the telephone to see whether Plaintiffs’ insurance policies covered him, and whether he could use the insurance to make some kind of settlement of these issues. He told Greenberg to "be a man" and contact his insurance company.
120. [According to Greenberg] Two days later, in a November 7, 2004 e-mail from Cohen, Cohen re-emphasized that it would be easier for him to recover his alleged losses through Plaintiffs and their insurers … stating: “Please do talk to the insurer. A great deal of suffering can be avoided.”
121. [According to Greenberg] Cohen with affirmative support from Kory, Steve Lindsay and Betsy Superfon, and John Doe Nos. 1-25, all acting toward a common end and each for his or her own purposes, began to direct an extortion [scheme] …
122. [According to Greenberg] Cohen and Kory indicated that, unless Plaintiffs obtained insurance funds … Cohen would go out on tour to promote his new album, and would give interviews to reporters in which he would state or insinuate that he was touring because he had been bankrupted by the improprieties of his financial advisors.
Cohen and Kory Had Substantial Motivation to Pressure Lynch to Join Their Conspiracy
124. Cohen and Kory began to pressure Lynch to assist in the extortion scheme against [Cohen’s representatives]. Specifically, they requested that she falsely testify that [Cohen’s representatives defrauded him, engaged in fraud in the inducement, etc.] Cohen sought to obtain this testimony from Lynch …
125. Lynch's cooperation in Cohen’s extortion scheme was critical. [According to Greenberg] Cohen believed that he could not only could use Lynch as a witness against Plaintiffs, but could also buy or coerce her silence as against himself at the same time …
126. Thus, [according to Greenberg] Cohen pressed for private "mediation" as an alternative to a public lawsuit, knowing full well that with Lynch's cooperation and silence, many of the critical documents [would be concealed]… his aggressive tactics to avoid taxes at all costs, and his desire to capitalize on and benefit from all of his intellectual property during his lifetime to fuel an extravagant lifestyle – would not be the subject of discovery. Thus, his phony allegations … would stand unrebutted … [which is precisely what occurred via default judgment against Lynch]
127. Thus, by deliberate misrepresentations and omissions of critical facts … Cohen could knowingly and deliberately misrepresent his objectives … long history of aggressive tax management …
128. For example [according to Greenberg], Cohen affirmatively misrepresented to Plaintiffs that Lynch had simply forged his signature on various documents, knowing full well that she had not done so, or had signed with his full authority …
129. [According to Greenberg] Cohen likewise falsely asserted that at no time had he authorized any of the shareholder loans from Traditional Holdings, and made various [false] accusations against Lynch for which he had no basis in fact, all in a knowing effort to falsely implicate [others and conceal his own wrongdoing] … As one example, he claimed never to have known, prior to November 2004, that Lynch was the majority shareholder of Traditional Holdings …
130. [According to Greenberg] … starting in March 2005, Cohen began to assert that Plaintiffs were responsible for the loss of $8 million, which figure included many millions of dollars which they knew Cohen had, in fact, received and previously spent …
132. [According to Greenberg] In short … Cohen planned to assert knowingly false claims against [others] in an effort to recover alleged losses (including the money Cohen himself undeniably received and spent) from Plaintiffs and their insurance carrier. Having garnered the support of Lynch's then-attorney, Dianne DiMascio (“DiMascio”), Cohen felt confident enough in January 2005 to misrepresent to Plaintiffs’ counsel, through Kory, that Lynch was then of the view that she, along with Cohen, was a victim of the misconduct of Plaintiffs and Westin. While Cohen hoped that Lynch would support [him] …
Cohen and Kory Exert Economic Pressure and Emotional Intimidation to Seek Lynch’s
Participation in Their Extortion Scheme
133. Cohen and Kory continually sought to purchase or coerce Lynch’s cooperation [including by offering to pay her monies due her for services rendered and confirming her 15% ownership interest in intellectual property] in the scheme to extort money from …
134. In [response to Dale Burgess’ recommendation] Lynch had retained DiMascio [& Berardo] as her attorney.
135. … In a demand letter from Kory to DiMascio, Kory wrote: I want to reemphasize my position that I am willing to work with you as part of a settlement between Mr. Cohen and Ms. Lynch in going after Westin’s and Greenberg’s insurers as a source of restitution. (Emphasis added)
136. Thereafter, on January 11, 2005, Kory wrote to DiMascio, telling her that [former Los Angeles District Attorney Ira Reiner believed] “properly framed letters to Greenberg and to Westin would cause their insurance companies to show up.”
137. Cohen and Kory then scheduled a meeting with DiMascio, with Kory proposing that Cohen and Lynch both be present to endorse a final agreement and “secure full cooperation.” [Lynch, as she had consistently done since parting ways with Cohen refused to attend any meeting where he would be present.]
138. Lynch declined to attend the meeting in person. Instead, DiMascio went to the meeting on Lynch’s behalf in early February 2005, after which she reported to Lynch: “[Cohen and Kory] want your cooperation in pursuing [the Plaintiffs] and Richard Westin …”
139. Repeatedly, from at least November 2004 through April 2005, Kory made known to Lynch, directly, through counsel, through Steve Lindsay (the father of Lynch’s youngest child and one of Cohen’s record producers), through … others … that he had extraordinary negotiating authority from Cohen to "forgive" any obligations of Lynch, to treat them as a gift, to make additional payments to her or her family members (including, according to Greenberg, disguised as "palimony" …), to make good on Lynch's shares of IP rights or legal entities …
140. Kory tried to do this directly in late spring 2005 when he met Lynch for lunch and tried to persuade her to work with Cohen to "go after" Plaintiffs [and Cohen’s other representatives].
141. Cohen and Kory also worked indirectly. For example, they recruited … [a] "friend" of Steve Lindsay, Betsy Superfon, a person of some notoriety due, among other reasons, to her entrepreneurship in the telephone sex trade. On numerous occasions, [Cohen and] Kory used Lindsay and Superfon to try to "broker" deals with Lynch …
142. In one such conversation [documented by Lynch in shorthand notes], in May 2005, Superfon, according to Lynch, called Greenberg “the kingpin” and a “criminal” and pleaded with Lynch to cooperate with Cohen for “[her] heart, [her] health, and [her] kids” and recommended that Lynch “get out of this.” Superfon promised that she could “settle this for [Lynch] immediately,” and stated that “Leonard and Kory [are] trying to get you out of this situation.” When asked why Cohen and Kory were going after Plaintiffs, Superfon responded: “Because he has got the deepest pockets and insurance. One plus one equals two. Very straightforward.”
143. When Lynch requested [that Superfon ask Cohen/Kory to fax through the proposed] … settlement agreement in writing … Superfon, according to Lynch, stated that when she asked Kory to fax Lynch a settlement, Kory said “you can’t fax this kind of a deal. It has to be discussed.”
144. Through Lindsay, Superfon and other friends, relatives and acquaintances, Cohen and Kory delivered the message that giving in to Cohen’s wishes would be in Lynch’s best interest … Cohen communicated the same message: Lynch should settle with Cohen by providing testimony against [various parties].
145. When these tactics to draw Lynch into his extortion scheme proved futile, Cohen and Kory … turned to far more aggressive means to obtain her cooperation. Indeed, as heard by other witnesses, Cohen and Kory vowed to "crush her," and planned to use restraining orders and other means to prevent her from serving as a credible witness regarding both Cohen's affairs and in regard to the scheme into which they had tried without success to draw her.
146. Consistent with that vow and plan, and according to … witnesses, and on information and belief, Cohen and Kory's tactics to terrorize, silence, or disparage Lynch have included, inter alia, the following:
a. contacting City National Bank, where Lynch, Lynch’s son … had personal banking accounts, and convincing City National Bank to put a freeze on all [their personal and business] accounts [based on fraudulent allegations and rumors];
b. alleging that Lynch's father and mother were depositing funds for Lynch in secret offshore bank accounts …
c. threatening Lynch that she would go to jail if she did not cooperate, and having her younger son's father, Steve Lindsay, who was also Cohen’s record producer, repeat these threats in the child's presence;
d. threatening to "go to child services,” encouraging Steve Lindsay to file legal action to remove Lynch’s younger (and his) son from her custody, and submitting affidavits (from Kory and Superfon) supporting that effort;
e. in a coordinated fashion with Lindsay’s child custody petition, encouraging or directing Steve Lindsay to call in a warning to the LAPD (not related to Traditional Holdings, but on some other, unknown pretext) that caused a police team to descend, guns drawn, on Lynch's home, resulting in her being handcuffed and taken involuntarily, in her bathing suit, to a hospital psychiatric ward and medicated without her consent, before being released the next day, during which time [Steve Lindsey] attempted to persuade Lynch’s older son, Rutger, to [sign over Lynch’s home to Cohen/Kory] …
Lynch Reveals Cohen’s Scheme
148. [According to Greenberg] Cohen’s scheme to force Plaintiffs into a contrived mediation without discovery or publicity might have succeeded, had not Lynch refused to cooperate. Instead, she made the unilateral decision to [permit] Plaintiffs' legal counsel [Boies Schiller to review] a variety of documents and other information that they might not have otherwise seen, all making clear that Cohen and Kory had clear knowledge that the core allegations they intended to raise … were entirely false and pretextual, as detailed above. See, e.g., Facsimile Message from K. Lynch to S. Posel (March 17, 2005) (Exh. 11 attached). Fortunately, Lynch turned over not only … files [for review by Boies Schiller], but [detailed] Cohen and Kory's illicit offers made to her through attorney DiMascio … and through other intermediaries, and shared every detail of Cohen and Kory's attempts to negotiate with or threaten her in order to obtain false testimony …
Cohen and Kory Send a Pretextual and Sham Claim Letter to Plaintiffs
149. [According to Greenberg] As Cohen and Kory continued to heighten their efforts to bribe or coerce Lynch … without knowing that Lynch had already exposed their scheme to Plaintiffs, Cohen and Kory also continued to take additional steps against Plaintiffs in furtherance of their extortion scheme …
151. [According to Greenberg] The myriad of demonstrable falsehoods in the April 10, 2005 demand letter showed that its clear and true purpose was not to demand compensation for a claimed wrong, but to extort money from Plaintiffs and their insurers by threatening to damage Plaintiffs’ reputation. Indeed, Cohen and Kory knew full well that, from Plaintiffs’ perspective, once a celebrity were to raise such allegations of fraud and breach of duty against them, the damage would already would be done, no matter the ultimate outcome.
The June 5, 2005 Meeting Scheduled by Cohen and Kory in Colorado
152. [According to Greenberg] In further pursuit of the scheme to pressure Plaintiffs into paying for Cohen’s alleged losses, Cohen and Kory arranged a meeting with Plaintiffs and their counsel to be held at an airport hotel in Denver, Colorado on June 5, 2005. See, T. Barnett Aff. (Exh. 9) ¶ 32.
[Posel, who was evidently also in Boulder for this meeting, made plans to visit Yongzin Rinpoche. Rinpoche had previously instructed Lynch to phone Posel to ask him to fly into Los Angeles so that he could perform Posel/Lynch’s wedding given the fact that Posel had attempted to convince Lynch that he loved her.]
154. [According to Greenberg] On or about June 2, 2005, Kory contacted the Courtyard by Marriott, Denver International Airport hotel’s sales office and contracted to reserve a conference room at the hotel for June 5, 2005.
156. [According to Greenberg] Thereafter, on June 3, 2005, Plaintiffs provided Kory, as promised, a draft complaint …
157. [According to Greenberg] The draft complaint also revealed to Cohen and Kory, for the first time, that Lynch and others had already exposed the extortion scheme. In particular, the draft complaint demonstrated that Plaintiffs were aware of Cohen’s scheme to use economic compensation, emotional intimidation, and other forms of undue pressure to coerce Lynch to provide false testimony …
158. [According to Greenberg] Thereafter, on June 4, 2005, having learned that the scheme had been disclosed, and notwithstanding the fact that they knew that Plaintiffs’ national counsel had already arrived in Denver for the June 5 meeting, Cohen and Kory cancelled their reservations with the Denver hotel, cancelled the planned meeting, and thereafter refused phone calls from Plaintiffs’ national counsel.
159. [According to Greenberg] Given Cohen and Kory’s conduct and threats, and their cancellation of the Denver meeting which they themselves had proposed, Plaintiffs commenced this lawsuit the next day by filing their Complaint in Boulder County District Court, from which it was later removed to this Court.
Cohen and Kory’s Conduct and Communications Directed Towards Plaintiffs in Colorado
Were Intended to Cause Injury in Colorado
160. From about November 2004 until June 2005, as part of and in furtherance of his scheme to extort funds … Cohen, through Kory, engaged in a continuing course of communications …
163. [According to Greenberg]… Cohen and Kory’s true purpose and motive was to gather information that could be cast in a false light and used to extort funds from …
Cohen and Kory Carry Out Their Threats to Disparage and Defame Plaintiffs
176. [According to Greenberg] Acting with Cohen’s knowledge, authority and consent, and within the course and scope of his agency, attorney, joint venture, and co-conspirator relationships with Cohen, Kory immediately disseminated the press release to various third parties, including, inter alia various industry and press representatives, with the knowledge and intent that such third parties would immediately cause the publication of the press release in industry publications, and on interactive websites, including blogs, message boards, and the like, that could be accessed in Colorado, in other states across the United States, and throughout Canada.
178. Cohen and Kory knew that the false, disparaging, and defamatory press release was not made in furtherance of any lawful objective or within the scope of the litigation … and that the intended recipients were not involved in or closely connected with the litigation.
182. Cohen and Kory’s press release and Cohen’s additional statements and publications …were false, and known to be false when made, and/or omitted to disclose or state material facts that were necessary to make the statements, and their portrayal of [Kelley Lynch and possibly others were] [in]accurate and … misleading.
183. Despite their continuing knowledge of falsity, Cohen and Kory have taken no steps to retract these statements or to cause their removal … As a result, the false, disparaging and defamatory statements have continued to be published to this day, and remain accessible to persons throughout the state of Colorado, across the United States, and throughout Canada and the world.
Through Their Publications and Other Tortious Conduct, Cohen and Kory Have Caused
Plaintiffs to Suffer Economic Injury in Colorado
185. Cohen and Kory also knew that their false, disparaging, and defamatory press release and other statements and publications would be disseminated to interactive websites that could be accessed …
Competing Claims For Traditional Holdings Funds
197. … Cohen claims that these remaining Traditional Holdings Funds belong to him.
198. On November 9, 2005, Plaintiffs moved the Court to accept deposit of these Traditional Holdings’ Funds, in the amount of $152,165.88, into the registry of the Court. This motion was granted by this Court’s Order dated November 14, 2005. Pursuant to that Order, the funds were so deposited on December 14, 2005.
SIXTH CLAIM FOR RELIEF
(Against Cohen and John Doe Nos. 1-25)
241. Plaintiffs reallege and incorporate herein the allegations contained in paragraphs 1
through 240 above.
242. [According to Greenberg] Cohen, John Doe Nos. 1-25, and other co-conspirators not currently named as Defendants herein (including Robert Kory, Steve Lindsay and Betsy Superfon), acting with malice and as a combination of two or more persons, agreed by words or conduct to accomplish unlawful goals and objectives, or to accomplish lawful goals and objectives though unlawful means.
243. [According to Greenberg] Cohen and other co-conspirators not currently named as Defendants herein (including Robert Kory, Steve Lindsay and Betsy Superfon) committed one or more unlawful acts in furtherance of these common goals and objectives.
SEVENTH CLAIM FOR RELIEF
(Against Cohen and John Doe Nos. 1-25)
249. Plaintiffs reallege and incorporate herein the allegations contained in paragraphs 1 through 248 above.
250. [According to Greenberg] Cohen and the other co-conspirators not currently named as Defendants herein (including Robert Kory, Steve Lindsay and Betsy Superfon) are “persons” within the meaning of C.R.S. §18-17-103(4).
251. [According to Greenberg] Cohen and the other co-conspirators not currently named as Defendants herein (including Robert Kory, Steve Lindsay and Betsy Superfon) are and/or were employed by and/or associated with an “enterprise” within the meaning of C.R.S. §18-17-103(2).
252. [According to Greenberg] Cohen and the other co-conspirators not currently named as Defendants herein (including Robert Kory, Steve Lindsay and Betsy Superfon) knowingly conducted or participated, directly or indirectly, in such enterprise through a “pattern of racketeering activity”, within the meaning of C.R.S. §§18-17-103 (3) and (5), and in violation of C.R.S. §18-17-104 (3).
253. [According to Greenberg] Cohen and the other co-conspirators not currently named as Defendants herein (including Robert Kory, Steve Lindsay and Betsy Superfon) conspired or endeavored to conduct or participate, directly or indirectly, in such enterprise through a pattern of racketeering activity, in violation of C.R.S. §18-17-104(4).
254. [According to Greenberg] The acts of racketeering activity which Cohen and the unnamed co-conspirators, and the enterprise committed, attempted to commit, conspired to commit, solicited, coerced or intimidated others to commit included, inter alia:
(a) Mail fraud, within the meaning of 18 U.S.C. §1341 (See, supra ¶ 245(a));
(b) Wire fraud, within the meaning of 18 U.S.C. §1343 (Id.);
(c) Interference with commerce by threats, within the meaning of 18 U.S.C.
§1951 (See, supra ¶ 245(f));
(d) Criminal extortion, within the meaning of C.R.S. §18-3-207 (See, supra
(e) Bribing a witness, within the meaning of C.R.S. §18-8-703 (See, supra
(f) Intimidating a witness; within the meaning of C.R.S. §18-8-704 (See,
supra ¶ 242(d));
(g) Tampering with a witness, within the meaning of C.R.S. §18-8-707 (See,
supra ¶ 245(a)).
255. The predicate acts described herein formed a pattern of racketeering activity, were related to the conduct of the enterprise, and were related to each other as part of the common plan described in paragraph 244 above.