Case Document 52 Filed 10/20/15 Page 1 of 51 PageID 450

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

 

PUES FAMILY TRUST IRA, BY MICHAEL PUES,
EXECUTOR OF THE ESTATE

Plaintiff,
MEMORANDUM OF
- against - DECISION AND ORDER
11-CV-5537 (ADS)
PARNAS HOLDINGS INC. and LEV PARNAS,

 

INDIVIDUALLY,
Defendants.

APPEARANCES:
HANTMAN ASSOCIATES

Attorneys for the Plaintiff
1120 Avenue of the Americas, 4th Floor
New York, New York 10036
BY: Robert J. Hantman, Esq.,
Shirin Movahen, Esq., of Counsel

RICHARD L. YELLEN 8: ASSOCIATES LLP
Attorneys for the Defendants
111 Broadway, 11th Floor
New York, New York 10006
BY: Richard L. Yellen, Esq.,
Brendan C. Kombol, Esq., of Counsel
SPATT, District Judge.
This is a diversity jurisdiction action to recover on an alleged loan by the plaintiff
Pues Family Trust IRA (the ?plaintiff" or ?Trust?) to the defendant Parnas Holdings Inc.
(?Parnas Holdings?) in the sum of $350,000. The plaintiff is seeking repayment from the

defendants Parnas Holdings and Lev Parnas ("Lev? or ?Parnas? and collectively, the

"defendants") of this sum, and, in addition, the amount of certain tax penalties. The

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plaintiff also asserts other causes of action including fraudulent inducement of contract;
conversion; fraud and unjust enrichment.

In response, among other contentions, the defendant Parnas Holdings asserts
that any sums paid by the plaintiff was in connection with an investment agreement and
was not a loan. In addition, the defendants dispute the validity of all of the other causes
of action.

I. THE TRIAL
A. The Plaintiff?s Case

After service in the US. Navy, Michael Pues (?Pues?) initially worked as a marble
setter in the stone industry. In 1994, he started his own company, Veterans Stone, Inc.
Unfortunately, Pues had an accident in June 2008. He had three surgeries and was out
of work to 2011. In October 2010, he met the defendant Lev Parnas. Lev introduced
himself to Pues as the ?youngest stock broker out there." Lev stated that his clients
never lost any money and that he would ?take care of all my investments.? (Tr. at 13).
Lev was a broker for a ?rm called Mammoth Bullion, a company that bought and sold
precious metals. Lev helped Pues with his investments and Pues trusted him.

At an unstated time, Pues was invited to Florida by Lev. While in Florida, Lev
and David Correia took him out to a golf club in Boca Raton. Apparently Lev became
the adviser and broker for Pues, and thereafter, Lev opened an investment account for
Pues and his brother and another friend and pooled their money together to invest
$260,000 in Lev?s medical connections company. Lev told Pues that he would

?basically double my money." (Tr. at 18).

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In November 2010, Pues met with Lev at the Millennium Hotel in New York and
they discussed an investment in a movie, a hotel, and other investments. Pues testi?ed .
that, at that time, Lev was his investment adviser and his broker. Lev told Pues that he
was successful as an investment adviser ?since he was 18" and was ?driving around in
a Bentley? and never lost money for any of his clients. (Tr. at 23). Pues testi?ed that he
relied on Lev and trusted him.

In November 2010, Lev also spoke to Pues about a movie deal. As a result of
his accident, Pues had ?nancial dif?culties and was having problems raising his three
teenage children. However, Lev gave him an exclusive opportunity to invest in this
movie deal. Lev told Pues, ?I?m tied with him. I'm family. I?m secured with that . .
(Tr. at 25).

In December 2010, Lev was back in New York and spoke to him about the
investment in the movie. Lev said that he would not have to put any money in the
venture because, ?I?m family.? At that time, Pues met with Rudy Durand of Koala
Productions who wrote up an agreement for Pues to invest in his company, Koala
Productions. The defendant was going to give Pues an opportunity to invest in Koala
Productions.

At that time, Pues was living on receivables coming in and the savings from the
house he sold in 2010. As of 2010, Pues had three children, 16, 14 and 12 years of
age. Clearly, Pues was having ?nancial dif?culties and Lev gave him the exclusive
opportunity to invest in the movie deal that, according to Lev, would provide him with "a
substantial amount of return,? (Tr. at 28); so that he could pay for his childrens? college

tuition.

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At the end of 2010, introduced by Lev Parnas, Pues met with Rudy Durand at the
Carlyle Hotel, in New York City, in order to invest in the movie business. He had no
prior experience in investing in movies. He went to dinner with Durand. Jack Nicholson
was also at the dinner. Pues was very impressed. The defendant told him that he will
make a lot of money with this investment. He felt that he would have money for his
children and for their college educations. The defendant told him that should have no
problem making two million off a perCentage point.? (Tr. at 32).

Pues decided to invest $100,000 in Koala Productions. That week he received
?two percentage points.? He was told he would receive the $100,000 back ?before the
movie is shot.? In order to obtain this money, he sold certain precious metals of the
Mammoth Bullion ?rm. Pues never had any direct agreement with Koala Productions.
However, he did sign the last page of an agreement with Lev Parnas. Speci?cally, on
November 14, 2010, he signed and received the last page of the agreement so that he
would be able to buy into Koala Productions, the movie business. (Pltf?s Ex. 3). Lev
told him that he didn?t have any other pages of the agreement. Although the agreement
states that the purchase price was one million dollars, his initial investment was
$100,000. This was the only money he had. Lev knew that he was in the process of
obtaining a divorce and had no other income. All the money he had was the $100,000
in Mammoth Bullion and he also owned a boat.

At this time, Lev Parnas was his broker and he knew how much money Pues had
in the Mammoth Bullion account. Pues signed the agreement, (Pltf's Ex. 3), knowing
that his investment was $100,000. Pues never saw any other page in the agreement,

whose last page he signed, until a month later when he met with Rudy Durand in New

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York. The agreement is entitled ?Subscription Booklet for Parnas Holdings Inc.? (Pltf?s
Ex. 3). This was the only document that Pues signed.

As stated above, Pues received $100,000 from Mammoth Bullion, which he used
to invest in the movie ?Anatomy of an Assassin," to be made by Koala Productions.
Also, as stated above, Pues was to receive ?two percentage points of gross from the
Koala Productions the movie.? (Tr. at 47). Pues was supposed to receive the return of
his $100,000 when the movie got budgeted, in about two years.

In January 2011, Pues was told by Lev that Durand needed another $400,000
from Parnas or Pues would lose his investment of $100,000. They needed a total
commitment of $500,000 to. make the movie deal. This disturbed Pues because the
$100,000 was his ?life savings.? Pues started scrambling in an effort to raise the
$400,000 so that he wouldn?t lose his $100,000. At that time, David Correia was the
President of Parnas Holdings. Also, Lev brought up his family trust and the ?bridge
loan.? Pues told Lev, can do a bridge loan but it?s a bridge loan, its my parents?
savings that?s all they have.? (Tr. at 53). Lev asked for the $350,000 and he would
cover the rest. Pues said if loaned, the money had to be repaid in forty-?ve days. ?It?s
their savings, that?s all they have.? (Tr. at 53). I

Lev asked Pues to speak to his parents to ?nd out if they could do a short-term
bridge loan. Pues told Lev that he was the executor of a family trust for the bene?t of
his parents who lived in Jupiter, Florida. He told Lev that he would talk to his parents
and ask them if they wanted to do a short-term bridge loan that would have to be paid

back. ?That's all they have.? (Tr. at 54).

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So that in January 2011, Pues had a conversation with his parents and asked

them to make the loan with the trust funds. After that conversation with his parents,

Pues discussed the matter with Lev, as follows:

Q.



After you had a conversation with your parents regarding the use of
the trust funds for this movie deal, did you have a conversation with
Mr. Parnas regarding the use of those funds?

Yes.

Did he understand where the $350,000 was coming from?

Yes, he knew.

Did you explain to him where the $350,000 was coming from?

Yes, I told him.

What exactly did you tell Mr. Parnas?

I told him my parents? family trust, it?s their retirement money, and they
said they can do the bridge loan short?term - - they wanted it back within
45 days.

And they wanted know why they should do it and that?s when
Parnas says he would throw in a bonus of 2 percentage points from the
gross of the movie if they give him $350,000 towards the movie deal, so it
saved them about $100,000, and it saved them a part - - temporarily until

the money would be raised by Lev or whoever, for the movie.

And he?d pay it back within 45 days which was March 15th, I
believe, it was supposed to be paid back.

So your understanding was that you were going to give Mr. Parnas
$350,000 out of your family's trust account and it would be paid back
around March of 201 1?

Yes.

When did you have this conversation with Mr. Parnas?

That was in January.

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Q. Do you recall if it was a phone conversation or was it in person?
A. It was in person, I believe.
THE COURT: January of what year?

THE WITNESS: 2011.
BY MS. MOVAHED:
Q. Was it in New York or in Florida?
A. There was one meeting in New York and then it was down in Florida.

Q. Did you sign any documents regarding this loan of $350,000 to Mr.
Parnas?

A. No.

Q. Did you have an oral understanding with Mr. Parnas regarding the return
of $350,000?

A. Yes.
It was an oral agreement for a return, it was 45 days.

Q. And Mr. Parnas - - and you expressed to Mr. Parnas that this $350,000
was coming out of your family's trust account.

Is that correct?
A. Yes.
He knew exactly where it was coming from.
(Tr. at 58-60).
80 that Pues explained to Lev the reason the money had to be repaid in forty??ve
days. The 2009 Pues Family Trust Agreement was received in evidence as Plaintiff?s

Exhibit 10. At the end of January 2011, $350,000 was transferred from his family?s trust

Case Document 52 Filed 10/20/15 Page 8 of 51 PageID 457

account into Parnas Holdings to be sent to Koala Productions to make the movie and,
as Pues testi?ed, ?to save my $100,000 investment." (Tr. at 69). Pues also stated that
he needed the $350,000 back into the Trust account to make certain payments to the
IRA to avoid paying taxes and penalties.

Pues testi?ed that the bridge loan of $350,000 was to be repaid in March of
2011. He did not receive the payment by that date and he started sending e-mails to
Parnas. His father passed away on March 17th and they wanted to make sure the
money was returned. However, Lev Parnas never responded to his e-mails or accepted
his telephone calls. This Trust Fund was to take care of his mother ?nancially and they
needed the money for that purpose. Other than social security and the father's small
pension, his mother relied on the money in the Trust Fund. In fact, Pues had to pay for
his father?s burial and cremation with his own money.

On April 21, 2011, Pues sent a certi?ed letter to Lev Parnas (Pl. Ex. 12). The
letter clearly refers to ?the outstanding balance on the unpaid $350,000 loan, made to
Parnas Holdings Inc. from the Pues Family Trust The letter stated the following:

Final noti?cation
Lev
I wanted to address with you again, as previously stated in
my e-mail dated March 27, 2011, as well as in our recent 
conversation in your of?ce this past Monday, the outstanding
balance on the unpaid $350,000 loan, made to Parnas
Holdings Inc. From the Pues Family Trust IRA. The loan
was made at the request of yourself as a bridge loan to
Parnas Holdings Inc. to be exclusively utilized as investment
capital to save the deal with Koala Productions for the movie
?Anatomy of an Assassin.? As you are aware the loan was

governed by very speci?c terms and was to be repaid by
March 12, 2011. These terms were not met, and as a result

Case Document 52 Filed 10/20/15 Page 9 of 51 PageID 458

taxes and penalties totaling $161,000.00 were assessed by
the IRS bringing the total outstanding amount due to the
Pues Family Trust from Parnas Holdings Inc. to
$511,000.00.

(Pltf?s Ex. 12).

?There is a signature on the certi?ed letter indicating the letter was received on

delivery. Also, there is an undated e-mail in evidence from Pues to Lev (Pltf?s Ex. 1)

which indicates that the $350,000 is to be paid back within forty-?ve days from January

26, 2011. The Court notes that this document from the plaintiff does not use the words

?bridge loan."

There is also another e-mail in evidence (Pltf?s Ex. 1, page no. 00003). This

e-mail is also from Pues to Lev and is dated March 28, 2011, and includes the following

language:

Hi Lev< Hopes this ?nds you well. was hoping you could
send me veri?cation of the receipt of the 10% we are
expecting from the movie deal with Rudy. As you know, I
personally wired Rudy $100,000 in addition to the $350,000
bridge loan money sent to Parnas Holdings from the Pues
Family Trust IRA, also intended for the movie deal. As
previously discussed, the terms of the bridge loan were that
the $350,000 was to be paid back net 45 from the date of
1/26/2011. . ..

In the meantime, please forward copies of the contracts that
we discussed in your of?ce last week regarding raising the
additional funds for the movie, so that I can get the
$350,000, plus paid back to the Family Trust. Thanks in
advance.

Mike.

Another important document in evidence as part of plaintiff?s exhibit 1, page

00005, dated May 25, 2011 is an e-mail from David Correia of Parnas Holdings to Pues.

In part it reads as follows:

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Michael,

as per our conversation a few moments ago, I am sending
you this email while we are waiting for the documents to be
put together by our attorney. In the meantime, Lev wanted
you to have something in writing for your security.

Parnas Holdings, Inc agrees to put up as collateral, 2pts of
our ownership of the ?lm "Memory of a Killer? for the $510k
owed to the Pues family Trust. As you know, this is the
amount agreed upon between you and Lev yesterday. I will,
however, mention to him that you are requesting a change in
these terms. or Lev will get back to you with a response to
that request at some point tomorrow. Please note that this
will entail holding off the lawyer from executing this
agreement until both sides agree upon the said terms.

f: 
Take Care,

David Correia
561 ?445-661 2

This "change in the terms? referred to in the e-mail was a request for more
?points". Also, in this exhibit the words ?bridge loan? are not mentioned.

On March 22, 2011, Pues called Correia to ?nd out about the repayment of the
money owed to the Pues Family Trust. He called a number of times to Correia and Lev
about repayment of the loan. He called on his mother?s birthday to try to get her repaid.
His father had passed away a month before. The $350,000 alleged bridge loan
comprised most of the money in the Pues Trust Fund.

The only person at Parnas Holdings that he was able to communicate with was
Mr. Correia. After he transferred the money into Parnas Holdings he could not
communicate with Lev Parnas. He was unable to have any further communications with

Lev Parnas. Correia told him that they didn't have the funds to make the payments, but

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they were trying to obtain the funds to do so. At that time, in April 2011, his parents'
taxes were due. As the executor of his parents Trust account, Pues took care of all the
?nancial affairs including the payment of any taxes. The current tax return showed that
$103,831 was due in 2011 with interest accruing for the last four or ?ve years.

On June 2, 2011, Pues sent an e-mail to Lev Parnas. He stated that this was the
?nal noti?cation of a termination of any direct correspondence between Pues and any
principal of Parnas Holdings Inc. and in the future he is to correspond with the attorney
for Pues. Lev kept saying that he was going to take care of it and gave excuse after
excuse and ?nothing happened.? (Tr. at 114).

On cross-examination, Pues testi?ed that he was in the construction ?eld as a
marble setter. His company was called Veterans Stone, Inc. In 2013 to 2014, he did
?maybe $300,000 or $400,000 per year.? He and his wife are ?nalizing a divorce. They
owned a house in Long Beach, New York. Lev Parnas was his personal broker through
the Mammoth Bullion company. He paid the brokerage fees to Mammoth.Pues signed
the ?agreement" on the last page without having seen the balance of the agreement.
Lev told him it was ?just a formality, don't worry about it.? He signed the last page of the
agreement to invest in the movie. The agreement said that it?s for a million dollars and
Pues objected to that. Lev told him not to worry, it's just a formality. He trusted Lev
Parnas. He was told to sign the last page and he did so without reviewing the entire
agreement. On December 8, 2010 and on December 17, 2010, Pues wired a total of
$100,000 to Koala Productions and not Parnas Holdings. He was investing in a movie.
He was to receive two percent of the gross proceeds of the movie called ?The Memory

of a Killer.? In somewhat confusing testimony, Pues testi?ed that he had an agreement

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with Parnas Holdings who had an agreement with Koala Productions. Pues had no
direct agreement with Koala Productions. So that Pues testi?ed that he believed that he
gave $100,000 to Parnas Holdings in return for a two percent interest or two points in
Koala Productions; namely $50,000 per point. Pues testi?ed that the $100,000 was an
investment in Koala Productions, as follows:

0. Just continuing, and those two points you bought without an agreement
through Koala Productions, was that an investment or was that a loan?

A. That was an investment in it because they told me I would get it back
before the movie when it was budgeted, it would get paid.

(Tr. at 169).
Pues received no documentation to establish he had the two points from Koala
Productions:

Q. You sent $100,000 to a guy and you assumed you had two points in the
movie.

That?s in essence your understanding of your agreement with
Koala Productions and you're entitled to those two points?

A. Yes.

Q. But at the time, when you send those monies in December 2010, you
understood that each point in Koala Productions or rather in the movie
project was worth 50,000 apiece?

A. One point, 50,000 percentage point, yes.

0. To your knowledge, at any time thereafter did the value of those points
change?

A. No.

(Tr. at 170).

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Pues testi?ed that Lev gave him two points as a bonus for providing the bridge
loan for $350,000. Lev told him that he needed a bridge loan or the Trust would lose
the $100,000 previously paid. Pues was then questioned extensively about the Pues
Family Trust. Pues commenced this action as the executor of the Pues Family Trust.
His mother and father both wanted him to handle their ?nances and pay their taxes.
The Pues Family Trust made the bridge loan to Parnas Holdings, which loan was
guaranteed by Lev. The loan was made in January 2011. He discussed the bridge loan
with his parents. The Pues Family Revocable Trust Agreement is in evidence as Pltf?s
Ex. 10. At page 139 of the exhibit, it says that Vl?lliam C. Pues and Mary Pues are the
Trustees by various powers. However, at page 170 of the Trust Agreement, it states
that in the event that Vl?lliam C. Pues is not living or is incapacitated, then their son, the
plaintiff Michael Peter Pues shall be the guardian of the principal?s estate and person.

Further, Pues testi?ed that his father and mother not only gave him the written
authority but both virtually told him that they wanted him to take care of all the ?nances
and gave him the "power to move funds.? (Tr. at 177). He decided to make the bridge
loan with his parents? trust fund and his mother and father authorized the making of the
loan. At the time, both parents were alive and they both approved the loan to Parnas
Holdings. His parents didn?t discuss the loan with Lev Parnaslieu of interest on the loan, there was an agreement of two points in the movie
project and to save his $100,000 previously invested. The points were worth $50,000

each. The loan was made to both Parnas Holdings and Lev Parnas.

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On April 27, 2011, Pues sent an e?mail to Lev Parnas in which he stated that you
Lev ?have personally guaranteed repayment of the now overdue loan.? (ths? Ex. E).
Pues stated that Lev Parnas personally guaranteed the bridge loan to Parnas Holdings
in the sum of $350,000. Although the e-mail itself is undated, the receipt is apparently
dated April 21st. The e?mail further stated that the terms of the loan, namely repayment
by March 12, 2011, ?were not met and as a result, taxes and penalties totalling
$161,000.00 were assessed by the IRS bringing the total outstanding amount due to the
Pues Family Trust from Parnas Holdings Inc. to $511,000.00.? (ths? Ex. E).

Pues testi?ed that this was one single bridge loan to Parnas Holdings Inc., in the
sum of $350,000, which was personally guaranteed by Lev Parnas. This oral
agreement was made in Lev?s of?ce. Actually, the alleged assessment $161,000 was just a ?rough estimate" by Pues. (Tr. at 193).

Q. How did the IRS assess those penalties?

A. They did. It was just an estimate. That?s all we could have is an estimate
with the IRS. We didn?t know what the penalties were so we took a ten
percent guess at it and the taxes, ?gured out what the tax bracket which
was. The taxes were $104,000. I seen the tax of 201 1, 2010, said
$103,000 and change and the other $50,000 was just a rough estimate.

I?m not the IRS. They assess what they want, how they want it.

Q. Is this accurate. Did the IRS assess $161,000 to the family trust in April of
2011have no idea. I was trying to get paid back the money
to my family trust and the IRS had hit penalties. I guessed that.

Q. It was an assumption?

I assumed.

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(Tr. at 193).

?k it i? 

THE COURT: Listen to me. You estimated this but there was never
actually levied this $161,000?

THE WITNESS: The IRS, no. Never sent any paperwork on that. I
wrote it out as I thought you would pay the IRS that
amount which you do, don?t you?

(Tr. at 195?196).

The defendant raised the question of whether the Trust authorized the making of
a loan such as the one on which this action is based. In a review of the Pues Family
Revocable Trust agreement (Pltf?s Ex. 10), the defendant asserts that it is ?unclear if
there is any authority whatsoever here with respect to loans to third parties.? (Tr. at
203). In response, plaintiff?s counsel points to paragraph 0 of Pltf?s Ex. 10, which
provides as follows:

To perform all other acts necessary for the proper
management, investment, and distribution of the Trust

property.?
Asked to explain how he, as an ?Executor" of the Estate is acting as a ?Trustee?
of the Trust, Pues turned to ths' Ex. 10 at page 170, which reads as follows:

In the event the Principal?s spouse, WILLIAM C. PUES is not
then living, or upon his death, resignation, or if at any time
he is incapacitated, the Principal?s son, MICHAEL PETER
PUES, shall be appointed as the guardian of Principal?s
estate and Principal's person. In the event the Principal's
son, MICHAEL PETER PUES is not then living, or upon his
death, resignation, or if at any time he is incapacitated, the
Principal?s son, WILLIAM DENIS PUES, shall be appointed
as the Second Alternate guardian of Principal's estate and
Principal?s person.

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(Tr. at 170).

This statement was signed under oath by Mary E. Pues on April 28, 2009. Pues
testi?ed that he acted on behalf of the Trust both under the power of attorney and as a
trustee. His parents told him to take care of the Trust. The Trust gives him the power
?to take care of his parents to the best of my knowledge and to the best of my ability.?
(Tr. at 212). When he made the bridge loan he was acting both as a trustee and under
the power of attorney.

During this period, Pues had been injured, was not working and had surgery to
his shoulder. Under doctor?s instructions, he played golf to exercise his shoulder.

Pues again stated that he had wired $100,000 from TD Bank to Koala
Productions and Rudy Durand for the movie. Then about a month later he sent
$350,000 to Parnas Holdings as a bridge loan from the family trust.

In December 2010, and January 2011, Lev told him that he wanted to buy his
boat for $100,000. His wife owned one-half of the boat and had to receive half of the
funds. He signed the bill of sale for the boat but his wife did not sign. In addition, Pues
felt that it was not a valid bill of sale agreement. He stated that the boat was sold
without his knowledge. He hasn?t sued to recover the value of the boat because of this
pending law suit. Strangely, Pues testi?ed that he reached an agreement with Lev to
sell the boat to him for $100,000; he shipped the boat to Florida where Lev sold the boat
without his consent and retained the money received from the sale of the boat. Yet, he
did not pursue any remedy against Lev in a court of law. The bill of sale of the boat

(ths? Ex. D, p. 65) indicates that the date of the sale was January 24, 2011. The name

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of the purchaser appears twice on the bill of sale. In the main section, the space for the
name of the purchaser states Parnas Holdings Inc. On the bottom of the bill of sale
under the word ?certi?cation", the Space entitled ?Purchaser?s Printed Name? has the
name Lev Parnas.

The assets of his parents' trust consist of a condominium, the money in the trust
account in the amount of approximately $15,000, and a checking account in the sum of
approximately $1,000. He had explained to his parents that he was withdrawing the
$350,000 to make the bridge loan in return for the two percentage points in the movie.
He told them he trusted Lev very much ?and we did it?. (Tr. at 243). Again, he testi?ed
that Lev told him that we didn?t need paperwork. ?It was a short term. It was all trust
issues. He was my adviser . . . a ?duciary duty whatever you call it.? (Tr. at 243).

Pues had been going through a divorce for the last ?ve years. His wife owned
one?half of his assets. He had formed a company with his brothers called Med
Investment. Also, his wife owned one-half of the boat he sent down to Florida at a cost
of $10,000.

On redirect examination, Pues testi?ed that the trust was created to take care of
his parents and their assets. He discussed the bridge loan of $350,000 with his
parents. He again reviewed his discussion with Lev; the bonus two percentage points
to be paid; and the repayment within forty-?ve days. He stated that there would be an
IRA penalty if the money was not paid within sixty days.

On April 27, 2011, Pues sent an e?mail to Lev Parnas (Pitt?s Ex. 9, p. 119) in

which he stated that Lev personally guaranteed repayment of the overdue loan. Again,

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he testi?ed that he trusted Lev Parnas. Lev wanted to purchase his boat for $100,000
and that's why he shipped the boat down to Florida. As stated, half of the purchase
price of the boat would go to his wife. The boat was ultimately sold and neither he nor
his wife received any proceeds from the sale of the boat.

Pues testi?ed repeatedly that he trusted Lev Parnas and he believed what Lev
was telling him. Lev was his personal and ?nancial adviser. His investment decisions
were based on the guidance and advice he received from Lev Parnas. Lev always told
him that his investments were ?rock solid, guaranteed to make money." (Tr. at 262-
263). Lev guaranteed that he would receive the $350,000 back within forty-?ve days or
even a shorter time. Lev told him that a written agreement was not needed because he
will get the money back, ?it?s guaranteed.? (Tr. at 264). Pues didn?t know that Lev
Parnas was involved in twenty other entities. On cross-examination, it was brought out
that he only knew Lev Parnas since October or November 2010, only a few months
prior to these transactions.

George A. Hanner is a real estate broker and appraiser. In 2007 or 2008, he met
Lev Parnas who said he was Vice President of the Monolith brokerage ?rm which dealt
in commodities.

Hanner had dealt and had an account with the Monolith ?rm and was unhappy
with its operation. Parnas told him that he was going to make his life better. Lev
wanted to manage his account. He had at least $100,000 in the Monolith account. Lev
told him that, ?He was going to use his expertise to make sure I had the right trader."
(Tr. at 122). Based on Lev's ?expertise? Hanner invested about $500,000 with Monolith

over a period of a few years.

18

Case Document 52 Filed 10/20/15 Page 19 of 51 PageID 468

Eventually, Lev Parnas left the Monolith ?rm and was involved in a company
called Parnas Industries or Associates Company. Half of Hanner?s $500,000
investment in Monolith was gone. Lev?s explanation was ?that?s the way the market
works.? (Tr. at 124). Hanner also invested in Parnas Holdings Co. He believes that
Lev was the president and chairman. Lev told him that Parnas Holdings intended to
raise $20 million dollars and use the funds to invest in investment opportunities. Hanner
estimates that he lost about $450,000 of the $500,000 he invested in the Monolith ?rm.

Hanner sought to recover his lost money. He thought there were some
transactions that were fraudulent. Lev Parnas told him that he was involved in other
new ventures. Hanner lost about $470,000 in his investment in Monolith over a period
of about three years. During that time, he received no dividends, interest or money of
any kind on his investments. Nor did he receive any documentation. During this time,
Lev told him that ?all the investments were doing (Tr. at 129). Eventually, he was
told that part of his investment was involved in a movie called ?The Assassin.? He
thought $100,000 of his investment was involved in the movie. However, he has no
proof that he has any interest in that movie.

His last communication with Lev Parnas about getting paid on his investment
was about six months prior to his testimony. At that time, Lev told him that he was
going to work things out and pay him back the money. Hanner told him that he was
going to hold off any legal action until about the end of the year. Lev told him that he
would present him with a plan to pay back the money by the end of 2015. Hanner
received no such plan.

Hanner spoke to Rudy Durand only one time.

19

Case Document 52 Filed 10/20/15 Page 20 of 51 PageID 469

On cross-examination, Hanner testi?ed that he signed a written agreement with
Lev Parnas in which he agreed to hold off any legal action. He referred to the money
that he gave to Parnas as an investment and not a loan.

Rudy Durand testi?ed at length about his service in the military in the Korean
War and his other activities in his life. He ?rst met Lev Parnas in 2000 in Beverly Hills,
California. He liked him. After that they kept in touch when Lev was visiting back and
forth to California. They became good friends. There came a time when they
discussed the possibility of Lev investing in a ?lm that he was in the process of
purchasing. Lev told Durand that he had money to invest.

Durand ?rst met Michael Pues in December 2010 at the Carlisle Hotel in New
York City. Lev told him that Pues was one of his investors. He explained the dif?cult
?lm business to Pues. He was looking for investors for a ?lm, ?Memory of a Killer.? Lev
told him that Pues would be one of the investors. The initial investment deal would be
$500,000 for ten points of the producer's share. Initially, only $100,000 was paid and
the balance of $400,000 would be paid on or before January 11, 2011. Pues paid the
initial payment of $100,000 in two wired payments of $50,000 each to his company,
Koala Productions.

Durand told Lev and Pues that if he didn?t get the additional $400,000 by January
15th, they would lose the $100,000. Parnas did come up with the additional $400,000.
He believed that the money came from Lev. Further, he stated that the money came
from David Correia on behalf of Parnas Holdings. A formal agreement was signed at
his attorney?s of?ce with regard to the $500,000 investment and Pues attended that

meeting.

20

Case Document 52 Filed 10/20/15 Page 21 of 51 PagelD 470

Of importance, Durand testi?ed that Pues and Lev Parnas had a discussion,

?about something to do with supposedly Mr. Pues had loaned Mr. Parnas $350,000

which would be the money. That would be part of the executed formal agreement . .

(Tr. at 293). This discussion took place in front of Durand at an Italian restaurant and

then later at the Beverly Hilton Hotel. The exact testimony is as follows:

0.
A.

And then what happened?

Then we went to have lunch and Mr. Pues asked me if I had received the
$400,000 and Isaid I don?t think I received the $400,000. And then Mr.
Pues and Mr. Parnas had a discussion about something to do with
supposedly Mr. Pues had loaned Mr. Parnas $350,000 which would be the
money that would be part of the executed formal agreement and it was a
heated discussion.

Was this discussion in front of you?

Yes.

Well, before you left them alone, what did Michael say and what did he
say - - what did Michael say and what did Mr. Parnas say?

Basically what I got from this, I don't know what was going on, was busy
getting my movie ready, is that Michael Pues had loaned $350,000 prior to
Lev and him coming to California to execute the agreement; that Mr. Pues
had gone to Florida and loaned $350,000 in order to save his $100,000
which Mr. Parnas was to send it immediately to my company.

Therefore, the 350 that was being paid from the loan and the 100
that Mr. Pues put up, there was still $50,000 lacking, and I believe Mr.
Pues or either Lev said they would make up the $50,000 later.

(Tr. at 293, 294).

Even though their agreement speci?ed that no one is allowed to sell anything

without written permission of his company, Durand found out that Parnas had sold a half

of a point to a third party for $250,000. He was very upset and sent an e-mail to Lev

21

Case Document 52 Filed 10/20/15 Page 22 of 51 PagelD 471

who did not respond. Durand has not spoken to Lev since that time. Further in his

testimony, Durand again discussed the alleged $350,000 loan.

0.

.0.)

A.



Did there ever come a time that you had conversations - - let's start with
Mr. Parnas ?rst - - with Lev Parnas concerning an alleged loan from the
Pues family trust to Parnas Holdings?

Yes. I testi?ed to that earlier.

Were there any more any conversations afterwards dealing with that
subject matter?

Yes.

When?

There were numerous. And there came a time, at the time I knew there
was a confusion who owned what so I offered to be a mediator and try to
mediate the problem between Lev and Mr. Pues. And that's during that
particular period we had many discussions.

Well, then, did Mr. Parnas ever admit to you that it was a loan?

Yes.

And when was that?

The initial meeting at the lunch he didn't deny it. But his position was that
the reason it was a loan - -

I?m not asking you for his position. Just what did he say? Did he admit to
you that it was a loan? Yes or no?

Yes.

(Tr. at 306, 307).

Durand testi?ed that Pues currently owns an interest in the ?lm, in the sum of

$100,000 or two points. However, Pues subsequently owned a total of four points in the

22

Case Document 52 . Filed 10/20/15 Page 23 of 51 PagelD 472

?lm, including two points from him and two points for the family trust. Again, Durand
referred to the subsequent payment of $350,000, as a loan.

Q. I don?t mean to characterize this in any way. I'm not suggesting there is
an admission. But in your mind, you are not really delineating between
the trust or Mr. Pues. It is four points somewhere between Mr. Pues and
the trust, and that is what is owned in that world of investors.

A. My previous conversations prior to sending this email, Mr. Parnas
informed me that he was giving two points to Mr. Pues for his family as a
bonus for the loan that his family gave him. Subsequently we have it right
in this email.

Q. So there?s four points.

A. Four points - yes.

(Tr. at 334, 335).

Durand testi?ed that at one time the value of each point was $50,000. However,
today the value is probably much higher. Durand was introduced to Pues by Lev
Parnas at the Carlisle Hotel as one of Lev Parnas? investors. The responsibility of either
Lev Parnas or Parnas Holding in the movie was the sum of $500,000 for ten points.
Since Pues didn't have a company, Lev suggested using Parnas Holdings, his
company's name.

On redirect examination, Durand testified that Lev Parnas was not trustworthy
and he was in breach of their contract. He also stated that Lev Parnas was trying to
promote his ?lm and keep the money for himself instead of the money going to Koala

Productions. So that at one time he liked and trusted Lev, but that he later found him to

be a con artist.

23

Case Document 52 Filed 10/20/15 Page 24 of 51 PagelD 473

On recross, Durand again referred to ?this loan" on several occasions and that
Mr. Parnas did borrow the money of $350,000. (Tr. at 361, 362, 363, 364) 
364). One such statement is as follows:

0. And just ?nally to follow up on that, sir, while you were not part of any

negotiations nor privy to the original agreement between Mr. Parnas and
Mr. Pues, is it not a fact that you testi?ed that Mr. Parnas, himself,
admitted to you that the money from the Pues Family Trust was a loan?

A. Yes, he had.

(Tr. at 365).

At the conclusion of Durand's testimony, the plaintiff rested with the exception of I
the testimony of Mary Pues, the mother of Michael Pues, who resides in Florida.

At the conclusion of the plaintiff?s case, the following motions were made with the
decisions of the Court.

(1) The plaintiff moved to conform the pleadings to the evidence with regard
to the boat owned by Michael Pues. In this regard, the plaintiff asked to amend the
pleadings to add a cause of action to recover $100,000, the value of the boat which Lev
Parnas allegedly took possession of and the additional sum of $10,000 in expenses 
paid by Michael Pues. This motion by the plaintiff was denied as ?being much too late?
and ?prejudicial".

(2) The defendants? moved to sever the ?rst cause of action for breach of
contract into two separate claims. One cause of action was on the alleged loan to

Parnas Holdings Inc. The second cause of action would be a guarantee of that loss by

Lev Parnas. That motion was denied.

24

Case Document 52 Filed 10/20/15 Page 25 of 51 PageID 474

(3) As to the defendants? motion to dismiss the second cause of action
sounding in ?Fraudulent Inducement of Contract,? the Court reserved decision.

(4) As to the third cause of action in conversion, decision was reserved on the
defendants? motion to dismiss.

(5) As to the fourth cause of action sounding in fraud, the Court reserved
decision on the defendants? motion to dismiss.

(6) As to the ?fth cause of action sounding in prima facie tort, the Court
granted the plaintiff?s motion and dismissed this cause of action.

(7) As to the sixth and ?nal cause of action sounding in Unjust Enrichment,
the defendants? declined to move to dismiss and reserved the right to move on papers.

Therefore, at the conclusion of the plaintiff?s case, there were still pending ?ve
causes of action; namely, breach of contract involving the alleged loan of $350,000;
fraudulent inducement of contract; conversion; fraud; and unjust enrichment. In
addition, the defendants? moved to add two af?rmative defenses, namely, ?rst, a parole
evidence rule and a statute of frauds defense; and, second, a usury defense. As to
both, the Court reserved decision.

The following morning, April 29, 2015, the defendants made an additional motion
to dismiss the complaint based on the plaintiff?s failure to establish his capacity to make
the alleged loan, namely ?for the failure to elect his capacity in which the actions were

purportedly undertaken.? (Tr. at 420). This motion was denied.

25

Case Document 52 Filed 10/20/15 Page 26 of 51 PageID 475

B. The Defendants? Case

The defendant Lev Parnas testi?ed as to his background. He came to this
country when he was three years old. He attended Baruch University and Brooklyn
College, but he did not graduate. He started working in real estate at an early age of
sixteen and started his own company at the age of eighteen. He became a licensed
Wall Street stock broker. In 1995, he moved to Florida and started his own company.
Parnas acquired a Series 24 license which allowed him to acquire his own ?rm and
oversee other brokers. He oversaw many other traders and brokers. His company
?basically" closed in 2002. So that he was a licensed broker and a supervisor.

Parnas stated that he was a ?nancial broker and ?nancial adviser to thousands of
individuals and companies. He took many companies public. He personally never had
a complaint made against him. Parnas is currently not licensed. His believes that his
license lapsed in 2004. He had no complaints against him as a ?nancial adviser.
Parnas advised thousands of people in an investment capacity, and only had one
complaint; by Michael Pues.

Parnas testi?ed that he was never the ?nancial adviser to Pues. He was never
employed by the Monolith Bullion Company but ?helped consulting in this.? (Tr. at
434). He met Pues and gave him ?nancial advice in order to assist him. Pues was
happy with the advice Lev gave him. Lev explained that Parnas Holdings Inc. is a
company that he set up ?to primarily invest in other ventures where I would allow other

partners and investors to be able to participate with me on the ventures.? (Tr. at 436).

26

Case Document 52 Filed 10/20/15 Page 27 of 51 PagelD 476

The plaintiff Michael Pues entered into a Parnas Holdings Inc. Subscription
Agreement. (ths? Ex. A). Pues signed the Subscription Agreement on November 11,
2010 in the presence of Parnas. By his own handwriting, Pues added the purchase
amount as one million dollars. Contrary to the testimony by Pues, the entire agreement
had been presented to Pues and he not only signed it but he entered the purchase
amount as one million dollars. Further, Parnas testi?ed that Pues entered his erroneous
social security number.

At that time, in 2010, Parnas Holdings was looking at various projects including
hotels, banks and a movie. He and Rudy Durand worked out an arrangement to fund a
movie called ?Memory of a Killer.? While there may have been some differences as to
similar agreements entered into evidence, Parnas testi?ed that they were the same. On
one of the agreements in evidence, there is a handwritten statement which says, ?Mike
to my old friend," signed with an initial which cannot be made out. Parnas stated that
this handwritten notation was written by Rudy Durand.

Parnas discussed the Subscription Agreement with Pues almost on a daily basis.
As stated above, the agreement called for Pues to invest one million dollars with Parnas
Holdings Inc. Pues only paid a portion of the million dollars he agreed to invest. Pues
paid $100,000 to Ludy Killers Promotions on behalf of Parnas Holdings Inc. and another
approximately $13,000 on the sale of the boat. Also, there was a ?scal payment made
by Pues in the sum of $350,000, which he described as an investment, as follows:

Q. What portion did he pay?

27

Case Document 52 Filed 10/20/15 Page 28 of 51 PageID 477

A.

p>p>p



I don?t have an exact accountingpaid $100,000 to Ludy
Killer Productions on our behalf which is credited towards his subscription
agreement.

Then there was a sale of a boat. There was another $13,000 or
something. I don?t have the exact ?gure credited towards his subscription
agreement.

And then the ?nal was the $350,000 that he invested which is why
we?re here right now talking about it which eventually would have been
credited to his subscription agreement.

Do you have a subscription agreement with the Pues Family Trust?
No, sir.
Do you have any agreements with the Pues Family Trust?

No, sir.

Now, Mr. Pues, through his testimony, alleges that you worked out some
kind of oral agreement for the loan.

Is that your customary business practice to do things through oral
agreements?

No, sir.

Is it your practice to do things in writing through binding contracts?
Yes, sir.

Is that why, for example, when you entered into an agreement with Mr.
Pues to fund you $1 million, we have a detailed subscription booklet
evidencing the obligation?

Yes, sir.

(Tr. at 450, 451).

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Case Document 52 Filed 10/20/15 Page 29 of 51 PageID 478

So that Parnas testi?ed that he had an agreement with Pues personally, and had
no agreement with the Pues Family Trust. He also denied having any oral loan
agreement with either Pues or the Pues Family Trust.

Lev Parnas testi?ed that George Hammer was an investor in Parnas Holdings
and was committed to two million dollars. Both Hammer and Pues signed the
Subscription Agreement on the same day.

Parnas Holdings Inc. is currently defunct because of ?nancial problems and
because of ?nancial commitments that Pues did not perform. He stated that Parnas
Holdings Inc. relied on the one million dollar commitment of Michael Pues with regard to
the movie deal and their investment and obligation in Ludy Killer Productions. Randy
Durand was his mentor and they were trying to raise money to invest in the movie.
When he signed the agreement with Michael Pues, it was con?rmed that they would
have one million dollars coming in to invest in the movie and Parnas Holdings assumed
the obligation to fund a half million dollars to Ludy Killer Productions. At that time, there
was no independent agreement between Pues and Ludy Killer Productions or Koala
Productions or any af?liate of Rudy Durand.

Lev Parnas testi?ed that Pues learned everything he knew in 2010 and 2011
about Koala Productions, the ?Memory of a Killer? ?lm. This investment opportunity in
the movie was through Lev and Parnas Holdings Inc. He also introduced Pues to Rudy
Durand. Also, the investor agreement with Ludy Killer Productions and Rudy Durand

was executed by Ludy and Parnas Holdings, Inc.

29

Case Document 52 Filed 10/20/15 Page 30 of 51 PageID 479

A memorandum, dated December 5, 1010, was signed between Parnas Holdings
and Rudy Durand for Impressionist Motion Pictures LLC and Koala Productions Ltd.,
with regard to the movie to be made. ?(Pltf's Ex. 14). Pursuant to the agreement with
Parnas Holdings and Koala Productions, Pues made payments of $50,000 on
December 8th and $50,000 on December 17th for a total of $100,000 paid in December
2010.

Thereafter, according to Parnas, they started having problems with Pues sending
the money, and in turn problems with Koala Productions and Durand. Lev again
restated that Pues had a binding agreement with Parnas Holdings to fund up to one
million dollars; Parnas Holdings executed an agreement with Durand, Koala
Productions and later through Ludy Killer Productions to fund money in connection with
their investment in the ?lm ?Memory of a Killer;? $100,000 was received by Parnas
Holdings; and there was an obligation by Pues to fund the balance of approximately a
half million dollars.

Of importance, Lev Parnas stated emphatically that the $350,000 was not a loan.

Among his numerous vigorous statements denying that the $350,000 was a loan is the

following:
Q. Mr. Pues then testi?ed in order to save his purchase of two points per
$100,000, another $350,000 had to be paid.
Did you hear Mr. Pues testify to that?
A. Yes, sir.
Q. Can you explain to me what you think he means by that agreement?

30

Case Document 52 Filed 10/20/15 Page 31 of 51 PageID 480

A. i don't know what he means by that agreement.

But all I know is Mr. Pues obviously owed us money and I never
borrowed money from him.

Plus, remember, I?m a president of a corporation. So why would I
personally borrow on behalf of all shareholders? That's not a logical
business sense.

Second of all, why would I borrow money from an individual that
owes me money? It doesn?t make sense.

(Tr. at 477).

Lev Parnas further testi?ed that a few weeks after Pues sent the money he came
to Lev ?almost in tears and crying.? He told Lev that he ?made a big mistake,? that he
has to work it out to get the money back to his parents? trust account because he had a
?big problem with one of his brothers.? (Tr. at 480). He further asserted that the
$350,000 paid was for Parnas Holdings and their other commitments in addition to the
movie and the only obligation to the movie was in the sum of $250,000. Further, Lev
denied that he told Pues that this was a ?no risk sure thing deal and we will be ?ying on
private jets.? (Tr. at 481). On the contrary, Lev told Pues that it was a very speculative
investment. It was a ?high risk high reward" deal, as Durand told Pues.

Lev explained why an additional $350,000 was ?owed or necessary? to save the
plaintiff?s $100,000. He testi?ed that Pues stated they made an oral agreement ?of
some sort of a loan.? (Tr. at 484). He stated that Pues owed more than $800,000 under
the Subscription Agreement and the $350,000 was ?toward his payment . . . what his
investment was with Parnas Holdings lnc., (Tr. at 486).; as set forth in the Subscription

Agreement.

31

Case Document 52 Filed 10/20/15 Page 32 of 51 PageID.#: 481

Lev knew that the $350,000 came from the Pues parents? trust. Lev testi?ed as
to the only time the word loan was used, as follows:

Q. Now Mr. Pues said it was a loan.

A. Well, the only time the loan conversation came up like I said several
weeks after the fact Mr. Pues called me up and he started panicking, with
the brother - - I don?t remember which brother - - that he needs to get the
money back and he has ways to get the money back, but in the meantime
he needs is documented that we need to do it as a loan because he was
having problems with his either brother or parents. I don't remember
exactly.

Q. Did you ever agree to convert the investment into a loan?

A. Never, sir. What I did - 

(Tr. at 487).

Lev testi?ed that sometime after the $350,000 in investment funds were
transferred to Parnas Holdings, Pues contacted him with a problem. He was having
trouble with his family. Pues was very nervous and he asked Lev ?to please help him
out to turn it into a loan.? (Tr. at 490). Lev responded that ?it was impossible, and would
not be prudent or proper. Hearing that Pues was upset, Lev tried to help Pues by
giving him collateral of two points until it got resolved, ?so his parents . . . would be more
comfortable.? (Tr. at 91). So that Pues tried to have Lev convert the equity contribution
into a loan.

Pues told him that the Pues Family Trust was assessed taxes and penalties
totaling $161,000 by the IRS. Lev stated that this statement was not true and the Pues

Family Trust was never assessed $161,000 by the IRS. Based on the Pues statement,

he agreed to a two point collateral transfer to help out Pues. However, Lev felt that he

32

Case Document 52 Filed 10/20/15 Page 33 of 51 PageID 482

was being defrauded. Lev reviewed a series of e?mails from Pues that he did not
respond to. His partner David Correia responded that Parnas Holdings agreed to put up
as collateral two points of its ownership of the ?lm, ?Memory of a Killer," ?for the 510k
owed to the Pues Family Trust.? (Tr. at 498). He agreed to the total sum of $510,000
being owed to the Pues Family Trust because Michael Pues told him that there was a
$161,000 tax bill levied on the Trust.

Lev Parnas testi?ed that Pues tried to sell his boat to fund additional money into
Parnas Holdings. Pues said he had an idea, that he would ship his boat down, sell it
and credit some of the money toward his account and ?50 percent of that money would
be credited to his wife and 50 percent would be credited to his account . . (Tr. at
500). Pues told them that the boat was in good shape and worth $100,000. However,
Lev testi?ed that the boat ?wasn?t worth the money that it was towed to get there.? (Tr.
at 500, 501 So that Lev testi?ed that Pues gave them the boat for them to sell and
credit the proceeds to his account. The boat was transferred from Pues to Parnas
Holdings for no consideration. As stated above, according to Lev, the intention was, "To
sell the boat and get the funds and credit Mr. Pues? account,? (Tr. at 507), meaning the
Pues account with Parnas Holdings.

Lev testi?ed that the boat was acquired by Parnas Holdings Inc. for no
consideration and was resold. Most of the money was given to Koala Productions and
Durand, approximately in the amount of $317,000. Parnas Holdings has zero points in
the movie and has a dispute with Durand. So that Lev testi?ed that he doesn?t have the

money and doesn?t have the points; all he has is a law suit.

33

Case Document 52 Filed 10/20/15 Page 34 of 51 PagelD 483

On cross-examination, Lev testi?ed that he met Pues in connection with the Pues
account at Monolith Bullion. Pues knew that the $350,000 was not a loan. He knew he
was investing in the company. He had directed Mr. Correia to make sure, in writing,
that the $350,000 was an investment and not a loan. In Plaintiff?s Exhibit 1 (Pltf?s Ex. 1),
it is stated that Parnas Holdings Inc. agrees to put up as collateral two points of
ownership of the ?lm ?Memory of a Killer," for the $510,000 owed to the Pues Family
Trust. Lev saw this e-mail and the word ?owed.?

Lev set up Parnas Holdings Inc. to make investments in approximately the year
2000. Later in his testimony, he said it was in the year 2010 or 2011. He invested over
$200,000 or $300,000. The shareholders of Parnas Holdings lnc., consisted of himself,
Correia, Pues, Hammer and two smaller ones. The company is now defunct and it is
bankrupt.

Lev ?rst met Pues when he was introduced to him as a person who had an
existing relationship with Parnas Holdings lnc., through someone in Monolith Bullion.

Lev had some disagreements with Randy Durand with regard to the ?lm they
were trying to ?nance. In one communication, Durand wrote that he was ?shocked,
dismayed and most of all very disappointed in your past transgression regarding my
?I?ve tried to be your friend since the day we met by always sharing my respect of
you.? (Tr. at 557). Durand was telling Lev to cease and desist from advertising his ?lm
on Lev?s web site. Lev had sold half a point in the ?lm being produced by Durand for
$250,000 and did not pay that sum to Durand and Koala Productions. As to Michael

Pues, Lev testi?ed that, ?He was just supposed to fund his million dollar commitment to

34

Case Document 52 Filed 10/20/15 Page 35 of 51 PageID 484

Parnas Holdings.? However, Lev did not know if he or Parnas Holdings ever made any
written demands to Pues for the million dollars.

Pues got the $100,000 he invested in Parnas Holdings from his Monolith
account. The additional $350,000 that Parnas Holdings received from Pues came from
a trust, the Pues Family Trust; an elderly parents' trust. Asked whether that raised a
?red ?ag? with him, Lev responded that he was happy that Michael was sending us the
money because ?we were owed the money and we were able to proceed with Mr.
Durand at the time.? (Tr. at 571).

At that time, in 2010, the only investments that Parnas Holdings had were from
Pues and Hammer. Because of the ?nancial problems with Pues, ?we ended up going
out of business.? (Tr. at 572). Despite this situation, neither he nor Parnas Holdings
ever ?led a law suit against Pues to recover the million dollars, nor did they interpose a
counterclaim in this law suit.

Lev Parnas knew that Michael Pues was a trustee for the Pues Family
Revocable Trust. In the Parnas Holdings Subscription Booklet, (Pitt?s Ex. 3), on the
page signed by Lev Parnas, one of the participants is cited as ?Michael Pues as Trustee
of the Pues Family Revocable Trust.?

As to the sale of the boat, Lev was told that the wife of Pues had a ?fty percent
interest in the boat. However, they did not remit that ?fty percent of the value of the
boat to Mrs. Pues. Instead, they credited that money to the investment of Pues. Lev

stated that they had to invest $13,000 to make the boat usable and saleable.

35

Case Document 52 Filed 10/20/15 Page 36 of 51 PagelD 485

In evidence is a document called the Participant Agreement (Pltf?s Ex. 3, p. 37).
In this agreement, it states that the participant contributed the sum of $350,000 to the
company. However, signi?cantly, Pues did not sign this agreement, as stated in the
following colloquy:

And he refused to sign this, correct?
I don?t know what happened with this. I wasn?t involved with the situation.

It was never signed, right?

Obviously if you don?t have a signature, it wasn?t signed.



That?s because he told you, Lev, what is this? I never agreed to contribute
$350,000; is that correct or not correct?

A. Like I said, this was brought up after the fact, after he send (sic) the
money.

We went through a lot of negotiations to help him out. This was an
attempt from our side to help him in his situation that he was going
through.

We asked our attorney to ?gure out a way where we can help him
in his trust information situation.

(Tr. at 579, 580).
During Lev?s testimony, he was questioned about a very signi?cant document. It
was an e-mail from David Correia of Parnas Holdings to Michael Pues. (Pltf's Ex. 1, p.
000005). In this e-mail, dated May 25, 2011, Correia, representing Parnas Holdings
Inc. wrote to Michael Pues including the following language:
Michael:

as per our conversation a few moments ago, I am sending
you this email while we are waiting for the documents to be

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Case Document 52 Filed 10/20/15 Page 37 of 51 PageID 486

put together by our attorney. In the meantime, Lev wanted
you to have something in writing for your security.

Parnas Holdings, Inc. agrees to put up as collateral 2pts of

our ownership of the ?lm ?Memory of a Killer? for the $510k

owed to the Pues Family Trust. As you know, this is the

amount agreed upon between you and Lev yesterday.
(Pltf's Ex. 3, p. 000005).

Lev denied that the use of the word ?owed" meant that the transaction was a
loan. In their dealings with Durand, Parnas Holdings sent approximately $317,000 to
him. According to the Subscription Agreement, Pues owes Parnas Holdings a million
dollars. However, no demand for this sum of money was made by Parnas Holdings.

The defendants rested.

In rebuttal, the plaintiff's called Randy Durand. He testi?ed that Koala
Productions received a total of $300,000 from Parnas Holdings. Durand denied being a
mentor for Lev Parnas.

On cross?examination, Durand testi?ed that he asked to come here to court, ?to
testify regarding my knowledge about a loan that Mr. Pues made to Mr. Parnas.? (Tr. at
610)

Both sides rested.

n. ll? FINDINGS oF FACT

After eliminating all of the extraneous and non-relevant facts, the Court is left with

two viable factual questions to be decided as follows:

1. Did the plaintiff prove that the $350,000 delivered to Parnas Holdings Inc. was

a loan or was it an investment in Parnas Holdings Inc.?

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Case Document 52 Filed 10/20/15 Page 38 of 51 PageID 487

2. Did the plaintiff prove any cause of action against the defendant Lev Parnas,
individually?

The Court will new review the testimony and makes the following ?ndings
established by a preponderance of the credible evidence.

Michael Pues initially worked as a marble setter in the stone industry. In 1994,
he started his own company called Veterans Stone, Inc. Unfortunately, Pues was badly
injured in a construction accident in June 2008 and was out of work to 2011. In 2010,
he met the defendant Lev Parnas. Lev was a stock broker who helped Pues with his
investments and Pues trusted him. Lev opened an investment account for Pues.

In November 2010, Pues met with Lev at the Millennium Hotel in New York and
they discussed various investments. At that time, the Court ?nds that Lev was his
investment adviser and his broker. Pues trusted Lev and relied on him for investments.
Lev spoke to Pues about a movie deal with Koala Productions. As a result of his
accident - and a divorce, Pues had ?nancial dif?culties and was having trouble raising
his three teenage children.

In December 2010, Lev was back in New York and spoke to Pues about
investing in the movie. At that time, Pues met with Rudy Durand, who wanted Pues to
invest in his company Koala Productions, which was involved in the making of the
movie called ?Anatomy of an Assassin.? Pues had three children who were 16, 14 and
12 years of age as of 2010. At that time, Pues was having ?nancial dif?culties and Lev
gave him the exclusive opportunity to invest in the movie deal that, according to Lev,

would provide him with ?a substantial amount of return.? After having dinner with

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Case Document 52 Filed 10/20/15 Page 39 of 51 PagelD 488

Durand and actor Jack Nicholson, Pues was very impressed. Lev told him that he
would make a lot of money with this investment. Pues felt that this investment would
provide him with money for his three children and their future college education.

Pues decided to invest $100,000 in Koala Productions. He received ?two
percentage points? in the movie. Pues never had any direct agreement with Koala
Productions. However, on November 11, 2010, he signed the last page of an
agreement with Lev Parnas. (Pltf?s Ex. 3). The agreement stated that the purchase
amount was one million dollars. Lev told him that he did not have any other pages of
the agreement and he did not see any other pages of the agreement until a month later
when he met Rudy Durand in New York. The agreement is entitled ?Subscription
Booklet for Parnas Holdings, Inc." This was the only document that Pues signed.

In January of 201 1, Pues was told by Lev that Durand needed another $400,000
from Parnas Holdings or Pues would lose his investment of $100,000. At that time,
Pues discussed his family trust and a ?bridge loan.? The Court ?nds that the following
conversation took place between Pues and Lev. Pues told Lev, can do a bridge loan
but it?s a bridge loan, it?s a bridge loan, it?s my parents savings; that?s all they have."
Lev asked him for the $350,000 and he would cover the rest. Pues told Lev that if he
loaned the $350,000 in the parents? trust, that the money had to be repaid in forty-?ve
days. He told Lev, ?It?s their savings, that?s all they have.?

The Court also ?nds that Lev asked Pues to speak to his parents to ?nd out if
they would do a short term bridge loan. In January 2011, Pues did obtain the approval

of his parents to make this substantial short term bridge loan on the condition that it was

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Case Document 52 Filed 10/20/15 Page 40 of 51 PageID 489

to be paid back within forty-?ve days, which date was March 15, 2011. The $350,000
was lent to Parnas Holdings for a bonus of two percentage points from the movie gross,
and also, to save the prior investment by Pues of $100,000. No documents were
signed in connection with the $350,000 loan; it was an oral agreement to return the
money in forty-?ve days. Clearly, Lev knew that the money came from the Pues Family
Trust account.

At the end of January 2011, $350,000 was transferred from his family?s trust
account to Parnas Holdings to be sent to Koala Productions to ?nance the movie. Also,
Pues told Lev that he needed the $350,000 loan returned within forty-?ve days to avoid
paying taxes and penalties. When he did not receive payment of the loan by the forty-
?ve day period, Pues sent e-mails and made telephone calls to Parnas. Lev did not
respond to the e-mails or the telephone calls. On April 21, 2011, Pues sent Lev a
certi?ed letter, which clearly referred to the ?unpaid $350,000 loan.? The certi?ed letter
was received on delivery. Also, these e-mails to Lev from Pues, which were not
answered, are in evidence referring to the ?$350,000 bridge loan.?

After he transferred the $350,000 to Parnas Holdings, Pues was not able to
communicate with Lev Parnas. The Court ?nds that the $350,000 was loaned to both
Lev Parnas and Parnas Holdings Inc.

Q. Who was the loan to?

A. Lev Parnas, Parnas Holdings, was supposed to be used for the movie to
save my $100,000 and everything.

1' 

4o

Case Document 52 Filed 10/20/15 Page 41 of 51 PagelD 490

(Tr. at 185).

THE COURT: Excuse me. Who was the loan to?

THE WITNESS: Parnas Holdings and Lev Parnas. Lev Parnas and
Parnas Holdings.

As stated above, on April 27, 2011, Pues sent an e-mail to Lev Parnas in which

he stated that Lev ?personally guaranteed repayment of the now overdue loan.? (ths?

Ex. E).



Mr. Pues, do you recognize this e?mail?

see it, yes, from myself, to Lev Parnas.

And it is your e-mail address, veteransstone@optonline.net?

Yes, it is.

Now, here, on April 26, 2011, you write I want to make it clear to you - -

strike that.

I want to make it clear, that you, Lev Parnas, have personally
guaranteed repayment of this now overdue loan.

Is it your understanding that Mr. Parnas personally guaranteed
the loan?

Yes, he said he would.

?k 

Parnas, Limited, was the borrower and you have a separate agreement
with Lev Parnas to act as the guarantor?

No, Lev Parnas and he guaranteed it personally.



I'll read to you from this e?mail in which you testi?ed earlier as to having
sent

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Case Document 52 Filed 10/20/15 Page 42 of 51 PagelD 491

There's an outstanding balance on the unpaid $350,000 loan,
made to Parnas Holdings, Inc., from the Pues Family Trust IRA.

Later on in that e-mail you state: These terms were not met and as
a result taxes and penalties totaling $161,000 were assessed by the IRS
bringing the total outstanding amount due to the Pues Family Trust from
Parnas Holdings, Inc. to $511,000.

80 am I correct in saying that the loan was the Pues Family - 
excuse me, the loan was to Parnas Holdings, Inc., and you alleged you
had a separate agreement with Lev Parnas as the guarantor?

A. No, it was together. Lev Parnas is Parnas Holdings and he guaranteed,
he said personally, I guarantee personally. That's it.

Q. Understood.

Now turning to paragraph 38 of your complaint - - excuse me.
Strike that.

Turning to paragraph 48 of your complaint where you allege breach
of contract. There you are not alleging one time then it appears, in fact
there are two contract. There?s one contract under the loan and another
contract with Lev as guarantor.

Is that your understanding?

A. No, he personally guaranteed it.
Q. There was a loan and there was a personal guarantee?
A. No, Parnas Holdings, he said it is all one, I guess.

I don't know what you are looking for. I don?t understand.
You?re a law company, you cosign a loan, you guarantee it for your

loan. Like my company has a line of credit and I personally guarantee it.
It?s one thing.



Q. There was a guarantee and the loan is what you are alleging?

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Case Document 52 Filed 10/20/15 Page 43 of 51 PageID 492

A

A.

A



A.

I don?t understand what you are saying.

I believe your testimony has been clear, so I?ll move on.

You are trying to separate it.

How was Lev Parnas, how would he personally guarantee the loan?

I let Lev Parnas, my trust guess his fame and
experience of being, you know, a stockbroker and running companies,
intelligent, smart man. I trusted him with everything. He used to call me
family.

Was it in person, was it through an e-mail, was it over the phone?

No, in his of?ce when he said it.

So you were in front of each other and you came to an oral agreement?

Yeah.

(Tr. at 189?192).

The $350,000 loan to Lev Parnas and Parnas Holdings Inc. was corroborated by

the testimony of Rudy Durand. As I stated previously, of importance, Durand testi?ed

about a conversation with Pues and Lev in which they stated that Pues loaned

$350,000 to Lev to save his $100,000. He stated there were numerous conversations

with Lev concerning ?the loan from the Pues Family Trust to Parnas Holdings.? (Tr. at

306, 307). He further testi?ed that Lev Parnas admitted to him that it was a loan. (Tr. at

306, 307). In this regard, Durand testi?ed that Lev Parnas himself admitted to him ?that

the money from the Pues Family Trust was a loan.? (Tr. at 365).

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Case Document 52 Filed 10/20/15 Page 44 of 51 PagelD 493

The Court ?nds that there is one single bridge loan to Parnas Holdings, Inc. in
the sum of $350,000, which was personally guaranteed by Lev Parnas in return for two
percentage points in the movie and to safeguard the prior loan of $100,000 by Pues.


A. First Cause of Action - Breach of Contract

The plaintiffs ?rst cause of action, delineated as a breach of contract, is in fact,
an action to recover on a loan. The allegations in the ?rst cause of action refer to the
loan of $350,000. The defendants oppose this cause of action as against the defendant
Lev Parnas. They contend that this complaint ?has not asserted a cause of action
against Lev as borrower but rather as guarantor.?

As stated above, the Court ?nds that the loan of $350,000 was made to both
defendants, Lev Parnas and Parnas Holdings inc. and therefore, both defendants are
liable for repayment of the loan. Under New York law, to establish a prima facie case of
default on a loan, the plaintiff must provide proof of a valid loan and of the defendants?
failure, despite proper demand, to make payment. A loan is a contract. To make out a
viable claim for breach of a loan agreement, the plaintiff need only prove: (1) the
existence of the loan; (2) breach of the loan contract by failure to repay the loan within
the prescribed repayment date; and (3) damages as a result of failure to repay the loan.
.312. Fisher Mandell LLP v. Citibank. NA, 632 F.3d 793, 799 (2d Cir. 2011);
Eternitv Global Master Fund Limited v. Morgan Trust Company of New York, 375 F.3d
168, 177 (2d Cir. 2004); Group Automotive. Inc. v. Countv Imported Car Corp., No. 07-

RRM WDW, 2012 WL 11955634, at 8 (E.D.N.Y. Aug. 5, 2012).

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Case Document 52 Filed 10/20/15 Page 45 of 51 PageID 494

Here, the Court ?nds that the facts in this case are simple and uncomplicated.
The plaintiff Pues Family Trust, acting by Michael Pues, made an oral loan of $350,000
to Parnas Holdings Inc. and Lev Parnas. The agreement was that the loan, taken from
the Pues Family Trust Account was to be repaid within forty-?ve days. The loan was
never paid and the plaintiff Pues Family Trust is entitled to judgment in the sum of
$350,000.

The plaintiff asserts that in addition to the amount of the loan, namely $350,000,
there is also due an additional $161 ,000, According to the plaintiff, this sum consisted
of taxes and penalties assessed by the IRS against the Pues Family Trust because of
the absence of the $350,000 loaned to the defendants. The Court declines to add this
amount to the $350,000 loan. There is no viable evidence that the defendants agreed
to pay the additional $161,000 and it is disallowed.

B. Second Cause of Action - Fraudulent Inducement of Contract

The plaintiff contends that it has established all the elements necessary to prove
its claim for fraudulent inducement of contract. This cause of action is based on the
alleged ?material false promise and misrepresentations to induce plaintiff to make a
short term bridge loan to the defendants in its principal sum of $350,000." (Complaint
1153).

Under New York law, the elements of a fraudulent inducement claim are: (1) the
defendant makes a representation; (2) regarding a material existing fact; (3) which was
false; (4) was known by the defendant to be false; (5) the representation was made for

the purpose of inducing the plaintiff to rely upon it; (6) the plaintiff reasonably did so rely

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Case Document 52 Filed 10/20/15 Page 46 of 51 PagelD 495

on the representation in ignorance of its fallacy; and (7) did so, to his injury. 
Computerized Radiological Services v. S?ex Corp., 786 F.2d 72, 76 (2d Cir. 1986);
quprs Co.. Inc. v. Cadburv Stani 380 F.Supp.2d 265 (S.D.N.Y. 2005).

In this case, the plaintiff failed to prove that the defendant Lev Parnas made a
material misrepresentation, known to be false with the intention of inducing reliance by
the plaintiff. The alleged ?promise" set forth in the complaint namely, the promise to
repay the loan of $350,000 was an integral element in the cause of action to recover
on the loan and is thus duplicative of the plaintiffs? breach of contract claim. ?g
Guilbert v. Gardner. 480 F.3d 140, 148 (2d Cir. 2007) (?The amended complaint,
however, fails to support a claim of fraud under New York law because it is duplicative
of the breach of contract claim").

As to the other alleged representation set forth in the complaint, namely, that the
prior loan by Pues of $100,000 would be lost if the additional loan was not made. The
Court ?nds that this was not a false misrepresentation. Also, the plaintiff failed to prove
that the $350,000 was not to be used for the movie project discussed. In addition, the
alleged false representation to repay the $350,000 no later than March 12, 2011, was a
component factor in the action on a loan and is not relevant in this fraudulent
inducement cause of action. Also, the other alleged misrepresentations leading to the
loan were either part and parcel of the loan cause of action itself or were not
established.

Stated simply, the plaintiff failed to prove a material false representation made

with the intention of inducing the loan of $350,000.

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Case Document 52 Filed 10/20/15 Page 47 of 51 PageID 496

C. Third Cause of Action - Conversion

In order to recover in this case, substantially based on an action on a loan, the
plaintiff must prove the elements of a conversion action as distinguished from the acts
involving the loan of $350,000. The plaintiff has failed to do so.

?Under New York Law, ?[c]onversion occurs when a defendant exercises
unauthorized dominion over personal property in interference with a plaintiff?s legal title
or superior right of possession.? gls_evier Inc. v. Mem-on, No. 
2015 WL 1412745, at *12 (E.D.N.Y. Mar. 23, 2015)(quoting LoPresti v. Terwilliqg, 126
F.3d 34, 41 (2d Cir. 1997)). ?To maintain a claim for conversion, a plaintiff must show:
(1) the property subject to conversion is a speci?c identi?able thing; (2) plaintiff had
ownership, possession or control over the property before its conversion; and (3)
defendant exercised an unauthorized dominion over the thing in question, to the
alteration of its condition or to the exclusion of the plaintiff?s rights.? Moses v. Martin,
360 F.Supp.2d 533, 541 (S.D.N.Y. 2004) (internal quotation marks and citation omitted).

In any event, a claim for conversion ?cannot be predicated on a mere breach of
contract.? Piven v. Wolf Haldenstein Adler Freeman No. 08CL 10578
(RJS), 2010 WL 1257326, at *9 (S.D.N.Y. Mar. 12, 2010)(citation omitted). ?Rather, to
state a claim for conversion, a plaintiff must allege ?independent facts suf?cient to give
rise to tort liability.? (citations omitted).

Here, the Court ?nds that the plaintiff?s conversion claim is simply a restatement
of the breach of contract action on a loan claim based on the defendants? failure to

repay the loan. Thus, there is no basis for a claim that the defendants violated an

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Case Document 52 Filed 10/20/15 Page 48 of 51 PageID 497

independent tort duty owed to the plaintiff. There was no proof of an unauthorized
conversion of this $350,000. The plaintiff loaned the money to the defendants and there
was no proof of unauthorized conversion in this case.

D. Fourth Cause of Action - Fraud

To prevail on a fraud cause of action, a plaintiff must prove: (1) that the
defendant made a misrepresentation; (2) as to a material fact; (3) which was false; (4)
known to be false by the defendant; (5) made for the purpose of inducing the plaintiff to
rely on it; (6) that the plaintiff rightfully did so rely; (7) with ignorance of its falsity; and (8)
to his injury. Cohen v. Koenig, 25 F.3d 1168, 1172 (2d Cir. 1994); Murray v. Xerox
Q_o_rg, 811 F.2d 118, 121 (2d Cir. 1987).

Again, what the plaintiff presented was an action on a loan. There was a failure
to prove fraud. As stated previously, and explained by the defendants, ?a fraud claim
may not be used to restate what is eventually a claim for breach of contract.? 
CSX Transp. Inc., 471 F.3d 410, 416 (2d Cir. 2006). In the Court?s view, the plaintiff
failed to prove that Lev Parnas made a false misrepresentation as to a material fact for
the purpose of inducing the plaintiff to rely on it. Accordingly, the fraud cause of action
is dismissed.

E. The Sixth Cause of Action - Uniust Enrichment

Under New York law, to make a claim for unjust enrichment, a plaintiff must
prove that: defendant was enriched, (2) at plaintiff?s expense, and (3) equity and
good conscience militate against permitting defendant to retain what plaintiff is seeking

to recover." Legurnic v. Ciccone, No. 09-CV-1436 (ADS), 2014 WL 6674593, at *7

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Case Document 52 Filed 10/20/15 Page 49 of 51 PageID 498

(E.D.N.Y. Nov. 25. 2014) (Spatt, J) (citing Briarpatch Ltd., L.P. v. Phoenix Pictures. Inc.,
373 F.3d 296, 306 (2d Cir. 2004)); see also, Transcience Com. vjiq Time Tovs. LLC,
No. ER, 2014 WL 4827878, at *6 (S.D.N.Y. Sept. 23, 2014) (same). ?The
basis of a claim for unjust enrichment is that the defendant has obtained a bene?t which
in ?equity and good conscience? should be paid to the [p]laintiff.? Corsello v. Verizon

New York Inc., 18 777, 790, 967 1177 (2012) (citing Mandarin Trading

 

v. lMldenstein, 16 172, 182 (2011)).

In the plaintiff?s Proposed Findings of Fact and Conclusions of Law, in support of
this cause of action, the plaintiff alleged that ?Plaintiff has produced documentary
evidence showing that $350,000 was loaned to defendants . . . Defendants have
retained those funds for its own pecuniary gain and their failure to repay or return these
funds to plaintiff has resulted in damages.? In the Court?s view, these allegations
support the cause of action on the loan but fail to establish an unjust enrichment claim.

As stated above, repeatedly, an unjust enrichment claim cannot be asserted in
what this proof reveals as a breach of contract on a loan cause of action. Not only is
the claim for unjust enrichment merely duplicative of the loan cause of action, it has not
been established. The plaintiff had agreed to accept two points in the ?lm ?Memory of a
Killer," as compensation for the loan and he has received those two points.

In this regard, the New York Court of Appeals has held that an ?unjust
enrichment claim? ?is not a catchall cause of action to be used when others fail," and
has dismissed such claims where they are duplicative of other claims. Corsello, 18

at 791, 967 1177 (?To the extent that these claims succeed, the unjust

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Case Document 52 Filed 10/20/15 Page 50 of 51 PagelD 499

enrichment claim is duplicative; if plaintiffs' other claims are defective, an unjust
enrichment claim cannot remedy the defects. The unjust enrichment claim should be
dismissed?); Town of Walkill v. Rosenstein, 40 972, 974, 837 212 (2d
Dept. 2007) (?For reasons other than those set forth by the Supreme Court, those
branches of the defendants? motion which were for summary judgment dismissing the
causes of action alleging breach of ?duciary duty, fraudulent concealment, unjust
enrichment, and breach of contract were properly dismissed. They were merely
duplicative of the legal malpractice cause of action, as they arose from the same facts
and did not allege distinct and different damages?).

Accordingly, the Court grants the defendants? motion to dismiss the plaintiff's
unjust enrichment claim.

IV. CONCLUSION

The Court ?nds that the plaintiff Pues Family Trust IRA, by Michael Pues,
Executor of the Estate, has established, by a preponderance of the credible evidence,
that a valid loan of $350,000 was made by the Pues Family Trust to both defendants,
Parnas Holdings Inc. and Lev Parnas, which has not been repaid and is due and owing.

Therefore, judgment is rendered on behalf of the Pues Family Trust IRA against
the defendants Parnas Holdings Inc. and Lev Parnas in the amount of $350,000, with
interest from March 17, 2011 and the costs of this action.

The attorneys for plaintiff are directed to submit a proposed judgment on notice

to the defendants within ten days of the date of this decision.

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SO ORDERED.

Dated: Central lslip, New York
October 20, 2015

Arthur Q. Spatt
ARTHUR D. SPATT
United States District Judge

51