United States District Court, M.D. Georgia, Macon Division
T. TREADWELL, UNITED STATES DISTRICT COURT JUDGE
added Defendants Harold Knowles and Knowles and Randolph,
P.A. (“the Knowles Defendants”) have moved to
dismiss Plaintiff Bibb County School District's
(“BCSD”) second amended complaint. Docs. 232;
241. For the following reasons, their motion is
filed its initial complaint on December 15, 2016. Doc. 1. On
November 20, 2017, BCSD filed its second amended complaint
and joined new Defendants, including the Knowles
Defendants. Doc. 162. The amended complaint asserts
the following claims against the Knowles Defendants: (1)
federal RICO violation (Count I); (2) Georgia RICO violation
(Count II); (3) fraud (Count III); (4) Unjust Enrichment
(Count IX); and (5) aiding and abetting a breach of fiduciary
duties (Count XI). See generally id.
amended complaint followed the June 13, 2017 indictment of
Isaac J. Culver, Dave Carty, and Progressive Consulting
Technologies, Inc., and the August 10, 2017 indictment of
Cliffard Whitby, Harold Knowles, Central Georgia Partnership
for Individual and Community Development
(“PICD”), and Positiventures Initiative, LLC
(“PVI”). See generally Doc. 136-5.
Incorporating in large part the allegations made in both
indictments, the amended complaint asserts that the
Defendants engaged in multiple schemes to defraud BCSD,
causing BCSD over $8 million in damages. See
generally Doc. 162. BCSD claims it learned of the new
Defendants' involvement in the fraudulent schemes from
the indictments. Doc. 136 at 3-9. BCSD also learned that
Dallemand was not indicted and that Dallemand entered into a
plea agreement with the Government in which Dallemand stated
he received a $100, 000.00 check from “Cliffard Whitby,
with assistance from Harold Knowles, as a bribe for Dallemand
to perform certain actions in his official capacity as the
Superintendent of the Bibb County School District in Bibb
County, Georgia.” Id. at 5. Indeed, Dallemand
cooperated with the Government in its prosecution of the
Defendants, which explains why the indictments and the
amended complaint were as detailed as they were regarding the
Defendants' alleged involvement in the fraudulent
the filing of the amended complaint, the following events
• BCSD reached a settlement agreement with all of the
Defendants except Defendant Romain Dallemand, the Knowles
Defendants, and Defendants Pinnacle/CSG Inc. and Cory
McFarlane (the “Pinnacle Defendants”). Docs. 293;
296; 318; 319.
• The Pinnacle Defendants filed without leave of Court a
counterclaim, then later moved to amend their answer to
assert that counterclaim. Docs. 201; 289.
• The Court stayed the case pending the resolution of
the criminal trials involving some of the Defendants. Doc.
221. There were three trials in total. On July 24, 2018,
Defendants Culver and Progressive Consulting Technologies,
Inc. were convicted of conspiracy to commit wire and mail
fraud, wire fraud, mail fraud, and conspiracy to launder
money. United States v. Culver and Progressive Consulting
Technologies, Inc., No. 5:17-cr-26, Doc. 117 (M.D. Ga.
July 24, 2018). On October 9, 2018, Defendants Whitby,
Knowles, PICD, and PVI were found not guilty on charges of
bribery, and conspiracy to commit bribery and launder money.
United States v. Whitby, et al., No. 5:17-cr-43,
Doc. 176 (M.D. Ga. Oct. 9, 2018). On February 1, 2019,
Defendant Carty was convicted of wire fraud. United
States v. Carty, No. 5:17-cr-26, Doc. 272 (M.D. Ga. Feb.
• During the stay on June 1, 2018, the Court held a
status conference to address primarily the arguments raised
in the Knowles Defendants' motion to dismiss,
particularly the issue of whether BCSD's claims are
barred by the statutes of limitations. See generally
Doc. 291. As the Court explained at the status conference,
the Knowles Defendants' motion is decided on the
allegations raised in the second amended complaint.
Id. at 35.
according to BCSD, the Defendants engaged in multiple schemes
to defraud BCSD. The factual bases for BCSD's allegations
are stated in its 549-paragraph second amended complaint.
Because of the issues raised by the Knowles Defendants'
motion, it is necessary to discuss those factual allegations
February 1, 2011, BCSD entered into an employment contract
with Defendant Dallemand. Doc. 162 ¶ 22. Pursuant to
that contract, Dallemand became the school district's new
superintendent and, during that tenure, was in a relationship
of trust and confidence with BCSD and its Board of Education.
Id. ¶¶ 22, 24. In April 2011, in one of
his first acts as superintendent, Dallemand reorganized the
purchasing department so that proposed purchases, like those
involved in this case, would be reviewed and approved by
employees unfamiliar with BCSD's bid procedures.
Id. ¶ 139. According to BCSD,
“Dallemand's reorganization was essential to the
execution of the Defendants' scheme to defraud
BCSD.” Id. For purposes of this Order, the
Court need not go into detail as to these alleged schemes
other than stating that Dallemand's reorganization
allegedly played a role in BCSD paying over $7 million to
Culver, Carty, Progressive Consulting, Pinnacle, and
McFarlane for a technology upgrade involving computer devices
and software that are either unused or
addition to technology upgrade schemes, Dallemand also
facilitated the Defendants' scheme to defraud BCSD
through the Macon Promise Neighborhood (“MPN”).
MPN was supposed to be a collaborative effort by thirty-five
non-profit or governmental partners, including Defendant
PICD, to improve education and quality of life for students
living in targeted areas of Macon. Id. ¶ 25.
According to BCSD and the indictments, that is not how things
turned out. PICD purchased a surplus school building for
$220, 000.00 to house the MPN. Id. ¶¶
26-27. PICD was formed and created by Defendant Whitby.
Id. ¶ 8. Whitby was not only the executive
director of PICD, but he was also the executive director and
fiscal agent of MPN. Id. ¶¶ 6, 59.
Dallemand resisted the collaborative MPN concept.
Id. ¶ 34. That changed after Whitby
“outlined” and “explained” just how
Whitby envisioned MPN would work. Id. ¶ 35.
That explanation came to include an initial $100, 000.00
bribe paid to Dallemand in exchange for his support of the
MPN. Id. ¶ 37. Further, Whitby and Dallemand
agreed that Dallemand would receive ten percent of ten annual
$1 million payments BCSD would agree to pay to the MPN.
Id. ¶ 39. Of course, Dallemand did not disclose
that he had been bribed to either BCSD or its Board of
Whitby and Dallemand both had concerns over Whitby directly
paying Dallemand the first $100, 000.00. Id. ¶
76. Whitby suggested they create a company through which they
could route the money. Id. Until that was done, they
agreed to use Defendants Knowles and Knowles & Randolph
as the “middle man.” Id. Knowles is the
CFO and general counsel of Pinnacle and an attorney of
Knowles & Randolph, a Florida legal entity. Id.
¶¶ 17, 19. Dallemand knew Knowles from an event in
Tallahassee, Florida. Id. ¶ 77. After Dallemand
gave Knowles's contact information to Whitby, Knowles and
Whitby began communicating with one another on how to funnel
the money to Dallemand. Id. Dallemand later learned
from Whitby and Knowles that the money had been transferred
and that Knowles had a check for $100, 000.00 for Dallemand.
Id. ¶ 78.
the bribe arrangements finalized, the Board of Education
adopted on June 27, 2012 a resolution to support the MPN.
Id. ¶ 52. Pursuant to the resolution, BCSD
agreed to offer its “programs, resources,
current-budgeted funds, and related in-kind contributions
(the “Resources”) for purposes of supporting the
MPN initiative and act as matching requirements for the DOEPN
grant.” Id. The Resources would help support
four schools-Ingram-Pye, Hartley, Ballard and Southwest-in
amounts not exceeding $250, 000.00 per school, per year.
Id. Thus, at that point, BCSD's contributions to
the MPN were to be “in-kind.” On July 17, 2012,
Dallemand delivered a $1 million invoice from PICD to Ron
Collier, BCSD's Chief Financial Officer at the time.
Id. ¶¶ 53-54. The invoice was for a
“2012 Macon Children's Promise Neighborhood
contribution for PICD.” Id. ¶ 54.
Dallemand directed Collier to pay the invoice from BCSD's
funds, but Collier had concerns and did not pay the invoice.
Id. ¶¶ 54-55. When Dallemand learned
Collier had not paid the invoice, he told Collier to contact
Jimmie Samuel, the president of PICD. Id. ¶ 56.
But before Collier had a chance to contact Samuel, Samuel
called him but was unable to allay Collier's concerns.
Id. Collier decided to consult Sharon Roberts,
BCSD's director of accounting who had worked with the
collaborative group. Id. ¶ 57. Roberts told him
she did not know anything about the invoice, and Dr. Peter
Brown, the co-principal investigator for the MPN, said the
same after Roberts emailed a copy of the invoice to Dr.
Brown. Id. ¶¶ 33, 57.
morning of July 20, 2012, Dallemand called Collier at home to
complain about Collier's failure to pay the invoice.
Id. ¶ 58. Dallemand said he was
“disappointed” in Collier and that the president
of the Board of Education wanted to know why the invoice had
not been paid and asked if he needed to hire another Chief
Financial Officer. Id. Collier told Dallemand that
he-Dallemand-should approve the payment of the invoice, but
Dallemand refused to do so. Id. Because Collier
still had concerns about the invoice, he refused to pay it.
25, 2012, Collier received an email from Ebony Harris, the
project director of the MPN. Id. ¶ 59. In that
email, Harris wrote: “I was asked by Mr. Cliffard
Whitby Macon Promise Neighborhood, Executive Director and Mr.
Jimmie Samuel Partnership for Individual and Community
Development, President to forward a copy of the attached
invoice to you.” Id. This second invoice, also
for $1 million with PICD as the payee, was issued to the
“Bibb County Board of Education” and was for
“School System 2012 contribution for Macon
Children's Promise Neighborhood match Commitment.”
Id. ¶ 61. A few hours after receiving
Harris's email, Collier received a letter from Dallemand
directing him to prepare a $1 million check or wire transfer
to PICD and to “have this check or wire transfer
authorization . . . to me no later than 5:00 p.m. on
Thursday, July 26, 2012.” Id. ¶ 62.
response, Collier sent a letter on July 26, 2012 to Dallemand
stating he could not “‘in good conscience write
the check'” because he believed doing so would
violate “‘Georgia Laws, Rules and Regulations as
well as The State Board of Education Rules and
Regulations.'” Id. ¶ 63.
Consequently, Collier did not pay the invoice, and Dallemand
thereafter excluded Collier from all discussions regarding
the MPN until after the Board of Education met on October 18,
2012. Id. ¶ 64.
27, 2012, the president of the Board of Education, with
Dallemand's knowledge and consent, signed a lease
agreement in which BCSD agreed to lease a portion of the
surplus building for a period of ten years from PICD.
Id. ¶ 65. Pursuant to the lease agreement, BCSD
would pay $575, 000.00 to PICD as rent per year for ten
years. Id. ¶ 66.
October 18, 2012, upon Dallemand's recommendation, the
Board of Education approved a Memorandum of Understanding
(“MOU”) between PICD and BCSD. Id.
¶ 67. Pursuant to that MOU, BCSD would pay PICD $1
million to customize the interior of the building that BCSD
was already leasing a part of from PICD. Id. BCSD
also agreed to provide up to $325, 000.00 per year for ten
years to PICD for costs and services incurred in the
implementation of the MPN. Id. In sum, BCSD agreed
to give PICD a one-time payment of $1 million along with
$900, 000.00 per year for ten years for the costs and
services and rent of the building. Id. The lease
agreement and the MOU were separate from the June 27, 2012
resolution and the invoices that resulted from it.
October 30, 2012, BCSD wrote a check for $1 million made
payable to PICD. Id. ¶ 68. On November 2, 2012,
PICD gave a $950, 000.00 check to Defendant PVI, a Georgia
limited liability company that was formed and created by
Whitby and whose registered agent was Whitby. Id.
¶¶ 9, 80. On November 9, 2012, PVI gave a $100,
00.00 check to Knowles and Knowles & Randolph to fund the
initial bribe payment to Dallemand. Id. ¶ 87.
On November 19, 2012, Knowles gave a $100, 000.00 check to
Dallemand at a rendezvous in Tifton, Georgia. Id.
¶¶ 96-97. The $100, 000.00 check from Knowles to
Dallemand was drawn from the trust account of Knowles &
Randolph. Id. ¶ 98. The words “Trust
Refund” are written on the memo line of the check.
Id. Along with the $100, 000.00 check, Knowles gave
Dallemand a letter indicating the $100, 000.00 was being
returned as money that Dallemand had put into Knowles &
Randolph's trust account to purchase a house.
Id. ¶ 99. Dallemand had never used Knowles as
an attorney and had never given Knowles money to keep in
trust for any purpose. Id.
the time he gave Dallemand the $100, 000.00 check, Knowles
offered Dallemand stock in Defendant Pinnacle, a construction
firm in Tallahassee, Florida, if Dallemand helped secure
future construction contracts for Pinnacle from BCSD.
Id. ¶¶ 122, 241. Specifically, on November
11, December 1, and December 2, 2012, Knowles, individually
and on behalf of Defendants Pinnacle and McFarlane, emailed
Dallemand a draft stock purchase agreement in which Dallemand
would pay $500, 000.00 to obtain stock in Pinnacle; however,
contrary to what was stated in the purchase agreement and
based on conversations between Knowles and Dallemand,
Dallemand would not pay any money but instead would obtain
stock in Pinnacle in exchange for helping Pinnacle obtain
future construction contracts with BCSD. Id. ¶
123-26. BCSD was not aware of this discussion between Knowles
and Dallemand. Id. ¶ 129. In the end, Dallemand
resigned from his position as superintendent and BCSD did not
enter into any construction contracts with Pinnacle.
Id. ¶ 130. Dallemand, therefore, did not obtain
any stock in Pinnacle and never signed the stock purchase
agreement that Knowles had sent him. Id. However,
Knowles and Pinnacle later offered additional bribes to
Dallemand in order to obtain computer software business from
BCSD related to the technology upgrade project mentioned
between November 19, 2012 and December 18, 2012, Whitby and
Knowles told Dallemand about a financial transaction in which
Pinnacle would be the company “on paper” selling
an accounting and financial software program to BCSD;
however, in reality, the software would be developed by
another entity. Id. ¶ 192. Whitby, Knowles, and
Pinnacle offered Dallemand $500, 000.00 in exchange for
Dallemand ensuring that BCSD purchased the software from
Pinnacle. Id. Dallemand accepted the offer
“and, in fact, did push through a purchase by BCSD of
accounting and financial software from Defendant
Pinnacle.” Id. ¶ 193.
December 19, 2012, BCSD wired $3, 247, 200.00 to Pinnacle for
the software. Id. ¶¶ 213, 215. On January
8, 2013, Pinnacle gave Knowles and Knowles & Randolph
$100, 000.00. Id. ¶ 225. On January 10, 2013,
Knowles and Knowles & Randolph gave PVI $100, 000.00 as
reimbursement for the alleged bribe money that PVI gave to
them to give to Dallemand. Id. ¶¶ 226-27.
the initial $100, 000.00 bribe payment, Whitby and Dallemand
established Belhannes, LLC to facilitate payment of
subsequent installments. Id. ¶ 115. A chart in
the second amended complaint shows payments made to Belhannes
from August 15, 2013 to June 25, 2016 totaling $337, 400.00.
Id. ¶ 116. Sometime in 2015, Dallemand
contacted Knowles to ask whether he would be paid as Knowles
and Whitby promised for helping push through BCSD's
purchase of Pinnacle's software. Id. ¶ 232.
On April 2, 2017, Whitby met with Dallemand at a restaurant
in South Georgia and gave Dallemand $24, 000.00 in cash.
Id. ¶ 119. ...