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Inc. v. Dean

United States District Court, N.D. Georgia, Gainesville Division

August 14, 2019

M3 ACCOUNTING SERVICES, INC., Plaintiff,
v.
WESLEY DEAN, DARRYL J. LANDRENEAU, KALEO TECHNOLOGY, LLC, and BLACK OPS SOLUTIONS & SYSTEMS, LLC, Defendants.

          ORDER

          RICHARD W. STORY, UNITED STATES DISTRICT JUDGE

         This case is before the Court on Defendants Kaleo Technology, LLC and Darryl J. Landreneau's Motion to Dismiss [25], as well as Defendant Wesley Dean's Motion to Dismiss [26]. After reviewing the record, the Court enters the following Order.

         Background[1]

         This case involves an alleged fraudulent invoice scheme orchestrated by Plaintiff's former employee, Defendant Wesley Dean, and his accomplice Darryl J. Landreneau (collectively the “Individual Defendants”) through their companies Defendants Black Ops Solutions & Systems, LLC (“B.O.S.S.”) and Kaleo Technology, LLC (“Kaleo”) (collectively the “Company Defendants”). In short, Plaintiff claims the Individual Defendants misrepresented various elements about the Company Defendants to entice Plaintiff into paying for false services and fees.

         Plaintiff employed Dean as its Executive Vice President of Technology from May 3, 2010, to October 6, 2014. (Amended Complaint, Dkt. [18] ¶ 9.) In this role, he was given broad authority to contract with third-party vendors on behalf of Plaintiff to assist in developing security software. (Id. ¶¶ 9-10.) During that time, Dean also accrued enough stock to become the third-largest owner of the company. (Id. ¶ 9.)

         On August 10, 2010, Dean filed Articles of Incorporation with the Secretary of State in Georgia for B.O.S.S., listing himself as the LLC's sole member and manager. (Id. ¶ 15.) Thirteen days later, Dean proposed that Plaintiff use B.O.S.S. as a vendor to provide specialized services.[2] (Id. ¶ 22.) However, Dean's portrayal of B.O.S.S. misrepresented the company's experience and omitted Dean's involvement altogether. (Id. ¶ 24.) Specifically, Dean said B.O.S.S. was “commonly known in the world of private military contractors.” (Id. ¶ 22, Exhibit A.) He also claimed to have visited the company's purported facilities abroad and to have personally utilized their services “in the past for various ‘skunkworks' projects that required strong accountability as well as some measure of discretion.” (Id.) Yet, B.O.S.S., having been formed less than two weeks before, had no reputation in the field, ability to provide services beyond what Dean himself could do, or facilities of any kind. (Id. ¶ 23.)

         After Dean convinced M3 to use B.O.S.S. in August 2010, Dean and Landreneau began their fraudulent invoice scheme that lasted until March 2017. While Plaintiff believed the company served as “project manager” or an intermediary company between M3 and third-party vendors and received invoices accordingly, Dean and Landreneau intentionally used B.O.S.S. as a shell company to carry out their scheme. (Id. ¶¶ 26, 27, 30, 33.) Dean and Landreneau created invoices from B.O.S.S. to Plaintiff, charging for services the company did not provide, and overcharging for bills paid to third-party vendors.

         In 2012, Landreneau formed Kaleo and is listed as the manager and registered agent on the company's Articles of Incorporation. (Id. ¶ 19.) Once formed, Plaintiff began paying B.O.S.S.'s invoices to Kaleo, at Dean's instruction. (Id. ¶ 35.) Dean later persuaded Plaintiff to use Kaleo as a vendor. In reality, he and Landreneau used Kaleo as a shell company, like B.O.S.S. (Id. ¶ 30.)

         Misrepresented Services

         Plaintiff alleges B.O.S.S. and Kaleo's services were repeatedly misrepresented in invoices to Plaintiff. (Id. ¶ 30.) It appears Plaintiff categorizes B.O.S.S.'s services as project/vendor management, processing, and software. (Id. ¶¶ 28, 43.) Of those, B.O.S.S. provided processing services and software but did not provide legitimate project/vendor management. (Id.) For example, in one invoice from October 21, 2010, B.O.S.S. represented that three of its engineers spent 528 hours researching for a project called “ACH Project.” (Id. ¶ 31, Exhibit B.) Plaintiff alleges the only people employed by B.O.S.S. at that time were Dean, Landreneau, and a third individual, none of whom were engineers. (Id. ¶¶ 28, 29, 32.) Further, any work done by Dean for B.O.S.S. violated M3's company policies and any project management services would have been the same that he was obligated to perform in his role at ¶ 3. (Id. ¶¶ 25, 29.)

         Overcharging for Third-Party Vendors

         B.O.S.S. and Kaleo also overcharged Plaintiff for work done by legitimate third-party vendors. As the intermediary, B.O.S.S. paid vendors for Plaintiff's work and then billed Plaintiff accordingly. (Id. ¶ 34.) B.O.S.S., however, billed Plaintiff for more than what it paid the vendor. (Id.) For example, while an invoice from December 15, 2010, shows B.O.S.S. billed Plaintiff $68, 000 for ANMSoft services, an invoice from November 16, 2010, shows ANMSoft only charged Plaintiff $23, 606 for the same services. (Id. ¶ 34, Exhibits C-D.) Thus, Plaintiff alleges B.O.S.S. overcharged them by $44, 394 in this invoice alone and approximately $1, 113, 003 for all inflated ANMSoft charges from September 2010 through March 2015. (Id. ¶¶ 34, 35.) And, records from ANMSoft indicate their services for M3 occurred between November 2010 and August 2012. (Id. ¶ 35.)

         B.O.S.S. inflated invoices for another third-party vendor, Chetu, from July 2012 through March 2015. (Id. ¶ 38.) This time, Chetu rendered services to Kaleo on behalf of B.O.S.S. (Id.) B.O.S.S. then billed M3. (Id.) Here, Plaintiff claims B.O.S.S.'s overcharges total approximately $1, 560, 303. (Id.) Chetu's records also indicate the legitimate services took place between September 2012 and May 2015. (Id.)

         Dean concealed the scheme through a combination of legitimate work and continued misrepresentations about B.O.S.S.'s services. (Id. ¶¶ 36, 42, 43.) Defendants submitted invoices for legitimate ACH processing services performed by B.O.S.S. and Kaleo and provided software used with those services. (Id. ¶ 43.) Further, on March 17, 2011, Dean represented to Allen Read in writing that B.O.S.S. was an essential vendor comprised of a “team” who provided an array of services for M3's projects and saved the company costs in the long term. (Id. ¶ 36, Exhibit E.) Plaintiff argues these tactics, combined with Dean's position of trust and elevated status as a shareholder at ¶ 3, kept Defendants' scheme hidden. (Id. ¶¶ 36, 42, 43.)

         On October 6, 2014, amid this scheme, Plaintiff terminated Dean for unrelated reasons. (Id. ¶ 11.) A separation agreement memorialized the termination and detailed terms such as stock buy-back, Plaintiff's release of claims against Dean arising from his job performance, and a continued relationship between M3 and Dean as a consultant. (Id. ¶ 14.) After his departure, Dean continued as a consultant, submitting false and inflated invoices through 2015. (Id. ¶¶ 31-44.)

         In March 2018, Plaintiff discovered Defendants' fraudulent scheme when law enforcement contacted it concerning an investigation into Dean. (Id. ¶ 45.) Plaintiff then hired forensic accountants who traced the stolen funds to Defendants, indicating that they used the money to purchase hunting gear, boating-related expenses, cars, sporting tickets, and gold, among others. (Id. ¶ 48.)

         On December 26, 2018, Plaintiff filed its Complaint [1] bringing federal and state claims against all Defendants. On February 4, 2019, the Clerk of Court entered default against Defendant B.O.S.S. for failure to plead or otherwise defend. Plaintiff has since filed an Amended Complaint [18] that the remaining Defendants now move to dismiss [25, 26]. The Court sets out the legal standard governing Defendants' Motions to Dismiss before considering the motions on the merits.

         Discussion

         I. Motion to Dismiss Legal Standard

         Federal Rule of Civil Procedure 8(a)(2) requires that a pleading contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” While this pleading standard does not require “detailed factual allegations, ” “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In order to withstand a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Id. (quoting Twombly, 550 U.S. at 570). A complaint is plausible on its face when the plaintiff pleads factual content necessary for the court to draw the reasonable inference that the defendant is liable for the conduct alleged. Id.

         At the motion to dismiss stage, “all well-pleaded facts are accepted as true, and the reasonable inferences therefrom are construed in the light most favorable to the plaintiff.” Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1273 n.1 (11th Cir. 1999). However, the same does not apply to legal conclusions set forth in the complaint. Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1260 (11th Cir. 2009) (citing Iqbal, 556 U.S. at 678). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678. Furthermore, the court does not “accept as true any legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555.

         II. Analysis

         In its Amended Complaint [18] Plaintiff asserts claims against all Defendants for conversion (Count VI), unjust enrichment (Count VII), and violation of both the federal and Georgia civil RICO acts (Counts II, IV). Against Defendants Dean, B.O.S.S., and Kaleo, Plaintiff also asserts a fraud (Count I) claim. Plaintiff additionally alleges Defendant Dean breached a ...


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