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ASDOURIAN v. KONSTANTIN

May 11, 1999

KEITH ASDOURIAN, AND BLUE CHIP MORTGAGE CORP., PLAINTIFFS,
v.
GARY KONSTANTIN, RAHIM ALI, JOHN MURPHY, SR., RELIANCE MORTGAGE CORP., TERI GUNGOR, THE HIP HOP CAFÉ, UNITED COMPANIES LENDING CORP., HAROLD PIERRE, SALVATORE CARIOLA, RUTHVEN PRITHWIE, HARVEY GLASER, ADI OKEON, AUGUSTO JALON, MICHAEL FUNDING, LINDA FUNDING, LLC, BENJAMIN FUNDING, LLC, RELIANCE MORTGAGE BANKING CORP., MICHAEL HARRIS, MICHAEL CONSULTING INC., AND ALLIANCE MORTGAGE CORP., DEFENDANTS.



The opinion of the court was delivered by: Spatt, District Judge.

MEMORANDUM OF DECISION AND ORDER

Presently before the Court is the plaintiffs' Order to Show Cause seeking a preliminary injunction pursuant to Rule 65 of the Federal Rules of Civil Procedure enjoining defendants Gary Konstantin ("Konstantin"), Rahim Ali ("Ali"), Reliance Mortgage Corp., Reliance Mortgage Banking Corp. (collectively, "Reliance"), The Hip Hop Café, Augusto Jalon ("Jalon"), Linda Funding LLC, Michael Funding LLC, and Benjamin Funding LLC from selling, transferring or otherwise disposing of any interest in the following property:

(1) A parcel of land located at 705 East Passyunk Ave., Philadelphia, PA (the "Hip Hop Café);"

(2) A parcel of land located at 69 Montauk Highway, Copiague, N.Y. 11752;

(3) Residential property located at 529 Queen Street, Philadelphia, PA;

(4) Real property located at 881 Cedar Swamp Road, Brookville, NY;

(5) Real property located at 95 Riviera Drive, Massapequa, N.Y. (properly should be 75 Riviera Drive South, Massapequa, NY);

(6) Real property located at 1886 Schenectady Avenue, Brooklyn, NY;

(7) Real property located at 517 Decatur Street, Uniondale, NY;

(8) Real property located at 111-60 Lefferts Blvd., Ozone Park, NY;

(9) Personal property including one 1997 BMW 740IL and a 1998 Lincoln Navigator, which are both registered to defendant Konstantin;

(10) Personal property including a 1995 Chevrolet Impala, 1998 Lincoln Navigator, and a 1998 BMW, all of which are registered to defendant Ali; and

(11) Any other real or personal property purchased in whole or in part with funds belonging to one or both of the Plaintiffs.

I. BACKGROUND

The following facts are taken from the plaintiffs' amended complaint, filed on December 20, 1998. The plaintiffs allege that in early 1996, defendants Konstantin, Okeon, Prithwie, and Ali (the "Konstantin Group") approached Blue Chip, a mortgage banker licensed with the New York State Department of Banking, and its principal Asdourian, regarding a joint venture in the mortgage service industry. Konstantin advised Asdourian that he had heard that Asdourian had just received his banking license and that he, with his substantial experience in this particular area could help get his business off the ground in a manner in which it would otherwise take Blue Chip years to achieve. Apparently, the Konstantin Group represented that it would help Blue Chip generate substantial revenues.

Based on these representations, Blue Chip and the Konstantin Group entered into a joint venture agreement dated July, 1996, in which they agreed to join forces and pursuant to which, Konstantin was named Chief Executive Officer of Blue Chip and added as a signatory to Blue Chip's bank accounts and warehouse lines. The plaintiffs allege that in October, 1997 they discovered substantial withdrawals for personal use by the Konstantin Group of Blue Chip funds, including the use of money to purchase properties in Pennsylvania. Upon learning of this, Asdourian removed Konstantin as a signatory of the Blue Chip bank accounts.

The plaintiffs allege that when Asdourian confronted Konstantin with this, he became enraged and threatened to kill him. In addition, Konstantin revealed that he had a criminal record and had been arrested for insurance fraud in the past. Despite this threat, the plaintiffs unwisely agreed to reinstate Konstantin as signatory to the bank account. Thereafter, the plaintiffs allege that the Konstantin Group falsified documents such as tax returns, and employment and bank verifications for mortgage applicants to make such applicants far more credit worthy than they actually were, thereby generating funds for its own benefits. In addition, the plaintiffs contend that Blue Chip sold loans to another company for $100,000, far below the loans' fair market value.

Despite this activity by the Konstantin Group, the plaintiffs continued to work with them in order to rectify problems such as a number of banks who requested that Blue Chip buy-back the mortgages that they were sold due to irregularities. In April, 1998 Blue Chip's offices in Westbury were burglarized. The plaintiffs allege "upon information and belief" that the Konstantin Group orchestrated this break in to recover records that would have exposed their unlawful conduct regarding the buy-back loans. Approximately 1 1/2 years after learning of Konstantin's unscrupulous conduct, in May, 1998 Asdourian finally moved out of Blue Chip's Westbury offices. In another surprising move, Asdourian made an agreement to sell Blue Chip to the Konstantin Group. Some time later, Asdourian learned that the Konstantin Group had purchased multiple parcels of land in New York and Pennsylvania with Blue Chip funds. Some of this property is the subject of the present motion. As a result of this conduct, the plaintiffs filed a twelve count complaint alleging violations of RICO, conversion, indemnification, breaches of fiduciary duties, common law fraud, breach of contract, and fraudulent conveyances.


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