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FIRST CAPITAL ASSET MGMT. v. BRICKELBUSH
July 19, 2001
FIRST CAPITAL ASSET MANAGEMENT, INC., ET AL., PLAINTIFFS,
BRICKELBUSH, INC., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Lewis A. Kaplan, District Judge.
This is a civil action under the Racketeer Influenced and Corrupt
Organizations Act ("RICO") based on alleged bankruptcy and mail fraud.
Plaintiffs are judgment creditors who allege that RICO violations and
state law fraudulent conveyances prevented them from satisfying
outstanding judgments against defendant Sohrab Vahabzadeh and related
companies. Defendants charged with RICO violations are members of the
Vahabzadeh family and the family's Swiss attorney, Jens Schlegelmilch
("Schlegelmilch"). The matter is before the Court on defendants' motions
to dismiss for failure to state a claim, lack of personal jurisdiction,
lack of standing, and failure to plead fraud with particularity and on
plaintiffs' conditional cross-motion for leave to amend the complaint and
their cross-motion to strike.*fn1
Sohrab Vahabzadeh Enters into a Stock Purchase Agreement with Plaintiffs
At the root of this dispute is a stock purchase agreement entered into
by plaintiff First Capital Asset Management ("FCAM") and defendant Sohrab
Vahabzadeh ("Sohrab") and his companies, NACI and NAP, in October 1993.
Sohrab was to pay FCAM $4.5 million in return for an interest in a new
Delaware corporation called First Capital Corp. The agreement provided
that Oost-Lievense, the other plaintiff in this case, would become First
Capital Corp.'s chief executive officer. Based on this agreement,
Oost-Lievense resigned as president of ABN AMRO Securities, Inc.
Later in October, Sohrab, NACI and NAP breached the agreement, leaving
FCAM without its $4.5 million and Oost-Lievense without a job. For
reasons not crucial here, plaintiffs allege that Sohrab. NACI and NAP
owed FCAM and Oost-Lievense fiduciary duties and that the failure to
disclose material adverse events concerning the financing of the deal
breached these duties.
FCAM and Oost-Lievense Sue
Upon realizing that the companies had no locatable assets available to
satisfy this judgment, FCAM filed a second lawsuit in New York County in
which it sought to hold Sohrab responsible for the judgment against NACI
as its alter ego.*fn3 The state court initially dismissed the petition
against Sohrab, but the Appellate Division reversed.*fn4 On June 27,
2001, the New York Supreme Court entered judgment in favor of FCAM
against Sohrab for more than $5 million.*fn5
Meanwhile, Oost-Lievense sued Sohrab, NACI and NAP in this Court for
breach of an employment agreement.*fn6 Eventually, without a trial, all
defendants stipulated to amounts of damages and judgment was entered in
On July 17, 1997, a few weeks before the Oost-Lievense trial was
scheduled to begin, Sobrab filed a bankruptcy petition. This was followed
closely by FCAM and Oost-Lievense filing an adversary proceeding in which
they objected to Sohrab's discharge under Section 727 of the Bankruptcy
Code*fn7 on the basis of bankruptcy fraud and fraudulent conveyance.
Eventually, Sohrab's Chapter 7 petition for discharge was denied on
grounds of bankruptcy fraud.*fn8
According to plaintiff, the RICO predicate acts revolved around
Sohrab's bankruptcy proceeding. Specifically, plaintiffs identify the
following RICO predicate acts, primarily bankruptcy frauds and mail
• In August 1995, Sohrab and Peninsula, allegedly Sohrab's alter
ego, fraudulently conveyed their interests in a partnership to
Brickelbush in contemplation of bankruptcy.
• In early 1997 Sohrab transferred property inherited from
Soleyman to other family members, including Afsar. Schlegelmilch prepared
the documents that effected the transfer.
• On July 17, 1997, Sohrab filed a materially false bankruptcy
• On September 16, 1997, Sohrab made false statements under oath
at the Bankruptcy Rule 2004 examination by his creditors.
• Ahmed and Schlegelmilch directed the estate's attorney to submit
declarations to the Bankruptcy Court in February and March 1998
containing false statements about the contents of Soleyman's estate and,
in June 1998, Afsar and Soleyman's estate directed the same attorney to
submit a similar declaration.
• In March 1998, Afsar and Schlegelmilch submitted affidavits to
the Bankruptcy Court making false claims ...