The opinion of the court was delivered by: Sweet, D.J.,
Defendant S.G. Cowen Securities Corporation has moved to dismiss the
claims set forth in the complaint filed by plaintiff Theodore Rozsa
("Rozsa") pursuant to Rule 12(b)(6), Fed.R.Civ.P. For the reasons set
forth below, the motion will be granted.
Plaintiff Rozsa is an 86 year-old Canadian citizen and a resident of
the Province of Alberta.
Defendant May Davis Group, Inc. ("May Davis") is a securities
broker-dealer incorporated in Delaware and with a place of business in
At all times relevant to this action, defendant Carl Corley ("Corley")
was a Senior Account Executive and Registered Options Principal in the
New York office of May Davis.
Defendant Thomas Baribeau ("Baribeau") is a resident of California who
founded the Nevada corporation, Aid for Humanity and Benevolence
Foundation, Inc. ("the Foundation"), in 1999.
Defendant S.G. Cowen Securities Corp. ("SG Cowen") is a New York
securities broker-dealer that acted as the clearing broker for May Davis
at all times relevant to the complaint.
As required in a motion to dismiss pursuant to Rule 12(b)(6), the facts
alleged in the complaint are presumed to be true, and all factual
inferences will be drawn in the plaintiff's favor. See Mills v. Polar
Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993).
The complaint alleges that in late 1999, Baribeau induced Rozsa to wire
$5 million to a sub-account at the Foundation and represented that Rozsa
would be the sole signatory of the account, and that the money would be
invested only in money market funds unless Rozsa otherwise directed.
Baribeau represented that Rozsa's funds would be deposited at SG Cowen,
and would be used only as "proof of funds" for the other Foundation's
depositors' low-risk, high-yield "program trading" in foreign bank
instruments, and that Rozsa would receive a share of the profits from
Three days later, Baribeau faxed Rozsa and Corley a letter on
Foundation letterhead confirming that the Foundation "released all
signatory rights over any movement of [the contemplated $5 million]
deposit with Cowen Securities, account HM10585711, credited FOR THE
BENEFIT OF, Mr. Theodore Rozsa." (Compl. ¶ 13, Ex. B.) The letter
further provided that "only Mr. Theodore Rozsa shall have the authority
to transfer, obligate, or encumber these funds." (Id.) Later on December
16th, Rozsa arranged that $5 million be wired from his Bank of Montreal
account in Calgary to a bank account at the Bank of New York in
Manhattan, as per Baribeau's instructions. Rozsa sent the wire to be
deposited in the name of SG Cowen Securities Corp., "Ref: May Davis
Group, for further credit to: Aid for Humanity and Benevolence
Foundation, a/c HM10585711 FOR THE BENEFIT OF: Mr. Theodore Rozsa."
(Compl. ¶ 14.)
The next day, Corley faxed and mailed a letter on May Davis letterhead
welcoming Rozsa to the May Davis Group and stating May Davis's objective
"to help you build your net worth and manage risk." (Compl. ¶ 15,
Rozsa filled out additional Cowen forms on December 20, 1999, including
a Retail New Account Form and a W-8 Certificate of Foreign Status form,
reflecting his ownership of the funds in the account, and sent them to
Corley at May Davis by overnight delivery for inclusion in his account
Rozsa contends that no "program trading" ever took place, and that this
investment strategy was fabricated by Baribeau, Corley and May Davis as a
means of fraudulently inducing Rozsa to transfer $5 million into the SG
Cowen account so they could appropriate it for themselves in subsequent
secret and unauthorized wire transfers to Foundation accounts at other
banks, and then on to their personal accounts. Specifically, the entire
$5 million was wired out of Rozsa's SG Cowen account in unauthorized
transfers on February 22, 2000, March 9, 2000, March 15, 2000, March 16,
2000 and March 17, 2000. Baribeau, Corley and May Davis did not advise of
any of these transfers. However, SG Cowen did send ...