9/11 Research Wiki

SunCruz Casinos has been linked to the hijackers. They were also caught dumping garbage into the ocean on April 24, 2003.

Michael A Hlavsa:

  • He received a bachelor of science degree from Canisius College in Buffalo, New York in 1975
  • His first 12 years of gaming experience was in Atlantic City, New Jersey in various audit and finance positions with well-established gaming companies such as Caesars, Tropicana and Trump Plaza.
  • From 1991 to 1993, Mr. Hlavsa was the Vice President of Finance and Administration for the Sands Hotel and Casino in Las Vegas, Nevada.
  • From 1993 to 1997, he served as Chief Financial Officer and Vice President, Midwest region, for Lady Luck Gaming Corporation, a publicly traded company. While at Lady Luck, he participated in that company’s initial public offering of equity and a $185 million debt financing.
  • From 1997 to 2000, Mr. Hlavsa was Managing Partner at Casino Princesa in Miami, Florida where he was responsible for the development and operation of a large mega-yacht gaming vessel.
  • From 2001 to 2004, Mr. Hlavsa was the Chief Executive Officer for SunCruz Casinos, the largest day cruise gaming company in the United States.
  • In 2005, he served as Chief Executive Officer for Titan Cruise Lines, a casino business which operated a 2,000 passenger ship and high speed shuttles.
  • From 2004 to the present, he has been the founder and principal owner of Signature Gaming Management LLC, a consulting firm specializing in advising emerging companies engaged in gaming operations.
  • From its inception in March 2007, Mr. Hlavsa has served as the Chief Financial Officer and continues as a Director of Asia Special Situation Acquisition Corp., a Cayman Islands special purpose acquisition corporation.
  • From its inception in November 2007, Mr. Hlavsa has served as the Chief Financial Officer and Secretary for Fund.com Inc.
  • From May 14, 2009 to January 20, 2010 Mr. Hlavsa served as Chief Financial Officer and Corporate Secretary of Rineon Group, Inc.
  • Gerova Financial Group Chief Financial Officer

Corporate Headquarters of Fund.com Inc. are 20th Floor 14 Wall Street New York, New York 10005

Cayman Islands-based Titan Cruise Lines, Incorporation date: 01/27/2003.

The beleaguered gaming company filed for Chapter 11 protection on Aug. 1, 2005, after Titan and its subsidiary, Ocean Jewel Casino and Entertainment Inc., failed to raise capital to keep the operation afloat after mandated annual repairs to the boat were completed.


February 24, 2011:

Gerova Financial Group, Ltd., the troubled Bermuda financial services company, announced today [Feb. 24] that the New York Stock Exchange has elected to halt trading pending the firm’s disclosure of additional information involving its operations, management restructuring and business plans.

Gerova Chief Financial Officer Michael Hlavsa said: “After a discussion with the NYSE, we concur that the best decision was to halt the trading of our securities.

05 January 2011: NYSE-Listed Gerova Financial Has Close Ties To Westmoore Ponzi Scamsters

On first blush Gerova Financial Group is the epitome of respectability. The company boasts a New York Stock Exchange listing, a share price of $28 and a market value of $750 million. Last month it announced plans to acquire broker-dealers Ticonderoga Securities of New York and Seymour Pierce Holdings Ltd. of London. This week it announced the purchase of life insurance policies and loans on policies for $105 million.

Below the surface things don’t look so good at Gerova.


Stillwater’s assets are those of a troubled slumlord that got taken by mortgage scamsters for $30 million in Columbus and other Ohio towns, according to the Columbus Dispatch. Its problems are far from over. In fact “a substantial majority of the real estate loans were experiencing interest payment delinquencies of 90 days or more,” according to Gerova’s 2009 annual report. How much are these bum loans worth now? That’s hard to say. Audits that were supposed to be completed last March are yet to be filed. Gerova says it received Stillwater audited financials last November and will release them with its annual report by June.

One certainty is that Chief Executive Officer Marshall Manley didn’t stick around for the results. Manley left Gerova last April, after just three months on the job. He is now suing Gerova for allegedly failing to provide him with $4 million in pay under a severance agreement.


All this adds up to sinister forces at play, if stock message boards and an anonymous tipster are to be believed. The story line is that Gerova and dozens of satellite companies are secretly being manipulated as part of a bid to pump up share prices and dump them on unsuspecting investors—many of whom are effectively required to own Gerova because of its inclusion in the Russell 2000 and 3000 value indexes. Supposedly behind this complex fraud: graduates of Westmoore Capital. Westmoore is a $53 million Ponzi scheme that the SEC shut down in June.

Also allegedly involved in the Gerova scam: Jason Galanis. Longtime Forbes readers will recall that Galanis is the son of John Peter Galanis, the California con artist who bilked the likes of Eddie Murphy and Sammy Davis Jr. and then drew serious prison time for orchestrating a $400 million Ponzi scheme. Jason, who received a Ferrari for his 16th birthday, focused his early enterprises on the Internet porn business and included Internet Billing, or iBill, a large web-porn collections outfit.

Galanis, the father, apparently had a big influence from prison on at least some of Jason’s early ventures. Incubator Capital, one of Jason’s early companies, was the subject of wild price swings and self-dealing, similar to that of the companies his father had controlled. Gerova has likewise been extremely volatile of late, posting both one of the NYSE’s ten largest daily increases and decreases in the past two weeks alone.

Jason was arrested, but not charged or prosecuted, in a drug-dealing case that landed his brother and sometime business partner Derek an 11-year sentence.

In 2004, Jason Galanis told Forbes he was “part of the investment banking team” at Robert Guccione’s Penthouse magazine. Three years later Galanis himself was fined $60,000 and barred by the Securities and Exchange Commission from serving as an officer or director of a public company for five years for his role in “knowingly and recklessly preparing false financial statements for Penthouse International” and for electronically forging Guccione’s signature.

So what’s the evidence that Galanis and his alleged Westmoore cronies have moved on to Gerova?

Galanis, for one, is listed as a member of Gerova’s real estate board in an SEC filing by Net Five Development Group. Net Five is a joint venture Gerova entered into last May with an outfit called Planet Five. Net Five is 10% controlled by Robert V. “Robbie” Willison. His previous job: Handling investor relations for Westmoore Capital, according to Cheryl Booth a San Diego, Calif. investor who lost 100% of her investment in Westmoore’s Ponzi fraud.

Separately, William Reimold, an administrator for a Pennsylvania pension plan, confirms that Willison represented Westmoore early last year amid the pension fund’s futile efforts to redeem money that had been invested with Westmoore affiliates. Willison is now a major shareholder in the Gerova-Planet Five joint venture, according to Gerova’s most recent filings.

Willison did not respond to calls to his office and his cell phone. Gerova says in a written statement that Willison is the only person who worked both for Westmoore and Gerova and that he was employed in a non-executive capacity in a real estate joint venture. In an interview, Gerova CEO Joseph Bianco stated that he was unaware of Willison’s role in the now defunct Westmoore.

The anonymous tipster forwarded a Planet Five memo dated April 17, 2010. In it, Planet Five seeks permission from Gerova to raise $5 million for real estate investments. The memo is addressed to Gerova CEO Bianco and Jason Galanis.

Bianco says he met Galanis a year and a half ago and that Galanis is working for Gerova Advisors LLC, a wholly owned subsidiary of the NYSE-listed parent company. Bianco describes Galanis as a “very smart guy and as far as I can see an honest guy.” Bianco doesn’t believe the SEC’s fraud charges would have stuck if the name Galanis weren’t involved.

Gerova describes Galanis’ role this way in a written statement: “Jason Galanis is chief executive of Gerova Advisors LLC, a wholly-owned subsidiary of Gerova Financial that reports to the Board and Officers of Gerova Financial, advising them on merger-and-acquisition strategy. He is neither an officer nor a director of Gerova Financial. Jason was also one of three members of a committee of a subsidiary of Gerova.”

The tipster also forwarded a presentation made by an NYSE Euronext listings official in a bid to attract new business. It is dated April 16, 2010 and this title:

GEROVA Financial Group Ltd. Presentation to Mr. Jason Galanis Partnership Opportunities with NYSE The NYSE declined comment.

Westmoore and Gerova have other connections. The now defunct Westmoore acquired a stake in China Tel Group Inc. on July 29, 2008. That same month Gerova entered into an agreement to acquire China Tel. The Gerova-China Tel deal was unwound three months later. China Tel’s chief executive, George Alvarez, served as a Director of Westmoore Holdings, Inc. until September 25, 2009.

Another Westmoore-Gerova link is Fund.com, a publicly listed outfit whose business is to “develop a diverse range of ‘actively managed’ ETFs together with established third party asset managers, and to list these ETFs on the New York Stock Exchange, or a similar national or international securities exchange.” In 2008, Fund.com agreed to raise $1.5 million from Westmoore.

Bianco, Gerova’s chief executive officer, also served as chairman of Fund.com. Bianco is also chairman of Weston Capital Management, a hedge fund business based in West Palm Beach Fla. that Fund.com acquired last March. Gerova chief financial officer and director Michael Hlvasa is listed in his 2009 Gerova bio as having spent over 18 years in the gaming industry and as having acted as Fund.com’s chief financial officer. Fund.com recently stated that its previous financials are not to be trusted.

Who is behind Fund.com? Jason Galanis, it appears. The company’s latest annual report names Equities Media Acquisition Corp Inc. as the largest shareholder with 28% voting stake. Says a footnote:

“The name of the party who has the power to vote and share power to dispose of the shares held by Equities Media Acquisition Corp Inc. is Arne van Roon. He disclaims beneficial ownership of the securities held by such entity, except to the extent of his pecuniary interest therein. The address Equities Media Acquisition Corp Inc. is World Trade Centre Lugano-Agno Switzerland.”

Jason Galanis, it turns out, is Equities Media Acquisition Corp.’s president, secretary, treasurer and a director, according to a company record filed with the Nevada Secretary of State. The company is headquartered in Beverly Hills, Calif., not far from Galanis’ home. That means a guy who has been barred by the SEC from acting as an officer or director of a public company is actually the largest shareholder in a company (Fund.com) that’s in the business of listing exchange traded funds on the NYSE and heavily involved in another (Gerova) that, pending regulatory approval, will become a trans-Atlantic broker-dealer and investment bank.

Gerova’s latest would-be partners clearly want to make a clean break with its past. Gerova has retained the crisis-management PR firm Sitrick and Co. to handle incoming queries. Sitrick put on the phone Joel Plasco, head of Ticonderoga Securities, which is hoping to become part of Gerova. Plasco acknowledges that Gerova has retained Galanis to search for investment opportunities but insists if Gerova’s acquisitions of Ticonderoga and Seymour Pierce receive regulatory approval that new management intends to bring in a fresh slate of actors.

Says Plasco of Galanis: “He’s a smart guy with a lot of connections and a desire to try and build a company with a reputation. He wants to associate himself with people who have extremely blue-chip reputations to make sure it’s done in a public company environment in an appropriate fashion.”

One sure thing is that Galanis isn’t sitting around waiting for his SEC time-out to expire in two years. In addition to his Gerova and Fund.com roles, Galanis is listed by the Nevada Secretary of State as an officer and/or a director in the following non-public enterprises: Carolus Capital Management, Devermont Communications Ltd., Emerging Markets Global Hedge Ltd., Furst REIT Partners LLC, Hettinger Media Ltd., IP Global Investors Ltd., Jamsfield Investments Inc., Mulsanne Enterprises Ltd., Life Investment Co. LLC, Pacific Rim Assurance Co. Ltd and Stanwich Absolute Return Ltd.

Galanis is also a partner in Holmby Companies. The name is apparently a reference to Holmby Hills, a ritzy area adjacent to Beverly Hills not far from where Galanis owns a $5.7 million home.

Update: Jason Galanis failed to return my calls and email seeking comment, but his attorney, Aaron McClennan, did respond in writing to those inquiries late today (Jan. 11). Mr. McClennan said that his client was not involved in the drug-dealing ring which resulted in the prison sentence for his client’s brother. Mr. McClennan also said that the SEC fraud charges and sanctions against his client were civil and not criminal.

Wed Feb 23, 2011:

Feb 23 (Reuters) - The New York Stock Exchange halted trading in shares of Gerova Financial Group Ltd , saying it was evaluating the need for further disclosures and the suitability for the reinsurer's continued listing.

The little-known Bermudan reinsurer, whose shares have lost 90 percent of their value since June last year, is now also without a chairman after Dennis Pelino backed out as the company failed to finalise his appointment terms.

March 01 2011:

Although not charged as a defendant, Galanis was accused of being involved in, and profiting from, a $60 million investment fraud by the family of Matthew Szulik, the former chief executive of Red Hat. That suit was filed in December in U.S. District Court in the Eastern District of North Carolina. In a letter to Forbes, Galanis has denied any wrongdoing. He also filed a counter-suit in U.S. District Court in the District of Massachusetts in January.

On June 18, 2010:

Investor’s Watchdog Saves Client From Alleged $53 Million Ponzi Scheme. This week, the U.S. Securities and Exchange Commission (SEC) validated IW’s safety rating when it charged Jennings with operating a $53 million Ponzi scheme.

In April 2009, an investor asked Investor’s Watchdog for a BrokerSnapshot® report on Matthew Jennings of Westmoore Securities. The most valuable thing about a BrokerSnapshot report is the Broker Safety Rating, which reflects the opinion of an SEC-trained investigator. On the IW scale, from 40 to 80, a score of 40 reflects an opinion that the person under investigation likely is engaged in fraudulent or reckless behavior. Investor’s Watchdog rated Mr. Jennings a 40.

This week, the U.S. Securities and Exchange Commission (SEC) validated IW’s safety rating when it charged Jennings with operating a $53 million Ponzi scheme. According to the SEC:

Matthew Jennings and his companies that collectively operated under the brand name of “Westmoore” raised the money from investors in more than 15 offerings of equity and debt that were not registered with the SEC under the securities laws. To attract the new investors necessary to sustain the scheme, Jennings and his companies offered exorbitant short-term returns as high as 130 percent annually.

Rather than financing the operations of Jennings’ businesses, the SEC alleges that Jennings misused new investor funds to pay returns to existing Westmoore investors, and diverted funds into his personal accounts.

The companies charged in the SEC’s complaint are Westmoore Management LLC, Westmoore Investment L.P., Westmoore Capital Management Inc., and Westmoore Capital LLC.

Big Brown[]

As 95-degree temperatures baked a crowd of nearly 100,000 at the 2008 Belmont Stakes—the hottest June 7 on record—the only person who seemed unfazed was Richard Dutrow Jr., the trainer of Big Brown, an undefeated colt just 12 furlongs from the first Triple Crown in three decades. With history against him, Dutrow remained immodest. It was a foregone conclusion, he said. "He cannot be beat."

The spring of Big Brown was a traveling circus, with the horse itself a sideshow. Dutrow, the ringleader, was all of racing's problems bundled into one man. The owners, Michael Iavarone and Richard Schiavo, were portrayed as clever businessmen who proposed to change the game with a new way of investing in horses. But the real decision-maker in International Equine Acquisitions Holdings was behind the scenes—a shadowy money man who ran an illegal investment fund in the Virgin Islands.

Only 11 horses had ever won the Triple Crown, and if Big Brown could do it, both Dutrow and IEAH would be immortalized. It would be the summit of anyone's career, but for both the horse and his connections the fall was swift and severe: a trainer banned for a decade; a stable put out of business, its funding revealed as the spoils of a Ponzi scheme. Big Brown was dead last at Belmont. He didn't even cross the finish line.

The worn sign outside Barn 10 on the Aqueduct backstretch has the feel of a Roman monument to a fallen dynasty. It reads: "2008 Winner of the Kentucky Derby & Preakness." Five years have passed since Big Brown came up empty in the Belmont Stakes; this plaque is what's left of IEAH and the career of Richard Dutrow.

It was supposed to be a revolution. Michael Iavarone had a vision of an equine hedge fund, something untried in the sport. Instead of the traditional syndicate, with investors owning shares in individual horses, they could now own part of IEAH itself. The fund would collect management and performance fees, and allow investors to own a part of all of IEAH's assets—its horses in training, its broodmares, its future stallions, a state-of-the-art equine hospital. Each financial quarter, an independent auditor would assess the fund's value and investors could enter or exit. Iavarone often said he was raising $100 million to take the fund public.


Barn 10 used to be Dutrow's. In October 2011, New York regulators revoked his license and barred him from training horses for 10 years, after one final strike in a career of almost 70 violations—from the minor, like showing up late to the paddock, to the serious, such as using banned medications and hiding workouts. After losing in New York's highest appellate court this past January, Dutrow's horses were led away from his barn.


Rick Dutrow is from a racing family. His late father was a trainer, and his two brothers train as well. And even by racing's Wild West standards, Dutrow, 53, is an outlaw. In the 1980s, he was banned from Maryland tracks for a year then five years from New York for various marijuana offenses (possession, failed drug tests, getting caught with a "concealed apparatus" to provide a fake urine sample). Years later, the mother of his daughter was murdered in a drug-related break-in. By 1998, he was sleeping on a cot next to saddles and bridles and other equipment in a tack room of Barn 1 at Aqueduct, a couple of cheap horses in stalls just outside the door and nothing but a microwave, fridge, and television to keep him company.


Michael Iavaraone, the public face of IEAH, was a slick hustler and deal-maker who had claimed to be a high-rolling stockbroker, even though he'd traded only penny stocks. Richard Schiavo, who had actually worked at major Wall Street firms, was the sober, nuts-and-bolts man. Long Island natives, they started IEAH as a traditional syndicate in 2003, bringing together people to own fractions of a few cheap horses. Their first trainer was Greg Martin, the son of Hall of Fame trainer Frank "Pancho" Martin. They were spending peanuts then and claimed a 4-year-old gelding named A One Rocket at Aqueduct for $7,500 on Dec. 13, 2003. Just five days later, A One Rocket ran off the screen, winning by 10 lengths and improving his time by nearly two seconds.

A year later, in an indictment of an illegal gambling ring affiliated with the Gambino crime family, it emerged that A One Rocket's winning race that day was the focus of a federal investigation. Martin was charged with drugging the horse. Several people pleaded guilty, including Martin.

IEAH and its principals weren't subjects of the investigation or charged with any wrongdoing, and they claimed to consider taking legal action against Martin. However, Martin had a suspicious record for anyone who cared to check, having served 60 days for medication violations after 2000. IEAH never followed through on its threatened lawsuit. When Martin had to give up his license in 2005, IEAH moved its six horses to other trainers—and ultimately to Dutrow. He seemed like a good match for IEAH's ambitions. Dutrow could win with cheap horses as often as he won with good horses, which was great if you didn't look too closely at how he did it.

Iavarone and Schiavo dreamed up the Ruffian hospital around this time. There was no surgical equine hospital on Long Island, so trainers sent injured horses to New Jersey or Pennsylvania. It was a good idea, in theory, but they were businessmen, not horsemen. "It was just another angle they had," says James Hunt, who has the largest private veterinary practice in New York racing and was hired to run the hospital.

"Mike could literally sell you the shirt off your back," Hunt says. "And Richard Schiavo was the bean counter. He counted the money. But then some bad guys got involved. And they started calling the shots."

James Tagliaferri punched Iavarone's ticket from nickel-and-dime races to the big time. They met during a social encounter at a Yankees game, according to the Times. Iavarone pitched Tagliaferri on his hospital as a potential investment, and Tagliaferri, who ran a highly regarded fund in Connecticut, was intrigued. Horses are illiquid assets, and the hospital would add a fixed income to IEAH's portfolio. And with Tagliaferri's cash, the quality of the horses they bought would set them apart.


"People have told me that I have a dispute with these guys," Lanzman told the Times in 2010. "Using that word is like saying Bernie Madoff's investors had a dispute with Bernie Madoff." Iavarone, in the same article, called Lanzman "a filthy animal" and said Lanzman would "sell his soul for a dime."

This controversy did not augur well for the Ruffian hospital, even though it was a beautiful facility that spared no expense. There were two surgery rooms, a bone-scan machine, top-of-the line equipment, all of it presided over by one of the country's most respected equine surgeons, Dr. Patty Hogan. Schiavo loved it and was very hands-on, Hunt says, while Iavarone was mostly concerned with whether it was making money. But although it didn't carry the IEAH name when it opened in 2009, Hogan says there were horsemen who refused to support the hospital because of the stable's reputation. IEAH was facing lawsuits for unpaid invoices at the time, which hinted at how stretched its finances already were. Once the economy sank, IEAH was dependent on Tagliaferri and his majority stake. Tagliaferri controlled the flow of money—buying horses, selling horses, keeping the hospital afloat.

Tagliaferri's ruse was nearing its expiration date. In December 2010, Matthew Szulik, the former CEO and chairman of software company Red Hat, filed suit, claiming Tagliaferri had defrauded him of $60 million, of which $20 million had gone to IEAH.

Szulik's suit painted an outlandish picture. Besides the horses, some of his money paid for a strip club in Mexico and the Beverly Hills house of Jason Galanis, listed in Tagliaferri's indictment as "Associate 1." Who was Galanis? Once called "Porn's New King" by Forbes, in 2007 he prepared a false quarterly report for Penthouse, and the SEC fined him $60,000 and barred him from serving as an officer of a public company for five years.

Galanis and Tagliaferri had their hands in a number of shady businesses, all seemingly existing to funnel money to IEAH. Right after Szulik filed his lawsuit, IEAH tried to sell its business to Gerova, a Bermuda-based reinsurance company for which Galanis was in charge of mergers and acquisitions. What possible interest could this company have had in a horse stable? When Szulik inquired about the sale, IEAH called it off. Galanis and Gerova also had close ties to Westmoore Capital, a $53 million Ponzi scheme that the SEC shut down in June 2011. Gerova didn't last long either. Several investment firms asserted that it was fraudulent, citing Galanis's involvement as a red flag, and last August Gerova filed for bankruptcy protection in U.S. court.

When Tagliaferri began feeling the heat, he moved money from deadbeat Fund.com, another Jason Galanis affiliate that traded on the pink sheets, into IEAH. According to prosecutors, Tagliaferri kept victims of his fraud in the dark by paying them with money from other clients. He wrote to Galanis that if he could get $5 or $10 million he could "probably ... stave off disaster."

As this played out, Iavarone and Schiavo continued to utilize Tagliaferri's money. In February 2010, IEAH faced a $237,000 insurance bill in order to keep its policy. Tagliaferri took care of it, prosecutors say, by using proceeds from Fund.com shares.


His human friends aren't in better shape. Tagliaferri faces up to 20 years in prison, effectively a life sentence at his age. In a recent interview with The Paulick Report, Iavarone said IEAH was still paying the taxes on and the costs of upkeep for the shuttered Ruffian hospital. After hoping to break even selling it, Iavarone auctioned it off. It fetched $2.6 million for the land, the building, and all the medical equipment, a small fraction of what he had put into it. He has no choice but to take the offer. IEAH is done for. "We've taken $30 million out of our cash flow and it's put us in a position where operating is impossible," Iavarone said.

Few people are mourning that loss. The racing establishment, Hunt says, "revels in the fact that IEAH has basically gone under."

Ryan Goldberg is an award-winning freelance journalist and has been following horse racing since ducking security as a teenager to bet the races at Monmouth Park. He lives in Brooklyn and is a sometime presence on Twitter at @goldbergryan.


RALEIGH, N.C. (CN) - The former CEO of Red Hat, a Raleigh-based software firm, claims his family's financial adviser blew more than $55 million in a series of questionable and now worthless ventures, including loans to "persons involved in illicit or potentially illegal activities".

In his federal complaint, Matthew Szulik says he wanted to put his family's money in a conservative portfolio of blue-chip stocks and bonds, so he turned to James S. Tagliaferri, a longtime family friend whom the Szulik children called "Uncle Jim." But Szulik says that Tagliaferri and co-defendant Patricia Cornell, owners and operators of TAG Virgin Islands fka Taurus Advisory Group, used his family's money for their own benefit and took millions in kickbacks along the way.

Among the losses, according to the complaint, were:

  • $18.6 million the defendants put into Conversion Securities, a business consultancy that has lost money every year since 2004, except for a small profit it 2009. These securities are "essentially worthless," Szulik says. He also questions a $400,000 loan to the CEO of Conversion Services, secured only "with worthless Conversion Services' equities."
  • $19.5 million to International Equine Acquisitions Holdings, which Szulik says "had a history of inadequate corporate management, has been repeatedly cited or sued for failing to pay its bills, and has been investigated by the SEC." Szulik says that these investments are "highly illiquid and ... essentially worthless."
  • $9.4 million to Protein Polymer Technologies, which according to its own Dec. 31, 2008 SEC filing, has "incurred operating losses since [its] inception in 1988 and will continue to do so for at least several more years," and whose auditors have expressed "substantial doubt about [PPTI's] ability to continue as a going concern," according to the complaint. Szulik says these securities too are "essentially worthless." (Brackets in complaint.)
  • $3.8 million to Paseo de la Reforma Partners, a Mexico City business, secured by a deed of trust on a property that hosts "a so-called gentlemen's club" called Bleu Club, owned by or associated with Penthouse Media Group, the porn empire. Szulik says he "would not have knowingly permitted the TAG defendants to invest their funds with entities in this line of business."
  • Szulik also cites another $2.2 million in questionable loans and $1.6 million in kickbacks for "undefined and virtually nonexistent consulting work."

The 35-complaint alleges that some of the defendants' dealings were with highly questionable people, including an online pornographer, and his father, who was sentenced to 27 years in prison for racketeering and then disappeared from a work-release program. The situation is a huge come-down for both the lead plaintiff and defendant.

Szulik joined Red Hat, a leading provider of open source technology, as president in 1998, and became CEO and chairman in 2002. He retired in 2007 to deal with family health issues, after transforming the Red Hat into a New York Stock Exchange-listed company with a market value of more than $8 billion.

Tagliaferri founded Taurus Advisory Group in Connecticut in 1996, and was later a major backer of Big Brown, the thoroughbred who in 2008 won the first two legs of the Triple Crown: the Kentucky Derby and the Preakness Stakes.

Szulik seeks restitution and punitive damages for lost earnings and lost business opportunities, imposition of a constructive trust and court costs, on claims of fraud, constructive fraud, breach of contract, breach of fiduciary duty, legal malpractice, conspiracy, negligence, negligent misrepresentation, malfeasance in accounting, breach of implied covenant of good faith and fair dealing, violation of the Investment Advisors Act, SEC rules, and the North Carolina Investment Advisers Act.

The Szulik family's lead counsel is Gordon Katz, with Holland & Knight Boston.