The More We Borrowed, the Deeper It Got

Posted by: on Wed, Feb 22, 2017

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digging deeper

LAS VEGAS (CN) — A Nevada man claims he tried to save his multi-state lending business, but plaintiffs in a RICO complaint say he ran a multimillion-dollar Ponzi scheme.

Lead plaintiff Scott Leslie claims DMA Financial Corp.’s CEO Alexander Zukovski ran his business as a Ponzi scheme, with help from defendant DMA president Darrin Landau.
They are among nine people and 11 corporations and LLCs that Leslie et al. sued on May 31 in Clark County Court. Four Zukovskis are named as defendants, as is the Alexander & Natasha Zukovski Revocable Family Trust.

Leslie sued individually and as a trustee of the Lawson Paragould Trust, as managing member of Paragould LLC, and derivatively on behalf of BGL Investments, which invested in DMA Financial. He says the plaintiffs loaned more than $2.5 million to DMA to try to keep it going.

The lengthy complaint quotes a long email Zukovski sent to investors in April, saying he did not try to deceive anyone, but only wanted the company to survive and not let anyone down.

“This was my deep, dark secret, which I thought I would make work without fail,” Zukovski wrote, according to the complaint. “I kept everyone in my life in the dark from how bad it really was. My wife didn’t know. My father didn’t know. Darrin didn’t know. You didn’t know. I didn’t want to fail in anyone’s eyes and fought to the last moment to make something happen to return the business to the way it was.”

Zukovski opened the business as a payday lender, then as an installment-loan lender in several states, according to the complaint. Leslie claims, among other things, that DMA Financial is holding more than $1.5 million in notes and loans secured by at least three trust deeds, which should belong to BGL and its owners and investors.

Leslie says he and others invested in BGL, which loaned their money to DMA to issue loans, and that DMA appeared to be a profitable business for several years.

That changed no later than 2013, Leslie says, when Zukovski directed DMA staff “to falsely treat money loaned to or invested in DMA, by its lenders and investors, as revenues earned by DMA, from its customers, on the books and financial reports.”

At Zukovski’s direction, Leslie says, workers at DMA offices in Las Vegas and/or Henderson “altered documents and digital reports, created fraudulent reports, and mis-utilized various software programs to create forged and fraudulent apparent .pdf copies of purported bank statements and other financial records to cause fraudulent reports and false information to be provided” to investors.

Income and revenue were “grossly overstated” in the fraudulent documents, Leslie says. He says the frauds were run because DMA had lost its ability to collect loan payments via automatically debited payments, commonly known as ACH accounts.

Public entities and/or private third parties in 2013 restricted DMA’s ability to process electronic payments, which “rendered it almost impossible” for DMA to collect the “vast majority” of loan payments owed, Leslie says.

But rather than inform investors, Zukovski concealed the lost revenue “via fraudulent schemes” and continued to accept new loans from investors and renew old loans and notes, according to the complaint.

The continuing deceptions caused BGL to renew DMA’s debts and prevented BGL from demanding payment or foreclosing on the securities used as collateral to cover the loans. Instead of using the invested money as intended, Zukovski distributed it through several associated companies he owned or operated, which in turn transferred the money to other entities for their own purposes, according to the complaint.

Leslie says Zukovski also put family members on DMA’s payroll, but did nothing to earn the money and benefits, and created false documentation to conceal illegal activities.

To maintain a positive bank balance, Leslie says, Zukovski et al. deposited investors’ money into DMA bank account to cover payments that borrowers owed on their loans. The check-kiting scheme eventually fell apart, leaving a negative balance of more than $250,000 in a Wells Fargo Bank account owned by DMA, the complaint states.

In addition to the $2.54 million the plaintiffs loaned to DMA, other investors loaned DMA “substantially in excess of $10 million,” according to the complaint.

In April, Zukovski finally admitted it, in the email that began: “This is not how i wanted it to go, but this is where it went,” according to the complaint. “Two years ago, the whole industry’s ACH was shot down for two months. During that time, we lost a huge amount of our money on the street, because we couldn’t collect. Once we got back up and running, I tried to do everything I could to build up the book again. The more we borrowed, the deeper it got.”

Zukovski wrote that he did not pay himself anything in the final 1½ years, put all his money into DMA, emptied his parents’ bank and life insurance accounts and maxed out their credit cards, and took all the money his wife’s parents had, to “make sure that every investor, every partner, every bill gets paid.”

The mail, as quoted in the lawsuit, ends: “I want’s [sic] acting maliciously. I didn’t mean to hurt any body. I know I hurt a lot of people who cared about me and for whom I cared. I am sorry.”

Leslie doesn’t buy it. He seeks damages and punitive damages for RICO violations, fraud, embezzlement, conversion, unjust enrichment, breach of fiduciary duty, conspiracy, deceptive trade and bad faith.

Named as defendants are Alexander Zukovski and his wife Natasha, Gregori Zukovski, Evelina Zukovski, the Alexander & Natasha Zukovski Revocable Family Trust, DMA Financial, Darrin Landau, Forlex Sales, Tri-State Lending Fund, Old Country Holdings, Glaz Inc., Global Process Ventures, ALZ LLC, LV Research and Development, Kanoah Investments and Ark Investments International.
The plaintiffs are represented by G. Mark Albright with Albright, Stoddard, Warnick & Albright, who was not available by telephone after hours Monday.
A phone number for customer inquiries on the DMA Financial Web page no longer is in service.

Written by: Mike Heuer