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Fitzgibbons v. Atkinson

United States District Court, D. South Carolina, Anderson/Greenwood Division

January 7, 2019

Michael J. Fitzgibbons, acting on behalf of the Director of the South Carolina Department of Insurance, in his capacity a the Special Deputy Receiver of the South Carolina Health Cooperative, Inc., a Multiple Employer Self-Insured Health Plan, Plaintiff,
v.
Alton Atkinson; John Thomas Childs, IV; Larry Busch; De'Shaun Williams; Cherise Raymond; Andre Garcia Littlejohn Vickie Damon; Winston Cook; Kristin Ketterman; Daniel Wheeler; Regent Financial d/b/a PF Holdings, LLC; King Capital Group; A-Z Consulting, LLC; Intermediary Network; Busch Law Center, LLC; JJLJ Financial; Protege Investments, LLC; IGWT Consulting, LLC; Cook Business Services, LLC; John Does 1-10; Interlink Global Messaging, LLC, Defendants.[1]

          REPORT AND RECOMMENDATION OF MAGISTRATE JUDGE

          JACQUELYN D. AUSTIN, UNITED STATES MAGISTRATE JUDGE.

         This matter is before the Court on a motion filed by Plaintiff for default judgment against Defendants Alton Atkinson (“Atkinson”); John Thomas Childs, IV (“Childs IV”); Larry Busch (“Busch”); Andre Garcia Littlejohn (“Littlejohn”); Vickie Damon (“Damon”); Winston Cook (“Cook”); Kristin Ketterman (“Ketterman”); Daniel Wheeler (“Wheeler”); King Capital Group (“King”); A-Z Consulting, LLC (“A-Z”); Intermediary Network (“Intermediary”); Busch Law Center, LLC (“Busch Law”); JJLJ Financial (“JJLJ”); Protege Investments, LLC (“Protege”); IGWT Consulting, LLC (“IGWT”); and Cook Business Services, LLC (“Cook Business”) (collectively, the “Defaulted Defendants”). [Doc. 240.] Pursuant to the provisions of 28 U.S.C. § 636(b)(1)(B) and Local Civil Rule 73.02(B)(2), D.S.C., this Magistrate Judge is authorized to review all pretrial matters in this case and to submit findings and recommendations to the District Court.

         On August 8, 2017, Plaintiff filed the instant action, alleging, among other things, racketeering activity in violation of the Racketeer Influenced and Corrupt Organization Act (“RICO”). [Doc. 1.] Cook and Cook Business were served via certified mail on August 21, 2017 [Docs. 7-1; 9-1]; Ketterman, via private process server on September 22, 2017 [Doc. 21-1]; Busch and Busch Law via private process server on August 31, 2017 [Doc. 6-1; 8-1]; Littlejohn, via private process server on September 25, 2017 [Doc. 52-1]; JJLJ, via private process server on September 25, 2017 [Doc. 53-1]; Protege, via certified mail on November 2, 2017 [Doc. 59-1]; Damon, via private process server on December 10, 2017 [Doc. 66-1]; Childs IV, via private process server on March 22, 2018 [Doc. 142-1]; IGWT, via publication once a week for four consecutive weeks in the Las Vegas Sun and the Independent-Mail, ending on April 5, 2018 [Docs. 147-1; 154-1]; Atkinson and King, via publication once a week for four consecutive weeks in the Independent-Mail and the Toronto Sun, ending April 7, 2018 [Docs. 152-1; 156-1; 158-1; 161-1]; and Wheeler, via private process server on May 7, 2018 [Doc. 177-1].[2]

         Cook and Busch filed pro se Answers to the Complaint on September 19, 2017, and October 6, 2017, respectively. [Docs. 12; 26.]

         On February 22, 2018, with Ketterman, Busch Law, Littlejohn, JJLJ, Protege, and Damon not having filed a pleading or otherwise participated in the case, Plaintiff filed a request for entry of default against those Defendants [Doc. 129], and the Clerk entered default against them the next day [Doc. 131]. On May 21, 2018, with Childs IV, Intermediary, A-Z, IGWT, Atkinson, King, and Cook Business not having filed a pleading or otherwise participated in the case, Plaintiff filed a request for entry of default against those Defendants [Doc. 173], and the Clerk entered default against them two days later [Doc. 175]. Finally, on May 31, 2018, with Wheeler not having filed a pleading or otherwise participated in the case, Plaintiff filed a request for entry of default against him [Doc. 179], and the Clerk entered default against him the next day [Doc. 185].

         On May 31, 2018, Plaintiff filed a motion for leave to amend his Complaint [Doc. 182], which this Court granted on July 18, 2018 [Doc. 215]. Plaintiff filed his Amended Complaint [Doc. 218] the following day. He did not re-serve any of the Defendants who were already in default. See Fed. R. Civ. P. 5(a)(2) (“No service is required on a party who is in default for failing to appear. But a pleading that asserts a new claim for relief against such a party must be served on that party under Rule 4.”). On July 30, 2018, Plaintiff filed a certificate of service as to Cook and Busch after sending both a copy of the Summons and Amended Complaint via U.S. Mail to the addresses they provided the Court when filing their responses to Plaintiff's original Complaint. [Doc. 222.] On September 7, 2018, neither Cook nor Busch having responded to the Amended Complaint, Plaintiff requested entry of default as to those two Defendants and the other Defaulted Defendants. [Doc. 231.] That same day, Williams and Raymond each filed pro se answers to the Amended Complaint.[3][Docs. 234; 235.] The Clerk entered default against the Defaulted Defendants on September 10, 2018. [Doc. 233.] On November 1, 2018, Plaintiff then filed a motion for default judgment against the Defaulted Defendants. [Doc. 240.]

         BACKGROUND

         Plaintiff, the duly appointed special deputy receiver for South Carolina Health Cooperative, Inc. (“SCHC”), alleges that Defendants collectively conspired to defraud SCHC out of millions of dollars. [Doc. 218 at 4-5 ¶¶ 9, 13.] SCHC is a multiple employer welfare arrangement (“MEWA”). [Id. at 3 ¶ 3; 15-16 ¶ 20.] MEWAs are insurance arrangements whereby a group of member employers pool contributions to provide dental, health, and short-term disability benefits to their employees. [Id. at 15 ¶ 18] MEWAs are not fully insured; thus, they are statutorily prohibited from receiving guaranty fund protection. [Id. ¶ 19.] Because SCHC was a MEWA, Plaintiff alleges that the South Carolina Department of Insurance (“SCDOI”) imposed financial requirements on SCHC. [Id. at 15-16 ¶ 20.] Plaintiff alleges that SCHC's licensing order required that it maintain a loss reserve in an amount set by the SCDOI, which was initially $5, 000, 000. [Id. at 16 ¶ 20.] SCDOI allowed SCHC to fund the loss reserve with an irrevocable stand-by letter of credit (“LOC”). [Id. ¶ 21.] The LOC would serve as a last-resort resource to pay claims in the event SCHC was declared insolvent. [Id. ¶ 22.]

         Plaintiff alleges that Defendants all knowingly participated in a scheme to defraud SCHC and other victims through the sale of fraudulent LOCs that Defendants deceived Plaintiff into believing were legitimate business transactions. [Id. at 25 ¶ 44; 27 ¶¶ 48d, 48e; 37 at ¶ 71; 39 ¶ 75; 40 ¶ 80.] Plaintiff maintains that Defendants derived income from these fraudulent sales, which they then used not only for their personal use, but also to continue the enterprise itself. [Id. at 32-36 ¶¶ 63-64.]

         LOC Number 1

         Mark Goodman (“Goodman”) was a principal and initial investor at Cooperative Solutions for America (“CSA”). [Id. at 16 ¶ 23.] Plaintiff alleges that in late 2011, Goodman advised SCHC's CEO, Littlejohn, to obtain an LOC through Interlink Global Messaging, LLC (“IGM”) and its affiliate Protege. [Id. at 16 ¶ 23.] Plaintiff also contends that Goodman introduced Littlejohn to Michael Ciuffo (“Ciuffo”). [Id.] Littlejohn and Ciuffo thereafter negotiated the sale of the first LOC (“LOC No. 1”) to SCHC, purportedly from Bank of America. [Id.] Plaintiff alleges that Littlejohn entered into a finder's fee agreement with IGM, committing SCHC to pay $600, 000 for IGM's assistance in obtaining LOC No. 1. [Id. ¶ 24.] Plaintiff contends that on or about June 1, 2012, Atkinson entered into an agreement with Childs IV and IGM to “assist” in obtaining the fraudulent LOC in exchange for $275, 000. [Id. at 17 ¶ 25.] Around June 2, 2012, SCHC wired $600, 000 to IGM's closing agent, Busch Law. [Id. at ¶ 26.] Plaintiff contends Busch Law disbursed $275, 000 via wire to Boddie & Associates Trust Account, which retained $5, 500 and then disbursed the remainder of that money via wire to JJLJ, King, IGWT, and Regent Financial (“Regent”). [Id.] As for the remainder of the $600, 000, Plaintiff alleges Busch Law disbursed it via wire to Sharon Colker, Zion Trust, Kimberly Davidson (“Davidson”), and several Defendants, including JJLJ, King, IGWT, Regent, A-Z, Intermediary, [4] Ciuffo, De'Shaun (“Williams”), Cherise Raymond (“Raymond”), Athena Childs (“Childs”), Zion Trust, and Sharon Colker. [Id.] Following receipt of the funds, Plaintiff alleges that Protege sent LOC No. 1 to SCHC via U.S. Mail. [Id. at 18 ¶ 27.]

         First Renewal of LOC No. 1

         LOCs have to be renewed annually. [Id. ¶ 28.] Plaintiff contends that Williams and Littlejohn communicated via electronic mail and during that correspondence Williams indicated that Protege would renew LOC No. 1 for $525, 000, even though Plaintiff alleges Williams knew LOC No. 1 was fraudulent. [Id. at 18-19 ¶ 28.] Plaintiff contends that SCHC wired fees to Busch Law to complete the renewal. [Id. at 19 ¶ 29.] Plaintiff contends Busch Law then disbursed the funds via wire to Safefunds.com; Zion Trust; and several Defendants, including JJLJ, Regent, Wheeler, Raymond, Williams, and A-Z. [Id.] Following receipt of the funds, Plaintiff alleges that Protege sent a renewal of LOC No. 1 (“LOC No. 1 Renewal No. 1”) to SCHC via U.S. Mail. [Id. ¶ 30.]

         LOC ...


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