Greenberg Traurig Team Scores $32M Alameda County Verdict in Trial Stemming from Ponzi Scheme
A team of high-profile litigators from Greenberg Traurig came out on top after a five-week jury trial, scoring a $32 million verdict in a dispute that stemmed from a scheme to import worthless home theater personal computer shells.
December 13, 2018 at 01:12 PM
4 minute read
The original version of this story was published on Litigation Daily
A team of high-profile litigators from Greenberg Traurig came out on top after a five-week jury trial, scoring a $32 million verdict in a dispute that stemmed from a brazen Ponzi scheme.
Firm vice chairman Richard Edlin, who also chairs the litigation practice in New York and the business and regulatory financial services litigation group, and William Goines, the co-managing shareholder of Greenberg Traurig's Silicon Valley office, led the team for KT Engcore, a subsidiary of KT Corp., the largest telecom company in South Korea.
They faced off in Alameda County Superior Court against lawyers from Gordon Rees Scully Mansukhani representing Silicon Valley-based ASI Computer Technologies.
Once upon a time, the two companies—along with Moneual, Inc., an up-and-coming South Korean computer manufacturer—seemed to be happy business partners. According to court papers, Moneual and ASI engaged in $600 million of business together relating to the sale of home theater personal computers.
KT Eng was a sort of middleman, providing certain financing support and acting as Moneual's exporter. The company would buy the home theater units for $1,853 per unit and export them to ASI for $1,955 per unit.
“At the time KT Eng entered into its agreements with Moneual and ASI, it had good reason to consider both companies legitimate business partners,” the Greenberg Traurig team wrote. “Moneual had recently received the Microsoft Innovation Award for its [home theater personal computers] in 2007 and was praised in Bill Gates' keynote at the Consumer Electronics Show in Las Vegas that year.”
But it turns out, the home theater products didn't sell well and Moneual couldn't absorb the losses. It allegedly began shipping the units back to Korea under the guise that they were “components” for other computer products, then allegedly re-shipped them as worthless “shells” at the original price.
“Moneual and ASI induced KT Eng to export these worthless or non-existent products to ASI at vastly inflated prices so that Moneual could obtain Korean bank loans and factoring based on KT Eng's credit receivables,” the Greenberg Traurig lawyers wrote.
It all came crashing down when Korean law enforcers in 2014 got wise to the scam. Moneual's CEO was sentenced to 23 years in prison, the harshest sentence in Korean history for a financial crime (reduced on appeal to 15 years) and the company went bankrupt.
KT Eng was one of the casualties, left holding the bag on $32 million of purchase orders from ASI.
But KT Eng's case was a little messy, Edlin of Greenberg Traurig admits. That's because one of KT's employees was convicted of taking bribes from Moneual and sent to jail.
But Edlin and Goines argued KT Eng as a whole was in the dark. “All that was going on not with our knowledge, but behind our back,” Edlin said by phone from Korea. Moreover, the impact of the bribes was to reduce KT Eng's margins. “We were really a victim,” he said.
KT Eng wasn't the only one burned by the scheme. Four South Korean banks have sued ASI and computer parts and accessories retailer Newegg.com in federal court in Los Angeles, alleging hundreds of millions of dollars in fraud.
“We purposely kept our case in state court,” Edlin said. “We didn't want to get consolidated with the bank cases. We wanted to get in and done before those cases went to trial.”
The jury—nine women and three men—sided with KT Eng across the board. On Dec. 7, they awarded the full amount of damages sought: $31,415,055.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllIn Lawsuit, Ex-Google Employee Says Company’s Layoffs Targeted Parents and Others on Leave
6 minute readMorrison & Foerster Doles Out Year-End and Special Bonuses, Raises Base Compensation for Associates
Trending Stories
- 1Call for Nominations: Elite Trial Lawyers 2025
- 2Senate Judiciary Dems Release Report on Supreme Court Ethics
- 3Senate Confirms Last 2 of Biden's California Judicial Nominees
- 4Morrison & Foerster Doles Out Year-End and Special Bonuses, Raises Base Compensation for Associates
- 5Tom Girardi to Surrender to Federal Authorities on Jan. 7
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250