Amended Complaint Filed No FeeCal. Super. - 6th Dist.November 5, 2020GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 200V373145 Santa Clara - Civil GRELLAS SHAH LLP DHAIVAT H. SHAH, ESQ. (SBN 196382) (ds@grellas.com) DAVID I. SIEGEL, ESQ. (SBN 264247) (dsiegel@grellas.com) ERIN M. ADRIAN, ESQ. (SBN: 228718) (ema@grellas.com) SURYA KUNDU, ESQ. (SBN: 308099) (sk@grellas.com) 20400 Stevens Creek Blvd, Suite 280 Cupertino, CA 95014 Telephone: (408) 255-63 10 Facsimile: (408) 255-6350 Electronically Filed by Superior Court of CA, County of Santa Clara, on 12/11/2020 7:41 PM Reviewed By: Y. Chavez Case #20CV373145 Envelope: 5461546 Attorneys for Plaintiffs MAGNOLIADRHOMESLLC, a California limited liability corporation, and YOULIN WANG, an individual SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SANTA CLARA MAGNOLIADRHOMES LLC, a California limited liability corporation, and YOULIN WANG, an individual Plaintiffs, vs. GUIDANCE LAW, APC, a California professional corporation, DEREK LONGSTAFF, an individual, RICHARD KAHN, an individual, LUIS BULAS-FELIX, an individual, LUIS BULAS-FELIX & ASSOCIATES, LLC, a Florida limited liability corporation, FORENSIC PROFESSIONALS GROUPS, INC., a Florida corporation, and Does 1-50, inclusive Defendants. Case No. 20CV373 145 FIRST AMENDED COMPLAINT JURY TRIAL DEMANDED Complaint Filed: November 5, 2020 Plaintiffs Magnoliadrhomes LLC (“Magnolia”) and Youlin Wang (“Wang”) (collectively with Magnolia, “Plaintiffs”) bring this action against Defendants Guidance Law 1 FIRST AMENDED COMPLAINT . Chavez GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 APC (“Guidance Law”), Derek Longstaff (“Longstaff”), Richard Kahn (“Kahn”), Luis Bulas- Felix (“Bulas-Felix”), Luis Bulas-Felix and Associates, LLC (“BulaS-Felix & Associates”) and Forensic Professionals Group USA, Inc. (“FPG”; Kahn, Bulas-Felix, Bulas-Felix & Associates and FPG together, the “Kahn Defendants”) and Does 1-50, and allege as follows: PARTIES 1. Magnolia is a limited liability company formed in California, with its principal place of business in Los Altos, California. 2. Wang is an individual residing in China. Wang owns 100% 0f Magnolia. 3. Longstaff is an attorney licensed in the state of California. Upon information and belief for the periods of time relevant to this Complaint, Longstaff maintained his law office and did business in Santa Clara County, California. 4. For the periods of time relevant t0 this Complaint, Guidance Law was a California professional corporation. Upon information and belief, Longstaff was the “Managing Attorney” of Guidance Law With offices in Palo Alto, California. 5. Kahn is an individual residing in Florida. 6. FPG is a Florida Corporation. 7. Upon information and belief, at all relevant times, Kahn acted as the “alter ego” ofFPG With respect to all of the matters at issue in this Complaint. Namely, FPG is Wholly owned by Kahn. Kahn acts as the registered agent for FPG and he is the only Officer or Director 0fFPG reported to the Florida Secretary of State. Kahn effectively uses FPG as a shell company to operate schemes such as the one alleged in this Complaint in order to promote his own personal gain. There exists a unity 0f interest and ownership between Kahn and FPG such that any separateness between the two has ceased t0 exist. Further, as alleged herein, the facts are such that an adherence t0 the fiction of the separate existence 0f these entities would, under the particular circumstances, sanction a fraud or promote injustice. 8. Bulas-Felix is an individual residing in Florida. 9. Bulas-Felix & Associates is a Florida Limited Liability Corporation. 2 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10. Upon information and belief, at all relevant times, Bulas-Felix acted as the “alter ego” of Bulas-Felix & Associates with respect t0 all 0f the matters at issue in this Complaint. Namely, Bulas-Felix & Associates is Wholly owned by Bulas-Felix and he is the only Officer or Director of Bulas-Felix & Associates reported t0 the Florida Secretary 0f State. Bulas-Felix effectively uses Bulas-Felix & Associates as a shell company to operate schemes such as the one alleged in this Complaint in order to promote his own personal gain. There exists a unity of interest and ownership between Bulas-Felix and Bulas-Felix & Associates such that any separateness between the two has ceased t0 exist. Further, as alleged herein, the facts are such that an adherence t0 the fiction 0f the separate existence 0f these entities would, under the particular circumstances, sanction a fraud 0r promote injustice. 11. Plaintiffs are ignorant of the true names and capacities, Whether individual, corporate or otherwise, 0f Defendants named herein as Does 1 through 50 (“Doe Defendants”). Plaintiffs sue said Defendants by their fictitious names. Plaintiffs will seek leave t0 amend this Complaint t0 assert allegations against the Doe Defendants When their true involvement in these matters and capacities are ascertained. Plaintiffs are informed and believe, and 0n that basis allege, that each 0f the Defendants sued herein as Does 1 through 50 inclusive, is in some way legally responsible and liable t0 Plaintiffs With respect t0 the matters set forth herein. VENUE AND JURISDICTION 12. Venue 0f this action in the County of Santa Clara in the State 0f California is proper pursuant to California Code of Civil Procedure Sections 395 and 395.5 because many of the services, representations, and negotiations provided in connection with the relevant agreements occurred in 0r from Santa Clara. Further, the relevant attorney-client relationship between Plaintiffs and Longstaffwas entered into in Santa Clara and legal services rendered by Longstaff and Guidance Law were to be performed in Santa Clara. 13. The Kahn Defendants are subj ect to personal jurisdiction in the State of California because they have established minimum contacts With the State. The Kahn Defendants solicited the business of California residents, including Plaintiff Magnolia. Kahn 3 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Defendants also directed communications t0 Longstaff, a California resident, in furtherance 0f the scheme t0 defraud Wang of millions of dollars associated with the sale of real property located in California, as well as t0 defraud Wang 0f portions 0f tax refunds from tax returns Wang filed with both the Internal Revenue Service and the California Franchise Tax Board. Longstaff and Kahn also made false and misleading statements t0 Guohua “Greg” Xiong (“Xiong”), Wang’s brother-in-law and authorized agent. Xiong is also a California resident and received these communications in California and replied from California as well. One of the properties at issue was held by Magnolia, a California limited liability company. Two 0f the relevant contracts, the Partially Deferred Retainer and Fee Agreement (“PDRFA”) and the Refund Disbursement Service Agreement (“RDS”), both pertain exclusively t0 tax filings related t0 the sale of properties in the State of California. Kahn solicited from Longstaff power 0f attorney documents purporting to authorize Longstaff to sign the PDRFA and RDS 0n Wang’s behalf. Longstaff fraudulently created these documents in California and appended t0 them acknowledgements from California notaries. As part of the scheme, the Kahn Defendants also filed fraudulent tax returns for Wang with the California Franchise Tax Board, and directed that the California Franchise Tax Board wire an over $136,000 tax refund for Wang t0 them directly, Which they then misappropriated. A11 Defendants communicated With Xiong knowing he was in California and caused him t0 direct communications t0 Defendants from California as well as transfer funds from California. FACTUAL BACKGROUND 14. Xiong is an authorized agent for Magnolia and Wang. 15. Wang developed two new single family residences in Palo Alto, California, at 3878 Magnolia Drive and at 3880 Magnolia Drive. Wang subsequently transferred ownership of 3880 Magnolia Drive to Magnolia. 16. In October 2017, Wang sold 3880 Magnolia Drive for $4.1M. In May 2018, Magnolia sold 3878 Magnolia Drive for $4.1M. 17. Because Wang is a foreign national, there was significant tax withholding of 4 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 over $1 million, from the proceeds of these sales by both the federal government and the government of the State of California pending filing ofWang’s tax returns for the calendar year 0f each sale. 18. Acting on behalf 0f Magnolia and Wang, Xiong retained Longstaff and Guidance t0 provide legal services t0 Wang in connection With Wang’s tax refunds for the 2017 and 2018 calendar year and t0 provide legal services to Magnolia in connection with Magnolia’s use of the proceeds from the sales 0f 3880 Magnolia Drive and 3878 Magnolia Drive. 19. Longstaff represented that he was the Managing Attorney at Guidance Law, with offices in Palo Alto and licensed in good standing with the State of California. I. Magnolia Is Defrauded Of Over $3 Million In Proceeds From The Sale Of 3878 Magnolia Drive A. Defendants Induce Magnolia T0 Enter Into The DAT Agreement 20. Longstaff and Guidance Law introduced Xiong t0 Joseph Libkey (“Libkey”). Libkey did business through Peak Financial Company (“Peak”), an entity that, upon information and belief, Libkey wholly owned. Peak is a Colorado-based corporation, but upon information and belief, Peak had maintained an office in California and transacted business in California and With clients located in California. 21. Libkey proposed that Magnolia use a tax deferral vehicle he called a Deferred Asset Trust (“DAT”) to defer taxation 0n the proceeds 0f the sale 0f 3878 Magnolia Drive into a future tax period. Magnolia would retain Peak t0 hold these proceeds in a DAT account under the terms of an Authorization For Settlement Of Deferred Asset Trust And Management Agreement (“DAT Agreement”). 22. Longstaff and Guidance Law were retained t0 provide legal advice With respect to the sales of 3880 Magnolia Drive, the DAT Agreement, and tax issues for tax years 2017 and 2018. Longstaff and Guidance held themselves out t0 have expertise With respect t0 real estate and tax matters. 5 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 23. On April 17, 2018, at approximately 1:30 p.m., Xiong and Libkey had a telephonic meeting regarding the proposed DAT and DAT Agreement. During this phone call, Libkey represented to Xiong that, after the funds were held in trust by Peak for one calendar quarter, Magnolia would always have access to distribution of the funds held in the DAT account. Upon request, after 5 days’ notice, the funds would be delivered by Peak to Magnolia. 24. Following this phone call, 0n April 17, 2018, at approximately 8: 15 p.m., Libkey sent an email t0 Xiong stating, “Glad we were able to talk today, and I am confident Peak Will be able t0 execute as we outlined in today’s call. Again, please provide escrow With only Exhibit A, with the Wire transfer amount.” 22. Longstaff advised Xiong that the DAT Agreement was a lawful and legitimate tax deferral vehicle and recommended that Magnolia use the DAT Agreement to defer taxes 0n the proceeds from sale 0f the two Magnolia properties. 25. In fact, the DAT Agreement is against public policy and not a lawful tax deferral vehicle. 26. In reliance 0n Libkey’s representation that if funds were transferred into the DAT, after a one-fiscal quarter holding period, Magnolia would retain the ability t0 instruct a distribution of its funds back to Magnolia after the expiration of a five-day period, and in reliance 0n Longstaff and Guidance’s legal advice, Magnolia executed the DAT Agreement. A true and correct copy of the DAT Agreement is attached as Exhibit A. 27. In executing the DAT Agreement, Magnolia retained and engaged Mr. Libkey and Peak for financial services. 28. On May 7, 2018, $3,130,953.66 from the proceeds ofthe sale of3878 Magnolia Drive were Wired into an account established by Peak and Libkey at U.S. Bank in Colorado. B. Key Provisions Of The DAT Agreement 29. The DAT Agreement provides that Peak will establish a trust with respect to certain assets designated by Magnolia and held in an account for Magnolia’s benefit. DAT Agreement Whereas clause, 11 2. 6 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 30. Peak agreed to accept its role as trustee 0f Magnolia’s assigned assets and to act as a fiduciary. DAT Agreement whereas clause, fl 3, fl 1.1. 3 1. Peak accepted full responsibility as a fiduciary and agreed that it is subject to, and would at all times comply with, the standard of care and other fiduciary duties. In connection With that standard of care, Peak agreed to act in accordance With Magnolia’s best interests. DAT Agreement fl 1.1, 1] 5. 32. Peak agreed that at the close of the first fiscal quarter 0f holding Magnolia’s fimds, Magnolia would determine Which assets would be transferred t0 or from the DAT from time to time and would inform Peak 0f its determinations in this regard. DAT Agreement 1] 2. 1. 33. Similarly, Peak agreed that at the end 0f the first complete fiscal quarter, Magnolia shall be permitted to instruct Peak to transfer or otherwise distribute, reinvest, 0r handle the assets held in the DAT 0r to withdraw the funds held in the DAT upon written notice within five days. DAT Agreement 1] 3.3. 34. Peak further agreed that it would, at all times, maintain a minimum of $5 million in errors and omissions insurance coverage. DAT Agreement 1] 13. C. Magnolia’s Money Disappears 35. On October 17, 2019, 0n behalf of Magnolia, Xiong instructed Libkey, acting in his capacity as the agent of Peak, to wire transfer the $3,130,953.66 held in the DAT back to Magnolia “as soon as possible.” 36. On October 19, 2019, Xiong sent Libkey another email, writing “I have not heard from you on this yet. Can you pls call me back []? I expect you can complete wire transfer in middle next week. Let know if there is any issue. Thanks.” In response, Libkey offered to talk to Xiong on Monday, October 21, 2019. 37. On Monday, October 2 1 , 2019, Xiong provided wire instructions for the return 0f the fimds held in the DAT. 38. On October 24, 2019, Libkey sent Xiong a Wire transfer “form” for completion. 7 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Libkey also claimed that he needed some “sign offs” on some closing paperwork and that he needed to “get the documents in place.” Libkey further stated, “I realize you want my company to start the transfer this week, but I need to make sure all parties are protected With the right documentation.” 39. In response, 0n October 24, 2019, Xiong wrote t0 Libkey, informing him that he had completed the Wire transfer form and stating, “I want you to release the full funds in the amount of $3,130,953.66 without any delay. Ihad made this same request by email a week ago 0n 10/ 17, and during the 3-Way conference call this Monday including you, Derek and I. I expect you Will expedite the process of Wire transfer.” 40. On October 25, 2019, Libkey acknowledged “the need t0 get this wire transfer done,” and finally agreed to “move promptly” 0n the wire transfer t0 Magnolia. Libkey promised, “I will set this in motion With our bank and follow through t0 push this across on Monday.” 41. Later that day, Xiong thanked Libkey for “making arrangement[s] to release the funds next Monday.” 42. On October 29, 2019, Xiong wrote t0 Libkey stating, “Per our conversation yesterday you Will Wire transfer the filll amount 0f funds today. You Will call me this morning t0 confirm the matter.” 43. Later that day, Libkey made further excuses for not wiring the funds, including running issues past attorneys, but promised t0 follow up “in writing and in detail” about What “steps are going to be taken to properly dissolve this trust ASAP.” 44. Later that day, Xiong again demanded the return 0f the funds and noted Libkey’s prior representations that he would promptly release the funds. 45. On November 1, 2019, counsel for Peak sent a letter to Magnolia stating that “transactions contemplated under the Agreement have been completed,” and that Peak would (CLmove to close-out’ Magnolia’s trust account with Peak Financial.” Peak wrote that it “anticipate[d] the process t0 be completed by December 1, 2019,” and that Magnolia’s funds 8 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 would be returned by December 6, 2019. Contrary t0 these representations, Peak did not send fithher communications or other notices t0 Magnolia by December 1, 2019. 46. On December 2, 2019, counsel for Magnolia wrote to counsel for Peak, requesting an explanation 0fwhat transactions Peak was referring t0 in its November 1, 2019, letter, as well as a confirmation of the amount 0f Magnolia’s funds held by Peak. When Peak failed t0 respond t0 Magnolia’s requests, 0n December 5, 2019, counsel for Magnolia again wrote to Peak’s counsel and requested a call. 47. On December 6, 2019, counsel for Peak disclosed Via telephone that Peak had transferred the Magnolia funds held in the DAT into a condominium project located in Colorado. Later that day, counsel for Peak confirmed that Peak had transferred Magnolia’s fimds into the Roth Park Place condominium project located at 1401 W 85th Avenue, Federal Heights, Colorado (“Roth Park Place”). Wang, Xiong, and Magnolia had n0 prior knowledge 0r notice of these transfers- n0 such disclosures had been made to them prior t0 this date. 48. On December 13, 2019, counsel for Peak informed Magnolia for the first time that Blueprint Investment Fund, LLC (“Blueprint Fund” or “Blueprint”), a Colorado limited liability company, currently holds title to Roth Park Place. Counsel for Peak also disclosed for the first time that Blueprint and Peak are “affiliated entities.” 49. Colorado Secretary 0f State records confirm that Libkey formed Blueprint and is its registered agent. Upon information and belief, Libkey is also the sole owner and/or member of Blueprint. 50. Peak did not notify Magnolia of the transferring 0f Magnolia’s funds into Blueprint, or of the conflict 0f interest regarding Libkey and/or Peak’s ownership of Blueprint, before counsel for Peak provided that information in response t0 Magnolia’s repeated inquiries on December 13, 20 1 9. 5 1. Magnolia never authorized or approved the transfer 0f its funds into Blueprint. 52. Magnolia never approved or waived any conflict 0f interest related to Peak’s transferring 0f Magnolia’s funds into a proj ect managed, owned, 0r affiliated With Libkey 9 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 and/or Peak. Nor did Longstaff have any authority t0 approve or waive any conflict 0f interest. 53. T0 date, Peak has refused all 0f Magnolia’s attempts t0 secure the return of its funds and has not yet returned any 0f Magnolia’s funds. 54. Libkey and Longstaff also introduced the Kahn Defendants as skilled tax practitioners Who could help file Wang’s 2017 and 2018 tax returns to obtain refunds of taxes withheld by the federal government and the State of California in accordance with statutes governing profits received 0n the sale of real estate by foreign nationals like Wang and Who could effectively utilize the tax deferral strategy associated With the DAT Agreement. 55. As is further detailed below, the Kahn Defendants directly and fraudulently obtained hundreds of thousands of dollars from Plaintiffs, the federal government, and the State 0f California. But they also played an important role in the fraudulent scheme t0 misappropriate the proceeds 0f 3878 Magnolia Drive. The Kahn Defendants corroborated that the DAT Agreement was a legitimate tax deferral vehicle. Likewise, When Plaintiffs began demanding the return of the proceeds of 3878 Magnolia Drive from Libkey and/or Peak, Longstaff represented t0 Plaintiffs that both Kahn and Libkey, the alleged tax experts, believed the return of fimds would have damaging tax consequences in an attempt to lull Plaintiffs into complacency and delay. 56. Upon information and belief, Defendants had an agreement that in return for assisting in Longstaff and Libkey and/or Peak t0 misappropriate the proceeds from the sale of 3878 Magnolia Drive, the Kahn Defendants would receive a portion of the monies. Upon further information and belief, on or around November 19, 2018, Longstaff wired $161,024 of the proceeds misappropriated from 3878 Magnolia Drive t0 the Kahn Defendants in Florida. II. Wang, The Federal Government And The State Of California Are Defrauded In Connection With Wang’s 2017 And 2018 Tax Returns 57. Upon information and belief, Libkey and the Kahn Defendants had a longstanding relationship and business arrangement in Which Libkey referred foreign national 10 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 taxpayers t0 Kahn for Kahn t0 solicit them with fraudulent tax vehicles. Kahn paid Libkey a referral fee 0f20% of the proceeds he obtained from his Victims. Upon fithher information and belief, Kahn also offered Longstaff a commission for any monies he was able t0 obtain from Wang or Magnolia. 58. The Kahn Defendants prepared and filed Wang’s 2017 and 2018 tax returns. The DAT Agreement was not used as a tax deferral vehicle and was not reflected in Wang’s tax returns in any way. The tax returns were also signed by Bulas-Felix. 59. Longstaff advised Xiong that the Kahn Defendants were preparing Wang’s tax returns properly, and consistent With a goal of properly discharging Wang’s tax obligations t0 the federal government and the State 0f California and the goal of ensuring that any tax Withholding amounts from the two Magnolia Drive transactions were properly credited t0 Wang. Longstaff also represented that the Kahn Defendants would file tax returns in such a manner as to capture the lawful tax deferral benefits of the DAT Agreement. 60. Upon information and belief, Longstaff created a fraudulent power of attorney (“POA”) dated November 13, 2017, purportedly from Wang and conferring on Longstaff and Guidance Law broad authority t0 act 0n Wang’s behalf. Wang did not sign this POA and did not give Longstaff the authority to act on his behalf as stated in the fraudulent POA. 61. On August 16, 2018, Longstaff entered into the Partially Deferred Retainer and Fee Agreement (“PDRFA”) and Refund Disbursement Service Agreement (“RDS,” and with the PDRFA, the “PDRFA Agreements”) between Wang and FPG. Longstaff signed these agreements as Wang’s attorney-in-fact, and the contracts stated that Longstafi’s authority to do so came from the fraudulent POA. The PDRFA Agreements purport to give FPG a significant contingent fee interest in Wang’s tax refunds. FPG was entitled to 100% ofWang’s refunds above a certain baseline. Based on the refunds that were claimed 0n Wang’s tax returns, this amounted t0 a nearly 50% contingency fee 0fWang’s total refunds. Such a contingency fee would not only be unconscionable but also illegal. Under IRS Circular 230, the IRS prohibits practitioners from collecting contingency fees for filing tax returns. See 31 C.F.R. § 10.27. 11 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Neither Xiong nor Wang authorized Longstaff to sign the PDRFA Agreements and were unaware at the time that these agreements existed. 62. But it was not enough for the Kahn Defendants to extract illegal and unconscionable fees from Wang. They also falsified Wang’s tax records to artificially inflate Wang’s refund- and thus the Kahn Defendants’ contingency fee. Specifically, the Kahn Defendants grossly understated the capital gains 0n the sales of the Magnolia properties by inflating Wang’s basis in them. As a result, the refund claimed on Wang’s tax returns was more than $200,000 greater than it should have been for 2017 and more than $200,000 greater for 2018. The contingency fees that the Kahn Defendants are claiming represent the entire unlawful refunds obtained from false filings with the IRS and Franchise Tax Board as well as refund amounts that Wang was legitimately owed from the FIRPTA Withholding. The Kahn Defendants have already unlawfully pocketed over $405,000. 63. Once Wang discovered that the Kahn Defendants filed false tax returns on his behalf, he has moved With alacrity and in good faith t0 correct these returns. He Will be filing amended returns that Will subj ect him t0 over $400,000 in additional tax liability, as well as interest and possible penalties. 64. In late 2019, Longstaff disclosed t0 Xiong that Kahn was claiming hundreds of thousands 0f dollars 0f fees for his services in connection with the preparation ofWang’s tax returns. Longstaff further disclosed that Kahn was withholding a federal tax refund check of $593,851 for Wang’s 2018 federal return that he would refilse t0 surrender to Xiong or Wang unless Kahn’s purported fees were first paid. 65. Longstaff represented t0 Xiong, however, that he had negotiated with Kahn and that Kahn was Willing t0 release the federal tax refund check if Xiong Wired t0 Kahn $107,500 towards payment 0f Kahn’s fees. Longstaff advised Xiong t0 Wire $107,500 t0 Kahn to obtain the refund. 66. On Longstaff’ s advice, Xiong Wired $107,500 t0 Kahn 0n October 25, 2019. 67. Unknown to Xiong 0r Wang at the time, upon information and belief, in 12 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 October 2018, the Kahn Defendants had also received $136,530 in wired funds from the Franchise Tax Board, representing Wang’s 2017 state tax refund. Neither Longstaff, nor the Kahn Defendants disclosed this receipt 0f funds to Xiong or Wang, and the Kahn Defendants converted these funds t0 their own use. Also upon information and belief, 0n or around November 19, 2018, Longstaff Wired $161,024 of the proceeds of 3878 Magnolia Drive that had been misappropriated from Plaintiffs t0 the Kahn Defendants. III.L0ngstaff and Guidance Law Purport t0 Act As Wang’s Attorney In Fact In A Pending Florida Arbitration 68. In or about November 2019, Kahn and FPG commenced arbitration proceedings before the American Arbitration Association in Miami, Florida against Wang (the “Arbitration”), in part arising from the contractual agreements Longstaff and Guidance Law purported to enter into on Wang’s behalf under the purported authority granted by the POA. 69. Wang did not receive notice of the Arbitration. Instead, it appears that Kahn and FPG served only Longstaff, Who had no authority t0 represent Wang in the dispute. In fact, 0n November 6, 2019, Xiong had terminated any attorney-client relationship with Longstaff and had duly notified Longstaff 0f the termination. 70. Beginning in December 2019, Longstaffbegan purporting t0 represent Wang in the Arbitration as Wang’s attorney-in-fact under the POA and the Second POA (discussed below). Furthermore, he wrongfully identified his address as the address 0f service for Wang. 71. A11 the While, Longstaff and Guidance Law concealed the existence of the Arbitration from Wang over nine months. IV. The Relationship Between Longstaff and Guidance Law 72. Upon information and belief, at all relevant times, Longstaffwas the agent 0r employee 0f Guidance Law, and Guidance Law authorized Longstaff t0 hold himself out as practicing law as an affiliate of Guidance Law. 73. The legal services Longstaff provided 0n behalf ofWang were Within the scope of his authority and/or were Within the scope 0f Longstaff s employment With Guidance Law. 13 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 74. Longstaff held himself out to Xiong and Plaintiffs as the Managing Attorney of Guidance Law. Longstaff’ s letterhead stated that he was working at Guidance Law’s Palo Alto offices. Longstaff also used an email address associating him With Guidance Law. 75. Longstaff continued holding himself out to Xiong as Managing Attorney of Guidance Law throughout the years 2018 and 2019. This included continuing t0 use Guidance Law letterhead and his Guidance Law email address. 76. In fact, upon information and belief, in 2019, Longstaff created a second fraudulent power of attorney, dated February 1, 2019, purportedly from Wang and conferring on Longstaff and Guidance Law continuing broad authority to act on Wang’s behalf (the “Second POA”). V. A Conspiracy And Its Conspirators 77. None 0f the Defendants was a lone actor. Each 0f them entered into a broad civil conspiracy with each other and with Libkey and Peak and all working towards the same goal. The object 0f the conspiracy was t0 defraud Magnolia and Wang 0f as much money as possible. 78. Longstaff and Guidance identified Wang and Magnolia as potential marks from the ongoing legal services they were providing to them. They were aware that Wang had received significant proceeds from his sales of the Magnolia homes and had been subject t0 over $1 million of tax withholding associated with these transactions. Longstaff and Guidance introduced Libkey and Peak as purveyors 0f a tax deferral vehicle, the DAT Agreement, that would allow advantageous tax treatment associated With the sale 0f the Magnolia properties. Longstaff, Guidance, Libkey and Peak also introduced the Kahn Defendants as tax professionals that could effectively deploy the DAT Agreement in Wang’s 2017 and 2018 tax returns and obtain all the tax deferral benefits promised. Even as the co-conspirators coaxed Wang into transferring over $3 million in proceeds t0 Libkey and Peak under the DAT Agreement, which fimds were then misappropriated, they also worked together t0 dissuade Xiong and Wang from asking for a return of Wang’s money. Libkey and Longstaff made 14 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 numerous excuses for delay. Longstaff represented t0 Xiong that Kahn’s expert opinion was that it would be a serious mistake from a tax perspective t0 request a return of the funds. 79. Longstaff and Guidance also entered into illegal contingent fee agreements with FPG, purportedly on Wang’s behalf, through the use of fraudulent power of attorney documents. The Kahn Defendants then deliberately prepared Wang’s 2017 and 2018 returns to understate his tax liability by hundreds 0f thousands 0f dollars. They did not d0 this using the DAT Agreement at all, but instead intentionally misstated Wang’s basis in the Magnolia properties. After defrauding the federal government and State of California of taxes owed, the Kahn Defendants intercepted refund payments, some 0f Which they kept Without any notice t0 Wang that they had been received, and others that they refused to provide t0 Wang until he paid contingent fees to which he had never agreed. 80. Each 0f the co-conspirators Defendants, as well as Libkey and Peak, played an orchestrated role in the conspiracy. Further, upon information and belief, Defendants had arrangements about how they would share and distribute the monies they obtained from Wang. FIRST CAUSE OF ACTION (Professional Negligence By An Attorney) (Against Longstaff and Guidance) 81. Plaintiffs incorporate by reference each of the allegations in Paragraphs 1-80 0f this Complaint as though fully set forth here. 82. Longstaff and Guidance Law had an attorney-client relationship with Wang and Magnolia. As such, they owed Wang and Magnolia a duty t0 meet the appropriate standard 0f care for attorneys in the State 0f California in providing advice to clients such as Plaintiffs. 83. Longstaff and Guidance were professionally negligent and breached their duty of care to Plaintiffs because the legal services they provided in connection with the DAT Agreement and the filing of the 2017 and 2018 tax returns, including retention of the Kahn Defendants t0 obtain tax refunds, fell far below the standard of care. 84. Wang and Magnolia suffered damages that were proximately caused by 15 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Longstaff’ s and Guidance Law’s breaches of their duties of care in an amount to be proved at trial, but Which is estimated t0 be in excess of $5 million. 85. Guidance Law is liable for Longstaff s conduct because he was a principal, agent and/or employee of Guidance Law. SECOND CAUSE OF ACTION (Breach 0f Fiduciary Duty By An Attorney) (Against All Defendants) 86. Plaintiffs incorporate by reference each of the allegations in Paragraphs 1-85 of this Complaint as though fully set forth here. 87. Longstaff and Guidance Law had an attorney-client relationship with Wang and Magnolia. As such, they owed Wang and Magnolia a fiduciary duty. Even after Wang and Magnolia terminated the attorney-client relationship, Longstaff and Guidance continued t0 owe Wang and Magnolia a fiduciary duty with respect to the subject matters of the representation. 88. Longstaff and Guidance Law intentionally 0r recklessly breached their fiduciary duty 0f loyalty towards Wang and Magnolia. Upon information and belief, Longstaff and Guidance Law entered into a civil conspiracy with Libkey, Peak, and the Kahn Defendants with the obj ect 0f defrauding Wang and Magnolia of the proceeds of the sale of 3878 Magnolia Drive and of hundreds 0f thousands 0f dollars 0f tax refunds from the U.S. Government and the State of California. 89. Longstaff and Guidance Law further intentionally or recklessly breached their fiduciary duty 0f loyalty towards Wang because, starting in December 2019, Longstaff masqueraded as Wang’s attorney-in-fact in an arbitral proceeding before the American Arbitration Association in Miami, Florida. Wang was sued in this arbitral proceeding in November 2019, after Wang had already terminated Longstaff and Guidance Law and notified them that they had n0 authority t0 act 0n Wang’s behalf. Nevertheless, neither Longstaff nor Guidance Law disclosed t0 Wang that he had been sued. Instead, Longstaff purported to act as 16 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Wang’s attorney-in-fact in the arbitration without any authority to do so and committed acts and omissions in the arbitration that caused Wang harm. 90. Longstaff and Guidance Law intentionally 0r recklessly breached their fiduciary duty 0f confidentiality to Wang and Magnolia. As part 0f the conspiracy, Longstaff repeatedly disclosed client confidential communications t0 Libkey and, upon information and belief, other co-conspirators, so that they could better conspire on how t0 achieve the ends of the conspiracy. 91. Wang and Magnolia suffered damages in an amount to be proven at trial that were proximately caused by Longstaff’ s and Guidance Law’s breaches of their fiduciary duties. 92. Longstaff’ s and Guidance Law’s conduct was Willfill, oppressive and malicious, giving rise t0 punitive damages. 93. Guidance Law is liable for Longstaffs conduct as its principal, agent and/or employee. 94. Guidance Law and all other Defendants, acting in concert, were aware of Longstaff’s conduct and agreed, intended, and encouraged the same. In so conspiring, each of them caused substantial harm suffered by Plaintiffs as a result of Longstaff’ s conduct and each of them are therefore subj ect t0 conspiracy liability. THIRD CAUSE OF ACTION (Aiding and Abetting Breach of Fiduciary Duty) (Against the Kahn Defendants) 95. Plaintiffs incorporate by reference each 0f the allegations in Paragraphs 1-94 of this Complaint as though fully set forth here. 96. Longstaff and Guidance Law owed Plaintiffs fiduciary duties and breached those fiduciary duties as alleged above. 97. At all relevant times, the Kahn Defendants were aware that Longstaff and Guidance Law owed these fiduciary duties. 98. The Kahn Defendants, each individually, and in concert, took acts to aid and 17 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 abet Longstaff and Guidance Law in their breaches of duty. The Kahn Defendants both knew that Longstaff and Guidance Law were breaching their fiduciary duties, and knew how their own conduct was aiding and abetting Longstafi’ s and Guidance Law’s breaches 0f their fiduciary duties. 99. The Kahn Defendants” acts in aiding and abetting Longstaff’ s and Guidance Law’s breaches 0f fiduciary duty were a substantial factor in the harms caused to Plaintiffs. 100. As a direct and proximate result of the Kahn Defendants’ acts in aiding and abetting Longstaff’s and Guidance Law’s breaches 0f fiduciary duty, Plaintiffs have suffered damages in an amount t0 be proven at trial. 101. The Kahn Defendants’ acts were willful, oppressive and malicious. As a consequence of these acts, Plaintiffs are entitled t0 punitive damages in an amount t0 be proven at trial. FOURTH CAUSE OF ACTION (Professional Negligence By A Tax Preparer) (Against The Kahn Defendants) 102. Plaintiffs incorporate by reference each of the allegations in Paragraphs 1-101 0f this Complaint as though fully set forth here. 103. The Kahn Defendants undertook t0 prepare Wang’s 2017 and 2018 tax returns as his tax preparers. As such, they owed Wang a duty to meet the appropriate standard of care for tax preparers filing returns before the Internal Revenue Service and the California Franchise Tax Board. 104. The Kahn Defendants were professionally negligent and breached their duty of care to Wang because the tax preparation services they provided in preparing Wang’s 2017 and 2018 tax returns, fell far below the standard 0f care. 105. Wang suffered damages that were proximately caused by the Kahn Defendants’ breaches of their duties in an amount t0 be proven at trial. 18 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 FIFTH CAUSE OF ACTION (Breach 0f Fiduciary Duty) (Against All Defendants) 106. Plaintiffs incorporate by reference each of the allegations in Paragraphs 1-105 0f this Complaint as though fully set forth here. 107. The Kahn Defendants put themselves in a position 0f trust and confidence With Wang and Magnolia. As such, they owed Wang and Magnolia a fiduciary duty. 108. The Kahn Defendants intentionally or recklessly breached their fiduciary duty of loyalty towards Wang and Magnolia. Upon information and belief, the Kahn Defendants entered into a civil conspiracy with Libkey, Peak, Longstaff and Guidance Law with the object 0f defrauding Wang and Magnolia of the proceeds of the sale of 3878 Magnolia Drive and of hundreds 0f thousands of dollars 0f tax refunds from the U.S. Government and the State of California. 109. Wang and Magnolia suffered damages in an amount to be proven at trial that were proximately caused by the Kahn Defendants’ breaches 0f their fiduciary duties. 110. The Kahn Defendants’ conduct was willful, oppressive and malicious, giving rise to punitive damages. 111. A11 other Defendants, acting in concert, were aware 0f the Kahn Defendants’ conduct and agreed, intended, and encouraged the same. In so conspiring, each 0f them caused substantial harm suffered by Plaintiffs as a result of the Kahn Defendants” conduct and each of them are therefore subj ect to conspiracy liability. SIXTH CAUSE OF ACTION (Aiding and Abetting Breach of Fiduciary Duty) (Against Longstaff and Guidance Law) 112. Plaintiffs incomorate by reference each 0f the allegations in Paragraphs 1-1 11 0f this Complaint as though fully set forth here. 113. The Kahn Defendants owed Plaintiffs fiduciary duties and breached those fiduciary duties as alleged above. 19 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 114. At all relevant times, Longstaff and Guidance Law were aware that the Kahn Defendants owed these fiduciary duties. 115. Longstaff and Guidance Law, each individually, and in concert, took acts to aid and abet the Kahn Defendants in their breaches of duty. Longstaff and Guidance Law both knew that the Kahn Defendants were breaching their fiduciary duties, and knew how their own conduct was aiding and abetting the Kahn Defendants’ breaches 0f their fiduciary duties. 116. Longstaff’s and Guidance Law’s acts in aiding and abetting the Kahn Defendants’ breaches of fiduciary duty were a substantial factor in the harms caused t0 Plaintiffs. 117. As a direct and proximate result of Longstaff’s and Guidance Law’s acts in aiding and abetting the Kahn Defendants” breaches 0f fiduciary duty, Plaintiffs have suffered damages in an amount t0 be proven at trial. 118. Longstaff’s and Guidance Law’s acts were willful, oppressive and malicious. As a consequence of these acts, Plaintiffs are entitled to punitive damages in an amount t0 be proven at trial. SEVENTH CAUSE OF ACTION (Breach 0f Fiduciary Duty) (Against All Defendants) 119. Plaintiffs incorporate by reference each of the allegations in Paragraphs 1-1 18 0f this Complaint as though fully set forth here. 120. Peak and Libkey owed a fiduciary duty t0 Magnolia as provided for in the DAT Agreement, in acting as a trustee with respect to the Magnolia funds in the DAT, and in providing financial services to Magnolia. At all relevant times, there was a special and confidential relationship between Peak and Libkey, 0n the one hand, and Magnolia, 0n the other hand, such that in reliance on this special relationship, Magnolia placed its trust and confidence in the competence, integrity, and fidelity of Peak and Libkey. 121. Peak and Libkey intentionally 0r negligently and carelessly failed t0 satisfy the fiduciary duty 0f care, of loyalty, 0f good faith, and notification required of an entity and/or 20 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 person acting as a financial services provider, fiduciary and/or trustee. 122. Peak and Libkey breached their fiduciary duty by failing t0 return Magnolia’s funds Within five days upon written request after the first quarter holding period. 123. Peak and Libkey breached their fiduciary duty by failing t0 notify 0r obtain consent for a transfer of Magnolia’s funds into a real estate proj ect for Which Peak had a conflict of interest in that it was affiliated with, owned, and/or controlled by Peak and/or Libkey. 124. Peak and Libkey breached their fiduciary duty by engaging in self-dealing that was not in Magnolia’s interests by transferringing Magnolia’s funds t0 Blueprint, an entity that was affiliated with, owned, and/or controlled by Peak and/or Libkey. 125. As a result of Peak’s and Libkey’s breach of fiduciary duty, Peak and Libkey have caused damage t0 Magnolia in an amount t0 be proved at trial. 126. Defendants, acting in concert, were aware 0f Peak and Libkey’s conduct and agreed, intended, and encouraged the same. In so conspiring, each 0f them caused substantial harm suffered by Plaintiffs as a result 0f each others’ conduct and each 0f them are therefore subj ect t0 conspiracy liability, and are jointly and severally liable for the full extent of the damage caused t0 Plaintiffs by Peak and Libkey’s breach of fiduciary duty 127. Defendants’ acts were willful, oppressive and malicious. As a consequence 0f these acts, Plaintiffs are entitled to punitive damages in an amount to be proven at trial. EIGHTH CAUSE OF ACTION (Aiding and Abetting Breach 0f Fiduciary Duty) (Against All Defendants) 128. Plaintiffs incorporate by reference each of the allegations in Paragraphs 1-127 of this Complaint as though fully set forth here. 129. Peak and Libkey owed a fiduciary duty to Magnolia as provided for in the DAT Agreement, in acting as a trustee With respect to the Magnolia funds in the DAT, and in providing financial services to Magnolia. At all relevant times, there was a special and confidential relationship between Peak and Libkey, on the one hand, and Magnolia, on the 2 1 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 other hand, such that in reliance on this special relationship, Magnolia placed its trust and confidence in the competence, integrity, and fidelity of Peak and Libkey. 130. Peak and Libkey intentionally 0r negligently and carelessly failed t0 satisfy the fiduciary duty 0f care, of loyalty, 0f good faith, and notification required of an entity and/or person acting as a financial services provider, fiduciary and/or trustee. 13 1. Peak and Libkey breached their fiduciary duty by failing to return Magnolia’s funds within five days upon written request after the first quarter holding period. 132. Peak and Libkey breached their fiduciary duty by failing t0 notify 0r obtain consent for a transfer 0f Magnolia’s funds into a real estate proj ect for Which Peak had a conflict 0f interest in that it was affiliated with, owned, and/or controlled by Peak and/or Libkey. 133. Peak and Libkey breached their fiduciary duty by engaging in self-dealing that was not in Magnolia’s interests by transferring Magnolia’s funds with Blueprint, an entity that was affiliated with, owned, and/or controlled by Peak and/or Libkey. 134. As a result 0f Peak’s and Libkey’s breach 0f fiduciary duty, Peak and Libkey have caused damage to Magnolia in an amount to be proved at trial. 135. Defendants were aware that Peak and Libkey owed these fiduciary duties. 136. Defendants, each individually, and in concert, took acts to aid and abet Peak and Libkey in their breaches of duty. Defendants both knew that Peak and Libkey were breaching their fiduciary duties, and knew how their own conduct was aiding and abetting Peak’s and Libkey’s breaches 0f their fiduciary duties. 137. Defendants’ acts in aiding and abetting Peak’s and Libkey’s breaches of fiduciary duty were a substantial factor in the harms caused to Plaintiffs. 138. Defendants, acting in concert, were aware of each others’ conduct and agreed, intended, and encouraged the same. In so conspiring, each of them caused substantial harm suffered by Plaintiffs as a result 0f each others” conduct and each of them are therefore subject t0 conspiracy liability. Accordingly, Defendants are jointly and severally liable for the full 22 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 extent of the damage caused to Plaintiffs by Peak and Libkey’s breaches 0f their fiduciary duties. 139. As a direct and proximate result 0f Defendants’ acts in aiding and abetting Peak’s and Libkey’s breaches of fiduciary duty, Plaintiffs have suffered damages in an amount t0 be proven at trial. 140. Defendants’ acts were willful, oppressive and malicious. As a consequence 0f these acts, Plaintiffs are entitled to punitive damages in an amount to be proven at trial. NINTH CAUSE OF ACTION (Fraudulent Inducement t0 Contract) (Against All Defendants) 141. Plaintiffs incorporate by reference each of the allegations in Paragraphs 1-140 of this Complaint as though fully set forth here. 142. At all times prior to the execution 0f the DAT Agreement, Peak and/or Libkey represented t0 Magnolia’s representative, Xiong, that Magnolia would always have access to the Magnolia funds transferred into the DAT upon five days’ notice after a one-quarter holding period. At the time Peak and/or Libkey made these representations and others like it, he knew them t0 be false. 143. At all times prior t0 the execution of the DAT Agreement, Peak and/or Libkey concealed their intent to convert Magnolia’s funds and/or not make them available upon five days’ notice for distribution t0 Magnolia. 144. Magnolia reasonably relied upon both Peak and/or Libkey’s affirmative misrepresentations and concealments to Magnolia’s detriment, and was damaged and fraudulently induced into entering the DAT Agreement as a result. 145. Defendants, acting in concert, were aware of each others’ conduct and agreed, intended, and encouraged the same. In so conspiring, each of them caused substantial harm suffered by Plaintiffs as a result 0f each others” conduct and each of them are therefore subject t0 conspiracy liability, and are jointly and severally liable for the full extent 0f the damage 23 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 caused t0 Plaintiffs by Peak and Libkey’s fraudulent actions. 146. Defendants’ acts were willfill, oppressive and malicious. As a consequence of these acts, Plaintiffs are entitled to punitive damages in an amount t0 be proven at trial. TENTH CAUSE OF ACTION (Fraud) (Against All Defendants) 147. Plaintiffs incorporate by reference each of the allegations in Paragraphs 1-146 0f this Complaint as though fully set forth here. 148. Defendants made a series of false and misleading statements to Magnolia, Wang, and Xiong, including that: 1) the DAT Agreement was a lawful and valid tax deferral vehicle; 2) that if Plaintiffs transferred the proceeds from the sale 0f 3878 Magnolia Drive to Libkey and Peak, Plaintiffs would receive tax deferral benefits and their money would remain safely in trust and would be returned in full upon 5 days’ notice after a one-quarter holding period; 3) that the Kahn Defendants would prepare Wang’s 2017 and 2018 tax returns in manner t0 lawfully maximize Wang’s tax refunds from FIRPTA withholding and its state law analogy; and 4) that the Kahn Defendants would use the DAT Agreement as a tax deferral vehicle in Wang’s tax returns. Defendants knew that each of these statements were false and misleading at the time that Defendants made them or made these statements With a reckless disregard for their truth 0r falsity. Defendants intended for Plaintiffs t0 rely on the false and misleading statements. 149. Each of these statements were material and Plaintiffs reasonably relied on these statements in entering into the DAT Agreement, transferring the proceeds 0f 3878 Magnolia Drive t0 Libkey and Peak, and in agreeing t0 allow the Kahn Defendants to file Wang’s 2017 and 2018 tax returns. 150. Plaintiffs suffered damages proximately caused by Defendants’ conduct in an amount to be proven at trial. 151. Defendants, acting in concert, were aware of each others’ conduct and agreed, 24 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 intended, and encouraged the same. In so conspiring, each of them caused substantial harm suffered by Plaintiffs as a result 0f each others” conduct and each of them are therefore subject t0 conspiracy liability. 152. Defendants’ acts were willful, oppressive and malicious. As a consequence of these acts, Plaintiffs are entitled to punitive damages in an amount to be proven at trial. ELEVENTH CAUSE OF ACTION (Conversion) (Against All Defendants) 153. Plaintiffs incorporate by reference each 0f the allegations in Paragraphs 1-152 0f this Complaint as though fully set forth here. 154. At all relevant times, Magnolia has owned the $3,130,953.66 in funds that it transferred into a DAT account pursuant t0 the DAT Agreement that Magnolia was fraudulently induced by Peak and/or Libkey t0 enter into on April 17, 2018, and which Peak and/or Libkey subsequently transferred t0 Roth Park Place or otherwise used for their personal benefit Without Magnolia’s knowledge or authorization. 155. Peak and Libkey intentionally and substantially interfered with Magnolia’s property by taking possession 0f the $3,130,953.66 in funds that Magnolia transferred into a DAT account and transferring them t0 Roth Park Place or otherwise using these funds for their personal benefit without Magnolia’s knowledge or authorization. 156. A11 Defendants intentionally and substantially interfered With Magnolia’s property by refusing to return Magnolia’s $3,130,953.66 in funds - pursuant to the terms of the DAT Agreement 0r otherwise- after Magnolia demanded the return of the funds. 157. Magnolia did not consent t0 Defendants” transfer of Magnolia’s fimds into Blueprint, Roth Park Place, 0r any project owned by Blueprint, Peak, 0r Libkey. 158. Wang had an ownership interest in those tax refunds which were transmitted from the U.S. Government and the State 0f California for his account for his 2017 and 2018 tax returns. A portion of those refunds were legitimately owed to Wang. A portion 0f those 25 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 refunds were paid due to the Kahn Defendants’ creation and filing 0f deliberately false tax returns. But Wang had an ownership interest in even those refimd overpayments because he is legally responsible for the taxes owed on his returns, including any refund overpayments made due t0 the Kahn Defendants’ misconduct, and will be filing amended tax returns in which any tax liability Will be paid in fill]. 159. The Kahn Defendants intentionally and substantially interfered With Wang’s property by taking possession of the refund amounts paid by the federal government and the State 0f California 0n Wang’s account. 160. Plaintiffs were harmed as a result 0f Defendants’ above-described conduct. 161. Defendants’ conduct was a substantial factor in causing Plaintiffs’ harm. 162. Defendants, acting in concert, were aware of each others’ conduct and agreed, intended, and encouraged the same. In so conspiring, each 0f them caused substantial harm suffered by Plaintiffs as a result 0f each others’ conduct and each of them are therefore subject t0 conspiracy liability, and are jointly and severally liable for the full extent of the damage caused to Plaintiffs. 163. Defendants’ acts were willful, oppressive and malicious. As a consequence of these acts, Plaintiffs are entitled to punitive damages in an amount to be proven at trial. TWELFTH CAUSE OF ACTION (Civil Theft Under Colorado Revised Statutes (C.R.S.) §§ 18-4-401, 405) (Against All Defendants) 164. Plaintiffs incorporate by reference each of the allegations in Paragraphs 1-163 0f this Complaint as though fully set forth here. 165. Peak and Libkey were obligated t0 return Magnolia’s funds t0 it Within 5 days of demand for their return. Peak and Libkey failed t0 return Magnolia’s funds after demand was made on them to d0 so. 166. Peak and Libkey retained and exercised control over Magnolia’s funds Without authorization by failing to return Magnolia’s funds When Magnolia demanded return of the 26 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 same on separate occasions in October, November, and December 0f 2019. 167. Upon information and belief, Peak and/ or Libkey withdrew Magnolia’s fimds from US Bank and delivered those funds t0 Blueprint for an undisclosed transfer into the Roth Park Place or for other uses. 168. Blueprint obtained and exercised control over Magnolia’s funds Which it was never authorized t0 receive 0r control. Blueprint has not returned Magnolia’s funds after demand was made on Peak and Libkey to do so. 169. Libkey, individually and/or through Peak and Blueprint, obtained, retained, and exercised control over Magnolia’s funds without authorization by transferring the funds from Peak to Blueprint without authorization and using said funds in the Roth Park Place, or for other purposes, all for his own personal benefit. 170. Defendants, acting in concert, were aware 0f each others’ conduct and agreed, intended, and encouraged the same. In so conspiring, each of them caused substantial harm suffered by Plaintiffs as a result 0f each others” conduct and each 0f them are therefore subject t0 conspiracy liability, and are jointly and severally liable for the full extent 0f the damage caused t0 Plaintiffs. 171. Each Defendant intended to deprive Magnolia permanently 0f the use or benefit of the funds. 172. Defendants knowingly used or concealed the funds in such a manner as to deprive Magnolia permanently of their use or benefit. 173. Magnolia has been and continues to be damaged by Defendants obtaining, retaining, or exercising control over Magnolia’s funds without authorization. Defendants’ conduct constitutes civil theft. 174. Magnolia has been damaged in the amount 0f $3,130,963.66 plus interest and other damages to be proven at trial. 175. Magnolia is entitled t0 judgment against Defendants jointly and severally caused by Defendants’ civil theft, in the amount of $3,130,953.66, plus three times the amount 27 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 0f actual damages sustained by Magnolia, and costs and reasonable attorney fees pursuant t0 C.R.S. § 18-4-405. THIRTEENTH CAUSE OF ACTION (Unjust Enrichment) (Against All Defendants) 176. Plaintiffs incorporate by reference each 0f the allegations in Paragraphs 1-175 0f this Complaint as though fully set forth here. 177. At all relevant times, Magnolia has owned the $3,130,953.66 in funds that it transferred into a DAT account pursuant t0 the DAT Agreement that Magnolia was fraudulently induced by Peak and/or Libkey t0 enter into on April 17, 2018, and which Peak and/or Libkey subsequently transferred t0 Roth Park Place or otherwise use for their benefit without Magnolia’s knowledge 0r authorization. 178. Defendants received a benefit by wrongfully withholding or transferring Magnolia’s funds in the Roth Park Property 0r otherwise using Magnolia’s fimds Without authorization and after Magnolia demanded that Magnolia’s funds be returned. 179. Defendants appreciated the benefit 0f Magnolia’s funds by transferring some 0r all of the funds into the Roth Park Property in Which Blueprint and Libkey have an interest, or otherwise using the funds for their personal benefit. 180. Wang had an ownership interest in those tax refunds which were transmitted from the U.S. Government and the State 0f California for his account for his 2017 and 2018 tax returns. A portion of those refunds were legitimately owed to Wang. A portion of those refunds were paid due to the Kahn Defendants’ creation and filing 0f deliberately false tax returns. But Wang had an ownership interest in even those refimd overpayments because he is legally responsible for the taxes owed on his returns, including any refund overpayments made due t0 the Kahn Defendants’ misconduct, and will be filing amended tax returns in which any tax liability Will be paid in fill]. 181. The Kahn Defendants intentionally and substantially interfered With Wang’s 28 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 property by taking possession of the refund amounts paid by the federal government and the State 0f California 0n Wang’s account. The Kahn Defendants also received a portion 0f the proceeds from the sale 0f 3878 Magnolia Drive that had been misappropriated from Plaintiffs. The Kahn Defendants also induced Plaintiffs to wire them an additional $107,500 by refusing t0 release other refund payments until these amounts were paid. 182. It is inequitable for Defendants t0 have accepted and retained the benefit 0f Plaintiffs’ funds without consideration 0r payment of their value. 183. Plaintiffs have and continue to be damaged by Defendants’ unjust enrichment. 184. Defendants, acting in concert, were aware of each others’ conduct and agreed, intended, and encouraged the same. In so conspiring, each of them caused substantial harm suffered by Plaintiffs as a result 0f each others” conduct and each of them are therefore subject t0 conspiracy liability, and are jointly and severally liable for the full extent 0f the damage caused t0 Plaintiffs. 185. Plaintiffs are entitled t0 judgment in an amount t0 be proven at trial. FOURTEENTH CAUSE OF ACTION Civil RICO Under 18 U.S.C. § 1962(c) (Against All Defendants) 186. Plaintiffs reallege and incorporate herein by this reference the allegations set forth in Paragraphs 1-185 of this Complaint. 187. Guidance Law, Longstaff, the Kahn Defendants, Libkey, Peak, and Blueprint are part 0f an enterprise the purpose of Which is t0 defraud foreign nationals, as well as the federal government and state governments. 188. The members of the enterprise served different roles. Libkey and Peak purported to offer advisory services in connection With tax deferral vehicles for foreign nationals, including 1031 exchanges and more purportedly specialized tax deferral vehicles such as the DAT Agreement. One 0f the aims of the enterprise was to induce Victims to transfer the proceeds of real estate sales into accounts under their control Where such funds 29 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 could be misappropriated. Libkey and Peak would then transfer the funds to other entities under Libkey’s control, including but not limited t0 Blueprint, Blueprint Investment Group LLC, Blueprint Property Management LLC, Blueprint OZ Fund LLC, Blueprint OZ Fund LP, Blueprint Fund Management LLC, Blueprint International Group LLC, and Roth Park Place LLC. 189. Libkey and Peak would also introduce Victims t0 the Kahn Defendants so that the Kahn Defendants could purportedly assist in filing tax returns t0 make use 0f the offered tax deferral vehicles as well as t0 maximize any refunds under FIRRPTA and its state law analogs. The purpose 0f introducing the Kahn Defendants was in part t0 corroborate the Viability of the tax deferral vehicles Libkey and Peak were offering and to induce Victims to transfer the proceeds of real estate sales t0 Libkey and Peak. Likewise, after the Victims had transferred the proceeds 0f sales t0 Libkey and Peak, the Kahn Defendants would often help lull and delay the Victims from demanding a return 0f their monies, purporting t0 render tax advice that further delay was necessary t0 avoid adverse tax consequences. 190. The Kahn Defendants would also - under the guise 0f using special expertise 0r knowledge of the tax regulatory regime- prepare deliberately false tax returns that grossly understated the taxes due and therefore defrauding the federal government and state governments into refunding hundreds 0f thousands 0f dollars that would not have been refunded had the returns been properly prepared. The Kahn Defendants also engaged in various artifices to defraud the enterprise’s Victims of both the improper refimds obtained as well bona fide refunds t0 Which the Victims were owed. In some instances, the Kahn Defendants would directly intercept refunds wired by state and federal governments on account of the Victims and misappropriate those funds for themselves Without telling the Victims they had been received. In other instances, they would claim that Victims had agreed to contingent refunds on their tax returns based on fraudulent paperwork. Any such agreements would have been illegal under IRS Circular 230, yet in many instances the agreements themselves were premised on forged documents and never agreed by the Victims. 30 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 In yet other instances, the Kahn Defendants would simply refuse t0 return tax refunds received from the federal and state government until the Victims paid them exorbitant sums. 191. Upon information and belief, Longstaff and Guidance Law participated in this enterprise by bringing potential foreign national Victims to Libkey, Peak and the Kahn Defendants and purporting t0 offer their clients legal advice that validated that the purported tax deferral vehicles and tax return preparation services were bona fide and that their clients should transfer funds t0 Libkey, Peak, and the Kahn Defendants. Longstaff and Guidance Law would also create fraudulent power 0f attorney documents t0 enter into unauthorized contingent fee agreements With the Kahn Defendants and t0 purport t0 authorize Libkey and Peak to misappropriate funds held for the benefit 0f their clients. 192. Upon information and belief, Defendants had agreements on how t0 divide the funds fraudulently obtained from the Victims 0f the enterprise. Among other things, the Kahn Defendants would pay referral fees t0 Longstaff and Libkey from the proceeds obtained through the efforts of the enterprise. Longstaff and Libkey would also facilitate transferring portions 0f the proceeds 0f real estate sales misappropriated from Victims to the Kahn Defendants. Defendants would also retain illegal fees and commissions as a result of these wrongfiJI acts. 193. Through their roles in the enterprise, Defendants were aware 0f pattern 0f racketeering activity in which the enterprise engaged and each cooperated in the commission 0f two or more 0f the RICO predicate acts as alleged herein. 194. This pattern 0f racketeering activity by the enterprise includes the following: a. Fraudulently inducing Plaintiff Magnolia to enter into the DAT Agreements. b. Inducing the Wire transfer, 0n May 7, 2018, 0f $3,130,953.66 from the proceeds of the sale of 3878 Magnolia Drive were into an account established by Peak and Libkey at U.S. Bank in Colorado. This transfer was from California t0 Colorado. 31 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Transferring, on or around May 8, 2018, these same proceeds to Blueprint, an entity under Libkey’s dominion and control, after which these funds were used for Libkey’s benefit, including a portion of them transferred to the Roth Park condominiums. . RefiJsing t0 return the funds at Plaintiffs’ request. Preparing deliberately false tax returns t0 wrongfully inflate the tax refunds paid the federal government and the State 0f California. The Kahn Defendants used the e-filing platforms operate by the Internal Revenue Service and the California Franchise Tax Board to file these returns. Intercepting a Wire transfer refimd payment by the State of California and misappropriating it While concealing from Plaintiffs that it had been received. This transfer was from California to Florida. . RefiJsing t0 return other refunds received from the federal government and the State 0f California by U.S. mail or wire transfer until Plaintiffs wired over $100,000 from California t0 the Kahn Defendants in Florida. The above-referenced racketeering activities involve interstate communications to perpetuate fraud and involved the transfer 0f funds in interstate commerce and as such constituted Wire fraud pursuant t0 18 U.S.C. § 1343. T0 effectuate their scheme, Defendants would communicate Via interstate email and telephone, 0r cause such communications, as detailed above and throughout this Complaint. In addition, at certain points during the time of these communications, Defendants would cause the interstate transmission of funds as alleged herein. Furthermore, Defendants directed the transfer of funds across interstate lines, using federal banking systems and Fedwire accounts to further their scheme, including soliciting the sending of funds from California t0 Colorado and Florida. The Kahn Defendants also used the e-filing platforms operated by the Internal Revenue Service and the California Franchise Tax 32 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Board t0 file and transmit Wang’s 2017 and 2018 tax returns. 196. Finally, the scheme 0f this enterprise represents a continuing threat of racketeering activity as the enterprise seeks out new Victims. The Kahn Defendants, Libkey, Peak and Blueprint actively advertise on the Internet and use their referral networks to solicit foreign nationals. 197. Plaintiffs suffered direct harm as a result of Defendants’ wrongful conduct 0f an amount to be proved at trial. FIFTEENTH CAUSE OF ACTION Conspiracy to Commit RICO in Violation 0f 18 U.S.C. § 1962(d) (Against All Defendants) 198. Plaintiffs reallege and incorporate herein by this reference the allegations set forth in Paragraphs 1-197 0f this Complaint. 199. Defendants were each aware 0f the nature and scope of the enterprise used to commit the pattern 0f racketeering activity described specifically in Paragraphs 187-196, and generally in this Complaint. 200. Defendants intended to and did participate in this racketeering enterprise as alleged herein, thus furthering the conspiracy. 201. Plaintiffs were harmed as a result of this conspiracy 0f an amount t0 be proved at trial. SIXTEENTH CAUSE OF ACTION (False Advertising Under California Business & Professions Code § 17500 et. seq) (Against All Defendants) 202. Plaintiffs hereby incorporate by reference each and every allegations from Paragraphs 1-201 0f this Complaint as though said Paragraphs were fully set forth herein. 203. Longstaff, Libkey and the Kahn Defendants made a series of statements to Plaintiffs regarding goods and services that were untrue and misleading, that they knew, 0r through the exercise of reasonable care should have known, were untrue and misleading. 33 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Specifically, they represented to Plaintiffs that they were offering a valid and legal tax deferral vehicle that would offer significant tax deferral benefits if Plaintiffs transferred the proceeds 0f the sale 0f 3878 Magnolia to an account under Libkey and/or Peak’s control. In fact, the tax deferral vehicle was not valid 0r legal and not available t0 provide tax deferral benefits to Plaintiffs. Longstaff, Libkey and the Kahn Defendants also represented t0 Plaintiffs that the Kahn Defendants could offer services t0 properly file Wang’s 2017 and 2018 tax returns in a manner that complied with all legal requirements. In fact, the Kahn Defendants did not offer such services and the manner in Which they filed tax returns was invalid, improper and illegal. 204. Guidance Law is liable for Longstaff s conduct because he was a principal, agent and/or employee of Guidance Law. 205. Defendants, acting in concert, were aware of each others” conduct and agreed, intended, and encouraged the same. In so conspiring, each 0f them caused substantial harm suffered by Plaintiffs as a result 0f each others’ conduct and each of them are therefore subject t0 conspiracy liability, and are jointly and severally liable for the full extent of the damage caused to Plaintiffs. 206. As a direct and proximate result of Defendants’ unfair competition, Defendants have been improperly and unjustly enriched at Plaintiffs’ expense for Which Plaintiffs are entitled to restitution. The amount of such restitution shall be established according t0 proof at trial. SEVENTEENTH CAUSE OF ACTION (Unfair Competition Under California Business & Professions Code § 17200 et. seq) (Against All Defendants) 207. Plaintiffs hereby incorporate by reference each and every allegations from Paragraphs 1-206 0f this Complaint as though said Paragraphs were fully set forth herein. 208. As is more fully alleged above, Defendants have engaged in unlawful and unfair business acts and/or practices that constitute unfair competition under California Business & Professions Code section 17200, et seq. 34 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD, SUITE 280 CUPERTINO. CA 95014 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 209. As a direct and proximate result of Defendants’ unfair competition, Defendants have been improperly and unjustly enriched at Plaintiffs’ expense. The amount 0f such unjust enrichment shall be established according t0 proof at trial. Prayer for Relief WHEREFORE, Plaintiffs respectfully pray for judgment against Defendants and in their favor as follows: (1) For pre-judgment and post-judgment interest as provided for by law; (2) For an award of all actual and compensatory damages in an amount t0 be proven at trial including but not limited to all funds paid into the DAT, all funds misappropriated by Kahn Defendants, and all funds expended t0 correct the fraudulent tax returns filed or prepared by Defendants, including but not limited to penalties and interest; (3) For an award 0f attorney’s fees and costs of suit; (4) For an award of all attorney’s fees paid by Plaintiffs t0 Longstaff and Guidance Law; (5) For an award 0f all attorney’s fees and costs incurred by Magnolia and Wang in litigation instituted 0r defended arising out 0f Longstaff’s and Guidance Law’s tortious conduct; (6) For an award of equitable indemnification for any judgment or award issued against Magnolia 0r Wang resulting from Longstaff and Guidance Law’s conduct, including any award in a pending AAA arbitral proceeding in Miami, Florida; (7) For a constructive trust over any monies received by Defendants as a result of the conduct alleged herein; (8) For restitution; (9) For restitutionary disgorgement; (10) For exemplary and punitive damages; (1 1) For treble damages; and 35 FIRST AMENDED COMPLAINT GRELLAS SHAH LLP 20400 STEVENS CREEK BLVD SUITE 280 CUPERTINO. CA 95014 \DOOQONUIAUJNp-n Nix) NHHwHHHt-tt-dr-ah-d (12) For such other, further, and difierent relief as the Court deems just and proper. Magnolia and Wang demand a trial by jury on all claims asserted herein. Dated: December 11, 2020 DEMAND FOR JURY TRIAL Respectfufly Submitted, GRELLAS SHAH LLP By: EMW Dhaivax H. Shah Attorneys for Plainfifi‘s mWW'WW ‘ EXHIBIT A AUTHORIZATION FOR SETTLEMENT OF DEFERRED ASSET TRUST AND MANAGEMENT AGREEMENT This Authorization for Settlement of Deferred Asset Trust and Management Agreement (this "Agreement") is made and entered into this day of April .11, 2018 (the "Effective Date"), by and between MAGNOLIADRHOMES LLC ("Magnolia") and PEAK FINANCIAL COMPANY ("Peak"), whereby Peak, as a qualified intermediary and asset manager with respect to a certain real estate asset(s) to be managed by Peak. WHEREAS, Magnolia represents that it has the requisite authority to appoint Peak and to authorize Peak to fund a trust for the benefit of Magnolia and its member(s) and act as its intermediary to facilitate the subject real estate transaction involving certain real estate asset(s) in Palo Alto, California; and WHEREAS, Magnolia desires to appoint and retain Peak to establish a trust and act_ as manager with respect to certain assets or proceeds from such assets (all such assets, together with any real property or other distributions and any proceeds collectively referred to herein as the "Assets") designated by Magnolia in writing and held in an account for Magnolia's benefit (the "Account"); and WHEREAS, Peak is a wholly separate, unaffiliated entity with respect to Magnolia, accepts its role as trustee of the assigned assets and to otherwise act as a qualified intermediary, as that term is defined in the Internal Revenue Code (IRC) and through other pertinent legal opinions and industry practices, and/or is willing to accept trust management or other responsibilities with respect to the Assets held for the benefit of Magnolia's financial planning. NOW, THEREFORE, in consideration of the promises and mutual considerations provided herein, and intending to be legally bound hereby, Magnolia, and Peak agree as follows: 1. Retention as Manager of Deferred Trust of Transferred Assets. Peak is hereby appointed by Magnolia as manager and settlor of the Account to direct the Assets in the deferred assets trust and/or deferred sales fund and/or other appropriate third party Account. 1.1 By execution and delivery of this Agreement, Peak accepts, as of the Effective Date, its appointment as manager and hereby acknowledges and accepts full responsibility as a fiduciary and acknowledges and agrees that it is subject to and shall at all 1 of 11 © 2018 Peak Financial Co. times comply with, the standard of care and fiduciary duties described in Section 7 (Standard of Care) below (collectively referred to as the "Fiduciary Duty"). 1.2 Peak has instructed U.S. Bank National Association. ("US Bank"), as custodian, or any successor custodian approved by Magnolia (in such capacity, the "Custodian"), to establish a separate account with respect to the Account on its books and records and to maintain the Account in a manner so as to enable the Custodian to account for the Account and transaction with respect thereto separately from Peak's other accounts under its management. The Account established for Magnolia's benefit Is set forth in Exhibit A hereto and made a part hereof. 2. Asset Management. Peak shall manage the Assets for Magnolia's benefits upon the following terms, and as further defined in this Agreement: 3. 2.1. At the close of one fiscal quarter (FQ) subsequent to the establishment of this trust, Magnolia will determine what Assets will be transferred to or from the Account from time to time. Magnolia shall notify Peak, in writing, of its determinations in this regard. 2.2. Peak shall have the authority to file quarterly statements, settlement documents, maintain bank records and relationships to insure the integrity of the Assets and manage said Assets in a manner consistent with the purpose of this Agreement. Guidelines for Assignment of Interests and Management of Funds. 3.1. Subject to the Fiduciary Duty and the following guidelines for the Account agreed to by Peak and Magnolia as of the date of this Agreement, Peak (i) shall have full control over the subject Assets prior to the close of any escrow and/or other sale or liquidation process of any Assets currently held by Magnolia and transferred by this Agreement; (ii) for the agreed upon service fees, Peak shall hold such Assets for no less than one (1) complete FQ in order to establish the genuine nature of this trust; and (iii) shall, on behalf of the Account, acknowledge the receipt of Assets and communicate with Magnolia regarding all pertinent matters pertaining to the Assets assigned to Peak for the FQ in which Peak holds such Assets in trust. 2of 11 © 2018 Peak Financial Co. 3.2. Peak shall not engage in securities lending transactions on behalf of the Account. Peak shall be entitled to rely upon oral and written clarifications, supplements and modifications to the Guidelines from Magnolia and make reasonable interpretations thereof. 3.3. At the end of the the first complete FQ, Magnolia shall be permitted to instruct Peak to transfer or otherwise distribute, reinvest or handle the Assets held in the Account or to withdraw funds held in the Account. Magnolia agrees to provide Peak with adequate written notice in light of normal settlement procedures provided that such notice period shall not be less than five (5) days prior to the relevant date for the requisite transfer or withdrawal of the Assets of the Account. 4. Custody. All securities and other assets in the Account shall remain in the possession of the Custodian who shall have complete custodial responsibility for such securities and other assets in the Account. Subject to the Fiduciary Duty, Peak may issue instructions to the Custodian as may be appropriate in connection with the settlement of the trust. Instructions of Peak to the Custodian shall be transmitted in writing or, at the option of Peak, orally and confirmed in writing as soon as practical thereafter and Peak will instruct the Custodian on behalf of the Account to forward to Magnolia copies of all confirmations. All payments, distributions and other transactions in respect of the Account shall be made directly to or from the Custodian. 5. Standard of Care. Peak is a fiduciary with respect to the Account. As a fiduciary, Peak acknowledges and agrees that it shall at all times (a) comply with all applicable law, including applicable California law, and (b) act in accordance with Magnolia's best interests for its financial planning. Magnolia shall provide Peak with copies of any documents related to the trust and/or its Assets upon the effective date of such documents. Peak shall issue suitable instructions to the Custodian with respect to deliveries and payments. Peak shall at all times perform its duties, obligations and responsibilities under this Agreement with, and shall at all times with respect to the Account use, the care, skill, prudence and diligence under the circumstances then prevailing that a prudent trustee and/or intermediary, which is knowledgeable about selecting and monitoring assets, acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. The foregoing fiduciary standard requires both substantive and procedural prudence. Peak shall at all times determine what information is material and relevant to its decisions, obligations, duties and responsibilities as a fiduciary 3of 11 © 2018 Peak Financial Co. with respect to the Account, and gather, examine, and understand that information and then make an informed and prudent decision based on its findings. Peak represents and warrants that there are no federal, state or local statutory disqualifications that apply to Peak that may impact its fiduciary status with respect to the Account as set forth in this Agreement. The presence of exculpatory language in this Agreement shall not be deemed by Magnolia, Peak or any other party appointed pursuant to this Agreement, including, without limitation, the Custodian, as in any way limiting causes of action and remedies that may, notwithstanding such language, be available to Magnolia either under common law or statutory law principles applicable to fiduciary relationships or under applicable federal or state securities laws. 6. Fees. For the services specified in this Agreement, Magnolia agrees to pay fees as set forth in Exhibit B hereto and made a part hereof, and Magnolia agrees to payment of said fees shall be deducted by Peak at the close of the first FQ. Magnolia acknowledges and agrees that, for performance analysis purposes, the performance inception date of this Account will be separately agreed upon by the parties. 7. Assignment. No assignment of this Agreement shall be made by Peak without the prior written consent of Magnolia. Peak shall promptly notify Magnolia within thirty (30) business days of any material changes in (i) key personnel (i.e. lead account manager) involved in the management of the Account; (ii) ownership; (iii) or any other matter which can be reasonably expected to have an effect on Peak's ability to provide the services contemplated by this Agreement, in accordance with the terms herein or otherwise have an impact on Magnolia (economically orotherwise). 8. Notices. Unless otherwise specified in this Agreement, all notices, instructions, requests and other communications with respect to matters contemplated by this Agreement shall be in writing and sent to the appropriate party at the addresses appearing below for each signatory hereto, or at such other address as may be specified in each case in a notice similarly given. All directions by or on behalf of Magnolia shall be signed by Magnolia or by an authorized agent of Magnolia. Notice shall be considered effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by confirmed electronic mail, telex or facsimile if sent during normal business hours of the recipient; if not, then on the next business day; (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) one (I) day after deposit with a nationally recognized overnight 4of 11 © 2018 Peak Financial Co. courier, specifying next day delivery, with written verification of receipt. Either party may change its contact information for notice purposes on five (5) days advance written notice to the other party. If to Magnolia: Magnoliadrhomes LLC 4546 El Camino Real #226 Los Altos, CA 94022 9. Term. If to Peak: Peak Financial Co. 201 Spear St., 1100 San Francisco, CA 94105 9.1. This Agreement shall continue until terminated in accordance with the terms herein. Magnolia may terminate this Agreement at anytime by giving five (5) days prior written notice to Peak. Peak may terminate this Agreement by giving sixty (60) days prior written notice to Magnolia. Notice shall be provided, in each case, as provided in Section 8 (Notices). Such termination shall in no way affect the validity of this Agreement with reference to any transactions, trades, dealings and actions for the Account initiated by Peak prior to such termination. Upon such termination, the provisions of this Agreement shall become null and void. 9.2. In the event that this Agreement is terminated by Magnolia or Peak, as soon as possible following the effective date of such termination, Peak shall provide Magnolia with a final report on the Account and which shall be signed by Peak. 9.3. This Agreement (and its accompanying Schedules and Exhibits) constitutes the entire agreement of the parties with respect to management of the Account and may be amended only by a written agreement signed by the parties. No waiver of any provision of this Agreement shall be deemed a waiver of any other provision, or a continuing waiver of the provision waived, unless such waiver is deemed otherwise. 10. Confidential Information. All information and advice furnished by either party to the other hereunder, including their respective agents and employees, shall be treated as confidential and shall not be disclosed to third parties except as required by applicable laws, where it is necessary for purposes of performing Sof 11 © 2018 Peak Financial Co. Peak' duties and responsibilities under this Agreement, or where Magnolia requests or authorizes Peak to do so. Notwithstanding any provision herein to the contrary, Peak agrees not to use or disclose Magnolia's nonpublic information for any purpose other than performance of its responsibilities and duties under this Agreement or as required or permitted by applicable laws and regulations. Notwithstanding the foregoing, in the event that Magnolia is required by any law, statute, governmental rule, regulation, or policy, or judicial or governmental order, judgment or decree, to disclose to the public ("Open Records Laws") any information regarding the Assets, identity, performance, or value of any Account managed and/or held in trust by Peak or confidential or proprietary business information relating to the services or products of Peak ("Confidential Information"). 11. Representations and Warranties of Magnolia. Magnolia represents and warrants that: 11.1. The execution and delivery of this Agreement by Magnolia shall constitute the representation by Magnolia has authority to delegate its management of the Assets to Peak. 11.2. Magnolia agrees that it will deliver to Peak such evidence of such authority as Peak may reasonably request, whether by way of certified resolution or otherwise. 11.3. Magnolia represents that it is not subject to the provisions of the Employee Retirement Income Security Act of 1974. 11.4. The Assets in the Account are free from all liens and charges and undertakes that no liens or charges will arise from the act or omissions of Magnolia which may prevent Peak from meeting the obligations of this Agreement. 12. Representations and Warranties of Peak. Peak represents and warrants that: 12.1. It is authorized to act as a qualified intermediary and/or trustee and its corporate compliance and registration with applicable state and other government entities is currently effective. 12.2. It has full power and authority under the provisions of the applicable instruments and law governing Peak to execute, deliver and perform 6 of 11 © 2018 Peak Financial Co. this Agreement. 12.3. Its execution and delivery of this Agreement have been authorized by appropriate corporate action and do not violate any obligation by which it is bound, and this Agreement, when executed and delivered by the parties, will be binding upon Peak. 12.4. It has completed, obtained or performed (and, when required, will complete, obtain or perform) all registrations, filings, approvals, authorizations, consents or examinations required by any applicable law (or any government or governmental authority) for the performance of the acts contemplated by this Agreement and, during the term of this Agreement, it shall comply with all existing, new or amended statutes of the United States (and any other government or governmental authority) having jurisdiction over its activities which are applicable to its performance under this Agreement. 12.5. Except as disclosed to Magnolia in writing, there are no actions, proceedings or investigations pending before any court or governmental authority, including, without limitation, the SEC or any state securities regulatory authority against Peak or its principals or senior officers which can be reasonably expected to have an adverse effect on Peak's ability to provide the services contemplated by this Agreement, in accordance with the terms herein or otherwise have an adverse effect on Magnolia (economically or otherwise). 12.6. A representative of Peak shall be available for consultation with personnel designated by Magnolia upon reasonable advance notice. 13. Insurance. Peak shall secure, and maintain throughout the term of the investment advisory relationship with Magnolia, insurance that satisfies the requirements set forth below and that is provided by insurer(s) rated A- or better by A.M. Best & Company. Peak shall maintain: (i) a copy of proof of the requisite insurance coverage (such as certification of insurance) upon initiation of the contract; (ii) an annual certification that the insurance requirements continue to be satisfied; and (iii) evidence of continued satisfaction of the insurance requirements upon request. The minimum insurance required for Peak shall include an errors and omissions coverage in an amount equal to the greater of: (x) $5 million or (y) 5% of the total of all assets under Peak's management, up to a maximum of $10 million of coverage. The errors and 7 of 11 © 2018 Peak Financial Co. omissions insurance shall protect the Account against losses from the negligent acts, errors or omissions of Peak. 14. Miscellaneous. The parties agree that they shall promptly notify the other (i) of any changes regarding the information about itself in this Agreement, or (ii) if any of their representations or warranties set further herein are no longer true or completely accurate. 15. Governing Law. To the extent federal law does not apply, this Agreement shall be construed and enforced in accordance with the laws of the State of California without giving effect to any conflict of laws principle, doctrine or statute, except to the extent such laws are preempted by the laws of the United States of America. 16. Jurisdiction and Venue. The parties agree that any action brought by either party under or in relation to this Agreement, including, without limitation, to and does hereby submit to the jurisdiction and venue of any state or federal court located in the County of San Francisco in the State of California for the purposes of any suit, action or other proceeding brought by any party arising out of any breach of any provision hereunder or otherwise relating to this Agreement, or the obligations hereunder, or the transactions contemplated herein, and hereby waive, and agree not to assert by way of motion, as a defense or otherwise, in any such suit, action, or proceeding, any claims that it is not personally subject to the jurisdiction of the above named courts, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper, or that this Agreement may not be enforced in or by such courts. 27. Severability. If any part of this Agreement is determined to be illegal, invalid, or unenforceable, then such part will be considered severed from this Agreement and the remainder of the Agreement will continue in full force and effect. · 28. Counterparts. This Agreement may be executed in several counterparts, each of which, when so executed and delivered, shall be deemed to be an original and all of which, when taken together, shall constitute one and the same signatory page of the Agreement. 80111 © 2018 Peak Financial Co. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed m its name and on its behalf as of the date first written on page 1 of this Agreement. PEAK HNANCIAL COMPANY By fMW Nam. Jvse\phJkaeyU I. Title: President- San Francisco MAGNOLIADRHOMES LLC By u/CLIAq L/Ouliw Name: YOulin Wang Title: Managing Member "schedule of Exhibits: _ Exhibit A Description of the Account Exhibit B Trust Management Fees 9of11 © 201a PeakfinandalCo. Di: EXHIBIT A DESCRIPTION OF THE ACCOUNT I Name on Account: Magnoliadrhomes LLC US Bank Account No.: 10368491 9238 US Bank Routing No. 102000021 The Magnoliadrhomés LLC (# 103684919238) willjfund with appfoximately > $ 3 900 000.00 , said sum representing the transferred value of the asset assigned to_ the settlor of the trust. ‘ This matter is not an exchange under IRC 103,1. So acknowledged: B.Sw/LC'UL JCkLQ“b Name: Suhua Xiong EXHIBIT B TRUST MANAGEMENT FEES AND COSTS Trust Amount over $600,000 to $1,000,000 over $1,000,000 Basic Fee $900 $1,100 Setup Fee(s) Additional $250 to setup the separate client account. Management Fees Expedited Fees No charge $600 $500, where applicable per above, in addition to all other applicable fees. 11 of 11 © 2018 Peak Financial Co.