- December 20, 2024
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After being criminally accused in late January by Regions Bank of orchestrating a $10 million check kiting scheme, prominent Sarasota real estate investor, developer and entrepreneur Marvin Kaplan is speaking out.
Kaplan says in a 46-page counterclaim filed Wednesday in the 12th Circuit Court in Sarasota he orchestrated nothing.
Kaplan alleges, with specific chronological details, that Larry Starr, a longtime Sarasota and Longboat Key tourism entrepreneur and one-time Business Review entrepreneur of the year, along with the owners of Fayettville, N.C.-based Smith Advertising & Associates conspired in a Ponzi scheme that duped Kaplan.
And that scheme unraveled in January, Kaplan's counterclaim alleges, when Regions Bank mishandled Kaplan's checks, ultimately costing Kaplan a loss of about $22 million in four days.
What's more, Kaplan's counterclaim says the Starr-Smith Advertising scheme is likely to have fleeced investors in multiple states out of as much as $400 million.
Kaplan's counterclaim also takes aim at Regions Bank, accusing the bank of systematically defaming Kaplan, of invasion of privacy and negligent misrepresentation when the bank publicly accused Kaplan of check kiting. This was done, Kaplan alleges, to divert attention away from the bank's faulty check-handling procedures, procedures that ultimately led Kaplan's lawyer to uncovering the alleged Ponzi scheme.
The three counts leveled against Regions in Kaplan's counterclaim were among 22 counts total he filed against Starr; Smith Advertising; its owners, Gary, Todd and Lucy Smith; Wells Fargo Bank; Bridgeview Bank in Illinois; the Florida Bankers Association; and Regions Bank security official Robert Nicholas Shaw. The counts ranged from fraud, racketeering, improper handling of checks, mail fraud and misappropriation of funds. Click here to see a list of the players involved.
Editor's Note ...
In the following text, the Business Review presents Kaplan's counterclaim in its entirety. Kaplan's attorney, Jon Parrish, a partner in the Naples law firm of Parrish, Lawhon and Yarnell, prepared the counterclaim after more than 80 hours of piecing together the chronology and events of Kaplan's involvement with Starr, Smith Advertising and its owners.
The narrative that follows is Parrish's version of what occurred, based on discussions with his client, Kaplan, and Parrish's research of bank records and other information. Kaplan declined to speak to the Business Review on advice of his lawyer.
All accusations and statements in the narrative are those made by Kaplan and his attorney in Kaplan's counterclaim.
Neither Gary, Todd nor Lucy B. Smith could be reached for comment. See the bottom of the page for Starr's response.
Linda Carlson and Robert Nicholas Shaw of Regions Bank could not be reached for comment. Mel Campbell, a spokesman for Regions Bank, said the bank does not comment on pending litigation.
Kathy Harrison, a spokeswoman for Wells Fargo, said the bank would be unable to respond until after its attorneys review Kaplan's claims.
Bridgeview Bank did not return the Business Review's call for comment. The Florida Bankers Association did not respond before press time.
The Facts, as alleged
in the counterclaim
The Pitch
In or around August, 2009, Kaplan relocated his business operations to an executive office suite in downtown Sarasota, owned and managed by longtime Sarasota entrepreneur and real estate investor Larry Starr.
Prior to that August, Kaplan did not otherwise know Starr and had only met him on one other occasion.
Shortly after Kaplan had moved into the office suites, Starr approached him and began to pitch an investment opportunity. As Starr explained, the opportunity involved the Smiths and their company, Smith Advertising & Associates.
Starr represented that he knew it was safe to invest with SAA and the Smiths because he was a long-term friend of the Smiths, had a 20-year history with them and was also a successful investor with them.
Starr explained that the Smiths and SAA wanted Kaplan or his companies to provide financing to them to allow them to take advantage of certain early payment discounts on private printing contracts.
According to Starr, the Smiths and SAA needed the financing because SAA was a successful and expanding company that needed capital to take advantage of discounts that it was offered on such contracts.
Starr explained that SAA's business was to act as a kind of middleman or broker between printers and entities that sought printing services for their advertising needs. He explained that customers would order print material from SAA and that SAA would then, in turn, enter into contracts with printing vendors to produce the materials, with a profit to SAA on the transaction.
Once the materials were printed, SAA would obtain them from the printer, deliver them to the customer and, in 30 days, receive payment, which it would use to pay the vendors, keeping a percentage for itself.
Starr explained that because the print vendors preferred to receive payment for their services up front, they routinely offered SAA early payment discounts of about 10% of the total cost of the contract if SAA would pay for the printing work in advance.
Starr explained that, while the Smiths and SAA could not afford to fund all of these large pre-payments alone, they were able to do so in partnership with investors.
Starr explained that the Smiths and SAA were requesting that investors advance half of the required early payment amount for any given print contract and that the Smiths and/or SAA would advance the other half.
According to Starr, this money would be paid immediately to the vendor to obtain the 10% discount.
The investor would immediately receive his share of the 10% discount via a check from SAA. The investor would also receive a promissory note or notes guaranteed by G. Smith and T. Smith and one or more checks representing the return of the principal. These checks were to be cashed after the 30-day period had expired and SAA had received payment from the customer.
The investor would then wait the 30 days until SAA received the payment back from the customer and then the investor would deposit the checks (with the 10% return) into his accounts.
Starr said that this investment offered no real risk because the customers were all governmental or quasi-governmental agencies and always paid their bills. He also represented that the Smiths and SAA had been in the publishing business for more that 30 years, had a distinguished list of clientele that included a large number of governmental tourist agencies and quasi-governmental agencies, that he had invested a large sum of money with the Smiths and SAA himself and had always received the promised returns.
Starr then offered to introduce Kaplan to the Smiths and SAA.
The unknown reality
Kaplan's counterclaim further states:
Although Kaplan and his investment companies were not aware of it at the time, Kaplan's counterclaim alleges that Starr, the Smiths and SAA, along with the conscious and knowing support of Bridgeview — all referred to in the counterclaim as “the conspirators” — orchestrated and developed a Ponzi-type scheme designed to defraud Kaplan, his investment companies and others.
The investment that was pitched was a fiction. It did not really exist and was designed to fraudulently induce Kaplan, the investment companies and many others to give money to the conspirators.
The conspirators would then take some or all of the money or compensation for themselves, constantly cycling and floating what remained among many victims to maintain the illusion that the fictional investments were paying off and to induce still more investment into the scheme.
Bridgeview, an Illinois bank, was directly complicit in this scheme, allowing the other conspirators to utilize it as a repository and accounting system for the fraud for what is believed to be many years in exchange for compensation.
Bridgeview and its employees were direct and knowing participants in the scheme with knowledge of the activities and directly participating in the fraud by actively transferring money between accounts, floating checks to facilitate the fraud and by inducing investors to wire funds by manipulating and false statements.
Says Kaplan's counterclaim: All of Starr's, the Smiths' and SAA's statements to Kaplan and the investment companies were false, and they knew them to be false, as all were direct participants in the fraud and received undisclosed compensation and kickbacks for bringing money into the scheme.
Unbeknown to Kaplan and the investment companies, the counterclaim says, Starr was an experienced con artist who had previously been convicted in Vermont for engaging in a mail fraud scheme with his father.
That conviction was overturned, but Kaplan's counterclaim says the factual findings of the court at the time demonstrate that Starr attempted to and succeeded in defrauding the U.S. Post Office of hundreds of thousands of dollars.
Later, Starr moved to Florida and obtained a position on the Sarasota Tourism Convention and Visitors Bureau (STCVB). While there, he had contact with the Smiths and SAA and served on the board of STCVB at a time when it dismissed and terminated further business dealings with the Smiths and SAA.
Contrary to Starr's misrepresentations to Kaplan and the investment companies, Starr, in collusion with the Smiths and SAA, would target individuals like him and his companies and offer them the bogus investment outlined above in to steal money.
Starr knew that the printing contracts and the customers that the conspirators said that they had did not actually exist. It is believed, the counterclaim says, that Starr either participated in developing or developed the fraudulent scheme himself, using his knowledge of the industry as a base and then creating exaggerated contracts to take in money for the scheme.
SAA may have had some much smaller real business, however the conspirators used this small base to fabricate contracts with customers and vendors that looked real but were actually forgeries and which often were many times larger than any real contract could or would be.
The conspirators lured Kaplan, the investment companies and many others to invest money under the scheme and then to increase their investments more and more, using the aforementioned mis-representations, all the while siphoning off large amounts for their own use and benefit.
As each subsequent bogus contract would come due to be paid, the conspirators would present new contracts to their “marks” to replace the old ones, keeping investors like Kaplan and the investment companies in play and keeping the principal in their own hands, by causing the marks to believe that their money was constantly growing.
At the same time, the conspirators would also pitch new contracts, constantly inducing investors like Kaplan and the investment companies to invest more “new” money as the paper profits on the old money seemed to grow.
Investors who would leave or briefly stop would be paid, using the money supplied by the constant influx of new money and new marks. This increased the credibility of the scheme and induced more re-investment.
The conspirators continuously stole a large portion of the invested money, leaving only enough to fund fluctuations in investment and cloak the fraud.
The object of the scheme was to increase the amount of new money invested as that increased the amount the conspirators could steal or siphon off without revealing the scheme.
It is believed that this scheme was widespread, operating over many states and with many investors like Kaplan and the investment companies. It was a massive Ponzi scheme involving perhaps $400 million or more.
Kaplan's Initial 'Investment'
The counterclaim goes on to say:
Unaware of the fact that he would be caught in a Ponzi scheme, Kaplan agreed to and did discuss investing with the Smiths and SAA.
In those discussions, the Smiths and SAA reiterated all that Starr had told Kaplan and confirmed the arrangement was as Starr had explained it.
In reliance upon all of these false and fraudulent representations by the conspirators, Kaplan agreed to invest personally an initial sum of $50,000 in or about August 2009.
Of course, this initial investment appeared to go as planned and as promised by the conspirators, who sought to get more money from Kaplan.
As a result of the apparent success, Kaplan caused his investment companies to begin investing with the Smiths and SAA.
Over a period of several months, the investment companies participated in more and more contracts with the Smiths and SAA, all the time believing they were receiving the promised returns and that things were going as the conspirators had promised.
Over this time, the Smiths and SAA continued to offer more and more investments and to renew the old ones, urging Kaplan through the investment companies to take new contracts upon the expiration of each prior contract, leaving the principal sum to “ride” from contract to contract.
Because of this, instead of depositing the checks when they were due at the end of the 30 days, the investment companies would hold them (if they had not expired) or discard them, and Smith and SAA would issue new ones (if they had expired) on new contracts.
Over time, as the investment companies began to realize more and more paper returns, the Smiths and SAA would consistently urge Kaplan to reinvest both the returns that the investment companies had made as well as new money into the deals.
By November 2011, the investment companies had more than $7 million collectively invested and/or re-invested with the Smiths and SAA.
Upping the Ante
Kaplan's counterclaim goes on to state:
For several months leading to November, the investment companies had not added any “new” money to their deals, preferring to let the “investments” grow without putting in new capital.
Because the Ponzi scheme relied upon the influx of new money and growth to survive, T. Smith contacted Kaplan and presented a “new” idea to try to get Kaplan and the investment companies to make additional infusions.
T. Smith explained to Kaplan and the investment companies that he had developed a new and better method to earn even larger returns, stating that he had found a way to bunch printers together in multiple contract deals and to time the payments that were to be received from customers in such a way that he could obtain discounts in shorter time frames, some in as little as 24 hours, thus substantially increasing the rate of return.
However, T. Smith and SAA added that, because they were multiple contract deals, the investment would have to be larger. To participate in these larger contracts, the investment companies would therefore have to invest more new money.
This new scheme was also complete fiction. However, unaware of this fact and based upon all the perceived prior successes, Kaplan and the investment companies agreed to the new arrangement and infused substantial additional capital into the Ponzi scheme.
The new or “Second” scheme differed somewhat from the first.
Under it, the investment companies would agree to a smaller number of larger, consolidated deals for the same type of pre-payment discounts.
However, according to T. Smith and SAA, SAA would obtain the same 10% discounts from the vendors immediately before it expected the customer to pay and only needed “bridge” funds for a short time.
As a result, the investment companies were to wire funds from their bank accounts to SAA's account at Bridgeview.
The Smiths and SAA would Fedex down the contracts and checks for these new transactions, to be received by the investment companies on the day they sent the wire(s) to the Bridgeview account. The contracts would provide for the deposit of the checks shortly thereafter, supposedly after SAA had received the customer payment.
Because these new transactions were so large, involving wires of more than $250,000, the investment companies were forced to establish a new banking relationship with Regions Bank because the previous lender would not do wires greater than that.
As a result, each of the investment companies opened an account with Regions Bank in November 2011.
As of that time, the investment companies had no prior banking or credit relationship with Regions, and Kaplan only had a small personal checking account at the bank with his wife.
Under the second arrangement, the contracts with SAA and the Smiths were grouped into two to three main groupings, and the investment companies would make new investments every few days.
The timing of the deals was such that the investment companies would wire up funds for each successive deal as Regions would advise Kaplan's investment companies that the checks from the prior deal had cleared, and the money was in the bank to wire.
From November 2011 through Jan. 20, the investment companies continued to invest and re-invest in these contracts and, through the infusion of new capital and the returns, their total investment grew to approximately $22 million.
The Final Days
The First Deal
Kaplan's counterclaim further states:
On Jan. 19, the investment companies agreed to invest funds in one of these bridge deals with T. Smith and SAA, with each of the four investment companies investing separate funds in separate contracts.
On the morning of Jan. 20, four of Kaplan's investment companies wired $9.7 million from accounts at Regions to SAA's account at Bridgeview.
In particular:
• R1A invested $6.6 million in 13 contracts.
• TNE invested $1,6 millioin in three contracts .
• MKI invested $1.1 million in three contracts.
• BNK invested $400,000 in one contract.
According to the contracts, the money was to be repaid later that day, and the investment companies received checks for repayment by Federal Express that morning, as well as checks for the payment of interest and certain incentive checks.
In particular:
• R1A received $7,395,125.
• TNE received $1,760,000.
• MKI received $1,124,000.
• BNK received $443,375.
The investment companies deposited the checks on Jan. 20.
The Second Deal
According to the counterclaim:
After the checks from the first deal were deposited in Kaplan's companies' accounts, T. Smith and SAA immediately requested that the investment companies invest in another “bridge” deal to occur on Jan. 23, and the investment companies agreed to do so. Again, each of the four investment companies agreed to invest separate funds in separate contracts, providing that the funds from the previous deal had cleared.
On the morning of Jan. 23, Kaplan, on behalf of the investment companies, reviewed the accounts with Regions and found that Regions had cleared all of the previously deposited checks.
Believing that the investment companies had been repaid for the prior transaction because Regions had so represented, the investment companies wired $10.45 million to SAA's account at Bridgeview.
In particular:
• R1A invested $7 million in 14 contracts.
• TNE invested $1.8 million in three contracts.
• MKI invested $1.25 million in three contracts.
• BNK invested $500,000 in one contract.
According to the contracts, the money was to be repaid later that day, and the investment companies received checks for repayment by Federal Express that morning, as well as checks for the payment of interest and certain incentive checks.
In particular:
• R1A received $8,044,660.
• TNE received $2,009,700.
• MKI received $1,395,000.
• BNK received $556,675.
The Third Deal
According to the counterclaim:
On Jan 23, T. Smith and SAA again requested that the investment companies invest in a third bridge deal to occur on Jan. 24, and the investment companies agreed to do so.
The investment companies deposited the checks from the second deal into their Regions accounts. However, Regions placed a hold on the checks and declined to credit them that day.
As a result, the investment companies advised T. Smith and SAA that they did not have sufficient funds to invest in the third deal.
At this point, T. Smith and SAA suggested that because the third deal was so time sensitive, rather than wait for the second set of checks to clear, they could simply stop payment on those checks relating to the return of principal from the second deal and use those funds, supposedly still in the Bridgeview account, to do the third deal.
Because the total investment amount for the third deal was $500,000 less than the total amount of the principal returned with the second set of checks, R1A's contribution was $500,000 less. T. Smith and SAA agreed to wire back $500,000 to the R1A account at Regions to account for the difference.
Because the investment companies still believed that they had funds in their own accounts, they agreed to this procedure, and T. Smith wired $500,000 to R1A and, presumably, stopped payment on the principal checks from the second deal on Jan. 24.
On Jan. 24, the investment companies invested in the third deal in the afore-mentioned manner, the total sum of $9.95 million left at Bridgeview to invest.
In particular:
• R1A invested $6.5 million in 12 contracts.
• TNE invested $2 million in four contracts.
• MKI invested $1.45 million in four contracts.
According to the contracts, the money was to be repaid later that day, and the investment companies received checks for repayment, as well as checks for the payment of interest and certain incentive checks. However, the checks for the third deal were not deposited Jan. 24 as planned because Kaplan was unable to get to the bank.
The Fourth Deal
Kaplan's counterclaim further states:
On Jan. 24, still believing that the investment companies had been repaid for the first transaction because Regions had so represented, R1A wired an additional $2 million to SAA's account at Bridgeview for a smaller fourth deal that had been discussed with T. Smith and SAA.
The parties agreed that under this smaller fourth deal, R1A would send $2 million for contracts valued at $2.25 million, and that the $225,000 plus a $25,000 incentive bonus would just be deducted from the money sent up rather than checks be sent down for that from SAA.
R1A invested the $2 million in five contracts.
According to the contracts for the smaller fourth deal, the money was to be repaid on Jan. 25.
A hole in the dike
According to the counterclaim:
Late in the day Jan. 24, T. Smith and SAA called Kaplan. T. Smith advised Kaplan that Bridgeview had frozen all of SAA's accounts after T. Smith had issued the stop payment on the checks from the second deal.
He told Kaplan that neither he nor SAA could move any money in or out of the Bridgeview accounts.
He advised Kaplan to wait while he took action to correct the problem.
Kaplan agreed.
The next morning, Jan. 25, Kaplan and the investment companies received a call from Linda Carlson, manager of the Regions Bank branch where Kaplan had deposited the funds from the first deal.
Carlson advised Kaplan and the investment companies that the funds that had been deposited Jan. 20 had not cleared and that the checks were being returned.
Kaplan and the investment companies were shocked to learn this, because Regions previously had represented that the funds from these checks had cleared.
Kaplan and the investment companies immediately inquired of Carlson why the checks had been returned and were told that the checks were returned “Refer to Maker,” not “Insufficient Funds” or some reason that would indicate that there was a problem with funds availability.
Kaplan immediately contacted T. Smith and SAA, the maker, and was advised that the problem was the same as the one he had informed Kaplan of the night before — that Bridgeview had wrongfully placed a hold on all of the SAA accounts. He advised that he was working on the problem and asked Kaplan and the investment companies to be patient.
At this point, T. Smith began to express concern to Kaplan about his fears of what would happen if this problem became public knowledge to his customers or his vendors.
T. Smith advised that he could not tell whether he was getting payments from customers because he could not see his account and that, if they discovered he was having a problem, they would hold payments still longer, destroying his business and reputation. In addition, his vendors would cease production and cease to work with him.
He stressed that Kaplan should keep this quiet, or SAA would be unable to repay Kaplan, the investment companies or anyone else.
What Kaplan and the investment companies were unaware of was that the Smiths and SAA were buying time to try to correct what was, basically, a hole in the dike that could lead to the collapse of the entire criminal enterprise and the greater Ponzi scheme.
They were buying time in an effort to keep the greater Ponzi scheme alive by correcting whatever problem existed and perpetuating the scheme.
The Smiths and SAA thought that they could get sufficient money from other investors to pay the investment companies off and allow the Ponzi scheme to continue.
What they told Kaplan and the investment companies was they just needed to straighten out their customer payment situation and get Kaplan's companies their money.
Moreover, Kaplan believing that funds were available to the Smiths and SAA and just on hold, took no action because the “Refer to Maker” designation led him to believe that funds were available and would be released at some point.
Regions jumps in
According to the counterclaim:
Later that day, Kaplan received a call from Robert Nicholas Shaw, who professed to be the head of security at Regions Bank. Shaw wanted to know what was happening.
Kaplan told him what he knew, and Shaw asked to speak with T. Smith and SAA.
Kaplan arranged a telephone conference with himself, Shaw and T. Smith.
Kaplan said Shaw became very belligerent with T. Smith and threatened him, telling him that he needed to straighten out the situation right away. Shaw claimed that he was an ex-FBI agent and that he would report the matter to the Secret Service if the money was not returned immediately.
T. Smith and SAA advised that they were not sure what was going on and were working on it.
After the call with Shaw, Smith and SAA contacted Kaplan and the investment companies, asking for time to straighten out the banking problems.
Still unaware of the Ponzi scheme, believing that Smith and SAA had real customers and vendors when they did not and believing that the checks had not been returned due to insufficient funds because they said “refer to maker,” Kaplan advised that he was willing to work with the Smiths and SAA and be patient but that the Regions Bank problem needed to be resolved.
New checks from a new bank
Kaplan's counterclaim further states:
In response to the concern about Regions, T. Smith and SAA advised Kaplan and the investment companies that they would issue a new set of checks for the first and second deals drawn on a bank account at Wells Fargo and have those checks sent down by a special air flight that day.
T. Smith and SAA did, indeed, send a special courier flight with a replacement set of checks, which arrived late in the day on Jan. 25.
The replacement set of checks was only for the contracts entered into in the second deal and not the first deal.
Kaplan and the investment companies deposited the replacement checks that same evening on Jan. 25. Regions extended its operating hours to allow the checks to be deposited late.
The returned checks
According to the counterclaim:
On or about Jan. 26, the investment companies received formal written notice from Regions of the return of 28 checks that had been returned by Bridgeview with the designation “Refer to Maker” as Carlson had previously reported.
The next day, Friday, Jan. 27, the investment companies received written notice from Regions of the return of a second set of 32 checks from the second deal that had been returned by Bridgeview, also with the designation “Refer to Maker.”
Some of the checks in the second set were checks that Kaplan and the investment companies believed had been stopped by Smith to invest in the third deal.
However, none of the returned checks bore any indication that funds were not available to SAA.
Nor did they provide any basis to cause Kaplan and the investment companies to take any action or disregard what they were being told by T. Smith and SAA.
On Jan. 30, the following Monday, Kaplan received another call from Shaw at Regions.
Shaw advised Kaplan and the investment companies that the third set of checks, drawn on Wells Fargo, had not cleared.
Unbeknown to Kaplan and the investment companies at the time, on that same day, Regions had already filed a lawsuit against Kaplan and was seeking ex-parte relief that included Wells Fargo, the new bank, as a party.
Nor were Kaplan and the investment companies aware that Shaw and Regions had begun what the counterclaim alleges to be “a campaign of systematic defamation against them.”
On or about Jan. 31, the investment companies received written notice from Regions Bank of the return of 21 checks that had been returned by Wells Fargo and which Shaw had reported, all but one also with the designation “Refer to Maker.”
Only one check was returned with the designation “NSF” for insufficient funds.
Kaplan contacted T. Smith and SAA because the designation “Refer to Maker” directed him to do so and was advised that Wells Fargo had frozen SAA's accounts there as a result of the interference by Regions and that was the reason the latest set of checks had bounced.
This interference was confirmed when Kaplan sought to use money he had transferred to Wells Fargo for an unrelated business transaction and was advised that all of the accounts of his or his businesses had been frozen, including the Lighthouse Point account from which the transaction was to occur.
Regions' attacks on Kaplan
According to the counterclaim:
On or around Jan. 30, the same day the third set of checks was returned by Wells Fargo, Shaw and Regions began to engage in a campaign of defamation, lies and deceit against Kaplan, designed to discredit him, destroy his reputation and distract attention from Regions' own failure to follow correct banking procedure, which caused the investment companies to lose millions of dollars.
Despite no evidence or backing, Shaw and other representatives of Regions Bank began to tell other third parties, including Wells Fargo, the Florida Bankers Association and the public that Kaplan and his wife had engaged in criminal conduct, illegal activities and were “check kiters.”
This accusation was blatantly false and was made with absolutely no knowledge or support by Shaw, acting in his capacity as an employee of Regions, according to the counterclaim.
Shaw falsely accused Kaplan and his wife of a criminal act in an alert bulletin sent to the Florida Banker's Association, including in that alert Kaplan and his wife's social security numbers, accusing them of fraud, check kiting and criminal conduct and falsely warranting the information to be true and correct when it was absolutely false, the counterclaim states.
Shaw, Regions and their attorneys also sued Kaplan individually without actually bringing a claim against him and repeated the false accusations of check kiting and fraud.
The Kaplan counterclaim states Shaw and Regions were perfectly well aware that there was no basis to suggest that Kaplan and SAA or T. Smith were coordinating a kite or that either Mr. or Mrs. Kaplan was engaged in any fraud.
Shaw and Regions sought only to discredit Kaplan in an effort to distract attention from the fact that, had they followed their own procedures or proper banking practice, the investment companies owned by Kaplan would not have lost millions of dollars to the conspirators because they would have known that the first checks had not cleared Bridgeview and would not have invested, and potentially lost, the additional funds, according to Kaplan's counterclaim.
It also appears that Shaw and Regions reported Kaplan to the Secret Service and law enforcement for a crime that did not occur, says Kaplan's counterclaim.
As a result of Shaw and Regions Bank's conduct, all of Kaplan's banking accounts, as well as those of any business he was associated with, were frozen at Wells Fargo and Regions, and he has been unable to maintain a banking relationship anywhere for himself or any of his companies.
The Dike Bursts
According to Kaplan's counterclaim:
In the weeks following the filing of Regions' lawsuit against Kaplan, Kaplan and the investment companies sought to obtain the return of their money from the conspirators, still not knowing of the Ponzi scheme.
The Smiths and SAA continually reassured Kaplan and the investment companies that they and Regions would be repaid as money came in from the customers.
The Smiths and SAA also continued to stress the need to keep silent to preserve the customer and vendor relationships that would allow the money to be returned. Kaplan and the investment companies tried to comply.
But as the story that had begun with Regions and Shaw's claims against Kaplan started to reach the public through press accounts, the Smiths and SAA began to make inconsistent comments to the press, indicating that the entire matter was somehow Kaplan's fault when it clearly was not.
As a result of this and that time was going by with no repayment and repayment dates were consistently missed, Kaplan began to investigate by contacting SAA's claimed vendors to verify contracts.
Kaplan discovered that the contracts offered by the conspirators were completely fictional and that neither the vendor nor the customer contracts actually existed and that the entire investment was a scam.
It also became apparent to him that the conspirators were trying to cover up the Ponzi scheme by attempting to pay back the investment companies with money raised from other victims.
This was not acceptable to Kaplan, and he and the investment companies immediately asked to meet with the Secret Service and the Tampa district attorney to report all that they knew.
Editor's Postscript
In an interview Tuesday with the Business Review, Kaplan's attorney, Jon Parrish, said Kaplan has recovered only about $800,000 since the investment scheme collapsed in late January and early February.
Parrish, who has represented Kaplan on many of his prior real estate investments, said he had been aware of Kaplan's involvement in the Starr-Smith Advertising scheme prior to Kaplan's difficulties. But he said he started growing increasingly suspicious of its legitimacy in late January when instead of sending millions of dollars back to Kaplan's companies, the Smiths sent only $800,000.
“(Todd) Smith began to never fulfill his promises on time,” Parrish says.
Then in late January, after the accusations of check kiting started and payments from the Smiths stopped, everything came to a head. Kaplan was in Parrish' office.
“Marvin is a very loyal person,” Parrish said. “He was even going back and forth then” on whether he was being duped.
Parrish said he then picked up a copy of an invoice from one of the alleged vendors with which the Smiths were doing business.
“The graphics on the invoice looked kind of weird and hokey,” Parrish recalls. “So I looked up the firm online. The invoice logo was different from the company logo online. So I called the customer.
“He laughed at me when I told him the amount on the invoice,” Parrish said. “When I asked why he laughed, he said, 'I would remember an invoice that big. It exceeds my whole revenues we have in a year.'”
Parrish said he called a second vendor. “The guy starts laughing,” Parrish said. “He gave me the same exact answer as the first one. I turned to Marvin and said they are all bogus.”
Asked how Kaplan, a sophisticated investor and businessman, did not have suspicions early on that the investment scheme was the proverbial “too good to be true,” Parrish, who has handled similar fraud litigation before, said: “That's not how it works in the real world. People don't (question that) when they are getting paid. You get blinded. And the people who do these crimes are some of the most likable people you meet in your life.
“Marvin is a very gentle, loyal kind of person,” Parrish said. “He's not a suspicious person.” Parrish said that as the scheme began to unravel after two years, Kaplan “sat in front of me, shaking his head, saying, 'I just can't see it.'”
LARRY STARR'S RESPONSE: 'I'M A VICTIM TOO'
According to Marvin Kaplan's counterclaim, longtime Sarasota businessman Larry Starr approached Kaplan in 2009 about participating in an investment opportunity that generated 10% returns each month.
Informed of the allegations and counts against him in Marvin Kaplan's countersuit, Sarasota entrepreneur Larry Starr issued the following statement Wednesday afternoon prior to press time:
“I am reluctant to talk about a lawsuit I haven't seen.
“Marvin dealt with the Smiths directly over a period of years, and whatever decisions he made to invest, he made on his own after talking with the Smiths.
“If the lawsuit is trying to say I'm responsible for his losses with the Smiths, that is simply not true.
“I am a victim of the Smiths just as Marvin is.
“In fact, Marvin just called me and told me the suit was coming. He told me he didn't want to name me in it and was very uncomfortable having done so, as he didn't think I had done anything wrong.
“He explained that he is involved in a complicated lawsuit, and only did so on the advice of his lawyers.”
Kaplan's version
Asked to verify Starr's comments, Kaplan said:
“I did not say that I didn't think he was involved. I said I hope everything comes out OK for him, and I hope it's not as it appears.
“I said, 'Larry, I don't know, and I'm taking the advice of counsel.
“I feel bad about suing him.”
• Marvin Kaplan — An entrepreneur involved in a wide range of businesses, Kaplan has owned car dealerships and invested in commercial real estate in Florida and New York. He previously owned nearly 20 Dunkin' Donuts stores on the Gulf Coast. He is a close, longtime business associate of Florida Sen. Mike Bennett.
• Larry Starr — Starr acquired a resort property rental firm, Longboat Accommodations, in the late 1980s. He later sold that business to ResortQuest International and headed up that company's operations along the West Coast of Florida. Starr also has run several commercial real estate businesses, most recently becoming the franchise owner of the Sarasota-Manatee office of Sperry Van Ness.
• Smith Advertising & Associates Inc. (SAA) — Founded in 1974 in Fayetteville, N.C., by three partners as Cain, Allen, Smith, it went on to become Smith Advertising & Associates. In 2002, the company opened its Raleigh office, and eventually did business in Hilton Head, S.C., and Sarasota. The agency closed its headquarters March 6, according to reports in the Fayetteville Observer, in the wake of widespread allegations of fraud in Florida, North Carolina and other states.
• Gary T. Smith — In 1974, Gary Smith was one of the three founders of Cain, Allen, Smith, which would go on to become Smith Advertising & Associates. He was the CEO of the firm.
• G. Todd Smith — Son of Gary Smith, Todd Smith was vice president and chief operating officer of Smith Advertising & Associates in Fayetteville, N.C.
• Lucy B. Smith — Wife of Gary T. Smith and an officer in Smith Advertising & Associates Inc.
• Linda Carlson — former manager of Sarasota Regions Bank branch where Kaplan made his deposits.
• Robert Nicholas Shaw — Regions Bank vice president of security, according to his business card. He sent an alert to the Florida Bankers Association alleging Kaplan engaged in check kiting.
• Bridgeview Bancorp — An Illinois bank holding company. It was the bank from which SAA sent checks back to Kaplan after the investment/printing deals were completed.
CHARGES ALLEGED IN KAPLAN LAWSUIT
Naples attorney Jon Parrish filed the following charges on behalf of Sarasota real estate investor Marvin Kaplan and four of his companies in a 46-page countersuit.
Whom Kaplan is suing:
• Regions Bank
• Robert Nicholas Shaw (of Regions Bank);
• The Florida Bankers Association, Inc.
• Bridgeview Bancorp, Inc., Bridgeview, Ill.
• Wells Fargo, N.A.
• Charles “Larry” Starr III
• Smith Advertising & Associates, Inc. (SAA)
• Gary T. Smith
• G. Todd Smith
The charges:
• Count I: Fraud — The Investment Companies v. Starr, T. Smith and SAA
• Count II: Conspiracy to defraud — The Investment Companies v. Starr, T. Smith, G. Smith, L. Smith, Bridgeview and SAA
• Count III: Negligent Misrepresentation — The Investment Companies v. Starr, T. Smith and SAA
• Count IV: Racketeering (Violation of 18 U.S.C. 1962 and 1964) — The Investment Companies v. Starr, T. Smith, G. Smith, L. Smith, Bridgeview and SAA
• Count V: Mail and wire fraud (Florida Statutes 772.103 and 772.104) —The Investment Companies v. Starr, T. Smith, G. Smith, L. Smith, Bridgeview and SAA
• Count VI: Depriving the right to money and misappropriation of funds (Florida Statute 772.11) — The Investment Companies v. T. Smith, G. Smith, L. Smith and SAA
• Count VII: Improper use of funds — The Investment Companies v. T. Smith, G. Smith, L. Smith, Bridgeview and SAA
• Count VIII: Deceptive and unfair trade practices — The Investment Companies v. T. Smith, G. Smith, L. Smith, Bridgeview and SAA
• Count IX: Action to collect payment (Florida Statute 68.065) — The Investment Companies v. SAA
• Count X: Breach of Contract — The Investment Companies v. SAA, T. Smith and G. Smith
• Count XI: Breach of U.C.C. 4-302(a) — The Investment Companies v. Bridgeview
• Count XII: Breach of U.C.C. 4-302(a) —The Investment Companies v. Wells Fargo
• Count XIII: Improper handling of checks; breach of 12 C.F.R. Part 229 —The Investment Companies v. Bridgeview
• Count XIV: Improper handling of checks; breach of 12 C.F.R. Part 229 —The Investment Companies v. Wells Fargo
• Count XV: Negligence — The Investment Companies v. Bridgeview
• Count XVI: Negligence — The Investment Companies v. Wells Fargo
• Count XVII: Fraud — The Investment Companies v. Bridgeview
• Count XVIII: Negligent Misrepresentation — The Investment Companies v. Bridgeview
• Count XIX: Defamation Per Se — Kaplan and the investment companies v. Regions, FBA and Shaw
•Count XX: Invasion of Privacy — Kaplan and the Investment Companies v. Regions, FBA and Shaw
• Count XXI: Negligence/Negligent Misrepresentation — The Investment Companies v. Regions
