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Iatarola v. Efrosman

August 14, 2008

MARIA AND JOSEPH IATAROLA, FRANCESCO AND MARIA MENZA, GERARDO AND GREGORIO RAGO, ANTONIO AND IDA MOLINO, MICHELANGELO AND ANGELINA COLAVITA, GIUSEPPE CARULLI, FILOMENA CARULLI, LUIGI CARULLI, ANTHONY IATAROLA, DR. ROBERT MARINO, JENNIE AND ARMAND FIGLIUOLO, JOHN THOMAS, MICHAEL SCANIO, ANTHONY BENTIVEGNA, ROBERT TYBURCZY, AND DR. RICHARD MANCINO, PLAINTIFFS-APPELLANTS,
v.
ALEX EFROSMAN, A/K/A ALEX BASSER, JOSEPH CHIARELLA, AND STEPHEN CHIARELLA, DEFENDANTS, AND NORTH FORK BANCORPORATION, INC., DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2148-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued April 21, 2008

Before Judges A. A. Rodríguez and C. L. Miniman.

Plaintiffs are seventeen investors who were apparently the victims of a currency trading scam. They allege losing hundreds of thousands of dollars when the promoter of the scam, defendant Alex Efrosman (Efrosman), also known as Alex Basser, a convicted felon posing as a licensed currency trading expert, appropriated their investment funds for his own use and absconded. His whereabouts are currently unknown. Plaintiffs appeal from the denial of their motion for leave to amend their complaint to join claims against North Fork Bancorporation (North Fork) and A. G. Edwards, Inc. (Edwards). We affirm.

This is a summary of the facts as alleged by plaintiffs.

Efrosman presented himself to plaintiffs, a group of senior citizens, as an experienced foreign exchange trader, and induced them to invest with the promise of huge returns "between 13% and 28% percent per month" on their investments. He promised "to double their investment within four months." In August 2004, Efrosman established AJR, Inc. (AJR).*fn1 He maintained sole ownership and control over AJR. Efrosman opened a bank account at a North Fork branch in Brooklyn, New York, designating it as the depository for AJR. Efrosman was listed as the only officer of AJR and the only signatory on its account.

In September 2004, plaintiffs began to invest large portions of their life savings to establish individual "investment" accounts with AJR. After opening their "investment" accounts with AJR, plaintiffs received fabricated monthly account summaries, showing trading activity and profits. In actuality, Efrosman paid a percentage of plaintiffs' initial investment, passing it off as a profit.

Eventually, Efrosman withdrew from the AJR account at North Fork all funds received from plaintiffs. This was done through wire transfers drawn on the account and payable to an entity identified as MPGE. After the commencement of this litigation, North Fork learned that MPGE is an abbreviation for Mashantucket Pequot Gaming Enterprise, which is owned by the Mashantucket Pequot Tribal Nation, whose businesses include Foxwoods Resort and Casino. Apparently, Efrosman bought gambling chips with the wire transfers. Later, he converted the chips into cash.

Defendant, Joseph Chiarella, learned about Efrosman and AJR through the internet. Attracted by the promise of an extraordinary return on his potential investment with AJR, Joseph consulted his financial advisor at Edwards. He wanted to verify the accuracy of Efrosman's claim that he was a fully licensed and experienced currency trading expert and that AJR was a legitimate business organization. The Edwards financial advisor responded that, in his opinion, Efrosman and his business were legitimate. Relying on this information, Joseph made a small investment in AJR. He shared what he deemed was an amazing opportunity with his family and friends, including plaintiffs and his brother Stephen.

Eventually, Joseph's and Stephen's roles in AJR evolved from merely one of a number of investors to that of officer and shareholder in AJR. Indeed, Stephen's ownership interest in AJR alone was equal to fifty-percent of the stock.

In early June 2005, Efrosman took a Caribbean cruise. He has not been seen since and his whereabouts remain unknown.

Plaintiffs filed their initial complaint against Efrosman, the Chiarella brothers and North Fork, alleging claims for violation of the Racketeer Influenced and Corrupt Organizations Act,*fn2 fraud, breach of fiduciary duties, negligent misrepresentation and negligence. A default judgment was entered against Efrosman and AJR. On the day that North Fork's answer was due, plaintiffs voluntarily dismissed the claims against them without prejudice.

Seven months later, plaintiffs moved to amend the complaint to join North Fork back into the case pursuant to a negligence theory. North Fork opposed that motion. The judge denied plaintiffs' motion to amend, finding that a late amendment would be prejudicial to North Fork and futile because North Fork ...


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