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Pietrangelo Cook Wins Jurisdictional Dispute in $5m Gold Fraud Case

Sunday, January 4th, 2015

District Court Judge Thomas Anderson held that two Texas Defendants knowingly directed their communications into the state of Tennessee, when they made phone calls and sent emails about an alleged gold scheme to Pietrangelo Cook’s clients in Memphis. The Order, entered in December 2014, resolved a threshold jurisdictional dispute and it means that the case can proceed in the Western District of Tennessee.

Pietrangelo Cook’s clients, the Plaintiffs, filed their initial Complaint against Defendants Cleal Watts, III (“Watts”) and his company, Indico Systems Resources, Inc. (“ISR”) in July 2013 alleging, among other things, fraud, conversion, misappropriation, violations of the Tennessee Consumer Protection Act, violations of the Securities and Exchange Act, breach of contract and breach of fiduciary duty. Specifically, the Complaint alleges that Watts and ICR deceived the Plaintiffs into investing millions of dollars in the purchase of unrefined gold dust from Ghana with the stated purpose of import, refinement and resale in the United States. Watts allegedly claimed experience in this area and claimed to own a refinery in Dallas. He promised Plaintiffs a thirty percent (30%) return on their investments. Plaintiffs never saw any gold, any profit or even the return of their investment. You can read the Complaint here.

In December 2013, counsel for Watts and ISR filed a Motion to Dismiss, asserting that the district court in Tennessee did not have personal jurisdiction over Watts or ISR because, they claimed, their clients had no offices in Tennessee, did no business in Tennessee, had never been to Tennessee and, finally, never knew the Plaintiffs were in Tennessee. After an evidentiary hearing in December 2014, the Court ruled these arguments did not preclude Tennessee from exercising jurisdiction over Watts and ISR. More particularly, the Court found that Watts did know that Plaintiffs were in Tennessee and, that since the phone calls and emails formed the “heart of the cause of action”, i.e., the fraud, they were sufficient to confer personal jurisdiction upon the Court over the Defendants. Accordingly, the litigation will proceed in Tennessee.

You can read a copy of the Court’s Order here.

 

 

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