James Biden Sued for Fraud: What You Need to Know

James Biden Sued for Fraud: What You Need to Know

NASHVILLE, TN – June 2, 2019 In the United States District Court for the Eastern District of Tennessee, Diverse Medical Management, (DMM) Inc.; and Azzam Medical Services, (AMS) LLC sued James B. Biden and others.

Mr. Biden is the brother of Former Vice President Joseph Biden.

Platinum Group USA, Inc. (PG); Amer Rustom (Rustom); The Third Friday Total Return Fund, (3F) L.P.; Michael Lewitt (Lewitt); Americore Health, LLC; Grant White (White) and James B. Biden (Biden) were all named in the suit.

The Amended Complaint, filed July 22, 2019, alleges against all defendants six counts of wrongdoing:

  1. Common Law Fraud;
  2. Promissory Fraud;
  3. Civil Conspiracy;
  4. Tortious Interference with Business Relationships;
  5. Promissory Estoppel/Detrimental Reliance;
  6. Negligent Misrepresentation.

The Complaint also alleges that The Third Friday Total Return Fund and Michael Lewitt also committed Fraudulent Inducement. A Declaratory Judgment is sought after The Third Friday Total Return Fund (3F).

Americore merchandised themselves as being in the business of acquiring and turning around struggling rural hospitals. DMM, owned by a husband and wife, formed the company to seek solutions in providing healthcare solutions to at-risk individuals across Rural America. They were an innovative leader in providing medical and psychiatric care in rural America.  AMS is a provider of medical services primarily to nursing homes. DMM’s success and specialization had attracted numerous investors to them.

In December of 2017, Americore Health and Grant White sought out a partnership with the plaintiffs, Diverse Medical Management (DMM) and Azzam Medical Services (AMS). December 19, 2017 DMM’s president and CEO Michael Frey and General Counsel Mitchell Cohen traveled to Ft. Lauderdale, Florida to meet with Americore and White to discuss the potential partnership. It was decided that DMM and AMS would provide business development and management services to rural hospitals purchased by Americore. The first two were to be Pineville Community Hospital in Pineville, Kentucky and Ellwood City Hospital in Ellwood City, Pennsylvania. (Stay tuned for part 2 to see what happened in these hospitals!)

During January of 2018, Frey traveled to Pineville, Kentucky to introduce the model to the hospital. While he was there, he met James Biden. Biden introduced himself as a Principal in Americore and gave him his business card.

The complaint alleges that during May of 2018 the parties and their lawyers discussed the purchase of DMM and AMS. Biden and White represented that they had the money required to complete the purchase. A term sheet was drafted showing the closing date to be June 28, 2018. The purchase price agreed on was $7,000,000 to be paid over a time period.

During June of 2018, Biden introduced DMM and AMS to Lewitt of 3F and Rustom. On June 20, 2018 a friend of DMM owners called Biden to determine Americore’s intent to proceed with the purchase. At that time, Biden told DMM and AMS not to speak to Americore or White anymore. Instead he directed them to speak with only the investors, Rustom, PG and 3F. These investors had ownership and financial interests in Americore. Biden told DMM and AMS that he would ensure their model (Intensive Outpatient Model “IOP”) would find its way into hospitals and the model would thrive and play an “integral role in healthcare policy at the highest levels of the United States government.” Biden also made it clear at this time that the investment made was not from Americore but directly through the investors. The initial payment, which was to be used for overhead and payroll, was missed forcing AMS to cover it. It became apparent then that Americore was unable to purchase the companies. That missed payment first caused  DMM to become wary of Americore and White.

Throughout the negotiations and communications, the defendants were advising DMM and AMS to purchase new businesses and service lines while stating that capital was coming to offset these costs. By the time of the filing of the lawsuit, it became apparent that the goals were to steal the IOP and to push DMM and AMS into insolvency to steal the company out from under them.

During July of 2018, the investors promised large infusions of cash fueled by PG purchasing them. Rustom was the CEO and President of PG. He was also the President, CEO and Chairman of Platinum Petroleum International Limited which is an oil company focusing on extraction in the Middle East.

During August 2018, Biden and Lewitt met DMM and AMS at a Summit in Dallas, Texas to discuss working with them. At that meeting, another purchase price of $10,000,000 was agreed on. The payments were structured in the following manner: $3.5 M to purchase DMM stock and loan repayments (details outlined below), $3M for AMS; and $3.5M for operational capital and DMM loan repayments. (3F made 10 loans to DMM over a period of six month which totaled $600,000. These loans were taken out to stay afloat from purchasing the new businesses during the negation and financing period. DMM relied on the promises made which later proved to be a series of fraudulent inducements.) Biden and Lewitt promised that the deal would now close on September 25, 2018.

August 24, 2018, right after the summit meeting, Lewitt sent Frey an email (copy to Biden) detailing why the investors were cutting out White and Americore. He stated suggesting White bow out gracefully:“When I lay out all the facts of what has happened here I don’t think there is any reason to wait or that Grant has any defense of any kind – the company has been effectively insolvent since at least May (probably earlier), he asked me make without disclosing the MCAs, the company has not functioning accounting system or financial controls, we are losing the confidence of our communities, etc etc. So, we need to get him out now and get to work cleaning up the mess he created.” Lewitt also described his cutthroat strategy if White resisted including: “If Grant does decide to fight, my plan will be to come at him very hard out of the box because putting him back on his heels will give us the advantage and we have much greater resources than he him and like in any fight the guy who scores the first hard blow will have a huge advantage.”

September 2018, leading up to the time right before the sale was scheduled to close, the Frey and DMM general counsel dined with the Bidens in Philadelphia, Pennsylvania where Biden again reassured that the funding would be completed by September 25, 2018 knowing that he had no intention of obtaining the funding.

September 25, 2018 Frey and Azzam traveled to Palm Beach, Florida to meet the investors only to be told that they did not yet have the money. They were told that now it would close as early as the next week and they would meet in NYC. That funding never took place. What did happen is that during the months of October through December of 2018, DMM, their leadership team and investors, received tons of calls, texts and emails giving constant updates on the “ever-imminent funding” even though they had no intention of providing that funding.

October 9, 2018 Lewitt texted Frey that he should get all documents the bank needed by the end of the week.

November 5, 2018 Biden accidentally sent a text to Frey which further raised the concern of DMM and AMS. The text stated, “We can wrap (A/C) into Frey’s entity further diluting the both in the process? After we take control of both. Just a thought. We must have complete control, too many moving pieces. Jim.” Biden never gave Frey an explanation for this text. This raised red flags, but the investors continued to reassure them that the purchase would occur.

This is when Biden et al ramped up the effort to steal the company. This was done via a voicemail on November 11, 2018 when he left a voicemail for Dr. Azzam, founder of AMS and Chief Medical Officer of DMM. He wanted a presentation of Dr. Azzam’s diabetes care model. Biden stated, “So if you can get it to me, I’ll have that letter for you, that contract for you by Friday at the latest, OK? And uh, the funding, uh, to follow.”

December 12, 2018 Lewitt texted Frey stating that he spoke for the investors.

December 17, 2018 Lewitt sought more information from Frey saying he was securing funding from the Qatar Investment Authority. After receiving the requested info, Lewitt stated to Frey, “Got it am reading the full article now on internet. Just make up some numbers throw darts it doesn’t matter nobody is going to hold you to them they just have to see stuff look a certain way it’s a Middle Eastern thing.” Lewitt, both an attorney and a previous registered broker-dealer, was directing Frey to make false statements.

December 26, 2018 PG and DMM exchanged draft stock Purchase Agreements. DMM had previously drafted a Convertible Secured Promissory Note which may have spooked Lewitt. He countered by drafting a stock purchase agreement that didn’t match the negotiated terms.

January 17, 2019 Rustom, Lewitt, Frey and Dr Azzam had meetings with Soner Gedik and Mer Vedat Mungan of Dogan Holdings (Dogan). Lewitt also informed the CEO at a hospital in Manchester, Tennessee that DMM was about to buy 200 hospitals. This was purely fiction.

The defendants then worked to actively steal DMM and AMS out from under Frey and Azzam. On January 23, 2019, PG, Rustom and Biden submitted an outline of the company (called a White Paper) to Dogan in which they outlined Platinum Group Diverse Medical Management (PGDMM)’s business model. Neither Frey or Azzam were aware of it or had signed it. They were not even aware that the investors had substituted PGDDM’s name instead of DMM until after it was done. On January 31, 2019 Lewitt texted Frey that Dogan had approved the purchase and was working on the term sheet. In fact, they had not approved the purchase.

February 4, 2019 Rustom emailed Frey with a cash flow projection claiming that DMM would make $324M in management revenue alone between the investment date and fiscal year end 2023. Rustom knew the numbers were fictional.

During the month of February 2019, Lewitt and Rustom continued the charade that the investment by the Turks (Dogan) was imminent and just trying to clear red tape. Lewitt even stated that the stress of this was personally affecting him. He stated he needed $1.5M back from White (Americore) so he could breathe. This concerned DMM and AMS since Biden had told them to avoid Americore and White. It was only because of the repeated promises, backgrounds and the biographies of the investors that persuaded DMM and AMS to believe them.

By late March – early April 2019 it was now apparent that DMM and AMS were the victims of fraud. The calls from the investors leadership and agents kept coming promising that they would be repaid in one to two weeks. DMM’s counsel called investors’ counsel, George Mesires, to finally get to the bottom of the promised investment. During that call, it was clear Mesires had no idea about any of the purported business; therefore it was not apparent that fraud truly was occurring.

After DMM and AMS notified Lewitt and the other defendants that litigation was pending to settle the $10 million loan, Lewitt filed suit on the Freys and the Azzams personally and professionally in order to have the loans from 3F repaid. These loans were only taken out due to the investors advising DMM and AMS to purchase companies to make their company more attractive after the funding went through. The lawsuit filed seeks a Declaratory Judgement made against 3F to make the loans voidable as they were made obtained under fraudulent settings. DMM entered into the 10 unsecured loan agreements based on numerous false statements of funding, and the intent was to saddle DMM with enough debt to further the fraudulent scheme. The loans were taken out with the understanding that the purchase of the company would include provisions to repay the loans.

Since the filing of this lawsuit on June 20, 2019 and the amended complaint filed July 22, 2019, more than twenty-one (21) days have elapsed since the defendants were served. The defendants have failed to file any pleading or defenses in this case. As a result, DMM and AMS have filed for an entry of default against Biden et al on August 20, 2019.

This case is ongoing, and updates will be provided.

To read the full amended complaint, click here.

To see the Affidavit in support of request for Entry of Default, click here.

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