In a motion filed 9/25/2017 in the case regarding many former Armando Montelongo students against Armando Montelongo and the various corporations he controls, the first amended complaint requests the court accept nearly 200 more former students to the RICO complaint action for several reasons: Failed Arbitration and new Plaintiffs.

A copy of the filing and supporting documentation is at the bottom of this post.

Arbitration

Many of the plaintiffs had signed Arbitration agreements, thus dropped from the case to pursue the Arbitration path with the American Arbitration Association (AAA).  The defendant, Armando Montelongo resisted the Arbitration rules as governed by the AAA and therefore the Association declined to take on the Arbitration case.

AAA Declines to Arbitrate

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Arbitration Failed

It appears the first attempt at arbitration was from a married couple who signed one contract with the corporation Armando Montelongo controls, yet when trying to arbitrate the case the Montelongo team tried to split them up as 2 individual cases.  The married couple, the Crabtrees felt since they signed the agreement jointly they should arbitrate jointly.  Armando Montelongo and his team refused.

In addition, the AAA has put Armando Montelongo on notice that they  “may decline future arbitrations involving Armando Montelongo, Jr…”, thus putting his arbitration rights at risk for any future conflicts.

Even worse, the AAA has requested Armando Montelongo, Jr. and companies remove the American Arbitration Association name from future contracts.

I suspect this decision only made the Plaintiffs original case stronger as now there are almost 200 more plaintiffs with similar stories of devastation, the nearly 100 that signed arbitration agreements plus the additional 114 that approached Plaintiffs counsel since learning about the action.

History

Late in February 2016, 164 Plaintiffs Filed a complaint against Armando Montelongo Jr., and his various companies in the Northern District of California claiming:

“Acting through his many corporate shells, Montelongo sells worthless, dangerous, and unlawful advice about real estate investing; takes advantage of the students’ trust to loot their accounts; sells them properties at inflated prices without disclosing his stake in them; encourages them to pursue their real estate investments using his allies, who also victimize the students; and harasses those who dare to speak out against him.”

Armando Montelongo and his team claimed 2 issues: the Jurisdiction was not proper as he resided in Texas and his business was in Texas, and that some of the people on the complaint had agreed to Arbitration, the very Arbitration that recently failed due to not the Defendants not complying with the AAA rules.

Plaintiffs Refiled in Texas

In December of 2016, the Plaintiffs refiled the complaint in the Jusridiction of the Defendant’s choosing, and submitted considerable effort for Arbitration which the Defendants would not comply with the AAA’s rules.  Therefore, this motion is to add those that originally agreed to arbitration plus the additional plaintiffs new to the forum.

Common Deceptive Practices

According to the original complaint for Arbitration the claim below describes a pattern that is all to common throughout this case:

The Crabtrees also were charged $3,495 without authorization by Seed Capital LLC, to which they were referred by Defendants, for “credit management services” that consisted of taking out credit cards in the Crabtrees’ name without their permission; paid $1,997 to Steve “the Lawyer” Szostek, to whom they were referred by Defendants, for a will and trust that appears illegitimate (Mr. Szostek has refused to respond to the Crabtrees’ repeated attempts to contact him); and have suffered severe emotional distress and reputational harm.

RICO Allegations

According to the Plaintiffs, Racketeering violations within Armando Montelongo and his various organizations and allies is a major activity that caused damages to the Plaintiffs.

According to Dictionary.com,  Racketeering is defined as “a person engaged in a racket“, Racket is defined as “a dishonest scheme, trick, business, activity, etc.”  The Plaintiffs claim and purport to have evidence of a student overhearing Montelongo discussion the scheme of,  “[using] an affiliate to purchase properties in the area where the event will occur, and then, during the event, sell the properties to students at inflated prices without disclosing that he has an interest in the sales or receives a share of the profits.”

Other examples in the claim state: “Defendants also encourage students to transfer money in their employer-controlled or other secure retirement accounts to self-directed IRAs held by companies allied with Montelongo and the Defendant entities.” where, “As but one example of many, a San Diego resident put $5,000 in a Preferred Trust self-directed IRA and, within three years, was charged $4,200 in fees—even though she had done nothing with her account.”  In addition, “Montelongo [had] access to confidential information about the students’ finances that Defendants then use to prey upon them.

And then, “To hide their deception, Montelongo and his employees instill fear in the students to discourage them from questioning the AMS system, and attacking or silencing those who attempt to speak out.”

The Plaintiff’s case also claims to have evidence that, “In late 2013, the news show 20/20 taped an interview with a student who complained that she and her husband had been cheated by Montelongo’s seminars. Montelongo had her followed by a private  investigator (as one of his employees later admitted).”

The entire motion and supporting documents are at the bottom of this post.

Violation #1, 18 U.S.C. § 1961 – (Wire Fraud)

According to the Plaintiffs claim, “…Montelongo will use an affiliate to purchase properties in the area where the event will occur, and then,  during the event, sell the properties to students at inflated prices without disclosing that he has an interest in the sales or receives a share of the profits. (One student fortuitously overheard Montelongo discussing this scheme when she dialed in early to a planned group call for AMS students.)”

Plaintiffs assert and evidence documented in the case of interstate activities “…constitute wire fraud because Defendants developed a scheme to defraud Plaintiffs out of their money by false promises and misrepresentations about their products and about the market for house flipping, and by self-dealing transactions with them; Defendants had the intent to defraud Plaintiffs; it was reasonably foreseeable to Defendants that  the wires would be used in that scheme; and Defendants used the wires to further that scheme by promoting their products.”

Violation #2, 18 U.S.C. § 2314

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transports or causes to be transported, or induces any person or persons to travel in, or to be transported in interstate or foreign commerce in the execution or concealment of a scheme or artifice to defraud that person or those persons of money or property having a value of $5,000 or more;

Based on the Plantiff’s claims of alleged fraudulent dealings, specific activities of transferring more than $5,000 from one state into another state supposedly triggers this particular RICO violation.

Violation #3, 18 U.S.C. § 2314

In addition to transferring over $5,000 across state lines, the Plaintiffs claim the “Defendants devised a scheme to defraud and then induced persons to travel in interstate commerce so that they could defraud those persons of more than $5,000. At live events, over the phone, and online, Defendants persuaded students (including some Plaintiffs herein) to travel to events in other states, where they were deceived into spending thousands or tens of thousands of dollars on AMS products.”

If you feel you’ve been financially harmed or want more information to see if you qualify to be a part of the case, CLICK HERE to fill out the form.

Case Documents

First Amended Complaint

Supporting Documents and Exhibits

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