In the past year Infotopia, Inc. has issued millions of shares of stock to dozens of people and companies in exchange for vague legal services and consulting work. Some of those consultants and attorneys can’t seem to keep out of the news – or the courts. Prosecutors have charged two of those attorney-consultants – Herbert Jacobi and Alan Berkun – with federal crimes, and Jacobi has already pleaded guilty. (See Update: Infotopia, Inc., The Professionals – Demise of a Consultant; and Update: Infotopia, Inc., The Professionals – A Familiar Ring). Now a civil lawsuit has been filed against Infotopia and its corporate attorneys, Bondy & Schloss. That suit, which also names Bondy & Schloss partners Jeffrey Rinde and Gerald Alan Adler, involves allegations of fraud, legal malpractice, broken contracts, and a laundry list of other wrongdoing by Infotopia and its legal team.
Readers of Stock Patrol are familiar with Bondy & Schloss, which has also acted as counsel to at least two other companies featured in our Stock or Schlock reports – HIV-VAC, Inc. and Ives Health Company, Inc. (See HIV-VAC – Can an AIDS Vaccine Possibly Be That Simplex; HIV-VAC – Moving Forward in Reverse; HIV-VAC – You Gotta Have Friends; Ives Health Company – Ives Forward; and Ives Health Company – When it Rains it Pours). The Securities and Exchange Commission suspended trading in Ives shares on March 5, 2001 amidst concerns over the accuracy of public statements by that Company. In August Ives Health, and its founder, Keith Ives, were indicted on charges of fraud relating to certain of those public statements.
So what is this latest lawsuit all about? The civil complaint against Infotopia and Bondy & Schloss was filed in New York Supreme Court by Julius Eulberg, Jane Schub, and their Company, J Group Holdings, Inc. They are claiming that the Bondy & Schloss lawyers pushed them into an unwanted relationship with Infotopia without disclosing essential facts – like the full nature of the relationship between Bondy & Schloss and Infotopia. They say that Bondy & Schloss failed to live up to its commitments to J Group, induced J Group to enter into a licensing agreement with Infotopia, took control of Infotopia stock that had been issued to J Group as part of that licensing agreement, and then failed to sell that stock at the agreed upon time and price.
The owners of J Group claim they began working with Bondy & Schloss long before Infotopia became involved with their business. According to the complaint, starting in March 2000, Rinde promised, but failed to deliver, financing for J Group’s operations, including a possible public offering. Then, in December 2000 Rinde allegedly arranged for a $100,000 loan to J Group from Altea Investments, Ltd., another Bondy & Schloss client. When J Group couldn’t make timely loan payments, Rinde purportedly recommended that Schub and Eulberg sell their business to yet another Bondy & Schloss client, Infotopia. Schub and Eulberg declined, but agreed to enter into a licensing agreement with Infotopia.
The complaint affords valuable insight into details of the relationships between Infotopia, Altea and J Group. It is not the first time, however, that we have seen these names. On April 3rd, Infotopia filed to register almost 273 million shares of its common stock, including 8.5 million shares that had been issued to a company identified only as “J Group Holdings.” That same Registration Statement included 3 million shares owned by Bondy & Schloss, and 11.6 million shares that Infotopia had issued to Altea. Another 2 million Infotopia shares had been registered for Altea on a Registration Statement filed on January 11, 2001. That January 11th Registration Statement also included 1 million shares owned by Bondy & Schloss. A more recent Registration Statement, which was most recently amended on October 18th, includes yet another 2.25 million Infotopia shares owned by Bondy & Schloss.
The January, April and October Registration Statements noted that Bondy & Schloss were the attorneys for Infotopia, but did not indicate that the law firm had also served as counsel to any other Infotopia shareholders, like Altea and J Group.
How did J Group acquire its Infotopia shares? According to the complaint the stock was issued under the license agreement, much to the surprise of J Group, which apparently was expecting cash from Infotopia. Then, again according to the complaint, the shares remained under the control of Bondy & Schloss, which failed to notify J Group once the stock was registered or to sell the shares on a timely basis. When the stock was sold, J Group claims it received less than it had been promised by the lawyers.
What happened to Infotopia’s plan to market the J Group products? According to the Complaint, Infotopia claimed that the licensing agreement had never been consummated, breached the contract, and then reneged on related consulting agreements with Schub and Eulberg.
Neither Infotopia nor the Bondy & Schloss defendants have responded to the J Group complaint yet.
The J Group complaint doesn’t represent the only legal action pending against Infotopia. In September, 58 plaintiffs sued Infotopia in the United States District Court for the Northern District of Ohio, charging that they purchased Infotopia shares at artificially inflated prices based upon the Company’s dissemination of false and misleading statements. That case is still pending.
Stock Patrol will keep its radar tuned to this one.
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