Case 2:21-cv-11460-ES-ESK Document 1 Filed 05/19/21 Page 1 of 26 PageID: 1
`
`Richard R. Best
`Sanjay Wadhwa
`Adam S. Grace
`Todd D. Brody
`Kenneth V. Byrne
`Rhonda L. Jung
`Attorneys for Plaintiff
`SECURITIES AND EXCHANGE COMMISSION
`New York Regional Office
`Brookfield Place
`200 Vesey Street, Suite 400
`New York, New York 10281-1022
`(212) 336-0080 (Brody)
`brodyt@sec.gov
`
`UNITED STATES DISTRICT COURT
`DISTRICT OF NEW JERSEY
`
`SECURITIES AND EXCHANGE
`COMMISSION,
`
` Plaintiff,
`
` -against-
`
`THE PREMIER HEALTHCARE SOLUTION,
`LLC and JOSIAH DAVID,
`
` Defendants,
`
`PROVISION CORPORATION LLC, and DENIS
`JOACHIM,
`
` Relief Defendants.
`
`
`
`
`
`
`
`
`
`COMPLAINT
`
`21 Civ. 11460 ( )
`
`
`
`
`
`
`JURY TRIAL DEMANDED
`
`
`
`
`Plaintiff Securities and Exchange Commission (“Commission”), for its Complaint against
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`Defendants The Premier Health Care Solution, LLC (“Premier”) and Josiah David (“David”)
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`(collectively, “Defendants”) and Relief Defendants Provision Corporation LLC (“Provision”) and
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`Denis Joachim (“Joachim”) (collectively, “Relief Defendants”) alleges as follows:
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`SUMMARY
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`1.
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`This matter involves the fraudulent offer and sale of membership interests in
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`Premier (“Premier Membership Interests”), a company controlled by David and whose purported
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`business is to operate a supplemental medical reimbursement plan.
`
`2.
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`David has an extensive criminal and regulatory history under his former name,
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`Dennis Lee, which he legally changed in 2015.
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`3.
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`When soliciting investors to purchase Premier Membership Interests, David and
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`Premier failed to disclose David’s criminal and regulatory history. And when ultimately confronted
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`by investors who discovered his past legal problems, David lied about the reasons for changing his
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`name and told the investors that his criminal and regulatory history was irrelevant.
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`4.
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`David and Premier also materially misrepresented Premier’s relationships with the
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`banks whose participation in the program was a critical component to Premier’s success, telling
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`prospective investors that a bank had agreed to financing terms and suggesting that there was a
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`syndicate of banks who would also participate on those same terms. In fact, no banks were willing
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`to participate in the program, which made Premier’s entire business plan nonviable.
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`5.
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`David and Premier also falsely misrepresented that the concept underlying Premier’s
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`business model was either patent pending or had already been patented and, as such, Premier would
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`have no competitors to draw away potential customers. In fact, the United States Patent and
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`Trademark Office (“USPTO”) repeatedly denied David’s attempts to patent the concept on the
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`grounds that the Premier business process was not patentable for lack of innovation.
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`6.
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`David’s and Premier’s material misrepresentations and misleading omissions induced
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`prospective investors to purchase Premier Membership Interests, and also induced existing investors
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`to purchase additional Premier Membership Interests themselves and to solicit their friends and
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`family members to invest.
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`7.
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`From at least July 2017 to the present, Premier has raised approximately $3.9 million
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`from approximately 131 investors.
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`VIOLATIONS
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`8.
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`By virtue of the foregoing conduct and as alleged further herein, Defendants have
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`violated Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. 77q(a)], and Section
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`10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 78j(b)]], and Rule 10b-
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`5 thereunder [17 C.F.R. § 240.10b-5].
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`9.
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`Unless Defendants are restrained and enjoined, they will continue to engage in the
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`acts, practices, transactions, and courses of business set forth in this Complaint or in acts, practices,
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`transactions, and courses of business of similar type and object.
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`NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT
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`10.
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`The Commission brings this action pursuant to the authority conferred upon it by
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`Securities Act Sections 20(b) and 20(d) [15 U.S.C. §§ 77t(b) and 77t(d)] and Exchange Act Section
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`21(d) [15 U.S.C. § 78u(d)].
`
`11.
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`The Commission seeks a final judgment: (a) permanently enjoining Defendants from
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`violating the federal securities laws and rules this Complaint alleges they have violated; (b) ordering
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`Defendants to disgorge the ill-gotten gains they received with prejudgment interest thereon pursuant
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`to 15 U.S.C. § 78u(d)(5) and Sections 6501(a)(1) and (a)(3) of the National Defense Authorization
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`Act for Fiscal Year 2021, Pub. L. No. 116-283, to be codified at 15 U.S.C. §§ 78u(d)(3) and
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`78u(d)(7); (c) ordering Defendants to pay civil money penalties pursuant to Securities Act Section
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`20(d) [15 U.S.C. § 77t(d)] and Exchange Act Section 21(d)(3) [15 U.S.C. § 78u(d)(3)]; (d) ordering
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`Relief Defendants to pay, with prejudgment interest, all ill-gotten gains by which they were unjustly
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`enriched pursuant to Exchange Act Section 21(d)(5) [15 U.S.C. § 78u(d)(5)]; and (e) ordering any
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`other and further relief the Court may deem just and proper.
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`JURISDICTION AND VENUE
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`12.
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`This Court has jurisdiction over this action pursuant to Securities Act Section 22(a)
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`[15 U.S.C. § 77v(a)] and Exchange Act Section 27 [15 U.S.C. § 78aa].
`
`13.
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`Defendants, directly and indirectly, have made use of the means or instrumentalities
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`of interstate commerce or of the mails in connection with the transactions, acts, practices, and
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`courses of business alleged herein.
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`14.
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`Venue lies in this District under Securities Act Section 22(a) [15 U.S.C. § 77v(a)] and
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`Exchange Act Section 27 [15 U.S.C. § 78aa]. Defendants are located in the District of New Jersey
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`and certain of the acts, practices, transactions, and courses of business alleged in this Complaint
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`occurred within this District, including offers and sales in this District.
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`DEFENDANTS
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`15.
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`The Premier Health Care Solution, LLC is a Delaware limited liability company
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`formed on June 8, 2017. Premier is headquartered in Vernon, New Jersey. Premier purports to
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`offer a medical insurance reimbursement plan that covers out of pocket insurance costs not covered
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`by health insurance.
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`16.
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`Josiah David, age 74, resides in Vernon, New Jersey. David is an adviser to
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`Premier’s Board of Directors. He is also the managing member of Provision Corporation, LLC
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`(“Provision”), one of the relief defendants described below. In 2015, David legally changed his
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`name from Dennis Lee.
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`RELIEF DEFENDANTS
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`17.
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`Provision Corporation, LLC is a Delaware limited liability company with its
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`headquarters at 200 Park Ave, New York, New York. Provision is controlled by David, its
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`managing member. Provision is a managing member of Premier’s Board of Directors.
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`18.
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`Denis Joachim, age 54, resides in Covington, Louisiana. On August 31, 2018, in
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`United States v. Denis J. Joachim, Donna K. Joachim, and The Total Financial Group, Inc., 18 Cr. 00189 (CJB)
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`Joachim was charged by the U.S. Attorney’s Office for the Eastern District of Louisiana (“USAO”)
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`with, among other things, conspiracy to commit wire fraud and money laundering in connection
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`with a business called The Total Financial Group, Inc. (“Total Financial”), which had a similar
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`business plan as Premier’s. On June 19, 2019, Joachim pleaded guilty to conspiracy to commit
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`money laundering. Joachim’s May 30, 2019 plea agreement expressly prohibits him from being
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`employed by, or from serving as an advisor or consultant to, any employee benefit plan.
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`OTHER RELEVANT PERSON
`
`19.
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`Allison David, age 71, resides with her husband David in Vernon, New Jersey.
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`Alison David manages Premier’s business and previously worked for Provision as an assistant to the
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`Board.
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`FACTS
`
`I.
`
`BACKGROUND ON HEALTH EXPENSE REIMBURSEMENT PLANS
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`20.
`
`Internal Revenue Code Section 105 [26 U.S.C. § 105] is the provision of the United
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`States Tax Code that addresses the tax treatment of amounts received by an insured under accident
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`and health plans. Section 105 allows certain qualified distributions from accident and health plans to
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`be excluded from income.
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`21.
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`Section 105 health reimbursement plans are IRS approved, employer-funded, tax-
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`advantaged, employer health benefit plans that reimburse employees for out-of-pocket medical
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`expenses.
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`22.
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`Pursuant to such health reimbursement plans, eligible medical expense
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`reimbursements are excluded from an individual’s taxable income.
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`23. Moreover, health reimbursement plans save employers money due to a reduction in
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`the payment of FICA taxes, which are payroll taxes, because the amounts paid by the employer for
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`medical expense reimbursements under such plans are not considered wages.
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`II.
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`PREMIER IS BASED ON TOTAL FINANCIAL’S CLASSIC 105 PLAN
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`24.
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`From 2013 until 2017, David served as a consultant to Total Financial, the company
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`owned and operated by Joachim and his wife.
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`25.
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`Total Financial offered an employee benefits plan that Joachim named the “Classic
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`105,” after Section 105 of the Tax Code.
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`26.
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`The Classic 105 purported to provide companies with a supplemental healthcare
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`benefits plan that would reimburse employees for medical expenses.
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`27.
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`The basic premise was as follows: whereas employees using typical healthcare
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`spending plans would lose access to pre-tax deductions set aside for medical expenses, Total
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`Financial offered to lend those amounts back to employees before claims were paid, while still using
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`employees’ contributions to handle the claims when they occurred.
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`28.
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`Total Financial charged employers monthly fees for this service depending on the
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`number of employees enrolled, and promised that it would obtain bank loans to fund the amounts
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`being lent back to employees. Total Financial further promised that the employees would not
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`ultimately be responsible to pay back the loans because Total Financial would obtain life insurance
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`policies that would repay the bank loans at the employees’ death.
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`29.
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`David’s responsibilities at Total Financial included trying to find banks to provide
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`the loans to fund the amounts being lent back to employees, a task at which he was unsuccessful.
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`30.
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`Over the span of approximately four years, Total Financial signed up approximately
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`350 employers, with a total of approximately 4,300 employees.
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`31. While Total Financial received millions of dollars in fees for the program, Joachim
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`and Total Financial never actually obtained the bank loans or life insurance policies as represented.
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`32.
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`The Classic 105 scheme began to unravel in January 2017, after a parallel
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`investigation conducted by the U.S. Department of Labor (“DOL”) and the USAO resulted in a
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`search of Total Financial’s business offices.
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`33.
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`In August 2018, Total Financial, Joachim, and two additional individuals were
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`indicted and charged with fraud based on the failure to obtain the bank loans. By June 2019, these
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`three defendants had pleaded guilty for their respective roles in the Classic 105 scheme.
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`III. DAVID STARTS PREMIER IN 2017 BASED ON TOTAL FINANCIAL’S PLAN
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`34.
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`David formed Premier on or about June 2017 after Total Financial ceased doing
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`business as a result of the parallel investigations into its operations by the DOL and the USAO.
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`35.
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`Premier’s business model is to deliver to employers a healthcare product similar to
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`the Classic 105 offered by Total Financial.
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`36.
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`According to Premier’s Partner Investment Informational Brochure (“Investment
`
`Brochure”), which David and Premier provided to prospective investors along with various
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`additional written promotional materials describing the Premier plan, “[t]he Premier 105 then, is
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`simply a 105 reimbursement fund deducted from the worker’s pay, added to a 125 Cafeteria Group
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`Healthcare Plan, with an optional loan that helps the worker replace the resulting shortfall in his or
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`her take home pay, that winds down each calendar year with the process starting anew each year.”
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`37.
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`In a purported effort to fund the creation and implementation of Premier’s plan,
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`Premier raised money from investors.
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`38.
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`In a document provided to prospective investors titled “Investment Teaser,” Premier
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`stated that the program “enables participants to fund a large portion of their out-of-pocket
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`healthcare costs and still garner the same take home pay as before the program. This is a market
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`disruptor business and is expected to grow larger very quickly because it has a large distribution
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`network ready to go. It is the solution to rising healthcare costs and rising deductibles.”
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`39.
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`In addition to promoting the Premier program as “the solution to rising healthcare
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`costs and rising deductibles”, the Investment Teaser claimed that “only [Premier’s] technology can
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`solve” the problems in the health insurance industry, that “the risks were low”, and that this was a
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`“very conservative investment.”
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`40.
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`In August 2017, David began selling the Premier Membership Interests. The
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`“Introduction to the Partnership Investment Packet” provided to prospective investors explained
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`that: “We plan for the first offer of 125 units to be sold at $10,000 each. The second tranche will go
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`to $25,000 each for 50 more units and the third tranche will be $50,000 each for the last 50 units we
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`intend to sell. We will raise five million dollars in total.”
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`41.
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`On August 9, 2017, Premier filed a Form D indicating reliance on Rule 504(b) for a
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`$1 million equity offering.1 On May 24, 2018, Premier filed an amended Form D, increasing the
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`offering amount to $5 million. The following day, Premier again amended the Form D indicating
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`the offering was expected to last more than one year.
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`42. While Premier recruited sales agents to pitch the program to prospective investors,
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`David instructed the agents to direct all leads to David, who speaks directly to prospective investors
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`about the Premier plan and Premier Membership Interests.
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`43.
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`David also encouraged existing investors to purchase additional Premier
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`Membership Interests themselves and to solicit their friends and family members to invest.
`
`
`1
`Form D is used to file a notice of an exempt offering of securities with the Commission.
`The federal securities laws require the notice to be filed by companies that have sold securities
`without registration under the Securities Act in an offering made under Rule 504 or 506 of
`Regulation D or Section 4(a)(5) of the Securities Act.
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`44.
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`According to the Investment Brochure, the Premier plan, like Total Financial’s
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`Classic 105, consists of a tax-exempt contribution from the employee to Premier, a loan from a
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`lender to repay the employee’s contribution, and an insurance policy obtained by Premier payable at
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`the employee’s death to repay the loan.
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`45.
`
`As described in the Investment Brochure: “This business holds significant
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`intellectual property. Here is the concept in brief summary, the rising costs of premiums for
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`healthcare for employers caused them to raise the deductibles for the plan for their employees in
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`order to try to stay in budget. Now the employees have very high deductible plans. That means the
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`employees are paying the first $5,000 or more before the insurance coverage even kicks in. They
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`used to pay less than $1,000 out-of-pocket for medical expenses. How do you solve the problem for
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`both the employer and the employees? We have the answer. We provide money to the employees
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`to cover their shortfall in take home pay after they make contributions from their pay every payday
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`to fund a pre-tax reimbursement account to cover their out-of-pocket costs. The private loan from
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`us to the employees is collateralized by a death benefit and it is paid back by the insurer when they
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`die. The employee is never required to make any payments on the loan we provide during their
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`lifetime. This is all done in a very clever manner that is in compliance with the rules for
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`reimbursement plans and all the appropriate IRS Codes. The employer can then raise deductibles to
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`avoid price increases without negatively affecting the finances of their workers (in fact, our program
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`very positively affects them). We devised a funding mechanism through community banks for this
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`purpose that is very innovative.”
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`46. While the Investment Brochure disclosed Joachim’s indictment in the Investment
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`Brochure and explained that this was why the Classic 105 program failed, the Investment Brochure
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`claimed that, unlike Total Financial, Premier would fulfill its promises to employers.
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`47.
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`The Premier Operating Agreement (“Operating Agreement”), effective as of June 8,
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`2017, provides that the LLC will initially be managed by Provision (through its own board) and
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`David, who is described as “an adviser”.
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`48. While the Operating Agreement provides for eventual member selection of a
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`permanent Board of Directors (and the potential for at least some LLC members to become board
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`members), the triggering event has not yet occurred, and Provision and David have remained in
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`control of Premier since the company’s inception.
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`Provision pays David approximately $525 per week for his advisory role.
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`The offering of Premier Membership Interests has not ceased since the company’s
`
`49.
`
`50.
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`inception.
`
`51.
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`To date, Premier has raised approximately $3.9 million by selling Premier
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`Membership Interests to approximately 131 investors throughout the United States.
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`52.
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`Each investor was promised a share of Premier’s profits based on the number of
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`units purchased. The Investment Teaser states that “The ROI return on investment for this proven
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`business model is outstanding: the earlier you get in, the higher the return e.g. 37% ROI in year one,
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`but they go even higher than that for subsequent years as profits increase.”
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`53.
`
`54.
`
`To date, Premier has not launched its program.
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`Over the last two years, Premier has given investors a series of reasons for why the
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`program has not launched. For example:
`
`a. In an April 4, 2019 investor call, Allison David stated, “This project is ready with
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`everything but a Premier opinion letter and operating capital to get everything to get
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`the last part of the way to the finish line. With the opinion, we can easily fund this
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`project.”
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`b. During a September 6, 2019 investor call, David told investors, “[t]he reason we are
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`not on the market is so that we are doing everything we need to do to assure our
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`investors and associates that has been accomplished unlike [Total Financial] before
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`we go to market.”
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`c. In a January 20, 2021 investor call, David disclosed that they recently realized that
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`they needed to modify the structure of the business for legal reasons.
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`d. During this same call, Allison David stated, “[o]ur top law firm required for us to
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`change our program into an insurance product that is not stand alone and needs to
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`be integrated with a companies’ [sic] major medical group healthcare plan. The key
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`word there is integrated.” Allison David went on to say, “[o]therwise, according to
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`them, it wouldn’t be ACA compliant. Somehow we failed to realize what that fact
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`meant.”
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`IV. DAVID AND PREMIER’S FRAUDULENT REPRESENTATIONS AND
`OMISSIONS TO PROSPECTIVE INVESTORS
`
`
`
`
`
`A.
`
`55.
`
`OMMISIONS AND MISLEADING STATEMENTS RELATING TO
`DAVID’S EXTENSIVE CRIMINAL AND REGULATORY HISTORY
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`Beyond his role as initial member and “adviser” to Premier, David is the face of
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`Premier. He speaks to all prospective investors before they invest. He leads all investor calls with
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`existing investors. And yet, despite the central nature of his role in the business, David and Premier
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`hid from investors David’s extensive criminal and regulatory history.
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`56.
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`Premier’s Operating Agreement provides:
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`Member Management. The business and affairs of the Company shall be managed by the
`Members and the Members shall act in accordance with the voting requirements set forth in
`Article 2 above. The membership management shall proceed as follows:
`
`(a)
`Provision Corporation, LLC (represented by its Board of Directors) and Josiah David
`as initial owners of 500 units, the ONLY initial members and owners of units of ownership in
`The Premier Healthcare Solution, LLC, shall direct the affairs of the Company during the first
`and second phase of the setup, as the Temporary Board of Directors and their adviser,
`
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`respectively. The Temporary Board shall make all the decisions and direct the affairs of the
`partnership until such time as a Premier Healthcare Solution, LLC Board of Directors is
`selected. Once the first 700 member units are issued, the members of The Premier Healthcare
`Solution, LLC, shall be given the opportunity to nominate Members for a five person Premier
`Board of Directors, and vote to approve the directors.
`
`57.
`
`The Investment Teaser states: “[t]hey [Premier] have a solid management team in
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`place with strong industry experience, as well as meaningful ownership stakes and generous
`
`incentives to highly motivate them to achieve goals. This firm retains several expert consultants to
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`complement the team and has a high quality staff.”
`
`58.
`
`During an April 16, 2018 call with David to discuss the Premier program, a
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`prospective investor asked David “What is your background?” David replied: “[w]ell, actually the
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`fact of the matter is I am an inventor and I have never worked for anybody my whole entire life
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`except me and I have fun. I do whatever the hell I want to do and I like to invent things.” David
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`went on to tell the investor he agreed to join Premier as a favor to the board President.
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`59. While touting the experience of its management team and high quality staff, neither
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`David nor Premier disclosed David’s extensive criminal and regulatory history.
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`60.
`
`In 2015, David legally changed his name to Josiah David. Prior to that time, he was
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`known as Dennis Lee.
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`61.
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`As Dennis Lee, David had an extensive regulatory history and two guilty pleas in
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`criminal proceedings arising from decades of making a living as a pseudoscientist traveling around
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`the country marketing fake technologies such as: (1) a perpetual motion machine that would
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`provide free electricity from nothing; (2) technology that allowed cars to run on water; and (3) a fuel
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`efficiency device that made every car a hybrid.
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`62.
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`By 2005, David had been sanctioned in numerous states for various unlawful, unfair
`
`or deceptive business or trade practices or for the unlawful sale of securities, including: (1) In 1985,
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`David was permanently enjoined from selling products relating to energy savings in Washington; (2)
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`In 2001, David was permanently enjoined from selling dealer ownership units, discount buying club
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`units or any products in Maine; (3) In 2001, David was again enjoined in the State of Washington
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`from promoting, marketing, selling, opportunity to invest in free electricity technology; (4) In 2001,
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`David was enjoined from soliciting investment into a “discount buyers club” for his electricity
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`technologies in the State of Alaska; and (5) In 2001, David was permanently prohibited and enjoined
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`from promoting and offering any opportunity to invest or contribute to a program or plan in the
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`state of Oregon
`
`63.
`
`In 1990, David pleaded guilty in California for fraud/failure to disclose information
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`in a marketing plan and was sentenced to prison for two years. (The People of the State of Cal. v. Dennis
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`M. Lee, No. CR-24072 (Cal Sup. Ct., Ventura Cty.)).
`
`64.
`
`In 2004, David pleaded guilty in Kentucky for failing to register a business
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`opportunity. (Commonwealth of Kentucky vs. Dennis M. Lee, No. 02-CR-0995 (Jefferson Cir. Ct.)).
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`65.
`
`In 2011, David settled a federal case brought by the FTC based on alleged deceptive
`
`practices related to his fuel efficiency device that claimed to turn any car into a hybrid. (Case No.
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`2:09-141 (D.N.J.)) The December 7, 2011 consent order in that case included a permanent
`
`injunction against “[m]aking any false or misleading representation of material fact directly or by
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`implication, including but not limited to any material misrepresentation concerning the performance,
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`efficacy, nature, characteristics, benefits, or safety of any product or service ….” (Docket # 165).2
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`66.
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`Tellingly, in an August 2011 report required in connection with the FTC action,
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`David (then still Dennis Lee) described that he had problems recruiting sales people for the
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`
`2
`David, his criminal history (when he was named Dennis Lee), and his tactics are discussed in
`detail on the internet, in magazine articles, and in the book, The Skeptics Guide to the Universe: How to
`Know What’s Really Real in a World Full of Increasingly Fake. See, e.g., Michael Maiello, Power Failure,
`Forbes: Investment Guide (June 6, 2005); Press Release, FTC, FTC Sues Promoters of Bogus Fuel
`Efficiency Device (Feb. 2, 2009) https://www.ftc.gov/news-events/press-releases/2009/02/ftc-sues-
`promoters-bogus-fuel-efficiency-device.
`
`
`
`13
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`Case 2:21-cv-11460-ES-ESK Document 1 Filed 05/19/21 Page 14 of 26 PageID: 14
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`company he was then associated with because while the recruits were impressed with the company,
`
`“when they researched Lee’s name many of them disengaged.” As such, David described that he
`
`needed to use a “nom-deplume” [sic].
`
`67.
`
`In March 2020, a Premier investor who had learned of David’s past revealed David’s
`
`criminal history to the other Premier investors.
`
`68.
`
`In response, David published a series of podcasts at www.amazingtruehistory.com
`
`and also discussed his past during an investor conference call.
`
`69.
`
`In a June 2020 newsletter distributed to existing Premier investors, David stated:
`
`“Somebody thinks he made the discovery of the century and has done an exhaustive search on me
`
`(David) and my background. This is a disgruntled EX-Team Leader that happens to be the only
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`agent or Team Leader we have ever fired. It is really not relevant to Premier but he has discovered
`
`that I have two names. I was not always Josiah David. That is true. Not real relevant to our project
`
`at hand, but true. He also wanted to expose my supposed history but what he selected to share
`
`leaves some of the most important facts out. Once again if anything, listening to my actual facts in
`
`the matter may explain a lot about why I never give up until we overcome whatever obstacle we
`
`encounter, but it is not real relevant to the project at hand.”
`
`70.
`
`In the June 2020 newsletter, David explained why he changed his name stating that:
`
`“I was Dennis Lee back then and have, as an inventor, been involved in some amazing technologies,
`
`and had a major battle with the fossil fuels companies. I held my own, but the Board asked me if I
`
`would disconnect from that history back when we started this project, and asked me to change my
`
`name, which I had been intending to do anyway.”
`
`71.
`
`David’s explanation in the June 2020 newsletter was also false and misleading as
`
`David changed his name in 2015, well prior to Premier being founded. Moreover, David controlled
`
`
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`Case 2:21-cv-11460-ES-ESK Document 1 Filed 05/19/21 Page 15 of 26 PageID: 15
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`the Premier Board. Consequently, his story that the Board asked him to “disconnect” from his prior
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`history was simply a misleading way of saying that he decided to do so.
`
`B.
`
`72.
`
`FALSE STATEMENTS REGARDING PREMIER’S BANKING
`RELATIONSHIPS
`
`Central to Premier’s ability to execute on its business plan was the ability to secure
`
`financing from banks willing to participate in the program.
`
`73.
`
`Premier’s Investment Brochure lists “Having many excellent banks as partners”
`
`among the “Critical Success Factors.”
`
`74.
`
`As a consultant to Total Financial, David had been involved in Total Financial’s
`
`unsuccessful attempts to secure bank loans for that program. David knew or should have known
`
`from those failures that there was a significant risk that Premier would never be able to secure bank
`
`financing.
`
`75.
`
`Not only did Premier fail to disclose to investors any concerns that Premier might
`
`not succeed in lining up banks, it affirmatively lied to prospective investors that it had already
`
`cemented a relationship with a bank, when it had not done so.
`
`76.
`
`In a section of the Investment Brochure titled “Banking Partners,” Premier
`
`represented:
`
`one of the syndicated banks, a MN-based bank, Minnwest, has independently
`performed its diligence in order to gain a sense of the magnitude of the loss or
`default exposure, the historical utilization of the 105 plan, and the type and size of
`the employer customers targeted for the Premier 105. This MN-based bank wants to
`participate in the plan funding which has them enter into one-year revolving $150
`million loan subject to a third party accepting an amount equal to 8% of the possible
`shortfall risk (i.e. exposure of $12 million).
`
`In exchange, the MN-banker offered to pass through a portion of the interest spread
`to the insurer who accepts this risk at a fee of 1% per annum of the total loan
`amount. The bank agreed to a 4% loan rate and will accept a 3% loan rate to secure
`the certainty of eliminating the loss exposure.
`
`
`
`
`15
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`

`Case 2:21-cv-11460-ES-ESK Document 1 Filed 05/19/21 Page 16 of 26 PageID: 16
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`Premier has had discussions with many banks who have already accepted the
`economic terms of the MN-bank, i.e. haircut on loan interest for the reduced credit
`risk.
`
`77.
`
`These statements were all false.
`
`78.
`
`In late 2014 – while David was still associated with Total Financial and more than
`
`two years prior to the founding of Premier – David approached Minnwest with a proposal for the
`
`bank’s consideration.
`
`79.
`
`Contrary to Premier’s representations that the bank performed due diligence, “wants
`
`to participate” in a “$150 million loan,” and “agreed” to specific rate terms, Minnwest declined the
`
`proposal early in the process. The bank never conducted due diligence. And the bank never agreed
`
`to enter into a one-year revolving $150 million loan. In fact, that amount would have far exceeded
`
`the bank’s legal lending limit of $20 million.
`
`80.
`
`And far from Premier’s suggestion to investors that there was a syndicate of banks
`
`ready to participate, Minnwest understood that there were no other bank lenders. That fact was
`
`important to Minnwest who did not want to be the first bank to participate in this novel program.
`
`81.
`
`After quickly rejecting David’s proposal in 2014, Minnwest had no further contact
`
`with David.
`
`82.
`
`83.
`
`David knew all of these facts from his communications with the bank.
`
`In a call with Premier investors in January 2021, David finally disclosed that, as of
`
`January, Premier had no banks committed to the program.
`
`C.
`
`
`84.
`
`FALSE STATEMENTS REGARDING PREMIER’S INTELLECTUAL
`PROPERTY
`
`Premier’s Investment Brochure states numerous times that the concept underlying
`
`Premier’s business model is either patent pending or has already been patented.
`
`85.
`
`For example, the In