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March 17, 2007

According to legal papers, Four Star insider and business partner Robert H. Lipp of Georgina Asset Management (a Securities and Exchange Commission registered investment adviser) recently settled with plaintiffs in two lawsuits related to the Four Star case.

Los Angeles Superior Court records show Lipp and his Santa Monica based firm settled for an undisclosed sum of money in a complaint (Ferrara v. Lipp/GAM, Los Angeles Superior Court, Case No. BC 304180) filed against him in late 2003 by several former clients. The suit accused Lipp of fraud, deceit, negligence, and breach of fiduciary duty for his role in the alleged Four Star Ponzi. Court records show the Ferrara case settled last September.

The complaint alleged Lipp defrauded his clients of more than $11 million. Court Exhibits cited in the lawsuit included an email that allegedly showed Four Star Chief Financial Officer Ronald I. Anson and Lipp “setting aside” more than half a million dollars of “incoming” Georgina Asset client funds as “payback” to another Four Star investor.

Plaintiffs asserted the email (as well as other internal Four Star emails and company documents submitted as Court Exhibits) offered evidence of Lipp’s involvement in the alleged Four Star fraud. According to the complaint, Plaintiffs further alleged Lipp: falsely represented Four Star as highly safe and not presenting any risk to investment principal; failed to disclose and actively concealed from Plaintiffs Four Star's criminal activities; negotiated and signed secret incentive contracts with Four Star in which he agreed to use “best efforts” and “super best efforts” to raise millions of dollars selling Four Star securities in exchange for secretly earning huge commissions and other compensation.

In court filings, attorneys for Lipp have denied any wrongdoing by their client and describe Lipp himself as a victim of the alleged Four Star fraud.

Court papers from November of 2005 in the Ferrara matter show Lipp and his firm Georgina Asset Management under investigation by the Los Angeles U.S. Attorney’s Office in connection with the Four Star case. Lipp, in turn, has sought the help of someone who knows that office intimately -- he hired a defense attorney who briefly served as the U.S. Attorney for the Central District of California Los Angeles and who also formerly served as Chief of the Criminal Division for that office.

Also, recently filed papers in federal court show Lipp settling with the Four Star Bankruptcy Trustee for $125,000. The Trustee had filed suit in late 2005 accusing the Four Star insider of earning more than $600,000 in “commissions” or “finders fees” and “preference payments” in furtherance of the alleged Four Star Ponzi -- a charge rejected by an attorney for Lipp in legal papers.

Lipp remains a named defendant in a class action lawsuit (Gilbert et al. v. Cohn, Anson, Garrett, Cato, Lipp/GAM, et al., Los Angeles Superior Court, Case No. BC 310846) filed by Four Star investors. The class action complaint included the following allegations:

"Defendant Robert Lipp ("Lipp"), a registered investment adviser, conspired with Anson, Garrett and Cohn to defraud Plaintiffs. Lipp boasted to Plaintiffs that he was 'intimately' involved in Four Star and that he would eventually be named President of Four Star. Despite holding himself out as an independent investment adviser, Lipp operated out of Four Star's offices and claimed to spend half of every day working on Four Star business. Lipp solicited funds for Four Star with full knowledge of the fraud in order to prop up the enterprise. In return, Lipp received kickbacks and commissions from Four Star on the funds he solicited. Lipp also assisted Defendants in maintaining the appearance of normalcy at Four Star, by, for instance, untruthfully telling Plaintiffs in 2002 that 'things are going great with the company, things could not be better.' Lipp also executed the Ponzi scheme by ordering incoming capital from Plaintiffs to be converted into payments to other, unknowing members and note-holders of Four Star. Lipp knew that Four Star was not profitable and needed continued infusions of capital to stay 'alive', i.e. to stay current on its obligations to investors."

In a court filing in July of 2005, Lipp denied any wrongdoing in the investor class action case.

Lipp was the target of another Four Star related lawsuit filed by a former client (Los Angeles entertainment attorney Donald Passman) in May of 2003. According to L.A. Superior Court records that case settled in May of 2005.

For more filings by plaintiffs, please click here.