Case 1:11-cv-22459-PAS Document 49 Entered on FLSD Docket 03/09/2012 Page 1 of 38

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA Case No. 11-cv-22459-PAS TIMOTHY L. BLIXSETH, individually; ) EMERALD CAY, LTD., a Turks and Caicos) Company, ) ) Plaintiffs, ) ) v. ) ) GARY Di SILVESTRI, individually and as ) agent, beneficial and/or true owner of ) WORLDWIDE COMMERCIAL ) PROPERTIES, LTD., a Turks and Caicos ) company; ANGELICA MORRONE, ) individually; SOUTHAVEN, LTD., a ) Turks and Caicos company, the sole ) shareholder of WORLDWIDE ) COMMERCIAL PROPERTIES, LTD.,; a ) Turks and Caicos company ITAL SWISS ) INVESTMENTS LTD., a Turks and Caicos ) company; and DOES 1 through 100 inclusive) ) Defendants. ) /

COMPLAINT FOR: 1. 2. 3. 4. 5. 6. 7. Civil RICO; Fraud; Negligent Representations; Enforcement of Indemnity Agreement; Contribution; Breach of Contract; and Breach of Covenant of Good Faith and Fair Dealing.

Timothy L. Blixseth and Emerald Cay, Ltd., by and through undersigned counsel, for their Complaint against Gary diSilvestri, Angelica Morrone, Southaven Ltd., Ital Swiss Investments, Ltd., and Does 1 through 100 inclusive (collectively Defendants), allege as follows: I. INTRODUCTION AND SUMMARY OF CASE 1. This action involves the Plaintiffs purchase and the Defendants sale of a

property located in the Turks and Caicos Islands known as Emerald Cay. Emerald Cay, -1-

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developed by defendants DiSilvestri and Morrone, is one of the premier residential properties in the Caribbean. However, DiSilvestri, Morrone and Ital Swiss conspired to structure the sale of Emerald Cay to Plaintiffs in order to avoid taxes on the sale, and then used their political influence, and potentially bribery, to quash any investigation of the taxes due on the property until they could pocket the final $12.5 million from the Plaintiffs. As part of the scheme to defraud Plaintiffs, the Defendants agreed to indemnify plaintiff Emerald Cay, Ltd. Through a shell corporation to further insulate them from liability. As a result of the scheme, and the underpayment of taxes directly caused by Defendants, Emerald Cay is unsalable, substantially diminished in value and encumbered with over $9 million in tax liens. As a result, and through this action, Plaintiffs seek in excess of $28 million in damages. II. PARTIES The Plaintiffs: 2. Plaintiff Timothy L. Blixseth is a citizen of the state of Washington. Mr. Blixseth

is an individually named defendant in the Turks and Caicos Action. 3. Plaintiff Emerald Cay, Ltd. is a Turks & Caicos corporation with a usual place of

business in Rancho Mirage, California. Emerald Cay, Ltd. owns Emerald Cay, which is subject to the tax and penalties for additional Stamp Duty Tax claimed to be owed to the Turks and Caicos government. The Defendants: 4. Defendant Gary di Silvestri, upon information and belief, is a citizen of the State of

Florida, who resides in Miami, Florida, and was the agent, beneficial and/or true owner of Worldwide Commercial Properties Ltd., a Turks and Caicos Corporation, the designated Seller of -2-

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Emerald Cay. At all times relevant, prior to its sale to Emerald Cay, Ltd., Worldwide was the mere instrumentality of DiSilvestri to shield himself and his assets from creditors and the Turks and Caicos Government. DiSilvestri directed the entirety of Worldwides actions himself, and held himself as the developer and owner of Emerald Cay. 5. Defendant Angelica Morrone (Morrone), upon information and belief, is a

citizen of the Italy, resides in Miami, Florida, and is the wife of defendant DiSilvestri (DiSilvestri and Morrone are referred to herein collectively as the DiSilvestris). Morrone is, upon information and belief, a beneficial owner of Worldwide Commercial Properties Ltd., a Turks and Caicos Corporation, the designated Seller of Emerald Cay, prior to Worldwides acquisition by Plaintiff Emerald Cay, Ltd. Morrone is also a party indemnitor to Emerald Cay Ltd. pursuant to that certain Indemnity Agreement between Morrone and Ital Swiss Investments Ltd., a Turks and Caicos Corporation (Ital Swiss). In the Indemnity Agreement, Morrone agreed to indemnify Emerald Cay Ltd. against claims or obligations arising out of or in respect of Worldwides activities on or before the sale of Emerald Cay to Emerald Cay Ltd. 6. Defendant Ital Swiss Investment, Ltd. is a Turks and Caicos corporation with a

usual place of business, upon information and belief, in Florida through it's agents, defendants DiSilvestri and Morrone. Ital Swiss is a party indemnitor to Emerald Cay Ltd. pursuant to that Indemnity Agreement between Morrone and Ital Swiss and Emerald Cay. In the Indemnity Agreement, Ital Swiss agreed to indemnify Emerald Cay Ltd arising out claims or obligations of or in respect of Worldwides activities on or before the sale of Emerald Cay to Emerald Cay Ltd. Ital Swiss only acts through its agents, defendants DiSilvestri and Morrone, from the United States and, upon information and belief, the State of Florida. 7. Defendant Southaven Limited is a Turks and Caicos corporation that held the -3-

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nominal title to the shares of Worldwide Commercial Properties, Ltd. and Ital Swiss, Ltd. prior to the sale of shares at closing of Worldwide Commercial Properties, Ltd. to Emerald Cay, Ltd. However, Plaintiffs are informed and believe that Southaven acted solely at the direction of defendants DiSilvestri and Morrone as their nominee and agent, solely to hold the stock shares on their behalf and took no independent action outside of directions from DiSilvestri and Morrone. 8. Plaintiffs are ignorant of the true names and capacities of those Defendants sued

here and DOES 1 though 100, inclusive, and therefore sue said Defendants under such fictitious names. Plaintiffs are informed and believe that such fictitiously name Defendants are responsible in some manner for the events and happenings herein referred to, and proximately caused damage to Plaintiffs as herein alleged. Plaintiffs will seek leave to amend this Complaint to allege their true names and capacities when the same have been ascertained. 9. Ital Swiss is, upon information and belief, merely a shell corporation created by

DiSilvestri and Morrone to evade the claims of creditors and, Plaintiffs are informed and believe, to evade taxes on at least $12.5 million paid by Plaintiffs in the acquisition of Emerald Cay from the United States Internal Revenue Service. Ital Swiss has no assets, conducts no business (other than through Morrone and DiSilvestri) and was used in this transaction to defraud Mr. Blixseth and Emerald Cay, Ltd. Ital Swiss is therefore a mere device or sham to evade liability to Plaintiffs, and is merely the agent of DiSilvestri and Morrone, who Plaintiffs are informed and believe are the beneficial owners and controlling persons of Ital Swiss. DiSilvestri has repeatedly referred to payments to Ital Swiss as payments to him personally Ital Swiss should thus be held to be the alter ego of DiSilvestri and Morrone.

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III. JURISDICTION 10. This Court has federal question jurisdiction pursuant to 28 U.S.C. 1331. This Court

also has diversity jurisdiction under 28 U.S.C. 1332 providing for jurisdiction where, as here, the aggregated amount in controversy exceeds Seventy Five Thousand ($75,000), exclusive of interest and costs and any member of a Plaintiff is a citizen of a State different from any Defendant; and/or any member of the Defendants is a citizen or subject of a foreign state. 11. The Court has supplemental jurisdiction over the state law claims and causes asserted

pursuant to 28 U.S.C. 1367, because the state claims are so related to the federal claims that they form part of the same case or controversy. IV. VENUE 12. Venue is proper in this Court in that both Defendants DiSilvestri and Morrone are

residents of this District, agents of the other Defendants. At all times relevant Defendants were the true owners of Worldwide Commercial Properties, Ltd. and Morrone was the beneficial owner of Ital Swiss Ltd.. Additionally and for the same reasons, venue is also proper pursuant to 18 U.S.C. 1965(a) and (b). V. FACTUAL ALLEGATIONS A. Mr. Blixseth. 13. Timothy L. Blixseth (Mr. Blixseth) has enjoyed a successful career in the

timber business. His success was built on applying simple, but valuable lessons he learned in growing up in a small timber town in Oregon, such as hard work and determination. Throughout -5-

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the 1980s and 1990s Mr. Blixseth used hard work and determination to build a prospering timber company. 14. Motivated by achievement in the timber business, Mr. Blixseth moved to build on

his timber success. In 1999, he had a vision to create a club where family and friends could gather and enjoy outdoor activities while enjoying each others company. Mr. Blixseth followed this dream and, through blood, sweat and tears, the Yellowstone Club (Yellowstone Club or Club) was formed near Big Sky, Montana. 15. The Club became a success on many levels. The Club became popular with

families looking to take a break from the hectic life and enjoy the beautiful outdoor setting while spending time together. The Club also became a family in itself as new friendships were formed amongst the members and their families. 16. Sometime in 2005, Mr. Blixseth saw an opportunity to expand the Club concept

and brand worldwide. It was out of this vision that the Yellowstone Club World (YCW) was born. The idea was to acquire properties throughout the world and to be managed by the YCW. Not only would family and friends have the opportunity to enjoy the beautiful mountain setting in Montana at the Club, they would also have access to a variety of unique properties throughout the world if they purchased a membership in YCW. YCWs offices were located in Los Angeles, California. 17. In 2005 Mr. Blixseth began looking for properties that would serve as ideal

candidates for YCW. He talked to members of the Club about potential locations and pursued leads within the Club on possible properties for sale. It was during this time period he was approached by Gary DiSilvestri (DiSilvestri) about a potential property. B. The DiSilvestris. -6-

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18.

DiSilvestri and his wife, Angelica Morrone (Morrone) were part of the

Yellowstone Club family, becoming members of the Club in 2004. DiSilvestri himself described his relationship with Mr. Blixseth as very close. DiSilvestri made his mark as a successful hedge fund manager and claimed to be DiSilvestri and Morrone claimed to be successful developers in the Turk and Caicos Islands. In 1999, DiSilvestri and Morrone began searching for beach front property to build a beach resort where they could reside six to eight months a year. Eventually they purchased some vacant land in Providenciales, Turks and Caicos Islands. Soon after the purchase of the bare land, DiSilvestri and Morrone moved forward with the development of the land, with plans to transform it into a private island complete with a luxurious residence with top-of-the-line amenities (known as Emerald Cay). In developing the property, DiSilvestri utilized key relationships that he had developed with high level Turks and Caicos government officials. DiSilvestri also received assistance in the project from his local counsel, Gordon Kerr of the local law firm Misick & Stanbrook. 19. Sometime in 2005, DiSilvestri approached Mr. Blixseth with a proposal to sell

Emerald Cay to Yellowstone Development, LLC (YD) to become one of the resorts to be operated and managed by YCW. When DiSilvestri approached Mr. Blixseth about this idea, Emerald Cay was under construction and there was much work still to be done in order to complete the development. Based on discussions with DiSilvestri about the Emerald Cay proposal, it was Mr. Blixseths understanding that DiSilvestri and Morrone were the true owners of the Emerald Cay property. 20. Mr. Blixseth had experience in the real estate business in the United States in

building up his timber company and the development of the Yellowstone Club. He did not, however, have any overseas business dealings and therefore had some initial reservations about -7-

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investing in property not yet developed on a foreign island in the Caribbean. However, DiSilvestri committed to Mr. Blixseth that he and Morrone would oversee the completion of the project and assured him that the project would be a success given their development experience in the Turks and Caicos Islands. Based on these assurances, Mr. Blixseth expressed an interest in moving forward and exploring the possibility of purchasing the Emerald Cay property for the YCW family. 21. DiSilvestri and Morrone represented themselves to Mr. Blixseth as sophisticated

real estate developers in the Turks and Caicos Islands. They claimed to be well-versed with Turks and Caicos customs, regulations and laws, including, but not limited to, the rules relating to the assessment of Stamp Duty Tax. Mr. Blixseth was also told by diSilvestri that DiSilvestri was well-connected to several key Government officials during his development of Emerald Cay, including deputy premier and Minister of Finance Floyd Hall, premier Michael Misick and in fact, was represented in the Turks and Caicos by Michael Misicks brothers law firm, Misick & Stanbrook. C. The Negotiations And Purchase Of Emerald Cay. 22. The negotiations for the sale of Emerald Cay began on July 21, 2005 with a letter

to Mr. Blixseth sent to him in Rancho Mirage, California from DiSilvestris attorney, Gordon Kerr at Misick & Stanbrook (Kerr Letter) in the Turks and Caicos. 23. In the Kerr Letter, Kerr proposed, as the DiSilvestris agent, that Mr. Blixseth set

up a Turks and Caicos corporation to purchase of the shares of Worldwide Commercial Properties Ltd. (Worldwide), the company that owned Emerald Cay. Although Worldwide Commercial Properties, Ltd. was nominally owned by defendant Southaven and Gordon Kerr was the director, the true owners and directors were DiSilvestri and Morrone, who directed -8-

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Gordon Kerr to take whatever action the DiSilvestris desired regarding Worldwide. Kerr had no authority independent of the diSilvestris to take any action on behalf of Worldwide. 24. Worldwide therefore had no purpose or function other than to shelter the

DiSilvestris from claims of creditors in the United States and, upon information and belief, other countries. 25. In the Kerr Letter, DiSilvestri, through his agent, Kerr, proposed that Emerald

Cay be sold for a total of $15.5 million. The $15.5 million also included an initial Option payment for $4,000,000 and the purchase of $1,000,000 worth of personal property that was located at Emerald Cay. Although the total consideration in the letter was $15.5 million, with DiSilvestri's consent, Kerr stressed that only the $10,500,000 allocated to the purchase of the share of Worldwide was subject to Stamp Duty under Turks and Caicos law: the value placed on the shares themselves is only $10,500,000 and it is that amount that you will pay share transfer duty at the rate of 8%. The Option payment and the value ascribed to the contents are exempt from the payment of the share transfer duty. 26. In addition, the letter also suggested an ancillary component would be included in

the deal in addition to the $10,500,000 stock purchase, a $4,000,000 option, and $1,000,000 for furniture. However the amount and the details regarding the ancillary deal were not clear. For example, Gordon Kerr wrote in his letter: I understand from the Seller, that there is an ancillary part to this transaction. The house is not yet complete at this moment and the Seller has offered to procure the services of Gary DiSilvestri to supervise completion of the property and to provide you with guidance and assistance relative to the property itself and to the -9-

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Turks and Caicos Islands in general. In consideration for the service the Seller or its nominee to be granted the right to acquire certain parcels of land in the Yellowstone Mountain Club and the option to take a membership in the World Club. 27.

Although the details regarding the ancillary component were not clear, it

was clear that DiSilvestri valued the real estate component at $10,500,000 through the sale of the Company stock which owned the real estate and it was only this amount that would be subject to Stamp Duty Tax in the Turks and Caicos. All other elements outside of the above valued real estate component, according to DiSilvestri to Mr. Blixseth and confirmed by Kerr to Mr. Blixseth on or about July 21, 2005, would be exempt from Stamp Duty under Turks and Caicos law. 28. Turks and Caicos is somewhat of a tax haven. Purchasers of property

there pay a one time stamp duty and owe no other sort of taxes. 29. Due to ongoing construction, negotiations for the purchase cooled slightly

until February 6, 2006, when DiSilvestri sent an e-mail to Mr. Blixseth in California assuring him that now would be a good time to move ahead, and again confirming the deal structure as set forth on July 21, 2005. In the e-mail he provided Mr. Blixseth with Kerrs contact information. Mr. Blixseth passed this information on to his in-house attorney, Andrew Hawes (Mr. Hawes), with instructions to proceed with completing a deal for the purchase of Emerald Cay.
30. All communications, whether originating from Gordon Kerr in the Turks and

Caicos, or Mr. DiSilvestri in the United States, were directed to either Mr. Hawes in Idaho or

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Mr. Blixseth in California or Montana from February 2006 through and including August 14, 2006, the date of the closing on Emerald Cay. More than 50 emails and numerous telephone calls were either made by the DiSilvestris in the United States or directed to Mr. Hawes or Mr. Blixseth in the United States. In addition, Mr. Blixseth specifically recalls speaking with Gary DiSilvestri on the telephone concerning the purchase of Emerald Cay and the required documents in the Spring 2006 when Mr. DiSilvestri stated that he was calling Mr. Blixseth from his home in Florida. 31.

Because Mr. Blixseth and Mr. Hawes were not familiar with Turks and

Caicos laws, customs and regulations, DiSilvestri referred Mr. Blixseth to local counsel in Turks and Caicos to work with DiSilvestri's counsel.
32. Negotiations continued to progress during the spring of 2006. Although the

Emerald Cay purchase began as a straight stock purchase of Worldwide, the purchase of Emerald Cay became a purchase of assets rather than through a stock purchase, even though the Stamp Duty would be 1.75% higher. DiSilvestri agreed to this approach, but only on the condition that the basic deal structure stay intact; specifically, that $10,000,000 would be attributed to the real estate, $1,000,000 for personal property, and $500,000 would be attributed to a Works Agreement. DiSilvestri also insisted that Mr. Blixseth agree to pay a total of $4,000,000 to option the property, as proposed to Mr. Blixseth on July 21, 2005. 33. Discussions on March 27, 2006, June 16, 2006 and July 13, 2006 addressed the

ancillary component of the deal and out of these discussions the parties eventually agreed to enter into a $6,500,000 Consultancy Agreement between Ital Swiss Investments, Ltd. and Yellowstone Club World, LLC, and also a separate Chattels Agreement in the amount

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$6,000,000, based on the Sellers value of certain chattels installed or to be installed at the Emerald Cay property. The total of all of these components equaled $28,000,000. However, as he had on February 7, 2006, DiSilvestri and his counsel reiterated that only the $10,000,000 should or needed to be allocated toward the real estate as the true value, and accordingly, only this component would be subject to Turks and Caicos Stamp Duty. 34. During these negotiations, DiSilvestri reiterated that his name should not appear

on any documentation and that the payments must not go through the United States. D. The Stamp Duty. 35. For reasons unbeknownst to Mr. Blixseth, from the beginning inception of the

negotiations for the purchase of Emerald Cay on July 21, 2005, DiSilvestri and Morrone and their counsel insisted that (1) the taxable value attributed to the Emerald Cay deal would have to be approximately $10,000,000 and (2) the remaining components of the transaction would not be subject to Stamp Duty Tax. DiSilvestri and Morrone further represented that it was proper under Turks and Caicos law to rely upon DiSilvestri and Morrones $10,000,000 real estate allocation, because the parties were free to state a value and the Turks and Caicos government would have an option to object to the value and initiate a formal valuation. According to DiSilvestri, if the Government elected not to initiate a valuation process within 14 days of filing a transfer, then the Government would be deemed to accept DiSilvestri and Morrones stated value. 36. Mr. Blixseth may have been perfectly willing and prepared to proceed with the

purchase of Emerald Cay if, under Turks and Caicos law, the total value of the components of the transaction would have been subject to Stamp Duty. It would then have been simply an economic decision as to whether the added cost of $1,775,000 (to be split evenly between the parties) would be worth it. However, DiSilvestri would not sell Emerald Cay unless only -12-

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$10,000,000 would be allocated as the value of the real estate under Turks and Caicos law. 37. Mr. Blixseth therefore deferred to DiSilvestri and Morrone regarding the taxable

value of Emerald Cay, given the Defendants familiarity with the property and the unique nature of Emerald Cay. DiSilvestri and/or Morrone knew or should have known their allocation of the $10,000,000 as the only portion of the sale that was subject to Stamp Duty without a verifiable appraisal carried with it unreasonably high risk to the Buyer, from a tax liability standpoint. 38. When questioned about his insistence to limit the $10,000,000 component as

taxable under Turks and Caicos law, DiSilvestri told Mr. Blixseth on several occasions between February 6, 2006 and August 14, 2006 that Turks and Caicos practice calls for the parties to designate the value of the real estate that is subject of a transaction on the transfer documents, and if the Government objects to that valuation within 14 days from the filing of the transfer document, the Government would have the option to object and to initiate a formal valuation process. The Buyer would then be obligated to pay for any additional tax as a result of a higher value, after all appeals under the valuation process were exhausted. (The Stamp Duty Ordinance actually provides that the obligation to pay the Stamp Duty Tax is joint and several between Buyer and Seller). In other words, it was represented that the Government would have an opportunity to participate in the valuation of the real estate. DiSilvestri also claimed to have a close personal relationship with Floyd Hall, the Deputy Premier and Minister of Finance, and Michael Misick, the Premier of Turks and Caicos, and the brother of the partner in DiSilvestris law firm, Misick & Stanbrook, the implication being that there would never be an issue with the Stamp Duty. 39. Initially, Mr. Blixseth proposed that DiSilvestri be responsible for paying the

Stamp Duty Tax. This did not sit well with DiSilvestri and the deal almost terminated. -13-

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However, because Mr. Blixseth valued DiSilvestri as a member of the Yellowstone family, he compromised and settled on an agreement to split the Stamp Duty Tax liability in order to keep the deal going. This compromise became memorialized as under paragraph 10.2 of the purchase agreement (and ultimately, the Indemnity Agreement): 10.2 Stamp duty and registration fees shall be for the account of the

Purchaser and the Vendor equally. The Vendor agrees to allow the Purchaser deduct Fifty Percentum (50%) of the anticipated stamp duty (Four Hundred and Eight Seven Thousand Five Hundred United States Dollars (US$487,500.00) from the balance of the Purchase Price payable on closing as its contribution towards stamp duty. The Vendor undertakes to contribute Fifty Percentum (50%) of any additional stamp duty levied by the Collector of Stamp Duties upon any reassessment of the market value of the Property upon stamping of the Deed of Transfer and to pay same to the Purchaser within fourteen (14) days of request with evidence of payment thereof by the Purchaser. The parties shall use all reasonable endeavors to limit any such additional duty if levied, which will include but not be limited to lodging appeal against such assessment to the Supreme Court of the Turks and Caicos Islands, in which event the costs of such appeal shall be borne equally by the Vendor and Purchaser.

40.

The parties then proceeded to finalize negotiations, memorialize their

agreements, and execute the various documents reflecting those agreements and the transaction closed on August 14, 2006. Although DiSilvestri and Morrone represented during negotiations they were the developers and owners of the Emerald Cay property, the Seller was designated as Worldwide Commercial Properties, Ltd. 41. Because Emerald Cay, Ltd. was purchasing the share of Worldwide after

all transfers were made at the closing, and Worldwide would therefore no longer exist,

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Mr. Blixseth and Emerald Cay required that Morrone and Ital Swiss contractually agree in writing to indemnify Emerald Cay Ltd. arising out of, among other things, (1) any claims or activities of the Seller, (2) any breach of warranty, covenant or condition under the Sale and Purchase of Share Agreement dated July 31, 2006, and (3) any breach of warranty, covenant or condition under the Sale Agreement regarding the sale of the real property, Emerald Cay. In addition, the Indemnity Agreement incorporated the same paragraph regarding the underpayment of Stamp Duty that had been contained in the Sale Agreement, 10.2. 42. The Indemnity Agreement was signed by Morrone and Ital Swiss on or

about August 14, 2006 and intentionally omitted both choice of law and venue selection clauses in order to maximize the ease with which it could be enforced, given that neither the DiSilvestris nor Ital Swiss had any further assets, business or connections with Turks and Caicos. 43. On August 14, 2006 a Land Transfer Certificate was filed with the Turks

and Caicos Government executed by Worldwide (and believed to have been signed by Kerr on DiSilvestris behalf) which conveyed Emerald Cay to Emerald Cay, Ltd. In the Land Transfer Certificate, the Seller affirmatively and unequivocally represented the following to the Turks and Caicos government: This transaction effected by this instrument does not form part of a larger transaction involving the conveyance of a larger transaction involving the conveyance of other immovable property in the Turks and Caicos island. 44. Although there was a designated signature line next to the above

representation for the Buyer to sign, the representation was never acknowledged by signature by Mr. Blixseth or his agents. -15-

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45.

Fourteen days passed after the registration and payment of the Stamp Duty

Tax obligation without objection by the Turks and Caicos government. Accordingly, it was Mr. Blixseth's belief the Government had elected not to initiate a valuation process and instead, accepted the Seller's stated value. 46. The Sellers designation and representation on the Transfer document that

$10,000,000 was the true taxable value constitutes an activity on or before the sale of Emerald Cay and the Turks and Caicos Action for additional Stamp Duty Tax liability against the Buyer is attributed to or is a result of the Sellers pre-closing/closing activity. Moreover, the underdeclaration of Stamp Tax Duty (and underpayment) by the Seller violated the covenants in the Sale and Purchase of Share Agreement that the Seller will have no liabilities or taxes due on any property, including Emerald Cay. E. The Stamp Duty Case Against Mr. Blixseth and Emerald Cay, Ltd. 47. Two agreements, the Consulting Agreement between YCW in Los

Angeles and Ital Swiss Investments and the Agreement for Equipment and Furnishings, were to be paid on or about January 14, 2007, five months post-closing. The payments on those agreements totaled $12.5 million. 48. On the day that Worldwide filed the Transfer of Land under-reporting the

consideration on the sale, the Registrar of Lands believed that the value of reported for stamping was undervalued. 49. Moreover, Plaintiffs are informed and believe that the Registrar notified

DiSilvestris counsel and agent, Gordon Kerr, that the Registrar believed that the consideration reported on the sale of Emerald Cay was under-reported, on or about August 14, 2006. -16-

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50.

Despite actual knowledge that the Government was dissatisfied with the

reported consideration, none of the defendants ever notified Plaintiffs that there may be a problem with the amount of Stamp Duty owed on the sale. 51. Defendants intentionally failed to disclose that information to Plaintiffs

because the Defendants were still owed $12.5 million from Plaintiffs, payable in January 2007. 52. Had the Registrar alerted Emerald Cay, Ltd. of its belief that the Stamp

Duty had been underpaid prior to January 2007, Plaintiffs could simply have offset or withheld payment of all or part of the $12.5 million payable to Ital Swiss. 53. Instead, Plaintiffs are informed and believe that DiSilvestri, through his

reportedly close friendship with Minister of Finance Floyd Hall, Premier Misick, and his well-connected lawyers at Misick & Stanbrook, conspired with Morrone, Ital Swiss and Southaven to delay any mention of a Government challenge to the Stamp Duty valuation until after the remaining $12.5 million was paid to Ital Swiss in January 2007. 54. On or about January 14, 2007, the $12.5 million was paid to Ital Swiss

from Mr. Blixseths account at American Bank and from YCWs account at American bank by wire transfer. 55. On March 9, 2007, approximately six weeks after the $12.5 million had

been wired from accounts in the United States to Ital Swiss, Mark Knighton, Superintendent of the Financial Crimes Unit of the Turks and Caicos, contacted Mr. Blixseths lawyer in the Turks and Caicos and told him that certain Government Ministers had concerns about the possible underpayment of Stamp Duty. At that time, the only Government Minister having jurisdiction over Stamp Duty was DiSilvestris -17-

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close friend, Minister of Finance Floyd Hall. 56. On March 29, 2007, Mr. Blixseths lawyer hand-delivered a letter to

Premier Misick, outlining the terms of the purchase of Emerald Cay and was told that it would be taken care of. 57. There matters lay until January 22, 2008, when two Government

investigators again visited Mr. Blixseths lawyer, saying that Knightons earlier investigation had not been concluded satisfactorily. 58. Mr. Blixseth spoke with DiSilvestri regarding the Governments claim

that additional Stamp Duty was owed on or about January 22, 2008. At that time, DiSilvestri told Mr. Blixseth that he would call his friend, the Minister of Finance, Floyd Hall. 59. Once again, shortly after Mr. Blixseths conversation with DiSilvestri,

Premier Misick again stated to Mr. Blixseth that there was no issue regarding the Stamp Duty. 60. However, according to an investigation commissioned by Turks and

Caicos Governor Richard Tauwhare beginning on July 10, 2008 and completed in May 2009, it was determined that Turks and Caicos government had suffered widespread corruption during the time of the Emerald Cay transaction. The report, known as the Auld Report, described that, during this period, the corruption consisted of bribery by overseas developers to secure Crown Land on favorable terms, coupled with Government approval for its commercial development. According to the Auld report, the decline in the Government was also attributed to the power of politics in the mix of public decisionmaking and commercial activity and willingness of overseas developers and other -18-

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investors to exploit that power for their own purposes. The report also outlined evidence of possible corruption and/or other serious dishonesty in relation to five elected Cabinet Members: Premier Michael Misick, Deputy Premier and Minister of Finance Floyd Hall, McAllister Hanchell, Jeffery Hall and Lillian Boyce. The report called for a criminal investigation of these Cabinet Members. 61. On March 24, 2009, after trying and failing to block the investigation,

Misick resigned as Premier of Turks and Caicos and a criminal investigation of Misick and a number of cabinet members is ongoing. 62. On August 5, 2009, the Turks and Caicos Constitution was suspended and

the country became governed by the United Kingdom. 63. On June 15, 2010 almost four years after the sale of Emerald Cay, the

Turks and Caicos government notified Mr. Blixseth that the Government contended that the Sellers signed statement on the Transfer of Land was false. Mr. Blixseth became aware of this assertion this summer when he was notified by the Turk and Caicos government by letter. The London solicitors conducting this investigation claimed to have examined all of the documentation regarding the various components of the transaction and alleged that the true consideration paid for the Emerald Cay property subject to Stamp Duty was $28,000,000, rather than the $10,000,000 that DiSilvestri insisted be allocated as the sole taxable component, as stated and signed by the Seller under the August 14, 2006 Transfer Registration. 64. Although it was Mr. Blixseth's understanding from Defendants that the

Government had accepted the Seller's valuation of the real estate and the amount of Stamp Duty Tax paid at closing, the Turks and Caicos Attorney General filed a civil -19-

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complaint in or about June 2010 against Mr. Blixseth and Emerald Cay, Ltd in the Supreme Court of the Turks and Caicos Islands, Case No. CL 192/2010 (the Turks and Caicos Action), claiming that the Stamp Duty Tax of $975,000 actually paid (which was split 50/50 between the Buyer and Seller) was understated by $1,755,000, based on a valuation of $28,000,000, representing the total consideration of the components of the deal. The Turks and Caicos government also asserted a late payment penalty of $7,020,000. With the potential for governmental costs to be awarded, the potential liability was well over $9,000,000. 65. The Government asserted that the $10,000,000 value of the real estate

reported by Seller could not be relied upon because no formal valuation was conducted at the time of the transaction that would have verified that the $10,000,000 was the true value of the real estate component of the Emerald Cay transaction. On June 4, 2010, a "restriction" was filed on the Emerald Cay property for the claimed outstanding Stamp Duty obligation, making it impossible to sell the property without this dispute being resolved. 66. On or about June 20, 2011, the Turks and Caicos court granted partial

summary judgment against Emerald Cay, Ltd., among others, on liability for additional Stamp Duty and granted a partial interim judgment for $975,000, together with $282,883.56 in back interest on that amount, for an interim total of $1,257,883.56. The court left open for trial the actual additional amount of Stamp Duty and the amount of penalties and additional interest. 67. On January 30, 2012, judgment was entered against Worldwide and

Emerald Cay for the following: (1) $1,744, 128 in underpaid Stamp Duty, (2) $6,976,512 -20-

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in penalties for the underpayment and (3) $571,118 in interest, which continues to accrue at 6% per year. The total amount of the judgment as of January 30, 2012 was $9,291,758. 68. The claims against Mr. Blixseth and Mr. Hawes were not dismissed,

however, and remain pending. 69. The Government has filed a restriction on the property (similar to a lis

pendens) for the additional claimed Stamp Duty obligation. The judgment is a lien on Emerald Cay and the pending litigation has rendered Emerald Cay unsalable. 70. In addition to apparently under-reporting the amount of the sale of

Emerald Cay, on November 11, 2009, DiSilvestri fraudulently contended that part of the transaction included a Yellowstone Club World membership in exchange for a reduction in the purchase price for Emerald Cay. Although the Seller was Worldwide, DiSilvestri individually filed a Proof of Claim in the U.S. Bankruptcy Court, District of Montana, Case No. 09-60061-RBK, claiming that he was entitled to receive a $1,500,000 refund on a credit deposit given for a Yellowstone Club World membership in exchange for a reduction in the purchase price for Emerald Cay, even though the Seller in the Emerald Cay transaction was designated Worldwide Commercial Properties, Ltd. 71. However, a reduction in price in exchange for a credit deposit for a YCW

membership was never part of the deal for Emerald Cay. The claim also included $300,000 in additional damages for failing to refund the deposit. 72. For whatever reason, DiSilvestris claim was approved by the bankruptcy

trustee of YCW as part of a global settlement between the bankruptcy estate and Mr. Blixseth, which included other claims consisting of former members who had -21-

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legitimately made a deposit for a YCW membership. Payment of the settlement is secured against Emerald Cay in the form of a debenture to be paid out of the proceeds of the sale of the resort. As a result of DiSilvestris fraudulent claim, Mr. Blixseths settlement is $1,800,000 higher than it should have been, and if and when Emerald Cay is sold, DiSilvestri will receive a settlement payment that he is not entitled to receive. 73. Finally, in or about February 2012, Plaintiffs discovered for the very first

time that the Turks and Caicos Government believed that Defendants had intentionally under-reported the consideration received for the purchase of Emerald Cay on the day that the transfer was filed. Plaintiffs are informed and believe that diSilvestri knew of the challenge at that time, but conspired with the other Defendants and so-called friends in the Turks government to quash any inquiry into the underpayment of Stamp Duty until after DiSilvestri had received the second payment of $12.5 million in January 2007. VI. CLAIMS FOR RELIEF FIRST CAUSE OF ACTION (Civil RICO against All Defendants) 74. full. 75. Defendant ItalSwiss is an enterprise as that term is used in 18 U.S.C. Plaintiffs incorporate the previous allegations as though restated herein in

1962(c) through which the defendants conducted a pattern of racketeering activity, which engaged in, and whose activities affected, interstate commerce. The enterprise is an entity separate and apart from the pattern of racketeering alleged, and among other things, engaged in fraud, tax evasion, violations of the Travel Act and the Currency and -22-

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Foreign Transactions Reporting Act. Alternatively, the enterprise is the association in fact of the defendants for the purpose of 1962(c). 76. Defendants DiSilvestri, Morrone, Ital Swiss and Southaven are persons

as that term is used in 18 U.S.C. 1962(c). 77. The Defendants were employed by or associated with the enterprise and

participated, both directly and indirectly, in the conduct of the affairs of the enterprise. 78. Defendants have conspired to conduct and are conducting the affairs of

the enterprise, either directly or indirectly, through a pattern of racketeering activity, as defined in 18 U.S.C. 1961(5). The purpose of this racketeering activity has been to defraud the Plaintiffs through the conduct described herein, including the scheme to avoid payment of Stamp Duty and instead, force Plaintiffs to pay what amounts to millions of dollars instead of Defendants. 79. In furtherance of this scheme, each defendant, since 2005 and continuing

through the present, has conspired to commit and has committed two or more violations of 18 U.S.C. 152(4), 1341, 1343, the Travel Act, 18 U.S.C. 1952, the Currency and Foreign Transactions Reporting Act, 31 U.S.C. 5322(b) and the Foreign Corrupt Practices Act, 15 U.S.C. 78dd-1 et seq.. Further, as described herein, each has conspired to commit and has committed numerous acts of fraud. 80. The Defendants each committed at least two predicate acts in furtherance

of their scheme to defraud Plaintiffs, including the following. 81. On or about July 21, 2005, DiSilvstri, through his agent Gordon Kerr,

wrote to Mr. Blixseth soliciting the purchase of Emerald Cay, including in that letter, numerous false statements regarding the legality of the structure of the proposed sale of -23-

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Emerald Cay. 82. On May 1, 2006, DiSilvestri used the wires in furtherance of his scheme

to evade taxes in the United States and in the Turks and Caicos while saddling Plaintiffs with the Stamp Duty by calling Plaintiffs counsel and stating that his name could not appear anywhere on the documents for the purchase of Emerald Cay, but instead should be that of his wife, Morrone, and Ital Swiss. 83. On June 29, 2006, DiSilvestris lawyer and agent, Gordon Kerr, told

Plaintiffs counsel by email that they needed to take steps to lend credibility to the consultancy agreement between Yellowstone Club World in Los Angeles, California and Ital Swiss. 84. On July 12, 2006, DiSilvestri stated by email to Plaintiffs counsel that

nothing should pass through the United States. Plaintiffs are informed and believe that DiSilvestri did not want anything to pass through the United States to evade taxes in the United States and saddle Plaintiffs with any risk of additional Stamp Duty. 85. On July 13, 2006, DiSilvestri stated to Plaintiffs counsel in Oregon by

telephone that he wanted a side letter stating that he did not have to perform any consulting services to receive the post-closing $12.5 million. 86. On August 14, 2006, Morrone executed the Indemnity Agreement in

furtherance of the defendants scheme to defraud Plaintiffs, knowing that without such indemnity, Plaintiffs would not purchase Emerald Cay. 87. On or about January 17, 2007, DiSilvestri directed Mr. Blixseth on the

telephone to transfer by wire $12.5 million from Plaintiffs United States bank to an account in the Turks and Caicos in the name of Ital Swiss, ostensibly controlled by -24-

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Southaven and Morrone, knowing at the time that he was directing the money to be transferred, that the Government intended to seeks the payment of additional Stamp Duty. 88. Plaintiffs are informed and believe that Morrone and DiSilvestri

knowingly and intentionally failed to report the receipt of the $12.5 million payment from Plaintiffs to the United States in violation of 31 U.S.C. 5322(b). 89. In addition, and in furtherance of the enterprise, DiSilvestri and Morrone

knowingly violated the Travel Act, 18 U.S.C. 1952. In particular, Plaintiffs are informed and believe that Defendants were informed on or about August 14, 2006 that the Turks and Caicos government believed that there was a substantial underpayment of Stamp Duty and conspired together and in violation of the Foreign Corrupt Practices Act, 15 U.S.C. 78dd-1, between August 14, 2006 and at least May 2008 to pay government officials such as Minister of Finance Floyd Hall, to quash any investigation into the underpayment of Stamp Duty until after DiSilvestri and Morrone received the last payment of $12.5 million from Plaintiffs and that DiSilvestri traveled to Turks and Caicos in furtherance of the scheme. 90. Plaintiffs are further informed and believe that on or about April 15, 2008,

Defendants Morrone and DiSilvestri failed to report the income received from the Plaintiffs to the United States in violation of 26 U.S.C. 7201 et seq. in furtherance of the scheme to defraud the Plaintiffs and as a part of the racketeering activity. 91. On November 9, 2009, and in furtherance of the scheme to defraud

Plaintiffs, DiSilvestri filed a knowingly false Proof of Claim under penalty of perjury in In re Yellowstone Club World, United States Bankruptcy Court for the District of -25-

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Montana Case No. 09-60061, falsely claiming that he was entitled to $1.5 million as part of the sale of Emerald Cay to Plaintiffs, along with $300,000 in alleged damages in violation of 18 U.S.C. 152(4). 92. As a result of the conduct alleged herein, defendants, and each of them,

have violated and conspired together to violate the Racketeering Influenced and Corrupt Organizations Act, 18 U.S.C. 1962(c) and (d). 93. As a direct and proximate result of the Defendants violations of the RICO

Act, Plaintiffs have sustained and continue to sustain damages of over $28 million. Specifically, as a direct result of the scheme, Emerald Cay is valueless, encumbered by a tax lien of over $9.2 million and Mr. Blixseth cannot sell the property or use it for business. Since the Government first filed a Restriction on the property, Mr. Blixseth has lost several opportunities to sell Emerald Cay, specifically because of the Restriction. Moreover, he has suffered a loss of property in at least $9.2 million the amount of the judgment against the property and Worldwide Commercial Properties, Ltd. 94. From August 14, 2006 through approximately May 2010, Plaintiffs were

unaware of any issue regarding underpayment of Stamp Duty. The two times that the issue was raised, first in March 2007 and then in January 2008, the matter was apparently resolved to the Turks Governments satisfaction. Only when the action was commenced in the Turks and Caicos alleging underpayment were Plaintiffs aware of the problem. Moreover, not until February 2012 did Plaintiffs discover from Turks and Caicos criminal investigators that the Government had believed that there had been an underpayment of Stamp Duty on August 14, 2006 but that the investigation into the underpayment of Stamp Duty had been suppressed until after Defendants received the -26-

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second payment of $12.5 million.

SECOND CAUSE OF ACTION (Common Law Fraud Against Defendant DiSilvestri and Defendant Morrone) 95. 96. Plaintiffs incorporate the foregoing paragraphs as if restated herein in full. DiSilvestri described his relationship with Mr. Blixseth as very close,

and told Mr. Blixseths lawyer on May 1, 2006, for example, that there was no need to put certain agreements in writing due to that close relationship. 97. However, between February 6, 2006 and August 10, 2006, Defendants

DiSilvestri and Morrone and through their authorized agent, Gordon Kerr intentionally provided false, misleading and untrue statements to the Plaintiffs by telephone, in person and by email that: (1) a valuation was not needed, (2) that the taxable value of the Emerald Cay purchase was $10,000,000: and (3) that the other components of the Emerald Cay deal would be tax exempt under Turks and Caicos law. The Defendants knew or should have known that their stated taxable value of $10,000,000, without a verifiable appraisal of Emerald Cay, posed a significant risk to the Buyers and its shareholders. 98. In addition, on June 1, 2006, in a conversation with counsel for the

Plaintiffs in Oregon, DiSilvestri confirmed that the Consulting Agreement would not be subject to Stamp Duty in the Turks and Caicos. 99. Furthermore, Defendants intentionally failed to disclose, and to contrary,

conspired to conceal the fact that on August 14, 2006, the Turks and Caicos government believed that there was a significant underpayment of Stamp Duty. -27-

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100.

Additionally, DiSilvestri fraudulently stated that he was owed $1.5 million

from Yellowstone Club World on November 11, 2009, an amount that became part of a mortgage on Emerald Cay. 101. DiSilvestri also fraudulently represented to Mr. Blixseth by telephone in

or about February 2008 that there was no issue regarding underpayment of Stamp Duty, when, in fact, the only reason that the investigation was suppressed was, upon information and belief, through payments from the Defendants to Government officials. 102. Defendants DiSilvestri and Morrones false, misleading and untrue

statements were material in that they related to matters that would have been of importance or significance in the Buyers decision whether to participate in the Emerald Cay transaction at all. 103. In addition, as to the concealment of the Governments belief that there

was an underpayment of Stamp Duty, Plaintiffs had a right to offset any damages from the $12.5 million that was due to be paid in January 2007. By concealing the truth about the Turks governments belief that there was an underpayment of Stamp Duty, DiSilvestri and Morrone and Ital Swiss were able to pocket $12.5 million, from which any dispute over Stamp Duty could have been paid. 104. At the time Buyer entered into the Emerald Cay transaction and payment

of the money related to the purchase, Plaintiffs were not aware of the above-detailed untruths or omissions. 105. Defendants DiSilvestri and Morrone made the aforementioned false

representations, statements and omissions with knowledge of their falsity at the time they were made, or with the reckless disregard for the truth and the rights of Plaintiffs, -28-

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knowing and intending that Plaintiffs would rely on the represented validity of the Buyers' deal structure. 106. Plaintiffs actually, reasonably and justifiably relied to his detriment on the

material representations and omissions of Defendants DiSilvestri and Morrone in entering the transaction with the Seller, and that reliance has proximately caused the damages for which the Plaintiffs seek redress in this civil action. Specifically, the Government is now claiming that the Stamp Duty Tax based on DiSilvestri and Morrones valuation of the $10,000,000 was not backed by an independent appraisal and was less than the true value and that additional Stamp Duty Tax is owed by the Buyer in the amount of $1,775,000 plus late penalties and attorneys fees. In addition, by filing a "caution" on the property for the additional claimed Stamp Duty Tax obligation and by threatening to pursue foreclosure on the property to satisfy the additional Stamp Duty Tax obligation, the property has been rendered unsalable. 107. Had the Plaintiffs known the that the Defendants DiSilvestri and

Morrones stated taxable value of $10,000,000 carried with it significant risk of additional Stamp Duty Tax liability, including penalties and attorneys fees, the Plaintiffs would have insisted that an objective, third party valuation be obtained prior to closing and that the Stamp Duty Tax be paid based on that valuation. 108. As a direct and proximate result of the aforesaid fraudulent conduct of

Defendants DiSilvestri and Morrone, the Defendants have caused severe economic damages in an amount to be determined at trial but which damages are in excess of the $75,000 jurisdictional amount. 109. Plaintiffs first learned that the representations made to them by -29-

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Defendants were potentially fraudulent in or about May 2010, when the Turks government first filed the complaint against the Plaintiffs. However, not until July 2011 did the Plaintiffs discover that the alleged claims had any validity. Moreover, Plaintiffs did not discover that the Defendants had, on information and belief, suppressed any Government investigation of the underpayment of Stamp Duty until February 2012. THIRD CAUSE OF ACTION (Negligent Misrepresentation Against Defendant DiSilvestri and Defendant Morrone) 110. herein in full. 111. In the alternative, Defendants DiSilvestri and/or Morrone are liable to Plaintiffs reallege and incorporate the foregoing paragraphs as if restated

Plaintiffs because they made negligent misrepresentations that: (1) the taxable value of the Emerald Cay deal was $10,000,000:, (2) that the other components of the Emerald Cay deal would be tax exempt: and (3) that an independent appraisal verifying the stated value was not necessary. 112. Defendants DiSilvestri and/or Morrone are successful developers in the

Turks and Caicos and were familiar with the customs, rules and laws governing how business is conducted on the island, including but not limited to, the rules relating to assessment of Stamp Duty Tax. Mr. Blixseth and Mr. Hawes were not familiar with these laws and relied on DiSilvestri and Morrones business experience in approaching and completing the Emerald Cay transaction. 113. Defendants DiSilvestri and/or Morrone had a duty to Plaintiffs because

Defendants DiSilvestri and/or Morrone knew that the Plaintiff would rely on their -30-

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representations that the structure of the Turks and Caicos transaction in terms of the allocation of the taxable and non-taxable portions were proper under Turks and Caicos law, given their significant knowledge and represented expertise in those matters. 114. Plaintiffs actually, reasonably and justifiably relied to his detriment on the

material representations and omissions of Defendants DiSilvestri and Morrone in entering the transaction with the Seller, and that reliance proximately caused the damages for which the Plaintiffs seek redress in this civil action. The Government is now claiming that the Stamp Duty Tax based on DiSilvestri and Morrones valuation of the $10,000,000 was not backed by an independent appraisal and was less than the true value and that additional Stamp Duty Tax is owed by the Buyer in the amount of $1,775,000 plus late penalties and attorneys fees. In addition, as set forth above, the Government has filed a lien on the property for the additional claimed Stamp Duty Tax obligation. 115. Had the Plaintiffs known the that the Defendants DiSilvestri and

Morrones stated taxable value of $10,000,000 carried with it significant risk of additional Stamp Duty Tax liability, including penalties and attorneys fees, the Plaintiffs would have insisted that an objective, third party valuation be obtained prior to closing and that the Stamp Duty Tax be paid based on that valuation. 116. As a direct and proximate result of the aforesaid misrepresentations,

Defendants DiSilvestri and Morrone, the Defendants have caused severe economic damages in an amount to be determined at trial but which damages are in excess of the $75,000 jurisdictional amount. 117. Plaintiffs first learned that the representations made to them by

Defendants were potentially fraudulent in or about May 2010, when the Turks -31-

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government first filed the complaint against the Plaintiffs. However, not until July 2011 did the Plaintiffs discover that the alleged claims had any validity. Moreover, Plaintiffs did not discover that the Defendants had, on information and belief, suppressed any Government investigation of the underpayment of Stamp Duty until February 2012. FOURTH CAUSE OF ACTION (Indemnity Claim Against Morrone, DiSilvestri and Defendant Ital Swiss) 118. herein in full. 119. Morrone and Ital Swiss contractually agreed to indemnify Emerald Cay Ltd. Plaintiffs reallege and incorporate the foregoing paragraphs as if restated

arising out of any claims or activities of the Seller. The Sellers designation and representation on the Transfer document that $10,000,000 was the true taxable value constitutes a Seller activity on or before the sale of Emerald Cay. The Turks and Caicos claim for additional Stamp Duty Tax liability as against the Buyer is attributed to or is a result of the Sellers pre-closing/ closing activity. 120. In addition, defendants Morrone and Ital Swiss contractually agreed to

indemnify Plaintiffs for any breach of warranty, covenant or condition under the Sale and Purchase of Share Agreement dated July 31, 2006, and (3) any breach of warranty, covenant or condition under the Sale Agreement regarding the sale of the real property, Emerald Cay. The Sellers designation and representation on the Transfer document that $10,000,000 was the true taxable value and the Sellers underpayment of Stamp Tax Duty also violated the covenants in the Sale and Purchase of Share Agreement that the Seller will have no liabilities or taxes due on any property, including Emerald Cay. 121. Defendant DiSilvestri is a beneficial owner and alter ego of Ital Swiss and is -32-

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therefore liable under the Indemnity. 122. Finally, the Indemnity Agreement provides for the payment of all claims,

demands, causes of actions, damages, liabilities, costs and expenses howsoever arising from the matters covered by the Indemnity Agreement. 123. Plaintiffs have expended hundreds of thousands of dollars in attorneys fees

and costs in defending the Turks and Caicos Action, in addition to the damages incurred from the alleged underpayment of Stamp Duty Tax and penalties, for which Defendants Morrone and Ital Swiss are liable under the terms of the indemnity agreement. 124. On or about November 17, 2010, Plaintiff made demand upon Morrone and

Ital Swiss to indemnify Emerald Cay, Ltd for any and all liability it incurred as a result of the Sellers representation on the Transfer document that the $10,000,000 was the proper true taxable value of the real estate for Stamp Duty Tax purposes. 125. Despite this demand, Defendants Morrone and Ital Swiss deny they are

responsible for any additional Stamp Duty Tax liability that is now being sought by the Turks and Caicos government against Plaintiffs and have refused to defend Plaintiffs or cover any expenses for Plaintiffs defense. 126. As a direct and proximate result of Defendant Morrone and Defendant Ital

Swisss refusal to indemnify Emerald Cay, the Defendants DiSilvestri and Morrone, the Defendants have caused severe economic damages in an amount to be determined at trial but which damages are no less than $9.2 million. 127. Plaintiffs seek a declaration of rights under the Indemnity Agreement

declaring that Defendants Morrone, Ital Swiss and DiSilvestri owe full indemnification for all of Plaintiffs losses. -33-

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FIFTH CAUSE OF ACTION (Contribution) 128. Plaintiffs reallege and incorporate by reference the allegations in the

foregoing paragraphs as though restated here in full. 129. To the extent that Plaintiffs are liable for any portion of any additional

Stamp Tax and/or penalties, Defendants owe contribution to the Plaintiffs for not only all penalties, which are solely attributable to Defendants, but any additional Stamp Tax as well. SIXTH CAUSE OF ACTION (Breach of Contract) 130. Plaintiffs allege and incorporate by reference the allegations in the

foregoing paragraphs as though restated here in full. 131. The indemnity agreement between the parties required that the seller pay

50% of any Stamp Duty Tax. 132. In addition, the Indemnity Agreement required that Morrone and Ital

Swiss indemnify Plaintiffs for all breaches of warranty and representations made by Worldwide Commercial Properties, Ltd., through the transfer of shares in Worldwide Commercial Properties, Ltd. after the recording of the Transfer of Land. 133. An term of the contract between the parties was not only that the property

subject to Stamp Duty Tax would be properly declared by the seller and explicitly that, in the event that any additional Stamp Duty Tax was assessed, the seller would pay 50% of -34-

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the increased duty. 134. Defendants have breached their contract with Plaintiffs by among other

things, (1) knowingly filing a "Transfer of Land" with the Registrar of Lands on August 17, 2006 declaring that the value subject to Stamp Tax Duty was $10,000,000 and (2) failing to pay the increased Stamp Duty that has been assessed by the Turks and Caicos Government. 135. As a direct and proximate result of the Defendants' breach of contract,

Plaintiffs have suffered and continue to suffer in an amount to be determined at trial, but in no event less than $9.2 million in addition to attorneys fees. SEVENTH CAUSE OF ACTION (Breach of The Covenant Of Good Faith And Fair Dealing) 136. herein in full. 137. One of the key purposes of the Indemnity Agreement was to, among other Plaintiffs incorporate by reference the prior allegations as though set forth

things, provide protection to the Plaintiffs from violations of law, breaches of warranty or failure to comply with Turks and Caicos laws. In addition, the Indemnity Agreement was broadly worded to afford Plaintiffs maximum protection and ease of enforcement against Morrone and Ital Swiss, given that the Defendants would no longer have any assets in the Turks and Caicos against which to enforce any judgment on the Indemnity Agreement. 138. As alleged above, defendants Morrone, DiSilvestri and Ital Swiss have

failed and refused to discharge their contractual responsibilities under the terms of the Indemnity Agreement. 139. The Defendants failure and refusal was prompted not by an honest -35-

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mistake, bad judgment or negligence, but rather by a conscious and deliberate act. 140. The failure to discharge their contractual responsibilities unfairly

frustrates the agreed common purpose of the Indemnity Contract and disappoints the reasonable expectations of the Plaintiffs 141. As a direct and proximate result thereof, Defendants deprived Plaintiffs of

the benefits of the Indemnity Agreement, and have causes Plaintiffs to expend hundreds of thousands of dollars in attorneys fees defending actions by the Turks and Caicos government, in addition to the judgment itself. DEMAND FOR TRIAL BY JURY Plaintiffs demand a trial by jury on all claims so triable. /// /// /// /// /// /// /// /// /// /// /// /// /// -36-

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WHEREFORE, PLAINTIFFS PRAY FOR RELIEF AS FOLLOWS: 1. General damages in an amount to be determined by this Court but no less

than $9,291,758; 2. For indemnification of any amounts for which Plaintiffs become liable to

the Turks and Caicos Government; 3. 4. 5. For costs and reasonable attorney's fees; Treble damages pursuant to 18 U.S.C. 1964(c); Such other and further relief as this Court deems just and appropriate.

Respectfully submitted, this 9th day of March, 2012. /s/ Joshua Bleil ________________ Joshua Bleil Florida Bar No. 11759 JBleil@legalbrains.com THE TICKTIN LAW GROUP, P.A. 600 West Hillsboro Boulevard, Suite 220 Deerfield Beach, Florida 33441-1610 (954) 570-6757 Fax (954) 570-6760 and Philip H. Stillman, pro hac vice pstillman@stillmanassociates.com STILLMAN & ASSOCIATES 2540 Manchester Avenue Cardiff, California 92007 (888) 235-4279 Attorneys for Plaintiffs, Timothy Blixseth and Emerald Cay, Ltd.

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CERTIFICATE OF SERVICE I HEREBY CERTIFY that on March 9, 2012, I electronically filed the foregoing document with the Clerk of Court using CM/ECF. I also certify that the foregoing document is being served on this day on all counsel of record via transmission of Notices of Electronic Filing generated by CM/ECF on all counsel of record that have appeared in this action. /s/ Joshua Bleil, Esq.

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