ORIGINAL | IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE Inte: ) CHAPTER 11 ) PITT PENN HOLDING CO., INC., ef al. i a Case No. 09-11475 (BLS) } Gointly Administered) Debtors. ) SSS ) Industrial Enterprises of America, Inc., ) ) Plaintiff, ) Adv. Proc. No. 09-52316 (BLS) v. ) ) Brandywine Consultants and ) Randall H. Rosenthal, ) Defendants.) —________) AMENDED COMPLAINT? Plaintiff Industrial Enterprises of America, Inc., fik/a Advanced Bio/Chem, Inc. ("IEAM") for its complaint alleges, upon information and belief: INTRODUCTION 1. This adversary action arises out of the Defendants Randall Rosenthal’s and Brandywine Consultants’ participation in a fraudulent scheme whereby Rosenthal, acting in concert with two of IEAM’s officers, John Mazzuto and James Margulies, illegitimately issued millions of shares of stock and defrauded IEAM, its creditors and investors. "The debtors are: Pitt Penn Holding Co. (Case No. 09-11475), Pitt Penn Oil Co. LLC (Case No. 09-1476), Industrial Enterprises of America, Inc. (Case No. 09-11508), EMC Packaging, Inc. (Case No. 09-1524), Today’s ‘Way Manufacturing LLC (Case No. 09-1586), and Unifide Industries LLC (Case No. 09-11587), all of which have been jointly administered. ? Plaintiff files this Amended Complaint per this Court's order dated May 11, 2010 dismissing the within adversary proceeding without prejudice. In this Amended Complaint, Plaintiff joins Randall H. Rosenthal as a co-defendant, against whom a separate action is pending at Adv. No. 09-52318. In the interest of judicial economy, Plaintiff intends to file a motion to consolidate the two adversary proceedings as the claims against co-defendants arise from the same set of facts and circumstances and the amended complaints filed in both cases are identical nt Compt ty & oth tre. DOCK a4)At the heart of the scheme was IEAM’s Form S-8 registration which permitted the company to i sue shares exclusively pursuant to an employee benefits plan. In violation of securities laws and as part of their fraud, Rosenthal, and his company, Brandywine Consultants (“Brandywine”) with Mazzuto and Margulies, participated in a scheme whereby millions of IEAM shares were illegally issued under the S-8 in violation of the securities laws. ‘These illegal shares were issued to various recipients, including themselves, and sold for tens of millions of dollars. ‘The illicit proceeds were either kept by these individuals or wired back to IEAM to be fraudulently booked as revenue, 3. As part of this scheme, Rosenthal and Brandywine received illegally issued shares. and sold them on the open market knowing that the shares were illegally issued. Rosenthal personally received in excess of $2,650,000 and the entity he controlled, Brandywine, received in excess of $6,600,000 for the sale of illegally issued IEAM stock. During the relevant time period Rosenthal never provided IEAM with any services, either directly or through Brandywine. All shares issued to Rosenthal and Brandywine pursuant to the 8-8 were improper and illegal. 4, Margulies and Mazzuto have been arrested and indicted for their roles in the fraud perpetrated on IEAM, its creditors and its investors. The fifty-seven count Indictment is attached as Exhibit 1. The Indictment includes allegations concerning “Co-Conspirator #1.” Upon information and belief, Rosenthal is the unindicted Co-Conspirator #1. By this action the Debtors seek to recover from Rosenthal and Brandywine the unlawful benefits they obtained by defrauding the Debtors, their creditors and IEAM investors. “Amended Complaint (Brandywine & Rosenthal adversaries) 2PARTIES 5. Plaintiff IEAM is a corporation with an office at 651 Holiday Drive, Suite 300, Pittsburgh, Pennsylvania 15220, Robert Renck was appointed its CEO and President on April 30, 2009. 6. Defendant Randall H. Rosenthal ("Rosenthal") is an individual residing at 3550 Lander Road, #160 Cleveland, Ohio 44124, During at least some of the relevant time period, Rosenthal was a paralegal employed by James Margulies. 7. Defendant Brandywine Consultants (“Brandywine”) is a corporation with its place of business at 3550 Lander Road, #160 Cleveland, Ohio 44124. Rosenthal is the sole principal of Brandywine Consultants, Inc. SURISDICTION AND VENUE 8. On May 1, 2009 ("Petition Date") IEAM filed a voluntary petition pursuant to Chapter 11 of the Bankruptcy Code. 9. Since the Petition Date, IEAM has continued in possession and the management of its business as debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code. 10. This Honorable Court has jurisdiction over these proceedings pursuant to 28 US.C. §§ 157 on 1334, 11, This proceeding constitutes a core proceeding pursuant to 28 U.S.C. § 157. 12, Venue is proper in this Court pursuant to 28 U.S.C. § 1409. FACTUAL BACKGROUND The Scheme 13. In 2004 IEAM promulgated its 2004 Stock Option Plan ("Plan"). Amended Complaint (Brandywine & Rosenthal adversaries) 314. On or about January 25, 2005 IEAM filed with the United States Securities and Exchange Commission a form S-8 registration statement for the Plan pursuant to the Securities Act of 1933. 15. The Plan provided for the issuance of restricted shares to Employees, Outside Directors and Consultants. Any issuance of shares outside of the terms of the Plan would be a violation of the securities law. 16. The illegal issuance of shares to Rosenthal and Brandywine began each time with a letter signed by either Mazzuto or Margulies authorizing IEAM’s transfer agent, Computershare Trust Co., to issue IEAM stock under the $-8. At all times, Mazzuto, Margulies, Rosenthal knew the issuance of these shares was illegal 17. Between January 24, 2005 and June 22, 2007 Mazzuto and/or Margulies improperly caused to be issued to Rosenthal a total of 490,050 post reverse split shares of IEAM stock purportedly pursuant to the Plan? Specifically: © On or about January 24, 2005, Mazzuto signed and caused to be sent an authorization of the issuance of 450,000 shares (45,000 post-reverse split shares) to Rosenthal. * On or about May 26, 2006, Margulies signed and caused to be sent an authorization of the issuance of 600,000 shares (60,000 post-reverse split shares) 0 Rosenthal. © On or about July 10, 2006 Margulies signed and caused to be sent an authorization of the issuance of 36,000 shares to Rosenthal. > TEAM caused its stock to be reversed split, issuing | share for every 10 shares effective June 5, 2006, Amended Complaint (Brandywine & Rosenthal siversaries) 418. caused to be issued to Brandywine a total of 1.2 million post reverse split shares of IEAM stock On or about October 12, 2006 Margulies signed and caused to be authorization of the issuance of 30,000 shares to Rosenthal, On or about November 7, 2006 Margulies signed and caused to be authorization of the issuance of 30,000 shares to Rosenthal. On or about November 29, 2006 Margulies signed and caused to be authorization of the issuance of 30,000 shares to Rosenthal. On or about December 18, 2006 Margulies signed and caused to be authorization of the issuance of 50,000 shares to Rosenthal. On or about February 20, 2007 Margulies signed and caused to be authorization of the issuance of 14,050 shares to Rosenthal, On or about February 28, 2007 Margulies signed and caused to be authorization of the issuance of 40,000 shares to Rosenthal. On or about June 21, 2007 Margulies signed and caused to be authorization of the issuance of 100,000 shares to Rosenthal. Between April 2007 and August 2007 Mazzuto and/or Margulies improperly purportedly pursuant to the Plan. Specifically: On or about April 26, 2007, Margulies signed and caused to be authorization of the issuance of 800,000 shares to Rosenthal’s company Brandywine. On or about July 3, 2007, Margulies signed and caused to be sent an authorization of the issuance of 100,000 shares to Rosenthal’s company Brandywine. ‘Amended Complaint (Brandywine & Rosenthal aversares) 5 sent sent sent sent sent sent sent sent an© On or about August 17, 2007, Margulies signed and caused to be sent an authorization of the issuance of 300,000 shares to Rosenthal’s company Brandywine. 19, True and correct copies of the letters to Computershare directing issuance of the shares to Rosenthal and Brandywine are attached hereto and included herein by reference as Exhibit 2. 20. IEAM could not legitimately issue those shares to Rosenthal and Brandywine because neither were an employee of, an outside director of or consultant to, IEAM. 21. — Moreover, although the Plan provided solely for the issuance of restricted stock the stock which was improperly issued to Rosenthal and Brandywine were freely trading shares. 22. Shortly after he and Brandywine received them, Rosenthal sold such shares to the public in violation of the Securities Act of 1933. 23. Rosenthal received in excess of $2,650,000 for the sale of such shares of stock. 24. Brandywine received in excess of $6,600,000 for the sale of such shares of stock, 25. Rosenthal was a knowing participant in Margulies and Mazzuto’s fraudulent scheme, Neither he nor Brandywine ever performed any service for IEAM and Rosenthal knew there was no legitimate basis for IEAM to issue to him and his company Brandywine shares worth over $9 million, 26. Also as part of the fraudulent scheme, Rosenthal and Margulies orchestrated a purported “Settlement Agreement” between Brandywine and IEAM, which includes a release of Brandywine and Rosenthal from all claims. ‘The “Settlement Agreement” is void and invalid, ‘Margulies had no authority to enter into a settlement agreement with Rosenthal and Brandywine, TEAM did not enter into the agreement, IEAM has never ratified the purported settlement ‘Amended Compisint (Brandywine & Rosenthal aversares) 6