Response Score Card

Page 1 of 14 – COMPLAINT TO DETERMINE THE NON- DISCHARGEABILITY OF DEBT AND TO OBJECT TO DISCHARGE

BLACK HELTERLINE LLP805 SW Broadway, Ste. 1900

Portland, OR 97205

Pg. 1 o(5f031) 4224-5560798467Case 14-04062-PBS Doc 1 Filed 02/20/14 Ent. 02/20/14 18:12:03

1 Hon. Paul B. SnyderChapter 7

2 Location: 500 W. 12th Street, 2nd FloorVancouver, Washington

3

4

5

6 UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF WASHINGTON

7 AT TACOMA

8 In re

9 Mark A.

Leonard, 10 Debtor.

Case No. 13-43836-PBS

Adv. Proc. No.

11Federal Deposit Insurance Corporation as

12 Receiver for Cowlitz Bank,

13 Plaintiff,v.

14Mark A. Leonard, an individual,

15Defendant.

16

COMPLAINT TO DETERMINE THE NON-DISCHARGEABILITY OF DEBT AND TO OBJECT TO DISCHARGE

17 For its Complaint against defendant Mark A. Leonard (“Leonard”), the

18 Federal Deposit Insurance Corporation, as Receiver for Cowlitz Bank (“FDIC”) alleges:

19 JURISDICTION AND VENUE

20 1. The court has jurisdiction over this adversary proceeding pursuant to Fed. R. 21

Bankr. P. 7001 and 28 U.S.C. §§ 157 and 1334.

22 2. The matters in controversy in this adversary proceeding arises under 11

23 U.S.C. §§ 523 and 727 and are core proceedings pursuant to 28 U.S.C. §§ 157(b)(2)(H) and

24 (b)(2)(J).



Portland, OR 97205


1 3. Venue in this district is proper pursuant to 28 U.S.C. § 1409.

2 DESCRIPTIONS OF THE PARTIES

3 4. The FDIC is an independent agency of the federal government. The FDIC

4 was appointed as receiver of Cowlitz Bank on July 20, 2010, after the institution failed and

5 was closed by the Washington Department of Financial Institutions.

6 5. Leonard is an individual residing in the State of Washington and the debtor in

7 the bankruptcy matter pending in the United States Bankruptcy Court District of Washington,

8 Case No. 13-43836-PBS (“Individual Bankruptcy”).

9 COMMON FACTUAL ALLEGATIONS

10 6. Cowlitz Bank obtained a judgment against Leonard for breach of obligations

11 under certain Commercial Guaranties on June 7, 2010 in Cowlitz County Superior Court,

12 Case No. 09-2-02188-1.

13 7. Pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act

14 of 1989 (“FIRREA”), the FDIC succeeded to all rights, titles, powers and privileges of

15 Cowlitz Bank upon appointment as receiver.

16 8. As of June 7, 2013, the date Leonard filed the Individual Bankruptcy, the

17 outstanding balance owed to the FDIC on account of the judgment was $938,670.44, as is

18 evidenced by the Proof of Claim on record in Case No. 13-43836-PBS as Claim No.1.

19 9. The Commercial Guaranties relate to a Promissory Note, Business Loan

20 Agreement, and Commercial Security Agreements entered into by Cowlitz Bank and Tytan

21 International, Inc. (“Tytan Int’l”) on April 10, 2006, subject to subsequent Modifications and

22 Extension Agreements.

23 10. At all relevant times, Leonard has acted as the President of Tytan Int’l, which

24 imports and sells Chinese tractors and tractor implements.



Portland, OR 97205


1 11. Pursuant to the Commercial Security Agreements and related Financing

2 Statements, the FDIC has a perfected security interest that extends to all Tytan Int’l’s

3 inventory, attachments and accessories, accessions, additions, replacements, substitutions,

4 records and proceeds related thereto, whether owned at the time of the grant of the security

5 interest or acquired thereafter, in addition to other items specifically set forth in the

6 Commercial Security Agreements (“Collateral”).

7 12. Tytan Int’l filed Chapter 7 bankruptcy in the United States Bankruptcy Court

8 District of Washington on November 7, 2013, as Case No. 13-46948-BDL (“Tytan

9 Bankruptcy”).

10 13. Leonard acted as the individual authorized to file the petition on behalf of

11 Tytan Int’l and declared under penalty of perjury that the information contained in the

12 petition, schedules and related statement of financial affairs was true and correct.

13 14. In or around June 2009, Leonard formed Tytan Holdings, Inc. (“Tytan

14 Holdings”). Tytan Holdings is denominated as a “penny stock” and is in listed on the Over

15 The Counter (“OTC”) Bulletin Board under the symbol TYTN PK.

16 15. According to the published OTC Bulletin issued for Tytan Holdings in

17 January 2013, Tytan Holdings acts as the holding company for Tytan Int’l, its wholly owned

18 subsidiary that generates revenue through the sale of tractors and tractor implements.

19 16. At the time Tytan Holdings acquired Tytan Int’l in or around December 2009,

20 Leonard was the sole shareholder of Tytan Int’l.

21 17. Leonard now acts as the controlling stockholder of Tytan Holdings, by virtue

22 of his majority ownership (500,000 of the 1,000,000 shares) of the Preferred Series A stock.

23 18. At all relevant times, Leonard has served as Chief Executive Officer and

24 Chairman of the Board of Tytan Holdings.



Portland, OR 97205


1 19. At all relevant times, Tytan Int’l and Tytan Holdings have been headquartered

2 at 5225 Meeker Drive, Kalama, Washington 98625 (“Commercial Property”).

3 20. As Chief Executive Officer of Tytan Holdings, Leonard issued Annual

4 Reports and Consolidated Financial Statements for 2009, 2010, 2011 and 2012. (Denies)

5 21. The Consolidated Financial Statement for the year of 2011 included a

6 statement that Tytan Int’l and/or Tytan Holdings has assets of 1.8 million dollars in inventory

7 and $230,242 in accounts receivable.

8 22. As Chief Executive Officer of Tytan Holdings, Leonard executed each

9 Consolidated Financial Statement and certified that such disclosures did not contain any

10 untrue statement of material fact or omit to state any material fact. (Denies)

11 23. Beginning in February 2011, Tytan Holdings engaged in a series of

12 exchanges under Rule 504 of Regulation D, as promulgated under the Securities Act of 1933

13 (“504 Exchanges”) in which Tytan Holdings sold approximately 600,000,000 shares of its

14 Common Stock to E-Lionheart and Associates, LLC, Fairhills Capital1 and TJ Management,

15 LLC. (NEI)

16 24. According to the multiple Resolutions to authorize the 504 Exchanges issued

17 by Leonard as Chief Executive Officer of Tytan Holdings, the funds raised in the 504

18 Exchanges were to be used for the purpose of enabling Tytan Holdings to develop and

19 expand its business.

20 25. The Resolutions to authorize the 504 Exchanges were issued by Leonard

21 under the pretense of having obtained the unanimous written consent of Tytan Holdings’

22 Board of Directors. (Denies)

23

241 E-Lionheart and Associates, LLC and Fairhills Capital have since been sued by the U.S. Securities and



Portland, OR 97205


Exchange Commission in the U.S. District Court for the Southern District of New York for violating theregistration provisions of the Securities Act of 1933.



Portland, OR 97205


1 26. According to Leonard’s sworn testimony at 341(a) hearings conducted in both

2 the Individual and Tytan Bankruptcies, as well as a subsequent 2004 Examination conducted

3 on December 20, 2013, Tytan Holdings received only $400,000 from the 504 Exchanges.

4 27. According to Leonard’s sworn testimony at the same 341(a) hearings and the

5 2004 Examination, the capital generated from the 504 Exchanges was exclusively used to

6 pay down corporate debt and purchase new inventory.

7 28. According to the 2011 Annual Report and Consolidated Financial Statement

8 filed by Tytan Holdings, it raised over $900,000 from the 504 Exchanges and the funds used

9 to purchase new inventory, increasing Tytan Holdings and/or Tytan Int’l’s assets by 27.9%,

10 from $1,914,572 in 2011 to $2,447,928. (Does Not Address)

11 29. According to the Pacific Continental Bank statements subpoenaed by the

12 FDIC, approximately $725,000 from the 504 Exchanges was deposited directly into Tytan

13 Holding and Tytan Int’l bank accounts in 2011. According to the same bank statements,

14 Leonard used a portion of the funds to fund his personal expenses.(NEI)

15 30. According to the Pacific Continental Bank statements subpoenaed by the

16 FDIC, a large portion of the funds generated from the 504 Exchanges was subsequently

17 wired to various manufacturing trading companies in China.

18 31. According to Leonard’s sworn testimony at the 341(a) hearings and the 2004

19 Examination, Tytan Int’l stopped operating business on or around November 7, 2013, the

20 date it filed bankruptcy.

21 32. According to Leonard’s sworn testimony at the same 341(a) hearings and

22 2004 Examination, all remaining assets of Tytan Int’l subject to the FDIC’s security interest

23 are properly accounted for on the schedules in the Tytan Bankruptcy and are currently stored

24 at the Commercial Property.



Portland, OR 97205


1 33. The FDIC conducted an appraisal of the remaining inventory on

2 January 4, 2014, which shows a value of only $157,100. Of that value, approximately

3 $26,000 of the inventory is subject to a purchase money security interest in favor of GE

4 Commercial Distribution Finance Corporation. (NEI)

5 34. Despite requests, Leonard has failed to provide adequate invoices or receipts

6 which evidence the disposition of the FDIC’s Collateral.

7 35. Leonard has failed to sufficiently account for the discrepancy in the amount of

8 inventory listed on the schedules in the Tytan Bankruptcy and the Annual Report and

9 Consolidated Financial Statements. (NEI)

10 36. Despite giving sworn testimony to the contrary, Leonard has in fact concealed

11 and subsequently transferred a portion of the FDIC’s Collateral to a business located in

12 Chehalis, Washington known as Southwest Tractors. (Denies)

13 37. As recently as November 2013 and January 2014, Leonard has imported

14 equipment from China under the name of the Truper Corporation (“Truper Corp.”), an entity

15 owned and operated by Leonard, with specific instructions that deliveries be made to

16 Southwest Tractors located in Chehalis, Washington. (Denies)

17 38. According to Leonard’s sworn testimony at the 341(a) hearings and 2004

18 Examination, the Truper Corp. has no bank accounts, no assets and does not conduct

19 business. (NEI)

20 39. According to documents subpoenaed by the FDIC, Leonard has stated to third

21 parties that the Truper Corp actively acts as an agent and importer for tractor dealers,

22 including Tytan Int’l and Southwest Tractors.

23 .(Denies) . . . . .

24 . . . . . .



Portland, OR 97205


1 40. At all relevant times, Leonard commingled funds and assets of Tytan

2 Holdings and Tytan Int’l with his own affairs and has treated corporate assets as his own,

3 including without limitation his personal consumption of funds from the 504 Exchanges. (Denies)

4 41. At all relevant times, Leonard, as President and Chief Executive Officer of

5 Tytan Holdings, has failed to maintain adequate corporate minutes or records for Tytan

6 Holdings or Tytan Int’l and has disregarded required corporate formalities. (Denies)

7 42. At all relevant times, Leonard has further failed to adequately disclose and

8 testified falsely as to the current state of assets, liabilities and related business affairs in both

9 the Individual and Tytan Bankruptcies, including without limitation, his ownership of a

10 house subject to a governmental ground lease near Hermisillo, Mexico, ownership of

11 significant antique firearms, financial transactions involving his two daughters, Heather S.

12 Jaeger and Holly A. King, and an alleged security interest granted to China National United

13 Equipment Co. (Denies)

14 43. Leonard submitted an Affidavit of Financial Condition (“Affidavit”) to the

15 FDIC in May 10, 2011, in connection with an attempt to settle litigation in Cowlitz County

16 Superior Court involving Tytan Int’l (Case No. 10-2-01361-1) collection of the judgment on

17 the Commercial Guaranties.

18 44. The Affidavit contains representations regarding Leonard’s income, assets and

19 financial condition which were materially false when made. The Affidavit also includes as

20 exhibits the 2009 and 2010 Consolidated Financial Statements for Tytan Holdings which

21 further contain materially false

information. 22 . . . . . .

23 . . . . . .

24 . . . . . .



Portland, OR 97205


1 FIRST CLAIM FOR RELIEF

2 (Alter Ego)

3 45. The FDIC incorporates the allegations and assertions of fact in paragraphs 1 –

4 44 set forth above, as if fully set forth herein.

5 46. Leonard is the controlling owner of Tytan Holdings, of which Tytan Int’l is a

6 wholly owned subsidiary.

7 47. At all relevant times, Leonard has dominated and controlled Tytan Holdings

8 and Tytan Int’l for his own personal gain. (Denies)

9 48. At all relevant times, Leonard has engaged in the unauthorized diversion of

10 corporate funds for other than corporate purposes and has abused the protections provided by

11 the corporate form. (Denies)

12 49. The corporate entities and Leonard are one and the same so that Leonard’s

13 conduct relating to the business operations of Tytan Holdings and/or Tytan Int’l, including

14 without limitation the disposition of corporate assets, should be considered one and the same.

(15 (Denies)CLAIMS FOR RELIEF RELATED TO OBJECTION TO DISCHARGE

16SECOND CLAIM FOR RELIEF

1711 U.S.C. § 523(a)(2)(A)

18(False Pretense, False Representation, Actual Fraud)

19 50. The FDIC incorporates the allegations and assertions of fact in paragraphs 1 –20 49 set forth above, as if fully set forth herein.21 51. Leonard fraudulently omitted and engaged in deceptive conduct when, on22 behalf of Tytan Int’l, he sought credit, renewals, refinancing and forbearance from both23 Cowlitz Bank and the FDIC. 24 (Denies)



Portland, OR 97205


1 52. Leonard misrepresented, fraudulently omitted, and engaged in deceptive

2 conduct when he entered into the Commercial Guaranties and subsequent negotiations with

3 Cowlitz Bank and the FDIC. (Denies)

4 53. Leonard had knowledge of the falsity or deceptiveness of his statements and

5 conduct. In the alternative, Leonard’s course of conduct demonstrates a reckless indifference

6 to the truth or falsity of his statements. (Denies)

7 54. The totality of the circumstances and conduct of Leonard demonstrate that he

8 had every intent to deceive Cowlitz Bank and later, the FDIC (Denies)

9 55. Cowlitz Bank and the FDIC justifiably relied on Leonard’s representations. (NEI)

10 56. The FDIC has suffered damage as the proximate result of its and Cowlitz

11 Bank’s reliance on Mr. Leonard’s representations.

12 THIRD CLAIM FOR RELIEF

13 11 U.S.C. § 523(a)(2)(B)

14 (False Financial Statement)



17 58. The financial statements submitted to Cowlitz Bank by Leonard during its

18 course of its dealings with Leonard and Tytan Int’l were materially false at the time such

19 documents were made. (Denies)

20 59. The Affidavit Leonard submitted to the FDIC on May 9, 2011 was materially

21 false at the time it was made. (NEI)

22 60. Leonard knew the statements were false at the time he executed the related

23 statements.

24 . . . . . .



Portland, OR 97205

Pg. 10 (o50f31) 2424-5560798467Case 14-04062-PBS Doc 1 Filed 02/20/14 Ent. 02/20/14 18:12:03

1 61. Leonard caused the financial statements and Affidavit to be made with the

2 intent to deceive Cowlitz Bank and the FDIC. (Denies)

3 62. Cowlitz Bank and the FDIC reasonably relied on the financial statements and

4 Affidavit.

5 63. The FDIC has suffered damage as the proximate result of its and Cowlitz

6 Bank’s reliance on false financial statements issued by Leonard. (NEI for 62 & 63)

7 FOURTH CLAIM FOR RELIEF

8 11 U.S.C. § 523(a)(6)

9 (Malicious and Willful Injury)



12 65. In concealing, transporting and disposing of the FDIC’s Collateral, Leonard

13 had the specific and deliberate intention of causing harm to the FDIC.

14 66. Leonard has disposed and concealed the FDIC’s Collateral with the specific

15 knowledge that the disposition would invariably and indubitably cause harm to the FDIC.

16 67. Leonard has acted willfully and maliciously with the intent to improperly use

17 the FDIC’s Collateral and/or its proceeds for purposes other than payment of the debt secured

18 by the Collateral.

19 68. Leonard has purposefully inflicted the injury or acted with substantial

20 certainty that injury would result from his conduct.

21 69. Leonard’s action are wrongful and without just cause or excuse. 22

. . . . . .

23 . . . . . .

24 . . . . . .



Portland, OR 97205


1 CLAIMS FOR RELIEF RELATED TO DENIAL OF DISCHARGE

2 FIFTH CLAIM FOR RELIEF

3 11 U.S.C. § 727(a)(2)(A)

4 (Pre-Petition Transfer and Concealment of Assets)



7 71. Within one year before the date of the filing of the petition in the Individual

8 Bankruptcy, Leonard, in his capacity as the alter ego of Tytan Holdings and Tytan Int’l, has

9 with the intent to hinder, delay, or defraud the FDIC transferred, removed, destroyed,

10 mutilated, or concealed or has permitted to be transferred, removed, destroyed, mutilated or

11 concealed, property of Tytan Int’l subject to the FDIC’s security interest

12 72. Within the year prior to filing the Individual Bankruptcy, Leonard has with

13 the intent to hinder, delay, or defraud his creditors transferred, removed, destroyed,

14 mutilated, or concealed or has permitted to be transferred removed, destroyed, mutilated or

15 concealed his property.

16 SIXTH CLAIM FOR RELIEF

17 11 U.S.C. § 727(a)(2)(B)

18 (Post-Petition Transfer and Concealment of Assets)



21 74. Since the filing of the Individual Bankruptcy, Leonard, in his capacity as the

22 alter ego of Tytan Holdings and Tytan Int’l, has with the intent to hinder, delay or defraud

23 the FDIC transferred, removed, destroyed or concealed or has permitted to be transferred,

24 removed, destroyed or concealed, property of the bankruptcy estate of Tytan Int’l.



Portland, OR 97205


1 75. Since the filing of the Individual Bankruptcy, Leonard has with the intent to

2 hinder, delay or defraud his creditors transferred, removed, destroyed, or concealed or has

3 permitted to be transferred, removed, destroyed or concealed his own property.

4 SEVENTH CLAIM FOR RELIEF

5 11 U.S.C. § 727(a)(3)

6 (Failure to Preserve Records)



9 77. Leonard, both in his individual capacity and in the capacity as the alter ego of

10 Tytan Holdings and Tytan Int’l, has concealed, destroyed, mutilated, falsified and failed to

11 keep and preserve recorded information, including books, documents, records, and papers,

12 from which to ascertain his, Tytan Int’l’s and Tytan Holdings financial condition and

13 business transactions without justification.

14 EIGHT CLAIM FOR RELIEF

15 11 U.S.C. § 727(a)(4)

16 (False Oath)



19 79. Leonard has knowingly and fraudulently, in or in connection with the

20 Individual Bankruptcy and Tytan Bankruptcy, made false oaths and accounts, including

21 without limitation his failure to disclose assets and liabilities on bankruptcy schedules signed

22 under penalty of perjury and false sworn testimony the 341 (a) hearings and 2004

23 Examination.

24 80. The oaths relate to a material facts.



Portland, OR 97205


1 81. The oaths were made knowingly.

2 82. The oaths were made with the specific purpose of perpetrating a fraud.

3 NINTH CLAIM FOR RELIEF

4 11 U.S.C. § 727(a)(5)

5 (Failure to Explain Loss or Deficiency)



8 84. According to the Consolidated Financial Statements issued by Leonard on

9 behalf of Tytan Int’l and Tytan Holdings, there existed $1.8 million in inventory and

10 $230,242 of accounts receivable at the end of 2011, both subject to the FDIC’s security

11 interest.

12 85. Leonard, in the capacity as the alter ego of Tytan Holdings and Tytan Int’l,

13 has failed to explain satisfactorily the loss and deficiency of the FDIC’s Collateral.

14 TENTH CLAIM FOR RELIEF

15 Fed. R. Bankr. P. 7008(b)

16 (Attorney’s Fees)

17 86. FDIC incorporates the allegations and assertions of fact in paragraphs 1 – 85

18 set forth above, as if fully set forth herein.

19 87. The Promissory Note, Business Loan Agreement, Commercial Security

20 Agreements and Commercial Guaranties provide for the recovery of attorney’s fees in any

21 enforcement activity or collection, including bankruptcy proceedings.

22 88. The FDIC has incurred and continues to incur attorney’s fees and costs with

23 respect to the enforcement of terms and provision set forth in the Promissory Note, Business

24 Loan Agreement, Commercial Security Agreements and Commercial Guaranties.



Portland, OR 97205


1 WHEREFORE, the FDIC prays for the following relief:

2 A. Judgment in favor of the FDIC on its claim against Leonard in an amount to

3 be determined at trial, but currently estimated to be $938,670.44, plus interest thereon;

4 B. Judgment declaring that the claims made by the FDIC against Leonard are

5 nondischargeable pursuant to 11 U.S.C. §§ 523(a)(2)(A) and (B) and 523(a)(6);

6 C. Judgment denying Leonard’s discharge pursuant to 11 U.S.C. §§ 727 7

(a)(2)(A) and (a)(2)(B), 727(a)(3), 727(a)(4) and 727(a)(5).

8 D. An award of all reasonable collection fees including but not limited to

9 attorney’s fees, costs of litigation and all court costs to the extent allowed by law;

10 E. Any other relief deemed just, equitable or appropriate under the

11 circumstances.

12

13

DATED this 20th day of February, 2014.

BLACK HELTERLINE LLP

14

15 By: /s/ Britta E. Warren Britta E. Warren, WSBA No. 43329

16 [email protected]: (503) 224-6148

17 Of Attorneys for Federal Deposit InsuranceCorporation as Receiver for Cowlitz Bank

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Response Score Card