Civil Complaint Exhibit — United States v. McCown (D. Wyo., Dkt. 26-1)
Summary
A Complaint and Request for Immediate Injunctive Relief filed by R Squared, Inc. against Paul D. McCown and McCown Enterprises, LLC in the District of Wyoming, attached as Document 26-1 in United States v. McCown, No. 22-cr-00023-SWS, and bearing a 06/22/21 filing stamp. R Squared alleges a scheme to defraud it out of 15 million by presenting falsified financial documentation, including forged bank statements, and alleges that most of the loan proceeds were transferred within hours or minutes. It states that jurisdiction rests on 28 U.S.C. § 1332 and that the amount in controversy exceeds $75,000.00. It describes the parties' relationship, a March 2021 call and a May 5, 2021 request for a loan.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Cite this document
“Civil Complaint Exhibit — United States v. McCown (D. Wyo., Dkt. 26-1).”
Original at archive.org. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/court-filing-usa-v-mccown-dkt-26-d-wyo-12b17c9921/
, SHA-256 38521146f5fe7a397ec375ac6cc1e3af1ad39bb62dabb62aca1c92b39dda4999.Full text
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Stuart R. Day, WSB# 5-2244, sday@.\\pdn.net 20ZIJU,\!22 PMfj:OIj
Rvan T. Schwartz. WSB# 6-3611. rschwartz®\\T)dn.net a
Ryan L. Ford, WSB# 7-4667, ■■forHfflrvpdn.n^r' •'WK.R,..o.p BOj
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WIL] .L\MS, POR'l-RR, D/W & Ni'VIlJ.Ii, P.C.
PO Box 10700
Casper, WY 82602
(307) 265-0700
(307) 266-2306 (facsimile)
Steven R. Popofsky, SPopofskv@kkwc.com
Pamela A. Frederick, PFredcfick@,kkwc.com
Kl.F.INBI'RC;, IC\PL.\N, WOLI-I' & COMEN, P.C.
500 Fifth Avenue
New York, NY 10110
(212) 880-9882
(212) 986-8866 (facsimile)
Admission pending
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF WYOMING
RL\ R SQUARED, INC.,
a Delaware corporation,
Plaintiff
V. Case No.
liCAllV^'S
PAUL D. MCCOWN, and
MCCOWN ENTERPRISES, LLC,
Defendants
COMPLAINT AND
REQUEST FOR IMMEDIATE INJUNCTIVE RELIEF
Plaintiff, Ria R Squared, Inc. ("R Squared"), by and through undersigned counsel, states
and alleges as follows for its Complaint and Kequest for Immediate Injunctive Pelief against
Defendants in the above-captioned matter:
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NATURE OF THE ACTION
1. This is the stoty of a complex, calculated, methodical and fraudulent scheme,
orchestrated by an individual holding a trusted and respected position with the Wyoming
Catholic College, to defraud R Squared out of the sum of S15 million.
2. Mr. Paul D. McCown, both individually and as the Managing Member and/or
sole interest holder of McCown Enterprises, LLC ("Enterprises"), intentionally and
deliberately falsified financial documentation to present himself to R Squared as an accredited
investor worth over S750 million dollars. Based upon those representations, including forged
bank statements and impersonating a bank officer, R Squared lent ^15 million to Enterprises.
3. Mr. McCown,through his then-counsel, subsequendy denied any knowledge of
the loan or loan documents, notwithstanding that he executed same, had them notarized by
an employee of his employer, Wyoming Cathohc College, and immediately transferred most
of the loan proceeds within hours or minutes of receiving them. The falsity, and the great
lengths Mr. McCown took to exact his plan, became known only days after funding the loan.
Regrettably, the vast majority of the funds have now been disseminated to various entities and
individuals affiliated with Mr. McCown,including his family members and his employer. But
almost a million dollars of the funds were not (as far as plaintiff knows) distributed by Mr.
Mc(^own,and of the funds distributed, the whereabouts of millions of dollars remain not fully
known.
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4. R Squared seeks the Court's assistance to halt the dissipation of Mr. McCown's
dwindling assets, including some of the fraudulently obtained funds, and to regain its loss and
recover its damages.
THE PARTIES
5. Plaintiff, Ria R Squared, Inc., is a registered Delaware Corporation, in good
standing, primarily conducting business out of New York City, New York.
6. Defendant Paul D. McCown is a resident of Lander, Fremont County,
Wyoming. Mr. McCown's last known address is 10 Red Rim Road; Lander, Fremont Count)',
Wyoming.
7. Defendant McCown Enterprises, LLC, is a registered Wyoming Limited
Liabilit)' Company of which Mr. McCown is its sole member. According to the Wyoming
Secretary of State's website. Enterprises' purported principal place of business is Mr.
McCown's personal residence address of 10 Red Rim Road; Lander, Fremont County,
Wyoming.
JURISDICTION AND VENUE
8. Jurisdiction is proper pursuant to 28 U.S.C. § 1332 (diversit)' of citizenship).
9. The amount in controversy in this matter exceeds the sum of §75,000.00.
10. Jurisdiction is proper in this District as both Mr. McCown and Enterprises
reside and do business here, and the Promissory Note between R Squared and Enterprises
expressly provides R Squared may commence legal proceedings or otherwise sue in any court
having jurisdiction.
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11. Venue is proper in this District pursuant to 28 U.S.C. § 1391(b) and (c) because
(i) Defendants reside in, or are deemed to be residents of, the District of Wyoming and (ii) a
substantial part of the events or omissions giving rise to the claims occurred in this District.
By way of example, and without limitation, Mr. McCown and Enterprises routinely conducted
business and issued fraudulent documents and correspondence from their home and principal
place of business. Said efforts involved, among other entities, the Wyoming Catholic College
("College"), Wyoming Community Bank(^'WCB") and Ameri-Tech Equipment Company,all
in Lander, Wyoming.
BACKGROUND
THE DEVELOPING RELATIONSHIP BETWEEN THE PARTIES
12. R Squared is a global alternative asset manager that applies its experience and
expertise across global markets to deliver superior returns and minimize risk. Mr. David Kang
serves as the President and Chief Executive Officer. Affidavit of David Exhibit A
(attached hereto and incorporated herein by reference), 1-2.
13. In conducting its normal operations, an affiliate of R Squared (also operated by
Mr. Kan^ was introduced to Mr. McCown, in his capacity as the Chief Financial Officer of
the College, by a fellow officer at the College named Jonathan Tonkowich, the school's
Executive Vice President. At the time, Mr. McCown represented that he was acting in
connection with obtaining advisory services related to the College's endowment fund, which
he stated was about to receive substantial additional funds. Id., at T| 6.
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14. In March of2021, Mr. McCown tragically altered the scope of that relationship.
During a phone call, Mr. McCown advised that he had amassed substantial personal wealth
and was seeking investment advisory services on his own behalf. Seeking to serve a potential
client, and possibly nurture other investment possibilities, Mr. Kang put into motion the
standard verification procedures, including obtaining a variety of personal and financial
information from Mr. McCown. W., at 7.
15. As the relationship continued to develop, Mr. McCown provided three (3)
months of bank statements purportedly from his personal bank account at WCB (with an
account number ending in 3668). Those statements revealed relatively small balances in
January and February; however, March's statement reflected an immense deposit, and a final
balance of $750,323,282. Id., at ^ 8. See also accompanying exhibits in the Affidavit of David
Kang.
16. Mr. McCown further supported his purported astounding wealth by pro^tiding
US Bank statements, which appeared to confirm the large transfer described above. These
statements revealed monthly balances of $753,827,565.56 in January, $825,378,726.44 in
February and - after the purported $750 million transfer from US Bank to WCB on March 1,
2021 - $146,928,364.32 in March. Id., at 10. See also accompanying exhibits in the Affidavit
ofDavid Kang.
17. Over the ensuing weeks, Mr. McCown,in his individual capacity, and Mr. Kang
continued to develop and formali2e the investment advisory relationship, entering into an
investment advisor agreement between Mr. McCown and R Squared's affiliate. Id., at H 11.
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18. Pursuant to regulatory requirements, various steps were required to further the
relationship, including, but not limited to, undertaking the Know-Your-Customer ("KYC")
process and anti-money laundering ("AML") procedures, as well as obtaining various
additional documents from Mr. McCown and his bank. Id.^ at ^ 12.
19. To facilitate the interaction with WCB,Mr. McCown instructed that all inquiries
be addressed to his bank officer Mr. Kendall Hayford, stating "I don't have his email address,
but his phone is (307) 310-5096." Id.
20. Later that month, Mr. Kang was contacted by "Kendall Hayford" via e-mail
correspondence emanating from the e-mail address of khavford@\vyocommunit:\L.com. and
containing a signature block bearing that same phone number of (307) 310-5096. That
correspondence stated "Please advise the information you need and a time to discuss if
necessary." Subsequently, Brian Kim, a colleague of Mr. Kang's, held a phone conversation
with "Kendall Hayford" on May 5, 2021. Id. With that purported confirmation, the
relationship with Mr. McCown appeared to be on track and moving in a positive direction.
MCCOWN'S REQUEST FOR A $15 MILLION LOAN
21. On May 5, 2021, Mr. McCown texted Mr. Kang that his business had a $26
million invoice outstanding to a supplier and that his business account (holding approximately
$16 million) did not have sufficient funds to cover the debt. Thus, Mr. McCown inquired if
Mr. Kang's business would float the difference and lend $10 million on a short term loan. 7^.,
at 1115.
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22. The loan was stated to be sought in lieu of moving funds from Mr. McCown's
personal account, which did not come as a surprise to R Squared. In the accredited investor
world, movement of funds into or out of a personal account, in the days preceding an
imminent transfer of substantial personal wealth to a custodial account, may result in delays
associated with AML requirements. Id., at K 16.
23. As Mr. McCown's request was not unusual, discussions ensued regarding
documenting the loan. Once it became apparent that the loan would be provided by R
Squared, Mr. McCown boldly increased his request from $10 million to $15 million,
supposedly so that he would not be required to entirely deplete his business's account. Id.
24. To process the loan, Mr. McCown e-mailed "Kendall Hayford" and R Squared,
instructing that WCB was to release all personal account information required."Mr. Hayford"
replied, stating "Let me know what information you will require." Id., at T| 17.
25. In the ensuing days, R Squared was provided, purportedly from "Mr. Hayford"
and copied to and on behalf of Mr. McCown, with the following:
a. A Deposit Account Control Agreement, purportedly executed by WCB,
granting R Squared operational control over Mr. McCown's personal
bank account, to act as security^ for the loan;
b. An "attestation" form from WCB,on WCB letterhead and purportedly
executed by WCB, verifying the account balance in Mr. McCown's
personal account, on May 7, 2021, of $761,481,265.21;
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c. An additional "attestation," to substantially the same effect as the prior
correspondence, on May 11, 2021; and
d. Purported confirmation from "Mr. Hayford" that WCB would comply
with R Squared's instructions and that WCB would provide prior written
notification to R Squared regarding any withdrawal request from Mr.
McCown's personal account.
Id., at^l 18.
26. With the t5q)ical requisite documents in order, on May 10, 2021, Mr. McCown,
on behalf of Enterprises, executed a Promissory Note ("Note"),in favor of R Squared,in the
amount of $15 million. He also personally executed a Security Agreement which granted R
Squared a continuing securit)' interest in his personal bank account. Id., at T| 20.
27. Where required, Mr. McCown's signature was notarized. Upon information and
belief, the notary is an employee of the College. Id., at T] 21.
28. Prior to wiring the loan, Mr. Kim telephoned the bank and asked for Mr.
Hayford. He was transferred through to Mr. Hayford's voicemail, thereby confirming that
Kendall Hayford was in fact a bank officer at WCB. This confirmation gave R Squared
additional comfort and security in issuing the loan. Id., at T| 23.
29. On May 11, 2021, R Squared wired the $15 million (less an origination fee) in
accordance with wire instructions pro^tided by Mr. McCown,the Note signed by Air. McCown
and duly notarized, and all of the supporting documentation referred to above. Id., at ^ 24.
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MCCOWN'S FRAUDULENT SCHEME COMES TO LIGHT
30. In the days following his receipt ofthe S15 million loan, Mr. McCown continued
to move forward with his stated intention to fund an investment advisory account with the
massive amount of money purportedly held in his personal account at WCB. 7^/., at ^ 27.
31. In the course of those dealings, "Kendall Hayford" supplied R Squared with a
required anti-money laundering letter, purportedly on WCB letterhead and executed by
"Kendall Hayford" as "VP Branch President." Id., at T| 28.
32. Notwithstanding various delays during mid-May - delays that Mr. McCown
attributed to WCB's lack of sophistication and experience — on Friday, May 21,2021 "Kendall
Hayford" wrote to R Squared from the above-identified e-mail address, stating that "The
funds have been released". A few hours later, Mr. "Hayford" confirmed "Details: amount;
$761,000,000.00. Reference number is 0512B10FD05D008127. BNP should see it come
through shortly". And a few hours after that, Mr."Hayford" sent a purported "Authorization
for Wire Transfer" in the amount of $761,000,000" from the "Originator" Paul McCown to
BNP Paribas, at the BNP account number Mr. Kang had pro\tided, with the "ABA #,Swift
Code, Sort Code" of"BNPAUS4NB25". Id., at1| 29.
33. However, the funds did not arrive that day, or on the following Monday the
24th (or ever). A series of excuses and evasions were put forth by Mr. "Hayford," but early
in the week of May 24th, R Squared's then-counsel was able to be in touch with WCB's
President and then with the bank's outside counsel. During those conversations, Mr.
McCown's fraudulent activities began to become known. Id., at ^ 30.
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34. In connection with R Squared's investigation, an attorney then representing Mr.
McCown stated that Mr. McCown denied signing the notari2ed loan documents; denied any
knowledge of those documents; and denied borrowing money from R Squared at all. Upon
request, that lawyer memorialized those denials in writing on June 1, 2021. Id, at T| 31.
35. Upon further investigation, WCB has confirmed and sworn to the following
information:
a. The WCB statements, with account number ending in 3668, as provided
by Mr. McCown, are not true and correct, and appear to be forgeries;
b. The purported wire transfer into the account ending with 3668, on
March 1, 2021,in the amount of$750,000,000.00, is fictitious and never
occurred;
c. The attestations do not reflect the true and correct letterhead for WCB
and the statements contained in the attestations are false, as they do not
accurately reflect the bank's records;
d. Neither Mr. McCown, nor any entity he owns or controls, has ever held
hundreds of millions of dollars in an account with WCB.
Exhibit B (attached hereto and incorporated herein by reference), Affidavit of Scott Estep,
President of Wyoming Community Bank.
36. Even more alarming, WCB provided the following additional sworn
information:
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a. WCB never provided a Deposit Account Control Agreement in
connection with Mr. McCown's bank account;
b. The signature "Kendall Hayford" on all purported WCB documentation
is not the actual signature of Mr. Hayford;
c. The purported e-mail address of Mr. Hayford is a false e-mail address
that has never been used by the real Mr. Hayford or the bank;
d. The purported telephone number for Mr. Hayford is false, and Mr.
Hayford has never used that number;
e. Mr. Hayford had no knowledge of Mr. McCown,or his entities, entering
into the loan agreement; and
f. When Mr. Hayford inquired of Mr. McCown about the voicemail
received from Mr. Kim as referred to above, Mr. McCown replied that
he had "no idea" to what the message was referring.
Exhibit C (attached hereto and incorporated herein by reference), Affidavit ofKendall Hayford^
Vice President, Branch Manager of Wyoming Community Bank.
37. The affidavits as provided by WCB represent clear and convincing evidence that
a complex, calculated, methodical and fraudulent scheme was orchestrated and executed by
Mr. McCown against R Squared, utilizing false and forged documents purportedly from Mr.
McCown's bank WCB and (presumably unwittingly) involving an employee of his employer,
the College, as a notary.
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WHEREABOUTS OF R SOUARED'S $15 MILLION
38. Upon further investigation, it appears that on May 11, 2021, within hours or
minutes of receiving the loan proceeds from R Squared, Mr. McCown began transferring all
ofthose millions of dollars out of his business's account at WCB (none ofit to pay a purported
"supplier"). Upon information and belief, he made the following transfers:
a. He sent Phillip McCown, believed to be his father, $375,000.
b. He sent his brother-in-law and sister-in-law, Paul and Claire Alarcon,
$750,000.
c. He transferred $550,000 to his personal WCB account, and that same
day sent those funds from his personal account to a company named
Trolan LLC, which is registered to conduct business in Wyoming but is
located in Michigan (Mr. McCown's home state), and with which upon
information and belief Mr. McCown is affiliated and may well own or
control.
d. He obtained,in person at WCB on May 11, a cashier's check payable to
the State of Wyoming in the amount of $841,863.
e. He sent $375,000 to an investment account in the name of Jonathan
Tonkowich (Mr. McCown's colleague at the College who had introduced
Mr. McCown to R Squared's principal) at the financial services firm
Robert W. Baird and Company. Later, he sent another $375,000 to
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Robert W. Baird and Company, presumably to the same account of Mr.
Tonkowich.
f. Most significantly, he transferred S10.5 million to an account in the name
of "The Paul and Jacinta McCown Fund'' at "Goldman Sachs
Philanthropy Fund," which he then directed to transfer ^0 million as
an "anonymous donation" to the College, where (as noted) he is the
Chief Financial Officer.
Exhibit A, at ^ 25.
39. The College recendy confirmed, through counsel, that it has the 510 million
"anonymous gift" received from the Goldman Sachs Philanthropy Fund. The College,
however, refused to accede to R Squared's request to provide R Squared with ten days notice
before transferring aU or any part of those funds, and told R Squared that it is "inclined to
believe" Mr. McCown's denial of any fraud or wrongdoing, but did state that it has "voluntarily
and unilaterally decided to hold the funds pending completion of its investigation, or its
determination that [R Squared] does not intend to . . . provide [sufficient] support [for] its
allegations." W., at H 32.
40. Upon information and belief, Goldman Sachs has the 5500,000 (difference
between the |10.5 million transferred to the Philanthropy Fund on May 11, 2021 and the $10
million transferred to College the next day). Id., at H 33.
41. Paul and Claire Alarcon, Mr. McCown's brother-in-law and sister-in-law,
confirmed through their counsel that they have the $750,000 that Mr. McCown sent to them
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on May 11, and they represented that they would provide R Squared with seven days notice
before transferring those funds. Id, at f 34.
42. Phillip McCown, believed to be defendant Mr. McCown's father, has not
responded to counsel's inquk}' and is presumed to be holding (or to have transferred or
dissipated) the $375,000 believed to have been sent to him by his son on May 11. Id, at T| 35.
43. Trolan, LLC, has not responded to counsel's inquiry and is presumed to be
holding (or to have transferred or dissipated) the $550,000 sent to it by Mr. McCown on May
19, 2021. Id, atT|36.
44. Robert W. Baird and Company has acknowledged R Squared's inquiry, but
without a subpoena or court order will not confirm receipt by Mr. McCown's fellow officer at
Wyoming Catholic College, Jonathan Tonkowich, of the two $375,000 transfers from Mr.
McCown or provide any information about subsequent transfers or where those funds may
be at this time. Id., at ^ 37.
45. R Squared has no further information regarding the funds issued to the State of
Wyoming. Id., at H 38.
46. The total of all known transfers of the $14.7 million wired to Enterprises, in
furtherance of the $15 million loan, is $13,766,863. While there may have been additional
subsequent transfers, almost a million dollars - $933,137 to be exact - remains unaccounted
for. All or part of that sum may yet be in Enterprises' account at WCB and/or in Mr.
McCown's personal account at that bank, or otherwise within Mr. McCown's custody and
control one way or another. Id., at ^ 39.
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R SQUARED ACTIONS SINCE FUNDING THE LOAN
47. Once it became apparent Mr. McCown had fraudulendy induced the loan and
had breached the Note, R Squared frantically sought to make contact with him to clarify the
situation. Such attempts were either ignored or answered with vague and avoiding language.
48. Consequently, on May 26, 2021, R Squared declared the Note in default and
accelerated the amount due in accordance with its terms and conditions. Id., at T| 22. R Squared
has not received an acknowledgement of that correspondence from Mr. McCown.
49. Given the extensive and complicated nature of this fraudulent and misleading
activity, R Squared remains concerned that the funds whose whereabouts are not fully known
- at least $3,450,000, or over $2,600,000 excluding the payment to Wyoming - may similarly
and quickly be dissipated. In addition, all of the disseminated funds may not remain stationar}'
and be recoverable, particularly those that Mr. McCown distributed to himself and his
company and his father. With each subsequent transfer, the efforts, costs and expenses
necessar}^ to find and halt the dissipation will be compounded.
50. This matter has already significantly impacted the operations of 10,if not more,
entities and individuals. It is crucial that Mr. McCown be immediately halted from engaging in
further activities that will continue to dissipate his assets, including the money fraudulently
obtained from R Squared.
51. The actions of Defendants have significantly damaged R Squared, said damages
to be proven at the trial of this action.
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CLAIM I
IMMEDIATE
PRELIMINARY INJUNCTION
52. R Squared hereby repeats, re-alleges and incorporates by reference the
allegations contained in the paragraphs above.
53. The fraudulent scheme set into play by Mr. McCown continues as of the filing
of this pleading.
54. Upon information and belief, Mr. McCown has no interest in resolving this
matter outside of the involvement of the Court.
55. Upon information and belief, and subject to further discover}', it is probable
that Mr. McCown is continuing to dissipate his assets, including the proceeds of the $15
million loan.
56. Given the elusive and creative nature of Mr. McCown to date, and his blatant
and brazen disregard for the consequences of his misconduct, it is imperative that Mr.
McCown and Enterprises be restrained from their ongoing fraudulent conduct, the continued
dissipation of assets, including the funds fraudulently obtained, and the hindrance of justice.
57. As a direct and proximate result of Mr. McCown's and Enterprises' actions, R
Squared has been, and will continue to be, damaged.
58. Given the circumstances as described herein, it is likely that should R Squared
be awarded a judgment, Mr. McCown and Enterprises will not be able to satisfy that judgment
— having dissipated their assets, including disseminating at least some of the proceeds of the
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$15 million loan out of the reach of R Squared and perhaps out of the reach of the Court. In
such event, R Squared will suffer irreparable injury, loss, harm and damage.
59. The actions of Mr. McCown and Enterprises are not justified or privileged.
60. The actions of Mr. McCown and Enterprises must be thwarted in order to avoid
furtherance of the fraudulent scheme and to promote justice.
61. The threatened, and continuing, injury to R Squared outweighs whatever
damage (if any) Mr. McCown and Enterprises may face in this matter.
62. An injunction would be in furtherance of the public interest, particularly as Mr.
McCown and Enterprises have committed fraud against and involving financial institutions,
including evidently impersonating a bank officer and forging bank documentation, while
utilizing the assets and property (and an employee) of the College.
63. An injunction, at this point, would preser\'"e the status quo of the parties. While
the funds would not be immediately returned to R Squared, Mr. McCown would not be able
to further dissipate his assets, including the loan proceeds he fraudulendy obtained from R
Squared. In the event of the further litigation of this matter, given the strong evidence -
including sworn testimony from the President and Vice President of Mr. McCown's bank -
of Mr. McCown's and Enterprises' fraud and unequivocal and material breaches of the Note,
there is a strong likelihood that R Squared will ultimately prevail on the merits of the case.
Nonetheless,should R Squared not be successful in its claims,those holding the funds pending
investigation and/or guidance or rulings from the Court would be able to retain them free and
clear.
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64. This pleading and its related exhibits and filings contain sufficient verified facts
and evidence to demonstrate immediate and irreparable loss, injury, loss or damage will result
absent the requested relief. Given Mr. McCown's lack of responsiveness following the
unraveling of his scheme, any further notice to him and to Enterprises would be a moot point.
65. As set forth in R Squared's Motionfor Preliminary Injunction^ filed concurrently
herewith and incorporated herein by reference, R Squared respectfully requests that the Court
preliminarily enjoin Mr. McCown and Enterprises, pursuant to F.R.C.P. 65 and the Wyoming
Fraudulent Transfer Act, from dissipating, disposing of, liquidating, disseminating and/or
transferring, directly or indirectly, any of their personal assets or any assets of entities they own
or control, other than in the ordinar)^ course of business or personal affairs. R Squared further
requests that under the circumstances, this order be granted without the requirement of
posting a bond.
CLAIMl II
BREACH OF CONTRACT
66. R Squared hereby repeats, re-alleges and incorporates by reference the
allegations contained in the paragraphs above.
67. Enterprises and R Squared expressly entered into the written Note.
68. Sufficient consideration was exchanged as R Squared wired the loan proceeds
based upon Enterprises' and Mr. McCown's promises to repay the loan.
69. Under the terms and conditions of the Note, Enterprises expressly
acknowledged as follows:
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Section 8. Events of Default. The occurrence of any of the
following shall constitute an Event of Default hereunder:
Section 8.2. Breach of Representations and Warranties. Any
representation or warranty made or deemed made by the
Borrower [Enterprises] to the Noteholder [R Squared] herein or
in any certificate, document or report delivered in conjunction
with the Loan is incorrect in any material respect or shall have
been false or misleading in any material respect on the date as of
which such representation or warrant}^ was made or deemed
made.
See Exhibit A,Affidavit ofDavid Kang, Exhibit 18, pgs. 3-4.
70. Based upon the factual allegations of the matter, it is now known that the
banking statements and other information delivered by and purportedly on behalf of
Enterprises and/or Mr. McCown were materially false and significantly altered to falsely
bolster the financial condition of Enterprises and Mr. McCown. See Exhibits B-C.
71. In addition, the Note expressly provided that Enterprises would not transfer
monies from the bank account referenced in the Deposit Account Control Agreement without
the prior written approval from R Squared. See Exhibit A,Affidavit ofDavid Kang^ Exhibit 18,
Pg- 4, § 7,1(c).
72. Despite this express language, Mr. McCown and/or Enterprises transferred
funds from the WCB accounts.
73. The actions of Mr. McCown on behalf of Enterprises constitute a material
breach of the express terms and conditions of the Note, and were willful and intentional.
74. Upon recognition of the breach, on May 26, 2021, R Squared declared the Note
in default and accelerated the amount due in accordance with its terms and conditions. Mr.
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McCown and Enterprises were provided with the opportunity to cure the breach, but no cure
has been provided as of the date of this pleading.
75. Following the notice, the entirety of the Note was immediately due and payable.
To date, Enterprises has failed to satisfy its obligations under the Note.
76. Due to the breach, R Squared has suffered damages for which Enterprises is
liable.
77. Therefore, R Squared respectfully requests that the Court find in favor of R
Squared on its breach of contract claim, order that Enterprises is required to repay the 515
million, plus pre-judgment interest at the rate of 5.5%, per the terms and conditions of the
Note, that R Squared be entitled to post-judgment interest at the statutory rate of 10.0%, and
for all fees, attorney fees, costs and expenses associated with the prosecution of this matter,
as may be provided by law, and for any other damages under law or equity that may be proven
at the trial of this matter.
CLAIM III
PIERCING THE CORPORATE VEIL
78. R Squared hereby repeats, re-alleges and incorporates by reference the
allegations contained in the paragraphs above.
79. The Wyoming Supreme Court has long recognized that piercing the corporate
veil is an equitable doctrine. The determination of whether the doctrine applies centers on
whether there is an element of injustice, fundamental unfairness, or inequity. This doctrine
should be applied to the current matter.
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80. Mr. McCown is the sole member and manager of Enterprises.
81. As evidenced in this pleading, Mr. McCown undertook methodical, ill-willed,
deceitful and intentional methods to induce Mr. Kang into a relationship and then deprive his
company R Squared out of $15 million.
82. Upon obtaining the loan proceeds, Mr. McCown instructed that the same be
disseminated for personal, rather than business-related, matters. Simply viewing the names
and entities the funds were distributed to reveals the lack of corporate formality.
83. Upon information and belief. Enterprises will not be able to satisfy any
judgment awarded in this case due to the actions taken by Mr. McCown.
84. Mr. McCown has failed to adequately capitalize the business, particularly in light
of the large debts Enterprises was already facing, compounded by the large debt as issued by
R Squared.
85. Mr. McCown has caused Enterprises to disperse funds to its member, to his
relatives and to other persons and entities, and has directly violated the terms of the Note, all
to the detriment of R Squared, Enterprises' creditor.
86. Upon information and belief, Mr. McCown utilized Enterprises to contract with
R Squared with the intent to avoid performance and liability by use ofthe entity as a subterfuge
for illegal and/or fraudulent transactions.
87. It would be unjust and inequitable for the Court to allow Mr. McCown to hide
behind the corporate veil of protection for the intentional and scheming actions that were
taken.
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88. It would be unjust and inequitable for the Court to permit Mr. McCown to
avoid personal liability on the Note for his actions in this case.
89. Indeed, even the Operating Agreement of Enterprises suggests that Mr.
McCown,its sole member, should be personally liable, as the agreement expressly states:
9.2 Indemnification by Company. The Company shall indemnify,
hold harmless and defend the Members, in their capacity as Members,
Managers, or Officers, from and against any loss, expense, damage or
injurj^ suffered or sustained by them by reason of any acts or omissions
arising out of their activities on behalf of the Company or in furtherance
of the interests of the Company, including but not limited to any
judgment, award, settlement, reasonable attorneys' fees and other costs
or expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim,if the acts or omissions were not
performed or omitted fraudulently or as a result of gross negligence or
willful misconduct by the indemnified part5^
See Exhibit A,Affidavit ofDavid Kang, Exhibit 31, pg. 7.
90. By the verj^ operation of the entit)' itself, Mr. McCown is not entitled to liabilitj^
protection from Enterprises and should be held personally liable for the essential theft of
millions of dollars from R Squared.
91. The Court should exercise this equitable doctrine and hold Mr. McCown
personally liable for all damages awarded in connection with the Note - ensuring that any
entity or asset he controls is subject to execution for repayment of the fraudulently obtained
funds.
92. Therefore, R Squared respectfully requests that the Court find in favor of R
Squared and order that the corporate veil of Enterprises is hereby pierced, and Mr. McCown
is personally liable for any judgment against Enterprises, including, but not limited to, the
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requirement to repay the $15 million, plus pre-judgment interest at the rate of 5.5%, per the
terms and conditions of the Note, plus post-judgment interest at the statutory rate of 10.0%,
and for all fees, attorney fees, costs and expenses associated with the prosecution of this
matter, as may be pro\dded by law, and for any other damages under law or equity that may
be proven at the trial of this matter.
CLAIM IV
FRAUD IN THE INDUCEMENT AND
INTENTIONAL MISREPRESENTATION
93. R Squared hereby repeats, re-alleges and incorporates by reference the
allegations contained in the paragraphs above.
94. Mr. McCown and Enterprises intentionally and fraudulently induced R Squared
into action, resulting in the loss of the proceeds of the $15 million loan.
95. Mr. McCown's intentional, deceptive and fraudulent actions include, but are not
limited to:
a. Falsifying material financial information on bank statements (which
require altering multiple pages of information, not just one transaction),
and providing the same to R Squared, in order to induce the belief that
Mr. McCown and Enterprises were financially flush and that the assets
in his personal account were sufficient to secure the $15 million loan
many times over;
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b. Providing false contact information (both phone number and e-mail
address) for an individual that he falsely represented was Mr. Kendall
Hayford, Vice President of WCB;
c. Creating a false, yet still functional, e-mail address purportedly on behalf
of"Mr. Hayford";
d. Impersonating a banking officer (in e-mails and phone calls) and forging
signatures upon legally binding documents and agreements;
e. Creating and producing falsified attestation statements (also with forged
signatures), in order to induce the belief that Mr. McCown and
Enterprises had more than sufficient assets at WCB to coUateralize the
|15 million loan; and
f. Even going so far as to create fake confirmation numbers for the
purported, but non-existent, conveyance of funds into the asset
management account of R Squared's affiliate.
96. Throughout the entirety of this process, Mr. McCown deflected the blame to
others, with the intention of concealing the truth of the matter, including fostering the
impression that Wyoming banks are unsophisticated and generally unfamiliar with funds
transfers of the magnitude he was pretending to effectuate.
97. Based upon the complexity and completeness of Mr. McCown's scheme, R
Squared reasonably believed his representations were true and the documents he provided
were legitimate.
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98. Reasonably relying on the information provided by Mr. McCown,including his
false representations, R Squared acted upon the matter and has lost millions of dollars as a
result
99. Indeed, the loan would not have been funded had the financial statements,
banldng confirmation and assistance and signatures not been presented during the due
diligence of the transaction, as the loan was extended on the basis of the assets purportedly
available to be seized by R Squared upon default through the Deposit Account Control
Agreement and Security Agreement.
100. Having 20-20 hindsight vision, it is now realized the represented funds were
never held with WCB and likely never existed.
101. The actions of Mr. McCown can only be described as intentional, with
knowledge of the falsity.
102. Therefore, R Squared respectfully requests that the Court find in favor of R
Squared and issue an order and judgment that Mr. McCown and Enterprises fraudulendy and
intentionally induced R Squared into action and Mr. McCown and Enterprises is liable for the
all damages incurred by R Squared, plus pre-judgment interest at the rate of 5.5%, per the
terms and conditions of the Note, plus post-judgment interest at the statutory rate of 10.0%,
and for all fees, attorney fees, costs and expenses associated with the prosecution of this
matter, as may be provided by law, and for any other damages under law or equity that may
be proven at the trial of this matter.
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CLAIM V
NEGLIGENT MISREPRESENTATION -IN THE ALTERNATIVE
103. R Squared hereby repeats, re-alleges and incorporates by reference the
allegations contained in the paragraphs above.
104. In addition, R Squared hereby repeats, re-alleges and incorporates by reference
the allegations of Claims IV.
105. In the alternative to the claim for fraud in the inducement and intentional
misrepresentation, R Squared asserts a claim for negligent misrepresentation.
106. Under this claim, Mr. McCown and Enterprises supplied false information in
the course of his business for the guidance of R Squared in its business.
107. In doing so, Mr. McCown and Enterprises failed to exercise reasonable care in
obtaining or relating the information.
108. Due to their failures, R Squared suffered pecuniary loss, due to its justifiable
reliance upon the provided information.
109. Therefore, R Squared respectfully requests, should Claim IV fail, that the Court
find in favor ofR Squared and issue an order and judgment that Mr. McCown and Enterprises
negligently induced R Squared into action and Mr. McCown and Enterprises is liable for all
damages incurred by R Squared, plus pre-judgment interest at the rate of 5.5%, per the terms
and conditions of the Note, plus post-judgment interest at the statutor)^ rate of 10.0%,and for
all fees, attorney fees, costs and expenses associated with the prosecution of this matter, as
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may be provided by law, and for any other damages under law or equity that may be proven
at the trial of this matter.
CLAIM VI
FRAUDULENT TRANSFER AND/OR CONVEYANCE
110. R Squared hereby repeats, re-aUeges and incorporates by reference the
allegations contained in the paragraphs above.
111. Pursuant to Wyoming's Uniform Fraudulent Transfer Act(Wyo. Stat § 34-14-
201, et. se^.)(the "Act"), R Squared respectfully requests the Court declare the distribution and
dissemination of the loan proceeds as a fraudulent transfer. The Act is designed to protect
unsecured creditors from debtor transfers designed to frustrate debt-collection efforts.
112. Upon discovery of the forged bank documents and instruments, R Squared
essentially became an unsecured creditor of Enterprises, particularly as it had no control over
the account the funds were wired to or Mr. McCown's personal accounts.
113. Equally concerning is the continued dissemination ofthe loan proceeds to third
parties. Pursuant to § 34-14-205, a transfer made by a debtor is fraudulent as to a creditor if
the debtor made the transfer: (i) with actual intent to hinder, delay or defraud any creditor, or
(ii) without receiving a reasonably equivalent value in exchange for the transfer and the debtor
was engaged in a transaction for which its remaining assets were unreasonably small in relation
to the transaction or would incur debts beyond his ability to pay as they became due.
114. As demonstrated earlier, Mr. McCown and Enterprises transferred the loan
proceeds to recipients including Mr. McCown (individually), his immediate family, affiliated
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and/or third-party business entities and his employer (through the Goldman Sachs
Philanthropy Fund) — but not to the creditor. At no point in time did Mr. McCown advise R
Squared of these transfers. Rather, he kept them concealed as best as he could after previously
having deceived R Squared about his intentions regarding the use of proceeds.
115. Upon information and belief, Mr. McCown received no value in exchange for
these transfers. Indeed, the conveyance to the Philanthropy Fund was couched as an
"anonymous gift" to be redirected, as |10 million of the $10.5 million conveyance was
redirected, to Mr. McCown's employer, the College, of which Mr. McCown is Chief Financial
Officer and presumably would have access to those funds.
116. The transfers Mr. McCown made of the funds received from R Squared,
immediately upon receipt of those funds, were of such a scope that it will not be possible to
reimburse R Squared's losses and repay the loan from the account to which the funds were
sent as directed by Mr. McCown.
117. As the transfers began immediately after confirmation ofthe wire into the WCB
account, the actions of Mr. McCown can only be described as occurring shordy after a
substantial debt was incurred.
118. Pursuant to § 34-14-208, R Squared may entitied to a preliminary injunction,
pursuant to F.R.C.P. 65 and the Wyoming Fraudulent Transfer Act, restraining Mr. McCown
and Enterprises from dissipating, disposing of, liquidating, disseminating and/or transferring,
direcdy or indirecdy, any of their personal assets or any assets of entities they own or control,
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other than in the ordinary course of business or personal affairs. R Squared further requests
that under the circumstances, this order be granted without the requirement of posting a bond.
119. Therefore, R Squared respectfully requests that the Court declare the transfers
of the loan proceeds from WCB as a fraudulent transfer under the Act, and issue an injunction
as set forth in paragraphs 65 and 118 above accordingly.
CLAIM VII
BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING
120. R Squared hereby repeats, re-alleges and incorporates by reference the
allegations contained in the paragraphs above.
121. The implied covenant of good faith and fair dealing requires that neither party
commit an act that would injure the rights of the other party to receive the benefit of their
agreement.
122. In Wyoming,compliance with the obligation to perform a contract in good faith
requires that a party's actions be consistent with the agreed upon common purpose and
justified expectations of the other party.
123. A breach of the covenant of good faith and fair dealing occurs when a party
interferes with the other party's performance. In the absence of evidence of self-dealing or
breach of communit}' standards of decency, fairness or reasonableness, the exercise of
contractual rights alone will not be considered a breach of the covenant.
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124. Here, the actions of Mr. McCown and Enterprises can only be described as
adverse to the agreed upon common purpose and justified expectations of R Squared under
the Note.
125. Under the Note, R Squared lent the sum of $15 million in reliance upon the
apparent security of McCown's financial strength, control over his WCB personal account
purportedly containing over $750 million, and his promise to ultimately repay the proceeds.
126. From the outset, Mr. McCown intentionally denied R Squared the right to
receive performance under the terms and conditions of the Note.
127. There is not merely absence of self-dealing or breach of community standards
of decency, fairness or reasonableness here; rather, this entire transaction is riddled with
instances of lying, misleading, forgeries and falsities, each of which were deliberately designed
and calculated to deprive R Squared ofits contractual rights to performance under the Note.
128. The actions by Mr. McCown and Enterprises injured R Squared's right to
receive the benefit of the Note and the $15 million loaned as consideration for entering into
the same.
129. Therefore, R Squared respectfully requests that the Court find in favor of R
Squared and issue an order and judgment that Mr. McCown and Enterprises have breached
the implied covenant of good faith and fair dealing, order that Mr. McCown and Enterprises
are liable for the $15 million, plus pre-judgment interest at the rate of 5.5%, per the terms and
conditions of the Note, plus post-judgment interest at the statutory rate of 10.0%, and for all
fees, attorney fees, costs and expenses associated with the prosecution of this matter, as may
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be provided by law, and for any other damages under law or equity that may be proven at the
trial of this matter.
CLAIM VIII
CLAIM FOR PUNITIVE DAMAGES
130. R Squared hereby repeats, re-alleges and incorporates by reference the
allegations contained in the paragraphs above.
131. At the outset, R Squared recogni2es and appreciates that, under Wyoming law,
punitive damages are disfavored and are to be allowed with caution within narrow limits.
132. As recognized in Wyoming, punitive damages are only appropriate for
circumstances involving outrageous conduct, such as intentional torts, torts involving malice
and torts involving willful and wanton misconduct.
133. Due to the willful, wanton and intentional actions of Mr. McCown, discussed
in detail above and in the accompanying exhibits, punitive damages are warranted in this
matter.
134. In addition to a sum sufficient to punish, reprimand and deter further actions
of a similar nature, R Squared requests that any profits derived from the proceeds of the loan
held by Mr. McCown or Enterprises (and their controlled affiliates) be disgorged to the favor
of R Squared, so as to deprive Mr. McCown and Enterprises of any ill-received benefit.
135. Finally, R Squared requests that it be awarded its attorney fees and costs in this
matter, based upon the intentional and fraudulent actions of Mr. McCown.
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136. Thus, R Squared respectfully requests that the Court enter an exception to the
"American rule" regarding recovery of attorney fees and costs, as Wyoming recognizes an
exception to the general rule (denying recovery of attorney fees and costs) may be applied in
the circumstances of fraud and the corollary award of punitive damages.
CONCLUSION
It is certainly rare to see a fraud-based case of this magnitude and scope which is
supported by early documentation and affidavits to this degree. The falsity, and the great
lengths Mr. McCown took to exact his monumental plan are essentially unheard of in
Wyoming. Regrettably, only through the involvement of the Court can implementation of Mr.
McCown's fraudulent plan be halted before he further dissipates his assets, the funds touch
more hands, and more parries need to be dragged into this litigation.
WHEREFORE, R Squared respectfully prays for immediate relief against Mr.
McC^own and Enterprises, as set forth in each respective claim and as may further the interests
of equity and justice.
Due to the sensitivity and complexity of this fraudulent scheme,R Squared,via separate
motion, may seek leave from the Court to perform expedited discover}^ (particularly in the
form of serving subpoenas) to further assist it in ascertaining and securing the whereabouts of
its funds and proving the scope and degree of the actions of Mr. McCown and Enterprises.
RESPECTFULLY SUBMITTED this 22nd day ofJune, 2021
Stuart R,^av, WSB# 5-2244
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sdny@.wpdn.nct
Ryan J. Schwartz, WSB# 6-3611
rschwartz@wpdn.net
Ryan L. Ford, WSB# 7-4667
rford@wpdn ■ nct
Williams,Porter,Day & Neville,P.C.
PO Box 10700
Casper, WY 82602
(307) 265-0700
(307) 266-2306 (facsimile)
Steven R. Popofsky,
SPopoFsky@kkwc.com
Pamela A. Frederick,
Pl''rederick@kkwc.com
Kleinberg,Kaplan,Wolff & Cohen,P.C.
500 Fifth Avenue
New York, NY 10110
(212) 880-9882
(212) 986-8866 (facsimile)
Admission pending
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Exhibit A
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Stuart R. Day, WSB# 5-2244, sdav@wpdn.net
Ryan J. Schwartz, WSB# 6-3611, rschwartz@wpdn.net
Ryan L. Ford, WSB# 7-4667, rfordfBwpdn.net
Williams, porter. Day & Neville, P.C.
PO Box 10700
Casper, WY 82602
(307) 265-0700
(307)266-2306(facsimile)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF WYOMING
RIA R SQUARED,INC.,
a Delaware corporation,
Plaintiff
V. Case No.
PAUL D. MCCOWN,and
MCCOWN ENTERPRISES,LLC,
Defendants
STATE OF CALIFORNIA )
(Lcc ) ss.:
DAVID RANG,being of legal age, sound mind,and duly sworn, hereby states and alleges
as follows:
1. I am the President and Chief Executive Officer of plaintiff Ria R Squared,
no., which has lost more than $15 million due to a complex fraud orchestrated by defendant Paul
D. McCown, who(among other things) forged bank statements and other documents purportedly
ssued by Wyoming Community Bank ("WCB") in Lander, Wyoming; impersonated and forged
he signature of a WCB officer; and created and utilized a fraudulent e-mail address purporting to
Emanate from the bank.
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2. Plaintiff, a Delaware corporation located in New York City, is a global
alternative asset manager that applies its experience and expertise across global markets to deliver
superior returns and minimize risk. Defendant McCown-the ChiefFinancial Officer of Wyoming
Catholic College in Lander-resides in Lander and has represented himself to be the sole member
of defendant McCown Enterprises, LLC, a Wyoming limited liability company also located in
Lander.
3. At defendant Mr. McCown's request and pursuant to a promissory note and
related documents, in May 2021 plaintiff extended a $15 million loan to McCown Enterprises
based largely on Mr. McCown's fraudulent representations - supported by the forged and
fraudulent documents referred to above and detailed below -that he held over $750 million in his
personal account at WCB.
4. Those representations are now known to be entirely false. Immediately
upon receiving the loan proceeds from Ria R Squared, Mr. McCown set about transferring the
funds to various recipients, including but not limited to his relatives, his employer (through a
supposedly "anonymous donation")and an additional company he appears to own and control.
5. Accordingly, I respectfully submit this affidavit in support of plaintiffs
:omplaint and claims against McCown (in his individual capacity)and McCown Enterprises, with
he request that the court grant immediate reliefto halt the further dissipation ofdefendants' assets
md further dissemination ofthe millions of dollars that were essentially stolen from our company
jnder false and misleading pretenses.
Background of the Relationship
6. Last year, an investment advisory firm (of which I am also the principal)
i iffiiiated with plaintiff was introduced to defendant McCown,in his capacity as CFO of Wyoming
atholic College, by a common contact named Jonathan Tonkowich,an Executive Vice President
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at Wyoming Catholic College. Initially Mr. McCown represented that his employer was to receive
a large addition to its endowment and therefore would need the services of an asset manager.
7. In March of 2021, however, Mr. McCown told me in a telephone
conversation that he had amassed substantial personal wealth and was seeking investment advisory
services on his own behalf. Accordingly, I put in motion the standard verification procedures,
including seeking a variety of personal and financial information from Mr. McCown, and we
created a Microsoft 365 shared folder into which he could upload the necessary documents
(including, for example, bank statements, passport, driver's license, and questionnaires).
Defendant McCown's fPurportedl Bank Statements
8. In that regard, in late March of this year, Mr. McCown sent us the -
purported - most recent three months of bank statements from his personal bank account at
Wyoming Community Bank (with an account number ending in 3668). Those statements,
accompanying this affidavit as Exhibits 1, 2 and 3 (attached hereto and incorporated herein by
reference) respectively,showed very small balances in January and February of2021, but showed
3 balance on the March 2021 statement of $750,323,282. That gargantuan sum derived -
purportedly - from a transfer of $750 million on March 1, 2021 from Mr. McCown's business
jccount(ending in 7190) at US Bank in Minneapolis.
9. After wiring funds to Mr. McCown in furtherance of the $15 million loan,
w learned, to our understandable horror, that those WCB bank statements were forgeries (see
>aragraph 18 below).
10. Mr. McCown also uploaded purported US Bank statements supporting the
ransfer of funds to WCB. Specifically, he sent us what were supposedly the then-most recent
ihree months of US Bank statements, for January through March of 2021 (Exhibits 4 through 6
lespectively, attached hereto and incorporated herein by reference), showing a balance of
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$753,827,565.56 in January, $825,378,726.44 in February and - after the purported $750 million
transfer from US Bank to WCB on March 1,2021 -$146,928,364.32 in March. Upon information
and belief, those purported US Bank statements - which showed, among other things, three
monthly deposits in excess of$92 million apiece from one single source - were also forgeries.
The Investment Advisory Relationship and the
Impersonation of WCB Vice President Kendall Havford
11. Over the ensuing weeks, Mr. McCown and 1 discussed the details of an
investment advisory relationship whereby we would set up, through the international bank BNP
Paribas, a custodial account for his - purported - substantial wealth, which would initially be
invested in a fund to be known as the Ducenta 80-20 Total Return Fund L.P. Mr. McCown,in his
personal capacity,entered into an Investment Advisory Agreement(Exhibit 7, attached hereto and
incorporated herein by reference) with Plaintiffs afftliate in order to facilitate that process, and
until recently he paid the corresponding fees.
12. Various administrative steps were required to implement that relationship,
including undertaking the Know-Your-Customer ("ICYC"} process and anti-money laundering
AML )procedures, as well as obtaining various additional documents from Mr. McCown and
his bank. To facilitate the necessary actions, on April 20th Mr. McCown informed me that "the
person to reach out to at Wyoming Community Bank is Kendall Hayford. I don't have his email
iddress, but his phone is(307)310-5096." (Exhibit 8, attached hereto omitting email attachments
md incorporated herein by reference.) Later that month, 1 received an e-mail purportedly from
vir. Hayford,"VP Branch President" at Wyoming Community Bank (with the signature block
ncluding the phone number identified by Mr. McCown), emanating from the e-mail address
Lhayford(5),wyocommunitvb.com and copying Mr. McCown. That e-mail (Exhibit 9, attached
hereto and incorporated herein by reference) stated:
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Paul McCown provided me with your contact information regarding transferring his funds
to your organization. Please advise the information you need and a time to discuss if
necessary.
1 responded and my colleague Brian Kim eventually had a phone conversation with "Kendall
Hayford" on May 5, 2021.
13. We have since learned that the domain "wyocommunltyb.com" is not a
domain used by Wyoming Community Bank; that it is not, and never has been, the e-mail address
of WCB Vice President Kendall Hayford - who is in fact a real bank officer, and who has in fact
had dealings with Paul McCown in connection with Mr. McCown's accounts at WCB - and that
the phone number for Mr. Hayford supplied by Mr. McCown and appearing on the signature ofe-
khayfordra),wvocommunityb.com is not, and never has been, the office or cell phone
numberof Kendall Hayford. See the accompanying affidavits of Mr. Hayford and WCB President
Scott Estep, provided concurrently with this filing. See also Exhibit 10 (attached hereto and
incorporated herein by reference), which demonstrates that the domain "wyocommunityb.com"
was created only on April 30,2021,the same day the first e-mail was sent to us from that domain.
14. Regrettably, we knew none of that at the time we were fostering our
relationship with Mr. McCown. During the first three weeks of May, I exchanged or was copied
on several e-mails with Mr. McCown and the false "Kendall Hayford"(at the above, illegitimate,
'wyocommunityb.com" e-mail address), regarding the logistics necessary to transfer the
purported) funds in Mr. McCown's personal WCB account to the investment vehicle being
ireated for that purpose. That process moved somewhat slowly, as discussed in paragraphs 27-31
)elow.
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Defendant McCown Seeks a SIS Million Loan
Based On Forged and False Documentation
15. On May 5,2021, Mr. McCown texted me that his business had a $26 million
invoice outstanding to a supplier, and because his business account had around $16 million.
Would it be at all possible to float the difference (--10) on a short term loan? I was planning to
have everything funded by now, but as we know, Wyoming [Community] Bank is taking its sweet
time. (See Exhibit 11, attached hereto and incorporated herein by reference.) 1 responded that I
would see what I could do and that plaintiff, in order to extend such a loan, would need some
•'confirm[ations] from Kendall" by way of"some kyc [Know Your Customer] [and] ami [Anti-
Money Laundering] docs We live in a paper trail world." I also asked Mr. McCown to "send
out an email to Kendall to release any and all info per your personal account info."
16. In the ensuing days, Mr. McCown and 1 exchanged multiple text messages
to and from his cell phone (248-376-3761), regarding the requested loan and what would be
[lecessary in order to extend the loan expeditiously, as he desired. In the course of those
discussions he asked that the loan amount be increased to $15 million "so I wouldn't have to clean
Dut my business account, but 10.5 is what 1 need [to] get to the invoice amount." That Mr.
VlcCown's business might desire a loan at that juncture, notwithstanding the sum of money wc
jnderstood to be in his personal bank account, was not surprising because 1 had previously advised
urn that movement into or out of his personal account, in the days preceding the (supposedly)
mminent transfer of his personal wealth to the custodial account at BNP Parlbas in furtherance of
■he investment advisory relationship, should be avoided if possible, as such movement would cause
urther scrutiny and delay implementation of the contemplated investment fund.
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17. On May 7^ Mr. McCown e-mailed "Kendall Hayford;' at the illegitimate
e-mail address referenced above, as follows (Exhibit 12, attached hereto and incorporated herein
by reference):
In chatting with David this morning, he will need a release of all of my personal account
information. I authorize you to give him any and all info he needs.
Kendall Hayford" responded,"David, Let me know what information you will require." {Id.)
18. In furtherance of the following, we sought and obtained the following
documentation from defendant McCown through the individual we understood to be WCB Vice
President Kendall Hayford:
• A Deposit Account Control Agreement("DACA") granting plaintiff operational
control over Mr. McCown's personal bank account at WCB. Pursuant to the
DACA, plaintiff was granted a security interest in that account and the bank was
directed to "cease complying with all instructions or directions" from Mr. McCown
regarding the account. The DACA with counterpart signatures from Mr, McCown
and "Kendall Hayford"(in two places) is attached hereto and incorporated herein
by reference as Exhibits 13 and 14; see paragraphs 2 and 5 and Exhibit A ("Notice
of Exclusive Control").
• An "attestation," on (purported) WCB letterhead, stating that "The purpose of this
document is an attestation ofthe account balance of Paul McCown's personal bank
account, ending in -3668. As of today, May 7, 2021, the account balance is
$761,481,265.21." That document bore the (purported) signature of Kendall
Hayford, and concluded that "I affirm this balance in my capacity as an officer of
the bank, its Corporate Vice President and Branch President"(Exhibit 15,attached
hereto and incorporated herein by reference).
• A subsequent "attestation," identical to Exhibit 15 except dated four days later and
setting forth the entire account number of ending in 3668 (Exhibit 16, attached
hereto and incorporated herein by reference)
• Confirmation from "Kendall Hayford"("Very good and understood"), sent from
the illegitimate e-mail address, that the bank would comply with plaintifTs
"Standing Instruction to Wyoming Community Bank.""[p]er the Deposit Account
Control Agreement and as the Secured Party," that WCB would "provide us written
prior notification of any withdrawal request from Paul McCown's account(s) at the
Bank" and would "only release ... funds afier receiving our written authorization"
(Exhibit 17, attached hereto and incorporated herein by reference).
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And,ofcourse, we possessed the March bank statement. Exhibit 3,that(fraudulently) reflected a
balance in the account at that time of$750,323,282.83. According to the President of Wyoming
Community Bank, that statement and the other statements provided to us by Mr. McCown
purportedly from WCB were "not true and correct statements from WCB for the account ending
in 3668 in Mr. McCown's name and appear to be forgeries"(see paragraph 4 ofthe Affidavit of
Scott Estep, sworn to on June 10, 2021, submitted herewith as Exhibit B to the Complaint.
19. All of the "Kendall Hayford" signatures on Exhibits 13, 15 and 16 were
forged, the contents of the Exhibit 15 and 16 "attestations" were false - defendant McCown did
not have anything approaching three-quarters of a billion dollars in his account at WCB (see
paragraph 4 ofthe Affidavit of Kendall Hayford,sworn to on June 10,2021 ("Hayford Affidavit")
submitted herewith as Exhibit C to the Complaint)-the e-mail purportedly from Kendall Hayford
in Exhibit 9 was not in fact from Kendall Hayford; and the purported bank letterhead on Exhibits
15 and 16 was forged. We knew none of that at the time, unfortunately.
The Loan Is Extended
20. On May 10, 2021, defendant McCown executed, on behalf of his company
McCown Enterprises LLC, a Promissory Note in favor of plaintiff in the amount of $15 million
Exhibit 18, attached hereto and incorporated herein by reference). He also executed, in his
ndividua! capacity, a Security Agreement(Exhibit 19, attached hereto and incorporated herein by
■eference) granting plaintiff a "continuing security interest" in the account that was the subject of
;he previously-referenced DACA (Exs. 13 and 14).
21. Mr. McCown's signature on both of those documents was notarized by one
\pril Pendleton, who upon information and belief was and is the Director of the Business and
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Financial Aid Office at Wyoming Catholic College, where Mr. McCown was and is the Chief
Financial Officer.
22. Paragraph 8.2 of the Promissory Note (Ex. 18) provided that if "[a]ny
representation or warranty made or deemed by the Borrower to the Noteholder herein or in any
certificate, document or report delivered in conjunction with the Loan is incorrect in any material
respect or shall have been false or misleading in any material respect on the date as of which such
representation or warranty was made or deemed made,''that would constitute an Event of Default
under the Promissory Note. On May 26, 2021, plaintiff declared the note in default on that basis
and accelerated the amount due in accordance with the terms of the note.
23. Before we advanced any funds, my colleague Brian Kim telephoned WCB
and asked for Mr. Hayford. He was eventually transferred to Mr. Hayford's voicemail, thereby
confirming that Mr. Hayford was a real person who was truly a bank officer at WCB. Later that
day - affer, we now know,the real Mr. Hayford asked Mr. McCown what the call was about and
Mr. McCown replied that he had "no idea"(see paragraph 15 of the Hayford Affidavit, submitted
lerewith as Exhibit C to the Complaint) - Mr. Kim received an e-mail from the illegitimate
'Kendall Hayford" account apparently referencing the voicemail (Exhibit 20, attached hereto and
ncorporated herein by reference).
24. Mr. McCown provided us with wire instructions directing that the loan
proceeds be sent to his business account at WCB,routed through its correspondent bank Bankers
Bank of the West(Exhibit 21, attached hereto and incorporated herein by reference). On May 11,
iD21, we wired the $15 million (less an origination fee) in accordance with the wire instructions,
he Promissory Note and all of the supporting documentation referred to above.
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Defendant McCown Immediately Transfers
The Loan Proceeds For His Personal Benefit
25. On May 11"\ within hours or minutes of receiving the loan proceeds from
plaintiff, Mr. McCown began transferring almost all of those millions of dollars out of his
business's account at WCB(none of it to pay a purported "supplier"). Specifically, we understand
that he made the following transfers:
(0 He sent Phillip McCown, believed to be his father, $375,000 on May 11.
(ii) He sent his brother-in-law and sister-in-law, Paul and Claire Alarcon,$750,000 on
May 11.
(iii) He transferred $550,000 to his personal WCB account, on May 19, and that same
day sent those funds from his personal account to a company named Trolan LLC, which is
registered to conduct business in Wyoming but is located in Michigan (Mr. McCown's home
state), and with which we believe Mr. McCown is affiliated and may well own or control.
(iv) He obtained, in person at WCB on May 11, a cashier's check payable to the State
3f Wyoming in the amount of$841,863.
(v) He sent $375,000 to the financial services firm Robert W. Baird and Company,
A'here we believe Jonathan Tonkowich (Mr. McCown's colleague at Wyoming Catholic College
vho had introduced us to Mr. McCown) has an investment account. Eight days later, he sent
mother $375,000 to Robert W. Baird and Company.
(vi) Most significantly, however, on May II, immediately upon receiving the $15
nilhon from plaintiff, Mr. McCown transferred $10.5 million to the "Goldman Sachs Philanthropy
•und," which he then directed to transfer $10 million as an "anonymous donation" to Wyoming
atholic College, where(as noted) he is the Chief Financial Officer.
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26. The Goldman Sachs-related transfers are reflected in Exhibits 22 through
25. The $750,000 transfer to Mr. McCown's brother-in-law and sister-in-law was confirmed by
their lawyer (see Exhibit 26). The remaining transfers have been learned through our counsel's
investigation, including what has been reported by WCB's counsel,and will be confirmed through
the expedited discovery sought on this motion.'
Defendant McCown Fraudulently Purports To Confirm
A Non-Existent Transfer of$761 Million From His Personal Bank Account,and
His Fraud Unravels
27. In the days following his receipt of the proceeds of the $15 million loan -
and without any knowledge on our part ofthe transfers referenced above- Mr. McCown continued
to move forward with his stated intention to fund an investment advisory account with the massive
amount of money purportedly held in his personal account at WCB. There were numerous
exchanges of e-mails between myself, Mr. McCown and the illegitimate ''Kendall Hayford" e-
■nail address, and text messages between myself and Mr. McCown, regarding necessary regulatory
and logistical requirements, among other things.
28. In the course of those exchanges, "Kendall Hayford" supplied us with a
■equired anti-money laundering letter, purportedly on WCB letterhead and executed by "Kendall
"layford as VP Branch President' (Exhibit 27), in a form previously provided to him by us. That
lignature, too, we now know, was forged.
29. Notwithstanding various delays during mid-May - delays that Mr. McCown
itlributed to "Kendall Hayford's" lack of sophistication and experience - on May 21, 2021
'Kendall Hayford" wrote to me (from the illegitimate e-mail address) that "The funds have been
eleased (Exhibit 28, attached hereto omitting attachment and Incorporated herein by reference).
One of the Goldman Sachs documents, Exhibit 22. reveals that Mr. McCown stated his e-mail address to be
pdm@trolanIlc.com," thereby confirming his connection with the "Trolan" recipient of $550,000 set forth above.
11
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A few hours later, Mr. "Hayford" confirmed "Details; amount: $761,000,000.00. Reference
number Is 0512B10FD05D008I27. BNP should see It come through shortly" (id.). And a few
hours after that, Mr."Hayford" sent a purported "Authorization for Wire Transfer" in the amount
of $761,000,000" from the "Originator" Paul McCown to BNP Parlbas, at the BNP account
number we had provided, with the "ABA #, Swift Code, Sort Code" of"BNPAUS4NB25"(Id.
and Exhibit 29,attached hereto and incorporated herein by reference).
30. Ail of that was on Friday, May 21^ The funds did not arrive that day, or
on the following Monday the 24*^'(or ever). A series of excuses and evasions were put forth by
Mr."Hayford," but early in the week of May 24^ our then-counsel was able to be in touch with
WCB's President and then with the bank's outside counsel, and defendant McCown's fraudulent
activities began to become known.
31. In connection with our counsel's investigation, an attorney then
representing Mr. McCown stated that Mr. McCown denied signing the notarized loan documents
exhibited here as Exs. 18 and 19; denied any knowledge ofthose documents; and denied borrowing
money from plaintiff at all. At our counsel's request, that lawyer memorialized those denials in
writing on June I, 2021 (Exhibit 30, attached hereto and incorporated herein by reference):
As you know, we represent Paul McCown. We have discussed with him the purported
term sheet, promissory note, and security agreement... forwarded to us on Thursday He
informed us that he has never seen these documents before and did not borrow money from
RIA R Squared. He has no knowledge of the origins of these documents.
I can confirm that 248-376-3761 is Mr. McCown's cell phone number. Mr. McCown is
noUware of any text exchanges with anyone at RIA R Squared about a loan or promissory
iven the facts presented above and below in this affidavit, and in the accompanying affidavits of
the real) Kendall Hayford and of WCB's President Scott Estep, all ofthose denials are incredible.
12
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Whereabouts Of the Proceeds of Our Loan
32. Wyoming Catholic College confirmed, through its counsel, that it has the
$10 million "anonymous gift" received from the Goldman Sachs Philanthropy Fund. The College
refused to accede to our request to provide us with ten days notice before transferring all or any
part of those funds, and told us that it is "inclined to believe" Mr. McCown's denial of any fraud
ar wrongdoing, but did state that it has "voluntarily and unilaterally decided to hold the funds
pending completion of its investigation, or its determination that[R Squared] does not intend to
.. provide [sufficient] support [for] its allegations."
33. Upon information and belief, Goldman Sachs has the $500,000 difference
between the $10.5 million transferred to the Philanthropy Fund on May 11, 2021 and the $10
■nillion transferred to Wyoming Catholic College the next day.
34. Paul and Claire Alarcon, Mr. McCown's brother-in-law and sister-in-law,
onfirmed through their counsel that they have the $750,000 that Mr. McCown sent to them on
V4ay 11, and they represented that they would provide us with seven days notice before transferring
hose funds.
35. Phillip McCown, believed to be defendant Paul McCown's father, has not
esponded to our counsel s inquiry and is presumed to be holding (or to have transferred or
lissipated) the $375,000 we believe was sent to him by his son on May 11.
36. Trolan LLC, the company with which Mr. McCown appears to be affiliated
i ind to which he sent $550,000, has not responded to our counsel's inquiry and is presumed to be
lolding (or to have transferred or dissipated) those funds.
37. Robert W. Baird and Company has acknowledged our counsel's inquiry,
>ut without a subpoena or court order will not confirm receipt by Mr. McCown's fellow officer at
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Wyoming Catholic College, Jonathan Tonkowich, of the two $375,000 transfers from Mr.
McCown or provide any information about subsequent transfers or where those funds may be at
this time.
38. $841,863 was apparently paid to the State of Wyoming.
39. The total of all known transfers of the $14.7 million wired to McCown
Enterprises by plaintiff, in furtherance ofthe $15 million loan, is $13,766,863. While there may
have been additional subsequent transfers, almost a million dollars - $933,137 to be exact -
remains unaccounted for. All or part of that sum may yet be in the McCown Enterprises account
at WCB,or otherwise within Mr. McCown's custody and control one way or another.
40. Furthermore, given the extensive and complicated nature of this fraudulent
and misleading activity, we remain concerned that the funds whose whereabouts are not fully
known - at least $3,450,000, or over $2,600,000 excluding the payment to Wyoming - may
similarly quickly be dissipated. In addition, all of the disseminated funds may not remain
stationary, and with any further transfers, the efforts, costs and expenses necessary to find and halt
he dissipation will be compounded.
Conclusion
41. Throughout the course of our relationship with Mr. McCown and his
)usiness entity, we reasonably relied upon his representations, as set forth above, and believed
hem to be true; and we reasonably relied upon the documentation he provided us (the exhibits
: eferred to above as well as the Operating Agreement of McCown Enterprises, attached hereto as
exhibit 31 and incorporated herein by reference) and believed it to be genuine, including
documents presented with the purported letterhead of WCB and with the purported signature of
VCB officer "Kendall Hayford." Based upon that reasonable reliance, we entered into the $15
14
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million loan transaction and wired the loan proceeds accordingly. We would not have done so in
the absence of those representations and documents.
42. I have reviewed the Verified Complaint and Request For Immediate
Injunctive Relief being filed contemporaneously with this affidavit, and I hereby verify its
accuracy and truthfulness.
43. This matter has already significantly impacted the operations of 10, if not
more,entities and individuals. It is crucial that Mr. McCown be halted immediately from engaging
in further activities that will continue to disseminate and/or dissipate his assets, including the
money he fraudulently obtained from Ria R Squared.
id Kang
Sworn to before me this
day of June 2021
/u
"^ota^Tubiic
Hiiiiiinintiiiiiiiiniiiiiiiiiiiiiuiiitiiiiiiiiiiiiniiiiiiiiiiiiiiiiiiiiiiiiiiniuiig
ANTHOSY TORRES
|
Notary Public - California =
Los Angeles County
|
Corrmission » 2269018 =
MyCoinm.ExplresDec 1,2022 1
SiiiiimiiiiiiiiiiiiiiiiiiiiniiiiiiiiiiiiuiuiiiiiuiiiiiiiiiiimMiiiiiiiiiimiiiiR:
15
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Exhibit B
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AFFIDAVIT OF SCOTT ESTEP
STATE OF WYOMING )
COUNTY OF \
SCOTT ESTEP, being sworn, states as follows:
1. I am of the age of majority and competent to testify to the matters contained
herein.
2. I am the President of Wyoming Community Bank("WCB")in Lander, Wyoming.
3. I have been provided with three documents("WCB Statements") purporting to be
WBC bank statements for January, February and March of 2021 in the name of Paul McCown
for an account "ending in 3668." The WCB Statements accompany this affidavit as Exhibit A.
4. WCB Statements are not true and correct statements from WCB for the account
ending in 3668 in Mr. McCown's name and appear to be forgeries.
5. The purported wire transfer into the account ending in 3668 on March 1, 2021, in
the amount of $750,000,000.00 as set forth in Exhibit A, is fictitious and never occurred. That
transfer is not reflected in any record of WCB.
6. I have been provided with two documents, dated May 7, 2021 and May 11, 2021
respectively, purporting to be on WCB letterhead (the "Attestations"). The Attestations
accompany this affidavit as Exhibit B.
7. The format of the letterhead on the Attestations does not reflect the true and
correct letterhead for WCB, and the representation set forth in the Attestations is false, to my
knowledge, and does not accurately reflect the bank's records.
Scott Estep Affidavit
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8. To my knowledge, neither Paul McCown nor any entity he owns or controls has
ever held hundreds of millions of dollars in an account or accounts at WCB as WCB would be
unable to hold such large of deposits.
FURTHER AFFIANT SAYETH NOT.
DATED this jO day of )un^ 20 "2-( .
STATE OF WYOMING )
) ss.
COUNTY OF
The foregoing Affidavit ofScott Estep was verified, subscribed, and sworn before me by
Scoll Estep, this /() day of June, 2021.
Witness mv hand and official seal.
PATRICIAA. O'NEAL-NOTARY PUBLIC
|
COUNTY OF STATE OF Notary Public
FREMONT WYOMING I
My Commission Expires 05-01-2023 4
My commission expires:
5-/-Z3
Affidavit of Scott Estep
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Exhibit C
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AFFIDAVIT OF KENDALL HAVFORD
STATE OF WYOMING )
COUNTY OF ?
KF,NDAI,I. HAYFORD,being duly sworn, states as follows:
1. I am of the age of majority and competent to testify to the matters contained
herein.
2. I am the Vice President, Branch Manager of Wyoming Community Bank
("WCB")in Lander, Wyoming.
3. I have been provided with copies of a "Deposit Account Control Agreement"
dated May 10, 2021, a"WCB Attestation" dated May 7, 2021, another"WCB Attestation" dated
May 11, 2021 and a letter dated May 19,2021 with the "Re" line "Wyoming Community Bank
Anti-Money Laundering Program." All four of those documents(the "WCB Documents")
accompany this affidavit as Exhibit A.
4. I affirm that the signature of"Kendall Hayford" on each ofthe four WCB
Documents is not my signature.
5. Prior to receiving the WCB Documents subsequent to the dates contained on each
of those documents, I had no knowledge of any ofthem and had never seen any ofthem
previously.
6. The representation set forth in the two"WCB Attestations" contained in Exhibit B
is false, to my knowledge, and does not accurately reflect the bank's records.
7. I also have been provided with emails sent to and received by the email address
khayford@wyocommunityb.com.
Kendall Hayford Affidavit
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8. I affirm that the email address khayford@wyocommunityb.com is not my email
address at WCB (or otherwise). I have never used that email address.
9. Prior to receiving the emails bearing the address
khayford@wyowcommunityb.com, I had no knowledge of any of those e-mails or the email
address khayford@wyowcommunityb.com, nor had I ever seen those emails or the email address
khayford@wyowcommunityb.com.
10. The emails bearing the address khayford@wyowcommunityb.com represent on
their face that the phone number for Kendall Hayford is 307-310-5096.
11. I affirm that the 307-310-5096 phone number is not my personal phone number or
business phone number. I have never used that telephone number.
12. Prior to receiving the emails bearing the address
khayford@wyowcommunityb.com, I had no knowledge of the 307-310-5096 phone number, nor
had I ever seen the 307-310-5096 phone number before, to the best of my knowledge.
13. Until I was provided with the WCB Documents and the emails bearing the
address khayford@wyowcommunityb.com, I had no knowledge of any loan agreement between
Ria R Squared Inc. and Paul McCown or McCown Enterprises LLC.
14. To my knowledge, neither Paul McCown nor any entity he owns or controls has
ever held hundreds of millions of dollars in an account or accounts at WCB because WCB would
not be capable of holding such sums.
15. On May 10, 2021 I received a voicemai! message, at my bank telephone number,
from an individual who identified himself as Brian Kim calling in connection with Paul
Affidavit of Kendall Hayford
Page 2 of3
Case
Case 1:22-cr-00023-SWS
0:21-cv-00125-SWS Document
Document26-1
1-5 Filed
Filed 06/22/21
06/15/22 Page
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McCown. Later that day, I asked Mr. McCown what the voicemail was about and he responded
that he had "no idea."
FURTHER AFFIANT SAYETH NOT.
DATED this 10 day of ,20 2/ .
Kendall Havford
STATE OF WYOMING )
I )
COUNTY OF rf^/vlu.-,r )
The foregoing Affidavit of Kendall Hayford was verified, subscribed, and sworn before
me by Kendall Hayford, this |0 day of June, 2021.
Witness my hand and official seal.
irsiA A /-.'aiCAI .kir^TADV DIIRl ir
PATRICIA
COUNTY OF
A. O'NEAL - NOTARY PUBLIC
STATE OF
T
f//-L A ^
FREMONT WYOMING I Notary Public
MyCommlasfon Expires 05-01-2023 i
My commission expires:
Affidavit of Kendall Hayford
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