Federal court green-lights adding Nader Ghermezian as defendant in civil racketeering lawsuit over ‘counterfeit’ hand sanitizer

Triple Five Chairman Nader Ghermezian and other family members — including a nephew listed as a principal in Calverton Aviation & Technology — will be added as defendants in a civil racketeering lawsuit pending in the Southern District of New York, under a court order signed last week.

The lawsuit accuses Triple Five and individual family members of wrongfully using a trademarked name and logo on a knock-off hand sanitizer produced in Mexico during the pandemic in 2020.

It seeks to hold the Ghermezians personally liable for losses suffered by the plaintiffs resulting from the alleged counterfeit sanitizer “scheme” undertaken in the name of Triple Five Worldwide. The FDA put the counterfeit sanitizer on its “do not use” list for potential methanol contamination, according to the complaint, which caused irreparable damage to plaintiffs’ brand and business, the complaint states.

Randy Toltz, owner of plaintiff Coronado Distribution, based in Colorado, told RiverheadLOCAL last year the plaintiffs estimate their damages to be approximately $30 million. The complaint seeks treble damages for racketeering and trademark infringement, as well as punitive damages.

A court will “pierce the corporate veil” to impose personal liability on corporate officers, directors, shareholders, or members when there’s no real separation between the corporate entity and its owners, the company’s actions were wrongful or fraudulent, and its creditors suffered an unjust cost. In deciding whether to “pierce the corporate veil,” courts will consider whether the company engaged in fraudulent behavior, whether it failed to follow corporate formalities, whether it was inadequately capitalized, and whether one person or a small group of closely related people were in complete control.

U.S. District Court Judge John P. Cronan on May 31 granted the plaintiffs’ application to amend their complaint in the civil racketeering case already pending against Triple Five Worldwide and other individual members of the Ghermezian family, which owns the international conglomerate.

The court’s 30-page opinion and order allows the complaint to be amended to add as defendants, in addition to Nader Ghermezian, his nephews, Don Ghermezian, CEO of Triple Five, and Syd Ghermezian, chairman and CEO of Community Federal Savings Bank, a bank owned by the Ghermezian family. The order also allows Community Federal Savings Bank to be added as a defendant.

The amended complaint says the Ghermezians failed to follow basic corporate formalities in operating Triple Five Worldwide, a limited liability company formed in Nevada in 2000, which the complaint calls “a sham vehicle.”

Triple Five Worldwide “possesses no tax records” or records of who owns the company, according to the complaint. It “failed to properly issue stock, hold meetings, and/or keep corporate records,” the complaint states.

Ghermezian family members involved in the sanitizer “scheme” conducted business using personal WhatsApp messaging accounts, personal phones, and email accounts associated with other business entities, according to the complaint.

The Ghermezians founded Community Federal Savings Bank in 2001 “as a vehicle to…support the Ghermezian family businesses,” the plaintiffs contend. “There is no real division between CFSB and the various Ghermezian family businesses, including Triple Five Worldwide,” according to the complaint, with Syd Ghermezian and Don Ghermezian having “access to certain CFSB accounts even if they are not account holders or managers of the accounts.”

The bank has been operated “as a conduit for the Ghermezian family businesses rather than as an independent bank,” the plaintiffs contend.

Triple Five denies the allegations of the complaint and fought the plaintiffs’ application for leave to amend the complaint. It has not yet filed a formal answer to the complaint because an answer was not required while the motion to amend was pending.

‘From its inception, Triple Five Worldwide has been a shell company, devoid of any actual assets’

Triple Five, through a limited liability company called Triple Five Real Estate I, owns, with Luminati Aerospace (Daniel Preston’s limited liability company) Calverton Aviation & Technology, the company in a $40 million land deal with the Town of Riverhead.

During the “qualified and eligible sponsor” vetting process conducted by the Town of Riverhead in 2018 — required by state law for the sale of land in a designated Urban Renewal area — Syd Ghermezian and John Ghermezian were identified by Triple Five Chairman Nader Ghermezian as members of Triple Five Real Estate I LLC. (Owners of a limited liability company are called members, according to the IRS.)

The contract of sale with the town originally listed a limited liability company called Triple Five Ventures Co. as an owner of CAT with Luminati, but Triple Five Real Estate I was substituted for Triple Five Ventures Co. after the contract was signed. The town asked for an explanation and more information.

“Typically each project is identified by a separate entity,” Nader Ghermezian wrote in a Jan. 17, 2018 letter responding to the town’s request.

“As we have advised you separately, Triple Five Group of Companies will provide Calverton Aviation & Technology LLC the required expertise and experience we have discussed with you directly,” Nader Ghermezian wrote. “The support offered by Triple Five Group of Companies is not affected by the change in the Triple Five entity that is the member of Calverton Aviation & Technology LLC,” he wrote.

But in CAT’s September 2022 application for financial assistance from the Riverhead Industrial Development Agency, Syd Ghermezian and John Ghermezian are not listed as members/owners of Triple Five Real Estate I. Instead, the application states that Triple Five Real Estate I is 100% owned by Fundco International Ltd., which is 100% owned by Global Investco Ltd., which is 100% owned by Justin Ghermezian, one of Nader Ghermezian’s sons.

Both Fundco International Ltd. and Global Investco Ltd. are corporations formed in the State of Delaware on Sept. 15, 2020. Delaware does not publicly disclose the names of corporate owners.

The Triple Five conglomerate and/or the Ghermezian family own hundreds of corporate and limited liability company entities, formed in multiple states across the U.S. as well as in Canada.

Attorneys for the plaintiff sanitizer companies complained to the court that Triple Five’s business practices and its multilayered ownership structure made it impossible to understand who actually owned Triple Five Worldwide and some of its other entities, including the ones that own and are developing the American Dream mall in New Jersey.

According to correspondence provided to the court by Triple Five’s lawyer in the case, there were some 210 entities “formed in a variety of states over the years” with “T5 or Triple Five” in the name, a company controller in its Edmonton, Canada headquarters wrote in an email to the defendants’ attorney.

“From its inception in or about June 2000, Triple Five Worldwide has been a shell company, devoid of any actual assets and used only as one of numerous conduits through which the Ghermezian family, including Don Ghermezian, Syd Ghermezian, and Nader Ghermezian, ran various real estate operations,” the amended complaint states.

“Triple Five Worldwide is the alter ego of Don Ghermezian, Syd Ghermezian, and Nader Ghermezian,” the complaint states, asking the court to pierce the corporate veil and hold the individuals involved personally liable for the acts and obligations of the company.

The plaintiffs’ attorney in the action is the Nixon Peabody law firm. Nixon Peabody is legal counsel to the Riverhead Industrial Development Agency, from which the Triple Five affiliate CAT is seeking financial assistance. In September, the IDA hired Nixon Peabody to act as “transaction counsel” in the agency’s review and vetting of the application. Following reporting by RiverheadLOCAL in October that Nixon Peabody had previously represented another Triple Five affiliate in connection with the American Dream mall, the IDA in December replaced the firm with a new transaction counsel, Phillips Lytle. IDA board member Lori Ann Pipczynski said at a special board meeting Dec. 21 the agency had obtained “several opinions” that “there is no legal conflict of interest with Nixon Peabody as transaction counsel, but chose to hire a new transaction counsel due community perception of a conflict, so that the review process could continue “without any perceived prejudice.”

Pipczynski did not reference either the RiverheadLOCAL article or the ongoing hand sanitizer lawsuit filed by Nixon Peabody against Triple Five Worldwide and certain Ghermezian family members.