"Down the ridiculous rabbit hole," "magical math," "smoke and mirrors," "sixteen-year charade." That's how the plaintiff's post-trial brief in Becker v Perla described the defendant's reverse-field disavowal of his sworn accounting in which he reported using $4.5 million dollars of plaintiff's funds to invest in a beachfront resort development project in the Dominican Republic (DR Project).
Those descriptors pale in comparison to the harsh assessment by Manhattan Commercial Division Justice Jennifer Schecter in her Decision After Trial earlier this month, in which she labels the defendant's position at trial as "outrageous" for having forced the plaintiff to "go on a wild goose chase based on a lie" and engaging in "wasteful gamesmanship." Mincing no words, Justice Schecter describes the defendant as someone who "cannot be trusted to testify truthfully after having lied for so many years about investing [plaintiff's] money" into the DR Project.
Background. The case concerns a business relationship that began many years ago, when defendant Daniel Perla brought on plaintiff Ronny Becker as paid consultant in residential real estate development projects in lower Manhattan. Starting around 2006 Becker invested up to $7.9 million in two of Perla's Manhattan projects. According to Becker, in 2009 Perla told him that Perla had transferred around $4.5 million of Becker's profits from the Manhattan projects being held by Perla to fund, along with funds of Perla and other investors, the DR Project on which Becker also was working as consultant. Becker's supposed $4.5 million investment subsequently was reflected in Form K-1s issued to him by an LLC formed for the DR Project and in correspondence to Becker's attorney in 2012.
The 2013 Lawsuit. The DR Project apparently encountered serious if not fatal setbacks. In 2013, Becker and others filed suit against Perla and several entities involved in the DR Project, alleging that Perla failed to perform adequate due diligence, solicited investors with false representations, withheld information from investors, and breached operating agreements and fiduciary duties owed the investors.
In 2015, the judge handling the case ordered Perla to provide accountings and all supporting documents regarding the corporate entities at issue. Perla failed to comply with the order and with a subsequent order with specific directives regarding the level of detail to be provided. He then filed an accounting that failed to comply with the second order, prompting the judge to issue a conditional order striking Perla's pleadings unless he filed a proper accounting with appropriate documentation and explanations.
The following year, Perla filed an accounting of the DR Project representing that $4.5 million of Becker's money was put into the DR Project as a capital contribution. The accounting included Perla's sworn verification of the accounting's accuracy. It was accompanied by two dozen exhibits but did not identify or explain which exhibits supported which portions of the accounting, which the court found violated its conditional order but imposed a monetary sanction instead of striking Perla's pleadings. As required Perla also filed an affidavit stating that he possessed no further documents supporting the accountings.
The parties completed fact and expert discovery and filed the note of issue certifying trial readiness in 2019.
The Trial. Other than delay due to the Covid pandemic or perhaps attempts at mediation, it's not clear why the case didn't go to trial until 2024, but that's what happened. By then the case was reassigned to Justice Schecter who conducted a bench trial in July of that year. In his pretrial brief and at trial, which was held over six days and included expert witnesses, Perla maintained that he never transferred to the DR Project any of Becker's funds from the Manhattan development projects and that, for various, complicated reasons I won't clutter this post with, there never were any Becker profits to transfer from those projects to the DR Project. Perla attempted to explain away the $4.5 million Becker capital contribution to the DR Project in his 2016 accounting as based on a mere "assumption" that he calculated by adding up the project's total expenses, subtracting other investors' capital contributions, and dividing the $9 million remainder 50% Becker, 50% himself.
Justice Schecter's Post-Trial Decision. You might expect that after 12 years of litigation, a six-day trial, and a court docket populated with over 1,200 entries including hundreds of (proposed) trial exhibits, Justice Schecter's post-trial opinion necessarily would be a magnum opus. Not the case. Justice Schecter's crisp, 6-page Decision After Trial in its opening paragraph boils the case down to the single issue of Perla's verified accounting giving rise to estoppel, amplified by his lack of credibility:
In the end though–at least for purposes of this action–many of these unresolved questions [concerning the DR Project] do not matter because: (1) in the accounting, Perla swore that he put $4.5 million of Becker's money into the DR Project; but (2) at his deposition and at trial, Perla admitted that he never did so. While Perla now contends that Becker is not owed any money from the NY Projects, he is estopped from taking that position based on his sworn statement to the contrary in the accounting (and, in any event, his convenient backtracking renders him wholly incredible on the matter). Since Perla admitted that Becker is owed $4.5 million and that ultimately such funds were never put into the DR Project, the court finds that he owes this money to Becker.
In the decision's following pages Justice Schecter comes down harder on Perla, noting that Perla's sworn accounting required "years and significant resources taking discovery to vet the veracity of this assertion and to see what happened to [Becker's] investment," while at trial "[h]e claims to have essentially made up the numbers to justify how much he wanted to attribute to the parties' capital contributions based on the amounts that were supposedly put into and spent on the DR Project." Therefore, she continued, "it is undisputed that Perla never put any of Becker's money into the DR Project and that Becker's $4.5 million capital contribution that Perla recorded was just a made-up accounting notation" (emphasis in original).
Perla's contention that he owed Becker no money draws even greater ire from the judge, who wrote:
The court rejects this outrageous assertion. There was no reason for the parties to have spent years trying to follow the money and to have investigated the details of the DR Project if Becker was not owed $4.5 million on the NY Projects in the first place. That was the whole basis for the DR Project accounting. If Perla's position was that Becker was not entitled to any further profits on the NY Projects, he should have just said so, and the focus of the case would have been limited to the accountings of the NY Projects. The DR Project would not have mattered. Instead, Perla repeatedly told Becker that his $4.5 million of profit on the NY Projects was invested into the DR Project. He now admits that never occurred. Perla could simply have taken the position that Becker was not owed any unpaid profits from the NY Projects rather than making up a fake capital contribution to which Becker was supposedly entitled. Perla made Becker go on a wild goose chase based on a lie.
Perla cannot "walk back at trial" and is estopped by his "fundamental admission that Becker, at a minimum, was entitled to $4.5 million as his outstanding profit share from the NY Projects," which otherwise, the judge writes, "would make a mockery of the judicial process."
Perla's lack of witness credibility earns him further personal reproof, the judge finding that "based on an evaluation of Perla's credibility, it appears that Perla never had any intention of paying Becker his profit share from the NY Projects and simply made up a story about putting his money into the DR Project." Then, "when it became clear that he could never properly account for the money and faced the prospect of being surcharged, he backtracked and tried to claim that Becker is owed nothing." In the end, says Justice Schecter, Perla "cannot be trusted to testify truthfully after having lied for so many years about investing Becker's money into the DR Project."
The decision orders entry of judgment in Becker's favor for $4.5 million plus interest at the 9% statutory rate from mid-2008, which should put the final judgment over $11 million.
Take the Court-Ordered Accounting Very Seriously. In my decades of practice and reading case law, I've gotten the impression that many commercial litigators don't fully appreciate the importance of understanding the elements of a formal accounting and the necessity to rigorously document the data in the schedules. I don't think that's nearly the case with counsel who administer and litigate trust and estate matters in which formal accountings by fiduciaries are a vital and frequent aspect of their practice. It also helps that trusts and estates practitioners, unlike commercial litigators, are bound to comply with specific standards and formats for accountings promulgated by the Surrogate's Court.
On that note, it's interesting that the initial judge in the Becker case, after Perla failed to comply with her first two orders directing him to file accountings, in her third order explicitly directed Perla to file accountings that "contain the schedules required for a fiduciary accounting in Surrogate's Court, minus the schedules pertinent only to estates such as funeral expenses, but adding all documents in the defendant's possession, custody or control as exhibits for each entry on his or its accounting." Her order even directed Perla to specific provisions governing accountings in the Uniform Rules for the Surrogate's Court, sample schedules found in a leading treatise on New York's Estate Practice & Trusts Law, and the Surrogate's Court's official trust accounting form with instructions. Little good it did Perla.
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