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O'Kane v. Sembritzky

United States District Court, S.D. Texas, Houston Division

June 19, 2019



          Lee H. Rosenthal, Chief United States District Judge.

         William O'Kane, Synergy Source, LLC, and Azkarta Crest Corporation sued individual and corporate defendants over an allegedly fraudulent investment scheme, the proceeds of which are alleged to have paid for a luxury condominium property. (Docket Entry No. 38). The plaintiffs moved for a preliminary injunction to compel two of the defendants, Verley Sembritzky and his ex-wife, Goldie Rose, to pay the property taxes assessed against that condominium, which is titled to Rose. (Docket Entry No. 105). Rose responded, Sembritzky did not, and the plaintiffs replied. (Docket Entry Nos. 107, 110).

         Based on the motion, response, and reply; the record; and the applicable law, the court grants the motion to compel Rose to pay the property taxes assessed against the condominium but denies the motion as to Sembritzky. (Docket Entry No. 105). The reasons for this ruling are detailed below.

         I. Background

         The case presents a colorful cast of characters. In late 2015, Verley Sembritzky, also known as “Rocky, ” gave O'Kane, Synergy, and Azkarta Regulation D, Rule 506 Private Placement Letters stating that he was authorized to sell 1, 000 shares of Rasli Bahari Kenya Limited stock for $175.5 million. (Docket Entry No. 38 at ¶¶ 20-22). This common stock was to be sold to accredited investors for $175, 500 per share. (Id. at ¶ 22). The letter represented Sembritzky as Rasli Bahari's founder and managing director. (Id.). Sembritzky told the plaintiffs that the money would be used to design, build, and operate the first of several Kenyan desalination plants, which the letter predicted would earn hundreds of millions of dollars starting in 2019. (Id. at ¶¶ 23-24).

         O'Kane completed and signed the Stock Subscription Agreement, offering to purchase five shares for $875, 000. (Id. at ¶¶ 29, 30). Sembritzky countersigned and responded that the offer was “Accepted By Rocky Sembritzky, Executive Chairman & Founder.” (Id. at ¶ 30). The Agreement instructed O'Kane to send a check to Ocean Harvest, which supposedly maintained an operating account for Rasli Bahari in the United States. (Id. at ¶ 32). A few days later, O'Kane was told to wire his payment to a bank account at BBVA Compass Bank in Houston under the name “Bounty of the Ocean, ” purportedly Rasli Bahari's American agent. (Id. at ¶ 33; see Id. at ¶ 12). Sembritzky emailed O'Kane these revised payment instructions, stating that O'Kane's investment would be used for Rasli Bahari's business expenses and that the total investment was $877, 500. (Id. at ¶ 34). O'Kane followed the instructions and wired his payment to the Bounty of the Ocean account at Compass Bank. (Id. at ¶ 35). Synergy and Azkarta followed similar instructions, investing $351, 000 and $175, 000 through transfers to the Bounty of the Ocean account. (Id. at ¶¶ 43, 51).

         A few days after receiving the money, Sembritzky transferred it to other Compass accounts Sembritzky or his then-wife, Rose, owned. (Docket Entry No. 102-1 at ¶¶ 10-12; 102-2 at ¶¶ 10-12; see Docket Entry No. 110-2 at 11). Before November 23, 2015, the Bounty of the Ocean bank account had a $0 balance. (Docket Entry No. 110-2 at 297). From November 23 to November 25, the account received deposits totaling $2, 106, 000, most from the plaintiffs. (Id.). On November 30, 2015, Sembritzky transferred $2 million to his personal account, and then transferred the same $2 million to Rose's personal account. (Id. at 11-12, 109). After Rose transferred $1.76 million back to Sembritzky and Sembritzky received a $580, 000 transfer from the Bounty of the Ocean account, Sembritzky transferred $2.3 million to a title company. (Id. at 111). The plaintiffs allege that none of the money was invested in Rasli Bahari. (Docket Entry No. 105-1 at 2). The plaintiffs also allege that Rasli Bahari has never attempted to build or operate any desalination plant, harvested any minerals, produced any fresh water, or engaged in operations or charitable donations. (Id.). The plaintiffs never received any financial statements or proof of stock purchase. (See Docket Entry No. 38 at ¶ 61; Docket Entry No. 5-1 at ¶ 9).

         The plaintiffs allege that Sembritzky and Rose used the money to buy a luxury condominium located at 2727 Kirby Drive, Unit 26L in Houston (the “Kirby Condominium”). (Docket Entry No. 102-1 at ¶ 12; Docket Entry No. 102-2 at ¶ 12; Docket Entry No. 5-1 at ¶¶ 12-16; Docket Entry No. 110-2 at 111). The building was deeded to Rose on December 14, 2015. (Docket Entry No. 5-1 at ¶ 14). Rose executed a Statutory Durable Power of Attorney appointing Sembritzky as her attorney-in-fact, with the power to act for her in real-estate transactions relating to the Kirby Condominium. (Docket Entry No. 5-1 at ¶ 16). In October 2016, Sembritzky and Rose began divorce proceedings in Harris County. (Docket Entry No. 38 at ¶ 66; Docket Entry No. 107-1). The plaintiffs allege that on March 1, 2018, Sembritzky executed a mortgage on the Kirby Condominium and delivered it to Rosemarie Johnson, with whom Sembritzky was romantically involved. (Docket Entry No. 38 at ¶ 68). The mortgage used the Kirby Condominium as collateral to secure a $1, 300, 000 loan. (Docket Entry No. 5-1 at ¶ 17; Docket Entry No. 38 at ¶¶ 67-68). Rose and Sembritzky were divorced on March 6, 2019, and the family court concluded that Sembritzky has no rights, title, or interest in the Kirby Condominium. (Docket Entry No. 107 at 1, 9-10; Docket Entry No. 107-4 at 4).

         The plaintiffs assert 20 counts against Sembritzky and Rose, including conversion; breach of fiduciary duty; aiding and abetting breach of fiduciary duty; defalcation; embezzlement; constructive trust; accounting; fraudulent conveyance and transfer, in violation of the Texas Uniform Fraudulent Transfer Act §§ 24.005(A)(1), (A)(2), 240.006(A), 24.006(B); unjust enrichment; and conspiracy. (Docket Entry No. 38 at ¶¶ 72-76, 85-102, 108-173, 178-85). They also seek a declaratory judgment against Sembritzky and Rose and assert additional fraud claims and federal securities violations against Sembritzky. (Id. at ¶¶ 77-84, 186-90).

         In September 2018, the court issued a preliminary injunction prohibiting Sembritzky and Rose “from selling, assigning, transferring, encumbering, or otherwise disposing of any interest in the Kirby Condominium and from receiving or acquiring any interest in the Kirby Condominium, without order from a court of competent jurisdiction.” (Docket Entry No. 11 at 3). The plaintiffs now argue that Sembritzky and Rose have not paid $132, 462.57 in property taxes assessed against the Kirby Condominium. (Docket Entry No. 105; Docket Entry No. 105-1 at 7). They move for a preliminary injunction to compel payment of those taxes and future taxes assessed against the property during this litigation. (Docket Entry No. 105).

         II. The Legal Standard

         A preliminary injunction is an “extraordinary remedy.” Texans for Free Enter. v. Tex. Ethics Comm'n, 732 F.3d 535, 536 (5th Cir. 2013). A court may grant a preliminary injunction only if the movant shows: “(1) a substantial likelihood of success on the merits, (2) a substantial threat of irreparable injury if the injunction is not issued, (3) that the threatened injury if the injunction is denied outweighs any harm that will result if the injunction is granted, and (4) that the grant of an injunction will not disserve the public interest.” Jones v. Tex. Dep't of Criminal Justice, 880 F.3d 756, 759 (5th Cir. 2018) (quoting Byrum v. Landreth, 566 F.3d 442, 445 (5th Cir. 2009)).

         III. Analysis

         The plaintiffs argue that they seek a preliminary injunction “to preserve the status quo and prevent the loss of the luxury condominium that is the subject matter of this case.” (Docket Entry No. 105-1 at 1). Without payment of the approximately $130, 000 in assessed taxes, they argue, the “condominium ...

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