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Case 1:01-cv-02315-LTB-CBS !O.

Document 485-3

Filed 08/25/2005

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO
2315 (CBS)

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Civil Case No. 01In re:

HARVEY SENDER, TRUSTEE OF THE LIFEBLOOD BIOMEDICAL , INC. LIQUIDATION
TRUST and HARVEY SENDER , TRUSTEE OF THE LIFEBLOOD BIOMEDICAL , INC. OPT- IN-TRUST

Plaintiffs

WILLIAM JEFFREY MANN , an individual , WILLIAM WELLS II , an individual , FREEBORN & PETERS , an Illinois partnership, MICHAEL SABIAN , an individual , DARWIN J. POYFAIR an individual , MERKLE & MAGRI , a Florida professional association , JAMES R. LEONE , a Florida professional association, JAMES R. LEONE , an individual , and THE WILLIAM & ELAINE WELLS F AMIL Y LIMITED PARTNERSHIP , a Florida limited partnership,
Defendants.

FINAL PRETRIAL ORDER

1. DATE OF CONFERENCE AND APPEARANCES OF COUNSEL

A final pretrial conference is scheduled for February 27 2004. The following counsel

and pro se parties are expected to appear.

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EXHIBIT

Case 1:01-cv-02315-LTB-CBS

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never have sufficient income to repay its mounting debt. He drafted an offering memorandum

for the purported sale of Lifeblood stock. Leone performed similar services for successive fraud
schemes. When the perpetrators of one of those schemes , including Mann, came under
indictment , Leone knowingly agreed to take possession of assets and information to prevent

them from falling into the hands of law enforcement officials. He now claims this benefited
Lifeblood.

The fraud perpetrated in connection with Lifeblood was not the first fraudulent scheme
with which Mann, the Freeborn Defendants and Leone were associated. Mann was involved
with the Legends Sports ' scheme , which contained many of the same elements as the Lifeblood

scheme. Through his brother and others , he was also involved in other fraudulent programs that
included promissory note elements. Leone and Sabian were also involved with Legends Sports
providing services in connection with that program that were similar to the services performed.

for Mann and Wells in connection with Lifeblood. Each of the limited liability partnership
programs that Freeborn & Peters and Sabian formed for Mann and Wells were intended to have

successive offerings around the country. Further, Sabian and Freeborn & Peters assisted Mann
and Wells in what was intended to be a reincarnation of the Lifeblood scheme , involving

promissory note and limited liability partnership elements. In short , the evidence demonstrates a
pattern of wrongful activity on the part of these Defendants.

As a result of the fraud perpetrated by Mann , Wells , the Freeborn Defendants and Leone
Defendants, more than 200 members of the public purchased and maintained investments in

Lifeblood promissory notes. The holders of the outstanding notes are now unsecured creditors of
Lifeblood and beneficiaries of the Lifeblood Biomedical , Inc. Liquidation Trus

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Case 1:01-cv-02315-LTB-CBS

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99 of those creditors also assigned their claims to the Lifeblood Biomedical , Inc. Opt- In Trust.

Plaintiff, as Trustee of both trusts , brings some claims in this action on behalf of the Liquidation
Trust and other claims on behalf of the Opt- In
Trust. His standing to bring such claims is

discussed in Plaintiffs response to the Freeborn Defendants ' motion for summary judgment.
Defendant Merkle & Magri was

not a participant in the fraud. It is named in this action

because it received $100, 000 in Lifeblood funds for purposes of representing Mann personally.
Merkle & Magri used the $100 000 to pay the legal fees incurred in representing Mann and his
brother , Richard, in criminal actions brought against them. The money was transferred to

Merkle & Magri by Freeborn & Peters. As more fully explained in Section 3. B. below , Merkle
& Magri contends that attorneys at Freeborn & Peters stated that the $100 000 belonged to Mann

and was not the product of wrongdoing. Freeborn & Peters denies that contention. Plaintiff
contends that the transfer is avoidable under applicable fraudulent transfer law.
(i)

Specific Claims against Mann, Wells and the William and Elaine
Wells Family Limited Partnership

Mann, Wells and the William and Elaine Wells Family Limited Partnership (the " Wells
Family, loP.

Committed fraud . Mann and Wells made material misrepresentations and omitted material information about themselves and Lifeblood in selling promissory notes. They purposefully created a false image of Lifeblood. Had noteholders or their agents known the truth, they would not have participated in the promissory note program. Mann and Wells also committed fraud by taking money intended for funding Lifeblood' purported business operations and using it for personal gain and other unauthorized purposes. Relying on the false image of Lifeblood , members of the public purchased promissory notes. The Trustee is entitled to recover damages in the form of the outstanding promissory notes, plus prejudgment interest. To the extent not duplicative , the Trustee is also entitled to recover the sums misappropriated from the Lifeblood Entities. In addition, the Trustee is entitled to punitive damages and post-judgment interest.
(A)

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