Trrus, BRUECKNER & BERRY 2 2 By Ey Ee Charles R, Berry, #003379 Wendy E. Giberti, 4020162 TITUS, BRUECKNER & BERRY, P.C. um Scottsdale Centre, Suite B-252 YL. MaLson 7373 North Scottsdale Road Scottsdale, Arizona 85253-3527 (480) 483-9600 ‘weiberti@tbb-law.com ‘Attorneys for Plaintiff IN THE SUPERIOR COURT OF THE STATE OF ARIZONA IN AND FOR THE COUNTY OF MARICOPA TIFFANY LEWIS, No. CV2002-022560 STATEMENT OF FACTS IN SUPPORT OF PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT Plaintiff, vs, CRAIG AND KRISTI SCHERF; ARIZONA BARTER EXCHANGE; SCHERF ENTERPRISES, INC., (Assigned to the Honorable Rebecca A. Albrecht) Defer ants. 1. The Plaintiff Tiffany Lewis is a 31 year-old single female, who has been diagnosed with a medical rendering her particularly susceptible to manipulation, coercion, and abuse. See affidavit of Margaret Lewis at paragraphs 4 and 5, a true and accurate copy of which is attached as Exhibit “1.” 2. Many years ago, Margaret and Larry Lewis, Tiffany's parents, set up a brokerage ‘Account (“Account”) for Ms, Lewis’ benefit, Id. at (6. See also affidavit of Lawrence Lewis, at ¢6, a true and accurate copy of which is attached as Exhibit “2.” 3. As of August 1, 2001 the Account was valued at approximately $250,000.00.‘This Account was Ms. Lewis’ primary - an d sometimes only ~ source of income. at 48. 2 | Exhibit “1” at 4 8; Exhibit “2' a 5, Mr. Scherf had actual knowledge of Ms. Lewis’ medical condition, and casily «| esined Ms. Lewis’ trust through manipulation and deceit. See Plintf's Request for Admissions 5 | at 97, true and accurate copy of which is attached as Exhibit “3.” 6 6. By his own admission, Mr. Scherf began his scheme to defraud Ms. Lewis, acted 7 | at all times with an evil mind in doing so, Exhibit “3” at paragraphs 11 and 12. 8 J. Mr. Scherf told Ms. Lewis he was an experienced, licensed securities broker, 8 | when in fact he is not. Exhibit “3” at paragraph 5. 10 8. He represented he would manage prudently Ms. Lewis’ money, and made a i 1« || numerous promises and representations to Ms. Lewis regarding the investment of her money. Td. e 2? fac (4 1 and 4. q i 8 9. In particular, and among other things, Mr. Scherf assured Ms. Lewis: (1) she a] #2 | sould receive substantial earnings in her bank account each month; (@)ber principal balance EB | sould be safe; Ghe would provide her with investment returns on het money far superior 0 * those she could obtain from her existing investments; (4)he could invest her money in a manner 7 80 as to minimize or avoid taxation; (S)and she would earn excellent returns from her . | investments. 1 “| 10. As part of his scheme to defraud Ms. Lewis, Mr. Scherf solicited Ms. Lewis to * | purchase 90,000 shares of Centech 21, Inc. in its alleged initial public offering. Td, at {2. See . also letter dated August 24, 2001 from Scherf Enterprises/Craig Scherf to Tiffany Lewis, a true : and-accurate copy of which is attached as Exhibit “4.” oa 11. Mr, Scherf now admits he made false representations 10 Ms. Lewis in order to og | Solicit her purchase of those shares. Id, at 41. 26v7 18 a 2 23 2 Ea 12. Ms. Lewis reasonably relied on Mr. Scherf"s false representations, and provided him a check for $200,000. Id. at 43. See also copy of Ms. Lewis’ $200,000 check payable to Craig Scherf, a true and accurate copy of which is attached as Exhibit “5.” 13. Mr. Scherf deposited Ms. Lewis’ $200,000 into an account in the name of Scherf Enterprises, Inc. d/b/a Arizona Barter Exchange, which is an Arizona corporation, See Exhibit age 14. Scherf Enterprises serves as the alter ego of Mr. Scherf and his wife, Kristi Scherf. See Exhibit “3” at 49. 15. As it turns out, there is no corporation, in Arizona or anywhere, called Centech 21, Inc., there was no public offering, and Mr. Scherf simply defrauded Ms. Lewis of her $200,000. See Exhibit “3” at 4 6. 16. On numerous. occasions thereafter, Ms. Lewis inquired of Mr. Scherf as to the | status of her investment, an accounting for her investment, copies of the Centech 21 shares, and ‘generally demanding information about the investment. See Exhibit “3" at ¢ 3. 17. Mr, Scherf never provided any of the requested information. In or about October 4, 2001, Ms. Lewis’ parents learned of the investment and on or about November 1, 2001, Mr. Lewis called Mr. Scherf to discuss the accounting of Ms. Lewis” funds. See Exhibit “1” at {9 and Exhibit “2” at $4 9 and10. 18. Mr. Scherf agreed to meet Mr. Lewis, but then failed to appear at the agreed upon time and place. See Exhibit “2" at (11 19. Mr. Lewis again demanded a meeting, and Mr, Scherf finally met with Mr. Lewis and Ms. Lewis at their residence to discuss the funds. Id. at § 12 20. At that time, Mr. Scherf denied misappropriation of the funds, but refused and failed to provide an accounting or a return of the funds. Id. 21. But on November 2, 2001, he gave Ms. Lewis a check for $1,500.00. See copy of check #1474, a true and accurate copy of which is attached as Exhibit “6.” 3333 anes a SBA uees sab eae gebeue & 19 ~ a 2 2 2 6 22. On or about December 1, 2001, the Lewises again demanded a return of funds. Exhibit “2” at ¢ B. , 23. Instead, on or about December 12, 2001, Mr. Scherf again provided Ms. Scherf payment in the amount of $500.00, a true and accurate copy of which is attached as Exhibit “7.” 24, Worse still, during this same period of time Mr. Scherf - still aware of Ms. Lewis’ medical condition - provided Ms. Lewis with prescription medication in an un-labeled container, | which did not a doctor's name, identification of any kind, or instructions for use. Exhibit “1” at 113. 25, The Lewises continued to demand information on the investment. On or about February 2, 2002, Mr. and Mrs, Lewis again asked Mr. Scherf to provide an accounting or any information relating to the investments. See Exhibit “1” at { 15 and Exhibit “2” at { 14 26, ‘Mr. Scherf initially agreed, but ultimately failed to do so. Id. Instead, Mr. Scherf continued to spin his web of lies by exaggerating his net worth and gross revenues, representing he did “11 million dollars worth of transactions” in the previous few months, and even told '| Mrs. Lewis he was doing Ms. Lewis a favor by getting her into certain investments, because he cared about her, Exhibit “1” at § 12. ‘27. Finally, Mr. Scherf assured Mr. and Mrs. Lewis that Tiffany would begin receiving funds in March 2002. Id. at {14. See also Exhibit “2" at $15. 28. The next eight months brought the same from Mr. Scherf. Mr. Lewis, Mrs, Lewis, and Ms. Lewis made numerous demands for an accounting and a return of Ms, Lewis’ funds. Exhibit “1” at § 16and Exhibit “2” at { 16. 29. Mr. Scherf often made promises to meet and discuss the investments, to provide accounting documents, and to return the funds. Mr. Scherf failed entirely to adhere to his at {17 and Exhibit “2” at {17. promises. Exhibit “‘Trrus, BRUECKNER & BERRY Pa Fa 23 2 26 30. So in early November 2002, Mr. Charles Berry, Ms. Lewis’ attorney, made yet another demand for an accounting and a return of the funds. Mr. Scherf ignored entirely ‘Mr. Berry’s demand. A true and accurate copy of the demand letter is attached at Exhibit “8.” 31. ‘The Defendants failed to file an Answer, and on December 12, 2003, the Plaintiff filed an Application for Entry of Default of Judgment, and Affidavit in Support, and a Notice of the Application. See Court's file. 32, Only then did - upon threat of default - did the Defendants respond to the Plaintiff's months of communications, and on December 27, 2003 finally filed their Answer. See Court's file. 33. In accordance with the Arizona Rules of Civil Procedure, Rule 26.1, the parties had an obligation to exchange initial disclosure statements no tater than February 5, 2003. On February 5, 2003, Plaintiff served her initial disclosure statement, and shortly thereafter agreed to extend the Defendants’ deadline for disclosure until February 28, 2003. See Court's file. 34. On September 18, 2003, the Plaintiff served the Defendants with Requests for ‘Admissions and a Request for Production of Documents. See Exhibit ‘The Defendants’ responses were due no later than November 3, 2003, but they failed entirely to respond to the discovery requests. Plaintiff again attempted to communicate with Defendants, but have received no response whatsoever. Id. RESPECTFULLY SUBMITTED this 22” day of December, 2003. TITUS, BRUECKNER & BERRY, P.C. By. © Charles R. Wendy B. Giberti Scottsdale Centre, Suite B-252 7373 North Scottsdale Road Scottsdale, Arizona 85253-3527 Attorneys for Plaintiff 5vomits ‘Trrvs, BRUECINER & Beary ORIGINAL of the foregoing filed and COPY hand-delivered this and lay of December, 2003, to: Honorable Rebecca A. Albrecht Maricopa County Superior Court | 101 West Jefferson, ECB #411 Phoenix, Arizona 85003-2243 COPIES of the foregoing mailed this day of December, 2003, to: Craig Scherf c/o Arizona Barter Exchange 29834 N. Cave Creek Road, Suite 128 Cave Creek, Arizona 85331 /Scherf Enterprises, Inc., d/b/a ‘Arizona Barter Exchange 2432 West Peoria Avenue, Suite 1185 Phoenix, Arizona 85029 [Alan R, Costello, Esq. Ridenour Hienton Harper & Kelhoffer PLLC 201 N. Central Avenue, Suite 3300 Phoenix, Arizona 85004-2397 Counsel for Defendant Kristi Scherf dor ‘TABSST FG TeOS_SOF doeEXHIBIT 1AFFIDAVIT OF MARGARET ANN LEWIS STATE OF ARIZONA) )ss. County of Maricopa ) 1, Margaret Ann Lewis, being first duly sworn upon oath, depose and state as follows: 1, Lam over the age of eighteen, I am competent to testify as to the matters set forth herein, and, to the best of my knowledge, the information set forth herein is accurate and truthful. 2. This affidavit is provided in conjunction with Lewis v, Scherf, et. al, €V2002-022560, Superior Court, Maricopa County, Arizona 3. reside 2t aaa ee. 4. ‘My daughter, Tiffany, was born on July@& 1971. Approximately four years ago my daughter, Tiffany, was diagnosed with a ‘medical condition rendering her particularly susceptible to manipulation, coercion, and abuse. In particular, she has been diagnosed as manic-depressive bipolar. She is still - to this day ~ treating for that condition. 6. Many years ago, her father, Lawrence Lewis, and I set up an account at RBC Dain Rauscher for Tiffany's benefit 7. AS of August 1, 2001 the account was valued at approximately $250,000. 8. AC all relevant times, this account was Tiffany’s primary ~ and sometimes only ~ source of income. 9. Inor about October 2001, I learned of Tiffany’s investment with Mr. Scherf. 10. I was aware that my husband was making efforts to talk with and/or meet with Mr. Scherf to obtain an accounting for Tiffany’s money. 11, On oor about December 1, 2001, I spoke with Mr. Scherf and demanded a return of Tiffany's funds.12, At that same time, Mr. Scherf represented to me that he had “11 million dollars worth of transactions” in the previous few months, and that he was doing Tiffany a favor by + into certain investments, because he cared about her. getting 13. At or around that same time, Mr. Scherf admitted to me that he obtained prescription medication from a friend of his and provided it to Tiffany in an unmarked bottle, fect information, or ‘other identifying which came with no instructions, use or information, 14. At or around that same time, Mr. Scherf assured me that Tiffany would begin receiving funds in March 2002 15. On or about February 2, 2002, I again asked Mr. Scherf to provide an accounting or any information relating {o the investments. Mr. Scherf initially agreed, but ultimately failed to do so. 16. Over the following eight months, I made numerous attempts to get information from Mr. Scherf, to obtain an accounting, and ultimately to obtain Tiffany's funds, 17, To date, Mr. Scherf has not provided an accounting for Tiffany's funds, has not reptid the money, and has not otherwise provided any information on the whereabouts of that money, FURTHER AFFIANT SAYETH NAUGHT. Mspellleog ;ARET ANN LEWI: SUBSCRIBED AND SWORN TO before me this 2nd day of December, 2003 by Margaret Ann Lewis. My Commission Expires; OFAGAL SEAL MARILYN L. ENNIS DTA 10 Sat of Ana va HORA COLT $y Gon Bes Rp 2008 ANBSS1\1072112003_ MLewis. docEXBIBIT 2ARFIDAVIT OF LAWRENCE DEAN LEWIS STATE OF ARIZONA) Ys. County of Maricopa ) I, Lawrence Dean Lewis, being first duly sworn upon oath, depose and state as follows: 1 1am over the age of eighteen, I am competent to testify as to the matters set forth herein, and, to the best of my knowledge, the information set forth herein is accurate and truthful. 2. ‘This affidavit is provided in conjunction with Lewis v. Scherf, et. al., CV2002-022560, Superior Court, Maricopa County, Arizona. 3, reside at An an eee en 4, My daughter, Tiffany, was born on July @ 1971. 5. Approximately four years ago my daughter, Tiffany, was diagnosed with a medical condition rendering her particularly susceptible to manipulation, coercion, and abuse. In particular, she has been diagnosed as manic-depressive bipolar. She is still ~ to this day ~ treating for that condition. Many years ago, her mother, Margaret Lewis, and [ set up an account at RBC Dain Rauscher for Tiffany's benefit. 7. "As of August 1, 2001 the account was valued at approximately $250,000. 8. At all relevant times, this account was Tiffany’s primary - and sometimes only ~ source of income. 9. Inor about October 2001, I learned of Tiffany's investment with Mr. Scherf. 10. Onor about November 1, 2001, I called Mr. Scherf to discuss the accounting of ‘Tiffany's funds 11, At that time, Mr, Scherf agreed to meet me, but then failed to appear at the agteed upon time and place.12. I contacted Mr. Scherf again and demanded a meeting. Instead, Mr. Scherf spoke over the telephone, and denied misappropriation of the funds, but also refused and failed to provide an accounting or a return of the funds. 13. On or about December 1, 2001, my wife and I again demanded a return of funds. 14, On or about February 2, 2002, I again asked Mr, Scherf to provide an accounting or any information relating to the investments. Mr, Scherf initially agreed, but ultimately failed to do so. 15. Mr, Scherf assured me that Tiffany would begin receiving funds in March 2002. 16. Over the following eight months, I made numerous attempts to get information from Mr. Scherf, to obtain an accounting, and ultimately to obtain Tiffany's funds. 17. To date, Mr. Scherf has not provided an accounting for Tiffany's funds, has not repaid the money, and has not otherwise provided any information on the whereabouts of that money, FURTHER AFFIANT SAYETH NAUGHT. Tees DEAN LEWIS SUBSCRIBED AND SWORN TO before me this 2nd day of December, 2003 by Lawrence Dean Lewis. My Commission Expires: iNess1\.07AL12003_LaryLewia 2SCHERF ENTERPRISES August 24, 2001 Ms. Tiffany Lewis > Phoenix, AZ 85008 Ms, Lewis as per our meeting on 08/23/01 at 1600hrs, Scherf Enterprises wil invest 180,000.00 into ‘Centech 21 Inc. in return far 90,000 IPO stocks ‘Ms, Lewis has Iooked at the given information and wishes to proceed. Scherf Enterprises takes no responsibility on or int the financial future of Ms. Lewis. Ms Lewis will review all investments before purchases. ee ASTATE OF ARIZOA COUNTY OF __MARICOpA” The foregoing instrument: was acknon n edged belore me this Dy day of Ax 2025 ee ay 2) ol _Aggat20 f Notary Pubio. Zz: “Agreed upon 08/24/01 by Ms. Tiffany Lewis My Commission Expires, —7-/caisO7 ible neo CEO SED, NATALIE A. ROLER Not Publ tzona ‘ericopa County My Commission Expires Jan. 16,2008 : 4039 © Greenways 184235 ‘Seaman Aiton 08254 Pane (05134120 Foe (48015138122 cBaeammcrangenetEXHIBIT 5SURPASS as2ayserm — NONAEGOTIARLE samen Enclosed are the photocopied itens you requested. For further assistance, please call 1-800-869-3557. (1-800-TO-WELLS) You have not been charged a fee for this service. Thank you for banking with Wells Fargo - your Anytime Anywhere Bank. ~~ + = INTEROFFICE MAIL - - ~ - MAC: TO: ANGELA FUSON AU: 09032 Group: vagina TLOOO1EXHIBIT 8: é EI [a ‘ (CHARLES A. BERRY wane BONEN URT M. BRUCKNER Law OFFICES Tirus, BRUECKNER & BERRY Fonoieseod ATROFESIONAL CORFORATTON FORO MANS SCOTTSDALE CENTRE MATTHEW & LEVINE . 173 Noni SCOTTSDALE ROAD SUITE 282 GaINSTORER D Lown SCOTTSDALE, ANZONA 63833997 MICHAEL PATTERN CANDIDA MC RUESG yornva rut ‘exer 4n4e39600 fae November 5, 2002 ae FACSIMILE 480483.325 EMAIL generl@eb>-ncom ‘Web eeesib-iomcom Certified Mail; Return Receipt Requested and Regular U.S. Mail. Craig & Kristi Sher Arizona Barter Exchange 4839 East Greenway Road - PMB 225 Scottsdale, Arizona 85254 Re: Tiffany Lewis Dear Mr. and Mrs. Sherf: We represent Ms. Tiffany Lewis in relation fo her investment with you and/or your company. After ingratiating yourself with Ms. Lewis for some time and taking advantage of her medical condition (of which you were fully aware), you convinced her to withdraw funds from a prudently-invested trust account and deliver those funds to you for investment through Arizona Barter Exchange, and/or Sherf Enterprises, Inc. On August 22, 2001, Ms, Lewis delivered to you a cashier's check payable to Craig Sherf in the amount of $200,000. At that time, you told Ms. Lewis that you would provide her with investment returns on her money far superior to those she could obtain from her existing investments. Since that time, you have failed to provide Ms. Lewis with statements of her investment, or an accounting of what you did with her money. You have failed to return her telephone calls and written correspondence, and have avoided meetings. Finally, you failed to return her investment as requested. Among the promises you made to Ms, Lewis were: * You could invest her money in a manner so that she could minimize or avoid taxation, * She would receive substantial earnings in her bank account each month. You repeatedly assured Ms, Lewis that her money was safe, and that she was earning excellent retums from her investments. You were involved in selling securities to Ms. Lewis as the issuer, seller, investment adviser and/or broker. You have not provided even minimal disclosures to her with respect to her investments. Because of this, we do not know if any securities purportedly sold wereCraig & Kristi Sher? Arizona Barter Exchange November 5, 2002 Page 2 registered with the United States Securities & Exchange Commission, or if you claim that the investments were exempt from state and federal securities registration requirements. In either case, the nature of the investments was misrepresented, and all relevant facts regarding the investments were not disclosed to Ms. Lewis. It appears that you fraudulently sold securities in Violation of both federal and state securities statutes. Therefore, you, and those acting with you, are liable for actual damages suffered by Ms. Lewis, as well as punitive damages. ‘The same aots constitute consumer fraud in violation of A.R.S. §44-1522. To the extent that there are any convictions for violations of securities laws, those acts are securities racketeering, and violate A.R.S. §13-2314.04(A), which gives rise to treble damages and attorney's fees, You are not a licensed securities salesman or registered investment adviser, and your solicitation of Ms. Lewis’ and sales to her are violations of A.R.S, §44-1842, and other statutes. Of course, it may be that you merely took the money under false pretenses, and not invest it as promised. In that case, you are liable, both civilly and criminally. At an absolute minimam, Arizona law entitles Ms. Lewis to receive back the funds she delivered to you, together with statutory itterest at the rate of 10% per annum on the amount due and owing. On behalf of Ms. Lewis, we demand that you remit immediately full payment in the amount of $224,000, which includes the principal plus statutory interest through the date of this letter. Interest continues to accrue at approximately $54,00 per day hereafter, If you can only make a substantial down payment, and need to arrange financing and/or require minimal additional time to accumulate, the balance of funds necessary to repay Ms. Lewis, please call me to discuss possible payment terms. If we do not hear from you and receive a meaningful payment by close of business on November 12, 2002, we will assume that you do not intend to. comply with this. demand, and_will-take_all-appropriate-steps, including filing legal action. Arizona law provides Ms. Lewis the right to recover attorneys" fees and costs incurred in collecting on this contract. I look forward to heating from you, so that we do not have to file suit. If I am not available, please speak with Ms, Wendy Giberti of our office. Very truly yours, TITUS, BRUECKNER & BERRY, P.C. Charles R. Berry CRB\cb cc: Tiffany Lewis owssnoonaen.n doe