L.B. Research Foundation Complaint - Attorney General - State of ...

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EDMUND G. BROWN JR.
Attorney General of California
'BELINDA J. JOHNS
Senior Assistant Attorney General
KELVIN GONG
Supervising Deputy Attorney General
WENDI A. HORWITZ, SBN 136021 '
TANIA M. IBANEZ, SBN 145398
Deputy Attorneys General
300 South Spring Street, Suite 1702
Los Angeles, CA 90013
Telephone: (213) 897-0218
Fax: (213) 897-7605
E-mail: tania.ibanez@doj.ca.gov
Attorneys/or Attorneys/or the People o/the State 0/
California
(j 'EXEMPT FROM FILING FEE
GOVERNMENT CODE § 6103
BC421250
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES-CENTRAL DISTRICT
THE PEOPLE OF THE STATE OF
CALIFORNIA,
v.
L.B. RESEARCH AND EDUCATION
FOUNDATION, A CALIFORNIA
NONPROFIT PUBLIC BENEFIT
CORPORATION; GERALDD.
BUCKBERG, AN INDIVIDUAL;
CONSTANTINE ATHANASULEAS, AN
INDIVIDUAL; DONALD PAGLIA, AN
INDIVIDUAL; SALEH
SALEHMOGHADDAM AKA SALEH
SALEH, AN INDIVIDUAL; LAWRENCE
F. MEYER, AKA LARRY MEYER, AN
INDIVIDUAL; LOWELL OFFER, AN
,INDIVIDUAL; AND DOES, 1 THROUGH
50, INCLUSIVE,
Case No.
COMPLAINT FOR DAMAGES, CIVIL
PENALTIES, RESTITUTION, AN
ACCOUNTING, A CONSTRUCTIVE
TRUST, A PRELIMINARY AND
PERMANENT INJUNCTION,
INVOLUNTARY DISSOLUTION AND FOR
OTHER RELIEF ARISING FROM:
(1) FAILURE TO MAINTAIN BOOKS
(2) VIOLATION OF CORP CODE § 5230
(3) BREACH OF FIDUCIARY DUTY-SELF
DEALING,
(4) BREACH OF FIDUCIARY DUTY­
LACK OF DUE CARE
(5) FILING AND DISTRIBUTING FALSE
REPORTS
(6) UNFAIR.BUSINESS PRACTICES
(7) ACCOUNTING '
(8) INVOLUNTARY DISSOLUTION
Action Filed:
Complaint

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enough to. constitute a charitable class, and (f) keeping all records related to grants made to
individuals.
23. In violation of Title 26 United States Code section 4945, defendants failed to
exercise expenditure responsibility. No annual reports or final reports were required from
individual grantees. No grant agreements were ever entered into. LB did not have a grant
procedure approved in advance by the Internal Revenue Service. Grants were not awarded on a
nondiscriminatory basis; instead, the directors of LB hand-picked their friends, colleagues, and
research collaborators as the grant recipients. As an example, LB funded a grant for $25,000, in
2006, to Catherine Woskow for her research in the arts, even though her research project was not
consistent with LB'scharitable purpose. Woskow was selected as a grantee based on her
association with Paglia, who donated money to LB so that Woskow's grant could be funded.
Likewise, multiple grants were funneled .by LB to individuals selected by donors. From 1998 to
2000, the Nathan Pritikin Research Foundation (PritikiJi Foundation) donated $ 80,000 to LB. In
return, from 2001-2.006, LB funneled Pritikin Foundation's donations to UCLA Foundation to
support the research ofR. James Bm;nard, Ph.D., a long-time consultantto Pritikin Longevity
Center and an advisory director ofthe Pritikin Foundation. Because LB engaged in no
expenditure responsibility, the grants to Barnard were taxable expenditures. Likewise, LB's
funding of Restore mee,tings by paying over $50,000 in hotel and travel expenses ofLB directors
and other medical researchers was a self-dealing transaction and also a taxable expenditure.
Buckberg selected the Restore participants, and created the agenda-for the meetings. In return,
the Restore researchers conducted the surgical ventricular restoration research. Restore's
research support the CorRestore System patch that is licensed and patented by a for-profit
corporation controlled by Buckberg and Athanasuleas and was marketed by Somanetics
corporation. The Restore participants were not selected in a unbiased fashion from the general
public, they were medical researchers selected by Buckberg to participate in medical research that
he was interested in and out of which he could gain substantial financial benefits, as well as
public recognition.
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o
Complaint

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alleged in this Complaint, has seriously offended against the statutes regulating corporations and
charitable organizations.
40. Involuntary dissolution of LB is therefore necessary and appropriate under the
provisions of Corporations Code sections 6510, subdivision (b)(5), and 6511, subdivisjon (a)(l).
PRAYER FOR RELIEF
WHEREFORE, the People pray for judgment as follows:
1. For a preliminary and permanent injunction, enjoining Defendants and DOES 1
through 50, their employees, agents, servants, representatives, successors, and assigns, any and all
persons acting in concert or participation with them, and all other persons, corporations, or other
entities acting under, by, through, or on their behalf, from doing any of the following until they
have first provided a full and complete accounting for all funds received by, and disbursed from,
any and. all financial accounts ofLB from January 1, 1999, to the present: (aY expending,
disbursing, transferring, encumbering, withdrawing or otherwise exercising control over any
funds received by or on behalf of LB or rightfully due LB except as authorized by the Court; (b)
.conducting business of any kind on behalf of, or relating to, LB other than as necessary to assist a
Receiver or appointed director(s), to compiy with discovery requests and orders, and as permitted
, . .
by the Court; and (c) controlling or directing the operations and affairs of, or acting in a fiduciary
capacity on behalf of any California nonprofit public benefit corporation;
2. . That an order issue direCting that Defendants and DOES 1 through 50 and each of
them, render to the Court and to the Attorney General a full and complete accounting of the .
financial activities and condition ofLB and their dealings with LB from January 1, 1999, to the
. . . .
present, to include the expenditure and disposition of all revenue and assets received by or on
behalf of LB. Upon the rendering of such accounting, that the Court detennine the property, real
or personal, or the proceeds thereof that LB and the charitable beneficiaries thereof are lawfully
entitled, in whatsoever form in whosoever hands they may now be, and order and declare that all
such property or the proceeds thereof is impressed with a trust for charitable purposes, that
defendants are constructive trustees of all such charitable funds and assets in their possession,
custody or control, and that the same shall be deposited forthwith in Court by each and every
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Complaint

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' 9. For plaintiff's attorney fees as provided in Government Code section 12598 and Code
of Civil Procedure section 1021.8; and
10. For such other and further relief as the Court may deem to be just and proper.
THIS COMPLAINT IS DEEMED VERIFIED UNDER THE PROVISIONS OF CODE
OF CIVIL PROCEDURE SECTION 446
Dated: September4, 2009
LA2007600785
60407992.doc
17
EDMUND G. BROWN IR.
Attorney General of California
BELINDA J. JOHNS
Senior Assistant Attorney General
KELVIN· GONG
SupervisingDeputy Attorney- General
TANIA M. IBANEZ
Deputy Attorneys General
Attorneysfor the People ofthe
State ofCalifornia
Complaint