Court of Appeals of Ohio, First District, Hamilton
Appeal From: Hamilton County Court of Common Pleas Trial No.
William Flax, for Plaintiffs-Appellants,
R. Hartke, for Defendant-Appellee Akram Othman,
M. Parker, for Defendant-Appellee Mark Woehler.
Cunningham, Presiding Judge.
Plaintiffs-appellants Richard and Gail Thomas appeal from the
judgment of the Hamilton County Court of Common Pleas
granting the motion of defendants-appellees Akram Othman and
Mark Woehler to dismiss the amended complaint for failure to
state a claim upon which relief could be granted, pursuant to
Civ.R. 12(B)(6). For the reasons that follow, we affirm.
Background Facts and Procedure
This appeal arises from the Thomases' efforts to recover
from Othman and Woehler a portion of the retirement funds the
Thomases lost after investing them in a Ponzi scheme operated
by Glen Galemmo. According to the allegations in the amended
complaint, Galemmo was convicted of securities fraud in the
case United States v. Galemmo, Case No.
1:13-CR-00141, for operating a "complex, "
multi-year "Ponzi scheme." The Thomases, Othman,
and Woehler were all investors in the scheme, and are all
members of the plaintiff class of "Net Losers"
investors-investors who lost more than their principal
investment-in several civil class-action lawsuits which were
referenced in the Thomases' complaint.
Like the other "Net Losers, " the Thomases, Othman,
and Woehler have recovered and may continue to recover some
of their losses from money forfeited in the criminal case
against Galemmo, and from money recovered from "Net
Winner" investors sued in the civil class actions in a
court approved allocation plan. The individual recoveries in
the criminal and civil actions are "pro rata, "
defined in the amended complaint as meaning that "each
'loser' recovers the same percentage of the total net
recovery as his net loss bears to the total net losses of
'Net Losers.' "
Although all are net loser investors, Othman and Woehler were
earlier investors who recouped a part of their principal
investment during the scheme. The Thomases were later
investors who had "no opportunity to recoup any
part" of their principal investment, comprising about
$700, 000 in retirement funds, some of which, they allege,
was paid to Othman and Woehler.
Although frustrated that the distribution in the class-action
cases did not draw the equitable distinctions among the
losing investors that the Thomases wanted, nonetheless the
Thomases took their pro rata distributions in those cases and
filed this individual action against Othman and Woehler to
recover "specific funds" they identified as their
Specifically, the Thomases alleged that they could
"trace" the retirement funds that they were
fraudulently induced to invest with Galemmo, and that were
deposited into a bank account associated with a Galemmo
entity, to "specific payments" made to Othman and
Woehler from a bank account associated with another Galemmo
entity during the execution of the Ponzi scheme. The Thomases
asserted they could trace their retirement fund deposits to
payments to Othman and Woehler even though those retirement
fund deposits had been commingled with other deposits in the
Galemmo entity accounts. The Thomases sought to recover from
Othman and Woehler a percentage of the challenged payments on
the grounds that the transfers by Galemmo were
"fraudulent, " as contemplated by Ohio's
Fraudulent Transfer Act, and that they had a superior
equitable "position" with respect to "their
own misallocated [retirement] funds" when compared with
Othman and Woehler, who were "unjustly enriched."
With regard to Woehler, the Thomases alleged that his claim
to the challenged payment was "compromised by [his]
longstanding interaction with Galemmo and the Galemmo
entities, " and he "is believed to have been
introduced to the Galemmo entities by Steve Schuholz, a close
and long standing associate" of Galemmo and a defendant
in one of the class-action lawsuits brought by the class of
With respect to Othman, they alleged that Galemmo issued him
a check from one of Galemmo's entities on June 6, 2013,
just two days after the IRS had raided Galemmo's main
office and seized voluminous documents. Further, they claimed
that this large payment made to Othman was allegedly
"requested" by Othman's "friend"
David Dahoud, an "associate" of Galemmo's
"who enjoyed the privilege and use of a desk in Glen
Galemmo's office, received commissions for introducing
persons who would invest in Galemmo entities, " was
"fully aware" of the IRS raid when he obtained the
check for Othman, and is a defendant in one of the
class-action lawsuits. Finally, they alleged that
Galemmo's "deliberate act of favoritism" to
Othman was also demonstrated by Othman's friendship with
Schuholz and by Galemmo's reference to Othman by his
first name in a 2014 deposition.
In relief, as relevant to this appeal, the Thomases requested
that the court impose a "constructive trust" on the
assets obtained or retained by Othman and Woehler as a result
of the "fraudulent transfers."
Othman and Woehler moved to dismiss. In the alternative, they
sought to transfer and consolidate the action with one of the
pending class-action cases in which all parties were members
of the plaintiff class, and where distributions had already
been made ...