December 23, 2002 11:56am
IBM Must Defend Paycom Claims
Source: Epoch News
by: Company Press Release
(LOS ANGELES, CA) -- Federal Judge Rules IBM Must Defend Claims that it Wrongfully Received and Retained Millions of Dollars Derived From Internet Porn Websites.
A U.S. Federal Judge has ruled that IBM must defend claims that it wrongfully received, retained and refused to return millions of dollars derived from the sale of pornographic content over the Internet. The lawsuit brought by Paycom Billing Services, Inc. claims that IBM along with Payment Resources International ("PRI") and its principals Andrew Phillips and John Blaugrund, along with a number of other defendants, participated in a pattern of Racketeering activities involving several different schemes in connection with the processing of credit card transactions related to the purchase of adult-oriented content over the Internet. IBM is alleged to have received, retained and refused to return millions of dollars which Paycom was allegedly defrauded out of by PRI, Phillips, Blaugrund and certain other defendants in the largest of those schemes.
Last January, United States District Judge Dean D. Pregerson ruled that PRI, Phillips, Blaugrund and others (including a British processor known as Global Payment Systems Limited ("GPSL")) must defend themselves in Federal Court against allegations of Rico violations, including numerous acts of wire fraud and laundering of monetary instruments to defraud Paycom in connection with the processing of credit card transactions over the Internet. Paycom is claiming tens of millions of dollars in actual cash losses as a result of the alleged fraud. IBM is alleged to have contracted with GPSL to process the transactions which GPSL fraudulently obtained from Paycom, and then to have wrongfully retained the lion's share of the proceeds of those transactions to pay for other, unrelated debts of GPSL and certain merchants other than Paycom to IBM. In a related development, the Los Angeles Federal Court granted judgment on December 20th, 2002 in favor of Paycom against GPSL in excess of $40 million (which is subject to collection).
IBM sought to avoid defending Paycom's claims on the basis that IBM's conduct was factually unrelated to the alleged fraudulent conduct of the other defendants. In a ruling dated December 12, 2002, Judge Pregerson denied IBM's Motion to Dismiss and ruled that IBM's alleged conduct was sufficiently related to the alleged conduct of the remaining defendants such that it is appropriate for IBM and the other defendants to be forced to respond to Paycom's claims in the same lawsuit.
The entire lawsuit may be found at Paycom.net/lawsuit.pdf Richard P. Crane, Jr., a former U.S. Attorney and Federal Prosecutor, and his partner at the law firm of Musick, Peeler & Garrett LLP, Dennis M. P. Ehling, represent Paycom. All press inquiries should be directed to Mr. Crane or Mr. Ehling at 213-629-7600.
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The Team at Epoch
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