A key player accused by the Federal Trade Commission of engaging in a national subscription fraud scheme that was based in Southern Oregon has filed a new lawsuit against his former business partner, alleging he embezzled millions from two partners.
Dennis Simpson, formerly of Southern Oregon but now living in San Diego, filed a $5 million lawsuit in Jackson County Civil Court against Jeffrey Hoyal, Simpson's former business partner in a sophisticated subscription-renewal operation based in White City that's also the subject of pending lawsuits filed by the FTC and New York Attorney General's Office.
The lawsuit claims Hoyal diverted for himself more than $6.3 million in revenue intended to be split three ways, and that Hoyal's businesses far overpaid his daughter's business while he was trustee in a lawsuit alleging breach of fiduciary duty, unjust enrichment, improper accounting and breach of contract over 15 years of business dealings.
The FTC claims Hoyal, Simpson, a handful of others and their numerous companies — more than 80 — profited handsomely on the backs of unwitting newspaper subscribers nationwide, using mailers that appeared to be legitimate renewal notices. The FTC says the subscriptions appeared to have been paid to the newspapers, but the price charged to customers was more than the newspapers would have charged.
Hoyal and Simpson have previously claimed to be mere consultants in the operation, but said that the companies they helped did nothing wrong.
In the May 25 suit Simpson filed in Jackson County, his third since March of last year and the second suit targeting his former business partner, he claims that Hoyal transferred two years of profits from a partnership in the subscription business known as Mail Industries involving Simpson and John Ackerman, who's neither a plaintiff or defendant in the new suit. Around 2006, while trustee of Mail Industries, Hoyal paid $6.3 million to Breeze Enterprises, a company solely controlled by Hoyal, according to the suit.
"Hoyal concealed from Simpson and Ackerman the distribution to Breeze Enterprises of $6,300,000," the suit says. "On information and belief, Breeze Enterprises did not provide services to Mail Industries sufficient to justify payment of the $6,300,000."
The suit also makes additional claims of fiduciary mismanagement related to a California housing project known as Novato Development discussed in Simpson's previous suit against Hoyal, this time mentioning more than $3 million in checks signed by Jeffrey Hoyal and his wife to their daughter Nicole Hoyal Allaoui's company, Eagle Eye Management.
The structure of Novato illustrates the complex business relationship between Hoyal and Simpson. Hoyal was trustee of the Scenic Trust, based in Jackson County that owned Reality Kats, a company founded by Simpson and then sold to the trust. Reality Kats owned 43 percent of the Novato Development Company, and Simpson individually owned 7 percent. The other 50 percent was owned by Crater Lake Trust, named in Simpson's suits, in which Hoyal was trustee and beneficiary, court documents and previous reports say.
Simpson in the latest suit claims that Hoyal never notified him that Novato sold to Nicole Allaoui and her husband a parcel of land for less than market value.
The new suit also says that the sale of real estate in Novato's dissolution was a "sham." Fifteen lots in the housing project were sold for a $3 million promissory note that was sold to a company called Rudnick operated by Hoyal's administrative assistant, which shortly thereafter sold its interests to Mirsyl, owned by Hoyal's lawyer, David Lennon.
"There were no security instruments or deeds executed in connection with Rudnick," the suit says.
None of the parties, which include Jeffrey and Lori Hoyal, Nicole and Fouad Allaoi, Eagle Eye Aviation and Crater Lake Trust, have yet replied to Simpson's suit. Hoyal's lawyer James Magleby did not respond to a request made Friday for comment about the allegations.
The previous case Simpson filed against Hoyal in 2016 was dismissed in February. However, the case remains open as arguments remain as to whether Simpson owes Hoyal attorney fees. The next hearing on the matter is set for Aug 2.
— Reach reporter Nick Morgan at 541-776-4471 or email@example.com. Follow him on Twitter at @MTCrimeBeat.