One of the largest donations to Rudy Giuliani’s legal defense fund is at the center of a new lawsuit that argues the $100,000 contribution rightfully belongs to victims of an alleged online fraud scheme.
The donation by Matthew Martorano in September accounted for nearly 13% of all the money that Giuliani, the former attorney for Donald Trump and onetime New York City mayor, raised in the fund.
The fund was intended to help Giuliani pay for lawyers in the Georgia election interference case — where Trump is a co-defendant — and in a civil defamation case that Giuliani lost, brought by two Georgia election workers.
But the plaintiff in the new civil suit — filed after CNBC reported on Martorano’s donation earlier this year — claims that $100,000 flowed from Martorano’s participation in an alleged online skin care product scam. They are seeking “to unwind” the donation to Giuliani.
There is no public evidence that Giuliani and Martorano know each other. CNBC has asked a spokesman for Giuliani if they did.
Still, the claim adds another layer of legal wrangling to the fight over Giuliani’s remaining assets. The former mayor filed for bankruptcy protection in December, after a judge ordered him to pay the election workers $146 million.
Giuliani “should give all the money back” that he received from Martorano, said Kevin Kneupper, the attorney who filed the lawsuit alleging fraudulent transfer in Fulton County against Martorano, his wife and corporate entities on behalf of his client, LeAnne Tan, who is also the named plaintiff in the federal racketeering lawsuit in California.
Giuliani spokesman Ted Goodman, in an email to CNBC, said, “This is a lawsuit unrelated to us.” He had no immediate additional comment.
CNBC requested comment from lawyers for Martorano, his wife, and the other defendants in both the Georgia lawsuit and a federal civil racketeering and fraud lawsuit in California related to the alleged skin care cream scam. None of them responded to the requests.
The scam
In early January, a judge in San Diego overseeing the federal lawsuit certified a nationwide class in the lawsuit against the alleged skin care sales scammers, as well as against Martorano, his wife Kathryn Martorano, their company called Konnektive LLC, and other connected entities, collectively known as the Konnektive defendants.
In her ruling, the judge wrote the plaintiff “has shown by a preponderance of the evidence that Konnektive Defendants deceived banks and credit card companies.”
The suit alleges many people around the country were duped into signing up for a purported “free trial” of skin care cream products under the brand name La Pura.
“The scammers’ only goal is to fraudulently obtain the victim’s credit card or bank account information,” the suit says. “And once they have it, they begin billing their victims for subscriptions they never signed up for, never agreed to, and about which they were never properly informed.”
According to the complaint, Martorano’s company, Konnektive, provided software known as a “load balancer” to the entities that sold La Pura products and began charging people despite them being told it was a free trial offer.
The load balancer allegedly helps sellers hide from Visa and Mastercard the number of chargebacks from their customers. A high number of chargebacks — or reversal of charges to a customer’s account — is viewed by Visa and Mastercard as a sign of potential fraud, the suit notes.
“The Konnektive software was designed specifically for the purpose of facilitating automated bank fraud,” according to the federal suit. That complaint also says the software was specifically marketed to ” ‘free trial’ scammers at conferences which those scammers attend.”
Kneupper, who was appointed the class counsel in the class-action suit, told CNBC that the question of whether the Konnektive defendants will be held civilly liable for fraud “is ultimately going to go to a jury” to decide.
“But I think the evidence is compelling,” Kneupper added.
The new suit that Kneupper filed in Fulton County Superior Court in Georgia, names as defendants the Martoranos, Konnektive LLC, and two other corporate entities. Giuliani is not named as a defendant.
The new complaint says that as a result of the San Diego judge’s ruling on Martorano and the other Konnektive defendants, “it is highly likely that … the Class of injured consumers will prevail on the merits and will obtain a favorable verdict, which could easily exceed $30 million.”
Asset transfers
The Georgia suit says that Martorano and the other Konnektive defendants “are aware of this,” and as a result have begun “a series of asset transfers in a blatant attempt to avoid paying a potential eight-figure judgment in the Federal RICO Action to consumers who were injured by their fraud.”
The suit cites the fact that Martorano has also “recently begun making high-dollar political donations,” among them the $100,000 donation to Giuliani’s legal defense fund.
Martorano also donated $5,000 to the Trump Save America Joint Fundraising Committee last year, $3,330 to Trump’s presidential campaign and $1,700 to Trump’s Save America political action committee, according to Federal Election Commission records.
And in November, Martorano and his wife also transferred a house and two properties in Georgia spanning 135 acres to a limited liability corporation, each time for a $0 purchase price, according to assessor offices’ records, the suit notes. The combined assessed and estimated value of the three properties was $4.1 million.
Two of the property transactions occurred on Nov. 14, the same day that Kathryn Martorano was being deposed for the federal racketeering lawsuit. The other transaction occurred five days before the deposition, the suit says.
Kneupper questioned Matthew Martorano’s motive for donating to Giuliani, whose former client Trump is the presumptive Republican presidential nominee.
“You just ask, why is this guy donating 13 percent of the [legal defense] fund?” Kneupper told CNBC. “People don’t do it for no reason.”
Nancy Simonick, a Michigan woman who was charged for her La Pura offer despite the “free trial” offer, echoed Kneupper’s argument about Giuliani’s donation from Martorano.
“Oh, yeah, if he knew it was money gained through a scam, for sure he should give it back,” said Simonick, who has signed up as a member of the class suing the Martoranos and the other defendants in the California lawsuit.
One of Martorano’s lawyers in the Georgia case, Holly Pierson, also represents David Shafer, the former chair of the Georgia Republican Party, in a pending criminal case in Fulton County.
Shafer is a co-defendant with Giuliani, Trump, and a dozen more people in that criminal case, which accuses them of conspiracy in trying to overturn Trump’s 2020 presidential election loss in the state.
The defendants have pleaded not guilty.
Read the full article here
