UNITED STATED DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

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ROGER B. JACOBS and
ROBIN HODES JACOBS, Civil Action No.

Plaintiffs, COMPLAINT

SYNDICAT DES COPROPRIETAIRES

CHATEAU BEAUVALLON;
CHATEAU BEAUVALLON d/b/a
THE GROUP ADVANTAGE TEAM AND
L’EQUIP DEGROUPE AVANTAGE;
GROUP AVANTAGE; GAVIN MacDONALD,
Individually and as President of Groupe
Avantage; 3080741 NOVA SCOTIA
COMPANY; KPMG INTERNATIONAL; and
HORWATH HTL CANADA,

Defendants.
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Plaintiffs Roger B. Jacobs and Robin Hodes Jacobs, by and through their attorneys,

Bernstein Levine Cherney, LLP, allege as follows:

PARTIES

1. At all times relevant to this Complaint, Plaintiffs Roger B. Jacobs and Robin

Hodes Jacobs (hereinafter “Plaintiffs” or “Jacobs”) have resided at 31 Undercliff Terrace, West

Orange, County of Essex, New Jersey 07052.

2. Upon information and belief, Chateau Beauvallon is a luxury hotel property

located at 6385 Montee Ryan, Mont-Tremblant, Quebec J8E 1S5, Canada (hereinafter the

“Property”).

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 3. Upon information and belief, Defendant, Syndicat des Coproprietaires Chateau

Beauvallon (“Syndicat”), is a _______ corporation having offices at

_______________________________.

4. Upon information and belief, Defendant, Chateau Beauvallon d/b/a/ The Group

Advantage Team and L’Equip DeGroupe Avantage (“GAT”), is a _________ corporation,

having an office at _________________.

5. Upon information and belief, Defendant, Groupe Avantage (hereinafter

“Avantage”) is a Quebec corporation, having offices at 447 Rue Charbonneau, Mont-temblant,

Quebec J8E 3H4, Canada.

6. Upon information and belief, Defendant Gavin MacDonald, is the President of

Groupe Avantage and resides in _____ Canada.

7. Upon information and belief, Defendant, 3080741 Nova Scotia Company

(“3080741”), is a Quebec corporation having offices at 447 Rue Charbonneau, Mont-temblant,

Quebec J8E 3H4, Canada.

8. Upon information and belief, Defendant KPMG International (“KPMG”) is a

Swiss corporation having offices around the world including two offices in the Canadian

province of Quebec as well as offices in the United States.

9. Defendant Horwath HTL Canada (“Horwath”) is a Canadian subsidiary of Crowe

Horwath International a Swiss corporation having its principal offices at 420 Lexington Avenue,

New York, New York 10170.

JURISDICTION AND VENUE

10. Jurisdiction of the Court is proper and exclusive pursuant to 28 U.S.C. §1331, The

Securities Exchange Act of 1934, The Securities Exchange Act of 1933, as well as under 15

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U.S.C. §77e. In addition, this Court has jurisdiction over this action pursuant to 28 U.S.C. §1332

as the matter in controversy exceeds the sum or value of $75,000, and is between citizens of New

Jersey and citizens of a foreign state.

11. This Court has personal jurisdiction over Defendants because the Defendants

purposefully established minimum contacts with the forum, engaged in the sale of securities in

the United States, and the Court’s exercise of jurisdiction will not offend traditional notions of

fair play and substantial justice.

12. Further, this Court has personal jurisdiction over the Defendants pursuant to Rule

4(k)(2) of the Federal Rules of Civil Procedure, because Defendants had sufficient contact with

the United States by virtue of their marketing and sale of securities to citizens of the United

States.

13. Defendants’ engaged in sufficient minimum contacts with the United States by

virtue of their efforts to market and sell securities to Plaintiffs and others, including, without

limitation, the placement of advertisements for such securities in general circulation newspapers

in the United States, delivery offering materials to persons, including Plaintiffs, in the United

States, and delivery of securities to persons within the United States, including Plaintiffs.

14. Furthermore, because all Defendants are non-resident aliens of the United States,

venue is proper in this District pursuant to 28 U.S.C. §1391(d) which provides for an alien to be

sued in any district.

BACKGROUND

15. Upon information and belief, the Property currently consists of approximately

seventy-one units, which have all been sold to the public, and operates currently as a

condominium/hotel property.

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 16. In or about August 2005, Plaintiffs responded to an Internet listing for the

Property by contacting Keith Brown, who was acting as a sales agent and representative of

Defendants Chateau Beauvallon and Syndicat.

17. During an initial telephone conversation with Plaintiffs, Brown stated that the

Property was not yet ready for occupancy by guests.

18. As an alternative, Brown suggested that Plaintiffs consider purchasing a

condominium unit at the Property as an investment.

19. In order to entice Plaintiffs to consider the proposed investment, Brown extolled

the virtues of the Property as a hotel, destination resort and investment.

20. In the course of his conversations with Plaintiffs, Brown suggested that Plaintiffs

review an advertisement for the Property that had appeared in the New York edition of the Wall

Street Journal.

21. Upon information and belief, the Wall Street Journal advertisement described the

Property as a member of the Small Luxury Hotel Association and invited inquiries from

individuals who might be interested in purchasing condominium units for use and investment.

22. After reviewing the informational material in the Wall Street Journal, Plaintiffs

again spoke with Brown, who provided further details of the Property and investment.

23. Subsequent to those conversations, Brown mailed to Plaintiffs, at their home in

Essex County, New Jersey, a package of promotional materials and offering documents

regarding the Property, including projected returns for investors.

24. The promotional materials provided by Brown indicated, among other things, that

the resort facilities would feature access to a large lake and dock abutting the Property and that

the resort would offer sailing, boating, and fly-fishing among other amenities and activities.

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 25. After reviewing the materials, and based upon the representations in those

materials as well as those made by Brown over the telephone, Plaintiffs arranged to visit the

Property site in or about August 2005.

26. Defendants, through Brown, made all arrangements for Plaintiff’s site visit,

including _______________.

27. During their visit to the Property, Keith Brown showed Plaintiffs various

condominium units available for purchase as well as a completely furnished unit.

28. While the Plaintiffs were visiting the site, Brown also provided details of

projected sales for the Property and revenue expectations for owner-investors.

29. Upon information and belief, during his telephone conversations with Plaintiffs

and the site visit, Brown was acting as an agent and representative of Syndicat as well as GAT.

30. Upon information and belief, at all relevant times, Brown was an employee and or

principal of Syndicat and/or of Defendant GAT.

31. During Plaintiffs’ visit to the Property, Brown explained to Plaintiffs that the

Property would be in the “Small Luxury Hotel” group and that each owner could expect positive

cash flow from the outset of the investment.

32. Plaintiffs had extensive discussions with Brown about their investment goals and

explained that they did not speak French and were not familiar with Canadian properties and

would be relying upon the representations by Defendants.

33. In response to Plaintiffs’ concerns, Brown presented written materials projecting a

positive cash flow for the Property and the condominium units and indicated, based upon his

personal experience with real estate in the area, that the investors could expect positive cash flow

and annual appreciation in excess of ten (10%) percent.

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 34. At all times, Plaintiffs relied upon each of the representations made by Brown, as

an agent and representative of Defendants.

35. During their visit, Plaintiffs were also provided with an analysis and projection

completed by KPMG, a highly-respected international accounting firm, which estimated annual

owner revenue for a two bedroom unit at $29, 912 CD, operating cash flow of $3,138 CD and

direct costs of $10,075 CD.

36. During their site visit, Brown advised Plaintiffs that the Property was on a small

lake that would have boating and swimming.

37. At no time did Brown nor any of the other Defendants advise Plaintiffs that the

lake was owned by another entity and would need to be acquired for use.

38. In reliance upon the information and materials provided by Mr. Brown, and in

particular the projections and financial statements prepared by KPMG, Plaintiffs agreed to

purchase a two bedroom condominium unit, Unit 202, at the Property, (hereinafter the “Unit”).

39. Other than the initial site visit, Plaintiffs made no other visits to the Property prior

to closing on their purchase of the Unit.

40. Plaintiffs relied at all times upon the representations by Brown, KPMG and the

marketing materials prepared and disseminated by Defendants concerning the plans for the

Property, the facilities to be offered at the Property, and the projected revenues and profits

generated by the Property.

41. Defendants caused all documents regarding the purchase of the Unit to be

delivered to Plaintiffs at their residence in West Orange, New Jersey.

42. In reliance upon the representations by Defendants, on or about August 25, 2005,

Plaintiffs signed a contract to purchase the Unit at a base price of $381,160.00 CD, plus

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applicable tax for a total purchase price of $458,788.00 CD and delivered a check to Chateau

Beauvallon in the amount of $39,886.00 CD as a deposit.

43. Approximately five days later the contract was signed by a representative of the

Property and notarized by a representative of the law firm Dupre Bedard, who are also owners of

Avantage.

44. Upon information and belief, Brown arranged for Plaintiffs to finance the balance

of the purchase price through Caisse Populaire Desjardins de Riviere-Rouge (hereinafter “Caisse

Populaire”), a Canadian bank with principal offices located at 550 Rue L’Annonciation Nord,

Riviere-Rouge, Quebec J0T 1T0.

45. In connection with their purchase of the Unit, Plaintiffs received a mortgage in the

amount of $299,145.00 CD from Caisse Populaire, and paid the balance of the purchase price

and all ancillary costs and expenses from their own funds.

46. Plaintiffs subsequently received a Declaration of Co-ownership of an Immovable

dated December 7, 2005, which stated that the owner of the Property is 3080741 Nova Scotia

Company, located at 447 Rue Charbonneau, Mont-temblant, Quebec J8E 3H4, Canada,

represented by Pierre Dupré, Secretary/Treasurer.

47. Plaintiff received a package of closing documents in connection with their

purchase of the Unit, including a document that set forth a list of condominium fees payable by

unit owners; a document entitled “certificat de localization,” which was in French; and a

document entitled “Report on Titles.”

49. A document of sale dated December 19, 2005, was also delivered to Plaintiffs and

registered by the law firm Dupré Bedard on January 18, 2006, under document number

12997106.

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 50. On December 22, 2005, Plaintiffs received a copy of the mortgage documents and

the property appraisal from Caisse Populaire, both of which were in French.

MISREPRESENTATIONS

51. Almost immediately after closing on the Unit, the Unit began to experience

losses, despite assurances from KPMG, Brown and the marketing and sales materials provided

by Defendants which had projected an immediate positive cash flow..

52. On April 7, 2006, Plaintiffs sent a letter to Jean-Louis Narboni, then General

Manager at the Property, which specifically commented upon the negative cash flow as follows:

Contrary to the representations made when we were considering our purchase,

there has been only modest cash flow to me. In fact, instead of positive or break
even, we have been out of pocket just on the Unit alone in excess of $1,000 US
per month. While a job action may have been unanticipated, planning should
have been made around the opening to simply have a stronger season.

53. Plaintiffs also questioned the “extraordinarily high” assessments for the Unit and

raised general issues of dissatisfaction with the operation of the Property.

54. After not receiving satisfactory explanations regarding the material

misrepresentations and omissions by Defendants as described above, Plaintiffs made

arrangements to attend the General Special Meeting of owners at the Property on Saturday, June

3, 2006 (the “General Special Meeting”).

55. Shortly after the General Special Meeting, Plaintiffs again wrote to Jean-Louis

Narboni, Manager of Chateau Beauvallon, by letter dated June 7, 2006, reminding him that

Brown, and the other Defendants had assured Plaintiffs the Property would have a positive cash

flow regularly and from the initial date of operation, and was expected to appreciate by a

minimum of ten (10%) percent per year.

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 56. During conversations with Plaintiffs at the General Special Meeting, Brown

reiterated his assurance of positive cash flow.

57. Upon information and belief, General Manager Narboni was replaced by

Avantage but no explanation was provided to owners regarding the reasons for his replacement.

58. In response, Plaintiffs received a letter dated June 29, 2006, from Geoffrey S.

Allan, Vice President-Development, acknowledging that, “positive cash flow projections in the

pre-opening were a confirmed expectation as stated by the market research by Horwath Horizon

Consultants in Montreal.” Plaintiffs relied upon those oral and written projections at all times to

their detriment.

59. During the General Special Meeting, Defendants suggested that a strike in the

region in December 2005 negatively affected Chateau Beauvallon’s profitability during its

opening season.

60. Representatives of Defendants stated that the prospect of a strike was known to

the developer, its agents and representatives at the time the projections were prepared.

61. At no time while Defendants were attempting to sell the Unit to Plaintiffs, did

Defendants disclose the prospect of a strike or the possibility that a strike might adversely affect

the projected revenues.

62. Plaintiffs, who are United States citizens and do not reside in the vicinity of the

Property, could not have reasonably known that a strike was imminent.

63. The developer, its agents and representatives failed to inform Plaintiffs and other

prospective purchasers regarding an impending job action and its impact on cash flow

projections.

64. Defendants’ failure to provide this information was intentional and material.

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 65. Furthermore, Plaintiffs were specifically told by Mr. Brown that Lake Beauvallon

(the “Lake”) would be made available to owners and guests at the Property for swimming and

small craft boating.

66. During the June 3, 2006 General Special Meeting Plaintiffs learned for the first

time that such comments by representatives of Property, including Brown, were untrue; that the

Property did not own the Lake, had no right to use the Lake, and that Defendants had no

intention to acquire the Lake or any right thereon.

67. Plaintiffs relied upon the representations of representatives of the Defendants,

including Brown, regarding the availability of the Lake for use by guests and owners.

68. Said representations were false and knowingly false at the time representatives of

Defendants made them.

69. After Plaintiff repeatedly advised Defendants and Caisse Populaire that they had

relied upon these numerous misrepresentations in connection with their decision to purchase the

Unit, Caisse Populaire agreed to excuse any further payments by Plaintiffs on the mortgage, in

an amount of __________ in exchange for Plaintiffs’ agreement to surrender title to the Unit.

70. As a result of Defendants’ conduct, as well as the conduct of their agents and

representatives, including Keith Brown, and the information provided by developer’s accountant,

KPMG and Horwarth Horizon Consultants, Plaintiffs have suffered damages in the amount of

_________, including the down payment, closing costs, and carrying charges.

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 ALLEGED COUNTS

COUNT ONE
Violation of §10(b) of the Securities Exchange Act of 1934

71. Plaintiffs incorporate herein by reference the allegations made in paragraphs 1

through 70 above, as though fully set forth herein.

72. Defendants violated §10(b) and Rule 10b-5 of the Securities and Exchange Act of

1934 through the use of the mails and means of interstate commerce fraudulently inducing

Plaintiffs to purchase securities being solicited and marketed by these Defendants through the

use of materially false and misleading sales materials, oral representations and electronic

communications.

73. The Plaintiffs purchased a condo/hotel unit (the “Securities”) at the Chateau

Beauvallon from the Defendants.

74. By definition the Securities offered and sold by Defendants are investment

contract securities because they involve (1) the investment of money, (2) in a common

enterprise, (3) with the expectation of profits garnered solely from the efforts of others. More

specifically:

a) The value of the Securities are dependent upon the success or failure of

the management of the Property and the operation of the hotel in order to boost and maintain the

occupancy, room rates and rental income of the Securities;

b) Defendants sales promotions of the investment in the Securities gave rise

to a reasonable expectation that a valuable benefit, over and above the purchase price of the Unit,

would accrue to the Plaintiffs as a result of the management and operation of the Chateau

Beauvallon by the Defendants;

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 c) Plaintiffs, as owners of at least one Unit, did not receive and did not intend

to receive the right to exercise any practical or actual control over the managerial decisions of the

Defendants’ enterprise.

75. Defendants, and each of them, were “sellers”, “promoters” and/or “sales persons”

as those terms are defined by the Securities Act of 1933 and the Securities Exchange Act of

1934.

76. Central to the Defendants’ marketing of the Securities were the representations

that the Securities would generate substantial amounts of revenue to the Plaintiffs.

77. Defendants induced the sale of the Securities through sales presentations that

raised Plaintiffs expectations of the economic benefits of the rental income to be obtained from

the Securities due solely to the efforts of Defendants management of the Property and the

Defendants operation of the front desk, housekeeping, valet & bell services, retail and

commercial operations of the hotel.

78. The sales presentations included the use of written materials and discussions that

represented a forecast of cash flow and appreciation, including projections prepared by KPMG.

79. The Defendants’ marketing strategy overtly emphasized the amount of revenue

the Plaintiffs would receive from the rental of the Securities.

80. The potential and assured economic benefits from ownership of the Unit were

central to Defendants’ sales efforts and Plaintiffs’ decision to purchase the Unit.

81. The monthly cash flow projections by Defendants was fundamental both to the

marketing scheme and Plaintiffs’ decision to purchase a Unit.

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 82. Plaintiffs paid $458,788.00 CD in the Defendants’ investment scheme to purchase

a Security at the Property based upon Defendants’ recommendations and income projections.

83. Plaintiffs purchased the Unit solely for investment purposes.

84. Defendants, and each of them, sold, marketed and financed the Securities by

means and/or instrumentalities of interstate commerce, including mail, facsimile and the internet.

85. Defendants made untrue statements of material facts and/or omitted to state

material facts necessary in order to make their statements true in connection with their sale of the

Securities.

86. Defendants engaged in acts, practices and a course of conduct with the intent to

deceive, manipulate and/or defraud the Plaintiffs and, as such, employed manipulative and

deceptive practices in the sale of Securities to the Plaintiffs in violation of §10(b) of the

Securities Exchange Act of 1934, and Rule 10b-5 of the Securities and Exchange Commission.

87. As a result of these Defendants’ securities fraud, Plaintiffs have suffered losses in

the amount of $_______.

COUNT TWO
Violation of §12(a)(2) of the Securities Act of 1933

88. Plaintiffs incorporate herein by reference the allegations made in paragraphs 1

through 87 above, as though fully set forth herein.

89. Defendants made untrue statements of material facts and/or omissions of material

facts necessary to make the statements not misleading under section 12(a)(2) of the Securities

Act of 1933.

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 90. Such untrue statements of material fact include the oral and written assurances

made by Keith Brown, KPMG and Horwath Horizon Consultants regarding positive cash flow

and appreciation of at least ten (10%) percent per year on the Property.

91. The developer, its agents and representatives made material omissions when they

failed to inform Plaintiffs and other prospective purchasers regarding an impending job strike

and its potential impact on cash flow projections.

92. Defendants’ failure to provide this information was intentional and material.

93. As a direct and proximate result of these misrepresentations and omissions by

Defendants, Plaintiffs have suffered and continue to suffer economic losses in the amount of

$___________________.

COUNT THREE
Violation of 15 U.S.C. §77e

94. Plaintiffs incorporate herein by reference the allegations made in paragraphs 1

through 93 above, as though fully set forth herein.

95. Under 15 U.S.C. §77e(a), unless a registration statement is in effect as to a

security, it shall be unlawful for any person, directly or indirectly (1) to make use of any means

or instruments of transportation or communication in interstate commerce or of the mails to sell

such security through the use or medium of any prospectus or otherwise; or (2) to carry or cause

to be carried through the mails or in interstate commerce, by any means or instruments of

transportation, any such security for the purpose of sale or for delivery after sale.

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 96. Defendants failed to file a registration statement for the subject Securities

purchased by Plaintiffs, as well as other investors, either the SEC or the Canadian Securities

Commission within the province of Quebec in violation of 15 U.S.C. §77e.

97. Such failure to file a registration statement in concert with Defendants soliciting

New Jersey purchasers in its offer to sell such Securities is a violation of Federal law and

requires Defendants to disgorge all monies from such sale of Securities including interest.

98. As a result of Defendants violation of 15 U.S.C. §77e, Plaintiffs have suffered and

continue to suffer economic losses in the amount of $______________________.

COUNT FOUR
Violation of New Jersey Securities Law

99. Plaintiffs incorporate herein by reference the allegations made in paragraphs 1

through 98 above, as though fully set forth herein.

100. Plaintiffs purchased the unregistered Securities from Defendants.

101. The Defendants’ sale of unqualified Securities in violation of §49:3-60 of the

New Jersey Uniform Securities Law of 1997 which states that it is unlawful for any security to

be offered or sold in this State unless it is registered under the act or exempt from registration

justifies rescission, restitution, interest and attorneys fees and damages against Defendants.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs pray for a judgment in its favor. For an order requiring disgorgement

and restitution of Defendants’ ill-gotten gains and payment of restitution to Plaintiffs of all funds

acquired by means of the fraudulent scheme complained of above. For punitive damages in an

amount sufficient to punish and deter future similar conduct; and for prejudgment interest; and

For such other and further relief as the interests of law or equity may require.

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 JURY DEMAND

Plaintiffs demand a trial by jury on all issues so triable as a matter of right.

DATED: December 17, 2009

BERNSTEIN LEVINE CHERNEY LLP

Hartley T. Bernstein, Esq.

Joshua N. Hergan, Esq.
Attorneys for Plaintiffs
370 Lexington Avenue, 24th Floor
New York, New York 10017
(212) 381-9684

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