GMF 157 LP, on behalf of itself and on behalf of all others similarly situated v. INSPIRIT DEVELOPMENT AND CONSTRUCTION LLC et al

7. This lawsuit arises out of IDC's failure to properly hold and account for trust funds paid to it by GMF, pursuant to the Lien Law of the State of New York.

8. The Contract called for IDC to bill GMF, and for GMF to pay IDC, on a "cost-plus" basis, meaning that IDC would pass along to GMF the costs of various subcontractors engaged by IDC to perform the Work, plus a mark-up for IDC's fee, general conditions, overhead, insurance, etc. (the "Mark-Up").

9. IDC submitted invoices to GMF, which purported to set forth costs incurred, and amounts paid, to subcontractors by IDC.

10. Thereafter, GMF made payments to IDC for amounts represented were owed, and that IDC would pay, to subcontractor of IDC.

11. The funds paid by GMF and received by IDC for the Project constituted trust funds (the "Trust") pursuant to Article 3-A of the Lien Law of the State of New York. Specifically, Lien Law 71-a.4(a) states, in part, that such payments "shall remain the property of such owner except as otherwise provided herein."

12. Lien Law 71-a.4(d) states, in part, that monies paid by GMF to ICD shall remain the property of GMF until "the proper payment, transfer or application of such deposits by the contractor to the purposes of the home improvement contract under the schedule of payments provided therein."

13. IDC was also required to keep records of all such trust funds, pursuant to the provisions of Article 3-A of the Lien law of the State of New York.

14. Beginning in late 2019 , and then in early 2020 , it became apparent that IDC had not paid its subcontractors with the funds paid to it by GMF.

15. In sworn testimony, IDC has admitted that it did not keep books and records of the Trust.

16. Pursuant to Section 75 of the Lien Law of the State of New York, a failure to keep the books and records of the Trust is presumptive evidence of a diversion of trust funds.

17. Pursuant to Article 3-A of the Lien Law, an officer of a trustee who knowingly participates in a diversion of trust funds may be held personally liable.

18. Upon information and belief, IDC diverted trust funds received by it for purposes, costs and expenses that were not valid trust purposes, costs and expenses, in violation of Article 3-A of the Lien Law.

19. Among other things:

a. IDC paid itself, purportedly on account of its "fee," prior to properly paying other beneficiaries of the Trust;

b. IDC distributed Trust funds to its principals and members prior to "the proper payment, transfer or application of such deposits by the contractor to the purposes of the home improvement contract;"

C. IDC applied (paid) Trust funds to certain of IDC's subcontractors for them to perform work on Mr. Chiesi's home; and

d. IDC applied (paid) Trust funds to certain of IDC's subcontractors for work performed by them for IDC on other project (other than GMF's Project).

20. IDC and Chiesi knew or should have known that funds received by IDC in connection with the Project were trust funds to be held in trust for the benefit of trade contractors and all others providing work, labor, materials and services to the Project.

21. IDC and Chiesi knowingly caused and participated in IDC's payment of trust funds for non-trust purposes.

22. Chiesi actively participated in deciding who and what amounts would be paid by IDC out of the Trust.

23. Because of his knowledge of and participation in IDC's diversion of trust funds, Chiesi is directly liable for such diversions.

24. The Project was not completed until April of 2024 .