attorneys for plaintiff...steele, cassandra steele, veronica timberlake, donald williams, andrew...

FREDERICKS PEEBLES & PATTERSON LLP

2020 L ST., STE. 250 SACRAMENTO, CA

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Gregory M. Narvaez (SBN 278367) John M. Peebles (SBN 237582) Tim Hennessy (SBN 233595) Fredericks Peebles & Patterson LLP 2020 L Street, Suite 250 Sacramento, CA 95811 Telephone: (916) 441-2700 Facsimile: (916) 441-2067 Email: [email protected] Attorneys for Plaintiff JW Gaming Development, LLC

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

JW GAMING DEVELOPMENT, LLC, a California limited liability company, Plaintiff, v. ANGELA JAMES; LEONA L. WILLIAMS; MICHAEL R. CANALES; MELISSA M. CANALES; JOHN TANG; PINOLEVILLE POMO NATION, a federally-recognized Indian tribe; PINOLEVILLE GAMING AUTHORITY; PINOLEVILLE GAMING COMMISSION; PINOLEVILLE BUSINESS BOARD; PINOLEVILLE ECONOMIC DEVELOPMENT, LLC, a California limited liability company; LENORA STEELE; KATHY STALLWORTH; MICHELLE CAMPBELL; JULIAN J. MALDONADO; DONALD D. WILLIAMS; VERONICA TIMBERLAKE; CASSANDRA STEELE; JASON EDWARD RUNNING BEAR STEELE; ANDREW STEVENSON; CANALES GROUP, LLC, a California limited liability company; LORI J. CANALES; KELLY L. CANALES; and DOES 1 through 20, Defendants.

Case No. 3:18-cv-02669-WHO (RMI) PLAINTIFF’S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT ON CLAIMS TWO AND THREE, AND ALTERNATIVELY FOR ENTRY OF FINAL JUDGMENT UNDER RULE 54(b) ON CLAIM ONE Hearing Date: April 29, 2020 Time: 2:00 p.m. Courtroom 2, 17th Floor Judge William H. Orrick

Case 3:18-cv-02669-WHO Document 191 Filed 03/23/20 of 29

2 Plaintiff’s MSJ on Claims 2 & 3; Alt. Motion for Final Judgment 3:18-cv-02669-WHO (RMI)

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES

& PATTERSON LLP 2020 L ST., STE. 250 SACRAMENTO, CA

NOTICE OF MOTION

TO THE PARTIES AND THEIR COUNSEL OF RECORD:

PLEASE TAKE NOTICE that on April 29, 2020 at 2:00 p.m., or as soon thereafter as the matter

may be heard in Courtroom 2 on the 17th floor of the above-entitled Court, located at 450 Golden Gate

Ave., San Francisco, California 94102, Plaintiff JW Gaming Development, LLC (“JW Gaming”) will

and hereby does move this Court for an order awarding summary judgment in favor of JW Gaming and

against defendants Angela James, Leona Williams, Michael Canales, Melissa Canales, John Tang,

Lenora Steele, Michelle Campbell, Kathy Stallworth, Jason Steele, Cassandra Steele, Veronica

Timberlake, Donald Williams, and Andrew Stevenson on the second cause of action for fraud and

deceit, and against defendants Angela James, Leona Williams, Michael Canales, Melissa Canales, Lori

J. Canales, Kelly L. Canales, John Tang, Lenora Steele, Michelle Campbell, Kathy Stallworth, Jason

Steele, Cassandra Steele, Veronica Timberlake, Donald Williams, Andrew Stevenson, and Canales

Group LLC on the third cause of action for violation of the Racketeer Influenced and Corrupt

Organizations Act (RICO), 18 U.S.C. § 1962(c).

In the alternative, JW Gaming moves the Court to direct entry of final judgment on the first

cause of action pursuant to Fed. R. Civ. P. 54(b).

The motions are brought pursuant to Fed. R. Civ. P. 56 and 54(b), respectively. The bases for

these motions are set forth more fully in the memorandum of points and authorities below. These

motions are based on this notice, the memorandum of points and authorities, the papers and pleadings

on file herein, and on such matters as may be adduced at the hearing of this matter.



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


TABLE OF CONTENTS

NOTICE OF MOTION .......................................................................................................................... 2

TABLE OF CONTENTS ....................................................................................................................... 3

TABLE OF AUTHORITIES ................................................................................................................. 4

INTRODUCTION ................................................................................................................................. 6

UNDISPUTED MATERIAL FACTS ................................................................................................... 6

PROCEDURAL BACKGROUND ........................................................................................................ 9

SUMMARY JUDGMENT STANDARD ............................................................................................ 10

ARGUMENT ....................................................................................................................................... 10

I. JW Gaming is entitled to judgment as a matter of law on the RICO and fraud claims. .......... 10

A. The undisputed facts satisfy all elements of the RICO claim under 1962(c). ..................... 10

1. The fourth element: “racketeering activity” ................................................................... 10

2. The third element: “through a pattern” .......................................................................... 13

3. The second element: “an enterprise that affects interstate commerce.” ......................... 13

a) First sub-element: Common Purpose ......................................................................... 14

b) Second sub-element: A structure or organization ...................................................... 21

c) Third sub-element: Longevity necessary to accomplish the purpose. ........................ 22

4. The first element: “conduct” of the enterprise’s affairs ................................................. 23

5. The fifth element: proximate cause ................................................................................ 25

B. JW Gaming is entitled to judgment as a matter of law on its claim for fraud and deceit. ........................................................................................................................................... 26

II. In the alternative, there is no just reason to delay the entry of final judgment on the contract claim alone. ........................................................................................................................ 26

CONCLUSION .................................................................................................................................... 29



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


TABLE OF AUTHORITIES

Cases

Am. States Ins. Co. v. Dastar Corp., 318 F.3d 881 (9th Cir. 2003)............................................................................................................ 26

Boyle v. United States, 556 U.S. 938 (2009) ....................................................................................................... 14, 21, 22, 23

Carpenter v. United States, 484 U.S. 19 (1987) ........................................................................................................................... 10

Curtiss-Wright Corp. v. Gen. Elec. Co., 446 U.S. 1 (1980) ............................................................................................................................. 27

Eclectic Properties East, LLC v. Marcus & Millichap Co., 751 F.3d 990 (9th Cir. 2014)................................................................................................ 10, 14, 25

Gelboim v. Bank of Am. Corp., 574 U.S. 405 (2015) ......................................................................................................................... 27

Gregorian v. Izvestia, 871 F.2d 1515 (9th Cir. 1989).......................................................................................................... 27

H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229 (1989) ......................................................................................................................... 13

In re Chrysler-Dodge-Jeep Ecodiesel Marketing, Sales Practices, and Products Liability Litigation, 295 F.Supp.3d 927 (N.D. Cal. 2018) ................................................................. 11, 13, 14, 21, 22, 23

In re Napster, Inc. Copyright Litig., 479 F.3d 1078 (9th Cir. 2007).......................................................................................................... 26

In re Volkswagen “Clean Diesel” Marketing, Sales Practices, and Products Liability Litigation, MDL No. 2672 CRB (JSC), 2017 WL 4890594 (N.D. Cal. Oct. 30, 2017) .................................... 23

James v. JW Gaming Dev’t LLC, No. 19-971, 2020 WL 1124446 (U.S. Supreme Ct., Mar. 9, 2020) ................................................... 9

Jewel v. National Security Agcy., 810 F.3d 622 (9th Cir. 2015)...................................................................................................... 26, 27

Jordan v. Paul Financial, LLC, 745 F.Supp.2d 1084 (N.D. Cal. 2010) ............................................................................................. 26

JW Gaming Dev’t LLC v. James, 778 Fed. Appx. 545 (2019) ................................................................................................................ 9

Lloyd v. Franklin Life Ins. Co., 245 F.2d 896 (9th Cir. 1957).............................................................................................................. 7



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


Reves v. Ernst & Young, 507 U.S. 170 (1993) ......................................................................................................................... 23

Sever v. Alaska Pulp Corp., 978 F.2d 1529 (1992) ....................................................................................................................... 13

Small v. Fritz Cos., Inc., 30 Cal.4th 167 (2003) ...................................................................................................................... 26

Sonner v. Schwabe N. Am., Inc., 911 F.3d 989 (9th Cir. 2018)............................................................................................................ 10

Texaco, Inc. v. Ponsoldt, 939 F.2d 794 (9th Cir. 1991)............................................................................................................ 27

Tsyn v. Wells Fargo Advisors, LLC, No. 14-cv-02552-LB, 2016 WL 7635883 (N.D. Cal. June 27, 2016) ....................................... 26, 27

United States v. Bingham, 653 F.3d 983 (9th Cir. 2011)............................................................................................................ 21

United States v. Christensen, 828 F.3d 763 (9th Cir. 2015)...................................................................................................... 13, 14

United States v. Lothian, 976 F.2d 1257 (9th Cir. 1992).......................................................................................................... 11

United States v. Stapleton, 293 F.3d 1111 (9th Cir. 2002).......................................................................................................... 11

Walter v. Drayson, 538 F.3d 1244 (9th Cir. 2008).......................................................................................................... 23

Wood v. GCC Bend, LLC, 422 F.3d 873 (9th Cir. 2005)............................................................................................................ 27

Statutes

18 U.S.C. § 1961(4) ............................................................................................................................. 13

18 U.S.C. § 1961(5) ............................................................................................................................. 13

18 U.S.C. § 1962(c) ....................................................................................................................... 10, 23

28 U.S.C. § 1291 .................................................................................................................................. 26

Cal. Civ. Code §§ 1709-1710 ............................................................................................................... 26

Rules

Fed. R. Civ. P. 54(b) ............................................................................................................................ 26



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


INTRODUCTION

The individual Tribal Defendants have twice moved for judgment as a matter of law on the

fraud and RICO claims (their most recent motion is currently set for hearing on April 1, 2020). In both

motions, they admit the allegations of the complaint and the evidence attached to it (purportedly on a

limited basis for purposes of their motions only). The facts alleged in the complaint, in addition to

having been admitted by the Tribal Defendants, are demonstrated as to all defendants by voluminous

evidence. JW Gaming has already lodged thousands of pages of that evidence with the complaint and

in connection with various filings. JW Gaming lodges hundreds more pages of evidence with this

motion.

The evidence shows the individual defendants (through the Tribe) fraudulently obtaining

millions of dollars from third parties (including JW Gaming) under false pretenses, and diverting assets

of the Tribe to their personal benefit, all corroborating the complaint’s allegations of large-scale

financial fraud. What is more, the evidence shows these activities have been ongoing for more than a

decade, and have continued through the pendency of this litigation.

All of this, coupled with extensive discovery already conducted (nearly 40,000 pages of

documents exchanged, and scores of interrogatories and requests for admission) during the more than

two years this case has been pending, supports the conclusion that no genuine issues of material fact

remain. Adding to the urgency of this motion is evidence, some of which is discussed below, that the

defendants are currently moving, and have already moved, assets beyond the reach of this Court.

JW Gaming is entitled to judgment on the fraud claim and RICO claim as a matter of law.1

UNDISPUTED MATERIAL FACTS

As they did in their first summary judgment motion, the Tribal Defendants again admit the

allegations of the Complaint and seek to treat them as “undisputed for purposes of this motion only.”

1 The fraud claim is asserted against the following individual Tribal Defendants: Angela James, Leona Williams, Lenora Steele, Michelle Campbell, Kathy Stallworth, Jason Steele, Cassandra Steele, Veronica Timberlake, Donald Williams, and Andrew Stevenson. This claim is also asserted against Non-Tribal Defendants Michael Canales, Melissa Canales, and John Tang. The RICO claims are asserted against all of the foregoing individuals and the additional Tribal Defendant Julian Maldonado. The RICO claims are also asserted against additional Non-Tribal Defendants Lori Canales, Kelly Canales, and Canales Group LLC.



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


Tribe Second MSJ, Dkt. 184 at 7 fn.1; see Tribe First MSJ, Dkt. 129 at 8 fn.1. Such a limitation has

been held “invalid.” Lloyd v. Franklin Life Ins. Co., 245 F.2d 896, 897 (9th Cir. 1957). “A concession

of fact on motion for summary judgment establishes the fact for all time between the parties. The party

cannot gamble on such a conditional admission and take advantage thereof when judgment has gone

against him.” Id.

It is undisputed that from August 2008 to April 2011, JW Gaming paid $5.38 million to the

Tribe as a loan for the Tribe’s casino project. Compl. (Dkt. 1-1) ¶¶ 115-117, 163-164, and Ex. 26

(promissory note).

JW Gaming did so believing that Michael Canales and Canales Group previously provided

$5.352 million for the project, and that JW Gaming was making a matching investment in a well-

capitalized venture. Compl. ¶¶ 106-107, and Exs. 1-5, 7-8. Several defendants represented to Jim

Winner, former principal of JW Gaming, that Canales had invested over $5 million in the project. Id.

For instance, the 2009 Joint Venture Agreement between Winner, Michael Canales, and John Tang

states: “CGLLC represents that he has provided pre-development funding in the amount of five million

three hundred fifty-two thousand dollars ($5,352,000.00) prior to the execution of this agreement.

CGLLC will provide the other Parties, adequate proof of such funding in the form of a PPN Resolution

commemorating the loan.” Joint Venture Agreement § 2.1.1, Compl. Ex. 10, Dkt. 1-2 at 44. As proof,

John Tang had sent Winner a promissory note signed by Leona Williams as Vice Chairperson of

Pinoleville Economic Development LLC (“PED LLC”) and Michael Canales for Canales Group LLC,

in which PED LLC promised to pay $5.38 million to Canales Group “[f]or value received from January

1, 2001 through December 10, 2008.” Compl. Ex. 5, Dkt. 1-2 at 26. Additionally, the same

representation was made in the promissory notes the Tribe later entered with JW Gaming (signed by

Leona Williams, Angela James, Michael Canales and John Tang) and with Canales Group (signed by

Leona Williams, Angela James and Michael Canales). Promissory Note, Compl. Ex. 26, at 4 of 9;

2012 Canales Note, Compl. Ex. 29 at 1 of 4. Moreover, the defendants touted the purported Canales

loan throughout their involvement with JW Gaming, including in many email communications. See

e.g., Compl. ¶¶ 112 (email from Tang), 113-114 (another email from Tang), 129-130 (another email

from Tang); 224-225 (email from Melissa Canales), and Exs. 1-5, 7-8.



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


JW Gaming later learned that Canales did not provide any such funding. Compl. ¶¶ 123, 320

(deposition testimony of Michael Canales), 322 (deposition testimony of Leona Williams), and Exs.

27-28 and 31; Dkt. 18-2.

From November 2011 through January 2012, the Tribe, through a variety of individual actors,

furnished JW Gaming a series of documents accounting for the Tribe’s expenditures of the proceeds

of the JW Gaming loan. Compl. ¶¶ 177-204, and Exs. 13, 16-17. JW Gaming later learned that the

accounting included false and double entries. Id. ¶ 178, and Ex. 32.

In early 2012, Canales, Tang and JW Gaming agreed to dissolve their joint venture after failing

to reach agreement with the Tribe’s demand for further investment. Compl. ¶¶ 210, 235, and Exs. 18-

21, 25. JW Gaming accepted a promissory note for the Tribe’s repayment of the $5.38 million JW

Gaming previously deposited with the Tribe. Compl. Ex. 26, Dkt. 1-4 at 10. Canales Group also

obtained a promissory note from the Tribe for $5.352 million. Compl. Ex. 29, Dkt. 1-4 at 54. The

Tribe failed to pay the JW Gaming Note when it matured on July 10, 2015. Compl. ¶¶ 301-302; Order,

Dkt. 178.

The Individual defendants, acting through the Tribe and in concert with each other, have

committed a pattern of similar fraudulent acts against others in addition to JW Gaming. See Compl. ¶

429. The most recent known fraud occurred during the pendency of this litigation, when, in or about

March of 2019, the Tribe, through defendants Angela James and Leona Williams, submitted a

fraudulent business credit application and associated financial statements to Westamerica Bank in

connection with the renewal of a $100,000 business line of credit. See Loan App., Dkt. 151-1 at pp. 2-

10. Prior to that, in 2017, the Tribe, again through the individual defendants, fraudulently obtained at

least one loan of more than $2 million from Clearinghouse Community Development Financial

Institution (“CCDFI”), again by submitting a fraudulent loan application and false financial statements.

See Dkt. 136-1 at 1-3, 141-366. About two years earlier, in 2015, the Tribe, again through the

individual defendants, fraudulently obtained five loans of approximately $147,000 each (for aggregate

loan proceeds of approximately $736,000) from Mid America Mortgage Inc., again by submitting

fraudulent loan applications and false financial statements. See Declaration of Gregory M. Narvaez,

Mar. 13, 2020, Dkt. 186-1 (“Narvaez Mar. Decl.”) at ¶ 4.a. and Ex. A; see also Compl. ¶¶ 459-460.



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


Records show that while the Tribe, through the individual defendants, fraudulently obtains

monies from third parties, the individual defendants convert the Tribe’s assets to their personal use.

For example, at all relevant times, the Tribe was, among other things, gifting real property and

assuming debt for Michael Canales (Dkt. 136-1 at 17-77), paying cash to Canales Group (the company

owned, at relevant times, by the Canales Defendants and John Tang) (Dkt. 151-1 at 12-49), gifting real

property to PED LLC, the state-chartered limited liability company owned by Angela James and Leona

Williams (Compl. ¶¶ 455-458; Dkt. 136-1 at 10-11; also see Grant Deed, Apr. 15, 2016, attached as

Ex. ZF to the Declaration of Gregory M. Narvaez, filed concurrently herewith (“Narvaez Decl.”); also

see Gift Deed, Nov. 17, 2006, Narvaez Decl. Ex. ZE), and paying cash to and for the benefit of the

individual Tribal Defendants (Dkt. 136-1 at 79-139; Narvaez Mar. Decl. at ¶¶ 4.b.- 4.h. and Exs. B-

H.).

PROCEDURAL BACKGROUND

JW Gaming filed its complaint in state court on March 1, 2018. The defendants removed it to

federal court on May 7, 2018. Dkt. Nos. 1, 1-1. On October 5, 2018, the Court denied defendants’

motion to dismiss. Dkt. No. 55. On October 2, 2019, the Court of Appeals affirmed an aspect of that

denial on interlocutory appeal, holding that tribal sovereign immunity did not shield the individual

tribal defendants from suit. JW Gaming Dev’t LLC v. James, 778 Fed. Appx. 545 (2019). The Supreme

Court denied review. James v. JW Gaming Dev’t LLC, No. 19-971, 2020 WL 1124446 (U.S. Supreme

Ct., Mar. 9, 2020).

On January 21, 2020, the Court: (1) granted JW Gaming’s motion for judgment on the pleadings

on the contract claim; (2) denied the Tribe’s motion for summary judgment on the contract claim; (3)

denied the Individual Tribal Defendants’ motion for summary judgment on the tort claims; (4) denied

the Tribal defendants’ motion to join additional defendants; (5) granted JW Gaming’s motion to strike

the Tribe’s (though not the Individual Tribal Defendants’) amended answer; and (6) granted JW

Gaming’s motion to dismiss the Tribe’s counterclaims asserted in the amended answer. Dkt. No. 178.

The Tribal Defendants filed their second motion for summary judgment on the tort claims on

February 28, 2020. Dkt. 184. They did so without seeking or obtaining leave of court, as required by

Judge Orrick’s Standing Order For Civil Case (eff. Jan. 2018) ¶ 6.



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate when “there is no genuine dispute as to any material fact.”

Fed. R. Civ. P. 56(a). To defeat summary judgment, the nonmoving party must produce evidence of a

genuine dispute of material fact that could satisfy its substantive evidentiary burden at trial. Sonner v.

Schwabe N. Am., Inc., 911 F.3d 989, 992 (9th Cir. 2018).

This case is ripe for summary judgment. Each of the elements of the subject claims is

demonstrated by voluminous evidence. Additionally, the allegations in the complaint have been

conceded by the individual Tribal Defendants.

ARGUMENT

I. JW Gaming is entitled to judgment as a matter of law on the RICO and fraud claims.

A. The undisputed facts satisfy all elements of the RICO claim under 1962(c).

The elements of a RICO claim under 18 U.S.C. § 1962(c) are: “(1) the conduct of (2) an

enterprise that affects interstate commerce (3) through a pattern (4) of racketeering activity or collection

of unlawful debt.” Eclectic Properties East, LLC v. Marcus & Millichap Co., 751 F.3d 990, 997 (9th

Cir. 2014). “In addition, the conduct must be (5) the proximate cause of harm to the victim.” Id.

The undisputed material facts satisfy each of these elements. For damages under this claim,

JW Gaming requests the court simply treble $5.38 million, for a total award of $16,140,000.

1. The fourth element: “racketeering activity”

Acts of wire fraud are predicate acts that may constitute “racketeering activity.”2 Eclectic at

972. Wire fraud includes “any scheme to deprive another of money or property by means of false or

fraudulent pretenses, representations, or promises” using wire or wireless transmissions. Carpenter v.

United States, 484 U.S. 19, 27 (1987); 18 U.S.C. § 1343. “[S]pecific intent to defraud” may be inferred

“by examining the scheme itself,” where the scheme “was reasonably calculated to deceive persons of

ordinary prudence and comprehension.” Eclectic at 997; United States v. Green, 745 F.2d 1205, 1207

2 The facts support other predicate acts, such as money laundering and bank fraud, both of which are alleged in the complaint. However, because the acts of wire fraud are adequate to establish the pertinent elements of the § 1962(c) claim in this case, this brief focuses exclusively on those, and not any other predicate acts.



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


(9th Cir. 1984); In re Chrysler-Dodge-Jeep Ecodiesel Marketing, Sales Practices, and Products

Liability Litigation, 295 F.Supp.3d 927, 977 (N.D. Cal. 2018) (“Ecodiesel MDL”). “Like co-

conspirators, ‘knowing participants in the scheme are legally liable’ for their co-schemers’ use of the

mails or wires.” Ecodiesel MDL at 972 (quoting United States v. Stapleton, 293 F.3d 1111, 1117 (9th

Cir. 2002), which itself is quoting United States v. Lothian, 976 F.2d 1257, 1262 (9th Cir. 1992)). The

facts easily establish predicate acts of wire fraud.

At a minimum, defendants’ scheme to harm JW Gaming through fraudulent representations is

established with respect to the Sham 2008 Canales Note (which induced JW Gaming to invest $5.38

million); the Falsified 2011 Accounting (which concealed diversion of loan proceeds); the 2012 JW

Gaming Note (which also falsely represents that Canales had loaned over $5 million); and the Sham

2012 Canales Note (which again falsely represents that Canales had loaned over $5 million). Each of

these materials falsely represented one or more material facts that induced JW Gaming to take, or

forego taking, action, which resulted in economic harm to JW Gaming. The more prominent

misrepresentations were that Canales Group LLC had previously invested approximately $5 million in

the project, and, with respect to the false accounting, that JW Gaming’s money had been spent in a

specific manner related to the casino project.

These representations were false. In regard to the sham $5 million Canales investment, Leona

Williams and Michael Canales have admitted under oath that no such investment occurred. Compl.

Exs. 27 and 31. In yet another deposition, Leona Williams unequivocally confirms that JW Gaming

was the only investor in the casino project, answering a plain “no” to five separate questions about

whether Canales Group LLC, Michael Canales, Michael Canales’s family, John Tang, or any other

person or entity had invested in the casino project. Deposition of Leona Williams, July 21, 2011, at

197:16-198:14, Narvaez Decl. Ex. ZB. Comparing the false accounting (Compl. Exs. 13, 16-17) with

the books and records of Forster-Gill Inc. (Compl. Ex. 32 and Dkt. 18-2) and Kandy Investments LLC

(Narvaez Decl. Ex. B) shows the accounting conceals over $800,000 in expenditures through false

entries and double accounting.

Each of these fraudulent documents, as well as communications related thereto, were

transmitted by wire. The Sham 2008 Canales Note, executed by Leona Williams and Michael Canales,



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


was presented to JW Gaming by email from John Tang (cc’d to Michael Canales and Melissa Canales)

dated January 30, 2009. Compl. ¶¶118-119, Ex. 5. The top margin of the Sham 2008 Canales Note

bears markings of what appear to be a facsimile machine, indicating that the Sham 2008 Canales Note

was faxed between locations before being scanned and emailed to JW Gaming. Compl. Ex. 5. Both

before and after JW Gaming was presented with the Sham 2008 Canales Note, it was represented to

JW Gaming that Canales Group had invested approximately $5 million with the Tribe. Compl. ¶¶ Exs.

3 (email from Tang), 4 (another email from Tang), 7 (another email from Tang); 21 (email from Melissa

Canales).

The Sham 2012 Canales Note—executed by Leona Williams, Angela James, and Michael

Canales—was presented to JW Gaming in an email from Melissa Canales dated November 1, 2012.

Compl. ¶ 370. The note bears markings at the top of each page indicating it had previously been faxed

from the Tribe’s facsimile machine to a third party. Compl. ¶ 259, Ex. 29. There are additional emails

sent and received by Michael Canales, Melissa Canales, Leona Williams, and Angela James, or on

which they were copied, that transmitted or referenced the Sham 2012 Canales Note. Compl. ¶ 515.

Additionally, as set forth in the complaint, Defendants utilized interstate wire communications on many

other occasions between at least 2009 through 2012, individually and together, to aid in perpetration

of their scheme or artifice to defraud JW Gaming out of $5.38 million. See, e.g., Compl. ¶¶ 127, 132,

181, 177, 192-93, 194-96, 198, 202-04, 211-33.

In addition to utilizing wire transmissions to defraud JW Gaming, the defendants also utilize

them in their broader scheme to defraud lenders and loot the Tribe. See e.g., Dkt. 136-1 at 142-46, 257

(emails connected with fraudulent CCDFI loan in 2017); Dkt. 186-2 at 185 (wiring of funds in

connection with fraudulent Mid America Mortgage loan in 2015); Narvaez Decl. Ex. ZK (electronic

data collection form for sham Single Audit submitted for fiscal period ended Dec. 31, 2016); and Dkts.

186-5, -7, and -9 (account statements of Williams, James, and Steele reflecting electronic deposits and

expenditures of tribal funds).

All of these predicate acts of wire fraud in a sufficient number to constitute “racketeering

activity.”



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


2. The third element: “through a pattern”

Moving to the third element, the facts establish the racketeering activity is part of “a pattern.”

“A ‘pattern of racketeering activity’ requires the commission of at least two predicate acts within a ten-

year period.” Ecodiesel MDL, 295 F.Supp.3d at 980 (quoting 18 U.S.C. § 1961(5)). “[T]o show a

pattern of racketeering activity, a RICO plaintiff must ‘show that the racketeering predicates are related,

and that they amount to or pose a threat of continued criminal activity.” Sever v. Alaska Pulp Corp.,

978 F.2d 1529, 1535 (1992) (quoting H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229 (1989)

(emphasis in original)).

Here, the racketeering predicates are related and continuous, thereby constituting a pattern. The

acts of wire fraud are related in that they are for the common purpose of defrauding third parties and

the Tribe, all for the self-enrichment of the defendants. Just with regard to JW Gaming, the defendants

committed many acts of wire fraud over their multi-year effort to obtain JW Gaming’s money,

misappropriate it, and then conceal their misconduct. In defrauding others beside JW Gaming—such

as Mid America Mortgage in 2015, CCDFI in 2017, Westamerica Bank in 2019, and the federal

government (through submission of sham Single Audits)—the defendants continue to perpetrate acts

of wire fraud. Finally, the span of time over which the defendants have perpetrated these racketeering

predicates—beginning with JW Gaming in 2008 and continuing through Westamerica Bank in 2019

while this litigation was pending—shows “that they amount to or pose a threat of continued criminal

activity.” This shows a pattern of racketeering activity.

3. The second element: “an enterprise that affects interstate commerce.”

Moving to the second element, the facts show the existence of “an enterprise that affects

interstate commerce.” “A RICO ‘enterprise’ consists of ‘any individual, partnership, corporation,

association, or other legal entity, or any union or group of individuals associated in fact although not

as a legal entity.’” Ecodiesel MDL at 980 (quoting 18 U.S.C. § 1961(4)). “The Ninth Circuit has

referred to this definition as ‘expansive’ and ‘not very demanding.’” Id. (quoting United States v.

Christensen, 828 F.3d 763, 780 (9th Cir. 2015) (further quotations omitted)).



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


An association-in-fact enterprise, like that alleged here, “is ‘a group of persons associated

together for a common purpose in engaging in a course of conduct.’” Christensen, 828 F.3d at 780

(quoting Odom v. Microsoft Corp., 486 F.3d 541, 552 (9th Cir. 2007) (en banc)). “Such an enterprise

has three elements: ‘(A) a common purpose, (B) a structure or organization, and (C) longevity

necessary to accomplish the purpose.’” Ecodiesel MDL, 295 F.Supp.3d at 980 (quoting Eclectic, 751

F.3d at 997); see Boyle v. United States, 556 U.S. 938, 946 (2009) (observing that “the evidence used

to prove the pattern of racketeering activity and the evidence establishing an enterprise may in

particular cases coalesce”) (internal quotation marks omitted). All three sub-elements of an

association-in-fact enterprise are present here.

a) First sub-element: Common Purpose

The facts show defendants share the common purpose of defrauding third parties (like JW

Gaming, other lenders, and the federal government) and looting the Tribe. The flow of illicit money

and assets identifies the primary beneficiaries of the enterprise. Of the individual Tribal Defendants,

the primary beneficiaries are defendants Angela James, Leona Williams, and Lenora Steele. For more

than a decade, this trio (comprised of a mother and two daughters) received salaries from the Tribe,

millions in cash from the Tribe through payments directly to them, and to third parties for their benefit

(such as mortgage companies, landlords, and credit card companies). Dkt. 136-1 at 79-139; Narvaez

Mar. Decl. at ¶¶ 4.b.- 4.h. and Exs. B-H. Additionally, as members of PED LLC, Angela James and

Leona Williams have received millions of dollars in real estate they caused the Tribe to deed to PED

LLC, in addition to $400,000 the Tribe’s fraudulent 2011 accounting showed the Tribe paid to PED

LLC from the $5.38 million JW Gaming deposited with the Tribe. Compl. ¶¶ 455-458; Dkt. 136-1 at

10-11; also see Grant Deed, Apr. 15, 2016, Narvaez Decl. Ex. ZF; also see Gift Deed, Nov. 17, 2006,

Narvaez Decl. Ex. ZE.

Of the Canales Defendants, the flow of illicit money and assets shows that Michael Canales,

Melissa Canales, and Canales Group LLC (of which Michael, Lori, Kelly, and Melissa have been



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


members) are also primary beneficiaries of the enterprise.3 Dkt. 136-1 at 17-77; Dkt. 151-1 at 12-49.

From JW Gaming’s $5.38 million alone, these defendants received over $1 million, according to the

Falsified 2011 Accounting: Michael Canales ($165,240.60); Melissa Canales ($14,000); and Canales

Group LLC ($844,184.10). Compl. ¶ 555, Ex. 13, 16-17. Additionally, these defendants received

many hundreds of thousands of dollars in additional monies from the Tribe, were gifted real property

from the Tribe, and had debt assumed by the Tribe.4

The evidence shows the primary beneficiaries from the individual Tribal Defendants and

Canales Defendants were aided and abetted by their co-defendants, who themselves also benefit from

the enterprise. The evidence fully supports the complaint’s description of each defendant’s role in the

fraudulent scheme. Compl. ¶¶ 388 (all individuals and Canales Group); 393 (Tribal Council

defendants); 408 (Michelle Campbell and Kathy Stallworth); 414 & 418 (Tribal Council defendants);

432 (Canales defendants); 432 (Angela James and Leona Williams); 451-454 (Angela James and Julian

3 At the time this lawsuit was filed, Kelly Canales (75%) and Lori Canales (16%) collectively owned 91% of Canales Group, with the remaining nine percent owned by Michael Canales. See Operating Agmt. Ex. A (Narvaez Decl. Ex. V). Melissa Canales was also a member of Canales Group, but relinquished her interest in 2014. Id. As of January 1, 2019, however, Kelly and Lori “decided to get out of the Canales Group” and “surrendered their ownership interest” to Michael Canales, making him the sole member. Deposition of Michael Canales, Mar. 28, 2019, 9:19-10:21 (Narvaez Decl. Ex. Y). 4 Michael Canales has a trail of civil judgments against him. See Narvaez Decl. Ex. A (eight abstracts of judgment totaling approx. $765,836.14, exclusive of interest). Additionally, three civil suits are pending against him (as well as Canales Group). Two of those suits were filed in San Diego County Superior Court in late 2019, see Gonzalez v. Canales, et al., No. 37-2019-62185, and K & A Enter. LLC v. Canales Group LLC, et al., No. 37-2019-23778, and the other one is Forster-Gill, Inc. v. Pinoleville Pomo Nation, et al., Mendocino County Sup. Ct., No. SCUK-CVG16-68514. Despite these judgments and three pending lawsuits, he has successfully evaded creditors, principally by moving assets into various LLCs owned by nominees, like his family members. Currently, Canales Group, through listing agent Lori Canales, is in the process of selling three houses and various other pieces of real estate, worth nearly $2 million. See Grant Deed to Canales Group LLC (Narvaez Decl. Ex. Z); and see pending real estate listings for San Diego properties at 3042 44th St. (https://www.redfin.com/CA/San-Diego/3042-44th-St-92105/home/22390049), 3052 44th St. (https://www.redfin.com/CA/San-Diego/3052-44th-St-92105/home/108882705), and 3056 44th St. (https://www.redfin.com/CA/San-Diego/3056-44th-St-92105/home/22420683). Canales Group LLC has already successfully sold one house in December of 2019, for approximately $520,000, see Grant Deed (Narvaez Decl. Ex. Z), and another property in April of 2019 for approximately $160,000, see Grant Deed (Narvaez Decl. Ex. Z). Further delay in judgment against Michael Canales and Canales Group will likely render these defendants judgment-proof.



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


Maldonado); 464-469 (Michelle Campbell and Kathy Stallworth); 478-480 (Lenora Steele); 481-483

(Tribal Council defendants); 488-498 (Canaleses and John Tang).

Of the Individual Tribal Defendants, the two accounting staff members—Kathy Redhorse

Stallworth and Michelle Campbell—play significant roles in the perpetuation of the enterprise.5

According to a grant application submitted under penalty of perjury by Lenora Steele on the Tribe’s

behalf to the Department of Education, Kathy Stallworth, Michelle Campbell, and Lenora Steele are

responsible for the Tribe’s financial and accounting activities. See Tribe Grant Application to U.S.

Dept. of Ed. (“DOE Application”), available at

https://www2.ed.gov/programs/indiandemo/16awards/2016-299a-0006.pdf (last visited Mar. 20,

2020); Compl. ¶¶ 406-412, 464-470, 478-480. According to the grant application, Kathy Stallworth is

responsible for the Tribe’s “financial reporting,” “cash management,” and “accounting policies and

procedures.” Compl. ¶ 409 (citing DOE app. at e253). According to the organization chart the Tribe

submitted with the application, DOE App. at e219, Michelle Campbell is the Tribe’s Fiscal Director,

and in that role is head of all of the Tribe’s accounting and finances.6 Consistently, Leona Williams

testified in deposition that Michelle Campbell handles the finances of the Tribe, see Deposition of

Leona Williams, July 21, 2011, at 120:21-121:21 (Narvaez Decl. Ex. ZB), and also the financials of

Angela James and Leona Williams’ personal company, PED LLC, id. at 151:4-14. A reasonable person

could not conclude that, as the Tribe’s accounting heads, they did not have a prominent role in,

knowledge of, and control over: the preparation and concealment of the Falsified 2011 Accounting,

Sham 2008 Canales Note, and Sham 2012 Canales Note; the many years of false financials utilized to

perpetrate frauds against third-parties including Mid America Mortgage, CCDFI, and Westamerica

5 Kathy Stallworth also serves in other prominent roles, such as board member of the Tribe’s business board, and signer on that board’s bank accounts. See Documents of Pinoleville Business Board, Dkt. 151-1 at 51-54. She was also chief financial officer and co-director—along with Leona Williams and the Tribe’s now-delicensed phony auditor Rudolph Vargas—of Pomo Nation Enterprises, Inc., which was chartered in 2007. https://businesssearch.sos.ca.gov/Document/RetrievePDF?Id=02793243-11749443. 6 The grant application also indicates that Lenora Steele “oversees all departments [and] budgets,” Compl. ¶ 406 (citing DOE App. at e37), which would include the fiscal department in which Kathy Stallworth and Michelle Campbell serve.



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


Bank; and the millions in checks drawn from the Tribe’s accounts to and for the benefit of themselves

and their co-defendants.

The Tribe’s more recent financial frauds corroborate the accounting department’s prominent

role in the ongoing enterprise. For example, in the approximately $2 million loan fraud perpetrated

against CCDFI in 2017, documents show Kathy Stallworth was heavily involved in fielding many of

the lender’s questions about the Tribe’s fabricated financial statements, Dkt. 136-1 at 142-46, 257,

including explaining why millions in liabilities were not reflected in the Tribe’s financials, id. at 145.

Importantly, she also took the lead in working with the Tribe’s phony auditors to amend the Tribe’s

(purportedly audited) financial statements to add millions in liabilities (while still omitting tens-of-

millions in other liabilities).7 See id. As the persons in charge of the fiscal and accounting heart of the

Tribe, they have significant roles in the enterprise.8 Compl. ¶¶ 377-381.

7 Notably, the financial statements primarily used to facilitate this and other loan frauds are those purportedly audited by the Tribe’s phony external auditor, Rudolph Vargas. See Dkt. 186-2 (Westamerica in 2015), and 136-1 at 140-366 (CCDFI in 2017). That auditor relinquished his accounting license in 2016 to resolve an enforcement action against him by the California Board of Accountancy. https://www.dca.ca.gov/cba/discipline/actions/ac-2016-72.pdf. Following the stripping of that license, the Tribe began using Napoleon Vargas, CPA—the apparent brother of Rudolph. See Data Collection Form, Narvaez Decl. Ex. ZK, available online at Federal Audit Clearinghouse https://harvester.census.gov/facdissem/UniformGuidanceAcknowledgement.aspx. However, the contact email for Napoleon, “[email protected],” is uncannily similar to the name of the now-unlicensed Rudolph Vargas, which could indicate that Rudolph is continuing to purportedly audit the Tribe’s financials under Napoleon’s CPA license. Also of note, Kathy Stallworth is the certifying tribal official for the financial statements provided to the auditor, see id., which further demonstrates her deep involvement in the enterprise. 8 Michelle Campbell and Kathy Stallworth, respectively, were previously indicted by a federal grand jury in this judicial district on the basis that they and others “conspired to participate in the alteration and destruction of Tribal and Casino records, with the intent to impede, obstruct and influence [a federal National Indian Gaming Commission] investigation.” United States v. Hunter et al., 3:06-cr-00565-CRB (N.D. Cal.), Superseding Indictment [Doc. 43] at ¶ 36. Specifically, the superseding indictment charged that “[i]n or around July 2003, defendants [Michelle Campbell and Kathy Redhorse-Stallworth] and others, met to alter, mutilate, conceal, cover up, falsify and make false entries in Tribal and Casino financial and business records.” Id. at ¶ 37.b.



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


Also serving significant roles in the RICO enterprise are the individual Tribal Defendants who

occupy seats on the Tribe’s seven-member tribal council.9 Notable among them are Jason Steele and

his sister Cassandra Steele—both of whom are children of Angela James and grandchildren of Leona

Williams. These two, along with their mother and grandmother, occupy the four officer positions, and,

critically, the majority of the seven-member tribal council. That four-person majority gives them

absolute control over the Tribe. Supporting this four-person majority are the three members-at-large,

Donald Williams, Andrew Stevenson, and Veronica Timberlake.

The evidence shows the culpability of these Tribal Council Defendants in the ongoing RICO

enterprise. As an initial matter, Leona Williams and Angela James each repeatedly testified under oath

that every transaction in which they act on behalf of the Tribe is approved by the tribal council. Compl.

¶¶ 256-258 (citing deposition transcripts of Leona Williams and Angela James, attached to the

Complaint as Exs. 27 and 28, respectively).10 Other evidence supports that assertion. For example,

the Tribe’s fraudulent loan application to CCDFI in 2017 was supported and approved by a resolution

of the Tribe’s tribal council.11 Dkt. 136-1 at 255-56, 293-94, 312-313. Indeed, the Tribe’s legal counsel

9 These defendants are: Jason Steele (Treasurer), Cassandra Steele (Secretary), Donald Williams (Member-at-Large), Andrew Stevenson (Member-at-Large), and Veronica Timberlake (Member-at-Large). 10 Declarations of other defendants are consistent. Immediately relevant here, Jason Steele declared, under oath, that “[a]t every Tribal Council meeting, the fiscal department prepares financial reports for the entire Tribal Council to review and approve.” Compl. ¶¶ 419-420, and Ex. 33 at ¶ 4. He also testified that “[w]hen any type of contract or agreement comes in front of the Tribal Council asking for a waiver of sovereign immunity, there is an in-depth discussion on the topic[,]” Compl. ¶ 420, and Ex. 33 at ¶ 7, and that he works closely with the Tribe’s fiscal department, Compl. Ex. 33 at ¶ 4, which, as noted, is comprised of Michelle Campbell and Kathy Stallworth. Tribal Council defendant Veronica Timberlake also testified that at a typical tribal council meeting the tribal council approves “the Financial report.” Compl., Ex. 34 at ¶ 6. Their co-council defendants Cassandra Steele, Angela James, and Leona Williams testified consistently. Compl., Exs. 35-37. 11 Notably, before discovery commenced in this action, JW Gaming foreshadowed this loan fraud in its briefing to this Court. See Dkt. 75 at 17-18 (“[T]he ‘representations and warranties’ that the Tribe provided the lender—likely including disclosures of revenue sources and financial liabilities—apparently assured the lender of the Tribe’s ability to service all of its financial obligations.”) In the Tribe’s responsive brief, the Tribe claimed JW Gaming’s assertion was “speculation.” See Dkt. 81 at 13-14 (“Plaintiff’s contention that ‘available information’ regarding a loan to the Tribe in recent years undermines the claim of financial distress is based on speculation about the terms of that loan and the



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


in that transaction (who also serves as legal counsel to the Tribal Defendants in this action) stated in an

email to the loan broker that he had discussed discrepancies on the Tribe’s financials with the tribal

council. Dkt. 136-1 at 142. Records of teleconferences between the Tribe and its counsel in advance

of the loan closing show multiple calls to discuss the loan, including, relevant here, one call “to discuss

questions regarding the Tribe’s 2015 audited financials,” Narvaez Decl. Ex C (Bates no. Pinoleville-

00001393), and another to discuss “the already-delivered 2013-2015 tribal financials[,]” id. (Bates no.

Pinoleville-00001396).12 Similar to the CCDFI loan fraud, the five loans the Tribe fraudulently

obtained from Mid America Mortgage in 2015 were supported by unanimous resolution of the Tribe’s

tribal council. Dkt. 186-2 at 45. In addition, the Tribe’s 2015 bank records show hundreds of thousands

of dollars in checks written to the Tribal Council Defendants. Dkts. 186-3, -4, -6, and -8. Also, in

response to discovery propounded by JW Gaming, the Tribe admitted it authorized the preparation of

the Falsified 2011 Accounting, Tribe Resp. to Pltf. RFA no. 88 (Narvaez Decl. Ex. ZD), which

fraudulently misrepresents the Tribe’s expenditure of JW Gaming’s loan proceeds. The only

reasonable conclusion is that fraud of this magnitude and duration could only be perpetrated with the

knowing involvement, or willful ignorance, of each member of the Tribe’s seven-member tribal

council.

Each of the Tribal Defendants benefits from their role in the enterprise. For example, the

Tribe’s bank records for 2015 (which is the only full year of Tribal bank records available to JW

Gaming) show Angela James, Leona Williams, and Lenora Steele personally received 103 checks in

the aggregate amount of $283,976.93, in addition to salaries and payment of living expenses and

personal credit cards. Declaration of Gregory M. Narvaez, Oct. 30, 2019, Dkt. 136-1 (“Narvaez Oct.

Decl.”) at ¶¶ 5.a. – d. The personal bank records for these three individuals shows they have received

lender’s willingness to make it.”) As noted, available evidence shows the Tribe in fact misrepresented its financial condition to obtain the loan, despite its earlier efforts to distance itself from its fraud. 12 In regard to this particular fraudulent transaction, the Tribe’s counsel explained in briefing before Judge Illman that he “advised the Tribe to carefully review all loan documents and ensure that the responses were truthful.” Dkt. 169 at 4. Although JW Gaming was not permitted to discover the communications between the Tribe and its counsel, see Order (Dkt. 182), counsel’s explanation is further confirmation of the tribal council’s knowledge of the financial frauds being perpetrated through the Tribe.



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


similar payments from at least 2012 through 2017 (the only years for which their personal records were

subpoenaed). See Narvaez Mar. Decl. at ¶¶ 4.b. – 4.h., and Exs. B-H. The remaining Tribal

Defendants—Jason Steele, Cassandra Steele, Veronica Timberlake, Donald Williams, Andrew

Stevenson, Julian Maldonado, Kathy Stallworth, and Michelle Campbell—also benefit. The Tribe’s

bank records for 2015 show these individuals collectively received $88,006.96 that year: Michelle

Campbell ($36,704.69); Kathy Stallworth ($7,756.55); Cassandra Steele ($6,560.76); Jason Steele

($6,239.27); Andrew Stevenson ($4,887.15); Donald Williams ($7,650); Julian Maldonado

($4,270.66); and Veronica Timberlake ($13,937.88). See Westamerica Bank Records for 2015, Dkt.

186-3; also see Narvaez Decl. Ex. ZC. This does not account for monies these individuals received as

payroll compensation, payments for their benefit, such as for living expenses and credit cards, and in-

kind payments such as housing. See id.

Finally, John Tang played a substantial role in the enterprise, and was a (if not the) major link

between the enterprise and JW Gaming. Compl. Ex. 4, 5, 1, 2 (Dkt. 1-2) (email correspondence

involving Mr. Tang). He presented the deal to JW Gaming, id. at Ex. 2; repeatedly represented that

Michael Canales had invested millions in the project, id. at Exs. 1, 3, 4, 7, et seq.; participated in the

preparation of the sham 2008 promissory note between Canales Group and PED LLC, see Deposition

of Michael Canales, Mar. 28, 2019 (“Canales Mar. 28 Depo.”) at 72:25-73:3 (Narvaez Decl. Ex Y);

provided JW Gaming with the Sham 2008 Canales Note, Compl. Ex. 5; and, when Jim Winner wanted

“to make it ‘Crystal Clear’ . . . that no fees will be paid to any member of any nature, including

consulting, mgmt. etc.” without JW Gaming’s approval, Mr. Tang (in an email copied to Michael

Canales) expressly agreed, id. at Ex. 9. Later, however, Mr. Tang would become a member of Canales

Group, see Canales Mar. 28 Depo. at 36:8-17, accept at least $68,000 from the Tribe and/or Canales

Group, see Narvaez Decl. Ex. 8, and perpetuate the false narrative that Canales had loaned the Tribe

millions of dollars, Compl. Exs. 4, 5, 1, and 2. In an email to Michael Canales, Mr. Tang also

acknowledged that JW Gaming’s principals “fulfilled their obligations” in the project and that the

defendants had improperly misappropriated monies furnished by JW Gaming. Narvaez Decl. Ex. E at

Bates no. TANG 230. Even after JW Gaming’s involvement in the project waned, Mr. Tang remained

involved with Canales Group and the Tribe, even becoming a stakeholder in their efforts in 2015 to



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


cultivate cannabis and manufacture derivative products. Deposition of Michael Canales, Mar. 29, 2019

(“Canales Mar. 29 Depo.”) at 242:3-23 (Narvaez Decl. Ex X).13

b) Second sub-element: A structure or organization

“RICO’s structural requirement requires only a ‘relationship among those associated with the

enterprise.’” Ecodiesel MDL, 295 F.Supp.3d at 982 (quoting Boyle, 556 U.S. at 946). “Neither a

‘hierarchy, role differentiation . . . [or] a chain of command’ is required.” Id. (quoting Boyle, 556 U.S.

at 946). A RICO enterprise “does not need a formalized decision-making method, nor must is assign

members specific roles and duties.” United States v. Bingham, 653 F.3d 983, 992 (9th Cir. 2011)

(citing Boyle). “A group that does nothing but engage in extortion through old-fashioned,

unsophisticated, and brutal means may fall squarely within the statute’s reach.” Id. (quoting Boyle at

938). “In short, [participants in the enterprise] must only have had some sort of framework, formal or

informal, for carrying out its objectives and members who worked as a continuing unit to achieve a

common purpose.” Id. (internal citations and markings omitted).

Here, the evidence demonstrates a RICO enterprise. In one respect, the enterprise here has a

fairly formal structure because it operates, at least in part, through the government shell of a hijacked

federally-recognized Indian tribe.14 Through their various roles in the tribal government, the individual

13 Similar to the Canales Defendants, Mr. Tang is also in the process of liquidating real property, which, in his case, is valued at approximately $1.75 million. Mr. Tang acquired the multi-unit property—located at the corner of Strandway and Whiting Ct. in San Diego’s Mission Beach neighborhood—in or about 2005. See Grant Deed, Apr. 11, 2005, Narvaez Decl. Ex. ZG, and Interspousal Transfer Deed, Nov. 14, 2012, Narvaez Decl. Ex. ZH. On Dec. 9, 2019, Mr. Tang listed the property for sale (under the address 3936 Strandway), which listing was removed in February of 2020. See https://www.zillow.com/homedetails/3936-Strandway-San-Diego-CA-92109/16922497_zpid/. In the same month, however, Mr. Tang relisted the property under the address 709 Whiting Ct. See https://www.zillow.com/homedetails/709-Whiting-Ct-San-Diego-CA-92109/2088249102_zpid/. Online records show the sale of the property is pending. Id. Both addresses pertain to the same property. See Narvaez Decl. Exs. ZH and ZI. 14 On this point, the complaint describes how the defendants gained control of the governmental shell through a fraudulently-certified constitution, and how they maintain that control by disenfranchising would-be citizens by, among other things, refusing to confirm individuals’ citizenship status, and requiring 100 hours community service to be eligible to vote in elections. Compl. ¶¶ 390-397. In a recent opinion holding that a large subset of the Pinoleville Rancheria is not eligible to organize a federally-recognized tribe independent of the Tribe, the Ninth Circuit noted some of the tribal council defendants’ deviousness in this regard. See Allen v. United States, No. 17-17463, 2019 WL 7369426,



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


Tribal Defendants control the Tribe.15 The Tribe, in turn, had formal and contractual relationships with

Michael Canales, Melissa Canales, and Canales Group (of which all of the Canales Defendants and

John Tang have been members).16 At the same time, notwithstanding their formal positions within the

Tribe, or within Canales Group, the defendants all, through affirmative act or omission, knowingly play

a role in the enterprise’s purpose of defrauding third parties and looting the Tribe for the benefit of the

enterprise. In this way, the enterprise also fits within the informal structure described in Bingham.

Either way, the defendants comprise a RICO enterprise.

c) Third sub-element: Longevity necessary to accomplish the purpose.

“RICO requires only ‘longevity sufficient to permit [the] associates to pursue the enterprise’s

purpose.’” Ecodiesel MDL at 982 (quoting Boyle, 556 U.S. at 946). However, “nothing in RICO

exempts an enterprise whose associates engage in spurts of activity punctuated by periods of

at *3 (9th Cir. 2019). For example, Allen notes the Tribe’s reversal of course on whether the petitioners in that case were in fact voting members of the Tribe. Id. Eventually, in February of 2016, Leona Williams submitted sworn and notarized declaration retracting an earlier statement that the petitioners were not members. Id. The same declaration also incorporated two tribal council resolutions from February of 2016 declaring that 16 of the 18 petitioners were members of the Tribe. Id. The two resolutions “also called for ‘the 16 tribal members’ to be charged with federal crimes for representing to Interior that they were ‘not members of any tribe.’” Id. 15 The tribal government shell is a critical component in the enterprise. When accountability to a tribal citizenship is eliminated, as has been done with the tribe in this case, it is a formidable entity through which the shell’s controllers can perpetrate financial crime. The tribal shell is exempt from state and federal taxation. It does not file state, federal, or any other tax return. It is immune from unconsented lawsuits. It is eligible to conduct Las Vegas-style gambling. It receives a perpetual cash flow of $1.1 million per year aggregated from revenues of other casino gaming tribes in California. It also receives substantial federal grant funding each year, with the Tribe’s 2018 federal expenditures totaling $4,529,581. See Single Audit for fiscal period ended Dec. 31, 2018, available at https://harvester.census.gov/facdissem/UniformGuidanceAcknowledgement.aspx. Because those in control of the tribal shell are the sole arbiters of tribal citizenship and elections, and state and federal courts almost always lack jurisdiction to hear grievances of would-be tribe members—even violations of the Indian Civil Rights Act, 25 U.S.C. § 1301 et seq., see Santa Clara Pueblo v. Martinez, 436 U.S. 49 (1978)—the controllers have virtually unfettered latitude to utilize the tribal shell for unlawful and self-enriching purposes, as is the case here. 16 Notably, despite the Tribe’s development agreement and promissory notes with Canales Group, both Leona Williams and Michael Canales previously testified (in what could only reasonably be viewed as coordinated false testimony) that the Tribe had no contracts with Canales Group. Compl. ¶¶ 320, 322, and Ex. 31.



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


quiescence.” Boyle at 948. In this case, the longevity requirement is easily satisfied. The enterprise

fraudulently induced JW Gaming to deposit monies with the Tribe from approximately 2009 through

2011. The enterprise has also fraudulently obtained loans in at least 2015, 2017, and 2019. The

enterprise has also been looting the Tribe for many years through misappropriating Tribal monies and

dissipating real property to and for the benefit of the enterprise’s participants.

4. The first element: “conduct” of the enterprise’s affairs

The final element of a 1962(c) claim is that “each [d]efendant ‘conduct[ed] or participate[d],

directly or indirectly, in the conduct of [the] enterprise’s affairs.’” Ecodiesel MDL at 982 (quoting 18

U.S.C. § 1962(c)). “[T]he Supreme Court [has] reasoned that the word ‘participate’ in § 1962(c)

‘makes clear that RICO liability is not limited to those with primary responsibility for the enterprise’s

affairs.’” Id. (quoting Reves v. Ernst & Young, 507 U.S. 170, 179 (1993)). The statute’s “use of the

phrase ‘directly or indirectly’ also ‘makes clear that RICO liability is not limited to those with a formal

position in the enterprise.’” Id. (quoting Reves at 179). “Yet, ‘some part in directing the enterprise’s

affairs is required.’” Id. (quoting Reves at 179). ““‘[S]imply performing services for the enterprise’

or failing to stop illegal activity, is not sufficient.’”” Id. (quoting In re Volkswagen “Clean Diesel”

Marketing, Sales Practices, and Products Liability Litigation, MDL No. 2672 CRB (JSC), 2017 WL

4890594, *16 (N.D. Cal. Oct. 30, 2017), which is quoting Walter v. Drayson, 538 F.3d 1244, 1248-49

(9th Cir. 2008)).

In Ecodiesel MDL, a subset of defendants (called the “Bosch Defendants”) who “played a role

in designing, implementing, and concealing software that was used in the Class Vehicles to cheat

emissions tests,” 295 F.Supp.3d at 983, challenged the “conduct” element of the RICO claim, arguing

they “were simply performing services for the enterprise,” 295 F.Supp.3d at 983. The court rejected

their argument, noting that the corrupt software was configured such that it could not be modified

without the Bosch Defendants’ consent. Id. The court reasoned: “[t]hat power of consent and control

over the configuration of the EDC Unit 17 plausibly shifts the Bosch Defendants from ‘simply

performing services for the enterprise,’ to taking ‘some part in directing the enterprise’s affairs.’” Id.

(citations omitted).



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


Here, the conduct element of the § 1962(c) claim is satisfied as to each of the defendants. Each

of the Tribal Defendants has a level of control over important aspects of the Tribe, through which the

enterprise operates. With regard to the Tribal Council Defendants, who collectively control the Tribe

in furtherance of the enterprise, this element is self-evident because, as noted, they utilize their positions

to unlawfully enrich themselves and to commit unlawful acts against third-parties like JW Gaming.

Next, although they do not serve on the Tribe’s tribal council, Tribal Defendants Lenora Steele, Kathy

Stallworth, and Michelle Campbell control the Tribe’s accounting department, which in this case, is

the core of the financial crimes being perpetrated. The last remaining Tribal Defendant, Julian

Maldonado, serves as a conduit for the funneling of assets out of the Tribe.

This element is also satisfied with respect to each of the Canales Defendants. Defendant

Canales Group LLC is a significant player in the enterprise. It is the entity that is party to two sham

notes with the Tribe, the recipient of millions of dollars in cash from the Tribe, and the holder of the

$5.352 million dollar sham note from the Tribe.17 Each of the Canales Defendants has, at relevant

times, has been a member of the Canales Group LLC, giving them control over it. In addition to their

roles in Canales Group LLC, Michael Canales and Melissa Canales have played significant roles

directly with the Tribe, including as president of the Tribe’s business board and legal counsel,

respectively. In these respects, the Canales Defendants conducted or participated in the acts of the

enterprise.

Finally, the conduct element is satisfied with respect to John Tang. Mr. Tang leveraged his

connection with JW Gaming to rope it into the scheme. He assured JW Gaming’s former principal, the

now-deceased Jim Winner, that Canales had invested over $5 million “for development costs over the

last 8 years.” Compl. ¶¶ 129-30, Ex. 7. Mr Tang also agreed that none of the money invested by JW

17 As JW Gaming noted in the Third Joint Case Management Statement, JW Gaming is informed by the Tribe’s counsel and believes that the Tribe and Canales Group LLC, under the guise of a restructuring, made the 2012 note between them essentially valueless. Dkt. 156 at 9-10. The note, which before the restructuring had a balance due of about $11 million collectible against all liquid assets of the Tribe, has been reduced to $2.5 million collectible against the revenues of a non-existent casino. Because the restructuring effectively transferred about $8.5 million from Canales Group into the Tribe, and rendered the balance of the note effectively uncollectible, it is likely a fraudulent conveyance within the meaning of applicable law.



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


Gaming would be paid to Mr. Tang or the Canales Group LLC. Compl. ¶ 132, Ex. 9. Despite the latter

assurance, however, Mr. Tang accepted at least $68,000 of the money deposited by JW Gaming,

according to the Falsified 2011 Accounting. Compl. ¶¶ 555 and 177. In an email to Michael Canales

dated Dec. 22, 2011, Mr. Tang acknowledged some of the wrongdoing that had been perpetrated against

JW Gaming, including his role in it. Narvaez Decl., Ex. E (Bates no. Tang 230). Relevant here, Tang

noted:

Mike: I wish I had a chance to see your email before it was sent. Jim and Donna [Winner] fulfilled their obligations under the [Joint Venture] Agreement. We are the ones guilty of violating terms of the contract, or at the very least, breach of trust. . . . The Canales Group and I both received consulting fees out of JW Gaming funds without proper approval (including any fees and health insurance premiums paid to me from the Canales Group). That amount totals about $758,000 (and doesn’t include about $345,000 in expense reimbursement to the Canales Group).

Id.

Moreover, as noted in Mr. Tang’s email, Mr. Tang became a member of Canales Group during

the period JW Gaming was depositing monies with the Tribe (which monies were subsequently paid

from Tribal accounts to Canales Group LLC). His role shows he participated, directly or indirectly, in

the conduct of the enterprise.

5. The fifth element: proximate cause

With regard to the fifth and final element of JW Gaming’s § 1962 claim, the facts show the

conduct is “the proximate cause of harm to [JW Gaming].” Eclectic at 997. Here, the evidence shows

that defendants’ misrepresentations directly contributed to JW Gaming’s decision to invest in the

casino project. Throughout early negotiations, there were repeated references to the Canales Group

investment, and JW Gaming repeatedly communicated it was willing to match what Canales Group

had invested in the project. In reliance on defendants’ misrepresentations about the Canales loan, JW

Gaming deposited its monies with the Tribe. The defendants’ misrepresentations continued throughout

JW Gaming’s involvement with them. All of this shows the defendants’ conduct is the proximate cause

of the harm to JW Gaming.



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


B. JW Gaming is entitled to judgment as a matter of law on its claim for fraud and deceit.

To prevail on a claim for fraud under California law, a plaintiff must show “(a)

misrepresentation, (b) knowledge of falsity (or scienter), (c) intent to defraud, i.e., to induce reliance;

(d) justifiable reliance; and (e) resulting in damage.” Jordan v. Paul Financial, LLC, 745 F.Supp.2d

1084, 1095 (N.D. Cal. 2010) (quoting In re Napster, Inc. Copyright Litig., 479 F.3d 1078, 1096 (9th

Cir. 2007), which itself was quoting Small v. Fritz Cos., Inc., 30 Cal.4th 167 (2003)), and citing Cal.

Civ. Code §§ 1709-1710).

Here, through the facts presented and discussed under the RICO claim, JW Gaming has also

established the elements of its fraud claim against each of the defendants thereto. JW Gaming will not

rehash all of those facts here in full. In short, the fraud defendants, through fraudulent

misrepresentations (of which the major ones are the two sham Canales notes and the fraudulent tribal

accounting), knowingly and successfully induced JW Gaming to deposit $5.38 million into tribal

accounts. As a result of justifiably relying on the fraud-defendants’ misrepresentations, JW Gaming

parted with its $5.38 million, none of which JW Gaming has yet recovered. On this claim, JW Gaming

requests entry of judgment in the amount of $5.38 million.

II. In the alternative, there is no just reason to delay the entry of final judgment on the contract claim alone.

“An order granting partial summary judgment is usually not an appealable final order under 28

U.S.C. § 1291 because it does not dispose of all of the claims.” Jewel v. National Security Agcy., 810

F.3d 622, 627 (9th Cir. 2015) (quoting Am. States Ins. Co. v. Dastar Corp., 318 F.3d 881, 884 (9th Cir.

2003), which was citing 28 U.S.C. § 1291).

An “important exception” to this rule is found in Rule 54(b), which provides in relevant part:

When an action presents more than one claim for relief . . . or when multiple parties are involved, the court may direct entry of final judgment as to one or more, but fewer than all, claims or parties only if the court expressly determines that there is no just reason for delay.

Id. (quoting Fed. R. Civ. P. 54(b)).

A two-step process guides a district court’s Rule 54(b) analysis. Tsyn v. Wells Fargo Advisors,

LLC, No. 14-cv-02552-LB, 2016 WL 7635883, *2 (N.D. Cal. June 27, 2016). “A district court must



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


first determine that it has rendered ‘final judgment,’ that is, a judgment that is ‘an ultimate disposition

of an individual claim entered in the course of a multiple claims action.’” Id. (quoting Wood v. GCC

Bend, LLC, 422 F.3d 873, 878 (9th Cir. 2005), which was quoting Curtiss-Wright Corp. v. Gen. Elec.

Co., 446 U.S. 1, 7 (1980) (further quotation omitted)). Second, the district court “must determine

whether there is any just reason for delay.” Id. (quoting Wood, 422 F.3d at 878). In connection with

the second step, the district court “should consider: (1) the interrelationship of the certified claims and

the remaining claims in light of the policy against piecemeal review; and (2) equitable factors such as

prejudice and delay.” Id. (citing Curtiss-Wright, 446 U.S. at 8-10, and Gregorian v. Izvestia, 871 F.2d

1515, 1518-20 (9th Cir. 1989)).

Rule 54(b) “was adopted ‘specifically to avoid the possible injustice of delay[ing] judgment

o[n] a distinctly separate claim [pending] adjudication of the entire case. . . . The Rule thus aimed to

augment, not diminish, appeal opportunity.’” Jewel, 810 F.3d at 628 (quoting Gelboim v. Bank of Am.

Corp., 574 U.S. 405, 135 S.Ct. 897, 902-03 (2015) (brackets in original)). “The Ninth Circuit has

indicated in this vein that the modern trend is ‘toward permitting Rule 54(b) certification, or, more

exactly, ‘toward greater deference to a district court’s decision to certify under Rule 54(b).’” Id.

(quoting Texaco, Inc. v. Ponsoldt, 939 F.2d 794, 798 (9th Cir. 1991)).

Here, the two-step analysis supports entry of final, enforceable judgment on the contract claim

pursuant to Rule 54(b). The first step of the analysis is satisfied in that the court fully resolved, and

rendered judgment (although not final), on the contract claim. See “Order on Motion for Summary

Judgment, Motion for Judgment on the Pleadings, Motion for Joinder, and Motion to Strike and

Dismiss,” Dkt. 178, at 19.

The second step of the analysis is also satisfied because “there is no just reason to delay”

entering final judgment on the contract claim. The contract claim is against a set of defendants who

are entirely distinct from the defendants to the remaining claims. Thus, the judgment on the contract

claim completely resolves all claims in this litigation against the contract defendants. While there is

factual overlap, the claims under the contract are based on the Tribe’s failure to pay the note upon its

maturity in July of 2015. The tort claims, on the other hand, concern the tort defendants’ fraudulent

inducement of the loan beginning in or about 2008, and of the note in 2012, and their longtime pattern



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


of defrauding JW Gaming and others, which pattern has continued through years 2015, 2017, and at

least through 2019 (during the pendency of this litigation). Thus, while aspects of any appellate review

of the contract judgment may overlap with appellate review of the tort claims, the operative analysis

of the claims is sufficiently distinct that entry of a 54(b) judgment would not be contrary to juridical

interests.

Equitable factors support entry of final judgment on the contract claim. JW Gaming’s ability

to collect on its contract award is likely to be frustrated if a judgment is not entered. JW Gaming has

lodged substantial evidence of the Tribe continuing to fraudulently obtain new loans, and thereby

accrue the corresponding debt. The Tribe was doing precisely that in March of 2019 in connection

with a business line of credit from Westamerica Bank. These fraudulent acts generate more creditors,

each with an interest in collecting against the Tribe’s assets.

In addition to continuing to accrue debt, JW Gaming has put on substantial evidence showing

over a decade of the Tribe dissipating its assets in favor of the tort defendants. This dissipation includes

the tort defendants looting the Tribe’s bank accounts, even while the Tribe defaults on its financial

obligations. Given the pattern of this behavior from at least 2009 through 2017 (the latest time period

for which individuals’ bank records were obtained), there is no basis to conclude the behavior is not

continuing or will not continue.

This potential for harm is exacerbated when coupled with the potential for significant delay in

the prosecution of the tort claims. Thus far, the tort defendants have hampered prosecution of the tort

claims for nearly two years through an interlocutory appeal of this Court’s denial of their immunity

claim in October of 2018. To date, JW Gaming has had two matters before the Ninth Circuit in

connection with that appeal (the merits appeal and a related mandamus petition), and only weeks ago

did the Supreme Court deny review of this Court’s immunity ruling. There is also significant likelihood

of further delay in JW Gaming’s continued prosecution of the tort claims. As noted, at least some of

the tort defendants are liquidating and/or moving assets, in what could be preparation for bankruptcy

petitions, which could delay prosecution of the tort claims. Also, given the extent of the financial

misconduct that has come to light, there is a potential for delay as a result of ancillary government

proceedings against some or all of the tort defendants.



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FREDERICKS PEEBLES


As an alternative to final judgment, JW Gaming asks the Court to enter a final, enforceable

judgment on the contract claim under Rule 54(b). For damages on this claim, JW Gaming has attached

its calculation of principal and interest, which as of March 31, 2020 will be $9,166,423.21. See Narvaez

Decl. Ex. ZL.

CONCLUSION

For the foregoing reasons, JW Gaming respectfully requests that the Court grant JW Gaming’s

motion and order entry of judgment on claim two in the amount of $5.38 million, on claim three in the

amount of $16,140,000, and on the previously-resolved claim one in the amount of $9,166,423.21.

Alternatively, JW Gaming requests that the Court direct entry of judgment pursuant to Rule 54(b) on

claim one only.

Dated: March 23, 2020 FREDERICKS PEEBLES & PATTERSON LLP

By: /s/ Gregory M. Narvaez Gregory M. Narvaez Attorneys for Plaintiff JW Gaming Development LLC
