PITTSBURGH - An investment firm will stay caught up in an embezzlement scheme involving the money of a prominent scientist who helped launch the Voyager spacecraft and the Hubble telescope.
Pittsburgh federal judge Mark Hornak on Nov. 15 refused to toss claims made against Mount West Investments, which gave a loan to a financial advisor who had stolen millions of dollars from the late Dr. Elwyn Berlekamp.
Berlekamp, who passed in 2019, was a professor of mathematics and computer science at the University of California, Berkeley. As Hornak's opinion notes, he was a pioneer in algorithms and became a successful investor.
But he was not so successful in choosing the right person to manage his money. He hired Pittsburgh-based Thomas Pipich to manage the fortune he set up in Berlekamp Family Investments.
Between 2015-23, Pipich stole $5.5 million from BFI, keeping some for himself but diverting some to BarTom Investments. That entity managed the wealth of Barton Woytowicz, with whom Pipich had played basketball at Fordham University in the 1970s.
Investment losses at BarTom prompted Pipich to take money from BFI. Some of that BFI money went to Mount West Investments to repay a loan to BarTom.
When BFI discovered the scheme and after those involved refused to return the funds, BFI filed suit in federal court, naming Mount West as one of the defendants. Mount West said the money it recovered came from BarTom (even though it originated at BFI), but BFI argued the loan agreement was void because Pipich forged Woytowicz's signature.
Hornak's 20-page decision will keep claims against Mount West alive.
"(T)o the extent that Mount West argues that the alleged downstream converter must wrongfully obtai the property from the true owner directly, it misstates the law," Hornak wrote.
"Courts applying Pennsylvania law routinely impose liability for conversion even where the converted property has passed through the hands of a third party."
Hornak added that the stolen BFI funds did not lose their separate identity when they were transferred to BarTom's accounts. BFI money was not commingled with BarTom money because BarTom's account was "effectively depleted," the complaint says.
"Moreover, even if BFI funds had been commingled with lawfully obtained funds, the stolen BFI funds would not have automatically lost their separate identity," Hornak wrote.
The amount in issue is $990,000, and BFI has adequately pleaded that it rightfully belongs to BFI.
"BFI is not claiming a security interest in the funds that might, on he occurrence of some future event, have become a possessory right," Hornak wrote.
"Rather, BFI claims ownership of the funds in question that, at all times, included the right to present possession."