Thomas & Wong — The Attorney-Escrow Loan Fraud

Wallace exploited her simultaneous role as Thomas & Wong's agent and a BDV director to direct Cane's attorney trust account as a pass-through, executing diversions before the promissory note was signed. The $1.8M gold-doré collateral (120% coverage) was fabricated — the bankruptcy court found Wallace never viewed it. Cane O'Neill executed the wire instructions without independent verification, supplying the professional veneer.

 Open the filed qui tam complaint at this section — the operative pleading (United States ex rel.), jumped to the matching allegation; the filed PDF is one click away.

The complete forensic brief behind this summary — the full record with exhibits. Page through it below, or open it larger for the document summary and key relations.

Thomas & Wong is the earliest fully documented run of the enterprise's operating template: Wallace cultivates the victim's trust; Cane supplies the legal infrastructure and the escrow that does the extracting. Every later joint scheme — Davi Skin, SDI, MOD Systems — is this one repeated.¹

In February 2003 Ed Tarapaski, Thomas & Wong's equipment-financing officer, arrived in Scottsdale for reconstructive eye surgery. He met Wallace at her laser hair-removal salon, Le Vanishe, and — when his hotel disappointed — stayed in her guesthouse. There he “overheard” Wallace in a distressed call with John Beardmore about BDV's debts: a staged opportunity engineered so Tarapaski would feel he had discovered a deal rather than been sold one.²

She said that she had a lot of experience at it. She said just that she would do the paperwork and I would look after lending the money. — Q: Did you rely on her expertise? A: Yes, yes, absolutely.Ed Tarapaski Trial Testimony, Thomas & Wong v. Blume (Maricopa Cnty. Super. Ct. Feb. 4, 2008) at 18:3–12

Wallace positioned herself as Thomas & Wong's trusted agent and financial advisor while secretly serving as a director of BDV — the very shell receiving the loan. Under oath she would later shrink it all to “all I do was introduce two guys,” a claim the documentary record contradicts at every line.³

1. Appellate Brief Re Wallace Breach of Trust, Thomas & Wong v. Blume (Dec. 1, 2008); Deposition of Jan Wallace, Thomas & Wong v. Blume (June 19, 2007). 
2. Trial Transcripts, Thomas & Wong v. Blume, Nos. CV2005-008545, CV2005-010599 (Maricopa Cnty. Super. Ct. Feb. 4–5, 2008). 
3. Deposition of Jan Wallace, Thomas & Wong v. Blume (June 19, 2007).

Wallace and Tarapaski built a “due diligence checklist” together — with Wallace contributing most of the items. It created the appearance of careful vetting while Wallace controlled what went on the list and how each item would be “verified.” She agreed to view the gold personally (Tarapaski would be in Korea), selected her own attorney for the legal advice, selected Cane O'Neill as escrow agent, and controlled every channel to Lake Bank and BDV.¹

Not one checklist condition was ever satisfied — yet Wallace repeatedly assured Tarapaski they had been. The centerpiece was a fabricated security ritual: when Tarapaski hesitated, Wallace invented the “safekeeping receipt” — a vault, an armored car, gold “brought into a viewing room” — none of which existed.²

1. Trial Transcripts, Thomas & Wong v. Blume (Feb. 4–5, 2008); Deposition of Jan Wallace (June 19, 2007). 
2. Ed Tarapaski Trial Testimony (Feb. 4, 2008) at 43:5–19 (fabricated safekeeping-receipt procedure). 

Wallace's advice was never neutral. She held a stack of concealed financial interests that all pointed one way — toward closing the loan regardless of its merit.¹

• MW Asia shell sale to Beardmore $250,000 · Dec. 6, 2002
  $50,000 deposit overdue; Wallace needed Beardmore financed to close. She admitted the contract under oath.
• Wallace Black LLC commission ~$15,000
  1% of the $1.5M loan — paid through an entity whose registered agent was Cane.
• BDV board seat
  Elected director on Mar. 6, 2003 — the same day as the first unauthorized transfer.
• Lake Bank kickback $50,000
  Paid to Wallace personally from loan proceeds, routed to obscure its origin.

She also hid what mattered most to any lender: Beardmore already owed Lake Bank more than $500,000 and carried an unpaid judgment of roughly $2 million. Tarapaski testified he believed Wallace was protecting Thomas & Wong's interests — the precise inverse of the truth.²

1. Deposition of Jan Wallace (June 19, 2007) (MW Asia contract; Wallace Black 1% commission; $50,000 Lake Bank kickback).
2. Trial Transcripts, Thomas & Wong v. Blume (Feb. 4–5, 2008) (concealed Beardmore debt and ~$2M judgment; BDV board election Mar. 6, 2003). 

The escrow was the machine. On Mar. 3, 2003 Wallace opened a Cane O'Neill trust account nominally for Thomas & Wong's benefit — but positioned herself as sole signatory and sole point of contact. Tarapaski had no direct contact with the firm; Cane O'Neill, bound to Wallace as client since 1998, treated her instructions as the client's. Of $799,960 that flowed in, every dollar flowed out.¹

I took one for the team. Jan was a little upset.Susan Johnson (Cane O'Neill employee), internal email, Mar. 6, 2003 (Trial Ex. 19)

Cane executed all of this operating as “Michael Cane” through Cane O'Neill & Taylor — twenty months after legally changing her name to Kyleen E. Cane on June 28, 2001. Holding the trust account and wiring the funds under the abandoned identity is of a piece with the 1,120-day SEC filing concealment documented elsewhere in the record.²

1. Consolidated Key Transactions, Appellate Brief Re Wallace Breach of Trust (Dec. 1, 2008); Trial Exhibits 14, 19, 22, 24–25, 29, 34–35, 51. 
2. Schedule 13D, Legal Access Technologies, Inc., filed by Michael A. Cane (June 26, 2001), Accession No. 0001075793-01-500095 ; Form 5, filed by Kyleen E. Cane (July 22, 2004), Accession No. 0001255294-04-000216  (first filing under new name, 1,120 days later).

The collateral securing $1.5 million was described as “gold doré” in a “secure New Mexico warehouse.” Every representation was false.¹

After BDV defaulted on May 6, 2003, Wallace bought time with an elaborate lie: a “gold melt” in Salt Lake City had yielded $12 million, moved “offshore,” then to a Florida bank escrow, then was “pulled back” when the deal collapsed. Every element was false — its only function was to delay Tarapaski from filing suit or seizing collateral while he flew to Phoenix to confront her.²

When she told me that the gold hadn't been melted, I couldn't believe it. I said, how could I be mistaken about that.Ed Tarapaski Trial Testimony (Feb. 4, 2008) at 57:19–22

1. Ed Tarapaski Trial Testimony (Feb. 4, 2008) at 59:15–60:4 (BSI assay “zero”; warehouse with no security); Wallace Trial Testimony (Feb. 5, 2008). 
2. Trial Transcripts, Thomas & Wong v. Blume (Feb. 4–5, 2008) (“gold melt” fabrication; July 2003 Lordsburg warehouse access). 

Every exchange below is verbatim from the sworn trial record in Thomas & Wong v. Blume (Maricopa Cnty. Super. Ct., Feb. 4–5, 2008), compiled with the wire-transfer table and the agency thesis in the forensic brief. ⁴⁸ Read together, they show a fraud built entirely out of fabricated assurances. ⁴⁹¹

The fabricated "safekeeping receipt." When Tarapaski hesitated to release funds, Wallace invented a security ritual on the spot:

She got irritated and she says, do you know what a safekeeping receipt is? And I said, well, no. And then she said, well, without that safekeeping receipt, there is no way in the world that you can move those funds because it has to be submitted to the warehouse, the vault has to be unlocked, and the gold is brought into a viewing room.Ed Tarapaski, Trial Testimony (Feb. 4, 2008) at 43:5–19

The "secure warehouse." The gold the receipt supposedly protected sat in a building with no security at all:

Q: Was this a high security warehouse with heavily restricted access, as has been described to you? — A: No. — Q: Describe it to the jury? — A: It was just a warehouse in the middle of nowhere, with no security at all.Ed Tarapaski, Trial Testimony (Feb. 4, 2008) at 59:15–60:4

The unauthorized transfers. Asked what he would have done had he known funds were moving without his sign-off, Tarapaski was unequivocal:

Oh, no, that would be the end of it. I mean, that was — that's absolutely dishonest and I'm really upset about it.Ed Tarapaski, Trial Testimony (Feb. 4, 2008) at 35:12–21

Wallace's own evasion. The person who agreed to verify the gold could not say she ever did — deflecting, then admitting the truth outright:

Q: Did Ed Tarapaski ever ask you to view the gold? — A: Ed Tarapaski asked everybody to go and view the gold. — Q: Did he ask you to view the gold? … Q: Did you view the gold? — A: No.Jan Wallace, Trial Testimony (Feb. 5, 2008)

1. Trial Transcripts, Thomas & Wong v. Blume, Nos. CV2005-008545, CV2005-010599 (Maricopa Cnty. Super. Ct. Feb. 4–5, 2008); compiled in Forensic Brief 05 (linked above). The appellate brief and the Ninth Circuit B.A.P. nondischargeability decision (No. 15-1319) are linked as source exhibits above; the standalone Feb. 4–5, 2008 trial transcript is compiled within Forensic Brief 05. 

The fraud has been validated by three independent tribunals. On April 11, 2008 a Maricopa County jury found Wallace 84% at fault and awarded $1,554,934. Final judgment entered January 10, 2011 at $1,306,144 plus 10% annual interest from February 8, 2008 — an obligation that has now grown past $3.6 million and remains 100% unpaid. ⁵⁰¹

When Wallace filed Chapter 7 in October 2013 to escape it, the Ninth Circuit Bankruptcy Appellate Panel ruled the judgment nondischargeable under 11 U.S.C. §523(a)(2)(A), finding Wallace committed “actual fraud” through “deception and material false representations made with intent to deceive.” Her concealment of offshore accounts and beneficial interests in the bankruptcy schedules is itself bankruptcy fraud under 18 U.S.C. §152. ⁵¹²

1. Appellate Brief Re Wallace Breach of Trust (Dec. 1, 2008); Final Judgment, Thomas & Wong v. Blume (Maricopa Cnty. Super. Ct. Jan. 10, 2011). 
2. In re Wallace, Memorandum Decision, No. 15-1319 (B.A.P. 9th Cir. Oct. 14, 2016); 11 U.S.C. §523(a)(2)(A); 18 U.S.C. §152. 

The two appellate-track rulings in the Tarapaski attorney-escrow fraud, side by side — the Ninth Circuit B.A.P. nondischargeability memorandum and the appellate brief — over the trial record they rest on.

The trial record underneath, by day. The Tarapaski matter (Maricopa Cnty. CV2005-051325) was tried over four days in February 2008 — the verbatim daily transcripts below, then the compiled documentary record the appellate rulings rest on.

1. 6 Dec 2002Wallace signs the $250,000 MW Asia shell-sale contract with Beardmore — financial motive never disclosed to Thomas & Wong.
2. 17–28 Feb 2003Tarapaski recovers from eye surgery at Wallace's guest house; Wallace stages a distressed Beardmore call to engineer the introduction.
3. 1 Mar 2003Cane O'Neill attorney trust account established as the fraud mechanism.
4. 5 Mar 2003Thomas & Wong wires $549,980 into the Cane O'Neill account.
5. 6 Mar 2003Wallace elected a BDV director (AM); authorizes a $275,000 transfer (PM). Susan Johnson email: “I took one for the team.”
6. 7 Mar 2003$275,000 wired to Minneapolis — a condominium for Beardmore's girlfriend.
7. 8 Mar 2003Promissory note signed — backdated to conceal the prior unauthorized transfer.
8. 12 Mar 2003Wallace pressures Tarapaski: “I've protected you pretty well to this point. Now, will you just release the funds and trust me the paperwork is done.” 
9. 13 Mar 2003$500,000 wired to Lake Bank (second unauthorized transfer); 21 Mar — $20,000 to L. Trust LLC (third).
10. Apr 2003Thomas & Wong wires a further $700,000 to Lake Bank, bypassing escrow.
11. Feb 2015Bankruptcy nondischargeability ruling — $1,306,144 not discharged (now exceeds $2M unpaid). 

• Jan Wallace (operator, BDV director, MW Asia seller)
• Kyleen Cane / Cane O'Neill (attorney trust account)
• Edward “Ed” Tarapaski (victim, Thomas & Wong principal)
• John Beardmore / BDV Investments (borrower)
• Susan Johnson (Cane O'Neill — “I took one for the team”)
• Wallace Black LLC ($15,000 commission; Cane registered agent)

• Thomas & Wong Gen. Contractor, Inc. v. Wallace, No. CV2005-051325 (Maricopa County Super. Ct.)
• Wallace Bankruptcy — 11 U.S.C. §523(a)(2)(A) nondischargeability
• Bankruptcy Memorandum; Appellate Brief at 9–11, 18–19; Trial Tr. Day 2 at 10:2–6; Wallace Dep. at 6:24–7:1
• Susan Johnson email (6 Mar 2003); FA Laurente emails (15 & 27 Jul 2010)