Law360 (January 11, 2022, 6:49 PM EST) — A Trump-era State Department appointee will have to face most of a lawsuit accusing him and a Philadelphia-based attorney of stealing over $9 million from an investment firm, a Pennsylvania federal judge has ruled, though the court trimmed certain claims from the suit.

U.S. District Judge Eduardo C. Robreno dismissed with prejudice a declaratory judgment claim the investment firm and its owner leveled against former State Department Deputy Chief of Protocol Michael Karloutsos and attorney James M. Rodgers. The court also dismissed without prejudice counts of alter ego and fraud, and struck a constructive trust claim, saying it was redundant.

“Plaintiffs have not satisfied the particularity requirements of Rule 9(b) in pleading their fraud claim. The complaint fails to identify with specificity any fraudulent representation made by either Karloutsos or Rodgers,” Judge Robreno said, adding that the complaint “provides little detail about defendants’ respective roles in the scheme and leaves unclear how much of the alleged fraud is attributable to non-party” Nikolaos Onoufriadis, a onetime manager of the investment firm.

But the court let stand several claims related to conversion, unjust enrichment, and breach of fiduciary duty that were brought against the pair and their related companies. Among other things, Judge Robreno rejected Karloutsos’ argument that plaintiffs Gabriel Chaleplis and the investment company One World LLC failed to state a claim for conversion because they didn’t allege that either Karloutsos or his consulting firm took specifically identifiable funds belonging to the plaintiffs.

“This argument is unpersuasive, as the complaint details at least ten banking transfers totaling over $600,000 of plaintiffs’ funds received by the Karloutsos defendants,” Judge Robreno said. “The allegations specifically allege the amount, date, recipient, account holder, and bank involved in each transfer. Whether these funds truly belonged to plaintiffs or to other parties is a question of fact to be determined at a later stage. In any event, plaintiffs have pled a plausible conversion claim.”

Karloutsos was briefly the No. 2 at the State Department’s protocol office, which coordinates diplomatic events for the president and other high-ranking officials, among other duties, under former President Donald Trump. He left the State Department after just four months in November 2017.

Chaleplis, a U.K. citizen, filed suit in March 2021, alleging Karloutsos and Rodgers funneled more than $9 million from One World into shell companies. Chaleplis claimed in his suit that he was introduced to Karloutsos through Boston-area consultant Onoufriadis, whom Chaleplis had initially tapped to join his investment firm. Karloutsos later recommended that Rodgers also join the firm, according to the complaint.

Karloutsos and Rodgers misrepresented their investment experience, according to Chaleplis, which he said led him to make Onoufriadis the firm’s manager and Rodgers the firm’s chief legal officer.

Karloutsos’ State Department job prevented him from consulting or working in the private sector, so Karloutsos entered into an oral “side agreement” with Rodgers to split Rodgers’ profits in One World, the complaint said.

The three men then allegedly used their positions to swindle at least $9 million out of One World’s accounts, in part through a Greek cannabis investment opportunity that became the focus of a since-dismissed lawsuit filed in the Southern District of New York against Karloutsos, Onoufriadis and Rodgers.

The men used that money to purchase expensive homes, according to the complaint, which insisted, “The homes Rodgers, Karloutsos and Onoufriadis purchased, as well as the terms of those purchases, were out of their price range and were only afforded due to their theft of plaintiffs’ funds.”

While Chaleplis’ current Pennsylvania suit does not name Onoufriadis, he was included in the New York suit. According to Judge Robreno’s Monday memo, Onoufriadis also sued Chaleplis and One World in Massachusetts state court for unpaid wages, breach of contract and fiduciary duty and malicious prosecution. That case was removed to federal court, where a motion to remand is pending.

Chaleplis also filed a separate action seeking to undo the transfer of a Massachusetts property related to the purported plot. And that complaint indicated the case was related to an additional, sealed case Chaleplis filed against Onoufriadis.

On Monday, Judge Robreno rejected Karloutsos’ argument that Onoufriadis is a necessary defendant in the Pennsylvania suit, saying the plaintiffs weren’t required to join him as a defendant in that action.

In a July 2021 motion to dismiss the Pennsylvania case and levy sanctions on the plaintiffs, Rodgers said that after the judge hearing Chaleplis’ New York suit ruled that diversity jurisdiction didn’t exist because Onoufriadis is a Greek citizen, Chaleplis filed this suit in Pennsylvania without naming Onoufriadis “in an effort to manufacture diversity jurisdiction.”

But Judge Robreno disagreed Monday and denied Rodgers’ sanctions motion, calling his arguments “at best premature.”

Judge Robreno also noted that most of a dismissal motion Rodgers filed is “essentially an unacknowledged word-for-word copy of Karloutsos’ motion to dismiss in the SDNY case.”

He pointed out that Rodgers failed to change out references to Karloutsos, addressed the claims in the New York complaint rather than the Pennsylvania complaint, and relied on the New York, SDNY and Second Circuit cases cited in Karloutsos’ New York brief without citing any Pennsylvania, Eastern District of Pennsylvania or Third Circuit cases.

Judge Robreno said the court doesn’t take Rodgers’ alleged plagiarism lightly, adding it is sanctionable conduct.

“In any event, as Rodgers’ 12(b)(6) motion cites to no Pennsylvania, Eastern District of Pennsylvania, or Third Circuit authority applicable to the present action, the motion will be denied,” Judge Robreno said.

Randall L. Rasey of Barton LLP, counsel for Karloutsos and his firm MAK Consulting LLC, said in a statement that he is pleased the court found that Chaleplis failed to plead fraudulent conduct on Karloutsos’ part.

“Mr. Karloutsos looks forward to proving the falsity of Mr. Chaleplis’ remaining claims and accusations based on the evidence and most importantly the truth,” Rasey said.

Rodgers and counsel for Chaleplis didn’t immediately respond to requests for comment Tuesday.

Karloutsos and MAK Consulting LLC are represented by Randall L. Rasey and Amy Y. Chen of Barton LLP, and Douglas F. Johnson and Carol S. Harding of Earp Cohn PC.

Chaleplis and One World are represented by Thomas Kamvosoulis and Bob Kasolas of Brach Eichler LLC.

James Rodgers is representing himself and Rodgers Investments LLC pro se.

The case is Chaleplis et al. v. Karloutsos et al., case number 2:21-Cv-01492, in the U.S. District Court for the Eastern District of Pennsylvania.

–Additional reporting by Jack Karp and Chris Villani. Editing by Michael Watanabe.