Source: https://ricoconsultingattorney.wordpress.com/2018/08/08/edny-provides-civil-rico-primer-in-denying-motions-to-dismiss-rico-claims-based-on-fraud-and-bribery/
Timestamp: 2019-04-24 22:50:13+00:00

Document:
The court heard motions to dismiss from two groups of Defendants- Insider Defendants, and the “Accord” Defendants. Insider Defendants were employees of Eagle One, a construction company, who worked with Accord Defendants, subcontractors to Eagle One, in submitting fictitious invoices for work performed. The Accord Defendants consisted of individuals and two legal entities (Accord Inc. and Accord Sales Inc). The court denied motions to dismiss the civil RICO claims of the Accord Defendants, finding a sufficient enterprise, sufficient participation, and sufficient allegation of a pattern of racketeering.
The Enterprise consisted of the Defendants, individuals and entities, who worked together to defraud Eagle One. Defendants claimed that they are separate individuals who have no common association, and Plaintiff’s asserted purpose of the RICO enterprise is identical to the alleged pattern of racketeering activity, and therefore fails to allege distinct conduct establishing an enterprise.
(2) the enterprise was distinct from the underlying conduct that establishes a pattern of racketeering, citing to United States v. Turkette, 452 U.S. 576, 583 (1981). “While the proof used to establish these separate elements may in particular cases coalesce, proof of one does not necessarily establish the other.” Id. “Proof of these separate elements [need not] be distinct and independent, as long as the proof offered is sufficient to satisfy both elements.” United States v. Mazzei, 700 F.2d 85, 89 (2d Cir. 1983), also citing Pavlov v. Bank of New York Co., 25 Fed.Appx. 70, 71 (2d Cir. 2002) “The enterprise need not necessarily have a continuity extending beyond the performance of the pattern of racketeering acts alleged, or a structural hierarchy, so long as it is in fact an enterprise as defined in the statute.” see also Boyle v. United States, 556 U.S. 938, 947 (2009) (“the evidence used to prove the pattern of racketeering activity and the evidence establishing an enterprise may in particular cases coalesce.”). The court further stated that the fact that the purpose of the enterprise is identical with the alleged pattern of racketeering does not preclude the finding of an enterprise. See Fuji Photo Film U.S.A., Inc. v. McNulty, 640 F. Supp. 2d 300, 314 (S.D.N.Y. 2009) (“The Complaint further alleges that the association-in-fact was united by a common purpose, namely that of defrauding [Plaintiff]. Accordingly, Plaintiff has sufficiently pled a RICO enterprise under Rule 8(a).”). *7.
(3) Defendants, except one (Stankey) sufficiently participated in the conduct of the enterprise’s affairs.” Elsevier, Inc. v. W.H.P.R., Inc., 692 F. Supp. 2d 297, 307 (S.D.N.Y. 2010) (citing 18 U.S.C. § 1962(c) (making it unlawful “to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity”) ). see Aerowest GmbH v. Freitag, No. CV-15-2894 (LW), 2016 WL 3636619, at *3 (E.D.N.Y. June 28, 2016) (“While each defendant need not have primary responsibility for the functioning of the enterprise, each must, at least, have some part in directing the affairs of the alleged unit.”).
1) the predicate acts of racketeering activity were sufficiently pleaded addressing the issue of whether “when fraud is alleged against multiple defendants, a plaintiff must plead with particularity by setting forth separately the acts or omissions complained of by each defendant.” Odyssey Re (London) Ltd. v. Stirling Cooke Brown Holdings Ltd., 85 F. Supp. 2d 282, 293 (S.D.N.Y. 2000), aff’d, 2 Fed.Appx. 109 (2d Cir. 2001). The court found that fraud was not pleaded with sufficient particularity with regard to some defendants finding Accord defendants sent invoices requesting payment for work done on the 55 Water Street Job even though no work was being done there at the time. While Eagle One is unable to point to which of the American Express invoices represent actual work and which are fraudulent, the allegations are sufficiently detailed for Rule 9(b). See Fuji, 640 F. Supp. 2d at 315 (“The Complaint alleges that many of the services for which [defendant] billed [plaintiff] were never performed. Although the Complaint does not identify the specific invoice descriptions that pertain to unperformed services, [plaintiff] has provided a schedule of all invoices submitted by [defendant].”).
Thus, because there is no particularity requirement in pleading knowledge or intent, one need only allege facts that carry a strong inference of fraudulent intent, and there is no requirement that the defendant him or herself use the mails. It suffices if the defendant caused them to be used by an agent, or set in motion events which foreseeably would involve their use.” Chevron Corp. v. Donziger, 871 F. Supp. 2d 229, 250 (S.D.N.Y. 2012) (citing United States v. Bortnovsky, 879 F.2d 30, 39 (2d Cir. 1989) ).
In sum, the Complaint identified the particular invoices believed to be false, identified who made them, stated where and when they were made, and explained why they were fraudulent. See Fuji, 640 F. Supp. 2d at 310. Accordingly, Eagle One has sufficiently pleaded fraud with regard to Accord, Yopp, and Carnabuci. Each individual fraudulent invoice can serve as a predicate act of fraud. Alternatively, each job collectively is a single act of fraud. Regardless, Eagle One has established the necessary two predicate acts for a RICO claim.
2) The court found other predicate acts, including commercial bribery and found a pattern as plaintiff alleged that the fraudulent scheme took place “from at least July of 2012 through January of 2015.” This allegation is supported by the invoices that establish that the 55 Water Street job lasted from September 2013 through January 2015, and that the American Express job lasted from July 2012 through October 2014. Because the court has previously determined that Plaintiff has sufficiently pleaded claims of fraud and bribery, Plaintiff has pleaded a pattern of at least two predicate acts of racketeering (the fraudulent invoices from the 55 Water Street job and the American Express job, and the checks from Accord to Eagle One employees), within ten years of each other, that extended for a period longer than two years. THIS IS IMPORTANT SINCE IT SHOWS THE SECOND CIRCUIT MEASURES TIME BY THE PREDICATE ACTS, NOT LENGTH OF THE FRAUDULENT SCHEME.
The court takes a view contrary to the district’s State Farm case holding because Eagle One failed to plead substantive RICO violations by Stankey or Jack Acquafredda, Eagle One’s conclusory allegation that they too “entered into a scheme to embezzle Eagle One funds” is insufficient, and the RICO conspiracy charges against them are dismissed. Discon, Inc. v. NYNEX Corp., 93 F.3d 1055, 1062-63 (2d Cir. 1996) (“Since we have held that the prior claims do not state a cause of action for substantive violations of RICO, the present [§ 1962(d) ] claim does not set forth a conspiracy to commit such violations.”).
Ed Note: This case provides detailed analysis and case law to support civil RICO claims in which Defendants commonly put forth arguments. The conspiracy analysis still is not congruent with Salinas.

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