Court Opinion

ID: 4455167
Source: CourtListenerOpinion
Date Created: 2019-11-13 08:00:28.976018+00
Date Added: 2024-06-11T14:45:10.202790
License: Public Domain

In the

    United States Court of Appeals
                 For the Seventh Circuit
                     ____________________
No. 18-3232
STEVEN MENZIES,
                                                  Plaintiff-Appellant,
                                 v.

SEYFARTH SHAW LLP, an Illinois limited liability partnership,
et al.,
                                       Defendants-Appellees.
                     ____________________

         Appeal from the United States District Court for the
           Northern District of Illinois, Eastern Division.
           No. 1:15-cv-3403 — John Robert Blakey, Judge.
                     ____________________

    ARGUED MAY 22, 2019 — DECIDED NOVEMBER 12, 2019
                ____________________

   Before HAMILTON, SCUDDER, and ST. EVE, Circuit Judges.
    SCUDDER, Circuit Judge. Insurance executive Steven Men-
zies sold over $64 million in his company’s stock but did not
report any capital gains on his 2006 federal income tax return.
He alleges that his underpayment of capital gains taxes (and
the related penalties and interest subsequently imposed by
the Internal Revenue Service) was because of a fraudulent tax
shelter peddled to him and others by a lawyer, law firm, and
2                                                  No. 18-3232

two financial services firms. Menzies advanced this conten-
tion in claims he brought under the Racketeer Influenced and
Corrupt Organizations Act or RICO and Illinois law. The dis-
trict court dismissed all claims.
    Menzies’s RICO claim falls short on the statute’s pattern-
of-racketeering element. Courts have labored mightily to ar-
ticulate what the pattern element requires, and Menzies’s
claim presents a close question. In the end, we believe Men-
zies failed to plead not only the particulars of how the defend-
ants marketed the same or a similar tax shelter to other tax-
payers, but also facts to support a finding that the alleged
racketeering activity would continue. To conclude otherwise
would allow an ordinary (albeit grave) claim of fraud to ad-
vance in the name of RICO—an outcome we have time and
again cautioned should not occur. In so holding, we in no way
question whether a fraudulent tax shelter scheme can violate
RICO. The shortcoming here is one of pleading alone, and it
occurred after the district court authorized discovery to allow
Menzies to develop his claims.
    As for Menzies’s state law claims, we hold that an Illinois
statute bars as untimely the claims advanced against the law-
yer and law firm defendants. The claims against the two re-
maining financial services defendants can proceed, however.
    So we aﬃrm in part, reverse in part, and remand.
                               I
    The original and amended complaints supply the opera-
tive facts on a motion to dismiss. On appeal we treat all alle-
gations as true, viewing them in the light most favorable to
Steven Menzies. See Moranski v. Gen. Motors Corp., 433 F.3d
537, 539 (7th Cir. 2005).
No. 18-3232                                                    3

    Menzies is the co-founder and president of an insurance
company called Applied Underwriters, Inc. or AUI. In 2002
advisers from Northern Trust approached him to begin a fi-
nancial planning relationship. In time these advisers pitched
Menzies and his colleague and AUI co-founder Sydney
Ferenc on a tax planning strategy (dubbed the Euram Oak
Strategy) to shield capital gains on major stock sales from fed-
eral tax liability. Not knowing the strategy reflected what the
IRS would later deem an abusive tax shelter, Menzies agreed
to go along with the scheme. He conducted a series of trans-
actions that, through the substitution of various assets and the
operation of multiple trusts, created an artificial tax loss used
to oﬀset the capital gains he realized upon later selling his
AUI stock.
    Northern Trust worked with others in marketing and
implementing the strategy. Christiana Bank, for example,
served as trustee for some of Menzies’s trusts while tax
attorney Graham Taylor and his law firm, Seyfarth Shaw,
provided legal advice. Taylor repeatedly assured Menzies
and Ferenc of the tax shelter’s legality, eventually opining that
there was a “greater than 50 percent likelihood that the tax
treatment described will be upheld if challenged by the IRS.”
Taylor stood by his more-likely-than-not opinion even after
being indicted in 2005 for the commission of unrelated tax
fraud—a development he never disclosed to Menzies.
    In 2006 Menzies sold his AUI stock to Berkshire Hathaway
for over $64 million. Nowhere in his 2006 federal income tax
return did Menzies report the sale or any related capital gains.
Nor did Christiana Bank, which filed tax returns on behalf of
Menzies’s trusts, report any taxable income from the stock
4                                                   No. 18-3232

sale. When the IRS learned of these developments, it com-
menced what became a three-year audit and found that the
primary purpose of the Euram Oak Strategy was tax evasion.
Facing large fines and potential adverse legal action, Menzies
agreed in October 2013 to settle with the IRS, paying over $10
million in back taxes, penalties, and interest.
    In April 2015 Menzies filed suit in the Northern District of
Illinois, advancing a civil RICO claim and various Illinois law
claims against Taylor, Seyfarth Shaw, Northern Trust, and
Christiana Bank. The district court granted the defendants’
motion to dismiss, but from there twice allowed Menzies to
amend his complaint. Indeed, the district court aﬀorded Men-
zies a full year of discovery to develop facts to support re-
newed pleading of the RICO claim that appeared in his sec-
ond amended complaint in August 2017. On the defendants’
motion, the district court dismissed that complaint for failure
to state any claim. Menzies now appeals.
                               II
    A. The RICO Bar for Actionable Securities Fraud
    Before addressing the district court’s dismissal of Men-
zies’s RICO claim, we confront a threshold issue pressed by
the defendants—whether an amendment to the RICO statute
added by the Private Securities Litigation Reform Act of 1995
or PSLRA precluded Menzies from bringing a RICO claim in
the first instance. We agree with the district court that the bar
now embodied in 18 U.S.C. § 1964(c) did not prevent Menzies
from pursuing a RICO claim on the facts alleged in his com-
plaint.
No. 18-3232                                                    5

    In enacting the PSLRA, Congress did more than seek to
curb abusive practices in securities class actions by, for exam-
ple, imposing a heightened pleading standard, requiring a
class representative to be the most adequate plaintiﬀ, and lim-
iting damages. See Amgen Inc. v. Connecticut Ret. Plans & Trust
Funds, 568 U.S. 455, 475–76 (2013) (describing the PSLRA). The
enactment also amended RICO to prohibit a cause of action
based on “any conduct that would have been actionable as
fraud in the purchase or sale of securities.” 18 U.S.C. § 1964(c)
(emphasis added).
    Upon reviewing the allegations in Menzies’s original com-
plaint, the district court denied the defendants’ motion to dis-
miss the RICO claim based on the bar in § 1964(c). The district
court started with the observation that “nothing about the sale
of his AUI stock itself was fraudulent.” Menzies v. Seyfarth
Shaw LLP, 197 F. Supp. 3d 1076, 1116 (N.D. Ill. 2016) (“Menzies
I”). “By selling Plaintiﬀ a bogus tax shelter plan,” the court
reasoned, “[d]efendants were attempting to hide the resulting
income from Plaintiﬀ’s sale of stock from the IRS,” and “[i]n
both form and substance” this was a “case about tax shelter
fraud, not securities fraud.” Id.
    The defendants urge us to reverse, contending that the
RICO bar applies because the whole point of the Euram Oak
Strategy was for Menzies to avoid realizing taxable gains
from a stock sale. But for the stock sale, the tax shelter meant
nothing, thereby easily satisfying, as the defendants see it, the
requirement for the alleged fraud to be “in connection with”
the sale of a security and thus actionable as securities fraud
under section 10(b) of the Securities and Exchange Act of 1934,
15 U.S.C. § 78j(b), and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5.
6                                                    No. 18-3232

    We see the analysis as more diﬃcult. By its terms, the bar
in § 1964(c), as the district court recognized, requires asking
whether the fraud Menzies alleged in his complaint would be
actionable under the securities laws, in particular under sec-
tion 10(b) and Rule 10b-5. See Rezner v. Bayerische Hypo-Und
Vereinsbank AG, 630 F.3d 866, 871 (9th Cir. 2010) (assessing the
PSLRA bar and explaining that “[a]ctions for fraud in the pur-
chase or sale of securities are controlled by section 10(b) of the
Securities Exchange Act of 1934”); Bixler v. Foster, 596 F.3d 751,
759–60 (10th Cir. 2010) (adopting a similar approach); Aﬀco
Investments 2001, LLC v. Proskauer Rose, LLP, 625 F.3d 185, 189–
90 (5th Cir. 2010) (same).
     Had he sought to plead a securities fraud claim under
those provisions, Menzies would have had to allege a material
misrepresentation or omission by a defendant, scienter, a con-
nection between the misrepresentation or omission and the
purchase or sale of a security, reliance, economic loss, and loss
causation. See Glickenhaus & Co. v. Household Int’l., Inc., 787
F.3d 408, 414 (7th Cir. 2015) (citing Halliburton Co. v. Erica P.
John Fund, Inc., 573 U.S. 258, 267 (2014)). The district court got
it right in concluding that the allegations in Menzies’s original
complaint did not amount to actionable securities fraud un-
der federal law.
    The Supreme Court supplied substantial direction in SEC
v. Zandford, 535 U.S. 813 (2002). The SEC brought a civil secu-
rities fraud action against a stockbroker who sold his elderly
and disabled clients’ securities and pocketed the proceeds.
See id. at 815. The Court granted review to determine whether
the stockbroker’s theft, which the SEC alleged also constituted
securities fraud, was suﬃciently “in connection with” the sale
of the clients’ securities to fall within section 10(b) and Rule
No. 18-3232                                                      7

10b-5. The Court answered yes, explaining that both provi-
sions “should be construed ‘not technically and restrictively,
but flexibly to eﬀectuate its remedial purposes.’” Id. at 819
(quoting Aﬃliated Ute Citizens of Utah v. United States, 406 U.S.
128, 151 (1972)). As a practical pleading matter, the Court con-
tinued, that meant a plaintiﬀ need not allege any misrepre-
sentation or omission about a security’s value. Nor was it nec-
essary to allege misappropriation or, even more generally, an-
other form of manipulation of a security. What would be
enough, the Court held, are allegations where “the scheme to
defraud and the sale of securities coincide.” Id. at 822.
    The SEC’s allegations met this standard because the
stockbroker        defendant,       alongside        aﬃrmatively
misrepresenting how he intended to manage his clients’
investments—he “secretly intend[ed] from the very
beginning to keep the proceeds”—acted on that intent by
engaging in unauthorized securities sales. Id. at 824. This
misconduct “deprived [his clients] of any compensation for
the sale of their valuable securities.” Id. at 822. The “securities
transactions and breaches of fiduciary duty coincide[d],” the
Court explained, because the “[clients’] securities did not
have value for the [stockbroker] apart from their use in a
securities transaction and the fraud was not complete before
the sale of securities occurred.” Id. at 824–25. Put another way,
the SEC’s allegations left no daylight between the alleged
fraud and the securities sale.
    Measured by these Zandford standards, Menzies’s allega-
tions do not satisfy the “in connection with” requirement for
an actionable claim under section 10(b) or Rule 10b-5. Start
with the alleged fraud itself. Menzies’s complaint focused not
on the AUI stock sale, but instead on its tax consequences. He
8                                                    No. 18-3232

alleged that the defendants marketed a tax shelter that they
knew was abusive—that would conceal capital gains from the
U.S. Treasury—and caused him to incur not just unexpected
taxes and related interest and penalties but also substantial
professional fees. Yes, this may be enough to show that but
for following the defendants’ advice and selling his AUI stock
he would not have incurred the taxes and related interest and
penalties. Yet we know that such “but for” allegations do not
satisfy section 10(b) under the teachings of Zandford. See Ray
v. Citigroup Global Mkts., Inc., 482 F.3d 991, 995 (7th Cir. 2007)
(explaining that “[i]t is not suﬃcient [under section 10(b) and
Rule 10b-5] for an investor to allege only that it would not
have invested but for the fraud” and instead the investor must
go further and “allege that, but for the circumstances that the
fraud concealed, the investment … would not have lost its
value”) (quoting Caremark, Inc. v. Coram Healthcare Corp., 113
F.3d 645, 648–49 (7th Cir. 1997)).
    If Menzies had tried to bring a securities fraud claim, he
would have had to close this pleading gap. His complaint
would have had to tether more directly the fraud to the stock
sale by including allegations that went beyond any “but for”
link and allowed a finding that the defendants’ misrepresen-
tations more closely coincided with Menzies’s sale of his AUI
stock. Menzies, in short, would have needed to plead facts
demonstrating that he incurred his alleged losses as a more
direct consequence of misrepresentations that closely touched
the stock sale itself and not just its tax consequences. That the
purpose of the tax shelter aimed to maximize the profits that
Menzies realized from his stock sale cannot itself bridge this
gap. See Ouwinga v. Benistar 419 Plan Servs., Inc., 694 F.3d 783,
791 (6th Cir. 2012) (aﬃrming a district court’s conclusion that
the RICO bar did not apply because the plaintiﬀs’ “fraud
No. 18-3232                                                   9

claim relates only to the tax consequences of the Benistar Plan,
and it is merely incidental that the [insurance] policies happen
to be securities”); Rezner, 630 F.3d at 872 (concluding the
RICO bar did not apply where, in a tax shelter fraud, “the se-
curities were merely a happenstance cog in the scheme”).
    We can come at the analysis another way. No aspect of the
complaint challenged any term or condition on which
Menzies sold his AUI shares to Berkshire Hathaway. The
complaint all but says every aspect of the stock sale itself was
entirely lawful. Even more generally, no portion of the
complaint alleged that any defendant engaged in an
irregularity that tainted or aﬀected the stock-sale transaction,
including, for example, by influencing the sales price or
somehow causing the proceeds to be mishandled. Every
indication is that Menzies received every last dollar he
expected from the sale. The fraud Menzies alleged is at least
one step removed—focused not on the sale of the AUI stock
but on how and why he charted a particular course in his
treatment of the sale for federal tax purposes and the losses
he sustained by doing so.
    Do not read us to say that Menzies failed to allege fraud.
He plainly did when considered through the prism of com-
mon law standards. What we cannot say, though, is that—for
purposes of applying the RICO bar in § 1964(c)—Menzies’s
allegations amounted to actionable securities fraud under the
standards the Supreme Court has told us are required by sec-
tion 10(b) and Rule 10b-5.
   While not aligning with the defendants’ view of the law,
our holding does seem on all fours with what we see and do
not see in the securities fraud case law. Our research, limited
though it is to reported decisions, reveals no meaningful
10                                                   No. 18-3232

number of section 10(b) and Rule 10b-5 private federal secu-
rities fraud claims brought to challenge abusive tax shelters.
Nor do we see an indication that the SEC has brought many
enforcement proceedings alleging securities fraud to combat
abusive tax shelters. None of this suggests that fraud perpe-
trated as part of a scheme to evade taxes can never be action-
able under section 10(b). Our point is limited only to the ob-
servation that the federal reporters do not contain many ex-
amples of such actions, whether by private parties or the SEC.
And perhaps that reality owes itself, at least in part, to the de-
manding requirements for pleading a federal securities law
claim.
   Unable to conclude that Menzies’s allegations of fraud
would be actionable under section 10(b) or Rule 10b-5, we
turn, as did the district court, to his civil RICO claim.
     B. Civil RICO Claims and the Pattern Element
    Enacted in response to long-term criminal activity, includ-
ing, of course, acts of organized crime, RICO provides a civil
cause of action for private plaintiﬀs and authorizes substan-
tial remedies, including the availability of treble damages and
attorneys’ fees. See 18 U.S.C. § 1964(c). Establishing a RICO
violation requires proof by a preponderance of the evidence
of “(1) conduct (2) of an enterprise (3) through a pattern (4) of
racketeering activity.” Sedima, S.P.R.L. v. Imrex Co., 473 U.S.
479, 496–97 (1985) (interpreting § 1964(c)). It follows that a
plaintiﬀ must plead these elements to state a claim. Congress
defined a “pattern of racketeering activity” to require “at least
two acts of racketeering activity” within a ten-year period. 18
U.S.C. § 1961(5).
No. 18-3232                                                        11

    Satisfying the pattern element is no easy feat and its pre-
cise requirements have bedeviled courts. See Jennings v. Auto
Meter Prod., Inc., 495 F.3d 466, 472 (7th Cir. 2007) (emphasizing
that “courts carefully scrutinize the pattern requirement”);
J.D. Marshall Int’l, Inc. v. Redstart, Inc., 935 F.2d 815, 820 (7th
Cir. 1991) (“Satisfying the pattern requirements—that there be
continuity and relationship among the predicate acts—is not
easy in practice.”).
    The Supreme Court has considered the issue at least twice,
and our case law shows many eﬀorts to articulate what a
plaintiﬀ must plead to establish a pattern of racketeering ac-
tivity. See, e.g., Sedima, 473 U.S. at 496; H.J., Inc. v. Northwestern
Bell Tel. Co., 492 U.S. 229, 237–38 (1989); Vicom, Inc. v. Harbridge
Merchant Servs., Inc., 20 F.3d 771, 779–80 (7th Cir. 1994);
McDonald v. Schencker, 18 F.3d 491, 497 (7th Cir. 1994). Over
these many cases the law has landed on a pleading and proof
requirement designed “to forestall RICO’s use against iso-
lated or sporadic criminal activity, and to prevent RICO from
becoming a surrogate for garden-variety fraud actions
properly brought under state law.” Midwest Grinding Co., Inc.
v. Spitz, 976 F.2d 1016, 1022 (7th Cir. 1992) (citing H.J., Inc., 492
U.S. at 240–41).
    To plead a pattern of racketeering activity, “a plaintiﬀ
must demonstrate a relationship between the predicate acts
as well as a threat of continuing activity”—a standard known
as the “continuity plus relationship” test. DeGuelle v. Camilli,
664 F.3d 192, 199 (7th Cir. 2011). The Supreme Court an-
nounced this test in H.J., Inc. and made plain that the relation-
ship prong is satisfied by acts of criminal conduct close in time
and character, undertaken for similar purposes, or involving
12                                                  No. 18-3232

the same or similar victims, participants, or means of commis-
sion. See 492 U.S. at 240. The relatedness of the predicate acts
often does not yield much disagreement, and much more of-
ten the focus is on the continuity prong of the test. See Vicom,
20 F.3d at 780.
    Just so here: the battleground in this appeal is whether
Menzies adequately pleaded the continuity dimension of the
continuity-plus-relationship test. Doing so requires “(1)
demonstrating a closed-ended series of conduct that existed
for such an extended period of time that a threat of future
harm is implicit, or (2) an open-ended series of conduct that,
while short-lived, shows clear signs of threatening to continue
into the future.” Roger Whitmore’s Auto Servs., Inc. v. Lake
County, Ill., 424 F.3d 659, 673 (7th Cir. 2005).
    Do not let the labels create confusion. The big picture
question is whether Menzies adequately alleged that the
challenged conduct occurred and went on long enough and
with enough of a relationship with itself to constitute a
pattern. Answering that question is aided by focusing on two,
more particular, inquiries. One of those inquiries—designed
to ascertain the presence of a so-called “closed-ended” series
of misconduct—asks whether there were enough predicate
acts over a finite time to support a conclusion that the criminal
behavior would continue. See Vicom, 20 F.3d at 779–80. The
focus, therefore, is on “the number and variety of predicate
acts and the length of time over which they were committed,
the number of victims, the presence of separate schemes and
the occurrence of distinct injuries.” Id. at 780 (quoting Morgan
v. Bank of Waukegan, 804 F.2d 970, 975 (7th Cir. 1986)).
   The alternative continuity inquiry—applicable to an
“open-ended” series of misconduct—focuses not on what acts
No. 18-3232                                                     13

occurred in the past but on whether a concrete threat remains
for the conduct to continue moving forward. See id. at 782.
This can be done by showing that a defendant’s actions pose
a specific threat of repetition; that the predicate acts form part
of the defendant’s ongoing and regular way of doing busi-
ness; or that the defendant operates a long-term association
for criminal purposes. See Empress Casino Joliet Corp. v. Bal-
moral Racing Club, Inc., 831 F.3d 815, 828 (7th Cir. 2016). On
these fronts, it is not enough to base an open-ended continuity
theory on just one prior predicate act and an otherwise un-
supported assertion that criminal activity will continue into
the future. See Gamboa v. Velez, 457 F.3d 703, 709 (7th Cir. 2006)
(explaining that when “a complaint explicitly presents a dis-
tinct and non-recurring scheme with a built-in termination
point and provides no indication that the perpetrators have
engaged or will engage in similar misconduct, the complaint
does not suﬃciently allege continuity”).
    Added complexity enters where, as here, a plaintiﬀ seeks
to plead RICO’s pattern element through predicate acts of
mail or wire fraud. When that occurs the heightened pleading
requirements of Fed. R. Civ. P. 9(b) apply and require a plain-
tiﬀ to do more than allege fraud generally. See Jepson v. Makita
Corp., 34 F.3d 1321, 1327 (7th Cir. 1994) (“Of course, Rule 9(b)
applies to allegations of mail and wire fraud and by extension
to RICO claims that rest on predicate acts of mail and wire
fraud.”). Rule 9(b) requires a plaintiﬀ to provide “precision
and some measure of substantiation” to each fraud allegation.
United States ex rel. Presser v. Acacia Mental Health Clinic, LLC,
836 F.3d 770, 776 (7th Cir. 2016). Put more simply, a plaintiﬀ
must plead the “who, what, when, where, and how” of the
alleged fraud. Vanzant v. Hill’s Pet Nutrition, Inc., 934 F.3d 730,
738 (7th Cir. 2019).
14                                                    No. 18-3232

    Given these heightened pleading standards and Con-
gress’s insistence that a RICO claim entail a clear pattern of
racketeering activity, we have cautioned that “we do not look
favorably on many instances of mail and wire fraud to form a
pattern.” Midwest Grinding, 976 F.2d at 1024–25 (quoting Hartz
v. Friedman, 919 F.2d 469, 473 (7th Cir. 1990)); see also Jennings,
495 F.3d at 475 (explaining that this court “repeatedly reject[s]
RICO claims that rely so heavily on mail and wire fraud alle-
gations to establish a pattern”). We can leave for another day
a more fulsome articulation of the interrelationship of RICO’s
pattern requirement and mail and wire fraud as predicate
acts. Our focus here is whether Menzies, within the four cor-
ners of his complaint, alleged with suﬃcient particularity the
acts of mail and wire fraud he believes demonstrate a pattern
of racketeering activity.
     C. Menzies’s Allegations of Racketeering Activity
    In his second amended complaint, Menzies detailed chap-
ter and verse the fraud the defendants allegedly perpetrated
on him. He told of the defendants approaching and pitching
him the tax benefits of the Euram Oak Strategy. Reassured
multiple times of the shelter’s legality, Menzies relied on the
defendants’ representations, executed the strategy’s compo-
nent steps through transactions with trusts and the like, and
ultimately sold his AUI stock for over $64 million to Berkshire
Hathaway. Again relying on the defendants’ assurances, he
then filed his 2006 tax return without reporting his AUI stock
sale as a taxable event.
    Menzies sought to plead RICO’s pattern element by
including allegations that the defendants marketed the
identical or a substantially-similar tax shelter to three
others—his business partner and co-founder of AUI, Sydney
No. 18-3232                                                  15

Ferenc, and two other investors, one in North Carolina and
another in Arizona.
    Menzies alleged that Northern Trust contacted him and
Ferenc at the same time to develop a financial advisory rela-
tionship. See SAC ¶¶ 25, 42, and 43. The complaint provides
substantial detail on the defendants’ interactions with Ferenc,
including the dates and content of phone calls, emails, and
meetings geared toward selling and advancing the scheme.
See SAC ¶¶ 58, 62, 63, 76, 81, 86, 88, and 115. By way of exam-
ple, consider these two factual allegations detailing the timing
and substance of Ferenc’s interactions with attorney Graham
Taylor:
          “On September 30, 2003, Taylor provided
           Ferenc with an outline of the pre-arranged
           steps of the Euram Oak Strategy via email,
           assuring Ferenc that the strategy was legiti-
           mate tax planning.” SAC ¶ 81.
          “On or about August 5, 2004, August 11, 2004
           and August 18, 2004, Taylor sent Ferenc a
           revised version of the tax opinion letter via
           e-mail assuring Ferenc (and Menzies) that
           the Euram Oak Strategy was legitimate tax
           planning.” SAC ¶ 115.
   From there Menzies alleged that Ferenc ultimately
“entered into a transaction substantially similar” to the one
undertaken by Menzies, including by receiving a loan from
Euram Bank, establishing a grantor trust, and maneuvering
various assets in anticipation of a major stock sale—all in
accordance with the instructions supplied by Taylor and
others. SAC ¶ 91.
16                                                   No. 18-3232

    While the complaint clearly alleges the defendants mar-
keted the same fraudulent tax shelter to Ferenc, Menzies
stopped short of alleging whether Ferenc followed through
with his sale of AUI stock and incurred substantial capital
gains tax liability and related penalties and interest as a result
of subsequent IRS scrutiny. The absence of such allegations in
no way meant that Menzies failed to plead a predicate act of
mail and wire fraud involving Ferenc, however. See United
States v. Koen, 982 F.2d 1101, 1106 (7th Cir. 1992) (explaining
that mail fraud under 18 U.S.C. § 1341 requires not actual and
successful deception but only “(1) a scheme to defraud and (2)
use of the mail for the purpose of executing, or attempting to
execute, the scheme to defraud”).
    Menzies further alleged an Arizona investor fell victim to
the defendants’ scheme. The second amended complaint al-
leged that the Arizona investor received legal opinions from
Taylor and Seyfarth Shaw regarding the Euram Oak Strategy
sometime in 2004. From there, though, the complaint says lit-
tle more, alleging only that it is “reasonable to assume that
any such opinion letter asserts the legality of the [Euram Oak]
Strategy.” SAC ¶ 162. On “information and belief,” the com-
plaint then alleges that the Arizona investor incurred unspec-
ified damages from the tax deficiency that resulted from the
scheme, penalties and interest, professional and attorneys’
fees, and the lost opportunity to invest in a legitimate tax
planning vehicle. See SAC ¶ 165.
    In much the same way, Menzies included similar allega-
tions of fraud against a North Carolina investor. According to
the complaint, the defendants approached this investor not
with the Euram Oak Strategy but with a diﬀerent abusive tax
shelter of the same nature called the Euram Rowan Strategy.
No. 18-3232                                                 17

See SAC ¶¶ 166, 167. With the exception of Northern Trust,
the other defendants pushed the Euram Rowan Strategy,
which “involved a series of integrated, pre-arranged, and
scripted steps designed to provide a taxpayer who had signif-
icant ordinary or capital gain with a non-economic ordinary
or capital loss.” SAC ¶ 167. Here too, however, the second
amended complaint adds few details. In 2003 the North Car-
olina investor received legal opinions from Taylor and Sey-
farth Shaw—leaving Menzies to allege that “it is reasonable
to assume that any such opinion letter asserted the legality of
the transaction.” SAC ¶ 177. From there the complaint alleges
that the North Carolina investor, as a result of the scheme,
owed a tax deficiency of $17.5 million to the IRS, along with
nearly $1 million in penalties. SAC ¶ 180.
    The second amended complaint also included broad alle-
gations of future harm. On this score, Menzies alleged that
“[t]here is a threat of continued racketeering activity in that
Defendants’ predicate acts of mail and wire fraud were part
of their regular way of conducting business.” SAC ¶ 183. This
future threat, the complaint added, is clear from the “manner
in which the Euram products were presented as products,
with a preexisting team that could execute and support the
tax shelter for other taxpayers and from the regular manner
in which this enterprise did business with Menzies, Ferenc,
[the Arizona and North Carolina investors] and other inves-
tors in the fraudulent Euram strategies.” SAC ¶ 184.
   D. The District Court’s Opinion
   The district court dismissed Menzies’s RICO claim for fail-
ing to adequately plead a pattern of racketeering under either
the closed- or open-ended theories of continuity. See Menzies
18                                                   No. 18-3232

v. Seyfarth Shaw LLP, No. 15C3403, 2018 WL 4538726 (N.D. Ill.
Sept. 21, 2018) (“Menzies II”).
    As to the closed-ended approach, the court focused on
Menzies’s allegations of fraud against Ferenc and the North
Carolina and Arizona investors. Relying on Emery v. American
Gen. Fin., Inc., 134 F.3d 1321 (7th Cir. 1998), the district judge
assessed whether these additional allegations showed the
other victims were “actually deceived” by the defendants’
communications regarding the scheme. Menzies II, 2018 WL
4538726, at *4. The district court read Menzies’s complaint to
lack particularity about statements any defendant made to the
Arizona investor about the Euram Oak Tax Strategy and, even
more specifically, whether any misrepresentation led to the
investor being deceived and suﬀering adverse tax conse-
quences. The same deficiency plagued Menzies’s allegations
about the North Carolina investor, as the complaint was silent
as to whether and how the defendants marketed the Euram
Rowan Strategy in a way that resulted in actual deception and
related losses. As to Ferenc, the district court emphasized that
Menzies “does not allege that Ferenc was deceived, how he
was deceived, or even that he suﬀered any injury in the way
of IRS penalties or disallowances.” Id. at *5.
    In summing these pleading shortcomings, the district
court reasoned that they were “particularly problematic in a
case, like this one, where the purported victims knowingly
entered into tax shelters, which by their nature are designed
to avoid taxes.” Id. The district court was unwilling to aﬀord
Menzies additional leeway to develop a potential RICO claim
because he had already filed two prior complaints and had
over a year to conduct discovery before filing his second
amended complaint. See id. at *9.
No. 18-3232                                                   19

    Turning to whether that complaint adequately alleged an
open-ended theory of continuity, the district court likewise
concluded that Menzies came up short. The court emphasized
that the complaint identified no specific threat of the tax
avoidance strategy repeating, in no small part because the at-
torney responsible for orchestrating the scheme, Graham Tay-
lor, had been indicted for tax fraud in 2005 and convicted in
2008. See id. at *6. These facts, without some alternative expla-
nation from Menzies, undermined any meaningful possibility
that Graham and the other defendants would continue to per-
petuate the alleged fraud. See id. What is more, the district
court was unwilling—without supporting facts appearing
somewhere in Menzies’s complaint—to permit an inference
that the alleged fraud reflected any of the institutional defend-
ants’ regular way of doing business. On Menzies’s pleading,
the district court saw any such conclusion as reflecting rank
speculation. See id. at *7.
   E. Menzies’s Insuﬃcient Pleading of the Pattern
      Element
    We agree with the district court that Menzies failed to
allege a pattern of racketeering based on mail and wire fraud
predicates. The proper analysis begins by returning to
Menzies’s second amended complaint, and it is there that the
details—or lack thereof—matter. This is so because of the
combined demands of RICO’s pattern element and Rule 9(b)’s
particularity mandate.
    Menzies is right that he pleaded enough to support a con-
clusion that what Sydney Ferenc experienced qualifies as a
predicate act of racketeering activity for pattern purposes.
The second amended complaint is replete with details de-
scribing how the defendants used phone calls, e-mails, and
20                                                 No. 18-3232

meetings to assure Ferenc that the Euram Oak Strategy re-
flected lawful tax minimization. Those allegations speak di-
rectly to the nature and substance of the mail and wire fraud
allegedly perpetrated on Ferenc and are advanced with the
specificity necessary to clear Rule 9(b)’s particularity hurdle.
And this is so even though Menzies’s complaint does not al-
lege that Ferenc went through with AUI stock sales and the
Euram Oak Strategy tax treatment. See Koen, 982 F.2d at 1107.
    Menzies’s complaint is night and day diﬀerent, though,
when it comes to the allegations regarding the Arizona and
North Carolina investors. The details of the defendants’ inter-
actions with both investors are few and far between. The sec-
ond amended complaint says little more than that one or more
of the defendants targeted these investors and sought to sell
them either the Euram Oak or Rowan Strategies. Nowhere,
though, does the complaint spell out the specifics of any de-
fendant’s communications with either investor and instead
resorts to saying “on information and belief” that each of the
two investors received an opinion letter from defendant Gra-
ham Taylor and furthermore that “it is reasonable to assume
that any such opinion letter asserted the legality of the trans-
action.” SAC ¶¶ 162, 177.
   These allegations meet neither Rule 9(b)’s particularity re-
quirement nor the demands of our RICO case law. In Emery,
we emphasized that RICO’s pattern element requires more
than a plaintiﬀ pointing to others and saying, on information
and belief, that those persons received mailings about an al-
legedly fraudulent loan scheme. See 134 F.3d at 1322. The
plaintiﬀ needed to come forward, not with general statements
about what others may have received, but with particular al-
legations detailing the content of the communications with
No. 18-3232                                                  21

others allegedly defrauded by the defendant’s conduct. See id.
at 1323. Without those alleged facts there was no way to con-
clude that the plaintiﬀ had advanced with particularity the
predicate acts of mail or wire fraud against anyone other than
himself. The complaint, in short, failed to plead the requisite
pattern of racketeering activity. See id.
    We see Menzies’s second amended complaint in much the
same way. He did not plead enough about what transpired
with the Arizona and North Carolina investors for us to know
what any defendant represented, misrepresented, or omitted.
Emery teaches that the pleading bar requires more than posit-
ing that he believes these two investors received similar opin-
ion letters from Graham Taylor. Resorting to that level of gen-
erality sidesteps what Rule 9(b) requires. What Menzies
needed to do—drawing perhaps on what he learned in the
year of discovery aﬀorded by the district court—was allege at
least some particulars about the precise communications with
each investor. See Katz v. Household Int’l, Inc., 91 F.3d 1036,
1040 (7th Cir. 1996) (explaining the demands of Rule 9(b) are
relaxed only if discovery is unavailable to a plaintiﬀ). Without
such allegations, we have no way to determine whether mul-
tiple predicate acts of mail or wire fraud occurred in a manner
that satisfies RICO’s pattern requirement.
    Without predicate acts of fraud covering the Arizona and
North Carolina investors, Menzies is left only with the
allegations of what he and Sydney Ferenc experienced with
the defendants. That falls short of pleading a pattern of
racketeering under the closed-ended approach to the
continuity-plus-relationship test that the Supreme Court
announced in H.J., Inc. We need to look at the number and
variety of predicate acts, the length of time over which they
22                                                  No. 18-3232

were committed, the number of victims, the presence of
separate schemes, and the occurrence of distinct injuries.
Vicom, 20 F.3d at 780; see also Roger Whitmore’s Auto Servs., 424
F.3d at 673 (explaining that, in this analysis, “[n]o one factor
is dispositive”). In doing so, we keep foremost in mind a
“natural and commonsense approach to RICO’s pattern
element,” which requires enforcing “a more stringent
requirement than proof simply of two predicates, but also
envisioning a concept of suﬃcient breadth that it might
encompass multiple predicates within a single scheme that
were related and that amount to, or threatened the likelihood
of, continued criminal activity.” H.J., Inc., 492 U.S. at 237.
    But here we only have two individuals (Menzies and
Ferenc)—two business partners and indeed co-founders of
AUI—who allegedly fell victim to the same fraudulent
scheme (the Euram Oak Strategy) at the same time. While the
scheme lasted from 2003 to 2006, the complaint alleges only
that Menzies went through with the strategy and suﬀered ad-
verse tax consequences. The second amended complaint says
not a word about whether Ferenc followed through on the
strategy or suﬀered financial harm of any kind. Given Men-
zies’s close business relationship with Ferenc, the absence of
particular factual allegations about how and to what degree
Ferenc was defrauded is noteworthy.
    On the whole, though, Menzies alleged enough with
respect to Ferenc to establish a predicate act of mail or wire
fraud. And with those allegations he advanced, in total, at
least two such predicates (against himself and Ferenc). But
RICO’s pattern element is not just quantitative; it includes
qualitative components designed to ascertain the presence of
a pattern of racketeering activity. And it is on this precise
No. 18-3232                                                    23

point—whether Menzies alleged enough, quantitatively and
qualitatively, to show a qualifying pattern of racketeering
activity—that we determine his pleading was deficient.
    To conclude that Menzies has failed to plead closed-ended
continuity is not to say that he has failed to plead fraud. He
clearly has and indeed he uses those precise allegations of
fraud as the basis for his state law claims against the defend-
ants. But what we are not permitted to do is allow a plaintiﬀ
to shoehorn a state-law fraud claim into a civil RICO claim.
See Jennings, 495 F.3d at 472. It is the statute’s pattern element
that separates the viable RICO wheat from the common-law
chaﬀ, and, despite substantial eﬀort, Menzies has come up
short.
    Our analysis of the open-ended theory of a pattern of rack-
eteering is more straightforward. Only a few lines of the sec-
ond amended complaint even hint at any threat of continued
fraud by the defendants, and even then Menzies presents only
conclusory assertions to support those allegations. He urges
us to infer a future threat of repetition because the Euram Oak
Strategy was developed for marketing to many taxpayers and
thus inherently presented a “threat of repetition” capable of
defrauding others.
    But “[a] threat of continuity cannot be found from bald as-
sertions.” Vicom, 20 F.3d at 783. The law requires us to exam-
ine Menzies’s complaint for allegations of “predicate acts,
[which] by their very nature, pose ‘a threat of repetition ex-
tending indefinitely into the future,’ or ‘are part of an ongoing
entity’s regular way of doing business.’” McDonald, 18 F.3d at
497 (quoting H.J., Inc., 492 U.S. at 242).
24                                                 No. 18-3232

    What we see is insuﬃcient. Even if we credit Menzies’s
contention that the development and marketing of the Euram
Oak Strategy foretold future oﬀenses, the claim still would
fail to measure up to the standard of alleging open-ended
continuity. That the tax shelter scheme was, as our dissenting
colleague puts it, an “oﬀ-the-rack product” capable of
distribution to other victims does not alone threaten
continuity. We cannot conclude as a legal matter—altogether
without regard to what a plaintiﬀ alleges in a complaint—that
all fraudulent tax shelters designed for use by multiple
taxpayers satisfy open-ended continuity for purposes of
RICO’s pattern element.
    A close look at the complaint shows allegations suggesting
that any risk of future fraud was drying up. As the district
court highlighted, a grand jury indicted Graham Taylor for
tax fraud in 2005, and he was convicted in 2008. With Taylor
out of the factual equation it is unclear how Menzies’s com-
plaint supports any inference that the alleged scheme would
continue. Menzies’s complaint is full of indications that the
scheme was running its course—reaching its “natural ending
point,” Roger Whitmore’s Auto Servs., 424 F.3d at 674—and was
not being shopped to new targets:
         In 2007, Euram Bank divested from its sub-
          sidiary, Pali Capital, which made integral
          contributions to the implementation of the
          Euram Oak and Rowan strategies. SAC ¶ 19.
         In 2008, Seyfarth Shaw forced one of Taylor’s
          colleagues who had helped with the opinion
          letters to resign for himself promoting illegal
          tax shelters. SAC ¶ 122.
No. 18-3232                                                 25

         As early as 2003, Christiana Bank and Euram
          Bank were conducting internal investiga-
          tions with the assistance of outside counsel
          “regarding the possibility that the Euram
          Oak Strategy might be a reportable transac-
          tion to the IRS.” SAC ¶ 94.
    Nowhere does Menzies counterbalance these allegations
with facts suggesting the schemes promoted by the defend-
ants presented any meaningful prospect of continuing. In-
stead, the thrust of Menzies’s complaint conveys that the de-
fendants were taking action to move away from the promo-
tion of the fraudulent tax shelters challenged here.
    The dissent sees our analysis as falling prey to “hindsight
error” by considering these intervening events. Not so. All we
have done is reach a conclusion about the suﬃciency of Men-
zies’s RICO pleading by assessing the totality of his factual
allegations. We cannot stop halfway by, for example, over-
looking what Menzies chose to plead about Taylor’s indict-
ment and what did (and did not) happen in its wake. The
open-ended continuity inquiry requires more than pinpoint-
ing a moment in time where it looked like a scheme may entail
continuity but then disregarding facts supplied by the plain-
tiﬀ that point in the opposite direction. What is missing from
Menzies’s second amended complaint is any factual allega-
tion supporting his conclusion that, following Taylor’s arrest
and indictment, there existed a threat of the defendants fraud-
ulently marketing the tax shelter into the indefinite future.
   Because Menzies did not plead a pattern of racketeering
under either an open- or closed-ended theory of continuity,
we agree with the district court’s dismissal of his RICO claim.
26                                                  No. 18-3232

                               III
    In closing we turn to Menzies’s state law claims. Beyond
his federal RICO claim, Menzies advanced claims under Illi-
nois law for fraudulent misrepresentation, conspiracy, joint
enterprise liability, negligent misrepresentation, breach of fi-
duciary duty, and unjust enrichment. Exercising supple-
mental jurisdiction, the district court addressed each of these
claims in one broad stroke. The court determined each claim
was untimely under the five-year statute of repose formerly
found in Illinois Securities Law, 735 ILCS 5/12 et seq., and in
eﬀect during the relevant period—in particular, during the
five years after Menzies’s May 2006 sale of his AUI stock. (In
August 2013, the Illinois legislature amended the Securities
Law to remove this provision.) While we disagree with that
conclusion, we nonetheless find that a separate limitations pe-
riod in Illinois law operates to preclude some—but not all—
of Menzies’s state law claims.
                               A
    The Illinois Securities Law’s (former) statute of repose
provided that “[n]o action shall be brought under this Section
or upon or because of any of the matters for which relief is
granted by this Section” after five years from the securities
transaction at issue. 815 ILCS 5/12(D). Illinois courts have em-
phasized the provision’s breadth, explaining that the five-
year time bar applies to any claim—whether brought under
the Illinois Securities Law or otherwise—that fits within the
statute’s substantive prohibitions. See, e.g., Tregenza v. Lehman
Bros., Inc., 678 N.E.2d 14, 15 (Ill. App. Ct. 1997) (concluding
that the Illinois Securities Law’s statute of repose barred com-
mon law claims, including for fraud, because those claims
were “reliant upon matters for which relief is granted by the
No. 18-3232                                                     27

Securities Law”); see also Klein v. George G. Kerasotes Corp., 500
F.3d 669, 671 (7th Cir. 2007) (recognizing that the Illinois Se-
curities Law’s limitations periods apply to common law
claims that otherwise could have been brought as securities
fraud claims under the statute). So the controlling question is
whether Menzies could have brought his state law claims as
securities fraud claims under the Illinois Securities Law.
    Section 12(F) of the Illinois law prohibits any person from
“engag[ing] in any transaction, practice or course of business
in connection with the sale or purchase of securities which
works or tends to work a fraud or deceit upon the purchaser
or seller thereof.” 815 ILCS 5/12(F). For its part, section 12(I)
disallows any person from “employ[ing] any device, scheme,
or artifice to defraud in connection with the sale or purchase
of any security, directly or indirectly.” 815 ILCS 5/12(I).
    If these provisions sound like the prohibitions in the fed-
eral securities laws, that is the right reaction. The Illinois leg-
islature modeled sections 12(F) and 12(I) after parallel provi-
sions in section 17(a) of the Securities Act of 1933. See Tirapelli
v. Advanced Equities, Inc., 813 N.E.2d 1138, 1142 (Ill. App. Ct.
2004). Not surprisingly, then, “Illinois courts look to federal
securities fraud case law in interpreting [that section] of the
Illinois Securities Law.” Id.
    After outlining this same framework, the district court
evaluated Menzies’s state law claims by asking whether the
alleged fraud fell within the ambit of sections 12(F) and 12(I)
of the Illinois Securities Law. More to it, the district court
asked whether the allegations in Menzies’s second amended
complaint reflected fraud “in connection with” the sale of his
AUI stock. This, of course, was the same question at the center
of the inquiry as to whether the RICO bar in 18
28                                                  No. 18-3232

U.S.C. § 1964(c) precluded Menzies from bringing a civil
RICO claim.
    For reasons unexplained by the record, however, the dis-
trict court gave two diﬀerent answers to this same question.
In its July 2016 opinion the district court concluded that Men-
zies had not alleged “an ‘actionable’ securities claim [within
the meaning of the § 1964(c) bar], because nothing about the
sale of his AUI stock itself was fraudulent in this case.” Men-
zies I, 197 F. Supp. 3d at 1116. But then two years later, in its
September 2018 opinion, the court determined that the five-
year statute of repose in the Illinois Securities Law barred
each of Menzies’s state law claims because those claims met
the “in connection with” requirement by alleging the “entire
purpose of the tax shelter was to shield the proceeds of [Men-
zies’s AUI] stock sale.” Menzies II, 2018 WL 4538726, at *8. We
cannot square these answers.
   Regardless, our review of the district court’s order dis-
missing Menzies’s state law claims proceeds de novo, and,
based on our own fresh look at the allegations in his second
amended complaint, we cannot conclude he pleaded claims
within the scope of sections 12(F) and 12(I) of the Illinois Se-
curities Law.
    We are aware of no substantive diﬀerences between the
“in connection with” requirements in sections 12(F) and 12(I)
of the Illinois statute and either section 17(a) of the federal
1933 Act or section 10(b) and Rule 10b-5 of the federal 1934
Act. And accepting that the Illinois courts look to the federal
securities laws to interpret the Illinois Securities Law, see
Tirapelli, 813 N.E.2d at 1142; People v. Whitlow, 433 N.E.2d 629,
633–34 (Ill. 1982), we see no reason to depart from our prior
conclusion that Menzies’s original complaint did not contain
No. 18-3232                                                  29

allegations suﬃcient to constitute actionable securities fraud
under section 10(b) and Rule 10b-5. See Schaefer v. First Nat’l
Bank of Lincolnwood, 509 F.2d 1287, 1295 (7th Cir. 1975) (ex-
plaining that section 12 of the Illinois Securities Law “closely
parallels Rule 10b-5 and a study of [the statute] reveals a
nearly identical aim”).
    As we explained when evaluating whether Menzies’s
allegations fell within the RICO bar of 18 U.S.C. § 1964(c), we
see an insuﬃcient link between the alleged fraud—deception
about the tax consequences of a sale of AUI stock—and the
securities transaction itself. To be sure, while a “but for”
connection is there, we know the law requires more. See Ray,
482 F.3d at 995. And Menzies’s complaints do not supply the
more because nowhere does he allege any misconduct that
coincided with his sale of his AUI stock. See Zandford, 535 U.S.
at 824. What this means for purposes of the RICO bar is that
Menzies’s allegations do not amount to actionable federal
securities fraud and thus he was able to proceed with his civil
RICO claim. And so, too, for purposes of the Illinois Securities
Act: Menzies’s state law claims are not barred by the statute’s
five-year period of repose.
                               B
    The question then becomes whether any other Illinois law
bars Menzies’s claims. The answer turns out to be yes as to the
state law claims brought against defendants Graham Taylor,
the attorney who provided legal advice to Menzies about the
Euram Oak tax shelter, and his firm, Seyfarth Shaw.
   The Illinois statutory provision addressing attorney
misconduct contains a two-year statute of limitations and a
30                                                  No. 18-3232

six-year statute of repose. See 735 ILCS 5/13-214.3. The Illinois
General Assembly provided that:
       (b) An action for damages based on tort, con-
       tract, or otherwise against an attorney arising
       out of an act or omission in the performance of
       professional services … must be commenced
       within 2 years from the time the person bringing
       the action knew or reasonably should have
       known of the injury for which damages are
       sought.
       (c) [A]n action described in subsection (b) may
       not be commenced in any event more than 6
       years after the date on which the act or omission
       occurred.
Id.
    By its terms, the statute covers the claims against Taylor,
as the second amended complaint plainly alleges that he pro-
vided fraudulent legal advice and opinion letters, all of which
fell within his role as Menzies’s counsel. The Illinois statute
likewise covers Menzies’s claims against Seyfarth Shaw. See
Blue Water Partners, Inc. v. Edwin D. Mason, Foley and Lardner,
975 N.E.2d 284, 297 (Ill. App. Ct. 2012) (applying the statute
of limitations in 735 ILCS 5/13-214.3 to claims against a law
firm).
   All that remains is a question of timing. On this score, the
math is straightforward and does not compute in Menzies’s
favor. Even on the most generous framing of the facts—that
Menzies did not discover the alleged attorney misconduct
until he received his deficiency notice from the IRS and settled
in December 2012—he would still be beyond the two-year
No. 18-3232                                                   31

limitations period in Illinois law by filing his lawsuit in
federal court as he did in April 2015. Under any timeline, then,
we conclude that this provision of Illinois law bars each of the
state law claims Menzies brought against Taylor and Seyfarth
Shaw.
    The same is not true as to the state law claims advanced
against the remaining financial services defendants, Northern
Trust and Christiana Bank & Trust Company. On remand the
district court will retain subject matter jurisdiction over those
claims under 28 U.S.C. § 1367. We leave the consideration of
those claims to the district court in the first instance.
                        *       *      *
    Therefore, the judgment of the district court is AFFIRMED
in part, VACATED in part, and REMANDED for proceedings
consistent with this opinion.
32                                                  No. 18-3232

    HAMILTON, Circuit Judge, dissenting in part. We should
reverse the dismissal of plaintiﬀ’s RICO claims. The com-
plaint alleges multiple acts of racketeering showing the
“continuity and relationship” needed to establish a “pattern
of racketeering activity.” Plaintiﬀ has alleged in detail how
the defendants created an oﬀ-the-shelf tax-shelter scam—one
that was easily replicable for other, similarly situated tax-
payers facing substantial tax bills on large capital gains. The
defendants marketed the scam to plaintiﬀ and others. They
were positioned to keep the fraud going unless and until
they were stopped.
    The majority errs by finding insuﬃcient plaintiﬀ’s allega-
tions of a “pattern” of racketeering activity. The most fun-
damental mistake is the majority’s use of the distorting lens
of hindsight. The majority relies on intervening events to
find no genuine threat that the defendants would have con-
tinued indefinitely with their profitable scheme. That mis-
take weakens RICO for both civil and criminal enforcement.
The mistake is also contrary to substantial case law and has
no apparent support in the case law. My colleagues also de-
mand far too much from a complaint that is already quite
detailed, and they fail to give plaintiﬀ the benefit of plausible
inferences from his complaint. I respectfully dissent from the
dismissal of plaintiﬀ’s RICO claims.
I. Points of Agreement
    I agree with my colleagues on some important points,
however. We agree that the securities-fraud bar to civil RICO
claims, which was added to 18 U.S.C. § 1964(c) by the Private
Securities Litigation Reform Act of 1995, does not apply to
plaintiﬀ’s claims. We also agree on the dispositions of the
defendants’ various statute of limitations defenses to
No. 18-3232                                                 33

plaintiﬀ’s state-law claims. I concur with the portions of the
judgment that address the state-law claims.
II. The RICO “Pattern” Requirement
    Turning to the RICO claims: Because defendants moved
to dismiss under Federal Rule of Civil Procedure 12(b)(6) for
failure to state a claim, I use harsh language to describe the
actions of a well-known law firm and two otherwise-
legitimate banks. I do not vouch for the truth of plaintiﬀ’s
allegations. I only apply the standard of appellate review
that defendants themselves have invoked: assume the factu-
al allegations in the complaint are true, and give plaintiﬀ the
benefit of reasonable, favorable inferences that can be drawn
from those allegations.
   A. The Fraudulent Scheme
    Attorney Graham Taylor (later convicted for another tax
fraud) and other attorneys at Seyfarth Shaw teamed up with
bankers from Euram Bank (The European American Invest-
ment Bank), Northern Trust Corporation, and later Christia-
na Bank to devise a fraudulent scheme for concealing a tax-
payer’s receipt of a large capital gain. The defendants
pitched the scheme to Menzies, his business partner Ferenc,
and others.
    The scheme involved a series of carefully designed paper
transactions among the taxpayer, the banks, and nominally
independent trusts established on the defendants’ instruc-
tions, all blessed with fraudulent legal opinion letters. The
strategy took several years to set up and execute just for
Menzies himself, beginning about three years before he ac-
tually sold his stock in AUI to Berkshire Hathaway.
34                                               No. 18-3232

    The complaint describes the scheme in great detail. A
brief description of the “Euram Oak Strategy,” must be in-
complete but can help show its complexity and why plaintiff
characterizes the scheme as a “product” that defendants
used at least several times and threatened to continue to re-
peat.
    The scheme used a network of trusts and a dizzying ar-
ray of sham transactions to disguise the ownership of AUI
stock and to enable Menzies to obscure a large capital gain
upon the eventual sale of the stock. See Second Amended
Cplt. (SAC) ¶¶ 65–97 (detailing the 2003 and 2004 transac-
tions). Menzies began to execute defendants’ fraudulent
“Euram Oak Strategy” in 2003. First, defendants had him
borrow $19 million from Euram and deposit those funds in
another Euram account in the name of a trust that the de-
fendants had just set up for him. SAC ¶ 74. The trust rein-
vested the proceeds with Euram itself, in return for a prom-
issory note. The defendants then set up another trust for
Menzies and orchestrated a series of sham transactions
among Menzies and the trusts. SAC ¶ 79.
    Menzies then swapped assets with the original trust, ac-
cepting the Euram promissory note in exchange for an equal
value of AUI stock, and used the note to pay off his original
loan obligation. SAC ¶¶ 83–85. After another series of trans-
actions involving the movement of assets and the termina-
tion of the first trust, the second trust held $19 million of
AUI stock and owed Menzies $19 million. SAC ¶ 90.
Throughout all of this, the funds from the original loan nev-
er left Euram.
    In 2004, the defendants led Menzies through another se-
ries of similar transactions with a new $54 million loan from
No. 18-3232                                                  35

Euram. SAC ¶¶ 95–96. After these transactions, another $54
million of AUI stock was in the second trust, with a corre-
sponding obligation from the trust to Menzies.
    The payoff came in 2006, when Menzies and Ferenc
agreed to sell their business to Berkshire Hathaway. As part
of the deal, Berkshire Hathaway paid the remaining trust
more than $64 million for the shares that Menzies had placed
there. SAC ¶ 132. The trust then used the proceeds from the
sale to repay Menzies the amount it owed him.
    Pursuant to advice from the defendants, when Menzies
filed his 2006 tax return, he did not report his capital gain of
more than $44 million. SAC ¶ 143. In 2009, the IRS began an
audit of Menzies, finding that the key transfers of stock were
not arms-length transactions and that the scheme constituted
an abusive tax shelter SAC ¶¶ 138–40. In 2012, Menzies set-
tled with the IRS, paying $6.7 million in capital gains tax,
$1.3 million in penalties, and $2.4 million in interest.
   B. Allegations of a “Pattern”
    The complaint includes detailed allegations about the
scope of the defendants’ scheme, their eﬀorts to market it
and its variations, and the threat of continued criminal activ-
ity. See SAC ¶¶ 25–27, 50–55, 69, 82, 89, 122, 157–58, 180–84.
The defendants’ scheme was not like a custom-designed suit,
cut just for Menzies. It was more like an oﬀ-the-rack suit: it
would fit a specific class of taxpayers with just a few indi-
vidual alterations at minimal eﬀort and cost. With repetition,
costs per taxpayer-client would drop and the defendants’
profits from fees would rise, adding to the incentive for and
the threat of repetition. The potential for repeated use of the
fraudulent tax shelter helps show why plaintiﬀ has alleged a
36                                                      No. 18-3232

pattern of racketeering activity. See SAC ¶ 157 (“it is the very
nature of a tax shelter product, such as the Euram Oak Strat-
egy, to be created once and then replicated multiple times to
multiple taxpayers”).
    The complaint does not rely on conclusions to show a
pattern. It includes specific factual allegations showing the
replicable nature of the fraudulent tax shelter and the threat
of continued fraud with other taxpayers. For example, de-
fendants presented plaintiﬀ with slick marketing materials
for the tax shelter—prepared with Euram—that came with a
disclaimer addressed generally to “investors.”1 Before de-
fendants would discuss the details of their proposed tax
shelter, they required Menzies to sign a confidentiality
agreement, which the complaint describes as “typical in the
presentation of purportedly proprietary tax shelter prod-
ucts,” SAC ¶ 36, indicating that defendants saw their inge-
nuity as a proprietary secret from which they could continue
to profit by repetition. One can also reasonably infer that the
confidentiality agreement had the eﬀect of deterring or pre-
venting targets from seeking truly independent legal and tax
advice.
   Other paragraphs of the complaint show that the
defendants marketed to Menzies and Ferenc an oﬀ-the-rack
product that they were adapting from previous applications
for other clients. The defendants themselves noted the
similarity between Menzies’s transactions and the
transactions carried out for these other clients, referred to in
the briefs as “the Arizona investor” and “the North Carolina

     1The Power-Point slides, labeled as Euram products, are an appen-
dix to the complaint.
No. 18-3232                                                 37

investor.” When the other defendants recruited Christiana
Bank to act as a supposedly independent trustee for Menzies
and Ferenc, they told Christiana that the proposed
transactions would be “very similar” to previous
transactions carried out for the Arizona investor. SAC ¶ 50.
When later sending documents to Christiana, the other
defendants said the documents “should be familiar to you
from the [Arizona] transaction,” and were “very similar” to
those used in the Arizona transaction. SAC ¶ 78. When the
other defendants sent more documents to Christiana for the
proposed Menzies and Ferenc transactions, they said the
transaction would be “in essence identical to that for” the
Arizona investor. SAC ¶ 82. Another email to Christiana
described the Menzies and Ferenc transactions as “two new
trades involving the Oak structure.” SAC ¶ 89.
    Thus, the defendants themselves described the tax shelter
strategy as a template that they had used before, were adapt-
ing to Menzies and Ferenc, and could continue replicating
and adapting for other taxpayers. As the complaint alleges,
these sorts of communications helped demonstrate “a con-
tinued threat that the Euram Oak strategy could later be rep-
licated for other taxpayers.” Id.
   C. “Continuity Plus Relationship”
    These detailed allegations easily satisfy pleading re-
quirements for a civil RICO claim, including the required
“pattern of racketeering activity.” To start with RICO basics,
“racketeering activity” is defined with a long list of specific
crimes and categories of crime. 18 U.S.C. § 1961(1). That list
includes mail fraud and wire fraud under 18 U.S.C. §§ 1341
& 1343. As a matter of general federal criminal law, each in-
dividual mailing or interstate wire transmission in further-
38                                                              No. 18-3232

ance of a scheme to defraud can count as a separate act of
mail or wire fraud.2
    RICO provides that a “‘pattern of racketeering activity’
requires at least two acts of racketeering activity’” that occur
within ten years of each other. 18 U.S.C. § 1961(5). The Su-
preme Court has interpreted this to require that the predi-
cate acts of racketeering activity show “continuity plus rela-
tionship.” See Roger Whitmore’s Auto Services, Inc. v. Lake
County, 424 F.3d 659, 672 (7th Cir. 2005), quoting H.J., Inc. v.
Northwestern Bell Telephone Co., 492 U.S. 229, 239 (1989), quot-
ing in turn 116 Cong. Rec. 18940 (1970) (Sen. McClellan),
quoting S. Rep. No. 91–617, at 158. The majority’s restrictive
approach to the pattern requirement here has lost sight of
the point the Supreme Court emphasized in H.J., Inc.: the
statutory language shows that “Congress intended to take a
flexible approach, and envisaged that a pattern might be
demonstrated by reference to a range of diﬀerent ordering
principles or relationships between predicates, within the
expansive bounds set.” 492 U.S. at 238.
    Our decisions have long recognized this need for flexibil-
ity in applying the pattern requirement. In Morgan v. Bank of
Waukegan, 804 F.2d 970, 975 (7th Cir. 1986), we anticipated

     2E.g., United States v. Bush, 522 F.2d 641, 649 (7th Cir. 1975) (“Each of
the eleven counts of the indictment charges only one offense—a mailing
in furtherance of one multifaceted scheme in violation of the mail fraud
statute.”); United States v. Brighton Building & Maintenance Co., 435 F.
Supp. 222, 229 n.10 (N.D. Ill. 1977) (Flaum, J.), citing United States v. Joyce,
499 F.2d 9, 18 (7th Cir. 1974), quoting in turn Badders v. United States, 240
U.S. 391, 394 (1916); see also Bridge v. Phoenix Bond & Indemnity Co., 553
U.S. 639, 648 (2008) (observing that each individual mailing in further-
ance of single scheme to defraud is predicate act of mail fraud under
RICO).
No. 18-3232                                                                 39

the holding of H.J., Inc. and rejected a rigid requirement of
“separate schemes.” In applying the “continuity plus rela-
tionship” standard, we recognized that many factors would
be relevant, including “the number and variety of predicate
acts and the length of time over which they were committed,
the number of victims, the presence of separate schemes and
the occurrence of distinct injuries.” Id. We cautioned, howev-
er, that having one overall scheme or even just one victim
would not automatically defeat the pattern requirement:
“The doctrinal requirement of a pattern of racketeering ac-
tivity is a standard, not a rule, and as such its determination
depends on the facts and circumstances of the particular
case, with no one factor being necessarily determinative.” Id.
at 976. Morgan reversed dismissal in a case with a much
weaker claim of a pattern than we see here. The plaintiﬀs al-
leged that defendants committed several acts of mail fraud
over several years in furtherance of one overall scheme to
defraud plaintiﬀs through foreclosure sales: “While these
acts can be viewed as part of a single grand scheme, they
were ongoing over a period of nearly four years in addition
to being distinct acts. Under the facts of this case, plaintiﬀs
have satisfied both the continuity and relationship aspects of
the pattern requirement.” Id. 3

    3 The flexibility of the pattern standard is evident in this circuit’s pat-
tern criminal jury instructions, which suggest the following general ex-
planation for charges under 18 U.S.C. § 1962:
        Acts are related to each other if they are not isolated
        events, that is, if they have similar purposes, or results,
        or participants, or victims, or are committed a similar
        way, [or have other similar distinguishing characteris-
        tics] [or are part of the affairs of the same enterprise].
40                                                         No. 18-3232

    Finding both continuity and relationship here is
consistent with our decisions that have recognized the
generality and flexibility of the standard, eschewing rigid
rules in both criminal and civil RICO cases. See, e.g., United
States v. Horak, 833 F.2d 1235, 1240 (7th Cir. 1987) (aﬃrming
RICO conviction; defendants’ three bribes to local oﬃcials
with monthly payments were suﬃcient to show pattern
under flexible standard aimed at ongoing crimes); Ashland
Oil, Inc. v. Arnett, 875 F.2d 1271, 1278–79 (7th Cir. 1989)
(aﬃrming jury verdict for plaintiﬀs on pattern issue where
defendants’ fraud and theft injured four victims in separate
transactions over a period of months); Olive Can Co. v.
Martin, 906 F.2d 1147, 1152 (7th Cir. 1990) (describing
Ashland Oil activity as open-ended scheme that threatened
continued crime, and confirming that Morgan test is
consistent with H.J., Inc.); DeGuelle v. Camilli, 664 F.3d 192,
202–04 (7th Cir. 2011) (reversing dismissal of RICO claim;
pattern shown where defendant corporation and its agents
allegedly carried out tax fraud scheme over several years
and retaliated against plaintiﬀ-whistleblower); United States
v. Maloney, 71 F.3d 645, 661 (7th Cir. 1995) (aﬃrming RICO
conviction of corrupt judge; bribes and criminal acts to
conceal them showed suﬃcient pattern under “relatively
broad standard” of H.J., Inc.); see also RWB Services, LLC v.
Hartford Computer Group, Inc., 539 F.3d 681, 688–89 (7th Cir.

        There is continuity between acts if, for example, they are
        ongoing over a substantial period, or if they are part of
        the regular way some entity does business or conducts
        its affairs.
Under this instruction, a jury that heard proof of plaintiff’s allegations
here could easily find a pattern.
No. 18-3232                                                              41

2008) (reversing dismissal of RICO claim for scheme to
defraud Wal-Mart and its customers; pattern conceded where
defendants sold 50,000 stolen and/or repackaged cameras as
new). With such plausible and detailed allegations of a
pattern as we have here, especially when made on the basis
of quite limited discovery, the better course is to let the case
go forward, let the case develop, and decide the pattern issue
on a full record.4
    As the majority acknowledges, the relationship prong of
“continuity and relationship” test can be satisfied by crimi-
nal acts close in time and character, undertaken for similar
purposes, or involving the same or similar victims, partici-
pants, or means of commission. See H.J., Inc., 492 U.S. at 240.
The majority and I agree that the relationship prong is satis-
fied here. Plaintiﬀ has alleged very similar eﬀorts by the de-
fendants to carry out the tax-shelter scam with him and with
his partner Ferenc, who received a similar large capital gain
in 2006. In those two episodes of the fraudulent scheme, we
have multiple acts of mail and wire fraud, and we have simi-
lar victims, the same criminal participants, and the same
means of commission, all undertaken for similar purposes at
around the same time.
    The majority correctly finds that plaintiﬀ has alleged
with suﬃcient specificity the defendants’ fraudulent eﬀorts
to target both him and his partner Ferenc through criminal

    4 Plaintiff will be entitled to further discovery from defendants on
his surviving state-law claims. What will the federal courts do if that dis-
covery turns up more detailed evidence of additional attempts by de-
fendants to sell the Euram Oak and Euram Rowan strategies such that
the scheme would satisfy even the majority’s restrictive view of the pat-
tern requirement? Will we reconsider our premature dismissal?
42                                                            No. 18-3232

mail and wire fraud, so that both episodes add up to racket-
eering activity. Ante at 19–20. The majority also correctly
recognizes that the allegations about Ferenc are suﬃcient
even though he apparently did not go through with the pro-
posed scam. Id., citing United States v. Koen, 982 F.2d 1101,
1107 (7th Cir. 1992).5
   Thus, the majority agrees that plaintiﬀ has suﬃciently al-
leged two distinct but related episodes in which the defend-
ants carried out their fraudulent scheme. The remaining re-
quirement of “continuity” is what divides us.
     D. Open-Ended Continuity
    The two fraudulent episodes aimed at Menzies and
Ferenc should be suﬃcient to establish a pattern. By design,
each episode lasted several years. Each episode required
numerous acts of mail and wire fraud and elaborate
sequences of otherwise-useless financial transactions. Each
episode produced hundreds of thousands of dollars in fees
for the defendants. This should be suﬃcient. See Ouwinga v.
Benistar 419 Plan Services, Inc., 694 F.3d 783, 795–96 (6th Cir.

     5See also Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639, 648
(2008) (civil RICO plaintiff alleging mail fraud need not prove it relied on
defendant’s misrepresentations), citing Neder v. United States, 527 U.S. 1,
24–25 (1999) (common-law requirement of justifiable reliance has no
place under mail, wire, or bank fraud statutes); United States v. Bucey, 876
F.2d 1297, 1311 (7th Cir. 1989) (“this court has reiterated on numerous
occasions that the ultimate success of the fraud and the actual defraud-
ing of a victim are not necessary prerequisites to a successful mail fraud
prosecution”); United States v. Keane, 852 F.2d 199, 205 (7th Cir. 1988). The
majority does not say so forthrightly, but its description of the district
court’s decision, see ante at 18, shows that the district court erred by fo-
cusing on whether Ferenc and the Arizona and North Carolina investors
actually followed through all the way with the fraudulent strategy.
No. 18-3232                                                   43

2012) (reversing dismissal of civil RICO claim based on
marketing of fraudulent tax shelter; pattern alleged
adequately where defendants marketed shelter over period
of five years); Gagan v. American Cablevision, Inc., 77 F.3d 951,
962–64 (7th Cir. 1996) (aﬃrming civil RICO conspiracy
verdict for plaintiﬀ; scheme to defraud all limited partners to
sell interests established pattern; even though evidence
appeared to point to only one scheme, “an inference can be
drawn that the various defendants certainly had the means
to conduct similar schemes”); Newmyer v. Philatelic Leasing,
Ltd., 888 F.2d 385, 396–97 (6th Cir. 1989) (reversing dismissal
of civil RICO claim based on marketing of fraudulent tax
shelter; defendants alleged to have acted in concert over five
years, defrauding hundreds of taxpayers); Durham v.
Business Management Associates, 847 F.2d 1505, 1512 (11th Cir.
1988) (aﬃrming denial of summary judgment; plaintiﬀs
oﬀered evidence of pattern with two related schemes to
market fraudulent tax shelters, and schemes’ similarity
presented jury question; “use of business instructional video
cassette tapes” deemed significant); United Energy Owners
Committee, Inc. v. U.S. Energy Management Systems, Inc., 837
F.2d 356, 360–61 (9th Cir. 1988) (reversing dismissal of civil
RICO claim based on marketing of fraudulent tax shelter;
pattern alleged adequately where defendants engaged in
multiple fraudulent acts involving multiple victims over
more than one year; no rigid requirement for plaintiﬀ to
allege or prove more than one criminal “episode”).
   The complaint easily satisfies the “pattern” requirement
when the Menzies and Ferenc episodes are combined with
the detailed allegations of a reasonably foreseeable threat of
continued eﬀorts to repeat the scheme with still more
similarly situated taxpayers. In the rubric of RICO patterns,
44                                                No. 18-3232

plaintiﬀ has alleged “open-ended continuity,” that is, “past
conduct that by its nature projects into the future with a
threat of repetition.” Vicom, Inc. v. Harbridge Merchant
Services, Inc., 20 F.3d 771, 782 (7th Cir. 1994), quoting H.J.,
Inc., 492 U.S. at 241.
    The majority, however, rejects open-ended continuity,
saying: “Only a few lines of the second amended complaint
even hint at any threat of continued fraud by the defendants,
and even then Menzies presented only conclusory assertions
to support those allegations.” Ante at 23. With respect, that
description is just wrong. The majority’s rejection of open-
ended continuity is based on two related errors: relying on
hindsight and failing to give the plaintiﬀ the benefit of his
detailed allegations.
      1. Hindsight Error
    First, the majority makes the basic error of giving the de-
fendants the benefit of hindsight rather than considering the
threat of continued fraud as it was happening. The majority
(like the district court) emphasizes the 2005 indictment and
2008 conviction of attorney Taylor for an unrelated tax fraud:
“With Taylor out of the factual equation it is unclear how
Menzies’s complaint supports any inference that the alleged
scheme would continue.” Ante at 24. This is wrong as a fac-
tual matter. According to the complaint, Taylor’s indictment
in 2005 most certainly did not deter him and the other defend-
ants from continuing the eﬀort to defraud Menzies in 2006
and 2007 with respect to his 2006 tax return. There is also no
reason the other defendants could not have continued the
scheme with another Seyfarth Shaw lawyer or two.
No. 18-3232                                                  45

   More fundamental, though, is the legal error. Taylor’s
2008 conviction was an intervening event that at most inter-
rupted the ongoing scheme. Extensive RICO case law shows
that such an intervening event is not relevant to the threat of
repetition. The same is true of the other events from 2007
and 2008 that the majority suggests are “indications that the
scheme was running its course … and was not being
shopped to new targets.” Ante at 24. (Aﬃrming dismissal
based on “indications” and “suggestions” in a complaint is
not consistent, of course, with the more generous reading of
complaints required in deciding Rule 12(b)(6) motions, but I
digress.)
    To see the problem with determining continuity based on
hindsight, consider how we and other federal courts would
consider this same defense to a RICO charge against mem-
bers of a street gang. Suppose the evidence showed that after
two profitable episodes of robbery, each time following the
same careful plan, the gang’s leader was arrested and later
convicted on unrelated charges. In a RICO prosecution alleg-
ing a pattern of robberies, the other gang members then ar-
gue they must be acquitted because there was no pattern:
“We stopped committing crimes after our leader was indict-
ed, arrested, and later convicted.” In a criminal case, that ar-
gument would be laughed out of court. E.g., United States v.
Aulicino, 44 F.3d 1102, 1113–14 (2d Cir. 1995). Yet the “pattern
of racketeering activity” standard is the same for both civil
and criminal RICO. The majority’s error in this civil case will
unduly narrow criminal applications of RICO where ongo-
ing schemes are interrupted by arrests, indictments, convic-
tions, or other events.
46                                                No. 18-3232

    The majority’s reliance on hindsight runs contrary to Au-
licino and numerous other RICO precedents, which establish
that courts do not rely on hindsight and intervening events
to show the absence of a threat of repetition. In Aulicino, the
defendants operated a kidnapping ring that carried out
about seven kidnappings over a period of three and a half
months. 44 F.3d at 1105. The kidnappings ended after one
leader was murdered and another was arrested on other
charges. The defendants argued that the government had
failed to prove a pattern, but the Second Circuit aﬃrmed the
RICO convictions. The Second Circuit did not use hindsight
to find that the intervening events (the murder and arrest of
two leaders) had defeated a threat of continued crimes. In-
stead, the Second Circuit found a suﬃcient threat of contin-
ued racketeering activity. The kidnappings were successful
and profitable. 44 F.3d at 1113. “The ring’s activities were
abandoned; they were not a discrete and finite project that
came to a natural end.” Id. at 1114. The same description fits
these defendants’ fraud.
    The Sixth Circuit rejected a similar argument based on
hindsight in United States v. Busacca, 936 F.2d 232 (6th Cir.
1991). A pension oﬃcial was convicted under RICO for em-
bezzling funds to pay for his defense in an earlier prosecu-
tion. He had obtained money illegally over only three
months. Id. at 236. He argued that there was no threat of con-
tinuity because his opportunity for embezzlement ended
with his earlier conviction and his removal from oﬃce, much
as defendants here and the majority argue that Taylor’s in-
dictment and conviction ended the threat of continuity.
   The Sixth Circuit rejected that argument based on hind-
sight and found open-ended continuity: “The manner in
No. 18-3232                                                  47

which the embezzlements occurred was capable of repetition
indefinitely into the future, as long as there were either legal
fees or other expenses which Busacca wanted paid.” Id. at
238. In words that apply directly here, the “analysis of the
threat of continuity cannot be made solely from hindsight”
and must instead “be viewed at the time the racketeering ac-
tivity occurred.” Id. The majority rejects that approach here,
and it is hard to see why, especially since it weakens crimi-
nal application of RICO where intervening events interrupt
ongoing criminal schemes.
    The Sixth Circuit applied this principle more recently in a
civil RICO case, Heinrich v. Waiting Angels Adoption Services,
Inc., 668 F.3d 393 (6th Cir. 2012). The individual defendants
argued that because the defendant adoption business they
owned was shut down as part of a criminal prosecution,
there had not been an open-ended threat of continued
crimes. Id. at 410. The Sixth Circuit rejected the argument
and reversed dismissal of civil RICO claims: “Subsequent
events are irrelevant to the continuity determination …
because ‘in the context of an open-ended period of
racketeering activity, the threat of continuity must be viewed
at the time the racketeering activity occurred.’” Id., quoting
Busacca, 936 F.2d at 238. “The lack of a threat of continuity of
racketeering activity cannot be asserted merely by showing a
fortuitous interruption of that activity such as by an arrest,
indictment or guilty verdict.’” Heinrich, 668 F.3d at 410, again
quoting Busacca, 936 F.2d at 238, and citing Blue Cross & Blue
Shield of Michigan v. Kamin, 876 F.2d 543, 545 (6th Cir. 1989)
(reversing dismissal on pattern issue; open-ended continuity
alleged because, if defendant had not been caught, there was
no reason to believe he would not still be submitting
fraudulent insurance claims). In language that applies
48                                                No. 18-3232

directly here, Heinrich explained that when the defendants
committed the four predicate acts, “there was no indication
that their pattern of behavior would not continue
indefinitely into the future.” 668 F.3d at 411. Dismissal under
Rule 12(b)(6) was reversed, just as we should reverse here.
   In fact, the district judge who dismissed this case made
exactly this point—even quoting Heinrich—in denying
dismissal in another civil RICO case:
      It is important to note that, in the context of an
      open-ended period of racketeering activity, the
      threat of continuity must be viewed “at the
      time the racketeering activity occurred.” Sub-
      sequent events “are irrelevant.” Thus, a lack of
      a threat of continuity “cannot be asserted
      merely by showing a fortuitous interruption of
      that activity such as by an arrest, indictment or
      guilty verdict.”
Inteliquent, Inc. v. Free Conferencing Corp., 2017 WL 1196957,
at *10 (N.D. Ill. 2017), quoting Heinrich, 668 F.3d at 410, and
citing CVLR Performance Horses, Inc. v. Wynne, 524 Fed. App’x
924, 929 (4th Cir. 2013). In Inteliquent, Judge Blakey found
correctly that the plaintiﬀ had suﬃciently alleged an open-
ended pattern of racketeering activity through a series of
fraudulent invoices under a contract that would renew au-
tomatically and that could be expected to be renewed. As a
result, there was no natural ending point or “clear and ter-
minable goal” for the scheme. Id. He was right then; he was
wrong in this case.
   In a criminal case, we have also held that even a brief
scheme cut short by intervening events can establish a
No. 18-3232                                                   49

pattern if the scheme threatened to continue from the per-
spective of the time the racketeering activity occurred. In
United States v. O’Connor, 910 F.2d 1466 (7th Cir. 1991), a po-
lice oﬃcer committed several acts of extortion over a two-
month period. The acts of extortion ended with his arrest.
We held that the evidence permitted the trier of fact to con-
clude that he “had committed himself to an enduring series
of criminal acts, suﬃcient to establish a ‘pattern’ under H.J.
Inc.” O’Connor, 910 F.2d at 1468. The Second Circuit in Au-
licino cited O’Connor to support its approach to open-ended
continuity. 44 F.3d at 1112–13.
    These cases can all be contrasted with schemes with no
open-ended continuity, which are those with discrete and
finite goals or natural end points. For example, in Vicom, Inc.
v. Harbridge Merchant Services, Inc., 20 F.3d 771, 783 (7th Cir.
1994), we found no open-ended continuity where the predi-
cate acts of fraud involved one particular contract and a fi-
nite scheme that did not threaten continued wrongdoing.
For other examples of inherently finite schemes, see Empress
Casino Joliet Corp. v. Balmoral Racing Club, Inc., 831 F.3d 815,
829–30 (7th Cir. 2016) (reversing plaintiﬀ’s verdict under civ-
il RICO for lack of pattern; scheme to bribe governor to se-
cure enactment of one new law did not pose threat of open-
ended continuity because scheme had a “natural ending
point”); Vemco, Inc. v. Camerdella, 23 F.3d 129, 134–35 (6th Cir.
1994) (alleged fraud in one construction contract over 17
months did not pose threat of continued wrongdoing);
Thompson v. Paasche, 950 F.2d 306, 311 (6th Cir. 1991) (five-
month fraudulent scheme involving sale of lots on one di-
vided tract of land was “an inherently short-term aﬀair”).
50                                                 No. 18-3232

    Against this substantial case law showing that courts do
not rely on hindsight and intervening events to avoid recog-
nizing a continued threat of crimes in both criminal and civil
RICO cases, the majority oﬀers no support for its reliance on
hindsight. Curiously, rather than respond to the applicable
precedent and reasoning, the majority instead denies that it
is relying on hindsight. Ante at 25. It’s hard to take that de-
nial seriously, though. The majority tells us quite plainly:
“What is missing from Menzies’s second amended com-
plaint is any factual allegation supporting his conclusion
that, following Taylor’s arrest and indictment, there existed a
threat of the defendants fraudulently marketing the tax shel-
ter into the indefinite future.” Id. Put aside the fact that de-
fendants actually did continue their scheme after Taylor’s in-
dictment. Where does that supposed requirement come
from, if not from hindsight and reliance on intervening
events? This mistaken reliance on hindsight oﬀers a windfall
to RICO defendants in both civil and criminal cases.
       2. The Detailed Allegations of Continuity
   The majority also errs by simply failing to engage with
the extensive factual details alleged in the complaint that
indicate a threat of repetition and support open-ended
continuity. The majority also fails to give the plaintiﬀ the
benefit of favorable inferences from his allegations. The
complaint uses the right labels and descriptors—“regular
way of conducting and participating in an ongoing criminal
enterprise,” SAC ¶ 26; “part of [a] pattern of similar or
identical activity by Defendants, as tax shelter promoters,
advisors, and others that had the same or similar purposes,
results, participants, victims, or methods of commission”
¶ 157; “it is the very nature of a tax shelter product, such as
No. 18-3232                                                  51

the Euram Oak Strategy, to be created once and then
replicated multiple times to multiple taxpayers,” ¶ 157;
“[t]he threat of repetition and continued criminal activity is
implicit, as there was a continued threat that it later could be
replicated for other taxpayers,” ¶ 158; defendants’
“predicate acts of mail and wire fraud were part of their
regular way of conducting business,” ¶ 183; and defendants’
“pattern of criminal conduct … projects into the future,” as
illustrated by “the manner in which the Euram products
were presented as products, with a preexisting team that
could execute and support the tax shelter for other taxpayers
and from the regular manner in which this enterprise did
business with Menzies, Ferenc, [the Arizona and North
Carolina investors], and other investors in fraudulent Euram
strategies,” ¶ 184.
    These general allegations are made more plausible by the
extensive details about how defendants carried out the fraud
with Menzies and Ferenc. The majority fails to recognize that
defendants themselves described those schemes as “very
similar” to and “in essence identical” to transactions with
the Arizona investor. The complaint also describes the simi-
lar “Euram Rowan Strategy” with the North Carolina inves-
tors (without Northern Trust, however). To one another,
they further described Menzies and Ferenc transactions as
“two new trades involving the Oak structure.” And the de-
fendants presented the fancy marketing materials to Menzies
with a disclaimer addressed to “investors” and demanded
that prospective clients sign confidentiality agreements be-
fore the scheme could be explained to them. These details
provide ample support for the allegation that defendants
would continue marketing identical or closely similar fraud-
ulent tax shelters to other taxpayers. Neither defendants nor
52                                                No. 18-3232

the majority have identified any natural ending point for this
profitable scheme.
    In rejecting open-ended continuity, the majority fails to
apply the proper standard of review, which gives the plain-
tiﬀ the benefit of reasonable inferences from the allegations.
Of course there was a threat of continued fraudulent epi-
sodes! As long as the defendants were getting away with this
scam, why should they have stopped with the Arizona in-
vestor, Menzies, and Ferenc? They had developed a profita-
ble product, one that promised their clients millions of dol-
lars in tax savings and assured defendants hundreds of
thousands of dollars in fees every time it was used. In the
law we ordinarily assume that people are rational actors.
Here, that means that we would expect defendants to con-
tinue with their profitable venture.
    Giving plaintiﬀ the benefit of his allegations and reason-
able inferences from them—and viewed at the time of the al-
leged fraud—these were “predicate acts, which by their very
nature, pose[d] ‘a threat of repetition extending indefinitely
into the future or [were] part of an ongoing entity’s regular
way of doing business.’” McDonald v. Schencker, 18 F.3d 491,
497 (7th Cir. 1994), quoting H.J., Inc., 492 U.S. at 242.
     E. Closed-Ended Continuity
    Plaintiﬀ’s strong case of open-ended continuity should be
suﬃcient to warrant reversal here, but the majority also errs
in rejecting closed-ended continuity. The majority criticizes
plaintiﬀ for not alleging in more fulsome detail the specifics
of defendants’ eﬀorts to defraud the Arizona investor and
the North Carolina investor using the same fraudulent tax
shelter or the Euram Rowan variant. Ante at 20. In doing so,
No. 18-3232                                                  53

the majority imposes an unfair and excessive pleading re-
quirement that goes beyond Rule 9(b) and any need for fair
notice to defendants.
    The pleading requirement is unfair because the defend-
ants have thus far kept the cloak of attorney-client privilege
around the content of some of their fraudulent communica-
tions with the Arizona and North Carolina investors and
others. Given the IRS’s rejection of these abusive tax shelters,
there are ample reasons to think that the crime-fraud excep-
tion would apply to pierce the privilege, which may still oc-
cur on remand of some of plaintiﬀ’s state-law claims. See
generally Valero Energy Corp. v. United States, 569 F.3d 626
(7th Cir. 2009) (discussing statutory tax-practitioner privi-
lege that parallels attorney-client privilege and is subject to
exceptions for crime and fraud, as well as promotion of tax
shelters, 26 U.S.C. § 7525).
    The majority’s pleading requirement is excessive because
it discounts the complaint’s plausible allegations about the
fraud aimed at the North Carolina and Arizona investors. In
rejecting closed-ended continuity, the majority relies on Em-
ery v. American General Finance, Inc., 134 F.3d 1321 (7th Cir.
1998), which aﬃrmed dismissal of a civil RICO complaint for
failure to allege with suﬃcient particularity facts concerning
alleged victims in addition to the named plaintiﬀ. Emery is
readily distinguishable. That complaint alleged only one vic-
tim with any particularity or evidence. It did not involve an
oﬀ-the-shelf fraudulent product that could be repeated easi-
ly with additional targets. The plaintiﬀ in Emery was not able
to provide any meaningful details about the alleged fraudu-
lent letters to other alleged victims, who apparently did not
54                                                No. 18-3232

keep any documents or remember anything about the
scheme. 134 F.3d at 1323.
    By comparison, the North Carolina and Arizona inves-
tors spent on the order of a million dollars each on the de-
fendants’ fraudulent professional services. These investors
experienced multimillion-dollar tax bills, with penalties and
interest. Unlike the other targets in Emery, these victims do
not seem to have forgotten the incidents or thrown away the
relevant documents. And recall that defendants themselves
described the transactions as “in essence identical” and
“very similar” to the transactions with Menzies and Ferenc.
SAC ¶¶ 50, 82.
    Even with these handicaps, plaintiﬀ has identified some
specific fraudulent communications for the North Carolina
and Arizona investors, suﬃcient to satisfy Rule 9(b). ¶¶ 160–
64, 166–78. The closed-end theory should not fail simply be-
cause plaintiﬀ has not yet seen those fraudulent opinion
letters. Defendants claim the letters are privileged, but the
complaint alleges they exist and were sent. It’s not diﬃcult
to infer what they said. If the letters had not asserted the
fraudulent shelters were legal, there of course would have
been no point in the transactions. See SAC ¶¶ 162, 177. The
inference that the defendants’ opinion letters say fraudulent-
ly that the tax shelters would be legal is not merely plausible
but compelling. The allegations about the opinion letters and
related communications provide suﬃcient information
about the who, what, when, where, and how of the fraud to
satisfy Rule 9(b) regarding the other investors.
   As discussed above, it also does not matter whether a
particular taxpayer-client was deceived regarding the tax
shelter’s legality. If he was not deceived and did not go
No. 18-3232                                                 55

through with the transaction, there was at least an attempt to
defraud by the defendants. If the targeted taxpayer was not
deceived, understood the transaction, and went through
with it, he was joining a criminal venture to defraud the fed-
eral government. Either way, that’s another episode of fraud
in implementing the scheme.
    Even with the limited information available to him,
plaintiﬀ provided suﬃcient information about these addi-
tional instances of fraud to satisfy the RICO pattern re-
quirement and Rule 9(b). By aﬃrming dismissal of the RICO
claims, the majority unfairly rewards defendants for their
eﬀorts to cover up their attempts to defraud other investor-
taxpayers.
    Because the majority has adopted an erroneous, restric-
tive view of the RICO pattern requirement, giving defend-
ants the benefit of hindsight and failing to give plaintiﬀ the
benefit of his allegations, the majority is substantially weak-
ening both civil and criminal RICO. I respectfully dissent
from the dismissal of plaintiﬀ’s RICO claims.