Civil Actions under RICO

The Racketeer Influenced and Corrupt Organizations Act of 1970 (“RICO”, 18 U.S.C.A. §§ 1961 et seq.) created a civil law cause of action (§ 1964) for violations of its provisions. Exclusive venue is in federal District Courts which are empowered to award triple monetary awards, attorney fees, and to issue equitable orders preventing and restraining violations, including divestiture of an interest in any enterprise, restrictions on future activities or investments of any person, and the dissolution or reorganization of the enterprise. Civil Actions under RICO In order to obtain relief, the plaintiff must prove two “predicate offenses” (violations of § 1962) which prohibits persons who derive income from a pattern of racketeering activity or through the collection of an unlawful debt to invest the income in any enterprise which engages in interstate commerce. The statute does not mention “organized crime” or limit its application to criminal endeavors and can be applied to legitimate businesses. This article provides a general overview of how the civil law of RICO has developed in the courts. Connection to organized crime Because of the treble damages, courts have struggled to place some limitations on this broad and poorly drafted statute. Nevertheless, courts agree that the plaintiff does not have to prove a criminal conviction or indictment to seek civil damages.1In a suit brought under 18 U.S.C.A. § 1964(c) for damages involving the failure of an industrial device, the court in Waterman S.S. Corp. v Avondale Shipyards, Inc. (1981, ED La) 527 F Supp 256, 1982-1 CCH Trade Cases ¶64602(disapproved Bennett v Berg (CA8 Mo) 685 F2d 1053, on reh (CA8 Mo) 710 F2d 1361,...

“Fraud victims plot legal strategies for recovery” – The Puget Sound Business Journal

Richard Finger Fraud – Victims plot strategy Fraud victims plot legal strategies for recovery Puget Sound Business Journal by Kelly Gilblom, Staff Writer Date: Friday, December 16, 2011, 3:00am PST In the wake of a $7 million financial fraud discovered in Kirkland this September, victims of securities broker Richard Finger have hired attorneys and are turning to arbitration and insurance to recover some of their lost investments. These defrauded investors include not just mom-and-pop outfits but a wealthy Kirkland family with numerous businesses — a family that has hired a prominent attorney. Their strategy to recover lost funds could lay out a possible path for other victims of financial crimes as they struggle to overcome major obstacles to recouping their losses. The majority of the $7 million in assets lost belonged to Finger’s mother-in-law and father-in-law, Brenda and Elling Halvorson, according to lawyers and information in Finger’s charging documents. Their investment with Finger represented only a fraction of their net worth. The Halvorsons own a number of businesses, according to information from the Washington Secretary of State. One of the most well-known of their entities is Papillon Helicopters, a company that offers helicopter, airplane and bus tours of the Grand Canyon and Las Vegas. Papillon, established in 1965, has more than 600 employees and a fleet of 48 helicopters and six airplanes, according to information on its website. The Finger story is familiar: At least 10 victims — family and friends — lost sums of money ranging from less than $100,000 to more than $1 million, according to a criminal indictment against Finger. He lost client money through risky...

“Regulators may have missed securities fraud by Kirkland firm” – The Puget Sound Business Journal

Smith v. Finger Stockbroker pleads guilty to taking millions from investors. FINRA arbitration filed. Regulators may have missed securities fraud by Kirkland firm Puget Sound Business Journal by Kelly Gilblom, Staff Writer Date: Friday, October 21, 2011, 3:00am PDT – Last Modified: Thursday, October 20, 2011, 6:51pm PDT On Aug. 18,Jon-Michael Smith called the Kirkland Police Department to report an unusual theft. Smith, a distraught investor, had been trying to reach his broker for several days because his July statement hadn’t arrived. Finally, Smith phoned a company that handles trading for his account. What he heard made him sick. Instead of the $1.56 million he was supposed to have, the clearing broker said Smith’s balance was just $27,000. The account statements Smith had received were false, part of a fraud allegedly conducted by Kirkland broker Richard Finger Jr. to conceal the fact that he had lost nearly $7 million that his 25 clients had trusted him to manage, according to police reports and court documents. By the end of that week, Smith had given statements to the FBI, the Justice Department and the Securities and Exchange Commission. On Sept. 8, the federal entities went to court to arrest Finger and freeze the assets of his firms, Black Diamond Securities and Black Diamond Capital. What makes the story unusual is that just three weeks before Smith called the police, regulators had audited Black Diamond Securities and did not report finding any fraud. Finger, 32, quickly admitted his misdeeds. In a statement issued two weeks after Smith went to the police, he “acknowledged deceiving some of his customers” and said he...

Unjust Enrichment

Unjust Enrichment – Washington State Law The terms “restitution” and “unjust enrichment” are the modern designations for the older “quasi contracts” terminology.127 WAPRAC § 5.51 The Washington court has adopted the unjust enrichment terminology, but continues to use the quasi contractual terminology interchangeably: “Quasi contracts” are not true contracts but are obligations created by the law when money or property has been placed in one person’s possession under such circumstances that in equity and good conscience, he ought not to retain it. [Citation omitted.] Thus, the substance of an action for unjust enrichment lies in a promise, implied by law, that one will render to the person entitled thereto that which in equity and good conscience, belongs to the latter. At common law, such actions are brought under the principles of assumpsit, and where the cause of action arises from a tortious wrong, it is the general rule, whether or not there be an express contract, that the injured party may waive the tort and sue in assumpsit, in which case the law will imply a contract on the part of the tort-feasor to pay the injured party a just remuneration for the damages suffered to his property.2Bill v. Gattavara, 34 Wash. 2d 645, 209 P.2d 457 (1949), (4-1 decision). In unjust enrichment terms, two basic elements must be established in quasi-contractual actions: the person receiving a benefit (such as money) must be unjustly enriched, and the party conferring the benefit must not be a volunteer.3Lynch v. Deaconess Medical Center, 113 Wash. 2d 162, 776 P.2d 681 (1989); Trane Co. v. Randolph Plumbing & Heating, 44 Wash. App. 438,...

Criminal Profiteering

Criminal Profiteering: Washington State’s “Baby” RICO Act The Criminal Profiteering Act of 1985 is Washington State’s version of the federal RICO law.1State v. Thomas, 103 Wash. App. 800, 14 P.3d 854 (2000); Bowcutt v. Delta North Star Corp., 95 Wash. App. 311, 976 P.2d 643 (1999) (trial court erred in failing to provide full scope of equitable remedies authorized by Washington statute). It provides civil penalties and remedies for a variety of criminal activities. “Criminal profiteering” is defined to include the commission, or attempted commission, for financial gain, of any one of a number of crimes listed in the statute.2These include many violent felonies, as well as felonies relating to gambling, drugs, pornography, prostitution, extortion, and securities fraud. The act provides that a “pattern of criminal profiteering activity” means engaging in at least three acts of criminal profiteering within a five-year period. To constitute a “pattern,” the three acts must have the same or similar intent, results, accomplices, principals, victims or methods of commission, or be otherwise interrelated by distinguishing characteristics including a nexus to the same enterprise, and must not be isolated events. A “pattern” of profiteering is usually required before any of the special civil remedies apply.3Winchester v. Stein, 135 Wash. 2d 835, 852, 959 P.2d 1077, 1083 (1998). See 16A WAPRAC § 26.51. There are many similarities between the Washington statute and the federal statute, and as a result, Washington courts look to the case law interpreting the federal statute as a guide to interpretation of the Washington statute.4Id. However, the Washington statute has been characterized as being somewhat narrower. For example, whereas the federal statute...

Fiduciaries

Fraud by Fiduciaries      Fiduciaries are those upon whom the law imposes the highest duty because of their special status and relationship. Examples include those who are trustees, those who have a power of attorney, professionals like lawyers, and others to whom property or money is entrusted. Depositories like banks whose relationship is defined by contract are not held to be fiduciaries. The law is sometimes inconsistent but those who have significant lobbying power (like financial institutions) are not considered fiduciaries because of protective statutes passed by the politicians. Unlike fraud cases, it is not generally necessary to prove intent by the fiduciary. Mere negligence is usually sufficient. Learn About Breach of Fiduciary Duties  Share...