SS Richmond LLC, et al. v. Christopher A. Harrison, et al., 2022 WL 1685570 (E.D. Va., Nov. 9, 2022)
The Court denied the defendants motions to dismiss civil RICO claims resulting from Defendants’ alleged series of fraudulent transactions relating to the development of the Model Tobacco Project. Defendants’ alleged fraud and embezzlement induced Plaintiffs to invest millions of dollars into the Project which Plaintiffs seek to recover.
Count One alleged a RICO claim against Harrison, both individually and by and through entities he controlled, i.e., CAH, CAHC and MBDC, alleging a pattern of racketeering activity to acquire and maintain interest in and control of Developer, MT Development and the Model Tobacco Project. Defendants sought dismissal arguing that Plaintiffs fail to allege a pattern of racketeering activity under Count One. The Court began by discussing Defendants’ Motion to Dismiss the Amended Complaint, first taking up the RICO claim before moving to the securities fraud claim and then the state law fraud, breach of contract and dissociation claims.
Regarding the civil RICO claim, Defendants do not dispute that the alleged predicates constitute related acts. Instead, the Motion to Dismiss focuses solely on the alleged lack of continuity of the “pattern” of racketeering activity. Regardless, undoubtably, Plaintiffs allegations satisfy the relatedness prong, as all allegations relate to the Model Tobacco Project.
As the Supreme Court explained in H.J. Inc., continuity “is both a closed-and open-ended concept, referring either to a closed period of repeated conduct, or to past conduct that by its nature projects into the future with a threat of repetition.” 492 U.S. at 241. A plaintiff can show closed-ended continuity through “a series of related predicates extending over a substantial period of time” or open-ended continuity by proving that a defendant’s past acts pose a threat of continued or future racketeering activity.
Closed-Ended Continuity – Single Scheme Sufficient
Plaintiffs alleged that Defendants’ actions constitute closed-ended continuity, as evidenced by a showing of a “series of related predicates extending over a substantial period of time.” H.J. Inc., 492 U.S. at 242. All of Defendants’ acts, Plaintiffs allege, furthered the Model Tobacco Project. The fact that only one scheme constituted the whole of the predicate acts’ goal does not defeat a finding of closed-ended continuity. The court discussed that the years-long, multi-document scheme that Plaintiffs allege here remains a far cry from a single prospectus distribution. Thus, the single project nature of Model Tobacco alone did not defeat the claim. Thus, Plaintiffs allege that Harrison, individually and through his entities CAH, CAHC and MBDC, defrauded both the named Plaintiffs and other individuals with regard to multiple interconnected projects, including the Model Tobacco Project, and alleged five years of predicate acts.*7.
Furthermore, as continuity constitutes a temporal prong, the Fourth Circuit and other courts evaluate ‘ “the number and variety of predicate acts and the length of time over which they were committed, the number of putative victims, the presence of separate schemes, and the potential for multiple distinct injuries.’ ”*8. The court stated most circuits have agreed with the Fourth Circuit that related racketeering activity over a period of years constitutes closed-ended continuity sufficient to satisfy the pattern prong.id. Additionally, while most of the acts alleged do constitute mail and wire fraud, and Defendants do not dispute the high number of alleged acts, Plaintiffs also allege thirty-three acts of bank fraud, numerous acts of money laundering and additional acts of fraud.
Regardless of the weight that the Court affords to the wire fraud allegations, the sheer number of predicate acts — both with and without the wire fraud allegations — sufficiently demonstrates closed-ended continuity. More than fifty acts over a period of five years constitutes the type of long-term criminal activity that Congress sought to curtail in enacting the RICO statute.
Closed-Ended Continuity- Other Crimes
Plaintiffs further allege that Harrison, individually and through his controlled entities, committed additional fraudulent acts through other related and unrelated schemes. In H.J. Inc., the Court noted that “proof that a RICO defendant has been involved in multiple criminal schemes would certainly be highly relevant to the inquiry into the continuity of the defendant’s racketeering activity.” 492 U.S. at 240. The Court finds these allegations further proof of the existence of a closed-ended continuity which, with the relatedness of the predicate acts, establishes a RICO pattern. *10.