Article

Yellow Brick Road (Victim) entered into an agreement to “lease” a USD 10 Million standby LC from Alicorn Capital Management and Berea, Inc (Fraudsters) for USD 300,000. The standby LC “was purportedly to be used to establish proof of funds so that [Fraudsters] could initiate trades or purchases of commodities.” Fraudsters were to “manage the entry of the [LC] into an investment opportunity and make minimum payments to [Victim] of 15% of the [LC] value on a monthly basis for 12 months.” To implement the “lease,” Victim entered an escrow agreement with Busch Law Center (Law Firm), owned by Larry Busch (Lawyer). Law Firm’s duties included transferring various sums of money and to receive a “stamped copy of the [LC] issued by Success Bullion.”When Fraudsters presented documents, “the [LC] was not a stamped copy, as required by the Escrow Instructions.” Law Firm disbursed the funds anyway. A stamped LC never materialized in any event.

Victim sued Law Firm for damages. After the action against Law Firm was dismissed on procedural grounds, Law Firm sued Victim over failure to abide by provisions of its escrow agreement which limited the liability of Law Firm. Victim countersued, claiming civil conspiracy to commit fraud, aiding and abetting fraud, conversion and RICO violations. The United States District Court for the District of Arizona, Tuchi, J., granted summary judgment on all except the RICO1 claims.

Lawyer exercised his 5th amendment rights not to testify on several occasions in deposition, while separately speaking on the issues he had avoided in declarations. The Judge found that when an individual speaks to an issue on which that individual has previously declined to answered questions, the refusal takes precedence and the testimony is stricken.

After striking many of Lawyer’s statements, partial summary judgment was granted. In the absence of those statements there was no genuine issue of material fact remaining. In addressing the RICO claims, the Judge ruled that the element requiring a “pattern” of racketeering activity was not met when there were multiple fraudulent acts all related to bringing about a single transaction. Further, Victim’s request for summary judgment on the count of conspiracy to violate RICO was also denied as further evidence needed to be produced to prove that there was a pattern of Busch’s acting as a fraudulent escrow agent. Given the pendency of RICO claims, the Judge reserved his ruling on damages.

[ARB]

1
RICO is the Racketeering Influenced and Corrupt Organizations Act which specifically punishes organized crime by making it illegal to engage in a pattern (two or more instances) of racketeering or collection of unlawful debt, and then using that ill-gotten income to purchase an interest in a business or other enterprise engaged in interstate commerce.

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