§ 1962(c): "Conduct or Participate "
Defendants argue that plaintiff has not alleged any facts which demonstrate that Kachanovsky and Khamidova played a role in directing the affairs of Feniks, and fail to establish that these defendants were engaged in the "performance of tasks that are 'necessary or helpful' to the enterprise" as required to show a violation of § 1962(c). According to defendants, the facts alleged demonstrate nothing more than that defendants Kachanovsky and Khamidova performed limited tasks at defendant Novikov's direction. See Defendants' Memo. pp. 31-32 ("the alleged actions of these individuals were limited to a few routine banking transactions performed at the direction of Isaak Novikov.").
It is true, as defendants contend, that "the simple taking of directions and performance of tasks that are 'necessary or helpful' to the enterprise, without more, is insufficient to bring a defendant within the scope of § 1962(c)." United States v. Viola, 35 F.3d 37, 41 (2d Cir. 1994), cert. denied, 131 L. Ed. 2d 148, 115 S. Ct. 1270 (1995). Thus, in Viola, the Second Circuit reversed the conviction of the defendant, who performed "light clean-up and maintenance work" for the 'kingpin' of a drug ring, where the evidence at trial demonstrated that the defendant's participation in the enterprise was limited to the performance of two acts which were undertaken "without the exercise of appreciable discretionary authority;" there was also no evidence that the defendant was even aware of the broader racketeering enterprise. Viola at 43.
However, while "participation" for purposes of § 1962(c) requires that the defendants have "some part in directing" the affairs of the enterprise, it does not require that they have "primary responsibility for the enterprise's affairs." Reves v. Ernst & Young, 507 U.S. 170, 113 S. Ct. 1163, 1170, 122 L. Ed. 2d 525 (1993). The facts of the complaint indicate that the defendants in question took an active role in the fraudulent scheme alleged, submitting false documents to the Secretary of State of New York and Chase Manhattan Bank, making misrepresentations to employees of Chase Manhattan regarding their authorization to act on behalf of Ventspils Nafta, and personally directing fraudulent transfers from the Ventspils Nafta account at Chase Manhattan. Far from being menial employees whose involvement in the alleged enterprise consisted of blindly following their superior's orders, defendants Kachanovsky and Khamidova were active and significant participants in the "operation or management of the enterprise itself." Reves, 113 S. Ct. at 1173. Unlike the defendant in Viola, defendants Kachanovsky and Khamidova, who were principals of the alleged enterprise and active in its affairs, would be hard-pressed to argue that they "did not come within the circle of people who operated or managed" Feniks. Viola at 43. Defendants certainly have not met the standard required by this motion to dismiss of demonstrating that there is no set of facts under which plaintiff could prove that Kachanovsky and Khamidova "participated" in the conduct of the enterprise, Feniks.
§ 1962(d): Conspiracy
As the Court declines to dismiss plaintiff's claims under §§ 1962(b) and (c), defendants' motion for dismissal of the plaintiff's conspiracy claim must also be denied, insofar as it rests on the argument that plaintiff has not demonstrated a violation of the underlying substantive offenses. However, defendants also argue that the conspiracy claims against defendants Kachanovsky and Khamidova must be dismissed because the "routine banking transactions" these defendants performed fail to provide a basis for inferring an agreement to commit any fraudulent act and the complaint therefore provides no factual basis for a finding that these defendants consciously agreed to defraud Ventspils Nafta. Defendants' Memo. at 37-39.
To state a claim for RICO conspiracy, plaintiff must allege that each defendant, by words or actions, manifested an agreement to commit two predicate acts in furtherance of the common purpose of the RICO enterprise. First City Nat'l Bank v. FDIC, 730 F. Supp. 501, 509 (E.D.N.Y. 1990). A plaintiff must show that defendants were parties to an unlawful agreement or that defendants, understanding the scope of the enterprise, knowingly agreed to further its affairs through the commission of various offenses. Id. at 510 (citing cases). The facts alleged by plaintiff would, if proved, establish that the defendants, including defendants Kachanovsky and Khamidova, entered into an agreement to defraud plaintiff and that each of them committed acts in furtherance of that agreement. The complaint includes allegations that defendant Khamidova signed corporate resolutions as President of Ventspils Nafta-NY, when she was never appointed to that position; that both she and defendant Kachanovsky represented to Chase Manhattan Bank that they were authorized signatories to the Ventspils Nafta bank account, when they were not; and that they engaged in unauthorized transfers of over two million dollars from plaintiff's account to accounts of the corporation of which they were principals. It is difficult to reconcile these facts with defendants' characterization of their activities as nothing more than "routine banking transactions." Rather, the only possible conclusion is that the actions of the defendants "manifest the necessary agreement to commit predicate acts in furtherance of a common design to defraud." First City Nat'l Bank v. FDIC, 730 F. Supp. 501, 510 (E.D.N.Y. 1991).
The cases cited by defendants in support of their position are inapposite. In both United States v. Teitler, 802 F.2d 606, 613 (2d Cir. 1986), and United States v. Ruggiero, 726 F.2d 913 (2d Cir.), cert. denied, 469 U.S. 831, 83 L. Ed. 2d 60, 105 S. Ct. 118 (1984), the Second Circuit's holding that a conspiracy conviction requires at a minimum evidence of an agreement to commit two predicate acts was dependent on the facts that the two predicate acts necessary to prove a substantive RICO violation could not be proved. Teitler at 613 (citing United States v. Ruggiero). Thus, in Teitler, the court held that the circumstantial evidence of the defendant's role in the fraudulent scheme, which included statements he made indicating knowledge of wrongdoing, his status as a partner in the firm engaged in the racketeering activity, and the testimony concerning his role in that firm, were sufficient for a jury to reasonably infer his agreement to participate in the enterprise. Teitler at 614. The facts alleged in this case in support of defendants' agreement to engage in a fraudulent scheme are significantly stronger than the evidence in Teitler. First, plaintiff's complaint alleges that both Kachanovsky and Khamidova engaged in at least two predicate acts, and for purposes of this motion to dismiss, the court accepts the facts alleged in plaintiff's complaint as true. Second, even were plaintiff's allegations that defendants Kachnovsky and Khamidova each commited a minimum of two acts not supported by the facts, defendants' status as principals of the alleged enterprise, Feniks, along with their acts taken in furtherance of the fraudulent scheme, are more than sufficient from which to infer an agreement.
Because the complaint alleges facts sufficient to infer an agreement on the part of defendants Kachanovsky and Khamidova to defraud plaintiff, and acts undertaken in furtherance of that agreement, the conspiracy claim against defendant Kachanovsky and Khamidova stands.
Failure to Plead Pursuant to 9(b)
Finally, defendants argue that all of the claims against defendants Kachanovsky and Khamidova must be dismissed because of plaintiff's failure to plead fraud with the requisite particularity pursuant to Fed. R. Civ. P. 9(b). Rule 9(b) provides that "in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other conditions of mind of a person may be averred generally."
To satisfy the requirements of Rule 9(b), the plaintiff must specify the statements contended to be fraudulent and the documents containing those statements; the time and place of each such fraudulent statement and the person who made (or in case of the omission did not make) the statement; and the content of the fraudulent statement, how it was misleading and the manner in which it was relied upon by the plaintiff. Quintel Corp. v. Citibank, 589 F. Supp. 1235, 1243 (S.D.N.Y. 1984) (citing cases). However, while the circumstances of fraud must be pleaded specifically, fraudulent intent may be averred generally, as long as the complaint provides a factual basis that gives rise to a strong inference of intent to defraud, knowledge of the falsity, or a reckless disregard for the truth. Thus, fraudulent intent is commonly pleaded by alleging facts showing a motive for committing fraud and a clear opportunity for doing so. Center Cadillac v. Bank Leumi Trust Co., 808 F. Supp. 213, 229 (S.D.N.Y. 1992).
Defendants argue that the acts allegedly committed by these defendants in furtherance of the scheme to defraud Ventspils Nafta "do not give rise to a strong inference that they acted with the intent to defraud," because the facts do not show that defendants knew that the transactions they engaged in were unauthorized, or that either of these defendants received any of the proceeds of these transaction. Defendant's Memo. p. 36. Defendants' arguments on this point simply fly in the face of reason. Even were this court not required for purposes of this motion to dismiss to interpret the facts as alleged in the complaint in the light most favorable to plaintiff, it would be hard pressed to conclude that the acts undertaken by defendants Kachanovsky and Khamidova were undertaken without an intent to defraud. The facts pleaded with respect to defendants are not simply that they "aided and abetted" in the alleged fraud, but that they took active steps in furtherance of the scheme. These acts can in no sense be interpreted as "routine banking transactions," rather, they were acts undertaken by principals of one corporation with respect to the official corporate and financial documents and funds of another corporation which resulted in a significant amount of money being transferred to their own corporation. Defendants' contention that plaintiff has failed to demonstrate that Kachanovsky and Khamidova had a motive to defraud is simply incomprehensible, given that the fraudulent acts they allegedly undertook resulted in approximately two million dollars being transferred to the bank accounts of a corporation of which they were principals. Defendants' motion to dismiss the claims against defendants Kachanovsky and Khamidova pursuant to Rule 9(b) is denied.
For the foregoing reasons, defendant's motion to dismiss is denied in its entirety.
Dated: Brooklyn, New York
July 2nd, 1996
I. Leo Glasser, U.S. D. J.