The opinion of the court was delivered by: NICKERSON
NICKERSON, District Judge:
The three plaintiffs, Congregacion de la Mision Provincia de Venezuela (Venezuela); Paules Padres Community, Inc. Provincia de Zaragoza (Zaragoza); and Paules Padres Community Philippine Islands (Philippine Islands) brought this action against defendants alleging violations of the Racketeer Influence and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968, and state law. Plaintiffs seek compensatory and punitive damages.
The complaint, filed in this court in April 1996, says that between 1976 and 1994, defendants, together with Emilio Valdes (Valdes) and his wife Miriam Valdes (Miriam), engaged in a scheme to defraud plaintiffs of money they had entrusted to defendant Marcelo Curi (Curi) and Valdes for investment purposes, and that in furtherance of such scheme, each defendant committed or conspired to commit at least two or more acts of mail fraud, 18 U.S.C. § 1341; wire fraud, 18 U.S.C. § 1343; transporting goods stolen or taken by fraud, 18 U.S.C. § 2314; or securities fraud, 18 U.S.C. § 78(j).
The scheme was allegedly brought to plaintiffs' attention by Valdes who, because of his cooperation with plaintiffs, is not a named defendant in this action.
Defendants move to dismiss, and Sheldon and Eleanor Feinstein move in the alternative for summary judgment.
The complaint, a prolix 66-page document, alleges the following relevant facts.
Plaintiffs are religious corporations whose members are Catholic priests devoted to preaching the "Gospel to the poor and promoting the health and mental welfare of their constituencies." Each of the plaintiffs is a member province of the Congregacion de la Mision, a Catholic religious community made up of forty-nine provinces throughout the world.
The nine defendants may be identified as follows. Curi is an attorney and real estate investor. Rosa Curi (Rosa) is Curi's wife; Jorge Curi (Jorge) is Curi's son; Lilliam Janata (Janata) is Curi's daughter and Thomas Janata (Thomas) is Curi's son-in-law. Luis Perez Vega and his wife Maria Luisa Perez Vega are friends of Curi. Sheldon Feinstein (Feinstein), also an attorney, was for some time Curi's law partner and later his real estate partner. Eleanor Feinstein (Eleanor) is Feinstein's wife.
In 1976 Valdes introduced Father Santos Perez Manzanado, a Venezuela priest, to Frank Fierro, a Merrill Lynch broker, and to Curi, who offered to invest Venezuela's funds in mortgages and real estate. Valdes told Fr. Manzanado that if he invested Venezuela's funds with Merrill Lynch and Curi, Valdes would supervise the investments.
In reliance on these representations, in September 1976, Venezuela gave $ 75,000 to Curi to make real estate investments on its behalf, and gave $ 100,000 to Merrill Lynch to open an investment account. Venezuela gave Valdes, who joined Merrill Lynch in 1980, signatory power over these investments and gave Miriam signatory power over its bank account. Philippine Islands opened an investment account with Merrill Lynch in 1984; Zaragoza did so in 1986. Both these plaintiffs gave Valdes full signatory power. Plaintiffs' accounts were later transferred to Oppenheimer & Co., Inc. and then to First Montauk Security Corporation. Plaintiffs collectively transferred $ 3,555,636 to these investment accounts.
Between 1976 and 1994, Valdes and Curi, together with the other defendants, used plaintiffs' money "to make secret real estate and loan transactions," the proceeds of which defendants used to purchase real estate, automobiles and securities for themselves, and to fund their own Individual Retirement Accounts. Defendants either stole plaintiffs' money directly, or embezzled it through fraudulent loan transactions and real estate ventures.
1. Direct theft of plaintiffs' funds
On over twenty-five occasions, defendants received funds from plaintiffs that should have been used for investment purposes but instead were "converted" for defendants' own uses.
The complaint appears to allege, in this order, that defendants stole the following: $ 20,000 Curi represented was put into a certificate of deposit (1976); $ 4,000 in two installments Curi said was connected to the "Ruderman" loan (1981); $ 15,000 in a check Miriam mailed to Curi and which Curi endorsed "Jackson Heights property, B. Fleishman mortgage" (1985); $ 5,000 in a check Miriam mailed to Curi and which Curi endorsed "Garco Pharmaceutical" (1981); $ 6,000 in a check Miriam mailed to Curi, deposited in Curi's escrow account and endorsed by Valdes "Ozone Park" (1984); $ 105,075 in fifteen checks deposited in Curi's escrow account between 1979 and 1987; $ 4,000 for an unauthorized automobile loan (1979); $ 35,000 in a check payable to Rosa (1979); $ 13,368 in ten checks payable to Curi and endorsed by Valdes with the words "aborted transaction" (1981-82); $ 5,400 in two checks payable to Curi for unauthorized "reimbursements" (1981); $ 8,202 in seven checks deposited in Jorge Curi's Merrill Lynch account (1981-1987); $ 20,000 deposited in Curi's Merrill Lynch account (1988); $ 2,000 cash deposited in Curi's Merrill Lynch account (1981); $ 1,375 check payable to Curi for fees (1984); $ 12,000 purportedly for a refund due to the Olympic Corporation (1981); $ 119,000 in three checks deposited into Curi's escrow account (1984-1986); $ 31,006 in nine checks payable to Jorge Curi (1982-1989); $ 1,000 deposited in Curi's Merrill Lynch Keogh Plan (date not given); and $ 100,000 in a check payable to Curi (1983).
Curi represented to Valdes that he invested amounts of plaintiffs' money in at least twelve separate loan transactions. Many of these loans were never made. Plaintiffs only received partial payments in satisfaction of these "loans" and in many instances never recovered substantial portions of the principal.
The loan transactions are as follows: (1) $ 10,000 to Guillermo Diaz (1976), (2) $ 3,000 to Arnoldo Martinez (1976), (3) $ 13,000 to Constantino Cadavid (1978), (4) $ 7,000 to Menta Puig (1978), (5) $ 14,000 to Maria Mejia (1979), (6) $ 6,000 to G. Ruderman (1979), (7) $ 18,000 to Peca (1982), (8) $ 20,000 to Rudolf Obregon (1984), (9) $ 200,000 to Edward Maguire, Jr. (1983), (10) $ 122,500 to an "unnamed person" supposedly Janata (1983), (11) $ 105,000 to Vega (1982), and (12) $ 80,000 to Vega (1983).
Defendants also invested plaintiffs' money in a variety real estate ventures, but failed to pay plaintiffs their return, and in some cases the principal, on the investments.
a. Marsego Realty Corporation
Around March 1978 Valdes and Miriam, using Venezuela's funds, became owners of 100 percent of the company stock of the Marsego Realty Corporation. That corporation owned a commercial building at 54-20 Roosevelt Avenue, Woodside New York. Valdes and Miriam used Venezuela's funds to make mortgage payments and to maintain the property. In July 1984 Curi and Valdes sold the property for more than $ 90,000, making a $ 28,000 profit. Curi and Valdes converted this money for their own use.
b. 72-11 110th Street conversion project
Feinstein and Curi, as well as other individuals, entered into a partnership agreement to convert to cooperative ownership the building located at 72-11 110th Street in Forest Hills, New York. In connection with this agreement, on January 20, 1984 Valdes sent Curi a check for $ 50,000 payable to Curi "as attorney." Curi endorsed this check to Feinstein who deposited the check in his escrow account. Valdes also sent two checks directly to Feinstein, one for $ 80,000 and one for $ 5,000, both payable to Feinstein. Feinstein also deposited these checks in his escrow account.
In return for these payments, Feinstein issued cooperative shares in the building to Curi and Valdes. In 1987 Feinstein and the five other partners purchased Curi's and Valdes' shares for $ 135,000. Curi and Valdes then failed to return this money to plaintiffs.
Sometime after the 110th Street transaction, Feinstein and Curi, using plaintiffs' money, purchased a building at 1632 Decatur Street, in Ridgewood, New York. In 1988 the building was sold to Cornell Muskan who paid more than $ 100,000 and gave a purchase money mortgage to Rosa Curi and Eleanor Feinstein for $ 100,000. Rosa and Eleanor subsequently foreclosed upon the mortgage but failed to account to plaintiffs for the funds invested.
Curi also used plaintiffs' funds to acquire property in: Colorado (date not given), Miami Beach, Florida (date not given), Garden City, New York (1983), and Ridgewood, New Jersey (1988). These properties were bought in the names of Valdes, Curi, Rosa, Janata and Thomas. Curi and Valdes concealed from plaintiffs the ownership of these properties.
B. The 1982-84 transaction
In 1982 Venezuela transferred $ 350,000 to its Merrill Lynch investment accounts in reliance on Valdes' representation that the investment would grow to $ 550,000 by January 1984, the time when Venezuela would be required to pay for a plot of land it had purchased from Zaragoza.
In December 1983 or January 1984 Valdes and Curi told Zaragoza that they would transfer $ 550,000 from Venezuela's account in payment for the land. But in February 1984, Fr. Gregorio Olangua, Zaragoza's financial administrator, and Fr. Benigno Presa, Venezuela's financial administrator in New York, learned that payment would not be made in cash, as previously represented, but by the assignment of mortgages which Curi and Valdes represented were worth $ 413,000. Curi and Valdes also told the administrators that they would transfer $ 137,000 in cash from Venezuela's investment account to a Merrill Lynch account Valdes would open for Zaragoza.
Curi and Valdes made such representations despite the fact that such mortgages either did not exist or were worthless. Curi and Valdes failed to open a Merrill Lynch account in Zaragoza's name until 1986, two years after the meeting.
C. Plaintiffs' discovery of the fraud
In 1991 Valdes left Merrill Lynch and joined Oppenheimer & Co., Inc., at which time plaintiffs' accounts were transferred. In May 1992 Valdes was dismissed from Oppenheimer & Co., Inc. and his license was suspended for fraudulent conduct supposedly unrelated to plaintiffs' accounts. From that time until March 1994, when Valdes' license was renewed, plaintiffs' investments were under the supervision of Valdes's son, Emilio J. Valdes. In 1994 Valdes told plaintiffs about the theft of their funds and has since cooperated with plaintiffs in their investigation.
As noted, the complaint was filed in April 1996. As a result of defendants' activities, plaintiffs say they have been "directly injured in their property by having to pay more for the participation in these investment opportunities . . . and are distinctly being injured in their business, that is, the activity of investing in business opportunities." Plaintiffs seek to compel a full accounting of how the funds were used, imposition of a constructive trust, and compensatory and punitive damages.
Defendants move to dismiss on the grounds that the action: (1) is time-barred, and (2) fails to state a RICO claim against each of the defendants.
On this motion to dismiss, the court assumes the facts stated in the complaint to be true and will grant the motion only if there are no facts under which the plaintiff could prevail. See Conley v. Gibson 355 U.S. 41, 45-46, 78 S. Ct. 99, 102, 2 L. Ed. 2d 80 (1957).
Defendants say that plaintiffs' claims are time-barred because they had notice of defendants' alleged ...