United States District Court, S.D. New York
January 29, 2004.
THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS, Plaintiff, -against- RON CAREY, WILLIAM HAMILTON, JERE NASH, THE NOVEMBER GROUP, INC., MARTIN DAVIS, THE SHARE GROUP, INC., MICHAEL ANSARA, BARBARA ARNOLD. CITIZEN ACTION MANAGEMENT FUND. IRA ARLOOK, CHARLES BLITZ, ROCHELLE DAVIS, COHEN, WEISS AND SIMON, and NATHANIEL CHARNY, Defendants
The opinion of the court was delivered by: LAURA TAYLOR SWAIN, District Judge Page 3
OPINION AND ORDER
Plaintiff, the International Brotherhood of Teamsters ("IBT"), brings
this action pursuant to the Racketeering Influenced and Corrupt
Organizations Act ("RICO"), alleging that Defendants defrauded the IBT of
funds which were used improperly to promote Defendant Ron Carey's
("Carey") 1996 candidacy for re-election as the IBT's General President.
Following the issuance of the Court's October 1, 2001. Opinion and Order
granting in part, and denying in part a motion to dismiss the complaint
in this case. Plaintiff filed an amended complaint (the "Amended
Complaint"). Defendants Ron Carey, William Hamilton, Michael Ansara,
Barbara Arnold, Ira Arlook, Charles Blitz, Rochelle Davis, Nathaniel
Charny, Martin Davis. The Share Group, Inc., Cohen & Weiss have moved
pursuant to Federal Rules of Civil Procedure 12(b)(6) to dismiss the
Amended Complaint. Subsequent to the service of Defendants' motion to
dismiss, the case was dismissed consensually as against Defendants Martin
Davis, Barbara Arnold, Michael Ansara, the Share Group, Cohen Weiss and
Simon ("Cohen Weiss") and Nathaniel Charny.*fn1 The Court has
jurisdiction of this action pursuant to 28 U.S.C. § 1331 and 1367.
For the reasons set forth below, the motions of Defendants Carey,
Hamilton, Ira Arlook, Rochelle Davis, Charles Blitz are granted with
respect to Plaintiff's federal claims; Plaintiff's state common law
claims will be dismissed without prejudice.
In 1988, the Government filed a civil RICO action against the IBT and
its leadership. In connection with the 1988 lawsuit against the IBT the
Government sought, among other relief, to establish Government
supervision of the election of IBT officials. Amended Complaint, ¶
27. In March 1989, the Government and the IBT entered into a consent
decree settling the Government's claims against IBT. The consent decree
provided, among other things, for direct, secret ballot, elections of IBT
officers and further provided that the court would appoint an election
officer (the "Election Officer") to supervise the election in 1991 for
IBT national officers and, if the Government so requested, the 1996
election. Id. ¶ 28. The consent decree also authorized
court-appointed officers to investigate and sanction IBT members and
officers for violations of the IBT constitution and federal law.
Id. Beginning in 1992, pursuant to the terms of the consent
decree, an Independent Review Board ("IRB") assumed responsibility for
determining whether members or officers had violated the IBT Constitution
and federal law. Id.
The Government exercised its right to have the 1996 IBT election
supervised pursuant to the consent decree. Id. ¶ 30. The
court gave the Election Officer authority to supervise the 1996 election
and approved rules governing the conduct of the 1996 election. The
election rules prohibited the use of IBT funds to promote the candidacy
of any individual and barred employers from contributing to the election
campaign or soliciting contributions for any candidate date.
Id. ¶ 31.
Defendant Carey and James P. Hoffa campaigned in the 1996 election for
IBT General President. Carey was declared the winner in a close and hotly
contested election. Id. ¶ 32.
On August 21, 1997, the Election Officer invalidated the 1996 election
on several grounds, one of which was that the Carey re-election campaign
had engaged in improper fund-raising that involved the use of IBT funds
to promote Carey's candidacy. The Election Officer ordered a rerun
election. Id. ¶ 33. In July 1998, the IRB permanently
barred Carey from IBT membership after finding that Carey had violated
his fiduciary duties and knowingly derived personal benefit from improper
election campaign contributions in connection with the 1996 election.
Id. ¶ 37. The IRB also permanently barred Defendant
Hamilton from holding any office or having any employment relationship
with the IBT upon finding that Hamilton had embezzled IBT funds and had
brought reproach on the IBT. Id. ¶ 38.
In late 1998, a rerun election was held and Hoffa was elected IBT
General President. IBT expended approximately $2.2 million in costs
associated with the supervision of the 1998 rerun election. IBT also
incurred costs for attorneys' fees in connection with the Government's
investigation into the 1996 election. Id. ¶ 39.
Defendants Hamilton, Nash, Martin Davis, Ansara, Blitz and Charny were
thereafter prosecuted on federal criminal charges. Defendant Martin Davis
pleaded guilty to conspiracy and making false statements to the Election
Officer. Defendant Ansara pleaded guilty to conspiring to embezzle union
funds, to commit mail fraud, and to making false statements to the
Election Officer, and Defendant Blitz pleaded guilty to making false
statements to the Election Officer. Id. ¶ 41. Defendant
Hamilton was convicted after trial of conspiracy, embezzlement,
mail and wire fraud, making false statements. Id. ¶
43. Defendants Arlook and Rochelle Davis entered into non-prosecution
agreements with the Government in which they agreed to cooperate in the
Government's investigation of the conduct that is the subject matter of
the Amended Complaint. Id. ¶ 44.
In connection with the 1996 election, Defendants devised and executed
certain schemes to defraud the IBT and embezzle funds from it.
Id. ¶ 47. Defendants needed to raise funds for Defendant
Carey because the race with Hoffa was very close and the Hoffa election
campaign was raising more funds than the Carey election campaign.
Defendants were aware that, if Defendant Carey lost the election,
Defendants would lose their positions and their relationships with the
IBT. Id. ¶ 48.
In or about July 1996, Defendant Nash, Martin Davis and Ansara devised
a scheme to defraud the IBT by causing the IBT to contribute funds to
designated organizations in exchange for contributions by wealthy
individuals to the Carey election campaign. Id. ¶ 49. In
connection with this scheme, Cohen Weiss and Charny established a
fund-raising committee. Teamsters for a Corruption Free Union ("TCFU"),
to accept donations to the Carey campaign. Id.
¶ 51. TCFU established a separate bank account for donations to
Carey's campaign. Id. Defendants Martin Davis, Ansara and Blitz
agreed to solicit donors for Carey's re-election campaign. Id.
¶ 52. The Defendants induced donors to make contributions by
promising that the IBT would make contributions, in amounts larger than
the amounts the donors contributed to the Carey's campaign to certain
political organizations or advocacy groups designated by the donors.
Id. ¶ 53.
In or about October 1996, Arsara and Blitz met numerous times in
California. They and Martin Davis agreed that Charles Blitz would
send the donors' checks to Michael Ansara, who would hold the checks
pending confirmation that a reciprocal IBT contribution had been made.
Id. ¶ 55. Michael Ansara agreed that, once the IBT approved
the reciprocal contribution, he would forward the donors' checks to the
TCFU in New York. Id. ¶ 56. At the direction of Martin
Davis, Defendant Nash contacted Defendant Hamilton, who agreed to seek
Carey's approval of the scheme. Id. ¶¶ 60-61. The IBT could
not make the contributions without Carey's approval. Id. ¶
In or about October 1996, Blitz asked Defendant Rochelle Davis, the
Financial and Administrative Director of Citizen Action, a lobbying
organization concerned with federal, state and local issues, to request a
$225.000 contribution from the IBT. Id. ¶ 63. On or about
October 14, 1996, Arlook and Rochelle Davis directed a Citizen Action
employee to send a written request for $225.000 to Hamilton with a copy
to Michael Ansara. On or about October 23, 1996, Arlook and Rochelle
Davis, at Blitz's direction, sent a request to Hamilton seeking a second
contribution in the amount of $250.000. The total amount requested by
Citizen Action was $475.000. Id. ¶¶ 64-65.
Martin Davis thereafter asked Nash to ask Hamilton to recommend to
Carey that the IBT make the contributions to Citizen Action. Nash met
with Carey's executive secretary in mid-October 1996 in order to explain
the scheme. Then, on or about October 16, 1996, Nash spoke with Carey by
telephone and explained that the IBT contributions to Citizen Action
would benefit Carey's re-election campaign. Carey told Nash that he would
approve the contribution to Citizen Action. Id. ¶¶ 66-69.
On or about October 23, 1996, Hamilton sent Carey a memo recommending
approval of the Citizen Action contributions. On or about October 24,
Carey approved the check request for Citizen Action. Id.
¶¶ 70-71. In or about October 1996, the IBT contributed $475,000 in
IBT General Treasury funds to Citizen Action. Id. ¶ 72.
In or about October 1996, Nash asked Hamilton to recommend an IBT
contribution to Project Vote, an organization whose goal was to mobilize
low income and minority voters. On or about October 17, 1996, Hamilton
sent a memo to Carey seeking approval of a $75,000 contribution to
Project Vote. Id. ¶ 74. On or about October 17, 1996,
Carey's executive secretary telephoned Carey and Carey approved the
request. Shortly thereafter, Hamilton caused the IBT to donate $75,000 to
Project Vote. Id. ¶¶ 75-76. On or about October 23, 1996,
Hamilton sent a second memo to Carey asking for another contribution of
$100,000 for Project Vote. Carey's executive secretary contacted Carey by
telephone and Carey approved the $100,000 check request for Project Vote.
The IBT then donated $100,000 to Project Vote. Id. ¶¶ 77-79.
In or about October 1996, Martin Davis asked Nash to ask Hamilton to
recommend an IBT contribution to the National Council of Senior Citizens
("NCSC"), an organization that promoted the interests of senior citizens.
Id. ¶ 80. On or about October 16, 1996, Hamilton sent Carey
a memo recommending that the IBT contribute $85,000 to NCSC. Carey spoke
with his secretary about the contribution on the telephone and approved
the request. The IBT then contributed $85,000 to NCSC. Id.
¶¶ 81-83. NCSC then sent one half of the $85,000 amount to the
November Group, a political consulting firm owned by Martin Davis.
Id. ¶ 84.
Under the IBT election rules, employers were not eligible to contribute
or solicit funds for any IBT candidate. Id. ¶ 85. Defendant
Barbara Arnold, Michael Ansara's wife, violated the election rules by
donating money to the Carey re-election campaign. Id. ¶ 86.
Barbara Arnold was a director of Defendant the Share Group, a telemarketing
firm that employed
hundreds of people. Id. ¶ 87. Her contribution was
solicited by Michael Ansara, also an employer. Id. In
connection with Arnold's contribution, Martin Davis and Ansara agreed to
obtain funds from the IBT to reimburse Arnold. At the same at time,
Charny advised Ansara that Arnold's contribution was acceptable.
Id. ¶ 88.
On or about October 31, 1996, Ansara arranged for Arnold to contribute
$45,000 to the TCFU. Id. 89. Subsequently, Ansara arranged for
Arnold to contribute an additional $50,000 to the TCFU. Id.
¶ 91. In order to reimburse Arnold for the contribution, Martin Davis
and Ansara caused Share Group to submit a padded invoice to the IBT for a
telephone "get out the vote" campaign. Arnold was reimbursed through the
excess funds paid by the IBT for the inflated bill. Id. ¶
94. In addition, Martin Davis and Ansara agreed that Share Consulting
would submit a fraudulent invoice for $75,000 to Citizen Action for
consulting work that had never been performed. Id. ¶ 95.
Citizen Action paid the bill, which was used to reimburse Arnold for her
contribution to Carey's re-election campaign. Id. ¶ 96.
In addition to the foregoing schemes, in or about October 1996, Martin
Davis sought to obtain an additional $100,000 from the IBT to pay a Carey
re-election campaign debt owed to the November Group. Id. ¶
98. Martin Davis first attempted to have the November Group debt paid by
causing IBT to make another contribution to Citizen Action, which would
then have paid the November Group. Martin Davis informed Defendant Ira
Arlook, Executive Director of Citizen Action, that he would raise
funds from the IBT for Citizen Action if Citizen Action would use
$100,000 of those funds to pay the November Group. Arlook then sent a
memo to Hamilton requesting a $150,000 contribution from the IBT.
Id. ¶¶ 98-99. Hamilton, however, believed that an additional
contribution to Citizen Action could not be justified. Id.
Hamilton and Martin Davis then agreed to disguise the Citizen Action
contribution by arranging with an AFL-CIO official to have the IBT
contribute $150,000 to the AFL-CIO, which would then contribute $150,000
to Citizen Action. At Martin Davis' request, Nash asked Hamilton to
recommend a $150,000 contribution from the IBT to the AFL-CIO.
Id. ¶¶ 101-102. On or about October 31, 1996, Hamilton sent
Carey a memo recommending that the IBT contribute $150,000 to the
AFL-CIO. Shortly thereafter, Carey spoke with his executive secretary by
telephone and approved the AFL-CIO contribution. Id. ¶¶
104-105. In or about November 1996, the IBT contributed $150,000 in IBT
funds to the AFL-CIO; the AFL-CIO then sent $150,000 to Citizen Action,
which then sent $100,000 to the November Group, benefitting Defendants.
Id. ¶ 106.
In or about the fall of 1996, Nash, Martin Davis and others devised a
scheme to bill the IBT for expenses related to Carey's and other
Defendants' efforts to protect and promote their positions and
relationships with the IBT. Id. ¶ 107. Nash and Martin
Davis caused November Group to send false invoices for approximately
$21,000 to IBT for expenses allegedly incurred in connection with the
July 1996 IBT convention. Id. ¶ 108. The $21,000 bill was
first sent to Carey's re-election campaign, but Nash, Martin Davis and
others decided to re-bill the IBT for the expenses. Id.
In 1997, the Election Officer began investigating whether contributions
to TCFU had violated the election rules. Id. ¶ 109. On or
about February 10, 1997, the Election Officer interviewed Blitz by
telephone. During the telephone conversation. Blitz concealed material
facts from and made materially false statements to the Election Officer
concerning the plan to solicit contributions from wealthy individuals in
exchange for contributions in alarger amount from the
IBT to organizations chosen by the contributor; Ansara's role in
the fundraising for Carey; Ansara's instruction to Blitz not to discuss
any contributions to benefit Carey; and the plan to have Ansara retain
possession of the donor's checks until the IBT contributions were
verified. Id. ¶¶ 114-115
On or about April 29, 1997, representatives of the Election Officer
interviewed Defendant Hamilton. Hamilton repeatedly made false statements
regarding the IBT's contributions to Citizen Action, Project Vote, and
the NCSC. Hamilton also concealed material facts from the Election
Officer regarding the IBT's contributions to outside organizations and
his relationships with other Defendants. Id. ¶ 127.
On or about July 1997, October 28, 1997 and November 10, 1997,
representatives of the Election Officer interviewed Defendant Carey
regarding contributions to Citizen Action, Project Vote, the AFL-CIO and
other organizations. Carey repeatedly made false statements and concealed
material facts from the Election Officer regarding his knowledge of these
contributions and their circumstances. Id. ¶ 128.
Plaintiffs allege in the Amended Complaint that the goals and purposes
of Defendants' enterprise, and the objects of their criminal venture,
included: the enrichment of Defendants through embezzlement and mail and
wire fraud; the protection and promotion of Defendants' positions and
relationships with the IBT; and the deprivation of the IBT and its
members of money, their right to the honest services of their
officers and employees, and their right to the honest conduct of the 1996
election and future elections. Id. ¶ 135. The Amended
Complaint further alleges that the fraudulent enrichment and subject
relationships "would have continued indefinitely if undetected." Id.
The Amended Complaint further alleges that, "[b]ecause of
defendants' positions and relationships with the IBT, their actions
posed a threat of continued criminal activity." Id. ¶ 142.
Dismissal of a complaint for failure to state a claim pursuant to
Rule 12(b)(6) is proper where "it appears beyond doubt that the plaintiff can
prove no set of facts in support of [its] claim which would entitle [it]
to relief." Harris v. City of New York, 186 F.3d 243, 247 (2d
Cir. 1999). "The task of the court in ruling on a Rule 12(b)(6) motion is
merely to assess the legal feasability of the complaint, not to assay the
weight of the evidence which might be offered in support thereof."
Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998) (internal
quotations omitted). Accordingly, in deciding a Rule 12(b)(6) motion, the
court must accept as true all material facts alleged in the complaint and
draw all reasonable inferences in the nonmovant's favor. Harris v.
City of New York, 186 F.3d at 247. However, "[a] complaint which
consists of conclusory allegations unsupported by factual assertions
fails even the liberal standard of Rule 12(b)(6)." De Jesus v.
Sears, Roebuck & Co., 87 F.3d 65. 70 (2d Cir. 1996) (internal
Plaintiff's RICO Claims
As this Court explained in Int'l Bhd. of Temsters v. Carey,
163 F. Supp.2d 271, 279 (S.D.N.Y. 2001) ("IBT I"). Section
1962 of the Title 18 of the United States Code prohibits: (a) the use of
income "derived . . . from a pattern of racketeering activity" to
acquire an interest in,
establish, or operate an enterprise engaged in or whose activities
affect interstate commerce; (b) the acquisition of any interest in or
control of such an enterprise "through a pattern of racketeering
activity;" (c) the conduct or participation in the conduct of such an
enterprise's affairs "through a pattern of racketeering activity;" and
(d) conspiring to do any of the above. 18 U.S.C.A. § 1962 (West
2001). A showing of the existence of a "pattern of racketeering activity"
is therefore a fundamental element of any civil RICO action.
"Racketeering activity," as defined in 18 U.S.C. § 1961 (1),
encompasses acts chargeable under certain state criminal laws, acts
indictable under numerous specific federal criminal provisions, including
mail and wire fraud, and any "offense" involving bankruptcy or securities
fraud or drug-related activities that is "punishable" under federal law.
See Sedima, S.P.R.L. v. Imrex Co.,
473 U.S. 479, 481-82 (1985). The state law offenses include murder, kidnaping,
gambling, arson, robbery, bribery, extortion, and drug offenses. The
federal law offenses include bribery, counterfeiting, theft,
embezzlement, extortion, and obstruction of criminal investigations and
enforcement. See 18 U.S.C.A. § 1961 (West 2001 & Supp.
2003); Sedima, S.P.R.L. v. Imrex Co., 473 U.S. at 482, n. 3.
Plaintiff asserts two causes of action under RICO, pursuant to
18 U.S.C. § 1962(c) and (d) against each of the Defendants. To state a
civil RICO claim under section 1962(c), the plaintiff must allege injury
resulting from "(1) conduct (2) of an enterprise (3) through a pattern
(4) of racketeering activity." Sedima, 473 U.S. at 496;
Azrielli v. Cohen Law, 21 F.3d 512, 520 (2d Cir. 1994).
The cause of action under section 1962(d) requires a [Illegible
text]piracy to violate one or more of the substantive RICO provisions.
Cofacredit, Cofacredit, S.A. v. Windsor Plumbing Supply Co. Inc.,
187 F.3d 229, 244 (2d Cir. 1999).
In IBT I, the Court dismissed Plaintiff's original complaint,
principally for failure to allege continuity of the alleged RICO
enterprise sufficiently to state a cause of action under section 1962(c).
The chief relevant difference between the original complaint and the
Amended Complaint is the Amended Complaint's replacement of continuity
and purpose allegations focused on the 1996-1997 election-related
activities with broader allegations focused on an alleged intent of the
defendants to perpetuate lucrative relationships with IBT, and the
addition of allegations that the wrongful activities and objectives would
have continued indefinitely. See, e.g., Amended Comp. ¶¶ 26
(purposes of alleged enterprise included "enriching defendants through
embezzlement and . . . fraud that would have continued indefinitely if
undetected" and "protecting and promoting defendants' positions and
relationships with the IBT that would have continued indefinitely if
undetected") and 75 (Defendant Carey approved allegedly fraudulent
contribution to "assist him and his co-defendants to protect and promote
their positions and relationships with the IBT"). The Amended Complaint
also groups the allegations concerning channels and methods of illegal
campaign contributions and the subsequent coverup of those contributions,
characterizing them as separate schemes. See id. ¶¶
3, 47-128. The Amended Complaint's specific factual allegations
of illicit activity remain confined to the 1996 campaign and 1997 coverup
activities relating to contributions and expense billing in connection
with that campaign.
Despite its references to open-ended continuity and the addition of the
broad continuity and motive allegations just described, the Amended
Complaint, like its predecessor, fails even when construed in the light
most favorable to IBT to allege facts sufficient to meet the continuity
element of its RICO causes of action IBT's federal Claims will therefore
dismissed for failure to state a claim upon which relief can be
Pattern of Racketeering Activity
As the Court explained in IBT I, proof of a "pattern of
racketeering activity" for purposes of RICO requires a showing of "at
least two acts of racketeering activity" committed in a 10-year period.
18 U.S.C.A. § 1961(5); De Falco v. Bernas, 244 F.3d 286,
320 (2d Cir. 2001); see also Cofacredit, S.A. v. Windsor
Plumbing Supply Co. Inc., 187 F.3d at 242; Azrielli v. Cohen
Law Offices, 21 F.3d at 520. In order to establish such a pattern,
the plaintiff must demonstrate that the predicate acts of racketeering
activity by a defendant are "related, and that they amount to or pose a
threat of continued criminal activity." H.J. Inc. v. Northwestern
Bell Tel. Co., 492 U.S. 229, 239 (1989); Cofacredit, 187
F.3d at 242. To satisfy the "continued criminal activity" element of the
cause of action, a showing of either "closed-ended continuity" or
"open-ended continuity" will sulfice. See H.J. Inc.,
492 U.S. at 239, 241.
There is no dispute as to the sufficiency of the factual allegations of
the Amended Complaint to demonstrate the requisite relationship among the
predicate acts. Defendants argue, however, that the Amended Complaint
fails to set forth facts sufficient to support the existence of a pattern
of racketeering, specifically, that the Amended Complaint is insufficient
to demonstrate "open-ended" continuity of the alleged racketeering
The Supreme Court has characterized open-ended continuity as a
reference to "past conduct that by its nature projects into the future
with a threat of repetition." H.J. Inc. v. Northwestern Bell
Telephone Company, 492 U.S. 229, 241 (1989). The H.J. Inc.
Court reviewed a number of examples of conduct indicative of such a
threat, including a protection racket a predicate offense that
involves "a distinct threat of long-term racketeering activity, either
implicit or explicit."*fn4 Id. at 242. The Second Circuit has
observed that courts applying section 1962(c) to open-ended activity
"generally have concluded that the requisite threat of continuity was
adequately established by the nature of the activity" where "the acts of
the defendant or the enterprise were inherently unlawful, such as murder
or obstruction of justice, and were in pursuit of inherently unlawful
goals, such as narcotics trafficking or embezzlement." United States
v. Aulicino, 44 F.3d 1102, 1111 (2d Cir. 1995).
The requisite threat can, alternatively, be "established by showing
that the predicate acts or offenses are part of an ongoing entry's
regular way of doing business. Thus, the threat of continuity is
sufficiently established where the predicates can be attributed to a
defendant operating as part of a long-term association that exists for
criminal purposes." H.J. Inc., 492 U.S. at 242-43. "The
[open-ended] continuity requirement is likewise satisfied where it is
shown that the predicates are a regular way of conducting defendant's
ongoing legitimate business (in the
sense that it is not a business that exists for criminal purposes),
or of conducting or participating in an ongoing and legitimate RICO
`enterprise.'" Id. at 243.
Plaintiff's factual allegations, as expanded in the Amended Complaint,
meet neither of these tests. Although, as that complaint points out,
several of the defendants have been convicted of predicate acts of
racketeering and/or have agreed to cooperate in the investigation or
prosecution of the alleged racketeering activity, the complaint
nonetheless fails to allege facts showing that the scheme is "inherently
unlawful" in the Aulicino sense. It is of course a truism that
criminal conduct is inherently unlawful. As Aulicino and the
Supreme Court's illustrations in H.J. Inc. make clear, however,
simple unlawfulness of past activity is not sufficient to embody the
requisite specific threat of future criminal activity. Rather, such acts
must (like protection or shakedown schemes) threaten repetition by their
nature, or (like killings to maintain discipline in a narcotics operation
or bribery and money laundering on behalf of organized crime) have been
undertaken in pursuit of some ongoing illegal goal. See
Aulicino, 44 F.3d at 1111-12; H.J. Inc., 492 U.S. at 242.
Here, the unlawful activity, all of which is alleged to have occurred
in the context of Carey's re-election campaign, is alleged to have been
undertaken for purposes of self enrichment protection of ongoing
relationships with Plaintiff, and depriving IBT and its members of money,
the honest services of its officers and employees and the right to have
elections conducted fairly. Most of these goals while likely unwelcome to
the object of Defendants' alleged attentions are not
themselves unlawful. Furthermore, fraud (the object of which is by
definition to obtain money or property from others) has been held
not to be "inherently unlawful" in the RICO continuity context.
See FD Property Holding, Inc. v. US Traffic Corp.,
206 F. Supp.2d 362, 370
(E.D.N.Y. 2002). Accordingly, the Court looks for other indicia of the
requisite threat of further criminal activity.
The Amended Complaint alleges no facts from which it could be inferred
that Defendants' activities were a regular way of conducting their, or
IBT's, ongoing legitimate business. Plaintiff argues that its allegations
are, however, sufficient to show the existence of an association-in-fact
criminal enterprise among defendants whose regular way of doing business
"was to engage in criminal activity." Plaintiff's Mem. In Opp. at 18.
Plaintiff also argues that the long-term relationship among Defendants
Carey, Martin Davis and the November Group, dating back to
1991, and between Carey and Cohen Weiss, dating back to 1967, supports a
finding of a threat of continuity because the November Group and Cohen
Weiss benefitted financially from their association with Carey and the
IBT. Plaintiff's Mem. In Opp. at 19. Thus, Plaintiff contends, Carey and
the other Defendants' long-term association supports the inference that
their illegal conduct would have continued unabated had Carey remained in
office. Id. at 18-19.
Even assuming for purposes of this analysis that Plaintiff's
allegations are sufficient to define an association-in-fact-enterprise.
Plaintiff's factual allegations are inadequate to support an inference
that the enterprise was an ongoing one that would, absent discovery of
the election-related fraud, have continued to engage in criminal activity
as a regular way of doing business. Plaintiff alleges that, "[t]hroughout
1996 and 1997, defendants . . . constituted an association-in-fact
enterprise that conducted its affairs through a pattern of racketeering
activity that, if undetected, would have continued indefinitely." Amended
Complaint ¶ 132. The 1996 and 1997 activities described in the
complaint were all election-related and were undertaken. Plaintiff
alleges, in the context of a "critical need to raise additional money for
Carey because the
[election] race with Hoffa was extremely close, and the Hoffa
campaign was raising substantially more money than the Carey campaign."
Plaintiff further alleges that "Defendants were aware that if Carey lost
the election, defendants would lose their positions and relationships
with the IBT." Id. ¶ 48; see also
id. ¶ 50 (need for several hundred thousand dollars to pay
for direct mail campaign to coincide with mailing of ballots). These
factual allegations, as distinguished from Plaintiff's conclusory
recitation of RICO-related legal propositions, cannot support a
reasonable inference that the enterprise would have continued after the
election or that it posed a specific threat of future criminal activity.
Plaintiff's additional allegations regarding the various Defendants'
long-term, lucrative prior relationships with the IBT, and regarding the
maintenance of those relationships as a motivation for engaging in the
alleged election-related schemes, simply do not indicate an ongoing
threat of criminal activity, particularly in the absence of any
allegations of non-election-related illicit activity by these persons.
Furthermore, in that the coverup activity described in the Amended
Complaint was directed at concealing past activity in connection with the
1996 election campaign, that activity is not inherently indicative of a
threat that the underlying alleged illegal activity (illegal campaign
contributions, mail and were fraud facilitating those contributions and
illegal campaign expense payments) was part of a larger generalized
continuing pattern of fraudulent activity. Plaintiffs' factual
allegations thus cannot reasonably be construed to suggest that such
activity would have continued past the conclusion of the particular
election-related efforts. See Cofacredit, 187 F.3d at
244 ("an `inherently terminable' scheme does not imply the
threat of continued racketeering activity") (citation omitted).
At most, the facts alleged in the Amended Complaint might suggest the
risk of a
recurrence of the criminal activity in connection with a
future election, particularly if the confluence of political and economic
factors identified in the Amended Complaint were to recur. The mere risk
that there could be a recurrence under certain limited circumstances,
however, does not constitute the sort of "specific threat of repetition
extending indefinitely into the future" that is required to support a
finding of a pattern of racketeering activity under Section 1962(c).
Cf. Pyramid Securities Limited v. IB Resolution,
Inc., 924 F.2d 1114, 1119 (D.C. Cir. 1991) (Supreme Court's
illustrations in H.J. Inc. "indicate a requirement of far more
than a hypothetical possibility of further predicate acts").
Plaintiff relies on a number of decisions whose underlying facts are
sufficiently different from the circumstances at hand that they fail to
provide support for the proposition that the Amended Complaint states a
viable section 1962(c) claim Plaintiff ciites United
States v. Busacca, 936 F.2d 232 (6th Cir. 1991), cert.
denied, 502 U.S. 985 (1993), in which, as this Court explained
in IBT I, the U.S. Court of Appeals for the Sixth Circuit held
that the defendant's embezzlement of union funds for the purpose of
funding his defense of a criminal action established a threat of
continued criminal activity. Busacca, who was at the time the president
of an IBT local, had used his authority over union employee benefit plan
fund assets to pay his own criminal defense costs from those assets
without approval of the Fund's trustees, in connection with charges of
embezzlement from the union and from those very plans. The embezzlement
ceased only upon Busacca's conviction on the underlying charges and
consequent removal from his position with the employee benefit plan. In
light of these facts, the court in Busacca found that, as of
the time during which the predicate acts were occurring, the "manner in
which the embezzlements occurred was capable of repetition indefinitely
into the future, as long as there
were either legal fees or other expenses which Busacca wanted
paid." United States v. Busacca, 936 F.2d at 238.
Unlike Busacca, where an initial round of embezzlement
predated the predicate acts and the scheme in question was terminated by
the fortuitous interruption of the racketeering activity by the
conviction of the defendant, the embezzlement scheme alleged by the IBT
began and terminated with the 1996 re-election campaign. The instant case
thus does not present "a specific threat of repetition extending
indefinitely into the future." See H.J. Inc. at
242.*fn5 Rather, the allegations in the complaint, if proved, would
establish that Defendants "engaged in a serious, but discrete and
relatively short-lived scheme" to solicit illegal campaign contributions
by promising IBT funds to donors. See Cofacredit, at
244. To the extent Plaintiff reads Busacca as supporting the
proposition that the mere demonstrated ability to engage in criminal
activity for one purpose suffices to support a finding of inherently
unlawful activity threatening future repetition, the Court respectfully
takes a different view.
This case is also quite different from United States v.
Aulicino, 44 F.3d 1102 (2d Cir. 1995), which involved a kidnaping
ring whose methods were inherently criminal and which had an unexhausted
list of targets. Other cases relied upon by the IBT involved facts
clearly demonstrating that the criminal activity was at the core of the
enterprise or that the defendant was involved with corruption broader
than the particular predicate activity. In Nafta v. Feniks
International House of Trade, 932 F. Supp. 422, 427
(E.D.N.Y. 1996), the court found open-ended continuity where defendants
had engaged in massive financial fraud that was outside "the genre of an
`ordinary commercial case'" against an unsophisticated Eastern European
business. After the fraudulent scheme was uncovered, the defendants
continued to engage in conduct that perpetuated the fraud, including
physically threatening the plaintiff in an attempt to intimidate the
plaintiff into concealing the fraud. In United States v.
Kaplan, 886 F.2d 536 (2d Cir. 1989), the Second Circuit determined
that there was a sufficient threat of continuing racketeering activity
where the court found that the defendant had demonstrated a "willingness
to facilitate corruption generally in the [Parking Violations Bureau]" to
which defendant had contracted to provide certain services. Id.
In Teamsters Local 372 v. Detroit Newspapers, 956 F. Supp. 753
(E.D. Mich. 1997), also cited by Plaintiffs in support of their
argument, the court determined that predicate acts consisting of some
forty-four instances of robbery, arson, destruction of property and
assault occurring in the context of a strike constituted a threat of
continuity. The court in Detroit Newspapers cited
Busacca to the effect that threats of violence during a four
day strike period "were deemed sufficient to allege a pattern of
racketeering activity since the threats could be found to be the means of
conducting the strike which in turn could have continued
for an indefinite period of time." Teamsters Local 372 v. Detroit
Newspapers, 956 F. Supp. at 766. (quoting Busacca, 936 F. Supp. at
238). In Allwaste, Inc. v. Hecht, 65 F.3d 1523 (9th Cir. 1995),
the Ninth Circuit, also citing Busacca, determined that
open-ended continuity existed with respect to a scheme in which several
corporate officers of a recycling company and their families "solicited
kickbacks, received and distributed illicit gratuities and commissions,
the proceeds in businesses that compete with [the recycling company
for which they worked], and created false receipts overcharging . . .
for the transportation of goods and services." Id. at 1526. The
court held that the defendants' "willingness to participate in the
kickback scheme and their affirmative misrepresentations regarding
transportation costs demonstrate that if they had not been fortuitously
interrupted by termination, the predicate acts could have recurred
indefinitely." Id. at 1530.
The set of schemes here described by Plaintiff was, by contrast,
inherently terminable. Once the election occurred, the schemes, and their
alleged sponsoring enterprise, necessarily came to an end. None of the
facts alleged by Plaintiffs indicates the adoption of fraud or
embezzlement as a general means of doing business by the IBT itself or
any other identifiable ongoing enterprise.
For these reasons the Amended Complaint, like its predecessor, fails to
allege facts sufficient to support an inference of the existence of a
pattern of racketeering activity and therefore fails to state a claim
upon which relief can be granted under section 1962(c) of the RICO
statute with respect to the Defendants. This is so even when the facts
alleged in the Amended Complaint are as is proper, read in the light most
favorable to Plaintiff. Plaintiff's section 1962(c) claim will therefore
be dismissed. Because Plaintiff has failed for a second time to identify
and allege facts sufficient to satisfy the continuity element of the
pattern requirement of section 1962(c) and has proffered no new facts in
its opposition to the motion that would be material to a determination of
this issue, the Amended Complaint will be dismissed with prejudice.
Defendants also move to dismiss Plaintiff's section 1962(d) claim on
the ground that Plaintiff has (i) failed to state a claim under section
1962(c), and (ii) failed to plead facts showing the existence of a RICO
conspiracy. Section 1962(d) prohibits any person from conspiring to
violate any of the substantive provisions of Section 1962(a)-(c). To
state a claim thereunder, a 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." Colony
at Holbrook, Inc. v. Strata, G.C., Inc., 928 F. Supp. 1224, 1238
Because, as explained in IBT I, there can be no RICO
conspiracy without a substantive RICO violation,*fn6 Plaintiff's section
1962(d) claim must be dismissed in light of the insufficiency of
Plaintiff's 1962(c) claim.
Common Law Fraud Claims
The Amended Complaint asserts common law fraud claims against all of
the Defendants and common law breach of fiduciary duty claims against
Defendants Carey and Hamilton. The Court declines to exercise its
supplemental jurisdiction over these claims. Therefore, they are
dismissed without prejudice.
For the foregoing reasons, the motions of Defendants Ron Carey, William
Hamilton, Ira Arlook, Charles Blitz and Rochelle Davis to dismiss the
complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure are granted. Plaintiff's federal causes of action are dismissed
with prejudice, and Plaintiff's state common law causes of action are
dismissed without prejudice. The Clerk of Court is directed to enter
judgment and close the case.