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RAMPERSAD v. DEUTSCHE BANK SECURITIES INC.

March 30, 2004.

DONALD RAMPERSAD, Plaintiff, -against- DEUTSCHE BANK SECURITIES, Inc., f/k/a DEUTSCHE BANC ALEX.BROWN, Inc., LANGTRY TRUST GROUP, RICHARD DeBOE, and PETER BRANT. Defendant(s)


The opinion of the court was delivered by: LAURA TAYLOR SWAIN, District Judge

MEMORANDUM OPINION AND ORDER

In this action arising out of the management of an offshore brokerage account, Plaintiff Donald Rampersad ("Rampersad") asserts claims for securities fraud under section 10(b) of the Securities and Exchange Act of 1934 ("Section 10(b)") and Rule 10b-5 promulgated thereunder, and for violation of the Racketeer Influenced Corrupt Organization Act ("RICO"). Plaintiff also asserts common law fraud, conversion, and breach of fiduciary duty claims. Plaintiff amended his original complaint following initial dispositive motion practice. Defendants Deutsche Bank Securities. Inc., formerly known as Deutsche Bank Alex.Brown Inc. ("Alex.Brown"), Richard DeBoe ("DeBoe"), and Langtry Trust Group ("Langtry") move for dismissal of the Amended Complaint pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6). Alex.Brown and DeBoe also seek, pursuant to Federal Rule of Civil Procedure 12(f), an order striking certain allegations in the Amended Complaint.

The Court has jurisdiction of Plaintiff's Section 10(b) and RICO claims pursuant to 2S U.S.C. § 1331. The Court has considered thoroughly all submissions in connection with Page 2 the instant motions. For the following reasons, Defendants' motions are granted.

  BACKGROUND

  The following facts, which are alleged in the Amended Complaint (the "Complaint"), are taken as true for purposes of the motions to dismiss.

  In October or early November 1998, Rampersad, a citizen of Trinidad and Tobago, telephoned Robert Parry ("Parry"), his cousin residing in the United States, about the possibility of investing approximately $500,000 (U.S. dollars) in the U.S. stock market. (Compl. ¶¶ 1, 10.) Parry contacted Steven Harrison ("Harrison"), an individual previously introduced to Rampersad by Parry, to discuss investment options for Rampersad. (Id. ¶¶ 8, 12.) Harrison suggested Rampersad contact Peter Brant ("Brant"), a convicted felon who managed Harrison's personal investments at Alex.Brown with DeBoe as broker. (Id. ¶¶ 12, 13.)

  On November 8, 1998, Brant recommended that Rampersad invest his money offshore. (Id. ¶ 15.) Once in the offshore account, the money would be transferred to an account at Alex.Brown that would be managed and traded by Brant with DeBoe as broker. (Id. ¶ 16.) So as to avoid U.S. tax liability, Rampersad agreed to the structure of the transaction. (Id.) Rampersad and Brant also agreed that Brant would receive a management fee equal to 20% of any gains realized by the account under his management. (Id. ¶ 17.) In connection with this arrangement, Rampersad urged Brant to "mind the money safely," to which Brant replied that he would invest the funds only in "renowned" stocks. (Id. ¶ 18.)

  On December 7, 1998, Rampersad received from Langtry, the offshore entity, a letter containing wiring instructions. (Id. ¶ 19.) Upon Brant's confirmation that the wiring instructions were legitimate, Rampersad wired $300,000 to Langtry, on December 16, 1998. (Id. ¶ 22.) The funds transfer report states that Rampersad was the "customer" with respect to the funds located in Page 3 the account established with Langtry. (Id. ¶ 23.) In late December 1998 or early January 1999,* Langtry directed Lloyd's Bank to send the sum of approximately $300,000 to an account at Alex.Brown. (Id. ¶ 27.) This account was opened in Langtry's name; Brant was authorized to trade in this account. (Id. ¶ 26.)

  In late December 1998 or early January 1999, Rampersad telephoned DeBoe requesting, among other things, confirmation that his account with Alex.Brown had been "performing well." (Id. ¶ 26.) DeBoe told him that the $300,000 had been received into an account at Alex.Brown and that the account would be established under the name "Langtry", though Rampersad would be the "owner." (Id.) Furthermore, DeBoe told Rampersad that Brant was going to trade the Langtry account, that Rampersad's account information was being sent to Brant and not Rampersad, that DeBoe would make him a copy of the account information, and that Brant was a "good client" of Alex.Brown. (Id.) Finally, Rampersad alleges that, based on this conversation with DeBoe, he wired the remaining $200,000 to Langtry. (Id. ¶ 29.)

  Langtry, on January 15, 1999, transferred the $200,000 to the same Alex.Brown account, held in its name, that contained the original deposit. (Id. ¶¶ 32-33.) Rampersad did not wire money directly to Alex.Brown but rather sent money directly to Langtry, which then forwarded the funds to the Alex.Brown account in Langtry's name. ((Id., ¶¶ 26, 29, 32.)

  In mid-January 1999, Rampersad alleges, he once again spoke to DeBoe, who continued receipt of the second set of funds. (Id. ¶ 34.) During this conversation, Rampersad further alleges, he asked DeBoe for certain forms in connection with avoiding U.S. tax liability and for copies of the monthly account statements. (Id.) DeBoe directed Rampersad to ask Brant for the paperwork. (Id.) Page 4

  Over the next year, the value of the Alex.Brown account began to drop precipitously.*fn1 Account statements reveal that the account was on margin as early as May 1999. (Id. ¶ 37.) Also, as of July 1999, the account only held Global Telesystems Group stock. (Id. ¶ 39.) If Rampersad had known that his portfolio was being managed in this way, he would have objected. (Id.) Funds from the Alex.Brown account were transferred to Lloyds Bank at the instruction of Langtry, to an account not belonging to Rampersad.*fn2 (Id. ¶¶ 35-38.) Rampersad alleges that DeBoe was aware that the wire transfers were without Rampersad's knowledge or consent. (Id. ¶¶ 35-38.)

  Rampersad asserts that DeBoe called him at least two times during 1999 seeking business from Rampersad's friends and/or family. (Id. ¶ 42.) During one of these conversations, Rampersad and DeBoe discussed the Alex.Brown account; the discussion, however, was limited to a request for the account statements and there was no discussion concerning the account's performance. (Id. ¶ 43.) Rampersad further alleges that he and Brant spoke occasionally throughout 1999, and Brant "continually informed" Rampersad that his investments were "doing well." (Id. 11 45.) Towards the end of 1999 Brant, suddenly and without warning, told Rampersad that the Alex.Brown account was negative by several hundred thousand dollars. (Id. 148.)

  On August 14, 2000, Rampersad submitted his claims against Alex.Brown, DeBoe and Matthew Kolb (Alex.Brown's New York City branch manager) arising out of the account to arbitration before the New York Stock Exchange, Inc. ("NYSE"). (Id. 1| 52; Uniform Submission Page 5 Agreement, Ex. A to DeBoe Not. of Mot.) Langtry was not a party to these proceedings. On March 7, 2002, the arbitration panel dismissed Rampersad's claim without prejudice. (Compl. ¶ 52.) On September 4, 2002, Rampersad commenced this action in New York Supreme Court, New York County. Alex.Brown and DeBoe removed the ...


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