The opinion of the court was delivered by: DAVID TRAGER, District Judge
Metropolitan Transportation Authority ("MTA" or "plaintiff"), a
New York Public Benefit Corporation that owns and manages public
transportation systems in the New York City Area, filed the
present action against defendants alleging that defendants
participated in a racketeering scheme to defraud the MTA out of
millions of dollars in connection with the renovation of the
MTA's new headquarters at 2 Broadway, New York, New York. Plaintiff alleges that defendant 144 Enterprises, LLC d/b/a
"City Check Cashing" ("City Check") violated sections 1962(c) and
1962(d) of the Racketeering Influenced and Corrupt Organizations
Act ("RICO") and aided and abetted a breach of fiduciary duty
under New York law. City Check moves to dismiss the complaint as
it pertains to it arguing that it fails to state a claim under
Fed.R.Civ.P. 12(b)(6). For the following reasons, defendant's
motion is denied.
The following facts are taken from plaintiff's complaint and
are presumed to be true for the purposes of this motion. This
case involves a conspiracy to defraud the MTA out of millions of
dollars by submitting false invoices that inflated fees for
services performed by elevator operators during a renovation
project on the MTA's new headquarters at 2 Broadway in New York
City. See Plaintiff's Complaint ("Compl.") ¶¶ 1-2. The MTA
alleges that City Check, the defendant making the pending motion,
participated in this scheme by laundering the ill-gotten gains of
the conspiracy. Id. ¶ 62.
In early 1999, the MTA contracted with Frederick Contini to
renovate 2 Broadway in downtown New York City after terminating
its contract with Contini's former employer. Id. ¶ 5. Contini
was responsible for overseeing the work on the building and coordinating the approval and payment of subcontractor invoices
for work performed. Id. The MTA also advanced funds to Contini,
to be held "in trust," for the payment of expenses. Id. ¶ 45.
Thus, Contini became a fiduciary of the MTA. Id. ¶ 137.
Soon after the MTA awarded Contini the 2 Broadway job, he and
the other defendants allegedly devised a scheme to embezzle money
from the 2 Broadway project by submitting fraudulent invoices to
the MTA for elevator operator services that were never performed.
Id. ¶ 6. The invoices also charged inflated rates for both the
work done and not done. Id. These invoices were prepared by
defendant Links Pepper Construction Inc. d/b/a Links Construction
Co. Inc. ("Links"), a shell company set up solely for the purpose
of funneling the proceeds of the scheme. Id. Contini submitted
eleven Links invoices to the MTA, the first in March 1999 and the
last in February 2000. Id. ¶ 57. The MTA issued checks to Links
based on the invoices, totaling $13,381,337.54, which were
cashed, the funds from which were then distributed to at least
six different shell companies controlled by various defendants.
Id. Only one company, defendant Conan Construction Corp.,
actually employed and paid elevator operators. Id.
Links used various methods to deliver the proceeds of the
fraudulent invoices to the various shell companies. Id. ¶¶
61-64. Of particular relevance for the motion here considered, checks issued by MTA payable to Links were brought to City Check,
a licensed check cashing facility located in Jersey City, New
Jersey, where the checks were converted to cash or bank checks
payable to certain of the defendant companies. Id. ¶ 31, 64.
The manager of City Check, defendant Santoro, an alleged member
of the Genovese crime family who was formerly convicted of money
laundering, was the contact at City Check. Id. ¶ 62. Santoro
negotiated the checks in exchange for a percentage of each
check's value. Id. The balance was given to Contini and
defendant Morris Dimino as kickbacks. Id. ¶ 64. The bank checks
were often cashed at City Check and the money distributed and
pocketed by various defendants. Id.
In or about May 2000, approximately fourteen months after the
first fraudulent invoice was submitted to the MTA, duly empaneled
grand juries in the Eastern District of New York began to
investigate whether individuals and unions connected with the 2
Broadway project had violated any federal laws. Id. ¶ 65. The
grand jury issued several subpoenas to witnesses and requested
documentation supporting the invoices submitted to the MTA. Id.
¶¶ 66-74. Various defendants engaged in a cover-up by creating
false documentation in response to the subpoenas and tampered
with at least one material witness. Moreover, at least one named
defendant gave false testimony before the grand jury. Id. This
cover-up lasted from May 2000 until at least January 2002. Id. On April 18, 2002, the federal government unsealed a fifty-five
count indictment against seven of the nine individually named
defendants in this action. Id. ¶ 76. Soon after, the other two
individual defendants were also charged for their roles in the
scheme. Id. ¶¶ 77, 80. By September 2003, all of the
individually named defendants in this suit had pled guilty to all
or some of the counts brought against them, including defendant
Santoro, who pled guilty to money laundering. Id. ¶ 80.
Plaintiff alleges that City Check played an essential role in
conducting the RICO scheme because it provided an essential
conduit in the distribution of the proceeds of the conspiracy.
Further, laundering the money allowed defendants to conceal the
conspiracy from plaintiff. Finally, plaintiff claims that City
Check aided and abetted Contini's breach of the fiduciary duty he
Pattern of Racketeering Activity
The RICO statute, 18 U.S.C. § 1962(c), prohibits a "person
employed by or associated with any enterprise engaged in, or the
activities of which affect, interstate or foreign commerce, to
conduct or participate, directly or indirectly, in the conduct of
such enterprise's affairs through a pattern of racketeering activity." 18 U.S.C. § 1962(c). A "pattern of racketeering
activity" may be shown by evidence of two or more predicate acts
"that . . . themselves amount to, or . . . otherwise constitute a
threat of, continuing racketeering activity." H.J. Inc. v.
N.W. Bell Tel. Co., 492 U.S. 229, 240 (1989) (emphasis in
original). City Check argues that plaintiff cannot show that the
alleged fraud amounts to a RICO violation because the fraud "is
limited to one project . . . one victim . . ., and a period of
less than one year."*fn1 Memorandum of Law in Support of
Defendant 144 Enterprises, LLC's Motion to Dismiss Complaint
("City Check Mem.") at 2.
Regardless of the number of projects, victims involved or
duration of the scheme, it is clear that many acts of fraud were
committed and that the fraud threatened to continue into the
foreseeable future. First, rather than look at the number of projects defendants' scheme affected, the question that should be
examined is what the potential life span of the scheme was and
whether the defendants' actions posed "a distinct threat of
long-term racketeering activity, either implicit or explicit."
H.J. Inc., 492 U.S. at 242. Although defendants only chose to
submit fraudulent invoices for eleven months, from March 1999 to
February 2000, they could clearly have carried on their
racketeering activity for a very long time. The "one project," as
City Check calls it, was, at the time, proclaimed to be the
largest renovation in New York City history and would likely take
a substantial and unknowable amount of time to complete. See
Comp. ¶¶ 3, 50. Therefore, at the time the elevator operator
fraud scheme was conceived and executed, there was no specific
end in sight. See Morrow v. Black, 742 F.Supp. 1199, 1207
(E.D.N.Y. 1990) (finding that even though predicate acts spanned
a few months, ...