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METROPOLITAN TRANSPORTATION AUTHORITY v. CONTINI

July 6, 2005.

METROPOLITAN TRANSPORTATION AUTHORITY, Plaintiff,
v.
FREDERICK CONTINI, EDWARD CARROLL, MORRIS DIMINNO, MATTHEW JOSEPH DOWNEY, JAMES ROEMER, JOHN VITIELLO, CONSTANTINE VAFIAS, DAVID COAKLEY, ROBERT SANTORO, 2 BW DEVELOPMENT LLC, LINKS PEPPER CONSTRUCTION INC. d/b/a "LINKS CONSTRUCTION CO, INC.", CONAN CONSTRUCTION CORP., YANKEE ASSOCIATES, ON-THE-JOB CARPENTRY SWILLEY CONTRACTING CORP., RHINO DEMO COMPANY, INC., BULLDOG MANAGEMENT & CONSULTING, INC. D&D ASSOCIATES, 144 ENTERPRISES LLC d/b/a "CITY CHECK CASHING" and BROADWAY CONSTRUCTION, Defendants.



The opinion of the court was delivered by: DAVID TRAGER, District Judge

MEMORANDUM AND ORDER

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.

Background

  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 owed plaintiff.

  Discussion

  (1)

  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, ...


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