RICO: Powerful Anti-Fraud Tool – EB-5 Class Action

Congress enacted the Racketeer Influenced and Corrupt Organizations Act (RICO) as a response to organized crime and biker gangs. A few decades later and this powerful statute is now mostly used by savvy private litigants seeking redress for a wide variety of fraud claims. This month a group of foreign investors filed a RICO class action saying they were defrauded in a scheme that gives U.S. visas to foreigners who invest in America.

The investment scheme was tied to the Jay Peak ski area in northern Vermont. Two promoters claimed they were going to raise millions of dollars to revitalize the aging ski area and add new hotels, a golf course and even a medical research facility. The promoters claimed it would generate 5000 new jobs.

One of the tests for the granting of permanent residency visa is whether the investment creates new jobs. Because the promoters claimed their project would create jobs, it became a popular vehicle for foreign investors seeking to gain coveted residency visas.

The three men who filed the RICO lawsuit were all foreign investors. They hail from England, Canada and the Netherlands.

Like many Ponzi schemes, the three men claim that their money didn’t go to create new jobs or expand the ski resort. They claim much of the money was instead used to support the promoters’ lavish lifestyle. Large sums of the investors’ money were also used to pay older investors, a typical indicator of a Ponzi scheme.

The investors are not alone in their belief. Earlier this spring the SEC filed similar lawsuits against the promoters.

In order to bring a RICO claim, there must be evidence of a conspiracy involving some type of criminal behavior. Examples of criminal behavior are called “predicate acts”.

Although the government typically brings RICO prosecutions against drug dealers and other conventional criminals, private litigants can file a RICO civil claim against those that engage in mail or wire fraud. Sending phony statements through the mail or making false promises by email is often enough.

In addition to the promoters, the investors have also named Raymond James & Associates and People’s United Bank. The addition of a well known brokerage firm and bank is critical. Typically, Ponzi scheme fraudsters don’t have sufficient assets to pay back all the victims. This is especially true if the fraudsters were wasting the money by living a lavish lifestyle.

RICO allows victims to collect against any party that was part of the conspiracy. Naming the bank and brokerage firm creates deep pockets that can satisfy any ultimate judgment or jury award.

According to the complaint, Raymond James “helped structure and execute” the scheme. People’s United Bank mismanaged the escrow account holding investor funds and failed to detect the fraud taking place through their accounts.

RICO Remedies

RICO is considered a powerful plaintiff’s tool because the law provides for triple damages and attorney’s fees. Unfortunately, it is also a very complex statute and frequently misused. From what we have observed, most RICO claims get tossed by courts because of procedural defects.

Few lawyers concentrate in lender liability cases Even fewer represent victims of bank fraud. (Most lender liability lawyers are defense lawyers who represent banks.) The lawyers at Judge, Lang & Katers and MahanyLaw concentrate in representing victims of financial fraud. We sue banks, special servicers, trustees and promoters. We also understand RICO.

For more information, contact attorney Chris Katers at 414-777-0778 or by email at [hidden email]. The author of this post, attorney Brian Mahany, can be reached at [hidden email] or by phone at 202-800-9791. Our minimum loss threshold is generally $10 million but we are flexible. Cases handled nationally.

MahanyLaw and Judge Lang & Katers – “Lawyers that Sue Banks”

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