Antitrust Law Daily Wrap Up, RICO—10th Cir.: Accountant’s claims don’t “add up” to a federal controversy, (Sep 5, 2014)

By Greg Hammond, J.D.

A former Grant Thornton LLP accountant failed to state a valid Racketeer Influenced and Corrupt Organizations Act (RICO) claim for the federal district court in Kansas to retain federal-question jurisdiction over his case. In affirming the lower court’s decision to dismiss, the U.S. Court of Appeals in Denver determined that the accountant made no attempt to identify predicate offenses in support of his RICO claim (Davison v. Grant Thornton LLP, September 3, 2014, Hartz, H.).

Background. Grant Thornton LLP is an accounting firm that found itself under investigation by the IRS and the Senate Finance Committee for allegedly promoting corporate tax shelters. According to Allen Davison II—a former Grant Thornton CPA and licensed attorney, Grant Thornton denied knowledge of the tax shelters and blamed Davison, along with another tax partner, for the misconduct. The federal government secured a civil injunction barring Davison from providing federal tax advice, and a number of civil actions were filed against him. Consequently, Davison filed suit against Grant Thornton, alleging that the accounting firm, and other defendants, misrepresented to the federal government his role in promoting tax shelters. The district court dismissed the complaint for lack of subject-matter jurisdiction, reasoning that there was not complete diversity, and the complaint failed to allege the elements of a RICO claim. Davison appealed.

Insufficient RICO claim. The court first noted that “dismissal for lack of subject-matter jurisdiction because of the inadequacy of the federal claim is proper only when the claim is so insubstantial, implausible, foreclosed by prior decisions of this Court, or otherwise completely devoid of merit as not to involve a federal controversy.” To state a private RICO claim, Davison was required to allege conduct of an enterprise through a pattern of racketeering activity, and at least two predicate acts. However, the court determined that Davison made no attempt to identify predicate offenses, and the court could not discern any. Further, Davison’s brief on appeal that listed a number of statutes that allegedly apply to his claim, without further explanation, was inadequate to preserve the issue on appeal. Consequently, the lower court’s decision dismissing the case for lack of federal-question and subject-matter jurisdiction was affirmed.

The case number is 14-3084.

Attorneys: Allen Reed Davison, II, pro se. Craig Steven O'Dear (Bryan Cave) for Grant Thornton LLP.

Companies: Grant Thornton LLP

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