Antitrust Law Daily Wrap Up, RICO—D.D.C.: Attorney faces racketeering charge after allegedly engaging in wire fraud, (May 29, 2014)

By Greg Hammond, J.D.

Victims of an alleged money wiring scam were unable to bring state law claims of professional negligence, civil conspiracy, and fraud, but brought a sufficient RICO action to survive a motion for summary judgment. In reaching its decision to partially grant and deny the alleged racketeer’s motion for summary judgment, the federal district court in Washington, D.C. determined that the state law claims were time barred under a three-year statute of limitations, but the harmed individuals sufficiently alleged that the purported racketeer participated in conduct of an enterprise through a pattern of racketeering activity (Lu v Lezell, May 27, 2014, Boasberg, J).

Background. Ying Qing Lu brought suit against Isam Ghosh, alleging that he fraudulently obtained $350,000 of her funds with an agreement that she would receive large returns. She claimed Ghosh and his attorney, Mark Lezell, engaged in state law violations of professional negligence, civil conspiracy, and fraud, as well as a civil RICO violation. Specifically, she alleged that in May 2008, she wired $50,000 to Lezell’s escrow account, but never received any return. That same month, Lu agreed to lend Ghosh and one of his companies an additional $50,000, and transferred it to Lezell’s escrow account. Although she was expecting $73,000 in return shortly thereafter, she only received $8,000. Afshin Afsharnia and Oklahoma Shelf Exploration and Development, LLC (OSED) also joined the law suit, making similar allegations. After Ghosh and Lezell failed to respond to the complaint, the court granted a default judgment. However, Lezell’s motion to vacate the default was granted, and the case was before the district court on his motion for summary judgment. He claimed that Lu’s state law claims were time barred, and that there were insufficient facts to support the RICO count.

RICO. To state a RICO claim, Lu, Afsharnia, and OSED were required to demonstrate that Lezell participated in “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Because Lezell knowingly received funds from Lu, Afsharnia, and OSED, inappropriately transferred them to Ghosh on three or more occasions, and took a “directive role” in deceptively inducing Lu, Afsharnia, and OSED to wire those funds, the court found that there were sufficient facts to satisfy the “conduct” requirement under RICO. Lezell did not contest that he and Ghosh constituted an “enterprise.” In addition, it was determined that because Lezell and Gosh used mail and wire fraud for three different individuals and entities, on three separate occasions, and in three different ways, there was a pattern of racketeering activity, which constituted a civil RICO violation. Consequently, the court denied Lezell’s motion for summary judgment in relation to the RICO claim.

State law claims. According to the court, there is a three-year statute of limitations for Lu’s state law claims of professional negligence, fraud, and civil conspiracy. In addition, the District of Columbia follows the “discovery rule,” meaning the statute of limitations began to run when Lu knew or should have known of her injury, its cause, and some evidence of wrongdoing. Because the record demonstrated that Lu knew or should have known that there was a default no later than June 13, 2008—the date she was supposed to receive the $73,000 return—but filed her complaint on October 13, 2011, the court determined that her state law claims were time barred. The court further noted that she did not lack legal knowledge, as she had legal representation in May and June 2008. Consequently, Lezell’s motion for summary judgment was granted as it related to Lu’s state law claims.

The case number is 11-1815 (JEB).

Attorneys: Randy McRae (Randy McRae & Associates) for Ying Qing Lu, Oklahoma Shelf Exploration and Development, LLC, and Bridges Financial, LLC. Peter L. Goldman (O'Reilly & Mark, PC) for Mark Lezell.

Companies: Oklahoma Shelf Exploration and Development, LLC; Bridges Financial, LLC

Cases: RICO DistrictofColumbiaNews