Antitrust Law Daily Wrap Up, RICO—M.D. La.: Scheme to defraud online student loan company involved wire fraud, (Aug 7, 2014)

By Jody Coultas, J.D.

The federal district court in Baton Rouge, Louisiana denied alleged Internet schemers’ motion to dismiss Edvisors Network, Inc.’s Racketeer Influenced and Corrupt Organization (RICO) claims based on a scheme that resulted in Edvisors paying over $90,000 in unearned commission to the schemers (Edvisors Network, Inc. v. Husser, August 4, 2014, Brady, J.).

Edvisors, an online company that helps students find student loans, uses affiliates to market their services. The Hussers, doing business as “Pay4mycollege,” became affiliates of Edvisors and placed an “Edvisors banner” on their website, which linked visitors to the Hussers’ website. Affiliates were compensated based upon the number of visitors who were routed to Edvisors’ website and then completed questionnaires.

The Hussers allegedly posed as students and completed thousands of online questionnaires. Clint Husser allegedly paid an unnamed woman $1 per questionnaire she submitted to Edvisors through the Hussers’ website and helped her become an affiliate with Edvisors in order to perpetrate the same fraudulent scheme on her own website.

RICO elements. The court held that Edvisors pleaded facts sufficient to support all three of the common RICO elements. To state a RICO claim, Edvisors was required to show that the Hussers were engaged in a pattern of racketeering activity and that an enterprise existed. A pattern of racketeering activity requires at least two acts of racketeering activity—which includes wire fraud, mail fraud, and interstate transportation of stolen goods—and related racketeering predicates. Edvisors’ allegations that the Hussers engaged in a scheme to defraud money by using the Internet were sufficient to show wire fraud. The Hussers used the Internet thousands of times to engage in wire fraud. The “Pay4mycollege” business and the relationship between the unnamed woman and Mr. Husser were enterprises for the purposes of RICO. “Pay4mycollege” was a business entity and legal enterprise. Edvisors’ allegations that the association between Mr. Husser and the unnamed woman had the common purpose of completing fraudulent questionnaires were sufficient.

Additionally, Edvisors was required to establish that the Husser’ actions met all the elements of at least one subsection of RICO Section 1962. The subsections include: (a) a person who has received income from a pattern of racketeering cannot invest that income in an enterprise; (b) a person who has not acquired or maintained an interest in an enterprise through a pattern of racketeering; (c) a person who is employed by or associated with an enterprise cannot conduct the enterprise's affairs through a pattern of racketeering; and (d) a person cannot conspire to violate subsections (a), (b), or (c).

Edvisors sufficiently alleged violations of each of the four subsections of Section 1962, according to the court. The company sufficiently pleaded that enterprises existed, that the Hussers engaged in racketeering activities, and that the Hussers derived income from those activities. The Hussers maintained control of Pay4mycollege, a legal enterprise, through their pattern of racketeering activity.

The Hussers were natural persons sufficiently distinct from “Pay4mycollege,” and Mr. Husser was distinct from the enterprise with the unnamed woman. Edvisors also pleaded facts to show that the Hussers had a part in directing both enterprises’ affairs through a pattern of racketeering activity. Finally, Edvisors sufficiently showed the parties were in agreement to violate a RICO subsection and that they committed an overt act in furtherance of that agreement.

The case is No. 14-062-JJB-RLB.

Attorneys: Matthew W. Pryor (Pujol Pryor & Irwin, LLC) for Edvisors Network, Inc. Rusty M. Messer (Rusty M. Messer, Attorney at Law) for Clint Husser.

Companies: Edvisors Network, Inc.

Cases: RICO LouisianaNews