Antitrust Law Daily Wrap Up, RICO—NDIll: Alleged Victims of Ponzi Scheme Stated Claims for Violation of the Ohio RICO Act and Conspiracy to Violate Ohio RICO Act, (May 31, 2013)

By Peter Reap, J.D., LL.M.

Alleged victims of a real estate/securities Ponzi scheme perpetrated by several individuals and entities adequately alleged claims for violation of Ohio’s Pattern of Corrupt Activity Act and for conspiracy to violate that statute, the federal district court in Cincinnati has ruled (Bradley v. Miller, May 30, 2013, Black, T.). Thus, the motion by one of the defendants, James W. Powell, to dismiss those claims was denied.

Background. Diana and James Bradley allegedly lost approximately $134,354.46 and Cora May Pyles lost approximately $50,000. The Bradleys and Ms. Pyles filed this lawsuit in an effort to recover those losses.

The defendants who allegedly perpetrated the fraud include Kevin Miller, James D. Powell, Capital Investments, Great Miami Debentures, Great Miami Real Estate, LLC, James W. Powell, Curtis Powell, Deanna Powell, Hubert Rials, and Chatsworth Jacobs. James D. Powell held himself out as the president and owner of the three entity-defendants. He is currently serving a 121-month sentence for conspiracy to commit mail fraud and wire fraud, the court noted.

Ohio RICO. Count Six of the complaint alleges a violation of Ohio’s Pattern of Corrupt Activity Act, which is analogous to the federal RICO Act. In order to prevail under that statute, a plaintiff must establish: (1) that the conduct of the defendant involves the commission of two or more specifically prohibited state or federal criminal offenses; (2) that the prohibited criminal conduct of the defendant constitutes a pattern of corrupt activity; and (3) that the defendant has participated in the affairs of an enterprise or has acquired and maintained an interest in or control of an enterprise that exists separate and apart from the defendant.

James W. Powell argues that the plaintiffs failed to adequately allege the first two elements: that he engaged in two or more criminal offenses sufficient to constitute predicate acts, or that he engaged in a pattern of corrupt activity sufficient to state a claim under Ohio’s RICO law. However, for the reasons stated in the Magistrate Judge’s Report and Recommendations, the plaintiffs adequately pled that James W. Powell engaged in two or more predicate offenses and engaged in a pattern of corrupt activity, the court determined.

Count seven of the complaint alleged a claim of conspiracy to violate Ohio’s RICO law. Because it is broader than the federal RICO statute, Ohio imposed a type of strict liability on persons who were guilty of participating in, directly or indirectly, two or more incidents of corrupt activity that were related to the affairs of the same enterprise, according to the court.

Based on the concept of strict liability, the plaintiffs were not required to prove that James W. Powell himself committed two or more predicate acts in order to prove the conspiracy offense alleged in count seven. Instead, the plaintiffs only needed to show that he cooperated in a common plan.

As fully explained in the Magistrate Judge’s Report and Recommendations, the plaintiffs’ allegations sufficiently alleged that some members of the enterprise engaged in the predicate offense of Tampering with Records in violation of Ohio law, the court held. Thus, the court adopted the Report and Recommendations with respect to counts six and seven and the motion to dismiss those claims was denied.

The case is No. 1:10-cv-760.

Attorneys: Ted L. Wills (Ted L Wills Attorney at Law) for Diana Bradley. Kevin Miller, Pro se.

Companies: Capital Investments; Great Miami Debentures; Great Miami Real Estate, LLC.

Cases: RICO OhioNews