Broker-Dealer Litigation - Greenberg Traurig LLP

investors allege that defendant bank engaged in common law aiding and abetting, fraud, and civil
conspiracy with Enron as part of a larger scheme to hide liabilities and improve Enron’s financial
statements. Common law aiding and abetting of fraud under New York law requires pleading
facts showing (1) the existence of fraud; (2) defendant’s actual knowledge of the fraud; and
(3) that defendant provided substantial assistance to advance the fraud’s commission. Anzerill v.
Am. Tobacco Co., 2000 WL 34016364 (N.Y. Sup. Ct. Oct. 27, 2000). Allegations of
constructive knowledge or recklessness are insufficient to allege the required state of mind of
actual and concrete knowledge of the underlying fraud. An allegation that a defendant “should
have known” about the fraud is also insufficient. In the complaint, plaintiffs alleged that the
bank structured certain tax transactions to help Enron achieve its fraudulent account objectives.
However, the complaint does not plead facts that establish that anyone at the bank knew at the
time of entering into the transactions how Enron would disclose them, that they were improper,
or that Enron was entering into them to commit fraud. The court held that absent such details,
the aiding and abetting claim must be dismissed for failure to plead actual knowledge of the
underlying fraud. Allegations of an intention to realize accounting income benefits do not
translate into knowledge of improper benefits or knowledge of fraud. The court granted
defendant’s motion to dismiss as to all claims.
HMV Props., LLC v. IDC Ohio Mgmt., LLC, 2011 U.S. Dist. LEXIS 1161 (S.D. Ohio Jan. 4,
2011).
Purchasers of various investment properties sued sellers of the properties, alleging that
the collective defendants participated in a conspiracy and perpetuated a scheme to dupe plaintiffs
into purchasing overvalued real estate in Ohio, violating RICO. Plaintiffs claimed defendants
aided and abetted the advancement of this scheme in connection with their RICO claim.
Defendants brought a motion to dismiss. The court held that there is no provision within RICO
that permits a private right of action for aiding and abetting. Furthermore, the court noted that in
Central Bank of Denver v. First Interstate Bank, 511 U.S. 164 (1994), the Supreme Court ruled
that private aiding and abetting suits were not authorized under Section 10(b) of the Securities
Exchange Act of 1934. Additionally, even if such a right exists, plaintiffs failed to state a claim
because they failed to allege all elements of the underlying substantive RICO claim. Therefore,
the court dismissed the aiding and abetting claim with prejudice as to all defendants.
Facciola v. Greenberg Traurig, LLP, 781 F. Supp. 2d 913 (D. Ariz. 2011).
Plaintiff investors brought suit arising from the collapse of a real estate lender.
Specifically, among other claims, plaintiffs asserted that management at both a private mortgage
lender and a related company aided and abetted statutory securities fraud and breach of fiduciary
duty. Defendant private mortgage lender was engaged in making high interest secured loans to
real estate developers. It formed a relationship with defendant company where the company
brought together investors to invest in various real estate projects, including pass-through
interests in loans originated by defendant mortgage lender. Plaintiffs alleged that management of
the private mortgage lender was aware of financial excess at the mortgage lender and the
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