Broker-Dealer Litigation - Greenberg Traurig LLP

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In re Refco Inc. Sec. Litig., 2011 WL 1219265 (S.D.N.Y. Mar. 30, 2011).
Investment manager of hedge fund and hedge fund brought suit against hedge fund
administrator, as well as the CEO and president of the administrator, alleging various claims
under New Jersey’s RICO Act arising out of the transfer of excess cash to the broker’s
unprotected offshore accounts. Although plaintiffs were entitled to name the enterprise and the
various individuals who constitute the “enterprise” as defendants under New Jersey’s RICO Act
(which is broader than its federal counterpart), plaintiffs failed to plead sufficient “organization”
because the amended complaint did not show how the members of the “enterprise” were
associated with each other, whether the participants performed discrete roles, the level of
planning involved, how decisions were made, or the coordination involved in implementing
those decisions. Nor did it describe the division of labor or separation of functions among the
enterprise members. Thus, no inference could be made that defendants collectively engaged in a
high degree of planning, cooperation and coordination, as required under New Jersey law. Thus,
even though plaintiffs adequately demonstrated a pattern of racketeering and proximate cause,
and adequately pleaded their allegations of mail and wire fraud under the heightened pleading
standards, the court affirmed the Special Master’s recommendation that the New Jersey RICO
count be dismissed with prejudice.
Indus. Enters. of Am., Inc. v. Brandywine Consultants, 2011 Bankr. LEXIS 3560 (Bankr. Del.
Sept. 16, 2011).
In this Chapter 11 bankruptcy proceeding, plaintiff commenced an adversarial proceeding
alleging that two former executives of the bankrupt corporation defrauded the corporation and its
shareholders by inflating the value of the corporation’s stock, illegally issuing shares of stock,
and wrongfully retaining proceeds of stock sales. Defendants moved to dismiss plaintiff’s civil
RICO claims, arguing that they were barred by the statute of limitations and improperly
predicated on securities law violations. The court accepted plaintiff’s argument that the fouryear
statute of limitations had not expired and began to run only in April 2009, when the former
executives who were accused of wrongdoing left the corporation and their actions could have
first been discovered. The court also rejected defendants’ argument that plaintiff’s RICO claims
were improperly based on securities law violations, finding that plaintiff had properly alleged
mail fraud and stock transfers without value as RICO predicates.
Leibholz v. Hariri, 2011 WL 1466139 (D.N.J. Apr. 15, 2011).
Plaintiff asserted violations of the New Jersey RICO Act arising out of an alleged
contract between defendant and plaintiff, whereby defendant agreed to give equity in his
company to plaintiff in exchange for plaintiff’s consulting services. Plaintiff alleged that
defendant (1) executed a scheme to obtain and/or retain for himself stock promised to employees
and consultants of his company in exchange for their services, and (2) fraudulently valued
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