Breslin Realty Development Corp. v. Schackner
| Decision Date | 24 October 2005 |
| Docket Number | No. CV 05-1070.,CV 05-1070. |
| Citation | 397 F.Supp.2d 390 |
| Parties | BRESLIN REALTY DEVELOPMENT CORP., Plaintiff, v. Martin SCHACKNER, and Ilana Yeroushalmi a/k/a/ Nazila Yeroushalmi, and John Doe # 1 through John Doe # 5, the true identity of such defendants being unknown, the parties intended being persons and/or entities who participated with the other named defendants in the commission of the fraudulent and unlawful acts alleged to have been committed herein, Defendants |
| Court | U.S. District Court — Eastern District of New York |
Dollinger, Gonski & Grossman by Matthew Dollinger, Carle Place, for Plaintiff.
Siller Wilk, LLP by Eric J. Snyder, New York, for Defendant Martin Schackner.
This is an action setting forth state law claims for breach of contract and fraud as well as federal claims brought pursuant to the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962 ("RICO"). The factual allegations underlying all claims are the same. Essentially, defendants, former employees of Plaintiff, are alleged to have participated in a scheme pursuant to which they bilked Plaintiff of hundreds of thousands of dollars. The RICO claims are the sole basis for federal jurisdiction.
Presently before the court is the motion of defendant Martin Schackner, pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the RICO claims for failure to state a claim. For the reasons that follow, the motion is granted in part and denied in part.
In light of the fact that this case is presented, at this juncture, as a motion to dismiss, the court will outline here those facts relevant to the motion that are not in dispute and in the light most favorable to Plaintiff, the non-moving party.
Plaintiff is Breslin Realty Development Corp. ("BRDC"), a company that is engaged in the purchase, sale, leasing, management and development of real property for both commercial and residential use. Wilbur F. Breslin is the president and sole shareholder of BRDC.
Prior to his termination in 2004, Defendant Martin Schackner ("Schackner") was employed as the Chief Financial Officer ("CFO") of BRDC. Prior to being promoted to the CFO position, Schackner worked in various financial positions for BRDC, beginning in 1988. In his capacity as BRDC's CFO, Schackner is alleged to have been responsible for overseeing the financial affairs of BRDC as well as those of certain entities owned by Wilbur Breslin and his family. In particular, Schackner is alleged to have been responsible for supervising, inter alia: (1) the receipt of all funds due and payable to BRDC; (2) the payment of all employee salaries and benefits; (3) the transfer of funds by and among BRDC, and (4) the receipt and payment of vendor invoices. Schackner is also alleged to have been responsible for overseeing the accounting department of BRDC. It is alleged specifically that, with the exception of two enumerated accounts, Schackner was not an authorized signatory on any checking account maintained in the names of either BRDC, Wilbur Breslin or any entity in which Wilbur Breslin or his family had any interest.
Defendant Ilana Yeroushalmi ("Yeroushalmi"), is alleged to have been employed by BRDC beginning in 1994. Like Schackner, Yeroushalmi was terminated in 2004. At the time of her termination, Yeroushalmi was employed as BRDC's Assistant Comptroller. In this capacity, Yeroushalmi is alleged to have been responsible for overseeing BRDC's cash and payroll functions, under the supervision of Schackner.
In addition to Schackner and Yeroushalmi, the complaint names "Mary Roe," as a non-party defendant. Mary Roe is alleged to have begun her employment with BRDC in 1990 as the Assistant Comptroller of the BRDC accounting department. In this capacity, as set forth in the complaint, Mary Roe is alleged to have been required to "participate in the conduct of all of the financial affairs of BRDC as was required to be performed by its Accounting Department." Finally, the complaint names several "John Doe" defendants whose true identities are unknown, but who are alleged to have been involved in the commission of the unlawful acts set forth in the complaint.
The complaint alleges that Schackner, Yeroushalmi and Roe ("collectively" "Defendants") were employed by BRDC to provide services in a manner consistent with BRDC policies and were afforded salary and benefits (including stated vacation periods) according to clearly established company policy. BRDC's payroll was administered by Automatic Data Processing, an employer payroll servicing company ("ADP"). BRDC maintained a separate payroll account upon which ADP would draw to prepare company payroll checks. While Defendants' job responsibilities included the transfer of funds from BRDC accounts to this payroll account, none of the Defendants were signatories to the payroll account.
In or about 1999, BRDC instituted a 401(k) retirement plan for the benefit of its employees. Pursuant to that plan, BRDC contributed matching funds for the benefit of employees. According to the complaint, Schackner is alleged to have served as a trustee for the plan. As part of their responsibilities, Defendants were required to provide accurate retirement plan information to appropriate entities.
As noted, the complaint alleges that Defendants had the responsibility of transferring BRDC funds into payroll accounts administered by ADP. Defendants are also alleged to have been responsible for providing BRDC 401(k) retirement plan information to appropriate entities. Defendants are alleged to have abused these responsibilities by making numerous unauthorized transfers and payments to themselves.
The complaint details unlawful payments starting in 1996 and continuing through 2004. Unauthorized payments are alleged to have been made by Schackner, for his own benefit, beginning in 1996 and continuing every year until his termination in 2004. Unauthorized payments are alleged to have been made by Schackner for the benefit of Mary Roe for a four year period beginning in 1997 and lasting until her voluntary termination from BRDC in 2001. Yeroushalmi is alleged to have been the beneficiary of unlawful payments authorized by Schackner for a five year period extending from 1999 until the termination of her employment with BRDC in 2004. The fraudulent payments alleged to have been caused by either Schackner or "defendants" were in the form of unauthorized vacation pay, bonuses and excessive contributions to retirement accounts. Additionally, Schackner is alleged to have signed unauthorized manual payroll checks payable to himself. Payments detailed in the complaint are alleged to have been made by the regular wiring of funds into the BRDC payroll account.
Relying on the allegations set forth above, Plaintiff alleges state law claims for breach of contract, an equitable claim for an accounting, fraud and unjust enrichment. Plaintiff's federal claims are set forth in the eighth cause of action and are alleged pursuant to RICO, 18 U.S.C. §§ 1962(b)(c) and (d).
In support of the RICO claims, Plaintiff alleges that defendants "engaged in a pattern of wrongful conduct involving mail fraud and wire fraud by unlawfully converting sums of money belonging to BRDC in violation of law and by intentionally secreting, fictionalizing and falsifying business records so as to conceal the unlawful and criminal conduct committed by each of them, both in violation of Federal and State Statutes and in violation of their contractual and/or fiduciary obligations to BRDC."
As to specific predicate acts, Plaintiff alleges that defendants acted in violation of the federal mail fraud statute, 18 U.S.C. § 1341, by mailing fraudulent and unauthorized checks and purchase orders to ADP and various vendors. Wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346, is alleged in the form of the unauthorized wire transfer of funds in furtherance of the alleged RICO scheme.
Plaintiff alleges a pattern of racketeering activity on the basis of "numerous acts" of racketeering undertaken pursuant to a scheme that is alleged to have lasted for a period of ten years. Such acts are alleged to have been related in that "they involved the same or similar purposes, results, participants, victims and methods of commission and did not involved isolated or sporadic events." Plaintiff further alleges that these acts "extended over a regular ongoing and considerable period of time and involved the threat of continuing wrongful activities and conduct."
As to a RICO's "enterprise," Plaintiff alleges that Schackner, Mary Roe and Yeroushalmi, along with unnamed "Doe" defendants, participated in an "associational enterprise-in-fact affecting interstate commerce." This enterprise is alleged to have been devoted to the commission of acts of larceny and to have been formed for the purpose of carrying out the activities alleged in the complaint. The enterprise is further alleged to be an "on-going organization" that "functions as a continuing unit," the purpose of which is to "accomplish the theft of huge sums of money from the plaintiff for the benefit of defendants."
Finally, RICO "acquisition injury" is sought to be alleged in that Plaintiff states that while the fraudulent conduct was aimed primarily at Plaintiff, there were other victims. These victims are alleged to have been injured "in their business or property by reason of a violation" of RICO "by the fact that the plaintiff has been deprived of huge sums of money that have been secreted, stolen and otherwise taken from plaintiff in violation of both Federal and State Statutes."
Schackner moves to dismiss...
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