Eplus Technology, Inc. v. Aboud

• Decision Date: 03 December 2002
• Docket Number: No. 02-1197.,02-1197.
• Citation: 313 F.3d 166
• Parties: EPLUS TECHNOLOGY, INCORPORATED, Plaintiff-Appellee, v. Patricia ABOUD, a/k/a Carole Girard, Defendant-Appellant, and Daniel Jacques Akerib; Jean-Marie Chartuny; George Bernachawy; John Doe, Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

313 F.3d 166

EPLUS TECHNOLOGY, INCORPORATED, Plaintiff-Appellee, v. Patricia ABOUD, a/k/a Carole Girard, Defendant-Appellant, and Daniel Jacques Akerib; Jean-Marie Chartuny; George Bernachawy; John Doe, Defendants.

No. 02-1197.

United States Court of Appeals, Fourth Circuit.

Argued September 25, 2002.

Decided December 3, 2002.

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ARGUED: John Francis Cahill, Carter, Ledyard & Milburn, Washington, D.C., for Appellant. Michael Edward Geltner, Geltner & Associates, P.C., Washington, D.C., for Appellee. ON BRIEF: Patrick C. Smith, Law Office of Patrick C. Smith, P.C., Baltimore, Maryland, for Appellant. Erica S. Stoecker, Herndon, Virginia, for Appellee.

Before WILLIAM W. WILKINS, JR., MICHAEL, and KING, Circuit Judges.

Affirmed by published opinion. Judge KING wrote the opinion, in which Judge WILLIAM W. WILKINS, JR., and Judge MICHAEL joined.

OPINION

KING, Circuit Judge.

During the technology boom of the late 1990s, Patricia Aboud organized several credit scams to defraud computer equipment suppliers. To recover losses resulting from one of these scams, ePlus Technology, Inc. ("ePlus") filed a civil action in the Eastern District of Virginia, asserting that Aboud had violated state tort law and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968 ("RICO"). Following a bench trial in 2001, the district court found Aboud liable on both state and federal claims, and it awarded ePlus $891,423 in damages, plus attorneys' fees and costs. ePlus Tech., Inc. v. Aboud, CA-00-699-A, Memorandum Opinion, at 20-21 (E.D.Va. Dec. 5, 2001) (the "Opinion").

In this appeal, Aboud raises several challenges to the court's judgment in favor of ePlus. She primarily insists that the court lacked jurisdiction over her, that her trial was tainted by the court's consideration of material not admitted into evidence, and that the evidence was insufficient to establish the "pattern of racketeering activity" necessary for a civil RICO violation. 18 U.S.C. § 1961(1), (5). Because Aboud's contentions are unavailing, we affirm the district court.

I.

A.

From the summer of 1999 until the spring of 2000, Aboud used a Canadian corporation to swindle computer equipment suppliers through what is known as a "bust-out scheme."¹ In a typical bust-out scheme, promoters form a seemingly legitimate corporation. At the outset of the scheme, the corporation's bills are paid, and its creditors are lured into extending larger and larger lines of credit. The schemers then use these inflated credit lines to obtain merchandise from suppliers, sell the merchandise at fire sale prices, and loot the corporation of its assets. Ultimately, the debtor corporation files for bankruptcy, and creditors can lose millions from unpaid and uncollectible debts. See United States v. Crockett, 534 F.2d 589, 592 (5th Cir.1976) (describing typical bust-out scheme).

1.

Aboud orchestrated such a bust-out scheme through her ownership and control of Micro Business Technology ("MBT"), a Canadian corporation ostensibly in the business of buying, assembling, and reselling computer components.² Opinion at 3. Aboud used MBT to establish credit lines with various wholesalers of computer equipment. Id. at 4. Just before MBT filed for bankruptcy in Canada, Aboud and her co-schemers charged large orders of computer equipment, sold the equipment at artificially-discounted prices, and stole the proceeds from MBT, leaving MBT with neither assets nor records. By the time MBT filed for bankruptcy in March of 2000, Aboud and her co-schemers had defrauded MBT's creditors out of millions of dollars. Id. at 5, 7-8, 14. As the district court found, "[t]he scope of the bust out scheme perpetrated by Aboud and her coconspirators is highlighted by the number of victims and the magnitude of their losses." Id. at 14.

MBT's business with ePlus commenced in a seemingly innocent fashion during the summer of 1999. In July of that year, George Bernachawy, "representing MBT and acting in furtherance of Aboud's scheme and conspiracy," placed two small orders for computer equipment with International Computer Networks ("ICN"). Id. at 6. These orders totaled between $15,000 and $20,000, and MBT paid for them with a credit card. Id. Within weeks after these orders were placed, ePlus acquired ICN. Thereafter, Bernachawy "pressed [ePlus] to allow MBT to purchase larger orders of computer components on credit from plaintiff, purportedly for use in connection with MBT's manufacture and assembly of clone PCs." Id. Bernachawy represented to ePlus that MBT needed computer parts to use in its Canadian computer assembly factory, which he claimed employed thirty workers. In truth, there was no MBT factory, MBT never had more than six employees, and fraud — not computer assembly — was MBT's business. Id. at 4.

During the latter part of 1999, Bernachawy, representing MBT and acting on behalf of Aboud, continued to order computer equipment and supplies from ePlus. With an initial thirty-day credit limit of $25,000, Bernachawy ordered, and MBT timely paid for, over $450,000 in computer components. Id. at 7 n. 8. The business relationship between MBT and ePlus progressed without incident until December 1999, when MBT was late on a payment. Id. at 7. At this point, ePlus contacted Bernachawy regarding the unpaid bill, and Bernachawy falsely told ePlus that the payment was late because MBT could not obtain a certified check while Canadian banks were closed over the holiday season.³ During this telephone conversation Bernachawy attempted to order additional computer components, but ePlus declined to extend MBT's credit because of its outstanding debt to ePlus. Ultimately, MBT made the overdue payment to ePlus, but the payment was approximately two weeks late. Id.

Following this late payment, "plaintiff increased MBT's credit line, reasonably relying on the false statements and promises of Aboud and her agents." Id. Thereafter, in March 2000, MBT was late on another payment to ePlus for approximately $129,000. When ePlus contacted MBT, Bernachawy asserted that the payment had been delayed because Aboud was selling MBT to a Chicago company owned by a Daniel Akerib. Id. Aboud did in fact transfer her MBT stock to Akerib, one of her co-schemers, on February 23, 2000. According to the district court, however, "[i]t is clear that the alleged `purchase' of MBT was executed to allow Aboud to deny she had anything to do with the bust out scheme, although she continued in fact to be part of the scheme." Id. at 7 n. 9. Aboud, using the alias "Carole Girard," continued to control MBT after transferring her MBT stock. Id. As the nominal owner of MBT, Akerib functioned as Aboud's front-man and accomplice in the bust-out scheme, and he became the "fall guy" in MBT's bankruptcy. Id. at 3.

When Bernachawy falsely advised ePlus about the change in MBT's control, he also attempted to place another order for more than $120,000 of computer equipment. Id. at 8. Because of the debt owed by MBT, however, ePlus refused to ship any additional orders. Id. Bernachawy then promised ePlus that MBT would immediately pay the outstanding bill, and ePlus received a check, in the sum of $129,000, on March 20, 2000. Id. Relying on this tender of payment, ePlus shipped MBT half of the new order, valued at $66,420. Id. As the court found, however, "Aboud and her co-conspirators knew full well that the $129,000 check would not be paid and they also never intended to pay for the new shipment." Id.

On March 23, 2000, MBT filed for bankruptcy in Montreal, Canada. On that same day, Bernachawy called ePlus to request that it ship the other half of the $120,000 order. Id. In this conversation, Bernachawy concealed MBT's bankruptcy filing, and he failed to advise ePlus that the $129,000 check was drawn on insufficient funds. In this conversation, ePlus advised Bernachawy that no additional shipments would be sent to MBT until its account with ePlus was cleared. In response, Bernachawy stated that MBT was sending yet another check. Id. at 8-9.

2.

In the execution of this scheme, Aboud played a central role. She "acted as MBT's president and was the leader of the conspiracy," and MBT's employees acted as her agents and co-conspirators in conducting the fraudulent affairs of MBT. Id. at 6. Furthermore, Aboud personally prepared and faxed to potential suppliers several credit applications that contained misleading credit references and false statements regarding MBT's business. Id. at 4-6. For example, "[i]n furtherance of the scheme, to persuade plaintiff to allow MBT to purchase larger orders on credit, in August 1999, Aboud transmitted to plaintiff by facsimile a credit application falsely stating that MBT upgraded and built computer systems." Id. at 6. Aboud also listed a company affiliated with MBT, Olympique Transport, as an independent credit reference. In truth, Olympique Transport was "a company that was located next door to MBT and was in fact not independent of MBT." Id.

Similarly, Aboud, as part of the scheme, provided false information to Dun & Bradstreet in connection with its preparation of two reports on MBT, a Business Information Report and a Supplier Evaluation Report (collectively, the "D & B Reports"). Id. at 9. Such reports are routinely used by creditors in assessing whether to extend credit to other businesses. In submitting information to Dun & Bradstreet, Aboud misrepresented the number of MBT's employees, the nature of MBT's business, and the fact that she and Girard were the same person. Significantly, Aboud's false statements to creditors and to Dun & Bradstreet gave the appearance that MBT was a legitimate company. Id. at 4-5, 17 n. 15.

In addition to the misrepresentations she made to Dun & Bradstreet, Aboud lied to MBT's creditors about her identity. She frequently used her alias, Carole Girard, to distance herself from the...