LaSalle Bank Lake View v. Seguban

• Decision Date: 23 August 1996
• Docket Number: No. 93 C 5949.,93 C 5949.
• Citation: 937 F. Supp. 1309
• Parties: LaSALLE BANK LAKE VIEW, an Illinois banking corporation, Plaintiff, v. Ellen SEGUBAN, Rafael Seguban and John DOE, Defendants.
• Court: U.S. District Court — Northern District of Illinois

937 F. Supp. 1309

LaSALLE BANK LAKE VIEW, an Illinois banking corporation, Plaintiff, v. Ellen SEGUBAN, Rafael Seguban and John DOE, Defendants.

No. 93 C 5949.

United States District Court, N.D. Illinois, Eastern Division.

August 23, 1996.

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Barry Alan Miller, Michael L. Shakman, Edward W. Feldman, Bernard A. Schlifke, Miller, Shakman, Hamilton, Kurtzon & Shlifke, Chicago, IL, for LaSalle Bank Lake View.

Brent Douglas Stratton, Jenner & Block, Chicago, IL, Patrick Alan Tuite, Arnstein & Lehr, Chicago, IL, for Ellen Seguban.

OPINION AND ORDER

NORGLE, District Judge:

Before the court is the renewed motion for summary judgment of Plaintiff LaSalle Bank Lake View ("Bank"). For the following reasons, the motion is granted in part and denied in part.

I. Background¹

The Bank brings this suit against Ellen Seguban ("E. Seguban") and Rafael Seguban ("R. Seguban") pursuant to the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968, including supplemental state claims for breach of fiduciary duty, conversion, and fraud. The Bank alleges that E. Seguban, its former Assistant Teller Manager, conducted a series of fraudulent transactions which divested the Bank of $940,000 over a twelve-year period between 1981 and 1993. The Bank also alleges that R. Seguban, E. Seguban's husband, accepted and used funds which he knew had been illegally taken from the Bank by his wife.

A. Procedural History

The Segubans claim that a criminal investigation is currently proceeding against both Segubans.² In response to the Bank's discovery requests throughout litigation of the instant civil suit, the Segubans invoked their Fifth Amendment privileges against self-incrimination and did not answer the Bank's attempts at discovery. At both the original summary judgment phase of this litigation and the instant renewed summary judgment phase, the Segubans did not file a Local Rule 12(N) statement answering the Bank's 12(M) statement.

On the original summary judgment motion, this court granted summary judgment in favor of the Bank in a previous opinion and order. See LaSalle Bank Lake View v. Seguban, 851 F.Supp. 336, 340 (N.D.Ill.1994). In so doing, the court stated that (1) the Segubans' failure to file a Local Rule 12(n) statement deemed admitted the facts contained in the Bank's 12(m) statement;³ (2) the court drew a negative inference from the Seguban's assertion of the Fifth Amendment in this civil case; and (3) in light of the preceding, there was no material issue of fact for trial. Id.

That judgment was reversed and remanded by the United States Court of Appeals, Seventh Circuit. LaSalle Bank Lake View v. Seguban, 54 F.3d 387, 394 (7th Cir. 1995). The opinion of the Seventh Circuit states,

Rule 12(N), which deems admitted un-rebutted Rule 12(M) facts that are evidentiarily supported, does no more than operationalize an inference that could in any event be reasonably drawn from Fifth Amendment silence in the face of such evidence — that the facts it reveals are true.

Id. at 391 (emphasis original). This inference alone does not lead to the entry of summary judgment, but simply establishes the facts upon which summary judgment analysis will proceed. Id. at 392. It was the analysis by this court which the Seventh Circuit found inadequate on appeal. Further, the Seventh Circuit opinion raised two legal issues, which it left to the consideration of this court: (1) whether the Bank, as a victim of an alleged RICO violation, could also be the "enterprise" through which the Segubans accomplished that violation, and (2) whether E. Seguban had sufficient control over the "operation or management" of the Bank to have caused such a violation. Id. at 393. This court reviews the Bank's renewed motion for summary judgment in light of the Seventh Circuit's observations.

B. Underlying Facts

The Bank states that E. Seguban created fictitious credit and debit transactions which rendered undetectable her many unauthorized cash withdrawals from the Bank's vault. She allegedly did so by taking advantage of an opportunity in the system used by the Bank to monitor cash flow in and out of its vault. The system consisted of various "checks and balances." Each time a bank teller received cash from the vault, the teller and the vault supervisor executed corresponding credit and debit receipts, known as "teller tickets." At the close of each day, the vault manager and the tellers submitted their teller tickets for entry into the Bank's records. Because corresponding credit and debit teller tickets arrived in separate batches from the vault and teller departments, they were processed separately. After approximately three days, if credit and debit receipts did not balance, the Bank's internal security controls were triggered and the unmatched transactions were investigated. The Bank states that, in September 1993, it discovered a discrepancy in the teller tickets which led it to investigate the transactions on the tickets in question.

The Bank questioned E. Seguban, who admitted to disguising fraudulent transactions by executing false teller tickets approximately every three days over a twelve-year period. E. Seguban also confirmed that she prepared the false teller tickets which triggered the Bank's internal investigation. She signed a statement to the effect that she did so in order to conceal a fraudulent transaction made by a former bank manager, identified only as "John Doe." She refused to disclose his "true" identity. The Bank's investigation revealed that E. Seguban's story about "John Doe" was false.⁴ The Bank also discovered that E. Seguban had diverted increasing amounts of money through each fraudulent transaction. The investigation revealed that she diverted a total of $940,000. The fraudulent transactions went undetected during the twelve-year period because, in her supervisory capacity, E. Seguban created new false teller tickets, totalling the full amount taken, every three days over that period, thus evading the Bank's three-day internal control trigger.

The Bank alleges that R. Seguban aided and abetted E. Seguban's embezzlement scheme. According to the Bank, R. Seguban knew that his wife was embezzling funds from the Bank over many years. Those funds were used to finance a family lifestyle which required far more than the Segubans' combined reported annual income of approximately $50,000.

The Bank claims that E. Seguban violated 18 U.S.C. § 1344 by knowingly executing a scheme (1) to defraud a financial institution, or (2) to procure funds under the custody of a financial institution by means of fraudulent pretenses, representations, or promises. Such a violation amounts to "racketeering activity" as defined by 18 U.S.C. § 1961. As it alleges that E. Seguban engaged in several acts of such racketeering activity over approximately twelve years, the Bank states that she engaged in a "pattern of racketeering activity" within the meaning of 18 U.S.C. § 1961. The Bank also alleges that E. Seguban is a "person" possessing the ability to operate or manage the Bank's business within the meaning of 18 U.S.C. § 1961. The Bank contends that it is an "enterprise" within the meaning of § 1961(4). Consequently, the Bank asserts that E. Seguban violated 18 U.S.C. § 1962(c) by conducting a pattern of racketeering activity via her employment at the Bank. The Bank claims resulting injury to its business or property in the amount of at least $940,000 of its funds.

The Bank requests an award of treble damages and attorney fees from E. Seguban. In addition, the Bank claims that the Segubans conspired to violate 18 U.S.C. § 1962(c), in violation of 18 U.S.C. § 1962(d). Therefore, the Bank asserts that both are jointly and severally liable for treble damages and attorney fees pursuant to 18 U.S.C. § 1964(c).

The Bank's first supplemental state claim asserts that E. Seguban breached her fiduciary duties of loyalty, honesty, and fair dealing to the Bank. The Bank also claims that R. Seguban knew of, encouraged, and solicited her embezzlement of the funds. Thus, according to the Bank, he is jointly and severally liable. Further, the Bank states claims for conversion and fraud against the Segubans.⁵

In support of its 12(M) statement, the Bank submits the following:

• E. Seguban's Answer to the Complaint, which exercises E. Seguban's Fifth Amendment privilege in lieu of answering the substantive allegations of the Complaint. E. Seguban's Answer does admit that she worked for the Bank for twenty years, until September 1993, and that she was the Assistant Teller Manager From February 1992 to September 1993. The Answer also admits that Seguban is a "person" within the meaning of 18 U.S.C. § 1961(3).

• The affidavit of Toni Stanek, Vice-President of the Bank since January 1994. Stanek's duties at the Bank include performing market valuations of real estate proposed as collateral for loans made by the Bank. Stanek inspected the Seguban's two-family home to estimate its market value. The second floor apartment was occupied by E. Seguban's parents, and the first by the Segubans. Stanek describes a "marked disparity" in the condition of the two units. Unlike the second floor, the first floor was "rehabbed," with a remodeled and upgraded kitchen. The living room contained a large-screen (forty-three inch) television and newer furniture. The bedroom closets and basement contained an "extremely large amount of clothing." Approximately sixty percent of the basement was used for clothing storage and included a segregated area containing hanging racks filled with clothing. There were numerous boxes containing unidentified items stacked in the kitchen pantry (which measured four feet by eight feet), two of the bedroom closets, and the basement. The property had been improved by a newer, high efficiency boiler with a water circulating pump servicing the radiator system. The building

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