National Credit Union Admin. Bd. v. Regine, Civ. A. No. 89-0688 L.
| Decision Date | 22 October 1990 |
| Docket Number | Civ. A. No. 89-0688 L. |
| Citation | 749 F. Supp. 401 |
| Parties | NATIONAL CREDIT UNION ADMINISTRATION BOARD, as Conservator of Fairlawn Credit Union v. Anthony J. REGINE, Henry V. Rosciti, Anthony F. Rosciti, Michael A. Cinquegrano, Providence Marine Realty, Inc., and Barge In, Inc. |
| Court | U.S. District Court — District of Rhode Island |
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Eileen M. Hagerty of Kern, Sosman Hagerty, Roach & Carpenter, Boston, Mass., and Kevin Brill, of Corrente & Brill, Providence, R.I., for plaintiff.
George M. Vetter and Thomas W. Lyons, Vetter & White, Providence, R.I., and Robert Mann, of Mann & Mitchell, Providence, R.I., for defendants.
This matter is presently before the Court on the separate motions to dismiss of defendant Regine and defendants Henry V. Rosciti, Anthony F. Rosciti, Michael A. Cinquegrano, Providence Marine Realty, Inc. and Barge In, Inc. Failure to state a claim upon which relief may be granted under Fed.R.Civ.P. 12(b)(6), failure to satisfy the strictures of Fed.R.Civ.P. 9(b), and lack of subject matter jurisdiction pursuant to Fed. R.Civ.P. 12(b)(1) are the rationales supporting the instant motions.
This action was initiated by the National Credit Union Administration Board (NCUA), a federal agency, as conservator for the Fairlawn Credit Union (Fairlawn). The case is essentially one for fraud in which plaintiff alleges that the four individual defendants engaged in a scheme to defraud Fairlawn, a federally insured financial institution, by purchasing real property from the credit union at less than fair market value, concealing the interest of an officer and director (defendant Anthony Regine) in the transaction and then using the real estate to obtain a loan in an amount exceeding the purchase price of the land.
NCUA has brought suit against all the individual defendants for fraud, for violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq., and for violation of RICO's Rhode Island counterpart, R.I.Gen.Laws § 7-15-1 et seq. Plaintiff also alleges state law claims against all defendants for breach of contract and against defendant Regine for negligence, recklessness and breach of fiduciary duties. Plaintiff invokes the jurisdiction of this Court pursuant to 28 U.S.C. § 1345, 12 U.S.C. § 1789(a)(2), 28 U.S.C. § 1331, and 18 U.S.C. § 1964(c).
The facts in this case, as alleged by NCUA in its Amended Complaint, are as follows. NCUA became conservator of Fairlawn on November 15, 1989, and has continued to act as conservator since that date. Fairlawn is the successor in interest of Co-op Credit Union which merged with Fairlawn on March 17, 1988. In March 1987, defendant Regine was a director of Co-op and of Co-op's subsidiary, Park Place Holding Co., Inc. Between March 1987 and March 1988, Regine also served as vice-president of Park Place Holding, acting chairman of the board of directors of Co-op, director of Park Place Holding's subsidiary, Park Realty, Inc., president of Co-op and president of Park Realty. From March 17, 1988, to November 15, 1989, Regine served as a paid advisor to Fairlawn's board of directors.
During the time that Regine was an officer and director of Co-op and its subsidiaries, he and the other defendants were associated in various ways. Regine and defendant Anthony Rosciti are and were business partners in Barge In, Inc. and Providence Marine Realty, Inc. Anthony Rosciti's brother, defendant Henry Rosciti, was also active in Providence Marine. Defendant Michael Cinquegrano is and was employed by Rosciti Construction, Inc., the president of which is Henry Rosciti.
The piece of property which is at the center of the dispute in this case is identified as Plat 14, Lot 10 on Moosehorn Road in East Greenwich, Rhode Island (the Moosehorn property). Co-op obtained this parcel of real estate by foreclosure in July of 1980 and subsequently conveyed it to Park Place Holding in November of 1985. Park Place Holding received at least three offers to purchase the Moosehorn property, at prices ranging from $350,000.00 to $460,000.00. On March 9, 1987, however, allegedly on Regine's motion, the Board of Directors of Park Place Holding rejected those offers and instead conveyed the property to Park Realty. On August 31, 1987, Park Realty conveyed the property back to Co-op which in turn sold it to defendants Cinquegrano and Anthony Rosciti for $340,000.00 — a figure that plaintiff alleges was substantially less than the fair market value of the property at the time.
Approximately five months later, on February 8, 1988, Henry Rosciti, without furnishing any consideration, was substituted for Anthony Rosciti as an owner of the Moosehorn property. On the same day, Cinquegrano and Henry Rosciti used the property to obtain $485,000.00 in loan proceeds from Co-op, giving Co-op a mortgage on the real estate.
On March 24, 1989, Regine became co-owner, with Cinquegrano and Henry Rosciti, of the Moosehorn property. Regine furnished no consideration for this one-third ownership interest. Regine, Cinquegrano and Henry Rosciti still own the Moosehorn property. Cinquegrano and Henry Rosciti have been in default on their Moosehorn mortgage payments since May, 1989. Presently, with interest and other charges, plaintiff alleges that they owe Fairlawn more than the amount of the mortgage.
Turning to a history of the instant litigation, NCUA initially filed a seven count complaint alleging fraud against all the individual defendants, breach of fiduciary obligations against defendant Regine and breach of contract against all defendants. At that time, plaintiff asserted "agency" jurisdiction pursuant to 28 U.S.C. § 1345 and 12 U.S.C. § 1789(a)(2). On February 5, 1990, defendant Regine moved to dismiss the case for lack of subject matter jurisdiction. On February 13, 1990, plaintiff filed an Amended Complaint which added claims for violations of RICO, 18 U.S.C. § 1961 et seq., RICO's state equivalent, R.I.Gen. Laws § 7-15-1 et seq., and for negligence. After inserting the federal RICO claim, plaintiff also asserted federal question jurisdiction pursuant to 18 U.S.C. § 1964(c) and 28 U.S.C. § 1331.
On March 1, 1990, defendants moved to dismiss the Amended Complaint on a number of grounds. First, all defendants moved to dismiss the state and federal RICO claims and the state law fraud claim for failure to state a claim for which relief could be granted, under Fed.R.Civ.P. 12(b)(6), and for failure to plead fraud with specificity as required by Fed.R.Civ.P. 9(b). Defendant Regine moved to dismiss the count alleging breach of fiduciary duties on the same grounds. Finally, all defendants moved to dismiss the remaining claims for lack of subject matter jurisdiction, under Fed.R.Civ.P. 12(b)(1).
After having heard arguments on the motions of all defendants, the Court took the matter under advisement. The motions are now in order for decision.
The federal RICO statute provides that "any person injured in his business or property by reason of a violation" of the prohibitions on racketeering in 18 U.S.C. § 1962 may recover treble damages plus litigation costs and attorneys' fees. 18 U.S.C. § 1964(c). In this case, plaintiff's Amended Complaint alleges violations of all four of the activities prohibited in § 1962 which renders criminally and civilly liable "any person" who (a) uses or invests income derived "from a pattern of racketeering activity" to acquire an interest in or to operate an enterprise engaged in interstate commerce; (b) acquires or maintains an interest in or control of such an enterprise "through a pattern of racketeering activity;" (c), being employed by or associated with such an enterprise, conducts or participates in the conduct of its affairs "through a pattern of racketeering activity;" or, finally, one who (d) conspires to violate the first three subsections.
Subsection 1961(1)(B) defines an act of "racketeering activity" to include any act indictable under one of numerous federal criminal provisions, including the money laundering statute, 18 U.S.C. § 1956(a), and the statutes prohibiting mail and interstate wire fraud, 18 U.S.C. §§ 1341 and 1343. Plaintiff alleges that the actions of all the individual defendants are indictable under 18 U.S.C. § 1956(a) in that the defendants engaged in financial transactions knowing that the property involved represented the proceeds of activity proscribed by 18 U.S.C. §§ 657, 666, 1344, 2113(b), and knowing that the transactions were designed to conceal or disguise the nature, source, ownership, or control of said proceeds. Plaintiff also states in its Amended Complaint that, on information and belief, the defendants used the United States mails and interstate wire communications in order to carry out their fraudulent scheme.
Defendants contend that plaintiff's Amended Complaint fails to identify any cognizable wire fraud, mail fraud, or money laundering predicate acts, thereby mandating summary dismissal of the RICO count. In New England Data Services, Inc., v. Becher, 829 F.2d 286, 290 (1st Cir. 1987), the First Circuit held that although Rule 9(b) requires specificity in the pleading of RICO mail and wire fraud, dismissal is not necessarily required where the complaint fails to allege the exact details of just when and where the mail or wires were used. There, the plaintiff set out a general scheme to defraud and established an inference that the mails or wires were used to carry out the scheme. Id. at 291. Recognizing that, in this day and age, it is difficult to perceive how the defendants would have communicated without the use of the mails or interstate wires, the Court concluded that it would be unreasonable to dismiss the RICO claim without allowing additional discovery. Id. The Court also noted, however, that the plaintiff in Becher was not directly involved in the alleged fraudulent...
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