Perez-Rubio v. Wyckoff
| Decision Date | 10 August 1989 |
| Docket Number | No. 84 Civ. 8229(RJW).,84 Civ. 8229(RJW). |
| Citation | 718 F. Supp. 217 |
| Parties | Miguel PEREZ-RUBIO and Teresa Arrastia Perez-Rubio, as Individuals, and on behalf of themselves as the shareholders of Four Aquarius Limited, and in the Right of Four Aquarius Limited, in its behalf as a shareholder of Aquarius One Hundred Limited and One Hundred Aquarius Limited and in the Right of Aquarius One Hundred Limited and One Hundred Aquarius Limited, Plaintiffs, v. E. Lisk WYCKOFF, Jr., Trubin Sillcocks Edelman & Knapp, a partnership, Kelley Drye & Warren, a partnership, Conyers, Dill & Pearman, a partnership, H.C. Butterfield, Charles T.M. Collis, C.F. Alexander Cooper, Nicholas B. Dill, John A. Ellison, North Rock Enterprises Limited, Pembroke Company Limited, J. Douglas Robinson, Joseph V. Ossorio, the Bank of Nova Scotia Trust Company (Cayman) Limited, Royan D. Ellis, Kenneth Kent Pritchard, Edward C. Warwick, Sherwin B. Abrams, Marvin V. Ausubel, Lester S. Bardack, Charles R. Bergoffen, Lester M. Bliwise, Thomas J. Dee, Albert I. Edelman, Philip M. Eisenberg, Gerald M. Freedman, John Gutheil, Lewis R. Kaster, Russell S. Knapp, Lola S. Lea, Edward A. Manuel, Martin Pomerance, Paul E. Roberts, H. Jackson Sillcocks, Abraham M. Stanger, John Trubin, Robert S. Warshaw and P. Bruce Wright, Defendants. |
| Court | U.S. District Court — Southern District of New York |
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Murray, Hollander, Sullivan & Bass, New York City, Daniel J. Sullivan, James M. Minamoto, Helene Rothenberg, Eric B. Levine, of counsel, for plaintiffs.
Donovan, Leisure, Newton & Irvine, New York City, Owen McGivern, J. Peter Coll, William J. Ruane, of counsel, for defendant E. Lisk Wyckoff, Jr.
Wilson, Elser, Moskowitz, Edelman & Dicker, New York City, Edward J. Boyle, Steven Kent, Raymond J. Dorado, Nancy F. Shapiro, John Diviney, of counsel, for defendants Trubin, Sillcocks, Edelman & Knapp, Sherwin B. Abrams, Marvin V. Ausubel, Lester S. Bardack, Charles R. Bergoffen, Lester M. Bliwise, Thomas J. Dee, Albert I. Edelman, Philip M. Eisenberg, Gerald M. Freedman, John Gutheil, Lewis R. Kaster, Russell S. Knapp, Lola S. Lea, Edward A. Manuel, Martin Pomerance, Paul E. Roberts, H. Jackson Sillcocks, Abraham M. Stanger, John Trubin, Robert S. Warshaw and P. Bruce Wright.
Coudert Bros., New York City, Jerry L. Siegel, Michael J. Calvey, John E. McDermott, Jr., Kevin W. Goering, Andrew M. Gold, of counsel, for defendants Conyers, Dill & Pearman, H.C. Butterfield, Charles T.M. Collis, C.F. Alexander Cooper, Nicholas B. Dill, Jr., John A. Ellison, North Rock Enterprises Ltd., Pembroke Co. Ltd. and J. Douglas Robinson.
Shearman & Sterling, New York City, George J. Wade, James P. Tallon, Maria M. Patterson, of counsel, for defendant The Bank of Nova Scotia Trust Co. (Cayman) Ltd., Royan D. Ellis, Kenneth Kent Pritchard and Edward C. Warwick.
Spengler, Carlson, Gubar, Brodsky & Frischling, New York City, Edward Brodsky, Thomas H. Sear, Lawrence R. Gelber, Seth H. Agata, of counsel, for defendant Kelley Drye & Warren.
Miguel and Teresa Perez-Rubio (collectively referred to as the Perez-Rubios) brought this action asserting violations of the federal securities laws, of the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), and of various state laws. Defendants moved to dismiss the complaint pursuant to Rules 12(b)(6) and 9(b), Fed.R.Civ.P. In addition, certain defendants challenge, pursuant to Rule 12(b)(2), the Court's personal jurisdiction over them. The motions were referred to the Honorable Ruth V. Washington, United States Magistrate, pursuant to 28 U.S.C. § 636(b)(1) and Rule 4 of the Local Rules for Proceedings before Magistrates, to hear and report. On June 3, 1987 Magistrate Washington filed her Report and Recommendation (the "Report"), in which she recommended that defendants' motions to dismiss the securities fraud claims and the RICO claims be granted. Plaintiffs' time to file objections to the Report was extended. The Court has reviewed the Report and has considered de novo those portions to which plaintiffs have objected. For the reasons hereinafter stated, the Court declines to adopt the magistrate's recommendation and grants defendants' motions only in part.
For the purpose of deciding defendants' motions to dismiss, the allegations contained in plaintiffs' amended complaint are taken as true. Dwyer v. Regan, 777 F.2d 825, 827 (2d Cir.1985). The Perez-Rubios, who are citizens of the Republic of the Philippines, sought to invest in American securities. Beginning in 1974, Joseph C. Ossorio, who was then a principal in the New York Stock Exchange firm of Platt, Shaw & Ossorio, Inc. ("PS & O"), convinced the Perez-Rubios and a number of other foreign investors to provide funds for investment in the United States. Amended Complaint ¶ 9. E. Lisk Wyckoff explained to the investors, in some cases directly and otherwise through Ossorio, that they could invest their money in the United States and avoid paying United States taxes if title to the investments was to be held by one or more off-shore corporations. Wyckoff acted as the investors' attorney in the formation of the companies, while he also represented Ossorio and PS & O, who would be managing the investments. Id. ¶ 14. In or about March 1974, Wyckoff, acting in his capacity as agent for the investors, retained the Bermuda law firm of Conyers, Dill & Pearman ("Conyers Dill")1 and others to incorporate and manage a series of companies to hold title to the foreigners' investments. The companies were named respectively Aquarius One Limited, Aquarius Two Limited, etc. Id. ¶ 15. At least nine of these companies were established. Id. ¶ 17. Collectively, these companies are referred to as the Bermuda Aquarius Companies.
On or about April 11, 1974, the Perez-Rubios, acting on Ossorio's advice, retained PS & O. Id. ¶ 22. Wyckoff, as attorney for the Perez-Rubios and at Ossorio's request, formed Aquarius Four, Ltd. ("Aquarius 4") in Bermuda, to facilitate the Perez-Rubios' investment in American securities. Wyckoff undertook this assignment in May of 1974 and the corporation was formed on or about March 21, 1975. Id. ¶¶ 23, 24. The Perez-Rubios made an initial investment of $270,058 early in 1975; later, on separate occasions in 1975 and 1976, they made further investments of $25,000, $3,495 and $100,000. Id. ¶¶ 26, 27.
At Wyckoff's and Ossorio's instance, the Bermuda Aquarius Companies, including Aquarius 4, engaged PS & O as investment advisors, authorized PS & O to trade securities on their behalf, and issued general powers-of-attorney. Id. ¶¶ 16, 25.
In 1975, after Ossorio had left PS & O to join Drysdale & Company,2 he engaged Wyckoff to represent Drysdale. At Ossorio's and Wyckoff's instance, in or about May or June of 1975, the Bermuda Aquarius Companies terminated their agreements with PS & O; they engaged Drysdale as their investment advisor, gave Drysdale their trading authorization, and executed general powers-of-attorney to Ossorio. Id. ¶¶ 18, 28, 30.
In or about January of 1976, Wyckoff became a member of Trubin, Sillcocks, Edelman & Knapp ("Trubin Sillcocks")3 and arranged for Trubin Sillcocks to take over the representation of Ossorio, Drysdale and the Bermuda Aquarius Companies, including Aquarius 4. Id. ¶¶ 19, 30.
On or about August 2, 1976, Wyckoff arranged for the management of Aquarius 4 and the other Bermuda Aquarius Companies to be transferred to Conyers Dill, with the appointment of Conyers Dill partners as officers and directors of the companies. Id. ¶ 30.
In or about May and June of 1976, Wyckoff had arranged for the formation of Aquarius One Hundred Limited ("Aquarius 100"), which was managed by Conyers Dill. Id. ¶ 31. Ossorio, with the assistance of Wyckoff, used Aquarius 100 to pool the assets of the various Bermuda Aquarius Companies, including Aquarius 4. Each of the Bermuda Aquarius Companies was to have a beneficial interest in Aquarius 100 in proportion to its contribution to Aquarius 100's total assets. Id. ¶ 32.
At Wyckoff's request, the directors of Aquarius 100, who were partners of Conyers Dill, resolved that Ossorio's sole signature on any contract, check, bill of exchange, promissory note or other negotiable instrument would bind Aquarius 100. Id. ¶ 33. The directors executed a series of documents, all dated July 15, 1976, giving Drysdale and Ossorio broad authority to trade on behalf of Aquarius 100. Drysdale was authorized to open a corporate account in the name of Aquarius 100, and was authorized to trade in securities and commodities, including margin transactions, short sales and option transactions of any kind. Ossorio was authorized to buy, sell and trade securities, commodities and options with the privilege to withdraw money and/or securities from the account. A loan consent agreement authorized Drysdale to lend any securities held by Drysdale to itself or to others. Id. ¶ 34.
By 1976, Drysdale was experiencing financial difficulties, of which the Perez-Rubios were unaware. In that same year, Ossorio began to manipulate the Aquarius accounts and even to embezzle cash and securities from them, all to the benefit and gain of either Drysdale or himself. Id. ¶ 35. Aided and abetted by Wyckoff, Ossorio devised a scheme to use the assets of the Bermuda Aquarius Companies that had been transferred to the account of Aquarius 100, including those of the Perez-Rubios, to shore up Drysdale's capital position and to keep the New York Stock Exchange satisfied as to Drysdale's viability. Id. ¶ 36. Within the space of two months, between November 26, 1976 and January 14, 1977, Wyckoff and Ossorio caused Aquarius 100 to loan to Drysdale or to Ossorio individually an aggregate amount in excess of one million dollars. Id. ¶ 37. The money loaned to Ossorio was then re-loaned to Drysdale and could thus be shown as part of Drysdale's...
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