Case 1:11-cv-02794-KMW Document 118 Filed 09/30/14 Page 1 of 20
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`UNITED STATES DISTRICT COURT
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`SOUTHERN DISTRICT OF NEW YORK
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`YULIA TYMOSHENKO, SCOTT SNIZEK,
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`CHRISTY GREGORY RULLIS, and JOHN
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`DOES 1 through 50, On Behalf of Themselves
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`and All Those Similarly Situated,
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`Plaintiffs,
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`-against-
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`DMYTRO FIRTASH, et al.,
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`Defendants.
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`KIMBA M. WOOD, District Judge:
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`11-CV-2794 (KMW)
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` OPINION AND ORDER
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`The Second Amended Complaint (“SAC”) in this action alleges that several Ukrainian
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`defendants, led by businessman Dmytro Firtash, financed a domestic racketeering enterprise (the
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`“U.S. Enterprise”) conducted primarily by defendant United States citizens and corporations.
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`Plaintiff Yulia Tymoshenko is the former Prime Minister of Ukraine and a longstanding critic of
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`Firtash’s energy company, RosUkrEnergo (“RUE”). Money laundered by the U.S. Enterprise
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`was allegedly used to finance Tymoshenko’s “persecution” in Ukraine, in retaliation for her
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`hostility to RUE while in office. Plaintiffs Scott Snizek and Christy Gregory Rullis, meanwhile,
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`are former employees of several defendant U.S. corporations that allegedly participated in the
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`U.S. Enterprise. According to the SAC, those corporations failed to provide wages and other
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`benefits promised to Snizek and Rullis. The SAC claims that the defendants’ conduct violated
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`the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961–1968,
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`and state fraud law.
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`1
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`Case 1:11-cv-02794-KMW Document 118 Filed 09/30/14 Page 2 of 20
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`Several defendant U.S. corporations and citizens — CMZ Ventures, LLC (“CMZ”); the
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`Dynamic Group (“Dynamic”); Barbara Ann Holdings, LLC; Vulcan Properties, Inc. (“Vulcan”);
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`Paul Manafort; and Brad Zackson (collectively, the “Moving Defendants”) — have moved to
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`dismiss the SAC with prejudice pursuant to Federal Rules of Civil Procedure 12(b)(2) and
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`12(b)(6).1 For the reasons set forth below, the Court GRANTS the motions to dismiss the SAC,
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`but with leave for Plaintiffs to amend.
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`I.
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`BACKGROUND
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`A. The Amended Complaint
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`On December 19, 2011, Tymoshenko filed the Amended Complaint (“AC”) in this action
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`on behalf of herself, unnamed former members of her administration, and all those similarly
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`situated. See [Dkt. No. 23]. The Court’s opinion in Tymoshenko v. Firtash, No. 11-CV-2794,
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`2013 WL 1234821 (S.D.N.Y. Mar. 26, 2013) (Wood, J.) (“Tymoshenko I”), describes the AC’s
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`factual allegations in detail. To summarize briefly here, the AC claimed that Firtash and his
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`associates directed Ukrainian officials to unlawfully persecute and arbitrarily detain the
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`plaintiffs, in retaliation for the plaintiffs’ political opposition to RUE. See AC ¶¶ 15, 93–94,
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`160–162, 279. The Ukrainian officials did Firtash’s “bidding” because he had secured their
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`loyalty through the payment of “illegal kickbacks.” Id. ¶ 94, 279. Firtash financed those
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`kickbacks, in turn, with money he laundered through transactions with a “labyrinth” of defendant
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`U.S. corporations and citizens. Id. ¶ 105.
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`The AC brought federal claims under RICO and the Alien Tort Statute (“ATS”), 28
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`U.S.C. § 1350, as well as state law claims for breach of fiduciary duty and malicious
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`1 Vulcan filed a separate motion to dismiss in which it “joins, adopts and incorporates the arguments” made
`by the other Moving Defendants. Mem. of Law in Supp. (Vulcan) [Dkt. No. 93] at 3. Consequently, the Court
`considers the motions together.
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`2
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`Case 1:11-cv-02794-KMW Document 118 Filed 09/30/14 Page 3 of 20
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`prosecution. See id. ¶¶ 261–294. The AC claimed that the defendants had violated RICO by
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`laundering Firtash’s money, and had violated the ATS by using some of that money to
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`orchestrate and implement arbitrary detentions in Ukraine. See id. Several defendants moved to
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`dismiss the AC in its entirety, arguing primarily that the AC failed to state any claim upon which
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`relief could be granted. See [Dkt. Nos. 45, 50, 57].
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`On March 26, 2013, this Court dismissed the AC. See Tymoshenko I, 2013 WL 1234821,
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`at *1. In keeping with this District’s jurisprudence at the time, the Court dismissed the AC’s
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`RICO claim as impermissibly extraterritorial because the alleged enterprise and pattern of
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`racketeering were both essentially foreign. See id. at *11–13. The Court dismissed the ATS
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`claim, in turn, because the AC failed to plead facts sufficient to establish that plaintiffs’
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`detentions were arbitrary (or that the U.S. defendants aided and abetted those detentions). Id. at
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`*7–11. Having dismissed all claims over which it had original jurisdiction, the Court then
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`declined to exercise supplemental jurisdiction over the remaining state-law claims. Id. at *13.
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`The Court granted the plaintiffs leave to amend. Id. at *14.
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`B. The Second Amended Complaint
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`On November 11, 2013, Tymoshenko, now joined by Snizek, Rullis and several unknown
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`“John Doe” U.S. corporations and citizens, filed the SAC. See [Dkt. No. 87]. It names as
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`defendants Firtash and his alleged associate, Semyon Mogilevich; several Ukrainian John Does;
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`four Ukrainian corporations allegedly controlled by Firtash, which do business using the name
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`“Group DF”; and several U.S. corporations and citizens. With the exception of two U.S.
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`citizens, all of those defendants are carried over from the AC. The SAC initially asserted RICO
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`claims and state law claims for fraud and malicious prosecution. Id. ¶¶ 122–137. Plaintiffs have
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`3
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`since withdrawn their malicious prosecution claim. See Mem. of Law in Opp. [Dkt. No. 97] at
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`23 n.24.
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`The SAC reiterates many of the AC’s allegations but ostensibly describes a different,
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`“U.S.-based” racketeering enterprise. SAC ¶ 2; see also Mem. of Law in Opp. 3. The factual
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`allegations that follow are accepted as true for the purposes of the Moving Defendants’ motions
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`to dismiss. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
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`i. RUE’s Operations and Income in Ukraine
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`From 2004 to 2009, RUE earned millions of dollars by serving as a “middleman” in
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`natural gas contracts between Naftogaz, a Ukrainian state-owned gas company, and Gazprom, a
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`Russian gas company. See SAC ¶¶ 3, 5, 22. Firtash secured RUE’s participation in those
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`contracts through “his close relationship with, and payment of illegal kickbacks to, Ukrainian
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`government officials.” Id. ¶ 3.
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`In December 2007, Tymoshenko — a “vocal critic” of RUE — became Ukraine’s Prime
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`Minister. Id. ¶¶ 5, 106. Over the next two years, she took several steps to exclude RUE from
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`Ukraine’s natural gas transactions with Russia. In 2008, Tymoshenko revoked the authority of
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`an RUE/Naftogaz joint venture to operate in Ukraine, and in 2009, she negotiated new natural
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`gas contracts with Russia that eliminated RUE as an intermediary. Id. ¶¶ 106–107. Those new
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`contracts also provided for Naftogaz to take control of, and assume the debt for, 11 billion cubic
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`meters of natural gas that Gazprom had delivered to RUE, but for which RUE had not yet paid.
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`Id. ¶ 108.
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`After Naftogaz took control of RUE’s natural gas, RUE and Firtash sought legal redress.
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`They initially sued Naftogaz in Ukrainian court; when that action proved unsuccessful, they filed
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`an international arbitration claim with the Arbitration Institute for the Stockholm Chamber of
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`Commerce. Id. ¶¶ 114–115. Under Tymoshenko’s leadership, Naftogaz contested RUE’s
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`arbitration claim. Id. ¶ 116. In February 2010, however, Viktor Yanukovych — an ally of
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`Firtash — narrowly defeated Tymoshenko to become the President of Ukraine, which prompted
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`Tymoshenko to resign as Prime Minister. Id. ¶¶ 36–37. Under Yanukovych’s leadership,
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`Naftogaz changed course in the arbitration and admitted that RUE’s claim was valid. Id. ¶¶ 116–
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`117. In June 2010, the Stockholm tribunal found in favor of RUE and ordered Naftogaz to
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`transfer 11 billion cubic meters of natural gas, plus interest, to Firtash’s company. Id. ¶ 118.
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`The gas was valued at $3.5 billion at the time. Id.
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`ii. The Defendants Use RUE’s Income as “Initial and Ongoing Financing” for the
`U.S. Enterprise
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`Firtash and his co-defendants used some of the money that RUE received from its natural
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`gas contracts and related arbitration as “initial and ongoing financing” for a “U.S.-based
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`Racketeering Enterprise.” Id. ¶¶ 19, 22. The U.S. Enterprise consisted largely of U.S.
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`corporations and citizens working together to commit “money laundering and other racketeering
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`acts . . . from their New York base under the guise of otherwise legitimate real estate deals and
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`other investment activities in New York and elsewhere in the United States.” Id. ¶ 20. The SAC
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`identifies 39 corporate entities that participated in the U.S. Enterprise. Id. ¶ 61.
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`Firtash and others “funneled” money to the U.S. Enterprise through several types of
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`transactions. Id. ¶ 20. First, Firtash wired funds for the ostensible purpose of financing real
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`estate investment proposals prepared by defendant U.S. corporations. Id. ¶ 80. Those proposed
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`investments were, by design, never consummated; they served merely as a pretense for Firtash to
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`send money to the U.S. Enterprise. Id. The SAC identifies one wire transfer of this type. In
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`2008 and 2009, three defendant companies — CMZ, Dynamic, and Calister Investments
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`(“Calister”), all of which served as “investment vehicles” for Firtash, id. ¶ 17 — collectively
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`Case 1:11-cv-02794-KMW Document 118 Filed 09/30/14 Page 6 of 20
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`sought to purchase and rebuild the “Drake Hotel project site” in New York. Id. ¶¶ 82–86.
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`Firtash, acting through one of his Ukrainian corporations, committed to invest $112 million in
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`the project, and actually wired $25 million to CMZ, Dynamic, and Calister’s domestic escrow
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`account. Id. The U.S. companies never closed on the deal, but they retained access to Firtash’s
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`$25 million. Id. ¶ 87.
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`The SAC describes two additional sham investment proposals that never closed: CMZ,
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`Dynamic and Calister’s “South Cat Cay Island” project in Miami, and CMZ and Dynamic’s “St.
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`Johns Terminal project” in New York. Id. ¶¶ 88–92. Although the SAC alleges that Firtash
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`“agreed to finance” both proposals, it does not identify any associated transfer of funds. Id.2
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`Second, Firtash instructed CMZ and its affiliates to market in the United States various
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`foreign real estate properties that Firtash and his Ukrainian corporations owned. Id. ¶ 93. That
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`marketing was “aimed at obtaining American investment money at fraudulently inflated prices in
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`order to enhance the [U.S.] Enterprise’s financing.” Id. The SAC does not identify any
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`properties sold through this marketing campaign, or explain how property prices were
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`fraudulently inflated.
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`Third, Firtash — acting through a non-defendant Viennese corporation — purchased a
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`controlling interest in Ukraine’s Nadra Bank. Id. ¶ 102. Firtash and other defendants
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`subsequently used the bank “to transfer unlawfully obtained proceeds from the Stockholm
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`arbitration and recent natural gas transactions to bank accounts in New York in furtherance of
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`their racketeering activities.” Id. ¶ 104. The SAC does not identify any particular transaction
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`through which Nadra Bank transferred money.
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`2 The SAC also claims that Firtash and Manafort discussed establishing another, apparently legitimate real
`estate investment vehicle, the “Global Real Estate Fund.” SAC ¶ 72. The SAC alleges that Firtash initially
`promised to invest $100 million in the fund and pay CMZ a $1.5 million fee for “manag[ing] the establishment” of
`the company. See id. ¶ 73. Again, however, the SAC does not identify any associated money transfer.
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`Finally, Firtash and his associates established several Panamanian corporations to
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`“siphon off and transfer their funds to New York bank accounts.” Id. ¶ 96. The SAC does not
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`clarify how the Panamanian corporations facilitated the movement of money to New York. The
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`SAC identifies one specific transaction involving a Panamanian corporation, in which CMZ,
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`along with a non-defendant law firm, deposited $500,000 in the Panamanian entity DVN
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`Eleuthera Development, Inc. Id. ¶ 98.
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`Firtash also established Dynamic BL Health, LLC, a company “purportedly aimed at
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`importing low-cost prescription drugs from Canada to the United States,” but actually created “to
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`launder funds for the Racketeering Enterprise.” Id. ¶ 101. The SAC does not explain whether
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`Dynamic BL Health functioned to “funnel” Firtash’s money to the U.S. Enterprise, facilitate the
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`U.S. Enterprise’s acts of money laundering, or both.
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`iii. The U.S. Enterprise’s Racketeering Activities
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`The SAC asserts that the U.S. Enterprise engaged in racketeering activity that violated
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`three RICO predicate statutes: 18 U.S.C. § 1343, the wire fraud statute; 18 U.S.C. § 1341, the
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`mail fraud statute; and 18 U.S.C. § 1956, the money laundering statute. See id. ¶¶ 124–125.
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`a. Wire and Mail Fraud
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`Plaintiffs never explicitly identify any particular act or transaction that constituted wire or
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`mail fraud. The SAC does, however, describe three courses of fraudulent conduct by the
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`defendants. First, domestic corporations participating in the U.S. Enterprise falsely promised to
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`provide their employees, including Snizek and Rullis, with “salaries, commissions and other
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`benefits, as well as career opportunities,” and misrepresented “that the defendant companies . . .
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`were legitimate and reputable.” Id. ¶ 131. That scheme purportedly “resulted in substantial
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`financial losses to the U.S.-based plaintiffs and plaintiff class members, including lost income,
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`interference with business careers, and lost opportunities which plaintiffs would have pursued.”
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`Id. ¶ 133. Second, as described above, defendants prepared sham real estate investment
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`proposals. Those proposals “misled” the owners of the target properties “into believing that [the]
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`defendants had a serious and good-faith intent to ‘close,’” which “wasted” the property owners’
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`“time and money.” Id. ¶ 128. Third, also as previously described, CMZ planned to market
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`Firtash’s properties in the United States at “fraudulently inflated” prices. See id. ¶¶ 93–95.
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`The defendants used interstate wires or mail in connection with two of those three
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`courses of fraudulent conduct: the sham real estate investment proposals and the overpriced
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`property marketing. Regarding the investment proposals, (1) Group DF Director David Brown
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`sent a letter to Calister, care of Dynamic, stating that “Group DF Finance Limited was ‘prepared
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`to provide $112 million in equity’” for the Drake Hotel project, “‘and had executed a $25 million
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`escrow deposit,’” id. ¶ 84 & Ex. 20; (2) Defendant Zackson sent an email to the owner of the
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`Drake Hotel site reporting that “‘CMZ’s 112[ ]m[illion] in equity has been firmed up and is
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`ready to go,’” id. ¶ 83 & Ex. 19; (3) Rick Gates, an associate of Firtash, sent an email to Zackson
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`attaching an escrow agreement between Group DF and Calister that “confirmed that $25 million
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`had been wired” to CMZ, Dynamic and Calister’s escrow account, id. ¶ 85 & Ex. 21;
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`(4) Zackson sent an email to unidentified recipients stating that “he had received ‘everyone’s
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`approval’ on the offer for the Drake site proposal,” id. ¶ 86;3 and (5) Dynamic sent a brochure
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`related to the St. John’s Center Redevelopment project to “Group DF, Firtash, and others” by
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`email and mail, id. ¶ 89 & Ex. 24.
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`Regarding the overpriced property marketing, (a) Carolyn Schlam, whose affiliation is
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`not clear, sent an email to CMZ requesting pictures in connection with “a DF properties
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`3 The SAC indicates that this email is Exhibit 23, but Plaintiffs failed to file that exhibit electronically.
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`presentation,” id. ¶ 94 & Ex. 27; (b) Gates sent an email to Zackson attaching a “presentation on
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`Group DF,” id. ¶ 94; and (c) “[v]arious defendants and CMZ Ventures employees” exchanged
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`emails attaching drafts of “the DF Properties presentation,” id. ¶ 95 & Ex. 28. The SAC does not
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`identify any wire or mail communication related to the defendants’ misrepresentation of
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`employee benefits. See id. ¶¶ 76, 131–133.
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`b. Money Laundering
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`The SAC asserts that the transactions through which Firtash “funneled” money to the
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`U.S. Enterprise, described in detail above, constituted acts of money laundering by the
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`defendants. See id. ¶ 19 (claiming that Firtash was “able to money launder” his “funds” by
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`becoming a “major ‘investor’” in CMZ); id. ¶ 23 (alleging that Firtash “utilize[d] various U.S.
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`based companies to facilitate [his] money laundering”); id. ¶ 80 (asserting that Firtash’s
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`investments in real estate projects were “abruptly ‘withdrawn’” after they “had been sufficiently
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`‘laundered’”); id. ¶ 99 (describing the purpose of Firtash’s Panamanian corporations as “to
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`siphon off and ‘launder’ funds . . . for defendants’ benefit”).
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`The SAC also asserts that the U.S. Enterprise used the money it received from Firtash to
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`“finance” additional “money laundering . . . from [its] New York base.” SAC ¶ 20; see also id.
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`¶¶ 23, 62. The SAC does not explicitly identify any additional act or transaction that constituted
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`money laundering, but it describes two uses of the U.S. Enterprise’s funds distinct from the
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`transactions with Firtash described above. First, the U.S. Enterprise used its “money laundered
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`funds” to “purchase and/or maintain an interest in the various defendant companies that
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`comprised part of the Racketeering Enterprise.” SAC ¶ 22. Second, “a portion of the [U.S.
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`Enterprise’s] money-laundered funds were . . . funneled back to Ukraine to provide the
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`‘financing’ for the persecution and political suppression of Tymoshenko.” Id. ¶ 22. The SAC
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`does not specify who transferred that money or how the money was transferred. And although
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`the SAC explains that Tymoshenko was persecuted in Ukraine through several politically
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`motivated prosecutions, it never mentions what role, if any, money transferred from the U.S.
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`Enterprise played in those prosecutions. See id. ¶¶ 45–53.
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`II.
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`LEGAL STANDARD
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`To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must plead facts sufficient “to
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`state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
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`(2007). A claim is facially plausible when the supporting factual allegations “allow[] the court to
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`draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556
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`U.S. at 678. Where a plaintiff has failed to “nudge” a claim “across the line from conceivable to
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`plausible,” a district court must dismiss the complaint. Twombly, 550 U.S. at 570.
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`The Court must accept as true all well-pleaded factual allegations in a complaint and
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`“draw[] all inferences in the plaintiff’s favor.” Allaire Corp. v. Okumus, 433 F.3d 248, 249–50
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`(2d Cir. 2006) (internal quotations omitted). But a court is “not bound to accept as true a legal
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`conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555.
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`III. DISCUSSION
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`The Moving Defendants contend that the SAC fails to plead the elements of either a civil
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`RICO claim or a state-law fraud offense, and that the SAC’s RICO claims impermissibly apply
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`the statute to extraterritorial conduct.4 See Mem. of Law in Supp. (Manafort et al.) [Dkt. No.
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`89]; Mem. of Law in Supp. (Vulcan) [Dkt. No. 93]. The Court agrees that the SAC fails to plead
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`a civil RICO violation, because it does not plead a predicate act of racketeering that proximately
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`4 Defendant Manafort also moves for dismissal, as he did regarding the AC, because the Court lacks
`personal jurisdiction over him. See Mem. of Law in Supp. (Manafort et al.) 17–20. As it did in Tymoshenko I, the
`Court now resolves Manafort’s motion without reaching that jurisdictional argument.
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`caused Plaintiffs’ injuries. Accordingly, the Court dismisses the SAC’s RICO claims without
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`reaching the issue of extraterritoriality.
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`A. The SAC’s RICO Claims
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`Under 18 U.S.C § 1962, a person can violate RICO in four ways. First, the statute bars
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`“any person who has received any income derived, directly or indirectly, from a pattern of
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`racketeering activity” from investing that income “in acquisition of any interest in, or the
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`establishment or operation of, any enterprise” affecting interstate or foreign commerce. 18
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`U.S.C. § 1962(a). Second, the statute bars any person from acquiring or maintaining “any
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`interest in or control of any [such] enterprise” “through a pattern of racketeering activity.” Id.
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`§ 1962(b). Third, the statute bars “any person employed by or associated with [such an]
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`enterprise” from “conduct[ing] or participat[ing], directly or indirectly, in the conduct of such
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`enterprise’s affairs through a pattern of racketeering activity.” Id. § 1962(c). Fourth, RICO bars
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`any conspiracy to commit the preceding violations. Id. § 1962(d).
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`Thus, to violate 18 U.S.C. § 1962(a)–(c), a person must affect an “enterprise” through a
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`“pattern of racketeering activity.” An enterprise “includes any individual, partnership,
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`corporation, association, or other legal entity, and any union or group of individuals associated in
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`fact although not a legal entity.” Id. § 1961(4). A pattern of racketeering activity, in turn,
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`requires at least two “predicate acts” that would violate a specified state or federal law, and that
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`are “related to each other and to the enterprise.” United States v. Daidone, 471 F.3d 371, 376
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`(2d Cir. 2006); see 18 U.S.C. § 1961(5). As for 18 U.S.C. § 1962(d), “[b]ecause the core of a
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`RICO civil conspiracy is an agreement to commit predicate acts, a RICO civil conspiracy
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`complaint, at the very least, must allege specifically such an agreement.” Hecht v. Commerce
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`Clearing House, Inc., 897 F.2d 21, 25 (2d Cir. 1990).
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`RICO provides a civil remedy for “[a]ny person injured in his business or property by
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`reason of a violation of section 1962.” 18 U.S.C. § 1964(c). In order to establish RICO
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`standing, therefore, “a plaintiff must plead (1) the defendant’s violation of [18 U.S.C] § 1962,
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`(2) an injury to the plaintiff’s business or property, and (3) causation of the injury by the
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`defendant’s violation.” Commercial Cleaning Servs., L.L.C. v. Colin Serv. Svs., Inc., 271 F.3d
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`374, 380 (2d Cir. 2001). To satisfy that causation requirement, “the plaintiff is required to show
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`that a RICO predicate offense not only was a ‘but for’ cause of his injury, but was the proximate
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`cause as well.” City of New York v. Venkataram, 396 F. App’x 722, 724 (2d Cir. 2010) (quoting
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`Hemi Grp., LLC v. City of New York, 559 U.S. 1, 9 (2010)).
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`To establish proximate causation under civil RICO, a plaintiff must show that an
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`enterprise’s acts of racketeering “were a substantial factor in the sequence of responsible
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`causation,” and that the plaintiff’s injury “was reasonably foreseeable or anticipated as a natural
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`consequence.” Lerner v. Fleet Bank, N.A., 318 F.3d 113, 123 (2d Cir. 2003) (internal quotation
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`marks omitted); see also Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 497 (1985) (“Any
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`recoverable damages occurring by reason of a violation of § 1962(c) will flow from the
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`commission of the predicate acts.”); Picard v. Kohn, 907 F. Supp. 2d 392, 397 (S.D.N.Y. 2012)
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`(Rakoff, J.) (explaining that “proximate cause” under civil RICO refers “to the directness of the
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`relationship between the purported enterprise’s alleged criminal acts and the plaintiff’s injuries”).
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`“[T]he reasonably foreseeable victims of a RICO violation are the targets, competitors and
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`intended victims of the racketeering enterprise.” Lerner, 318 F.3d at 124; see also Abrahams v.
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`Young & Rubicam Inc., 79 F.3d 234, 238 (2d Cir. 1996) (concluding that the plaintiff could not
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`bring a civil RICO suit because he “was neither an intended target of the scheme nor an intended
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`beneficiary of the laws prohibiting it”).
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`Case 1:11-cv-02794-KMW Document 118 Filed 09/30/14 Page 13 of 20
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` The SAC alleges that the defendants violated all four subsections of 18 U.S.C. § 1962.
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`See SAC ¶¶ 124, 126–128. As mentioned above, the SAC claims that the defendants committed
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`three types of predicate acts: money laundering under 18 U.S.C. § 1956, wire fraud under 18
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`U.S.C. § 1343, and mail fraud under 18 U.S.C. § 1341. See id. ¶¶ 124–125. The SAC fails,
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`however, to adequately plead any predicate act that proximately caused Plaintiffs’ injuries. The
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`SAC thus fails to state a civil RICO claim.5
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`i. Predicate Acts of Wire Fraud and Mail Fraud
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`“The elements of wire fraud under 18 U.S.C. § 1343 are (i) a scheme to defraud (ii) to get
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`money or property, (iii) furthered by the use of interstate wires.” United States v. Pierce, 224
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`F.3d 158, 165 (2d Cir. 2000). The elements of mail fraud under 18 U.S.C. § 1341 are identical,
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`except that mail fraud must be furthered by use of the mails. See United States v. Vilar, 729 F.3d
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`62, 91 n.26 (2d Cir. 2013), cert. denied, 134 S. Ct. 2684 (2014). Thus, to violate either the wire
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`fraud or mail fraud statute, “the object of the fraud” must “be [money or] property in the victim's
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`hands.” Pasquantino v. United States, 544 U.S. 349, 355 & n.2 (2005) (internal quotation marks
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`omitted) (alteration in original); see also Pierce, 224 F.3d at 165 (“A scheme to deceive,
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`5 The SAC contains no factual allegations about how the unknown “John Doe” plaintiffs were injured by
`the defendants’ conduct. See SAC ¶ 13 (making the conclusory assertion that the “John Doe” plaintiffs “have been
`damaged as a result of the acts of racketeering engaged in by defendants and other participants in the Racketeering
`Enterprise,” but making no factual allegations in support of that assertion). Accordingly, those plaintiffs fail to state
`a civil RICO claim. The remainder of this Opinion and Order explains why Plaintiffs Snizek, Rullis and
`Tymoshenko also fail to state a civil RICO claim.
`In their Memorandum of Law in Opposition, Plaintiffs ask the Court to take judicial notice of the
`allegations in a complaint filed in state court by Inovalis SA against CMZ and Dynamic, among others. See Mem.
`of Law in Opp. 12 & n.11. According to Plaintiffs, Inovalis alleges that CMZ and Dynamic “defrauded [Inovalis]
`out of at least $465,000” that it invested in the Drake Hotel real estate proposal. Id. at 12. Plaintiffs appear to
`request that the Court draw factual inferences in the instant case based on Inovalis’s allegations in state court.
`Plaintiffs also contend that Inovalis “may be considered . . . one of the plaintiff ‘John Does #1-50.’” Id. at 12 n.11.
`Such a use of judicial notice would be improper. The Court may “‘take judicial notice of documents filed
`in other courts . . . to establish the fact of such litigation and related filings.” OneBeacon Ins. Co. v. Empress
`Ambulance Serv., Inc., No. 02 Civ. 2595, 2003 WL 1857622, at *2 (S.D.N.Y. Mar. 28, 2003) (Pauley, J.) (quoting
`Kramer v. Time Warner, Inc., 937 F.2d 767, 774 (2d Cir. 1991)). But the Court cannot “make factual inferences
`based on the content” of the pleadings in another case “that it could not otherwise make pursuant to its power under
`Fed. R. Evid. 201 to take notice of widely known and indisputable facts.” O’Keefe v. Ogilvy & Mather Worldwide,
`Inc., No. 06 Civ. 6278, 2006 WL 3771013, at *2 (S.D.N.Y. Dec. 18, 2006) (Stein, J.).
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`Case 1:11-cv-02794-KMW Document 118 Filed 09/30/14 Page 14 of 20
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`however dishonest the methods employed, is not a scheme to defraud in the absence of a
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`property right for the scheme to interfere with.”); United States v. Martin, 411 F. Supp. 2d 370,
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`373–74 (S.D.N.Y. 2006) (Cedarbaum, J.) (“The wire fraud statute . . . requires that money or
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`property be the object of the defendant’s ‘scheme to defraud.’” (citing Fountain v. United States,
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`357 F.3d 250, 255 (2d Cir. 2004)). Additionally, a “complaint alleging mail and wire fraud must
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`plead facts that give rise to a strong inference that the defendant possessed fraudulent intent.”
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`Mills v. Polar Molecular Corp., 12 F.3d 1170, 1176 (2d Cir. 1993).
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`As noted above, the SAC describes three courses of fraudulent conduct: (1) defendant
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`U.S. corporations’ misrepresentations regarding employee benefits, see SAC ¶¶ 131–133;
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`(2) defendants’ sham real estate investment proposals, see id. ¶ 128; and (3) CMZ’s plan to
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`market foreign properties at inflated prices, see id. ¶¶ 93–95.
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`The SAC fails to adequately plead wire or mail fraud in connection with either of the first
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`two schemes. Regarding the misrepresentations to employees, the SAC never alleges that the
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`defendants used interstate wires or mail in connection with their fraudulent conduct. See SAC
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`¶¶ 76, 131–133. Regarding the sham real estate investment proposals, in turn, the SAC does not
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`allege that the defendants used — or intended to use — their misrepresentations to target a third
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`party’s money or property. To the contrary, the SAC alleges that the defendants’ intention in
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`preparing the sham proposals “was to create the appearance that they were engaged in legitimate
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`business activities.” Id. ¶ 128. At this stage, the Court accepts as true Plaintiffs’ claim that
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`property owners “wasted” their “time and money” by treating the defendants’ sham proposals as
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`legitimate. Id. But that fact alone is insufficient to establish that the property owners’ money
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`Case 1:11-cv-02794-KMW Document 118 Filed 09/30/14 Page 15 of 20
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`was the object of the defendants’ fraudulent conduct, as required by the wire and mail fraud
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`statutes. See Pasquantino, 544 U.S. at 355 & n.2; Martin, 411 F. Supp. 2d at 373–74.6
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`Whether the SAC adequately pleads wire fraud in connection with the third course of
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`fraudulent conduct — CMZ’s overpriced marketing scheme — is a closer question. The Court
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`need not decide that question, however, because even if that scheme constituted wire fraud, it
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`would not have proximately caused Plaintiffs’ injuries under the civil RICO statute. To establish
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`proximate causation, Plaintiffs must plead that they were “the targets, competitors [or] intended
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`victims” of the marketing scheme. Lerner, 318 F.3d at 124. Plaintiffs have failed to meet that
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`pleading requirement. The intended victims of the marketing scheme were unidentified
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`American investors, not employees of defendant corporations or a Ukrainian politician critical of
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`Firtash’s business practices. Defendants’ plan to sell properties at inflated prices simply had no
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`significant connection to Snizek and Rullis’s deprivation of employee benefits or Tymoshenko’s
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`prosecutions.7
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`ii. Predicate Acts of Money Laundering
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`To establish a violation of the money laundering statute cited in the SAC, 18 U.S.C.
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`§ 1956, a plaintiff must first show “(1) that the defendant conducted a financial transaction;
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`6 Again, the Court declines to make factual inferences in this action based on Plaintiffs’ description of
`Inovalis’s allegations against CMZ and Dy