certainly highly relevant to the inquiry into the continuity of the defendant's racketeering activity." 109 S. Ct. at 2901. Here, as in H.J. the predicate acts all relate to a single scheme. In H.J., however, the Court found that multiple acts of bribery in the context of a single scheme to fix rates could state an adequate RICO pattern. That case is far different than the one facing this Court. H.J. involved a recurring wrong, continued tampering with an ongoing rate-setting process. The preparatory acts in the present case, however, are related to a single scheme to disburse funds one time.
Not only did they concern only one scheme, but the preparatory acts of the Moon Organization concerned a single instance of economic injury. See Sutherland v. O'Malley, 882 F.2d 1196 (7th Cir. 1989); Pyramid Securities, Ltd. v. International Bank, 726 F. Supp. 1377, 1383 aff'd at 288 App. D.C. 157, 924 F.2d 1114 (D.C. Cir. 1991) (no continuity when plaintiff alleged "essentially similar predicate acts with one economic injury."). In Sutherland the court found that RICO's continuity requirement was not met by an attorney's repeated acts of mail fraud, over a five month period, to wrongfully divert settlement money that should have gone to the client. Like the lawyer in Sutherland, the Moon Organization allegedly performed a series of preparatory acts which culminated in a single wrongful diversion of funds. Like Sutherland also, the requisite continuity is absent. One cannot turn a state law claim for corporate waste into a RICO claim by merely counting up the number of times defendants pick up a telephone or adding the number of stamps they use. It is far more relevant to the inquiry that the defendants actions, however numerous they may be, result in a single instance of injury.
Finally, "'acts extending over a few weeks or months' are not enough" to establish a continuity in the acts. Pyramid Securities Ltd. v. IB Resolution, Inc., 288 App. D.C. 157, 924 F.2d 1114, 1117 (D.C. Cir. 1991), quoting H.J. at 2902. The Moon Organization's alleged predicate acts began, at the earliest, when the Committee was formed on July 11, 1985, and ended when the funds were disbursed, on February 11, 1986, a period of seven months. Furthermore, in the case of the Schwalb firm, the total span from its first to its last alleged predicate was only two months.
In Pyramid, the court found that when a "closed-ended" period of a half year was involved, a court should be reluctant, absent other factors, to find that the requisite continuity existed. Id. at 1117-1118. Those factors of separate injuries, victims and schemes are absent here. Nor is it any answer for the Committee to claim that there might be further instances of fraud using the Committee in the future. There was little threat that the disbursement of Committee funds would recur. Indeed, all indications were that the Committee was scaling down its operations after the February 11, 1986 disbursement. Such guesswork is insufficient to establish a RICO pattern. The statute contains "a requirement of far more than a hypothetical possibility of further predicate acts." Id. at 1119. "Congress was concerned in RICO with long-term criminal conduct." H.J. at 2902. Because the Committee does not allege such conduct on the part of the Moon Organization, no RICO "pattern" or continuity has been stated.
B. Identity of the Plaintiff and the Enterprise
It is undisputed that "section 1962(c) was intended to govern only those instances in which an 'innocent' or 'passive' corporation is victimized by the RICO 'persons' and either drained of its own money or used as a passive tool to extract money from third parties." Rose v. Bartle, 871 F.2d 331, 358 (3rd Cir. 1989) (citation omitted). Thus, the purpose of § 1962(c) was to prevent "the exploitation and appropriation of legitimate business by corrupt individuals." Yellow Bus Lines, Inc. v. Local Union 639, 883 F.2d 132, 139 (D.C. Cir. 1989) (emphasis added). The Committee simply cannot qualify as such a legitimate or innocent business and therefore cannot avail itself of the civil RICO statute.
The Committee as alleged was conceived in sin. From its very beginning, from the act of its incorporation, it was nothing more than a front for Moon's campaign for a Presidential pardon.
It never received funding from any source other than the Moon Organization. It never acted out of the control of the Moon Organization. It never conducted a single activity in furtherance of its "legitimate" goal -- educating the public on the Constitution. Now that same Committee would have this court find it a victim, and allow it to recover from its creator by using civil RICO. Such a plaintiff, which was never legitimate or innocent, however, was not the intended beneficiary of the RICO statute.
Applying RICO to disputes between two wholly illegitimate enterprises would lead to results clearly not intended by Congress. "Congress was aware that organized crime operates by infiltration of legitimate enterprises through a pattern of racketeering activity." Yellow Bus, 883 F.2d at 139, citing the S.Rep. No. 617, 91st Cong., 1st Sess. 76-78 (1969). Congress intended to prevent such infiltration by allowing civil recovery by an innocent victim of such infiltration.
What Congress did not intend was for federal courts to involve themselves in the division of funds between two illegitimate enterprises. That type of case, however, is unavoidable once the Committee's theory is accepted. The Committee, a corporation spun-off by the Moon Organization for alleged illegitimate purposes, cannot now sue its creator because the Committee carried out the very acts for which the Moon Organization created it. The Committee cannot recover for the success of the plot which hatched it -- whose purpose it only existed to further. RICO was not intended to provide funds for an immaculate rebirth of an entity originally conceived in sin.
Rose certainly offers no support for such a suit. In that case the court found that a county Republican party could be sued under RICO by former county party officials. See Rose, 871 F.2d at 359. The court stated that the party could be both the enterprise and the innocent victim. Whatever its eventual use, however, one cannot claim the Republican party was created solely for the purpose of furthering political corruption. The Republican party is just the type of legitimate enterprise Congress intended to protect from infiltration. The Committee, however, is another matter. From the start, it is admitted that the Committee was nothing more than a front for the Moon Organization. Whether the individuals, such as Finzer, who were wronged by the Moon Organization have a valid RICO claim is not before me.
C. Statute of Limitations
The statute of limitations argument advanced by defendants is actually dispositive of this entire action. In determining when the statute began running and whether it was ever tolled, however, the court has had to analyze the plaintiff's entire complaint. Since the statute of limitations issue entailed such complete analysis, the Court has also decided the substantive issues underlying the complaint. Now that the relevant alleged predicate acts have been determined, however, it is clear to the Court that the statute of limitations has run on all plaintiff's RICO claims.
A plaintiff has four years to bring a RICO action from the time when the action accrues. See Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U.S. 143, 97 L. Ed. 2d 121, 107 S. Ct. 2759 (1987). A claim accrues at the time the plaintiff knows or has reason to know of the injury which is the basis the action. See Pocahontas Supreme Coal Co. v. Bethlehem Steel, 828 F.2d 211, 220 (4th Cir. 1987). The only injury of which the Committee complains occurred on February 11, 1986. This case was filed on September 14, 1990, over four years later. Thus, all the Committee's claims are barred by RICO's statute of limitations.
Plaintiff Committee, and even Finzer individually, knew or should have known of the expenditure of Committee funds. Finzer was a director at all times relevant to this case and owed a fiduciary duty to the Committee. In Estate of Grant v. U.S. News & World Report, Inc., this court found that a director, absent affirmative acts of concealment, has a "general duty . . . to keep himself at least minimally aware of corporate affairs." 639 F. Supp. 342, 349 (D.D.C. 1986).
Finzer, therefore, had an obligation to remain reasonably informed of the Committee's operations. No acts of affirmative concealment by the other directors are alleged. In fact, the Committee admits that when, after two years, Finzer merely inquired as to the Committee's activities, it immediately divulged to him all the facts which form the basis of the plaintiff's complaint. In addition, the alleged misconduct in this case was the conducting of a high profile publicity campaign. Full-paged advertisements were run in major national newspapers over the Committee's name. A magazine was produced and distributed. If Finzer, a director, did not actually learn of these activities, it is certainly through no act of concealment on any defendant's part. A director cannot ignore his duties and fail to read the newspaper for two years and later claim that an applicable statute of limitations is tolled by his neglect.
D. Rule 11 Motion
Grant Thorton, the accountant for the Committee, has filed a motion for Rule 11 sanctions against the Committee, claiming that it was erroneously named as a defendant in the first complaints. Grant Thorton merely did normal accounting work for the Committee and was not even mentioned as part of the "enterprise" in the first complaint. Its actions seem beyond reproach.
Clearly, the plaintiff now agrees with that substantive position. The Committee has dropped Grant Thorton from its final complaint, in part because it was informed that Rule 11 sanctions might be assessed were a defendant improperly named. Although the Committee wrongly named Grant Thorton in its first complaints, I must assess its pleadings in total in deciding whether to grant Rule 11 sanctions. The Committee has acted responsibly in reassessing the merits of its claim against Grant Thorton. Therefore I decline to apply Rule 11 in this case.
For the above stated reasons, the motion to dismiss is granted with respect to all the defendants, and the motion for Rule 11 sanctions is denied.
A separate order accompanies this opinion.
ORDER - October 30, 1991, Filed
In consideration of the defendants' motion to dismiss this case, the plaintiff's opposition thereto, and the entire record in the above captioned case, it is this 30 day of October, 1991 it is hereby
ORDERED that, with respect to all the defendants, this case is DISMISSED and
FURTHER ORDERED that Grant Thorton's motion to assess Rule 11 sanctions against the plaintiff in the above captioned case is DENIED.