D.C. District Court Examines Location of Pattern of Racketeering Rather of the Than Enterprise

The World in U.S. Courts: Summer 2013 - RICO | May.08.2013

Hourani v. Mirtchev (U.S. District Court, D.D.C., May 8, 2013)

The extraterritoriality of RICO claims is determined based on where the pattern of racketeering activity takes place, rather than where a particular enterprise is located.

Facts

Two brothers with business in Kazakhstan brought RICO and defamation claims against Dariga Nazarbayev, daughter of Kazakhstan’s president, her accomplice, and a U.S.-based company. The brothers claimed that defendants engaged in a plot to take control over Kazakhstan’s media outlets and defame the brothers in support of Dariga’s political ambitions. The plot allegedly began in Kazakhstan, where at Dariga’s behest, the brothers’ businesses were harassed and raided by government officials who eventually gained control of the businesses through extortion. After gaining control of the businesses, defendants laundered plaintiffs’ assets, in part by using a U.S.-based corporation affiliated with Dariga’s co-conspirator, who approved the scheme while in the U.S. After the brothers were driven out of Kazakhstan, the defendants allegedly defamed the brothers, falsely identifying them as Islamic terrorists and members of Hamas.

The sole connections between the alleged wrongdoing and the United States included: (1) the U.S. citizenship of one plaintiff; (2) the fact that one defendant agreed to the conspiracy while in Washington, D.C.; (3) the domestic corporation used to launder money; and (4) the fact that defendants allegedly laundered money through U.S. accounts. Based on those alleged connections, the court found the conspiracy to be essentially foreign, and therefore outside the scope of RICO.

Analysis

Noting that D.C. Circuit precedent was unclear about how to evaluate whether a scheme falls within RICO’s scope, the district court considered both alternatives: the enterprise-focused approach, and the approach focused on the pattern of racketeering activity. The court considered the plain language of the statute, as well as its legislative history, to determine that the proper focus in evaluating the extraterritoriality of RICO schemes is on the location of racketeering activity.

Drawing on precedent from the Second and Ninth Circuits, the court concluded that the Hourani plaintiffs failed to show anything more than a slim connection with the United States based on isolated, peripheral contacts. The alleged extortion of Kazakh-based assets took place in Kazakhstan, by a Kazakh actor; therefore, every predicate act that proximately caused plaintiffs’ injuries took place abroad. The post-extortion money laundering, and the mere assent by one co-conspirator while in the U.S., was not enough to render a RICO conspiracy domestic.

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