The World in U.S. Courts: Winter 2014 - Racketeer Influenced and Corrupt Organizations Act (RICO)
December.02.2013
Plaintiff Bhari Information Technology System alleged that the defendant Kormal Sririam sold a U.S. company to it but refused to transfer the shares for which Bhari made payment. Sriram continued to work for the company after the transaction but also allegedly diverted business opportunities to third parties with whom he was associated. Bhari, a Dubai corporation, asserted a RICO claim in addition to fraudulent concealment and tortious interference claims. Sririam is a U.S. citizen who lived in India at all relevant times.
In determining whether to apply RICO to actions occurring at least partially outside the U.S., the U.S. district court in Maryland stated that the relevant inquiry was the connection between the U.S. and the alleged "enterprise," the existence of which is a predicate for a RICO violation. Here, the court noted that Sririam’s allegedly illegal conduct—including the execution of the agreement to sell his company and his allegedly fraudulent actions while a consultant that gave rise to the claims—all occurred in India. While it was true that the dispute centered on the sale of a U.S. corporation, payment for which was paid into a U.S. bank, the court observed that the allegedly unlawful conduct occurred after the sale. The court distinguished and declined to follow an alternative jurisdictional test based on the connection between the U.S. and the alleged "pattern of racketeering activity," but similarly found this standard not to have been met, apparently for the same reasons cited above.