Bascuñán v. Elsaca
927 F.3d 108
2d Cir.
2019

Background

  • Plaintiff Jorge Yarur Bascuñán (Chilean) alleges his cousin Daniel Yarur Elsaca (Chilean) and affiliates misappropriated at least $64 million from the Bascuñán estate through multiple schemes using New York bank accounts and wire/mail communications.
  • Core allegations in the Second Amended Complaint (SAC): misuses of New York trust accounts (Capri Star/Afghan Trust administered in NY), creation/acquisition of Fintair and New York Morgan Stanley accounts, sham transfers/sales (Anacapri, Nueva T/BCI shares), and repeated transfers from estate-owned accounts into defendants’ accounts.
  • Procedural history: District court dismissed prior complaint as impermissibly extraterritorial; this Court reversed in Bascuñán I, holding misappropriation of U.S.-located property can be a domestic RICO injury and remanded. On remand the district court again dismissed the SAC, finding most claims extraterritorial or failing pattern requirement.
  • Central legal question: whether the alleged conduct and predicate offenses (mail/wire fraud, bank fraud, money laundering, Travel Act) require extraterritorial application of U.S. law or instead involve domestic applications sufficient to sustain civil RICO claims.
  • Facts added in the SAC (and conceded by defendants) include that Fintair was owned by the Estate (2003–2009) and that defendants opened/used multiple Morgan Stanley New York accounts—allegations establishing that the estate’s property was located in the U.S. when converted.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether §1964(c) (civil RICO) applies given extraterritoriality presumption Bascuñán: misappropriation occurred when defendants converted funds out of estate-owned U.S. bank accounts → domestic injury Elsaca: injury occurred earlier abroad when funds were moved into estate-controlled U.S. accounts, so injury is foreign and RICO’s private right does not apply Held: Domestic. Misappropriation occurred when defendants converted estate funds out of U.S. accounts; all but one scheme allege domestic injuries under §1964(c)
Whether mail and wire fraud statutes apply domestically (focus test) Use of domestic mail/wires to order transfers from NY accounts was a core component of the schemes → domestic application of §1341/1343 Defendants: statutes focus on where the scheme was planned/managed; because defendants acted abroad the applications are extraterritorial Held: Mail/wire fraud focuses on use of mails/wires in furtherance of a scheme; if domestic mail/wire use was a core component (not incidental), the statute applies domestically here
Whether bank fraud statute (§1344) applies The schemes sought to obtain property "under the custody or control" of U.S. financial institutions by false pretenses → domestic focus Defendants: bank fraud cannot apply because scheme was managed abroad and transfers began abroad Held: §1344(2) focuses on schemes to obtain property owned/controlled by banks by fraud; here taking funds from estate-owned NY accounts invokes domestic application
Whether the alleged acts together constitute a RICO "pattern" Bascuñán: multiple related predicate acts across schemes constitute related, continuous racketeering activity Elsaca: even accepting one domestic scheme (BCI share theft), a single scheme cannot satisfy pattern; other schemes are extraterritorial Held: Surviving domestic schemes (all except Sham Management Fees scheme) together adequately plead a RICO pattern; district court erred dismissing for lack of pattern

Key Cases Cited

  • RJR Nabisco, 136 S. Ct. 2090 (2016) (RICO’s civil remedy does not rebut presumption against extraterritoriality; plaintiffs must allege a domestic injury)
  • Bascuñán v. Elsaca (Bascuñán I), 874 F.3d 806 (2d Cir. 2017) (misappropriation of U.S.-located property by foreign plaintiff can be a domestic RICO injury)
  • In re Picard, 917 F.3d 85 (2d Cir. 2019) (explaining extraterritoriality two-step and ‘‘focus’’ analysis)
  • Skilling v. United States, 561 U.S. 358 (2010) (describing mail/wire fraud as criminalizing use of mails/wires in furtherance of a scheme to defraud)
  • Bullock v. BankChampaign, N.A., 569 U.S. 267 (2013) (embezzlement/ conversion concepts relevant to determining where property loss occurs)
  • Loughrin v. United States, 573 U.S. 351 (2014) (elements and structure of §1344 bank-fraud liability)
  • WesternGeco LLC v. ION Geophysical Corp., 138 S. Ct. 2129 (2018) (incidental domestic conduct does not automatically overcome extraterritoriality; focus on primacy of regulated conduct)
  • United States v. McCarthy, 271 F.3d 287 (2d Cir. 2001) (embezzlement complete when defendant transferred trust funds into personal accounts without authorization)
  • Cofacredit, S.A. v. Windsor Plumbing Supply Co., 187 F.3d 229 (2d Cir. 1999) (RICO ‘‘pattern’’ requires at least two related predicate acts)
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