ORDER: (1) GRANTING DEFENDANT CURTIS POWELL’S MOTION FOR SUMMARY JUDGMENT (Doc. 198); (2) GRANTING DEFENDANT JAMES WILBURN POWELL’S MOTION FOR SUMMARY JUDGMENT (Doc. 205); AND (3) GRANTING IN PART AND DENYING IN PART PLAINTIFFS DIANA AND JAMES BRADLEY’S MOTION FOR SUMMARY JUDGMENT (Doc. 208)
This civil action is before the Court on (1) Defendant Curtis Powell’s motion for
I. BACKGROUND
Plaintiffs Diana and James Bradley allege they were the victims of a real estate securities Ponzi scheme in which they lost at least $134,354.46.
Four individuals and three business entities remain as Defendants. The individual Defendants include James D. Powell (“James D.”), James Wilburn Powell (“James Wilburn”), Curtis Powell (“Curtis”), and Kevin Miller. James D. was the president of the three business entity Defendants, Capital Investments (“Cl”), Great Miami Debentures (“GMD”), and Great Miami Real Estate, LLC (“GMRE”). (Doc. 208, Ex. 9). James Wilburn is the father of James D. and the uncle of Curtis. James D. and Curtis are cousins.
Count one of the amended complaint is asserted by Pyles against Miller for violations of section 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j, and Rule 10b5, 17 C.F.R. § 240.10b-5. (Doc. 46 at 28-29). This is the only claim brought by Pyles, and it is not part of the summary judgment motions before the Court. (Doc. 182). The remaining counts were originally pleaded by the Bradleys against all ten Defendants.
Counts two through five of the amended complaint assert violations of each of the four subsections of the Racketeering Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962. Counts six and seven assert a violation and a conspiracy to violate the Ohio Corrupt Practices Act (“OCPA”), Ohio Rev.Code § 2923.32. Counts eight, nine, and ten assert claims for fraud, breach of contract, and negligence. Count eleven asserts a claim for fraudulent transfer under Ohio law, Ohio Rev.Code § 1336.04, and count twelve asserts a common law claim for civil conspiracy. By stipulation, Plaintiffs have narrowed the scope of the claims against James Wilburn and Curtis to OCPA, OCPA conspiracy, fraudulent transfer, and civil conspiracy. (Docs. 76, 87).
Defendants Cl, GMD, and GMRE failed to answer or otherwise defend in this case and, on August 22, 2013, the Court entered default judgment as to liability and damages. (Doc. 188). The Court found that Defendants Cl, GMD, and GMRE were jointly and severally liable for $403,063.40 in damages, plus an additional amount, to be determined, of attorney’s fees and costs. (Id. at 5).
James D. and Miller did not respond to the summary judgment motion filed against them. Prior to moving for summary judgment, Plaintiffs filed motions for adverse inferences against James D. and Miller after both refused to answer questions at their depositions based on their Fifth Amendment rights against self-incrimination. (Docs. 187, 192). Neither filed a responsive memorandum. After dispositive motion briefing closed, the Court granted the motions and drew adverse inferences on forty-eight questions asked to James D. and seventy-three questions asked to Miller. (Doc. 250).
II. UNDISPUTED FACTS
A. Criminal Charges
James D. and Miller pled guilty to federal criminal charges,
The Ponzi scheme began to form in approximately 2002 when James D. formed Cl, GMD, and GMRE. (Doc. 208, Ex. 9 at 1). James D. and his wife transferred real estate valued at over $2 million to GMRE in 2002. (Doc. 163 at 28). GMRE purchased, sold, and managed a portfolio of real estate properties. (Id. at 16). Cl held itself out as an investment company offering attractive rates of return on investments evidenced by promissory notes that were purportedly backed by the real estate portfolio of properties owned and managed by either Cl or GMRE. (Doc. 208, Ex. 9 at 1). GMD purported to issue Mortgage security promissory notes on real estate properties owned by GMRE. (Id. at 2).
Around 2002, James D. and David Col-well, who was the owner of Midwest Marketing Alliance (“MMA”), agreed to a plan using their respective business entities. (Doc. 163 at 27).
The Ponzi scheme primarily targeted elderly, unsophisticated, and inexperienced investors. (Doc. 192, Ex. 1 at 1; Doc. 208, Ex. 9 at 3). The victims were induced to roll over their pre-existing IRA’s into investments in promissory notes or debt investments offered by Cl and GMD. (Doc. 208, Ex. 9 at 3). James D. and Colwell arranged for Fiserv, an unaffiliated and presumably innocent entity, to serve as the IRA trustee/custodian for self-directed IRA accounts. (Id. at 2-3). On November 3, 2004, James D. executed a Declaration of Administrative Feasibility to establish retirement plan accounts with Fiserv for investments into Cl and GMD. (Id. at 3). James D. falsely agreed on behalf of Cl and GMD to provide investors “with all information and documentation regarding their investments.” (Id. at 4). Fiserv served as the trustee/custodian over the investors’ IRA accounts for tax purposes only. (Id.) Colwell was named as the Servicing Agent, which is required to be a “disinterested independent third party entity or individual,” to carry out certain responsibilities on behalf of the note holders or investors. (Id. at 3) Most importantly, the Servicing Agent was tasked with overseeing repayments to investors. (Id. at 4). In reality, Colwell personally obtained the investors’ funds and converted them to further the Ponzi scheme and for Defendants’ own personal use. (Id.)
James D. and Miller admitted to participation in a conspiracy that made false representations and promises, and failed to disclose known material information, to investors in order to induce them to invest money in Cl and GMD. (Doc. 208, Ex. 9 at 46). Specifically, the conspirators falsely promised guaranteed annual interest rates that exceeded the investors’ current in
By November 2007, the Ponzi scheme had squandered the investors’ money. (Doc. 208, Ex. 9 at 5). Nonetheless, Cl and GMD continued to produce monthly account statements falsely listing each investor’s principal investment and interest earned. (Id.) James D., Miller, and Col-well scrambled each month to come up money to make monthly interest payments to certain investors. (Id.) The Ponzi scheme continued to solicit new investors, using that money to make interest payments to earlier investors and keeping the remainder for their own personal living expenses. (Id. at 5-6).
James D., as president of Cl, sent periodic letters to investors assuring them that their investments were doing well. (Id. at 6). On January 8, 2008, James D. sent a letter falsely stating that Cl was an active player in the investment industry and was producing yields well above the market average. (Id.) In late January 2008, the investors’ money was completely gone, leaving Cl and GMD unable to make any monthly interest payments. (Id. at 8). Colwell refused to continue to contact investors and demanded that his address be removed from the companies’ materials. (Id. at 8). On February 5, 2008, James D. wrote a letter to investors advising them of a “minor change” in the mailing address of Cl due to “some restructuring within the company,” but provided no indication that the investors’ money was completely gone. (Id.) On March 4, 2008, Colwell committed suicide by shooting himself in the head. (Doc. 108-8, Ex. 1 at ¶ 4; Doc. 162 at 18; Doc. 200 at 139).
On January 10, 2010, Miller entered a guilty plea to charges of conspiracy to commit mail fraud in violation of 18 U.S.C. § 1349, and obstruction of investigation in violation of 18 U.S.C. § 1519. (Doc. 192, Ex. 1). He was sentenced to fifteen months imprisonment.
On June 28, 2010, James D. pled guilty to conspiracy to commit mail fraud in violation of 18 U.S.C. § 1349, and wire fraud in violation of 18 U.S.C. § 1343. (Doc. 208, Ex. 9). The wire fraud conviction resulted from a series of real estate purchases and mortgage loan applications completed between 2000 and 2005. (Id. at 8-10). In 2000, James D. purchased a total of six properties for $750,000. (Id. at 8). The purchase price was financed through multiple bank mortgage loans and a promissory note and mortgage with the
On September 28, 2010, James D. was sentenced to 121 months imprisonment. James Wilburn made a brief, unsworn statement at his’son’s sentencing hearing in an attempt to offer mitigating factors. (Doc. 205, Ex. B at 33-37).
B. Bradleys’ Involvement in the Investment Scheme
Plaintiffs Diana and James Bradley first met Miller in 1996 when Miller was selling insurance. (Doc. 173-1 at ¶¶ 4 — 5).
In 2005, the Bradleys contacted Miller for assistance in making a change to James Bradley’s Northwestern annuity, which at that time had grown in value to $88,362.23. (Doc. 173-1 at ¶¶ 19, 23). Diana Bradley also had an annuity worth $45,990.77. (Id. at ¶ 28). Miller used the opportunity to pitch the Bradleys on the benefits of investing in CL (Id. at ¶ 20). Miller told the Bradleys that Cl was invested in locally-owned real estate, that Cl’s guaranteed interest rate of 6.65% exceeded their current annuities, and that Cl was a very safe investment. (Id. at ¶¶ 20-26; Doc. 192, Ex. A at 5). Based on then-discussions with Miller, the Bradleys transferred their annuities, worth a total of $134,353, to investments with Cl. (Doc. 173-1 at ¶¶ 23, 28).
On June 1, 2005, the Bradleys received account statements from Cl signed by James D. (Doc. 173-1 at ¶29). Diana Bradley also received statements from Fi-serv, which stated that her money had been transferred to GMD promissory notes. (Id. at ¶ 35). The Bradleys continued to receive periodic statements from Cl and Fiserv from June 2005 to May 2008. (Id. at ¶ 37).
On May 22, 2008, Diana Bradley received a letter from Fiserv stating that the GMD promissory notes where her money was invested had been administratively dissolved. (Doc. 110-18 at 20; Doc. 173-1 at ¶ 38). An account statement dated September 30, 2008 provided that Diana Bradley’s Fiserv IRA account had a balance of $55.58. (Doc. 110-18 at 21).
In June 2008, the Bradleys received written questionnaires from the Ohio Department of Commerce, Division of Securities requesting information about their investments in Cl. (Doc. 173-1 at ¶ 46). The
C. James Wilburn
In December 2002, James Wilburn and his wife Betty Powell entered into a Land Contract to sell a mobile home park called Midwest to GMRE for $600,000. (Doc. 198, Ex. A). The Land Contract required James D. to make a $100,000 dowp payment and pay the remaining balance in $4,000 monthly payments at 6% interest. (Id. at ¶ 2). James Wilburn and Betty retained title to Midwest until GMRE paid the full balance of the purchase price. (Id. at ¶ 16). The Land Contract prohibited GMRE from assigning its interest without consent. (Id. at ¶¶ 7, 17). James D. made timely monthly payments of $4,000 from January 2003 to April 2006, which amounted to over $160,000 in payments. (Doc. 200 at 59-60).
On May 1, 2007, after James D. failed to make several monthly payments on Midwest, James Wilburn and James D. executed a Mutual Release of Land Contract, which cancelled the 2002 Land .Contract for Midwest. (Doc. 19.8, Ex. G). The Mutual Release of Land contract recited that James D. owed over $466,000 on Midwest, that James D. failed to make the required monthly installment payments since May 2006 and had failed to pay the real estate taxes since 2005, and that James Wilburn had loaned $120,000 to James D. (Id.) On June 28, 2007, James D. executed a Quit Claim Deed on behalf of GMRE to transfer any remaining interest in Midwest to his parents James Wilburn and Betty. (Doc. 208-16). Also on June 28, 2007, James Wilburn transferred Midwest to Curtis through a General Warranty Deed. (Doc. 198, Ex. O).
James. Wilburn and Betty made several loans or payments to their son James D. in 2006 and 2007. On November 10, 2006; December 21, 2006; June 29, 2007; and April 4, 2008, James Wilburn wrote four checks to James D. for a total of $80,500. (Doc. 208-20; Doc. 216, Ex. 23 at 23, 26, 44). Three of the checks were made payable to James D. personally, while the $32,500 check dated June 29, 2007 was made payable to CL (Doc. 208-20). On September 14, 2006, Betty transferred $10,000 from her First Financial checking account to James D. (Doc. 216, Ex. 23 at 13). On November 1, 2006, Betty transferred another $20,000 to James D. (Id. at 22). Between September 6, 2007 and October 15, 2007, Betty purchased four cashier’s checks totaling $59,000 from her Fifth Third account made payable to James D. (Id. at 35, 37, 40, 41). Betty first opened her Fifth Third checking account in July 2007 and the account was solely in her name, James Wilburn was not authorized to make transactions. (Doc. 200 at 112).
D. Curtis
Curtis moved from Georgia to Ohio in 2003. (Doc. 195 at 96). Between 2003 and 2006, he saw his cousin James D. very infrequently, typically only on Christmas Eve and at the large church both attended. (Id. at 12). In the summer of 2006, Curtis worked construction for a company that purchased, refurbished, and then resold foreclosed homes. (Doc. 195 at 8). Curtis also assisted in finding and viewing foreclosed homes for the company to purchase. (Id. at 8-9). Curtis had never owned rental property, but he had a long-standing
Curtis found a six-family apartment for sale by the owner and was quoted a price. (Doc. 195 at 9-10). No knowing whether this was a fair price, Curtis sought the opinion of his cousin James D., whom Curtis thought owned two nearby 12-family apartment complexes (Id.) James D. said it was not a good price, and the two did not speak again for quite some time. (Id.)
Several weeks later, in late September or early October 2006, Curtis was performing construction work on a home listed for sale by his employer when James D.’s daughter and son-in-law came to view it. (Doc. 195 at 8, 10-11). About one week later, James D. called Curtis to arrange to view the home himself. (Id. at 10-11). James D. invited Curtis to lunch after-wards, which Curtis thought was to continue their conversation about the house. (Id. at 11-12).
James D. used the lunch to pitch Curtis on an investment opportunity. (Doc. 163 at 122-23; Doc. 195 at 13-14). James D. told Curtis that he had entered a land contract with his father James Wilburn in 2002 to purchase Midwest for $600,000, that he made a $100,000 down payment, and that he owed another $425,000. (Doc. 163 at 122-26; Doc. 195 at 13-14). James D. told Curtis that he owned several other properties and could use Curtis’ help to manage and maintain Midwest. (Doc. 163 at 122-26; Doc. 195 at 13-15). James D. also told Curtis that he planned to refinance Midwest to help purchase another mobile home park called 8000 Hamilton. (Doc. 195 at 14-15). Then James D. told Curtis that the two could be equal partners on Midwest, which James D. said was worth $725,000, if Curtis came up with $50,000. (Doc. 163 at 122-23; Doc. 195 at 14-15). James D. said he would put Curtis’ $50,000 in an interest bearing savings or escrow account while James D. arranged the refinancing. (Doc. 195 at 15). Curtis, who expected the lunch conversation to center on whether James D.’s daughter should purchase the house, was caught completely off guard and asked for time to think over James D.’s investment offer. (Id.) James D. did not mention that he was in default on the Midwest installment payments, that he did not hold title to Midwest, or that the other properties he owned were in various stages of foreclosure. (Id.)
James D. called Curtis about a week later to follow up on the investment offer. (Doc. 195 at 15-16). Curtis spoke with his father about the opportunity and then requested further information from James D. (Id.) James D. told Curtis that Midwest brought in $9,000 per month in rent, that the installment payments were $4,000 per month, and that the utility payments were such that Midwest turned a profit each month. (Id. at 15-17). Curtis returned again to his father, who agreed to loan Curtis the $50,000 because he felt that Curtis’ grandfather would be happy that the cousins were going into business together. (Id. at 17).
Curtis wrote a $50,000 check to James D. on October 18, 2006. (Doc. 195 at 17Í8; Doc. 198, Ex. B). The two opened a joint checking account for their purported business and Curtis deposited $50 from his personal account. (Doc. 195 at 17-18). James D. told Curtis that he deposited the $50,000 check in a separate savings or escrow account to accrue interest before it went towards a down payment on 8000 Hamilton. (Doc. 195 at 15, 17-19, 31, 134-35). In reality, James D. spent the $50,000 almost immediately, something Curtis did not learn until late March 2007. (Id. at 31, 135-35). On November 13, 2006, Curtis met with Barbara Hoffman from Coldstream Financial Services to apply for
On December 29, 2006, Curtis and James D. officially formed a company called C & J Property Enterprises, LLC. (Doc. 198, Ex. C). James D. worked with an attorney to draft the paperwork, which Curtis did not see or know about prior to the day of signing. (Doc. 195 at 104-07). An Operating Agreement and attached Exhibit 8.1 set forth their respective contributions and provided that each would hold a 50% interest. (Id., Exs. C and D). Curtis’ contribution was the $50,000 delivered to James D. two months earlier, which Curtis was unaware had already been spent. (Id., Ex. D). James D.’s contribution was to be $50,000 in equity gained from the future refinancing of Midwest and two other properties. (Id.) According to the agreement, James D. would refinance the properties and then transfer them to C & J, with James D. to retain any excess proceeds. (Id.) However, Curtis and James D. had a verbal agreement that the excess proceeds from the refinancing would go towards the down payment on 8000 Hamilton. (Doc. 195 at 108). Curtis had not heard about the other two properties set forth in the Operating Agreement. (Id. at 106-08). James D. told Curtis that the bank had made a mistake with a mortgage payment on those properties, but assured Curtis that he would resolve the matter soon. (Id.) Unbeknownst to Curtis, those properties were already foreclosed upon and James D. held no interest at the time. (Id. at 105-09).
On January 1, 2007, James D. and Curtis signed an Assignment of Land Contract drafted by James D. (Doc. 198, Ex. E). The contracted purported to assign Midwest from GMRE to C & J. (Id.) Curtis gave James D. the assignment to file with the recorder’s office. (Doc. 195 at 27, 110, 153, 184; Doc. 198, Ex. E). Curtis thought that C & J owned Midwest on January 1, 2007 and began managing and maintaining Midwest for the next three months. (Doc. 195 at 26, 154). However, the assignment had no effect because the Land Contract required James Wilburn and Betty to consent to any assignment. (Doc. 198, Ex. A at ¶¶ 7, 17). James D. had never shown the Land Contract to Curtis, and Curtis was unaware that it contained an anti-assignment provision. (Doc. 195 at 14-15). James Wilburn had not given consent and did not learn about the purported assignment until late March 2007. (Doc. 200 at 77). To help conceal the assignment from James Wilburn, James D. delayed filing the assignment with the recorder’s office until April 3, 2007. (Doc. 198, Ex. E).
In January 2007, James D. approached Howard Robinson to purchase an apartment duplex called Marlou. (Doc. 197 at 8-11). Robinson first met James D. in late 2006. (Id. at 6). Robinson described James D. as a person desperate for money but also a charismatic and persuasive salesman. (Id. at 6-7). For example, James D. successfully convinced Robinson to purchase a gun from James D. for $700 even though Robinson knew the gun was worth significantly less. (Id. at 6-7). On January 23, 2007, James D. and Robinson signed a contract to purchase Marlou for $235,000. (Id. at 9-10; Doc. 218, Ex. K). As part of the negotiations, Robinson loaned James D. $20,000, which James D. promised to repay at the closing. (Doc. 197 at 13; Doc. 224 Ex. B). On the memo line of the check, Robinson wrote that the money was for Marlou. (Doc. 224 Ex. B). Robinson repeatedly testified that James D. presented himself as the buyer of Mar-lou in January 2007 and that James D. never mentioned Curtis or C & J. (Doc. 197 at 8,10-11,15).
James D. first spoke with Curtis about purchasing Marlou in late February 2007
The closing on Marlou occurred on March 2, 2007. (Doc. 195 at 22). Only minutes before the closing began, James D. approached Robinson in the parking lot to tell Robinson that Curtis and his wife would be the real purchasers of Marlou. (Doc. 197 at 16-17, 35, 39). Robinson was caught completely off guard because James D. had discussed purchasing Mar-lou himself and Robinson had never heard of Curtis before. (Id.) Robinson testified that he received only $175,000 of the $215,000 purchase price at the Marlou closing. {Id. at 19-22). Robinson first realized this discrepancy during the closing, which also attended by at least one title agent. {Id.) James D. silently mouthed to Robinson that he would take care of the $40,000 difference, in addition to repaying the $20,000 loan James D. had promised to repay at the closing. {Id.) Robinson trusted James D. at the time so he took James D. at his word. {Id. at 65). Robinson repeatedly testified that James D., not Curtis or Wilburn, owed Robinson the outstanding $60,000. (Doc. 197 at 21, 27, 40, 50, 56).
Curtis began to realize that James D. had defrauded him in late March 2007. First, James Wilburn told Curtis that C & J did not own an interest in Midwest because the Land Contract required James Wilburn’s consent for the purported assignment of Midwest to C & J. (Doc. 200 at 68-71, 77). Curtis also learned that James D. had lied about making the $4,000 monthly installment payments to James Wilburn. (Doc. 195 at 25-26, 28). James D. had been deducting money from the Midwest rent payments and told Curtis the money went to James Wilburn. {Id.) However, James D. actually spent that money on personal expenses. {Id.) Curtis believed that he had owned an interest in Midwest for three months and attempted to pay the three missed installment payments in an attempt to salvage his investment; however, James Wilburn refused to accept the money out of fear that doing so would tacitly recognize Curtis as a partial owner. {Id.)’ Still desperate to save his investment, Curtis gave $12,000 to James D. so that he could make the installment payments to James Wilburn. {Id. at 73-74). Later in March 2007, Curtis first learned that James D. had spent his initial $50,000 investment on personal expenses. {Id. at 31,134-35).
On April 2, 2007, three months after forming C & J with James D., Curtis dissolved C & J and terminated the Operating Agreement. (Doc. 198, Exs. H, I). On April 17 and 26, 2007, Curtis reorganized C & J and declared himself the sole member. {Id., Exs. J, K). Additionally, Curtis removed James D. from the C & J checking account and changed the key to the post office box the two had previously shared. (Doc. 195 at 33-34,149).
On April 6, 2007, James D. wrote three postdated checks to Robinson for a total of $40,000. (Doc. 197 at 27; Doc. 224, Ex. G). The three checks bounced when Robinson attempted to cash them in early May 2007. (Doc. 224, Ex. H). Robinson called Curtis soon after to tell Curtis that the checks bounced and threatened to call the sheriff on James D. (Doc. 195 at 21; Doc. 197 at 28). On June 13, 2007, James Wilburn repaid his son’s $20,000 to Robinson to prevent the situation from escalating with law enforcement. (Doc. 183-5 at 3).
On May 1, 2007, Curtis signed a quitclaim deed conveying any interest C & J had in Midwest back to GMRE. (Doc. 198, Ex. L). Also on May 1, 2007, James Wilburn and James D. executed a Mutual Release of Land Contract, which cancelled the 2002 Land Contract for Midwest. (IcL, Ex. G). The Mutual Release of Land Contract recited that James D. owed over $466,000 on Midwest, that James D. failed to make the required monthly installment payments since May 2006 and had failed to pay the real estate taxes since 2005, and that James Wilburn had loaned $120,000 to James D. (Id.)
James D. called Curtis in early June 2007 to request a $10,000 commission for his role in the Midwest sale. (Doc. 195 at 65-68). On June 14, 2007, Curtis agreed to the commission because James D. was the only reason that Curtis knew about Midwest and wrote a $10,000 check to James D. (Id.; Doc. 198, Ex. N).
On June 28, 2007, James Wilburn and his wife sold Midwest to Curtis and his wife for $700,000 and transferred title through a General Warranty Deed. (Doc. 1945 at 52; Doc. 198, Ex. O). Also on June 28, 2007, Curtis and his wife purchased 8000 Hamilton from a couple who are not involved in this litigation. (Doc. 195 at 49, 103). Curtis and his wife signed loan applications for the financing on Midwest and 8000 Hamilton, and a HUD-1 statement for Midwest. (Doc. 221-3; Doc. 224, Exs. J, O). Curtis met with Barbara Hoffman in February 2007 to complete the loan application. (Doc. 195 at 61).
Curtis and his wife received a $38,500 loan towards his purchase of 8000 Hamilton and a $682,500 loan on the refinance of Midwest. (Doc. 221-3; Doc. 224, Ex. O). Wilburn received a check for $469,500 from Silver Hill Financial as part of the purchase price for Midwest. (Doc. 200 at 97; Doc. 216-8). Curtis also executed a $215,000 promissory note to James Wilburn, which was secured by a mortgage. (Doc. 243-3).
Curtis did not speak with James D. again until early September 2007, when James D. approached Curtis in a very desperate manner talking about suicide. (Doc. 195 at 6972). James D. said that he needed money to pay the mortgage on his own house and adamantly asserted that he held equity in Midwest. (Id.) Curtis was particularly sensitive to suicide because years earlier another cousin committed suicide and Curtis watched the children grow up without a father. (Id. at 70). Eventually Curtis borrowed $12,000 from another family member and wrote a check on September 12, 2007, which Curtis hoped would prevent his cousin James D. from also committing suicide. (Id.; Doc. 198, Ex. P). It was not until Colwell committed suicide in March 2008 that Curtis learned that James D.’s properties were in foreclosure and that James D. had taken money from other investors. (Doc. 195 at 174,181).
III. STANDARD OF REVIEW
A motion for summary judgment should be granted if the evidence submitted to the Court demonstrates that there is no genuine issue as to any material fact, and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); see
A party opposing a motion for summary judgment “may not rest upon the mere allegations or denials of his pleading, but ... must set forth specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 248,
“[JJudges are not like pigs, hunting for truffles that might be buried in the record.” Emerson v. Novartis Pharm. Corp.,
IV. FRAUDULENT TRANSFER
James Wilburn and Curtis argue that Plaintiffs’ fraudulent transfer and civil conspiracy claims are barred by the statute of limitations.
A claim under the Ohio Uniform Fraudulent Transfer Act (“UFTA”) requires proof that a debtor made a transfer or incurred an obligation “with actual intent to hinder, delay, or defraud any creditor of the debtor.” Ohio Rev.Code § 1336.04(A)(1). The UFTA was enacted to “create a right of action for a creditor to set aside an allegedly fraudulent transfer of assets.” Esteco, Inc. v. Kimpel, No. 07-co-3,
“The tort of civil conspiracy is a malicious combination of two or more persons to injure another in person or property, in a way not competent for one alone, resulting in actual damages.” Williams v. Aetna Fin. Co.,
James Wilburn and Curtis contend that the UFTA and civil conspiracy claims related to the 2007 transfer of Midwest are barred by the statute of limitations. The UFTA provides that an actual fraud claim under § 1336.04(A)(1) is “extinguished unless an action is brought ... within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or reasonably could have been discovered by the claimant.” Ohio Rev.Code § 1336.09(A).
The dispositive question here is whether the Midwest transfer “was or reasonably could have been discovered by” Plaintiffs before August 20, 2011. Ohio Rev.Code § 1336.09(A). In determining whether a party should have discovered wrongful conduct, the relevant inquiry under Ohio law is whether the facts known “would lead a fair and prudent man, using ordinary care and thoughtfulness, to make further inquiry.” Hambleton v. R.G. Barry Corp.,
The Court first addresses a preliminary matter. Plaintiffs insist that the Court’s two prior rulings that factual disputes precluded summary judgment on the statute of limitations issue prevents James Wil-. burn and Curtis from raising the issue in their current motions. (Docs. 147, 186). The Court’s second ruling denied Plaintiffs’ motion for partial summary judgment that the statute of limitations defense did not apply. (Doc. 186). James Wilburn filed his responsive memorandum to Plaintiffs’ motion on June 20, 2013. (Doc. 160). On June 25, 2013, Plaintiffs filed a motion to extend the discovery deadline to September 15, 2013. (Doc. 166). The Court granted the extension in part and extended the discovery deadline to August 5, 2013 and the dispositive motions deadline to September 13, 2013. (Doc. 169). Plaintiffs then moved for default judgment against the business entity Defendants on-July 8, 2013, supported by the affidavit of Diana , Bradley. (Doc. 173-1). Diana Bradley was deposed that same day. (Doc. 203).
Courts have the inherent authority reconsider interlocutory orders when new
The affidavit of Diana Bradley provides that on May 22, 2008 she received a letter from Fiserv, the IRA custodian, informing her that the GMD promissory notes where her money was invested been administratively dissolved. (Doc. 110-18 at 20; Doc. 173-1 at ¶ 38).
Several weeks later, in June 2008, the Bradleys received written questionnaires from the Ohio Department of Commerce, Ohio Division of Securities requesting information about their investments in Cl. (Doc. 173-1 at ¶ 46). The Bradleys signed the questionnaires in blank and permitted Miller to complete them. (Id. at ¶¶ 47-49, 51). Sometime thereafter, Mark Ballen-ger, an enforcement attorney at the Ohio Division of Securities, called Diana Bradley with follow-up questions about the questionnaires. (Id. at ¶ 50). Ballenger asked Bradley about Colwell, who was listed on the questionnaire as the person who sold her the investments. (Id.) Bradley denied that Colwell sold her the investments and told Ballenger that Miller had completed the questionnaires. (Id. at ¶¶ 41-42, 51).
Fifteen minutes later, Miller called Diana Bradley in an “angry” tone to ask what she told Ballenger. (Doc. 173-1 at ¶ 52). Ballenger called Bradley again later that day, explaining that the Ohio Division of Securities was beginning an investigation into Cl and that she and her husband could be called to testify in court. (Id. at ¶ 53). Ballenger continued to speak with Diana Bradley about the investigation from approximately June to September 2008. (Id. at ¶ 55).
On January 29, 2009, Diana Bradley received a letter from the Butler County Prosecutor informing her of an ongoing criminal investigation into CL (Doc. 173-1 at ¶ 65). The letter specifically advised the Bradleys that their money was gone and that they should consult with an at-
On December 30, 2008, the Ohio Department of Commerce filed a civil action against, inter alia, James D., Miller, Cl, GMD, and GMRE. (Doc. 108-8). On March 10, 2009, Diana Bradley received a letter from the court-appointed receiver for James D. advising her to submit a claim. (Doc. 203 at 93-94, 180). Diana Bradley responded to the receiver with a letter dated March 14, 2009. (Doc. 110-6 at 8-9). Bradley’s letter explained that the May 22, 2008 letter from Fiserv informed her that there was no money remaining in her IRA account. (Id. at 9). Bradley had called Fiserv shortly after she received the letter intending to close her account. (Id.) Bradley received another notice from Fiserv on January 10, 2009 charging her an account service fee. (Id.) On February 16, 2009, Bradley officially requested that Fiserv close her account and disburse any remaining funds. (Id.) Bradley received a check for $25.69 several weeks later. (Id.)
Based on this new evidence introduced by Diana Bradley’s affidavit, the Court concludes as a matter of law that the Bradleys “possessed knowledge sufficient to lead a reasonably prudent person to make inquiry and had such inquiry been made with reasonable care and diligence, it would have led to the discovery of the alleged” fraudulent transfer of Midwest prior to August 20, 2011. Hambleton,
Under the totality of the circumstances, the Bradleys had “knowledge of such facts as would lead a fair and prudent man, using ordinary care and thoughtfulness, to make further inquiry.” Hambleton,
Y. OCPA and OCPA Conspiracy
Plaintiffs move for summary judgment against all four Defendants on their OCPA and OCPA conspiracy claims, while James Wilburn and Curtis filed cross motions for summary judgment on these claims. James D. and Miller did not file responsive memoranda.
A. Legal Standard
The OCPA, which is primarily a criminal statute, is modeled after the federal RICO statute. These statutes were enacted to. “enhance the government’s ability to quell organized crime.” State v. Schlosser,
1. Substantive OCPA Violation
The OCPA contains three distinct prohibitions:
(A)(1) No person employed by, or associated with, any enterprise shall conduct or participate in, directly or ■ indirectly, the affairs of the enterprise through a pattern of corrupt activity or the collection of an unlawful debt.
(2) No person, through a pattern of corrupt activity or the collection of an unlawful debt, shall acquire or maintain, directly or indirectly, any interest in, or control of, any enterprise or real property-
(3) No person, who knowingly has received any proceeds derived, directly or indirectly, from a pattern of corrupt activity or the collection of any unlawful debt, shall use or invest, directly, or indirectly, any part of those proceeds, or any proceeds derived from the use or investment of any of those proceeds, in the acquisition of any title to, or any right, interest, or equity in, real property or in the establishment or operation of any enterprise.
Ohio Rev.Code § 2923.32(A).
To establish a violation of § 2923.32(A)(1), Plaintiffs must prove “(1) that the conduct of the defendant involves the commission of two or more specifically prohibited state or federal criminal offenses, (2) that the prohibited criminal conduct of the defendant constitutes a pattern of corrupt activity, and (3) that the defendant has participated in the affairs of an enterprise.” Hall v. CFIC Home Mtg.,
The Supreme Court of Ohio summarized the multiple overlapping elements of a § 2923.32(A)(1) violation as follows:
A RICO offense is dependent upon a defendant committing two or more predicate offenses listed in R.C. 2923.31(1). However, a RICO offense also requires a defendant to be “employed by, or associated with” an “enterprise” and to “conduct or participate in” an “enterprise through a pattern of corrupt activity.” R.C. 2923.32(A)(1). Such pattern must include both a relationship and continuous activity, as well as proof of the existence of an enterprise. Thus, the conduct required to commit a RICO violation is independent of the conduct required to commit the underlying predicate offenses. The intent of RICO is to criminalize the pattern of criminal activity, not the underlying predicate acts.
State v. Miranda,
Many of the terms used in the OCPA are statutorily defined. “Corrupt activity” means “engaging in, attempting to engage in, conspiring to engage in, or soliciting, coercing, or intimidating another person to engage in” any of a long list of enumerated state and federal criminal statutes. § 2923.31(1). A “pattern of corrupt activity” means “two or more incidents of corrupt activity, whether or not there has been a prior conviction, that are related to the affairs of the same enterprise, are not isolated, and are not so closely related to each other and connected in time and place that they constitute a single event.” § 2923.31(E).
“Enterprise” is defined as including “any individual, sole proprietorship, partnership, limited partnership, corporation, trust, union, government agency, or other legal entity, or' any organization, association, or group of persons associated in fact although not a legal entity. ‘Enterprise’ includes illicit as well as licit enterprises.” § 2923.31(C). The Supreme Court of Ohio has remarked that “[t]he definition of ‘enterprise’ is remarkably open-ended” and observed that the statute “does not indicate how the existence of an enterprise is to be proved.” Beverly,
To prove that a defendant was “associated” with an enterprise, the prosecution or a civil plaintiff must “prove that each defendant was voluntarily connected to that pattern [of corrupt activity] and performed at least two acts in furtherance of it.” Schlosser,
In State v. Griffin,
For an OCPA conspiracy claim, “the plaintiff is not required to prove that each defendant committed two or more predicate acts.” In re Nat’l Century Fin. Enterprises, Inc., Inv. Litig.,
In addition to establishing a violation or conspiracy to violate any or all of the subsections of § 2923.32(A), a plaintiff in a civil OCPA action must prove he or she was injured, directly or indirectly, by the OCPA violation and the injuries were proximately caused by that violation.
First, the plaintiff must prove that he or she is a “person directly or indirectly injured by conduct in violation of section 2923.32 of the Revised Code or a conspiracy to violate that section.” Ohio Rev.Code § 2923.34(E). Ohio courts apply “traditional notions of proximate cause” to civil OCPA actions. Cleveland v. JP Morgan Chase Bank, N.A., No. 98656,
Proximate cause “requires a showing of connection between the violations and the claimed injuries.” Lesick v. Manning, No. 91-C-70,
Second, the pattern of corrupt activity that forms the basis of a civil claim “shall include at least one incident other than a violation of’ state and federal criminal statutes prohibiting mail or wire fraud, securities fraud, or interstate transportation of stolen goods. Ohio Rev.Code § 2923.34(E). Accordingly, Plaintiffs must demonstrate that each defendant engaged in a “pattern of corrupt activity that includes at least one predicate act that is not a form of securities fraud, mail or wire fraud, or the interstate transportation of stolen property or securities.” Baker v. Pfeifer,
3. Predicate Acts
Plaintiffs allege that the Defendants’ pattern of corrupt activity included money laundering, § 1315.55(A), and tampering with records, § 2913.42(A).
Plaintiffs rely on two subsections of the money laundering statute, which provide:
(1) No person shall conduct or attempt to conduct a transaction knowing that the property involved in the transaction is the proceeds of some form of unlawful activity with the purpose of committing or furthering the commission of corrupt activity.
(3) No person shall conduct or attempt to conduct a transaction with the purpose to promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on of corrupt activity.
§ 1315.55(A). The term “transaction” includes “a purchase, sale, trade, loan, pledge, investment, gift, transfer, transmission, delivery, deposit, withdrawal, payment, transfer between accounts, exchange of currency, extension of credit, purchase or sale of a payment instrument, use of a safe deposit box, or any other acquisition or disposition of property.” § 1315.51(L). “Corrupt activity” has the same meaning as in the OCPA. § 1315.51(B).
In State v. Pugh, No. 24905,
b. Tampering with records
The Ohio tampering with records statute provides:
(A) No person, knowing the person has no privilege to do so, and with purpose to defraud or knowing that the person is facilitating a fraud, shall do any of the following:
(1) Falsify, destroy, remove, conceal, alter, deface, or mutilate any writing, computer software, data, or record;
(2) Utter any writing or record, knowing it to have been tampered with as provided in division (A)(1) of this section.
§ 2913.42(A). “Defraud” means to “knowingly obtain, by deception, some benefit for oneself or another, or to knowingly cause, by deception, some detriment to another.” § 2913.01(B). The dispositive question is whether the defendant, “with a purpose to commit'fraud, falsified any writing or record.” State v. Brunning,
A violation of § 2913.42(A)(1) requires .proof that the defendant falsified or destroyed the particular record at issue, while under § 2913.42(A)(2) the defendant need only utter the record. State v. Burns, No. 95465,
B. James D. and Miller
James D. and Miller failed to respond to Plaintiffs’ motion for summary judgment. Accordingly, the Court will consider Plaintiffs’ properly supported facts as undisputed for purposes of their claims against James D. and Miller. Fed.R.Civ.P. 56(e)(2). The facts involving these two Defendants are further buttressed by the factual admissions made in their plea agreements, as well as the adverse inferences entered by the Court after the close of dispositive motion briefing. (Doc. 250). Together, this undisputed evidence establishes that James D. engaged in a pattern of corrupt activity that proximately caused Plaintiffs’ injuries. The evidence also demonstrates that Miller conspired with James D. to engage in a pattern of corrupt activity. Accordingly, Plaintiffs have shown that there are entitled to judgment as a matter of law on their OCPA and OCPA conspiracy claims against James D., and their OCPA conspiracy claim against Miller.
In addition to * James D.’s wire fraud conviction, Plaintiffs establish that James D. engaged in dozens of acts of money laundering in violation of § 1315.55(A)(1) or (A)(3). Between October 2005 and January 2006, James D. received nine checks from GMRE, three checks for $1,430.50 and six for $2,000. (Doc. 216-3). James D. knew that these funds were proceeds from the Ponzi scheme, and in utilizing the proceeds, James D. intended to further the commission of the investment scheme. § 1315.55(A)(1).
James D. also personally wrote or authorized others to write checks from the Cl and GMRE bank accounts to salesmen as commission for attracting new investors. Miller received at least three commission checks from Cl between May 10, 2005 and January 1, 2006, in the amounts of $668.21, $2,864.90, and $110.42. (Doc. 163 at 11213; Doc. 216-4). Hubert Rials, another salesman for Cl, received twenty-two checks from Cl. (Doc. 163 at 58-59; Doc. 216-5). James D. testified that Col-well used James D.’s signature stamp to issue the checks, which James D. had authorized Colwell to use. (Doc. 163 at 58-59, 113-14). The checks are dated between May 19, 2005 and October 13, 2006 and range in amount from $600 to $7,889. (Doe. 216-5).
The Court also entered a number of adverse inferences against James D. that establish predicate acts of money laundering. James D. wrote thirty-one checks from the bank accounts of GMRE and
The undisputed evidence establishes that James D. committed money laundering in violation of § 1315.55(A)(1) or (A)(3) through each of theses checks. James D. was intimately involved in the operation of Cl, GMRE, and GMD. He had full knowledge that the funds in the bank accounts were derived from investors and he acted with the intent to further the commission of the Ponzi scheme by ensuring that the salesmen continued to solicit new investors to roll over their IRA accounts into promissory notes or debt instruments with Cl or GMD. (Doc. 208, Ex. 9; Doc. 250 at 3-5). Additionally, this amounts to a pattern of corrupt activity because the predicate acts of money laundering and wire fraud were “related and pose[d] a threat of continued criminal activity.” Morrow,
By reason of his guilty plea to the charge of conspiracy to commit mail fraud and the conduct admitted in his statement of facts, Miller conspired to violate the OCPA.
Finally, it is undisputed that Plaintiffs’ injuries were proximately caused by the pattern of corrupt activity perpetrated by James D. and Colwell, which Miller conspired to further. Accordingly, Plaintiffs are entitled to judgment as a matter of law on their OCPA and OCPA conspiracy claims against James D., and upon their OCPA conspiracy claim against Miller. Plaintiffs failed to show they are entitled to judgment as a matter of law on their substantive OCPA claim against Miller.
C. James Wilburn and Curtis
■Plaintiffs were unquestionably defrauded by the false representations and material omissions of James D., Miller, and Colwell as they solicited investments in promissory notes offered by Cl and GMD, purportedly backed by property owned by GMRE. By the time the Ponzi scheme and the real estate market collapsed in close succession, Plaintiffs were among the 90 investors who lost upwards of $9.2 million. However, after extensive discovery and years of litigation, Plaintiffs fail to produce any evidence that James Wilburn or Curtis played any role in that unfortunate chain of events.
1. James Wilburn pattern of corrupt activity
Plaintiffs contend that James Wilburn engaged in over twenty-five predicate acts of money laundering. Plaintiffs contend that the following acts related to Midwest were in violation of the money laundering statute: executing the Quit Claim Deed with James D.; executing the Mutual Release of Land Contract and releasing $120,000 in loans to James D.; arranging for James D. to receive a $10,000 commission on the sale of Midwest;, agreeing to sell Midwest to Curtis; executing a mortgage with Curtis; receiving a check for the Midwest sale; and depositing that check in his bank account. Plaintiffs also challenge a number of money transfer made by James Wilburn personally or by his wife Betty with James Wilburn’s participation. Although Plaintiffs succeed in showing that mány of these acts were “transactions” within the broad statutory definition of the term, Plaintiffs fail to offer evidence suggesting that James Wilburn made any of these transactions with the purpose to commit, further, or promote corrupt activity-
Plaintiffs allege money laundering in violation of § 1315.55(A)(1) and (A)(3). A violation of § 1315.55(A)(1) requires that proof that the defendant conducted the transaction “knowing that the property involved in the transaction is the proceeds of some form of unlawful activity with the purpose of committing or furthering the commission of corrupt activity.” ' The only acts that could arguably involve property that was the proceeds of unlawful activity are the transfers of Midwest.
James Wilburn divested James D. of any interest in Midwest through the Mutual Release of Land Contract and the Quit Claim Deed. (Doc. 198, Ex. G; Doc. 208-16). However, James Wilburn retained title under the Land Contract until James D. paid the purchase price in full. (Doc. 198, Ex. A at ¶ 16). James D. defaulted on those payments and title never trans
The Court need not decide whether these acts are a “transaction” under § 1315.51(L) because Plaintiffs cannot satisfy the other elements of § 1315.55(A)(1). There is no evidence that Midwest was the “proceeds of some form of unlawful activity.” Plaintiffs do not challenge the initial Land Contract. Although James D. may have held out Midwest as a property owned by GMRE, there is nothing to support the legal conclusion that Midwest became the “proceeds” of the investment scheme. The evidence only demonstrates that James D. neglected Midwest, failed to make his required monthly payments, and then James Wilburn exercised his creditor’s rights after James D. defaulted. James Wilburn cannot reasonably be said to have acted “with the purpose of committing or furthering unlawful activity” by divesting James D. of any interest he had in Midwest. Instead, James Wilburn clearly acted inconsistent with any intent to further a corrupt activity. The subsequent sale of Midwest to Curtis also has no connection to committing or furthering corrupt activity.
The remaining acts could only constitute money laundering under § 1315.55(A)(3) because there is no evidence that the property involved were the proceeds of unlawful activity. Yet “[t]he act of transacting money alone does not amount to money laundering. Instead, one must transact with the ‘purpose to promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on of corrupt activity.’” Pugh,
Plaintiffs allege that James Wilburn made payments to two investors in the Ponzi scheme, F.D. Jaffe and Robinson. On February 22, 2006, an individual, whom Plaintiffs identify in their' briefs only by the name Jaffe, wrote a $45,000 check to GMD. (Doc. 163 at 134; Doc. 216, Ex. 3).
On June 13, 2007, James Wilburn paid $20,000 to Robinson. (Doc. 183-5 at 3). The record is undisputed that Robinson loaned $20,000 to James D. on January 23, 2007 as the two negotiated for the purchase of Marlou. (Doc. 197 at 13; Doc. 224 Ex. B). Robinson wrote on the memo line of the check that the money was for Marlou. (Doc. 224 Ex. B). It is undisputed that Robinson thought that James D. would purchase Marlou and that James D. would repay the loan at the closing. (Doc. 197 at 16-17). There is no evidence that
Plaintiffs allege that the ten checks, cashier’s checks, and transfer from James Wilburn and Betty constituted money laundering. (Doc. 216, Ex. 23 at 13, 22, 23, 26, 35, 37, 40, 41, 44).
With respect to the checks actually written by James Wilburn, Plaintiffs cannot show that James Wilburn wrote them with the intent to facilitate or perpetuate James D.’s Ponzi scheme. The evidence establishes only that James Wilburn lent money to his cash-strapped son. The fact that James D. was operating a fraudulent investment scheme is not sufficient to establish that his father was both aware of its existence and intended to keep it in operation. The Court need not dwell on whether the remaining acts could qualify as transactions because they are wholly unrelated to the Ponzi scheme. While Plaintiffs survived motions to dismiss based on allegations alone, those same allegations are not sufficient to survive summary judgment. Plaintiffs were required to offer evidence that James Wilburn engaged in these transactions “with the purpose to promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on of corrupt activity.” § 1315.55(A)(3). Even after construing all inferences in their favor, there is simply no support for finding James Wilburn engaged in these transactions “with the purpose to promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on of corrupt activity.” Id.
2. Curtis pattern of corrupt activity
Plaintiffs contend that Curtis committed tampering by signing loan applications containing inaccurate financial statements and committed money laundering by writing two checks to his cousin James D.
a. Tampering
Plaintiffs identify eighteen inaccurate statements across four documents and contend that each statement constituted a separate act of tampering. Curtis concedes that there were several errors on the loan applications and the settlement statement he signed, but he adamantly contends that this information was taken without his knowledge from a prior loan application submitted to the same lender on November 13, 2006, that the information was entirely accurate at that time, and that he was unaware of the inaccuracies when he hurriedly signed the documents. (Doc. 218 at ¶ 10).
If there were any doubt remaining, case law solidifies the answer. In State v. Trammell,
Plaintiffs must prove that Curtis acted “with a purpose to commit fraud.” Brunning,
Curtis provided uncontradicted testimony that Barbara Hoffman completed the information on the loan applications, which Curtis then signed apparently without reviewing. (Doc. 195 at 55-56, 64, 76, 80). Hoffman completed at least four loan applications for Curtis, including loans for the purchase of real estate that somehow were not made part of this action. (Id. at 84, 153). Curtis’ purchase of Marlou and 8000 Hamilton has no connection to the Ponzi scheme that caused Plaintiffs’ injuries. Plaintiffs offer no evidence about Marlou after its purchase on March 2, 2007. There is no allegation or evidence that Marlou was ever presented as a property purchased with investor monies or was in any way associated with Cl, GMRE, or GMD. Instead, the undisputed evidence demonstrates that James D. negotiated the purchase of Marlou with Robinson to obtain easy money for himself, then substituted Curtis as the purchaser minutes before the closing occurred. Cur
b. Money laundering
Plaintiffs argue that Curtis committed money laundering by writing two checks to James D. and by taking possession of Midwest after he purchased it from James Wilburn. It is undisputed that on June 14, 2007 Curtis paid James D. $10,000 as a commission for acting as the realtor on the sale of Midwest. (Doc. 198, Ex. N). It is also undisputed that Curtis paid James D. $12,000 on September 12, 2007. (Id., Ex. P). The two checks could only amount to money laundering under § 1315.55(A)(3) because there were not proceeds of unlawful activity. “The act of transacting money alone does not amount to money laundering.” Pugh,
Curtis provided uncontradicted explanations for each check. James D. approached Curtis about the $10,000 commission; it was not something that Curtis initiated. (Doc. 19 at 65-68). Curtis had only learned about Midwest because of James D., so he consented to paying the commission. (Id.) After that, Curtis did not speak with James D. again until early September 2007, when James D. approached Curtis in a very desperate manner talking about suicide. (Id. at 69-72). James D. said that he needed money to pay the mortgage on his own house and adamantly asserted that he held equity in Midwest. (Id.) Curtis was particularly sensitive to suicide because years earlier another cousin had committed suicide and Curtis watched the children grow up without a father. (Id. at 70). Eventually Curtis borrowed $12,000 from another family member and wrote a check on September 12, 2007, which Curtis hoped would prevent his cousin James D. from also committing suicide. (Id.; Doc. 198, Ex. P). It was not until Colwell committed suicide in March 2008 that Curtis learned that James D.’s properties were in foreclosure and that James D. had taken money from other investors. (Doc. 195 at 174,181).
Plaintiffs offer no evidence suggesting that Curtis was aware of the Ponzi scheme during this timeframe. Curtis testified that he had no knowledge of other investors until after Colwell died in March 2008. (Doc. 195 at 174, 181). Plaintiffs attempt to impute knowledge of the Ponzi scheme based primarily on hindsight. It is undisputed that Curtis knew that James D. had squandered his $50,000 buy-in to C & J Properties, that James D. wrote bad checks to Robinson, and that James D. had defaulted on his Midwest payments to his father James Wilburn. (Doc. 195 at 20-22, 25-26). Hówever, knowledge that James D. had bounced a check or defaulted on a mortgage provides no basis to suggest that Curtis was aware that James D. was operating a Ponzi scheme that defrauded over 90 investors out of $9.2 million. (Doc. 208, Ex. 9 at 8). Further, Plaintiffs offer no evidence of why Curtis would want to assist that scheme. Curtis never received commission checks nor any monetary benefit from Cl. Accordingly, Plaintiffs cannot show that Curtis wrote these two isolated
3. Association and Participation
Even if Plaintiffs could establish that James Wilburn and Curtis committed sufficient'predicate acts to constitute a pattern of corrupt activity, Plaintiffs present no evidence suggesting that either was “employed by, or associated with” the Pon-zi scheme enterprise or “conducted or participated in” that enterprise through the pattern of corrupt activity. Miranda,
The Court finds that the recent decision in State v. Sparks,
The Ohio appellate court reversed and vacated the conviction because the prosecution failed to prove that the individuals “functioned as separate parts to form a whole, with a shared, common purpose.” Sparks,
[E]ach individual had his own separate and distinct “business” venture when selling marijuana and that each individual participated in his own affairs. There is no evidence that any of these individu*784 als had any involvement in the others’ business affairs; there is no evidence that they joined together to make money for the same enterprise; and there is no evidence demonstrating that their motive to make a profit was common in the sense it supported the enterprise. While the various individuals may have had the same purpose in selling their marijuana (i.e., to make money), having the same purpose is not the equivalent of having a “common purpose.”
Id. Although “each committed crimes by selling marijuana at some given point in time,” there was no evidence that the individuals had a common purpose to act together:
[A] finding of “enterprise” would have required the state to prove that Lopez and Pagenstecher voluntarily participated in, or were in fact, associated with organized conduct for the purpose of an enterprise existing between Sparks, Baker, and the Lampes. Neither Lopez nor Pagenstecher did anything to further Sparks’ enterprise. Rather, théy sold marijuana only in furtherance of their own personal gain.
Id. at 762.
The court provided useful guidance to frame the current analysis: “the more appropriate focus is upon the common purpose of the individuals involved, their combined efforts in pursuing such common purpose, and their relationship with one another.” Sparks,
Boyle [v. United States,556 U.S. 938 ,129 S.Ct. 2237 ,173 L.Ed.2d 1265 (2009) ] and Siferd address only what is not necessary in order to find association with an enterprise (i.e., formalized organization, participation in a managerial capacity, and inter-relationship with all other enterprise associates). At most, these cases provide guidance here to the extent that the absence of formal organization, managerial control, and interaction with certain other individuals associated with the enterprise is not dispositive of whether a particular person has associated himself with that enterprise based upon the particular facts of those cases. Boyle and Siferd do not hold that the foregoing indicia are never relevant and important in determining whether an individual has associated himself with an enterprise.
Id. at 764. The court in Sparks also distinguished the holding in Siferd based on the numerous facts showing that the defendant was voluntarily associated with and participated in the drug trafficking enterprise:
Siferd purchased substantial quantities of cocaine from enterprise associates, fronted enterprise associates money to obtain cocaine for him, offered enterprise associates an alternate source for cocaine when they did not have any on hand, and was compensated by the enterprise for his involvement with a reliable flow of cocaine and free cocaine. Many of these features of an association are lacking in the case at bar.
Id. at 767. This Court finds that the same features are lacking here.
Here, Plaintiffs undisputedly demonstrate the existence of an enterprise to fraudulently induce unsophisticated investors to roll over their IRA accounts into investments in promissory notes offered by Cl or GMD and purportedly backed by a real estate portfolio owned by GMRE. Colwell, Miller, and other salesmen recruited investors with false representations and promises, while James D. oversaw the backend and created false account statements to lull investors into a false sense of security. All the while these per
The Court is guided by the maxim that the “appropriate focus is upon the common purpose of the individuals involved, their combined efforts in pursuing such common purpose, and their relationship with one another.” Sparks,
Although James Wilburn and Curtis shared a last name with one of the participants, there is no evidence that either “conducted or participated in conduct that pertained to [that] enterprise, rather than their own affairs.” Sparks,
A reasonable jury could not find that James Wilburn or Curtis were associated with and participated in the enterprise through a pattern of corrupt activity. Nor could a reasonable jury find that James Wilburn or Curtis “agreed that others would commit the acts that would establish the ‘pattern of corrupt activity.’ ” Feliciano,
4. Acquisition or Investment
Plaintiffs also cannot show that James Wilburn or Curtis violated § 2923.32(A)(2) or (A)(3). An acquisition claim under § 2923.32(A)(2) requires proof that James Wilburn or Curtis acquired property through a pattern of corrupt activity. Plaintiffs show only that each acquired Midwest, but do not demonstrate that a pattern of corrupt activity allowed that acquisition. Instead, James Wilburn acquired Midwest by exercising his creditor’s rights under the Land Contract and Ohio law. Curtis then purchased Midwest from James Wilburn through an arm’s-length transaction that was duly recorded. Plaintiffs provide no factual support for their allegations that either engaged in a pattern of corrupt activity.
Under § 2923.32(A)(3), James Wilburn and Curtis must have knowingly received proceeds from the Ponzi scheme and then used those proceeds to purchase real estate. Plaintiffs do not address this threshold element, contending only that an investment can show proximate cause. Plaintiffs fail to see that the OCPA requires proof of a substantive violation of § 2923.32(A)(3) before reaching the proximate cause analysis. The Supreme Court of Ohio stressed that § 2923.32(A)(3) “refers to ‘knowingly’ receiving and investing
5. Proximate Cause
Finally, even if James Wilburn and Curtis did violate a substantive provision of the OCPA, Plaintiffs cannot show this violation proximately caused their injuries. The undisputed evidence shows that Plaintiffs lost their investment because James D. and Colwell solicited unsophisticated investors with false promises of guaranteed returns and a portfolio of real estate they did pot own, and then James D. and Colwell used the investments for personal purposes or to pay earlier investors. (Doc. 208, Ex. 9). In the end, over 90 victims lost upward of $9.2 million.
In TJX Cos. v. Hall,
While not dispositive, it is notable that James Wilburn and Curtis were never investigated as part of any of the multiple state and federal criminal investigations into Cl and GMD. Even if James Wilburn and Curtis actually did everything of which they are accused, Plaintiffs cannot show ■that this conduct proximately caused the loss of their investments. Curtis acquired several pieces of real estate that undisput-edly were not connected to the Real Estate Portfolio. If Curtis used fraudulent mortgage loans to finance those purchases, that injury would fall on the banks. However, Plaintiffs produce no evidence that Curtis missed even a single mortgage payment.
In State v. Stevens,
Should an 18-year-old high school senior who sells $10 worth of marijuana to classmates be prosecuted as a first-degree felon under the Ohio RICO Act merely because the ■ drugs could be traced back to a multibillion-dollar Colombian drug cartel? How would this put a damper on organized crime in Ohio? That student is acting as an individual, and his conviction and punishment would have no discernable effect on the fight against organized crime.
Id. at 256. The same logic applies here. James D., Colwell, and Miller perpetrated a Ponzi scheme that defrauded 90 victims out of $9.2 million. At best, Plaintiffs accuse James Wilburn of giving James D. around $150,000, cancelling a land contract for the sale of a trailer park several months after James D. defaulted, and then selling that trailer park to his nephew. Curtis is accused of submitting false loan applications, purchasing a trailer park from his uncle, and giving James D.
There is no evidence that James Wilburn or Curtis violated a substantive provision of the OCPA or conspired with others to do the same. Further, there is no evidence that Plaintiffs’ lost investments were proximately caused by any act or omission of James Wilburn or Curtis. Accordingly, James Wilburn and Curtis are entitled to judgment as a matter of law on Plaintiffs’ OCPA and OCPA conspiracy claims.
VI. FEDERAL RICO
Plaintiffs also move for summary judgment against James D. and Miller on one of their RICO claims. The federal RICO statute is substantially similar to the OCPA. See Beverly,
Plaintiffs must prove the following elements: “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” In re ClassicStar Mare Lease Litig.,
Although RICO generally excludes “any conduct that would have been actionable as fraud in the purchase or sale of securities to establish a violation of section 1962,” that exception “does not apply to an action against any person that is criminally convicted. in connection with the fraud.” 18 U.S.C. § 1964(c). James D. agreed in his statement of facts that promissory notes issued by Cl and GMD constituted “securities” within the. meaning of federal and state securities law. (Doc. 208, Ex. 9 at 2). This is sufficient to remove the limitation on civil actions in 18 U.S.C. § 1964(c). James D. proximately caused Plaintiffs’ injury under the RICO analysis and the OCPA analysis. Accordingly, Plaintiffs are entitled to judgment as a matter of law on their 18 U.S.C. § 1962(c) RICO claim against James D.
Plaintiffs have failed to show that Miller violated 18 U.S.C. § 1962(c).
Wherefore, for these reasons, the Court finds as follows:
+ The motions for summary judgment filed by Defendants James Wilburn Powell and Curtis Powell (Docs. 198, 205) are GRANTED; and Plaintiffs’ cross motion for summary against Defendants James Wilburn Powell and Curtis Powell (Doc. 208) is DENIED. As no claims remain pending against Defendants James Wilburn Powell and Curtis Powell, Defendants James Wilburn Powell and Curtis Powell are hereby DISMISSED from this action.
+ Plaintiffs’ motion for summary judgment (Doc. 208) is GRANTED as to their claims for violations of OCPA, OCPA conspiracy, and RICO (18 U.S.C. § 1962(c) only) against Defendant James D. Powell.
+ Plaintiffs’ motion for summary judgment (Doc. 208) is GRANTED as to their OCPA conspiracy claim against Defendant Kevin Miller.
+ Plaintiffs’ motion for summary judgment (Doc. 208) is DENIED as to the OCPA and RICO claims against Defendant Miller.
Within fourteen days of the entry date of this Order, Plaintiffs shall advise the Court in writing whether they intend to pursue their remaining claims.
The determination of James D. Powell’s and Kevin Miller’s damages also remains pending before the Court.
IT IS SO ORDERED.
Notes
. James Bradley passed away during this litigation and his wife Diana was substituted as his fiduciary on June 11, 2013.
. Diana Bradley is the attorney-in-fact for her mother Cora Pyles and proceeds on her behalf. (Doc. 182 at 2).
. Pursuant to separate joint motions to dismiss, Hubert Rials and Deanna Powell were dismissed with prejudice on October 7, 2013 and December 13, 2013, respectively. Subsequently, on January 2, 2014, Chatsworth Jacobs was dismissed without prejudice.
.The Court will address Plaintiffs’ pending motion for attorney’s fees and costs (Doc. 237) by separate entry.
. Counts two through five alleged RICO claims under each of the four provisions of 18 U.S.C. § 1962. (Doc. 46 at 29). However, as the Court discusses more fully infra, Plaintiffs only moved for summary judgment on count four, which alleges a violation of 18 U.S.C. § 1962(c).
. An adverse inference applies only against that particular Defendant.
. United States v. Kevin Miller, 1:09-cr-176 (S.D.Ohio); United States v. James D. Powell, 1:10-cr-75 (S.D.Ohio).
. James D. and Miller were prosecuted in separate cases and each statement of facts refers to two unnamed co-conspirators. However, it is undisputed that James D., Miller, and David Colwell were members of the same conspiracy to commit mail fraud.
. Despite knowing that Colwell died in March 2008, Plaintiffs named Colwell and MMA as Defendants in their original complaint. (Doc. 1 at ¶ 11). The Court was forced to issue several orders before Plaintiffs finally conceded that they had no intention of pursuing those claims. (Docs. 21, 28, 33).
. Diana Bradley's affidavit contains a significant number of conclusions of law as well as factual statements not based on her personal knowledge and. (Doc. 173 at ¶¶ 85-249, 252). "When ultimate facts or conclusions of law appear in an affidavit which also contains the proper subject of affidavit testimony, facts within the personal knowledge of the affiant, the extraneous material should be disregarded, and only the facts considered.” A.L. Pickens Co., Inc. v. Youngstown Sheet & Tube Co.,
. Beyond the sheer volume of exhibits submitted, the Court's ability to address the pending motions was particularly hindered by Plaintiffs' inconsistent and confusing labeling of exhibits and citations thereto. Among the various labels are appendix, deposition exhibit, deposition document, tab, and admission, often used in combination. For example, record citations include "Depo. Exh. 23, at Depo. Doc. 26,” “Appx A, Exh. 48, at 17057-61,” "Exh., 9, Tab 139, 1599,” and "Depo. Exh. 9, at Tab 89.” Frequently the pinche is to a five-digit Bates number, but the pages in exhibits are often not organized sequentially.
. The statute of limitations for a civil conspiracy claim is the same as the underlying cause of action. Cramer v. Fairfield Med. Ctr.,
. As previously noted, the Court only considers the portions of Diana Bradley's affidavit which are based on her personal knowledge.
. Plaintiffs submitted a number of account statements from Fiserv dated between 2005 and 2007, which prominently list David Col-well as the financial representative on her account. (Doc. 110-18 at 1, 3, 8, 11, 15, 18).
. Ohio case law focuses almost exclusively on § 2923.32(A)(1).
. In contrast, Plaintiffs alleged violations of the four RICO subsections in separate claims. (Doc. 46 at ¶¶ 212-18).
. "Ohio's RICO statute differs from its federal counterpart in that an acquisition or investment claim under R.C. 2923.32(A)(2) or (3), respectively, may be made by alleging acquisition of, or investment in either an enterprise or real property. In contrast, a federal acquisition or investment claim under sections 1962(b) and (a), respectively, must allege acquisition of, or investment in[,] an enterprise.” Sheets,
. This does not remove the necessity to prove the mens rea for the underlying predicate offenses that make up the pattern of corrupt activity. Schlosser,
. As discussed infra, not every pattern of corrupt activity is sufficient to support a civil OCPA action.
. Plaintiffs erroneously argue that an OCPA conspiracy may also be established through strict liability. In doing so, Plaintiffs appear to conflate the distinct concept of a strict liability offense with a conspiracy. In State v. Schlosser,
. The court observed that the defendant likely violated § 2913.42(A)(2), but he was not charged with violating that particular provision. Id.
. The twenty-two checks are all made payable to the Bank of Kentucky, a detail that Plaintiffs neither identify for the Court nor attempt to explain. (Doc. 216-5). Notwithstanding this unexplained discrepancy, the memo line indicates the checks are for "Hugh Rials" and several also include the word "commission,” "interest,” or "renewals.” (Id.) .
. In stark contrast to the independent evidence that supported the adverse inferences entered against James D., such as copies of the relevant checks, the independent evidence for the adverse inferences against Miller was his statement of facts from the plea agreement and Diana Bradley's affidavit. (Doc. 250 at 14-28). The questions Miller refused to answer on Fifth Amendment grounds consisted of Plaintiffs’ counsel reading each sentence from his statement of facts and select sentences from Diana Bradley’s affidavit, and then asking Miller to confirm if that sentence was true. (Doc. 191 at 14-33).
. The Court notes that Plaintiffs’ devote only seven sentences to their contention that they are entitled to judgment as a matter of law on their OCPA claims against Miller, and these sentences are entirely devoid of any attempt to make a developed argument. (Doc. 208 at 49-51). Three sentences merely refer to Miller’s criminal conviction or his statement of facts. The remaining four sentences state in conclusory fashion that Plaintiffs have established the elements of their claims. The Court declines to make the arguments that Plaintiffs simply failed to make. Guarino,
.Plaintiffs' complete argument that Miller committed predicate acts states: "In his Statement of Facts, Miller recited dozens of predicate acts related to this criminal enterprise. (Doc. 192, Appx. A). All these facts, and the many more contained in Miller's Statement of facts, are predicate acts for the purposes of Bradleys’ individual RICO claim against him. Ohio Rev.Code § 2923.31(1).” (Doc. 208 at 49-50). Plaintiffs made no attempt to apply any of these facts admitted in his plea agreement, which Miller is estopped from denying, to the elements of any of the
. The cited check clearly identifies the payor as F.D. Jaffe & Co, Inc. (Doc. 216, Ex. 3). Plaintiffs make no mention of this in their briefs.
. Plaintiffs also cite a $31,000 Fifth Third cashier’s check made payable to GMD purchased by "James Powell” on December 21, 2006. (Doc. 216, Ex. 23 at 31). James Wilburn testified that he knew nothing about the check, that he never signs his name as simply "James Powell” without using his middle name or initial, that the Fifth Third account was in his wife’s name only, and that her account was not opened until July 2007. (Doc. 200 at 112-13, 117). Additionally, Betty Powell testified that she knew nothing about that cashier's check and had not heard of GMD at the time the check was issued. (Doc. 249-6 at 90).
. Even if the allegations could amount to more than one tampering offense under that statute, the OCPA provides that each incident of corrupt activity may not be "so closely related to each other and connected in time and place that they constitute a single event.” Ohio Rev.Code § 2923.31(E).
. James Wilburn's motion to sever; motion to bifurcate; and motion to exclude evidence (Doc. 207) is therefore DENIED as moot.
. The Court reiterates its conclusion that Plaintiffs did not move for summary judgment on count five, which asserted a RICO conspiracy under 18 U.S.C. § 1962(d). Plaintiffs conspicuously did move for summary judgment on their OCPA conspiracy claim. (Doc. 208 at 26-27).
.The only two sentences that pertain to' the RICO claim against Miller provide: “Miller has been convicted of federal securities crimes 'in connection with securities fraud.' For that reason, Bradleys have established their federal RICO claim against Miller.” (Doc. 208 at 50-51). Beyond the inaccuracy that Miller was not convicted of a federal securities crime, that alone would not be sufficient to satisfy the remaining elements.
. The Bradleys originally asserted eleven claims against Defendants James D. Powell and Kevin Miller. (Doc. 46).
The following six claims remain pending against Defendant James D. Powell: (a) count two, 18 U.S.C. § 1962(a); (b) count three, 18 U.S.C. § 1962(b); (c) count five, 18 U.S.C. § 1962(d); (d) count eight, fraud; (e) count nine, breach of contract; and (f) count ten, negligence. The Court sua sponte dismisses count eleven, fraudulent transfer, and count' twelve, civil conspiracy, as these claims are barred by the statute of limitations. See supra pp. 767-70.
. The following eight claims remain pending against Defendant Kevin Miller: (a) count two, 18 U.S.C. § 1962(a); (b) count three, 18 U.S.C. § 1962(b); (c) count four, 18 U.S.C. § 1962(c); (d) count five, 18 U.S.C. § 1962(d); (e) count six, Ohio Rev.Code § 2923.32; (f) count eight, fraud; (g) count nine, breach of contract; and (h) count ten, negligence. The Court sua sponte dismisses count eleven, fraudulent transfer, and count twelve, civil conspiracy, as these claims are barred by the statute of limitations. See supra pp. 767-70.
Finally, Plaintiff Cora Pyles’ securities law claim in count one remains pending against Defendant Kevin Miller.
. See supra notes 32-33.
. The Court notes that default judgment as to liability and damages was previously entered against Defendants Cl,' GMD, and GMRE. (Doc. 188). The Court found that Plaintiffs Diana and James Bradley evidenced $134,354.46 in damages, which were trebled pursuant to Ohio Rev.Code § 2923.34(F). (Id.) Accordingly, the Court found Defendants Cl, GMD, and GMRE jointly and severally liable for $403,063.40 in damages. (Id.) Presumably, Plaintiffs will also seek to hold Defendants James D. Powell and Kevin Miller jointly and severally liable for this amount.