CPA Defeats Racketeering & Corrupt Charges

October 1, 2003

George V. Genzmer, III, Gina E. Och and Pascal Gagnon-Morris successfully obtained a summary judgment in a Racketeer Influenced and Corrupt Organizations ("RICO) federal case. Defendant was the CPA for several start-up companies that were preparing to go public. The related reverse mergers and financing of the companies subsequently failed; thus, prompting the plaintiffs to sue defendant, alleging that he was involved in an enterprise engaged in criminal racketeering.

The defense filed for motion for summary judgement and argued that defendant did not operate, manage or participate in any criminal activity or racketeering enterprise. Specifically, it was argued that Reves v. Ernst & Young, 507 U.S. 170, 113 S.Ct. 1163, 1172, 122 L.Ed.2d 1163 (1993), applied. In Reves, the United States Supreme Court held that a violation of § 1962(c) of RICO required participation by the accountant defendant in the operation or management of the enterprise. Here, defendant simply provided auditing services to these companies and did not operate or manage any enterprise.

The court granted the motion a summary judgment stating that defendant simply provided auditing services and did not participate or operate any racketeering enterprise.