Bascunan v. Elsaca

JORGE YARUR BASCUNAN; TARASCONA CORP.; HOFSTRA CORP.; INMOBILIARIA MILANO S.A.; INMOBILIARIA E INVERSIONES TAURO S.A.; INVERSIONES T & V.S.A., Plaintiffs, v. DANIEL YARUR ELSACA; CRISTIAN JARA TAITO; OSCAR BRETON DIEGUEZ; GM & E ASSET MANAGEMENT S.A.; FINTAIR FINANCE CORP.; EUWELAND CORP.; HAY'S FINANCE CORP.; GARY EQUITY'S CORP.; AGRICOLA E INMOBILIARIA CHAUQUEN LIMITADA; JOHN DOES 1-10; ALAPINJDP INVESTPNG CORP.; SAN INVESTMENT COMPANY LTD, Defendants.

No. 15 Civ. 2009 (GBD)

United States District Court, S.D. New York

August 11, 2021

MEMORANDUM DECISION AND ORDER

GEORGE B. DANIELS, United States District Judge

Plaintiff Jorge Yarur Bascunan, as well as several entities he owns and controls (the "Bascunan Entities")^[1], bring this action under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., against Defendants Daniel Yarur Elsaca several entities he owns and controls, and two of his associates, Cristian Jara Taito ("Jara") and Oscar Breton Dieguez ("Breton"). (Second Am. Compl ("SAC"), ECF No. 76, ¶¶ 6-26.) Plaintiff alleges that Defendants violated and conspired to violate RICO by engaging in numerous predicate acts of racketeering activity, including mail fraud, wire fraud, bank fraud, money laundering, and violations of the Travel Act, with the purpose and intent of misappropriating millions of dollars Plaintiff inherited from his late parents in the late 1990s (Id. ¶¶ 1-3, 185-234, 236-39.) Plaintiff also asserts several state law causes of action for unjust enrichment, constructive trust, and accounting. (Id. ¶¶ 186-234, 236-39, 241-45, 247-50, 252-58.)

In July 2019, this case returned from the Second Circuit with the direction that this Court should instruct Defendants "to expeditiously file an answer to the SAC so that the action may proceed to discovery/" See Bascunan v. Elsaca (Bascunan II), 927 F.3d 108, 126 (2d Cir. 2019). Defendants filed their answer on August 15, 2019. (ECF No 119.) Defendants now move for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) dismissing Plaintiffs RICO and state law claims as time-barred. (Notice of Defendants' Rule 12(c) Mot. for J. on the Pleadings, ECF No. 151.) Specifically, Defendants claim that Plaintiffs pleadings and certain documents subject to judicial notice demonstrate that Bascunan was aware of his alleged injuries more than four years-the applicable RICO statute of limitations period-prior to the filing of this action. Defendants' motion is GRANFED as to Plaintiffs claims related to the alleged sham sale of Anacapri and the alleged theft of BCI shares. Defendants' motion is also GRANFED as to Plaintiffs state law claims for unjust enrichment and the imposition of a constructive trust. Because this Circuit's separate accrual rule applies to the other RICO injuries alleged, Defendants' motion is DENIED in all other respects regarding the RICO claims. Defendants' motion to dismiss Plaintiffs accounting cause of action is also DENIED.

I. RELEVANT FACTUAL BACKGROUND

In 1999, Plaintiff Bascunan engaged his cousin, Defendant Elsaca, to manage his vast estate. (SAC ¶¶ 37, 39.) Plaintiff Bascunan's Estate consists largely of companies and assets owned by Plaintiff, including a substantial stake in Banco de Credito e Inversiones ("BCI"), a Chilean bank. (Id. ¶ 35.) Bascunan agreed to pay Elsaca an annual salary for managing his Estate (Id. ¶ 39.) Soon after taking charge, Elsaca convinced Bascunan to grant him a power of attorney that conferred broad authority on Elsaca to manage the Estate and enter into transactions on its behalf. (Id. ¶ 40.) Plaintiff Bascunan alleges that for the ten years Elsaca managed the Estate, he and his co-conspirators engaged in a multifaceted fraudulent scheme to misappropriate money, securities, and other assets from the Estate siphoning off approximately $70 million. (Id. ¶¶ 3, 45.) The various schemes are laid out in detail in the prior decisions of this Court and the opinions of the Second Circuit. See Bascunan v. Elsaca, 2016 WL 5475998 (S.D.N.Y.Sept. 28, 2016); Bascunan v. Elsaca, 927 F.3d 108, 111 (2d Cir. 2019).

A. The New York Trust Account Scheme

The New York Trust Account scheme involved the misappropriation of assets held in two trusts owned by the Estate. (SAC ¶ 46.) The first trust, known as the "Afghan Trust," was established in 1998 and administered by J.P. Morgan in New York, and used to finance Bascunan's charitable endeavors. (Id. ¶ 47.) In 2001, after Elsaca took over the management of the Estate, he established the Capri Star Trust on Bascunan's behalf using funds from the Afghan Trust. (Id. ¶ 48.) The Capri Star Trust was created and administered by UBS AG in New York and its stated purpose was also to finance Bascunan's charitable undertakings. (Id.) According to Bascunan, however, the Capri Star Trust's true purpose was to generate sham investment advisor fees and legal fees, and transfer more than $2.7 million from the Capri Star Trust to accounts under Elsaca's control. (Id. ¶¶ 53-56; id., Ex. A.)

B. The Anacapri Investment Fund Scheme

The Anacapri Investment Fund Scheme involved four sub-schemes by which Elsaca allegedly misappropriated tens of millions of dollars. (Id. ¶¶ 68-128.) In Bascunan II, the Second Circuit affirmed the dismissal of one of these sub-schemes regarding sham management fees for lack of a domestic injury. Bascunan II, 927 F.3d at 120. The three remaining sub-schemes revolve around the ANACAPRI Private Investment Fund, created by Elsaca in 2003. (SAC ¶ 70.) Elsaca funded Anacapri using funds from three separate Bascunan Entities Elsaca controlled pursuant to the power of attorney. (Id. ¶¶ 71-72.)

1. The Fintair Misappropriation

Around June 2003, Elsaca caused Anacapri to acquire Fintair, a British Virgin Islands ("BVI'') company that Elsaca owned and formed in 2000. (Id. ¶ 74.) This acquisition made Fintair part of the Estate. (Id.) Despite being part of the Estate, the SAC alleges that Elsaca opened a Morgan Stanley bank account in Fintair's name, representing to Morgan Stanley that he remained Fintair s sole owner. (Id. ¶¶ 75-77.) Under these false pretenses, Elsaca made numerous transfers from the Estate into the Morgan Stanley bank account, transferring over $37 million into the account. (Id. 75-16, 81-86; id., Ex. B.) Elsaca allegedly then transferred the funds to himself, entities he owned, and associates of his. (Id.)

2. New Tarascona and the BCI Share Theft

The Estate owned a 1.47% stake in BCI (the Chilean Bank controlled by Bascunan's father before his death) through Tarascona Corp., a BVI entity. (Id. ¶¶ 8, 91.) Tarascona was in turn wholly owned by Hofstra Corp., another BVI entity that was part of the Bascunan Estate. (Id. ¶¶ 9, 91.) Hofstra's interest in Tarascona was represented by physical bearer shares stored in a J.P. Morgan safety deposit box in New York.^[2] (Id. ¶ 91.)

Notably, the BCI Share Theft has two component parts. First, the SAC alleges that in December 2007, Elsaca or one of his agents traveled to New York and removed the Tarascona bearer shares from Hofstra's safety deposit box. (Id. ¶ 92.) At the time of the alleged theft, the shares had a value of approximately $47 million. (Id. ¶IOI.) Subsequently, Elsaca directed a Panamanian law firm to register the stolen bearer shares in the name of Nueva T Corp. ("New Tarascona"), a BVI entity Elsaca incorporated for himself on or about November 30, 2007. (Id. ¶¶ 94-98.) Second, Bascuhan claims that Elsaca then caused the Estate to purchase the very share that had been stolen for $43 million. (Id. ¶ 102-103.) Though financially tangled, this scheme reduces to the allegation that Elsaca stole shares from Bascunan and then sold them back to him. Bascunan II, 927 F.3d at 114.

3. The Sham Anacapri Sale

Next, after allegedly misappropriating millions of dollars from Anacapri through Fintair, Bascuhan claims that Elsaca and his associates ultimately misappropriated Anacapri itself through a sham sale to one of Elsaca's shell companies. (Id. ¶ 109.) Specifically, Elsaca allegedly caused Bascuhan Entities to sell their stakes in Anacapri to Defendant Agrfcola E Inmobiliaria Chauquen Limitada, a Chilean company owned by Elsaca, for $7.5 million. (Id. ¶¶ 22, 113.) At the time of the sale, Anacapri had a book value of $21.5 million, thus Elsaca "sold" Anacapri to his shell company at a $14 million discount.

C. The Tarascona Misappropriation

The SAC alleges that between 1999 and 2004, Elsaca opened almost a dozen accounts at Morgan Stanley in Tarascona's name "for the purpose of misappropriating [the Estate's funds] and laundering them through the global banking system." (Id. ¶ 129.) Bascuhan alleges that Elsaca misrepresented to Morgan Stanley in New York that he owned Tarascona (when in fact it was owned by the Estate), so that he could freely transfer money from Tarascona to his own personal accounts. (Id. ¶¶ 130-32.) Elsaca allegedly transferred over $2 million via 333 separate transfers. (Id. ¶ 135.)

D. The BCI Dividend Misappropriation

From 2007 to 2010, the BCI shares earned over $3.5 million in dividends. (Id. ¶ 136.) Bascunan alleges that Elsaca misappropriated these funds by diverting them to Estate owned bank accounts, including the Morgan Stanley Fintair account, and then taking the funds. (Id. ¶ 136-141.) Notably, this alleged scheme is distinct from the BCI Share Theft alleged in the SAC.

II. LEGAL STANDARD

A party may move for judgment on the pleadings "[a]fter the pleadings are closed-but early enough not to delay trial[.]" Fed.R.Civ.P. 12(c). "Judgment on the pleadings is appropriate if, from the pleadings, the moving party is entitled to judgment as a matter of law." Burns Int'l Sec. Servs., Inc. v. Int'l Union United Plant Guard...