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Article United States: Federal Appellate Court Holds RICO Relief Is Unavailable for Foreign Investors Defrauded by Individuals in the United States

United States: Federal Appellate Court Holds RICO Relief Is Unavailable for Foreign Investors Defrauded by Individuals in the United States

On April 30, 2024, the U.S. Court of Appeals for the Fourth Circuit held that foreign investors who were defrauded by individuals living in the United States cannot seek relief in U.S. courts under the Racketeer Influenced and Corrupt Organization Act (RICO). (Percival Partners Ltd v. Nduom, No. 23-1309 (4th Cir. 2024) (opinion).)

Case Background

This case arose after a Ghanaian company called Gold Coast solicited investments from Ghanaian investors. Gold Coast was owned and operated by members of the Nduom family, a Ghanaian family who resided in the United States. The Ghanaian investors alleged that Gold Coast promised to distribute their investments in “microfinance loans to small family businesses and individuals in Africa. In theory, the loans would stimulate African economies while also earning interest for the investors.” (Opinion at 3.) Instead, the funds were transferred to a Virginia-based company and disbursed to Nduom family members and several shell companies.

In 2019, Ghanaian authorities began investigating Gold Coast and documented that it had placed 99.41% of its funds into a Nduom family corporation, while failing to repay its investors. (Opinion at 3.) As a result of these alleged actions, and after receiving millions of dollars from Ghanaian investors, Gold Coast eventually became insolvent, and Ghana’s Securities and Exchange Commission revoked the investment firm’s license.

The investors sued the Nduom family and its businesses in the Eastern District of Virginia. They listed five claims under Virigina state law and one federal claim under RICO. The civil RICO claim alleged that the defendants had engaged in several RICO crimes, including transporting stolen property, possessing stolen property, money laundering, and “engaging in monetary transactions with property derived from unlawful activity.” (Opinion at 4.)

The District Court dismissed all state and federal claims on February 17, 2023. (Percival Partners Ltd v. Nduom, No. 1:22-cv-16 (E.D. Va. Feb. 17, 2023) (memorandum opinion and order).) The District Court ruled that civil RICO claims provide a remedy only for those who suffer domestic injuries to business or property. Because the injuries in this case involved Ghanaian citizens losing their money in Ghana, the District Court dismissed the RICO claim. (Opinion at 8-9.)

Fourth Circuit’s Opinion

The Fourth Circuit affirmed the District Court’s decision, holding that the “injury the plaintiffs have alleged is foreign, not domestic, and therefore cannot sustain a civil RICO suit.” (Opinion at 7). The appellate court relied on the U.S. Supreme Court case RJR Nabisco v. European Community, 579 U.S. 325 (2016), which held that, while some of RICO’s provisions may apply to fraudulent activities committed abroad, the private right of action in 18 U.S.C. § 1964(c) applies only to injuries that occur in the United States. (RJR Nabisco, 579 U.S. at 346.)

The investors argued that because the money was eventually funneled to the United States and taken by people in the U.S., the investors had presented sufficient domestic connections to support a civil RICO claim. The Fourth Circuit disagreed, concluding that even if racketeering conduct occurred in the United States, a RICO claim must involve a domestic injury. (Opinion at 11-12.) Applying the analysis from RJR Nabisco and subsequent cases, the Fourth Circuit identified several ways that the alleged injuries occurred in Ghana.

As alleged by the plaintiffs, the victims are Ghanaian investors. They placed their funds with Gold Coast, a Ghanaian firm. They expected their money would be distributed as microloans within the African continent and then returned to them in Ghana. Instead, the Ghanaian funds were stolen from the Ghanaian plaintiffs in Ghana, when the Nduoms took the money from their Gold Coast accounts. Across all these dimensions, what is alleged is a distinctly foreign injury.(Opinion at 10.)

In affirming the District Court’s dismissal of the federal civil RICO claim, the Fourth Circuit also affirmed the District Court’s decision not to exercise supplemental jurisdiction over the plaintiffs’ corresponding state law claims.

Anna Price, Law Library of Congress
May 13, 2024

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Chicago citation style:

Price, Anna. United States: Federal Appellate Court Holds RICO Relief Is Unavailable for Foreign Investors Defrauded by Individuals in the United States. 2024. Web Page. https://www.loc.gov/item/global-legal-monitor/2024-05-12/united-states-federal-appellate-court-holds-rico-relief-is-unavailable-for-foreign-investors-defrauded-by-individuals-in-the-united-states/.

APA citation style:

Price, A. (2024) United States: Federal Appellate Court Holds RICO Relief Is Unavailable for Foreign Investors Defrauded by Individuals in the United States. [Web Page] Retrieved from the Library of Congress, https://www.loc.gov/item/global-legal-monitor/2024-05-12/united-states-federal-appellate-court-holds-rico-relief-is-unavailable-for-foreign-investors-defrauded-by-individuals-in-the-united-states/.

MLA citation style:

Price, Anna. United States: Federal Appellate Court Holds RICO Relief Is Unavailable for Foreign Investors Defrauded by Individuals in the United States. 2024. Web Page. Retrieved from the Library of Congress, <www.loc.gov/item/global-legal-monitor/2024-05-12/united-states-federal-appellate-court-holds-rico-relief-is-unavailable-for-foreign-investors-defrauded-by-individuals-in-the-united-states/>.