RICO Act -- 2005



Bank of China v. NBM L.L.C.   (U.S. Supreme Court)

Reliance as an element of a RICO case

The Court granted certiorari 6/27/05 in a case that presents the questions whether a civil RICO plaintiff, who seeks to establish liability based on the predicate offenses of mail fraud, wire fraud, and bank fraud, must establish “reasonable reliance.”  The case stems from alleged fraud spanning a number of years, allegedly committed by the defendants (including a former employee) against the Bank of China.  Specifically, the Bank alleged a scheme whereby various defendants borrowed funds from the Bank under false pretenses, converted them into different currencies, and ultimately pocketed them.  At trial, the district court instructed the jury that the Bank could prove the RICO frauds even if its agents or employees permitted or participated in the fraud.  The jury ultimately found liability, and awarded the Bank over $35 million.  The Second Circuit, however, reversed, holding - in accord with the Fourth, Fifth, Sixth, Eighth, and Eleventh Circuits, but in conflict with the First, Third, Seventh, and Ninth Circuits - that the Bank was required to demonstrate “reasonable reliance” for the mail and wire fraud counts.  The Second Circuit also held, as a matter of first impression, that “reasonable reliance” must also be established for bank fraud.  The case is of significant potential import to any company victimized in a manner compensable under civil RICO.

The Court initially agreed to hear the appeal, but dismissed the case without opinion on 11/15/05.

Decision Below:  359 F.3d 171 (2d Cir. 2004)