Updates to our Terms of Use

We are updating our Terms of Use. Please carefully review the updated Terms before proceeding to our website.

Monday, June 17, 2024 | Back issues
Courthouse News Service Courthouse News Service

$3.5 Million Award|for RICO Conspiracy

(CN) - An importer of Chinese industrial machinery must pay $3.5 million for bribing the manager of a Virginia-based flooring company to buy equipment at more than 500 percent markup, a federal judge ruled.

U.S. District Judge James Jones, in Abingdon, Va., ruled in VFI Associates LLC et al. vs. Lobo Machinery Corp. et al.

According to Jones's 21-page Opinion:

VFI was formed in 2005 to import exotic wood and finish it as hardwood flooring, which it sold to retail outlets. The owners of the Virginia-based company, Michael Burke and Donald Nicewonder, hired Luther Boyd, who operated a similar flooring business, to manage VFI.

Boyd told Burke and Nicewonder that VFI would need to buy "finishing line" machinery to finish the wood into hardwood flooring. A finishing line consists of sanding machines, roll coaters for applying lacquer, ultraviolet curing ovens and conveyors.

Boyd said they could get one from Taiwan for nearly $1 million. In fact, a finishing line only costs about $250,000, Jones wrote. Boyd later persuaded the business partners to purchase a second finishing line.

VFI bought two finishing lines for a total of $1.48 million from Lobo Power Tools, a California-based company owned by Robin Yuan and Ester Chang, which buys industrial equipment from China for resale in the United States.

Lobo Power Tools bought the equipment for $197,730 and sold it to VFI at more than 500 percent markup, Jones wrote. The average markup on the firm's sales was only 24.4 percent.

"In essence, the case boils down to a conspiracy by Yuan and Chang to defraud VFI by charging excessive prices for equipment sold by their companies, Lobo Machinery and Lobo Power Tools, and paying kickbacks to VFI's dishonest manager, Luther Boyd, in order to facilitate the fraud," Jones wrote.

Lobo Power Tools "paid large sums of money in kickbacks or bribes to Boyd, his wife, relatives, or companies that they controlled, in order to obtain the excessive prices for the equipment," according to the judgment.

Jones found that Chang participated directly in the RICO conspiracy, of which Chang's co-defendants were previously found guilty.

"The fraud engaged in by the defendants may have been a single overall scheme related to the sale of the machinery, but it was made up of multiple related predicate acts extending over a substantial period of time," Jones wrote. "The predicate acts included multiple acts not just of mail and wire fraud, but also included commercial bribery, and obstruction of justice. ... This is sufficient to show a pattern of racketeering activity under RICO. ...

"Finally as to Chang's overall liability, I note that she invoked her Fifth Amendment privilege against self-incrimination at her second deposition. As the finder of fact, I am permitted to draw an adverse inference from this invocation and I find that it provides additional evidence that she participated in an enterprise engaged in a pattern of racketeering activity and violated the federal RICO statute."

To calculate damages, Jones subtracted the money Lobo Power Tools paid for the finishing lines, its average 24.4 percent markup, and a $52,000 offer VFI received for the machines from the amount VFI paid for the finishing lines.

He then trebled the damages, and ordered the defendants to pay VFI $3,562,400 for RICO and state conspiracy violations.

Jones granted plaintiffs attorney fees of $356,387, but declined to award punitive damages.

Categories / Uncategorized

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.