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Sunday, June 16, 2024 | Back issues
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Racketeering Case Based in Chile Revived by NY Court

Reviving a suit involving Chilean cousins, the Second Circuit offered the country’s first interpretation Monday of Supreme Court precedent requiring domestic injury to bring U.S. racketeering claims.

MANHATTAN (CN) – Reviving a $64 million family feud, the Second Circuit ruled Monday that a Chilean man properly alleged at least some injuries to property located in the United States.

The ruling from the Manhattan-based U.S. Court of Appeal comes just over a year after RJR Nabisco Inc. v. European Community, a case in which the Supreme Court said litigants must show a domestic injury to seek relief under U.S. racketeering law.

As that case was headed toward Washington, Chilean resident Jorge Bascunan brought the offshoot case in 2015.

Living with AIDS among a number of emotional ailments, Bascunan accused his cousin, Daniel Elsaca, of abusing his power-of-attorney status to steal $64 million that Bascunan had inherited from his parents.

Both men live in Chile, but Bascunan filed his 2015 case in New York. Though a federal judge dismissed the case for failure to allege a domestic injury as required by RJR Nabisco, the Second Circuit reversed in part Monday.

Clocking in at 40-pages, the new ruling emphasizes that about $40 million of the money at issue was in bearer shares held in a New York City bank safety deposit box.

Bascunan says Elsaca stole the shares and then reregistered them under his own name using a Panamanian law firm.

Robin Alperstein, an attorney for Bascunan with the firm Becker Glynn, said her client was “really, really happy with the result.”

“Our client placed faith in the American banking system when he put his money here,” she said.

Though the federal appeals court revived only the claims regarding the $40 milllion in bearer shares, Alperstein said all $64 million originated from Morgan Stanley accounts in the United States, and thus would fall under the court’s domestic-injury test. She plans to bring an amended complaint later this week to include all $64 million.

Though the ruling opens Elsaca to potential RICO liability, an attorney for the Chilean economist said she is pleased with the ruling as well and expects to prevail on remand.

Among other issues, said Quinn Emanuel attorney Jennifer Selendy, the case is barred by statute of limitations. Selendy also claimed that travel restrictions Bascunan faces due to his prior drug abuse means he cannot testify in the United States.

Before appointing Elsaca to oversee his parents’ estate in 1999, Bascunan relied on a financial adviser to manage the funds. Bascunan says Elsaca, who has a business degree from the London School of Economics, transferred the funds over the next ten years to accounts under his own control, some of which were designed to create sham investment and legal fees while others allowed Elsaca to merely liquidate the funds.

The Second Circuit declined to revive Bascunan’s case in full. “To the extent Bascunan alleged injuries to property located outside of the United States, the fact that Elsaca or his co‐defendants transferred those stolen funds to (or through) the United States fails to transform an otherwise foreign injury into a domestic one,” U.S. Circuit Judge Jose Cabranes wrote for a three-member panel.

Cabranes emphasized that the RJR Nabisco rule should not be interpreted as “discriminat[-ing] against foreigners who own property in the United States.”

“It ensures that both foreign and domestic plaintiffs can obtain civil RICO’s remedy for damage to their property, but only if their property was located within the territorial jurisdiction of the United States,” the ruling states.

The ruling says it rests upon the courts to determine whether a plaintiff alleged a domestic injury among several claims.

“Where the injury is to tangible property, we conclude that, absent some extraordinary circumstance, the injury is domestic if the plaintiff’s property was located in the United States when it was stolen or harmed, even if the plaintiff himself resides abroad,” Cabranes wrote.

Elasca’s attorney Selendy said that the case at its heart is a contract dispute over investment fees that Bascunan did not want to pay Elsaca.

Disputing that the bearer shares were stolen, Selendy said they were nominalized to be tax efficient. If a theft occurred, she added, it occurred in Panama. This is something the District Court even determined in one of the footnotes in its 2016 ruling, Selendy continued.

“They are trying to trump up a simple contract dispute into an international RICO case,” she said. “I’m trying to contain the litigation to one continent.”

Selendy said she plans to file a Rule 11 motion against Bascunan, noting that Alperstein has never met her client in person and that a similar case is pending in Chile. “I don’t want to litigate a pretend case,” she said.

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Categories / Appeals, International

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