After a partial default judgment and a bench trial on plaintiff investor’s damages from claims of fraud and RICO conspiracy against defendants who urged him to invest over $2 million in the “Old Navajo Foundation,” which was in fact a Ponzi scheme, an Alexandria U.S. District Court awards plaintiff fraud damages of $1.19 million; RICO treble damages of $6.555 million and civil conspiracy damages of $2.185 million.
Unbeknownst to plaintiff at the time, defendants were actually operating a “Ponzi scheme,” whereby they encouraged plaintiff and others to invest in fraudulent high-yield investment vehicles that never existed. As is typical of most Ponzi schemes, defendants solicited investment funds from plaintiffs and others, paying returns to old investors with such new funds to create the appearance that the investments were legitimate and profitable. Defendants regularly emailed and mailed plaintiff confirmations, account statements and updates, indicating his investments were safe and making profits. All the statements received by plaintiff were intentional fabrications. Although defendant testified he trusted plaintiffs because there were regular payouts, the only evidence of a payout was $60,000 that plaintiff withdrew in 2005, which came from the $1 million investment he made at defendant’s behest.
The funds plaintiff invested were never returned. In all, he invested $2.245 million with defendants, and received only $60,000 in return. Federal criminal charges are pending against defendants in a Massachusetts federal court.
The court concludes plaintiff has suffered $2.185 million in actual loss as a result of defendants’ fraud. However, only $1.285 million can be directly attributable to defendant Gilner’s fraudulent conduct, less the $60,000 withdrawal, with the rest attributable directly to defendant Bochinski’s conduct, even though the two clearly worked together. There is insufficient evidence to support a claim for punitive damages against Gilner and the court awards plaintiff $1.190 million against Gilner for the fraudulent behavior directly attributable to him.
The court also concludes plaintiff sustained compensatory damages of $2.185 million as a result of defendants’ RICO violation. Pursuant to RICO’s specific authorization of treble damages, plaintiff is entitled to $6.555 million. The court awards plaintiff $2.185 million on his civil conspiracy claim; as a participant in the conspiracy, those damages are assessable against Gilner, whether caused directly by Bochinski’s statements and conduct or Gilner’s own.
The court declines to award plaintiff damages for intentional infliction of emotional distress, based on his testimony that, as a result of defendants’ actions, he no longer exercises regularly, weighs 50 pounds more than before, has high blood pressure and “snaps” at his family members and prefers to be alone. Without minimizing the impact that defendants’ conduct had on plaintiff, the court does not find the evidence sufficient to establish the required degree of severity by clear and convincing evidence.
Brown v. Gilner (Trenga) No. 1:10cv00980, Sept. 25, 2012; USDC at Alexandria, Va. VLW 012-3-485, 17 pp.