Fake Affiliate Registrations Can Trigger RICO Claims

Richard Raysman is a Pattner in the New York office

The Racketeering Influenced Corrupt Organizations Act (RICO) (18 U.S.C. § 1962) is a federal civil and criminal statute originally designed to thwart organized crime. It has been previously used to prosecute, among others, the Hells Angels, the Genovese crime family, and junk bond king Michael Milken. At least in one recent case, Edvisors Network, Inc. v. Husser, No. 14-062-JJB-RLB (M.D. La. Aug 4, 2014), it was used to allege causes of action against a scheme designed to defraud a referral program established by an online lending website.

Facts

Edvisors Network, Inc. (Edvisors) operates an online lending resource center that assists prospective students in finding student loans. To do so, Edvisors uses affiliates to market its services and direct prospective students to its website. One of those affiliates was run by individuals at a site called "Pay4mycollege" (the Hussers). The Hussers became an affiliate of Edvisors and thereafter posted a banner on its pay4mycollege.com website that hyperlinked (and therefore, routed) visitors to Edvisors. The Hussers were compensated based on the number of visitors that completed student loan questionnaires after being routed to Edvisors via pay4mycollege.com

In filing a complaint that alleged violations of RICO, Edvisors claimed that the Hussers used the information of unknowing students and thereafter posed as these students to complete thousands of questionnaires on Edvisors while purposefully concealing their true identity. Edvisors further averred that Clint Husser had become involved in a sordid pay-for-sex relationship with a unnamed "Jane Doe." Husser allegedly compensated Jane Doe $1 per questionnaire submitted to Edvisors via the pay4college.com website. He also assisted her in becoming an affiliate of Edvisors so as to perpetrate similar online fraud against Edvisors.

This purported fraud resulted in Edvisors paying the Hussers in excess of $90,000 in "unearned" commissions. Edvisors filed suit based on RICO and the corresponding Louisiana state law. The Hussers filed a motion to dismiss.

Legal Conclusions/Analysis

To succeed in a civil RICO claim, the plaintiff must establish these three common elements: (1) a person; (2) a pattern of racketeering activity; and (3) an enterprise. See Delta Truck & Tractor, Inc. v. J.I. Case Co., 855 F.2d 241 (5th Cir. 1988). The RICO person (in this case, the Hussers) must "pose[] or has posed a...