The opinion of the court was delivered by: Judge Rebecca R. Pallmeyer
MEMORANDUM OPINION AND ORDER
Over a period beginning as early as 1993 and lasting at least ten years, Plaintiffs, Gas Technology Institute ("GTI"), Gas Research Institute, ("GRI"), and Endesco Clean Harbors LLC, ("ECH"), entered into subcontracts related to the research and development of certain technologies. Plaintiffs received project reports and paid invoices for work done under these subcontracts, only to discover in mid-2002 that the subcontracting entities had not, in fact, performed the work. In this lawsuit, filed on May 6, 2005, Plaintiffs, GTI and GRI, Illinois not-for-profit corporations, and ECH, a for-profit Delaware company, allege that Defendants engaged in a scheme to prepare and submit fraudulent invoices and charges to Plaintiffs for projects that were never performed. (Compl. ¶¶ 1, 4.) In response to the fraudulent invoices, Plaintiffs mailed numerous checks for deposit in bank accounts set up by Defendants in the U.S. and Canada, and lost millions of dollars as a result of fraud and deceit by the individual Defendants and the subcontractors they set up to facilitate the alleged theft and embezzlement.*fn1 (Id. ¶ 1-3.) Plaintiffs now seek monetary and punitive damages as well as a permanent injunction to prevent Defendants from concealing or squandering these allegedly stolen funds and assets. (Id. ¶ 2.)
In their seven-count complaint,*fn2 Plaintiffs allege substantive racketeering under the Racketeering Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962(c) and 1964 against Defendants S. Peter Barone ("Peter Barone"), Amirali G. Rehmat ("Amir Rehmat"), and Anthony L. Lee ("Tony Lee") (Count I); a racketeering conspiracy under 18 U.S.C. §§ 1962(d) and 1964 against all Defendants (Count II); breach of fiduciary duties and the duty of loyalty against Defendants Peter Barone, Amir Rehmat, Tony Lee, and Serge Randhava (Count III); and common law fraud against Defendants Amir Rehmat, Minaz Rehmat, Peter Barone, Tony Lee, Michael Morin, Lois A. Barone, Charles Wayne Jones, Kathreen L. Jones, Jinnet Hemani, Zuli Rehmat, and Rozy Fazal (Count IV). In addition, Plaintiff GRI alleges common law fraud against Defendants Shyam Singh, Peter Barone, Serge Randhava, and Richard Kao (Count V), all Plaintiffs allege civil conspiracy to commit fraud against all Defendants (Count VI), and GRI seeks an equitable accounting against Serge Randhava and UT/GT LLC (Count VII).
As described in more detail below, twenty-two of the Defendants now move for dismissal of the various claims against them.*fn3 Some of these Defendants move, in the alternative, for summary judgment. As explained below, the court declines to consider any materials outside the pleadings and therefore denies the motions for summary judgment without prejudice. Further, the court grants in part and denies in part Defendants Peter Barone and Barone Consulting Group, Inc.'s Motion to Dismiss, grants in part and denies in part Defendants Charles Wayne Jones, Kathreen L. Jones, Homatex, Inc. and Wayne and Associates' Motion to Dismiss the Complaint, grants in part and denies in part Defendants Amirali G. Rehmat, Anar Rehmat, Zulfikar Rehmat, Jinnet Rehmat, ANE Research Inc., and Resource Recovery Consultants, Inc.'s Motion to Dismiss the Complaint, grants Defendants Surijit Randhava, Richard Kao, Unitel Technologies, and UT/GT's Motion to Dismiss, grants in part and denies in part Defendants Susan Lee and Reaction Kinetics Consultants' Motion to Dismiss, grants in part and denies in part Defendant Lloyd L. Lee's Motion to Dismiss, grants in part and denies in part Defendant Anthony Lee's Motion to Dismiss, grants in part and denies in part Defendant Lois Barone's Motion to Dismiss, and grants Defendant Shyam Singh's Motion to Dismiss.
The court accepts all well-pleaded allegations as true on a motion to dismiss. Shawnee Trail Conservancy v. U.S. Dep't of Agric., 222 F.3d 383, 385 (7th Cir. 2000). Plaintiffs GTI and GRI, two of the nation's premier natural gas research and development organizations, provide research products and technical services to help their customers solve environmental and energy problems related to natural gas. (Compl. ¶ 7.) GTI was created in April of 2000 as a "combination" of GRI and the Institute of Gas Technology ("IGT"). (Id. ¶ 7.)*fn4 Endesco Services, Inc. ("ESI"), is a wholly-owned subsidiary of GTI and is also organized under the laws of Illinois. (Id. ¶ 8.) In 1997, Plaintiff ECH was established as a jointly-owned, for-profit subsidiary of GRI and ESI with the principal mission of constructing and operating commercial-scale plants for waste processing based on the "Cement-Lock Technology," a process that decontaminates soils, sediments, and waste and converts them into a construction-grade cement additive. (Id. ¶¶ 9, 11.) At some point subsequent to ECH's formation, Cement-Lock Group LLC licensed the Cement-Lock Technology to Plaintiff ECH. (Id. ¶ 54.)
Cement-Lock Group's ownership of rights to the Cement-Lock Technology has a complicated history in itself. Around 1996, Defendants Amir Rehmat and Tony Lee, GTI employees; Richard Kao, a former GTI employee; Serge Randhava, and others began circumventing GTI's policy that GTI employees must assign all of their rights in inventions to GTI. (Id. ¶¶ 47-48.) Instead, GTI employees Amir Rehmat and Tony Lee assigned their rights in any GTI technology inventions to Cement-Lock LLC, an entity that Amir Rehmat and Tony Lee formed around 1996 together with Serge Randhava, Richard Kao, Wayne and Associates,*fn5 Jinnet Hemani, and others for the alleged purpose of misappropriating intellectual property belonging to GTI. (Id. ¶¶ 48-49.) In December of 1996, senior GTI staff became aware that GTI employees were attempting to obtain, for Cement-Lock LLC, patents in technology-including the Cement-Lock Technology-largely developed in the course of Amir Rehmat and Tony Lee's employment for GTI, and had filed patent applications in the United States and abroad. (Id. ¶¶ 50-51.) GTI responded by negotiating with Cement-Lock LLC for the formation of a new entity, "Cement-Lock Group LLC." (Id. ¶ 52.) The formation of Cement-Lock Group LLC in 1997 resolved the dispute between Cement-Lock LLC and GTI concerning the patent rights and gave Cement-Lock Group LLC the right to hold the intellectual property rights at issue and market and develop the technology. (Id. ¶¶ 51-52.)
The Cement-Lock Technology is among the technologies Defendants exploited and misused to perpetrate the fraudulent schemes that give rise to this action. (Id. ¶ 10.) This action also concerns the Defendants' misuse of other technologies, including the "ACIMET Technology," the "Perpetual Light Project," the "Gas Tech Technology," the "New Acid Removal System," the "TDP Technology," and the "Thermogenics Technology/Autofluff." (Id. ¶¶ 11-17.)
Three of the Defendants-Amir Rehmat, Tony Lee, and Peter Barone (referred to by Plaintiffs as the "Core Group")-had oversight and planning responsibilities for the schemes to defraud Plaintiffs and held positions in each of the Plaintiff organizations. (Id. ¶¶ 3, 21.) Amir Rehmat was formerly the president of ECH and an employee of GTI, Tony Lee was a chemical engineer employed by GTI and president of the Cement-Lock Group, and Peter Barone was also the president of ECH at relevant times and employed by GTI and GRI. (Id. ¶¶ 18-20.) In each scheme described in the Complaint, a Defendant or Defendants requested that a Plaintiff disburse funds to pay for research, development, or other expenses related to one of the technologies; Defendants in fact intended to distribute the funds among themselves and use them for their own purposes. (Id. ¶ 53.) The Core Group Defendants used their positions as insiders in the Plaintiffs' organizations to facilitate approval of these funding requests. (Id.) The Core Group Defendants and other Defendants further set up sham subcontractors and presented fraudulent paperwork to make it appear that the subcontractors would perform the services described. (Id.) In combination with other Defendants, the Core Group planned and executed at least the following four schemes to defraud Plaintiffs. (Id.) Plaintiffs did not discover the schemes until sometime in mid-2002. (Id. ¶ 175.)
1. Cement-Lock Technology Scheme
Plaintiffs claim to have been defrauded of more than $4,300,000 as a result of fraudulent subcontracts relating to the research, development, and testing of the Cement-Lock Technology. (Id. ¶¶ 86, Ex.C.) As president of ECH, Defendant Amir Rehmat had the authority to negotiate and execute subcontracts to assist ECH in developing the Cement-Lock Technology licensed to ECH by Cement-Lock Group LLC, as described above. (Id. ¶¶ 54-55.) Defendants Tony Lee and Peter Barone were authorized to assist Amir Rehmat in the project to demonstrate the capability of the Technology. (Id. ¶ 56.) Together, the Core Group Defendants purported to rely on outside contractors to perform "nearly all of the key and sensitive work needed to develop" the Cement-Lock Technology, (id. ¶ 57), with Amir Rehmat preparing and executing subcontracts on behalf of Plaintiff ECH for actual and purported projects related to the Cement-Lock Technology. (Id. ¶ 58.) Some of the entities with which Amir Rehmat executed subcontracts were authentic and did work related to the Cement-Lock Technology, but at least ten of the entities, all named as Defendants in this lawsuit, were "sham entities" controlled or owned by the Core Group Defendants, their friends and relatives, or other Defendants, a fact the Core Group Defendants intentionally concealed from Plaintiffs. (Id.) Defendants represented to Plaintiffs that the Defendant entities were authentic operations capable of performing work for GTI, GRI, or related to the Cement-Lock Technology, that the subcontracts executed with Defendant entities were valid, and that invoices accurately reflected services rendered. (Id. ¶ 81.) These representations caused GTI, GRI, and ECH to pay money to Defendants for work they did not perform. (E.g., id. ¶¶ 196, 198, 202, Exs. A & B.)*fn6
For example, the Core Group Defendants and individuals from the Oklahoma and Pacific Northwest groups, including Minaz Rehmat, Rozy Fazal, Lloyd Lee, Lois Barone, Zuli Rehmat, Jinnet Hemani, Charles Wayne Jones, Kathreen Jones, and Michael Morin knew that the sham entities were not performing work under the subcontracts and were not qualified to do so. (Id. ¶ 64.) These Defendants nevertheless prepared (or caused to be prepared) contracts between ECH and sham subcontractors TEFES, ANE, EEM, Wayne and Associates, Homatex, and Molecular Thermoengines, and submitted invoices for payment under these subcontracts. (Id.) GTI allegedly wrote checks-delivered by mail or other means-on ECH's behalf to pay these sham subcontractors a total of $4,646,442 for purported research and development related to the Cement-Lock Technology. (Id. ¶¶ 64, Ex. A.) Similarly, the Core Group Defendants and individuals from the Oklahoma and Pacific Northwest groups, including Zuli Rehmat, Minaz Rehmat, Jinnet Hemani, Lloyd Lee, Susan Lee, Lois Barone, Charles Wayne Jones, and Kathreen Jones, knew that the entities were not performing such work but nevertheless prepared (or caused to be prepared) and submitted invoices to Plaintiffs for work arising from research and development for GTI or the Cement-Lock Technology Project. (Id. ¶¶ 65, Ex. B.) As a result, GTI paid invoices totaling $2,419,580, through checks delivered by mail or other means, for purported research and development related to the GTI or Cement-Lock Technology Project. (Id. ¶¶ 65, Exs. A & B.)
Defendant TEFES, a corporation registered under the law of British Columbia, Canada in March of 2002, is among the "sham entities" that subcontracted to do research for ECH. (Id. ¶¶ 27, 59.) TEFES did no actual work on ECH projects, was not adequately capitalized or professionally staffed, and had no research facilities, all of which the Core Group and Defendant Michael Morin deliberately concealed from Plaintiffs. (Id. ¶ 59.) Morin, an attorney, held himself out as president of TEFES, although he is not qualified to perform any work that relates to the business performed by GTI or the Cement-Lock Technology. (Id. ¶¶ 25, 27, 59.) Defendants Peter Barone, Tony Lee, Amir Rehmat, Michael Morin, Minaz Rehmat, and Charles Wayne Jones each had ownership and shared interest in TEFES. (Id. ¶ 199.)
TEFES also billed Plaintiffs for marketing services purportedly rendered by other Defendant subcontractors. (Id. ¶¶ 199-200.)*fn7 Around February 5, 2001, Tony Lee prepared and submitted an invoice from TEFES for marketing services rendered by Defendant Reaction Kinetics though Reaction Kinetics never rendered any such services. (Id. ¶ 199.) On February 6, 2001, Peter Barone similarly prepared and submitted an invoice for marketing services rendered by Defendant Barone Consulting to TEFES, which also were never rendered. (Id. ¶ 200.)
The Core Group Defendants further concealed from Plaintiffs that Amir Rehmat and his brother, Defendant Minaz Rehmat, who was not qualified to perform any work for GTI or related to the Cement-Lock Technology, controlled subcontractor Defendant EEM. (Id. ¶¶ 22, 60.) They also concealed the facts that EEM had no production or research facilities, did no actual work on ECH projects, was not staffed with professionals or engineers, and listed as a director Defendant Rozy Fazal, an employee and associate of Minaz Rehmat with no relevant professional background or qualifications. (Id. ¶¶ 24, 26, 60.) On October 3, 2001, Amir Rehmat, representing ECH, and Minaz Rehmat and Rozy Fazal, who were associated with EEM, signed and executed a subcontract for research between ECH and EEM. (Id. ¶ 191.)*fn8 Though this work was never performed, it was paid for by GTI and GRI with kickbacks going to Defendants. (Id. ¶ 192.)
Defendant ANE, a corporation also registered under the laws of British Columbia, Canada in 2000, was controlled by Amir Rehmat's brother, Defendant Zuli Rehmat, and Zuli Rehmat's wife, Defendant Jinnet Hemani. (Id. ¶¶ 22, 23, 28-29, 61.) Neither Zuli Rehmat or Jinnet Hemani had any experience or background to qualify them for work on a GTI or Cement-Lock Technology project. (Id. ¶¶ 22, 23.) ANE did no work on ECH projects and had no professional staff or research facilities. (Id. ¶ 61.) Nevertheless, ECH had contracted with ANE to perform research on May 29, 2001 and July 15, 2001 in subcontracts executed by Amir Rehmat, Zuli Rehmat, and Jinnet Hemani. (Id. ¶ 189.) These Defendants received kickbacks from payments made by GTI and GRI under the subcontracts. (Id. ¶ 190.)
Defendant Molecular Thermoengines is an Oklahoma corporation formed in 1994 but suspended in 1995. (Id. ¶ 43, 63.) Molecular Thermoengines was controlled by Defendant Lloyd Lee, Tony Lee's brother, and also allegedly did not perform any of the work for which it billed Plaintiffs. (Id. ¶¶ 40, 63.) Lloyd Lee and Amir Rehmat executed two subcontracts between ECH and Molecular Thermoengines on June 13, 2000 and November 13, 2000. (Id. ¶ 195.) Monies paid by GTI and GRI under these subcontracts were kicked back to these Defendants for their personal use. (Id. ¶ 196.)
Defendants Wayne and Associates, incorporated in Oklahoma in 1994, and Homatex, incorporated in Oklahoma in 1997, were controlled by Defendants Charles Wayne Jones, the president of both entities, and his wife, Kathreen Jones, the treasurer of Homatex and secretary of Wayne and Associates. Neither Charles nor Kathreen had a business affiliation with GTI or GRI or a professional background relating to projects conducted by GTI or ECH. (Id. ¶¶ 42, 44-46, 62) Homatex is not qualified to conduct business that relates to Plaintiffs' research and development projects, but Defendant Charles Wayne Jones nevertheless entered into two subcontracts (December 27, 2000 and September 27, 2001) with Amir Rehmat for work to be done by Homatex for ECH. (Id. ¶¶ 44, 193.) This work was not performed and the money paid by GTI and GRI was kicked back to Defendants. (Id. ¶ 194.) Charles Wayne Jones also signed a subcontract with Amir Rehmat for Wayne and Associates to perform research for ECH, despite the fact that Wayne and Associates is not qualified to do any research related to the work of ECH. (Id. ¶¶ 46, 197.) This work was not done, and money paid by GTI and GRI was kicked back to Defendants. (Id. ¶ 198.)
The Core Group Defendants and their spouses set up a number of entities in order to deposit, conceal, and spend the money paid by Plaintiffs under the subcontracts related to the Cement-Lock Technology. In each case, the Core Group Defendant and his wife had access to and controlled the bank account of the entity. (Id. ¶¶ 69-71.) Amir Rehmat and his wife, Anar Rehmat, set up Defendant Resource Recovery Consultants as an Illinois corporation in 1997. (Id. ¶¶ 35, 69.) Tony Lee and his wife, Susan Lee, set up Defendant Reaction Kinetics as an Illinois corporation in 1987. (Id. ¶¶ 36, 70.) The Lees also prepared invoices for services to be performed by Defendant Ultra-Time for Reaction Kinetics, which services were not actually rendered. (Id.) Peter Barone and his wife, Lois Barone, likewise set up Defendant Barone Consulting. (Id. ¶ 71.) The Barones also prepared invoices for services from Barone Consulting to Plaintiffs, though Barone Consulting did not render any services of value. (Id.)
Around April 17, 2001, multiple Defendants also signed and executed a Declaration of Trust for the purpose of disposing of funds paid by GTI and GRI. (Id. ¶ 186.) By signing this declaration, Defendants Amir Rehmat, Michael Morin, Peter Barone, Lois Barone, Charles Wayne Jones, Kathreen Jones, and others confirmed their ownership and proprietary interests in the TEFES Trust. (Id.) Defendants did not inform Plaintiffs of the TEFES trust or of Defendants' ownership of shares in the TEFES trust. (Id.)*fn9
The Core Group Defendantsand their spouses as well as Zuli Rehmat, Jinnet Hemani, and Minaz Rehmat diverted and used, for their personal benefit, the monies paid by Plaintiff in a number of instances. (Id. ¶ 72.)In January of 2002, Amir and Minaz Rehmat diverted $230,000 of funds paid by Plaintiff to EEM in Canada for work EEM claimed to have performed and used the funds to pay off a mortgage loan on Amir's personal residence. (Id. ¶ 73.) In that same month, Amir and Minaz Rehmat also diverted funds paid to Resource Recovery, EEM, and ANE, (id. ¶ 74), and, together with Michael Morin, Tony Lee, and Peter Barone, converted $360,000 that had been paid to TEFES for work performed by TEFES for personal purposes. (Id. ¶ 75.)
In May of 2002, Amir Rehmat, Minaz Rehmat, and Michael Morin diverted $245,000 of Plaintiff's money, and converted $82,000 to Amir and Anar Rehmat, $93,000 to Amir Rehmat's son, and $66,000 to a Canadian bank that was a creditor of Amir Rehmat.(Id. ¶ 76.) EEM, Peter Barone, and Amir and Minaz Rehmat also took part in kicking back $220,000 of Plaintiffs' funds from EEMto the Barone Consulting Group, the sham entity set up by the Barones. (Id. ¶ 77.) From February through April 2002, Amir and Zuli Rehmat and Jimmet Hemani took part in another scheme whereby $270,000 of funds paid by Plaintiff to EEM were kicked back to Reaction Kinetics, the sham entity set up by Tony and Susan Lee. (Id. ¶ 78.)
In both 2001 and 2002, the Core Group Defendants and their wives received (and used, in part, to pay mortgages on their personal residences) several million dollars that had been stolen from Plaintiffs and deposited in the accounts of the sham entities that the Core Group Defendants or other Defendants controlled. (Id. ¶ 79.)In total, Plaintiffs claim that of the $21,000,000 allocated to the development, implementation, and testing of the Cement-Lock Technology, Defendants converted approximately $4,300,000 for their personal use, and thatGTI and others incurred at least $1,000,000 in other general costs and expenses as a result of Defendants' scheme. (Id. ¶¶ 86, Ex. C.)
2. ACIMET Technology Scheme
Plaintiffs also claim losses arising out of fraudulent subcontracts with Defendant entities ANE, TEFES, Molecular Thermoengines, and Ultra-Time Production for work concerning the ACIMET Technology and the related Perpetual Light Technology. The ACIMET Technology is a technology developed by GTI and owned by ECH to treat wastewater sludge in order to generate methane gas, which is then used to generate electric power. (Id. ¶ 87.) The Perpetual Light Technology is a process related to ACIMET Technology, developed by GTI and ESI to convert wastewater sludge into electrical power. (Id. ¶ 88.) From February 2001 until at least March of 2002,Amir Rehmat, Peter Barone, Michael Morin, Jinnet Hemani, and Lloyd Lee participated in a scheme to defraud Plaintiff GTI of at least $1,051,500 in funds designated for the process referred to as ACIMET Technology. (Id. ¶ 89, Ex. D.)
In February of 2001, Amir Rehmat, signing on behalf of ECH, and Jinnet Hemani, signing as President of ANE, executed a subcontract for ANE to conduct research related to an ACIMET facilityfor $432,900. (Id. ¶¶ 91-92, Ex. D.)The subcontract stated, falsely, according to Plaintiffs, that ANE was, among other qualifications, familiar with wastewater treatment technologies and had expertise in "biosolids." (Id. ¶ 95.) Neither Jinnet Hemani nor ANE performed any research work under the subcontract, but after causing GTI to pay the $432,000 contract amount, Amir Rehmat, Jinnet Hemani, and other Defendants converted the funds for their personal use. (Id. ¶¶ 94, 96.)
Defendant TEFES likewise entered into a subcontract with ECH for research relating to the ACIMET and Perpetual Light Technologies in the city of Victoria, British Columbia, Canada. (Id. ¶ 98.) Defendants executed this subcontract in July of 2001, Amir Rehmat signing on behalf of ECH and Defendant Michael Morin signing as "Director" of TEFES. (Id.) Both Amir Rehmat and Michael Morin knew that TEFES was not capable and would not perform the research for which it contracted. (Id. ¶¶ 99, 187.)Amir Rehmat, Michael Morin, and other Defendants nevertheless falsely stated in a "sole source justification form" provided to GRI that TEFES was an expert in waste technologies and had relationships that would help it to secure lucrative projects. (Id. ¶ 101.) The subcontract work was not performed, yet GTI paid $229,600 under the subcontract signed by ECH, its subsidiary. (Id. ¶¶ 102-03, Ex. D.) Amir Rehmat, Michael Morin, Minaz Rehmat, and other Defendants converted this sum to their personal use. (Id. ¶ 104.)
In June 2001, Amir Rehmat executed, on behalf of ECH, another subcontract with Molecular Thermoengines, this time for "design and engineering work" for the Perpetual Light Technology. Defendant Lloyd Lee signed the contract on behalf of Molecular Thermoengines. (Id. ¶ 106.) Amir Rehmat and Lloyd and Tony Lee knew that Molecular Thermoengines would not perform the work for which ECH contracted, and Molecular Thermoengines did not in fact perform such work. (Id. ¶ 107.)Nevertheless, Molecular Thermoengines, Lloyd Lee, and Amir Rehmat, submitted a report to Plaintiffs purporting to summarize work on the project. (Id. ¶ 110.) Between July 2001 and November 2, 2001, GTI sent checks to Molecular Thermoengines for the contracted amount of $365,000, whichAmir Rehmat, Lloyd Lee, and other Defendants diverted and used for their personal benefit. (Id. ¶¶ 109, Ex. D.)
Also in June of 2001, Amir Rehmat, Minaz Rehmat, and Rozy Fazal prepared a letter from Defendant Ultra-Time Productions to ECH, proposing to assist ECH in publicizing the Perpetual Light Technology in Canada for a flat fee of $19,700 to Ultra-Time and Fazal. (Id. ¶ 111.)In July and August 2001, Amir Rehmat prepared and submitted to ECH a false invoice for services allegedly performed by Ultra-Time, including the publishing of a newspaper article about Perpetual Light Technology-services that Ultra-Time did not in fact provide. (Id. ¶ 112.)These three Defendants and other Defendants also submitted a purchase order to ECH in July of 2001 in the amount of $4,300 for preparation of a PowerPoint presentation, though no such presentation was ever prepared. (Id. ¶¶ 113-14.) GTI paid Ultra-Time a total of $24,000 for work not performed. (Id. ¶ Ex. D.)
3. Gas Tech Technology Scheme
In September 1999, GRI and Defendant Unitel Technologies agreed to form a joint venture to develop and market an "adsorption technology" involving methane gas to be applied in the fertilizer and ammonia markets (the "Gas Tech Project"). (Id. ¶ 122.) Gas Tech LLC, formed in early November of 1999, was the result. (Id.) At GRI, Peter Barone was the project manager for the GasTech Project; he maintained this responsibility in 1999 and 2000 after the creation of Gas Tech LLC. (Id. ¶¶ 122, 127.) Plaintiffs allege that GRI owned 50% of Gas Tech LLC.*fn10 (Id. ¶ 123.) The other 50% was owned by Defendant UT/GT LLC, a company set up and controlled by Defendant Serge Randhava, who also owned and controlled Unitel Technologies and executed the Gas Tech LLC Agreement on behalf of UT/GT LLC. (Id. ¶¶ 118, 123, 129.) According to Plaintiffs, GRI agreed to provide $650,000 to capitalize Gas Tech LLC in exchange for the intellectual property that UT/GT LLC was to contribute to Gas Tech LLC. (Id. ¶ 124.)
Although the agreement required separate capital accounts to be maintained for each member of Gas Tech LLC, Serge Randhava failed to establish or maintain such separate accounts, and funds for Gas Tech LLC were deposited into Unitel Technologies' accounts. (Id. ¶¶ 130-31.) Under the Agreement, Randhava was also required to maintain full and accurate books and records of Gas Tech LLC, subject to inspection by each LLC member. (Id. ¶ 214.) Before the filing of the Complaint, Plaintiff GRI requested repeatedly that UT/GT or Randhava, the manager of UT/GT, provide Plaintiff with the accounting information related to the disposition and expenditure of funds by GRI for the Gas Tech Project, but UT/GT and Randhava refused to provide such information. (Id. ¶ 213.)
On about November 15, 1999, Barone requested that GRI pay Gas Tech LLC-through a bank account of Unitel Technologies-the lump-sum of $650,000 for the Gas Tech Project. (Id. ¶ 132.) Four days later, on November 19, 1999, Barone caused GRI to transfer the $650,000 to Unitel Technologies' checking account. (Id. ¶ 133.) Defendants Shyam Singh, Serge Randhava, Peter Barone, Richard Kao, Charles Wayne Jones, and others did not work on the research or development for the Gas Tech Projectbut converted money from Unitel Technologies' checking account for their personal use . (Id. ¶¶ 134, Ex. E.) Defendants "omitted to disclose" to GRI these payments to subcontractors that did no work on the Gas Tech Project, nor did they disclose that at least $530,000 of the funds that GRI had contributed to Gas Tech LLC were not spent on the Project. (Id. ¶ 148.)*fn11 In total, at least $530,000 of the $650,000 contributed by GRI to Gas Tech LLC for the development, testing, and commercialization of the Gas Tech Technology was converted to the personal use of Defendants specified above and others. (Id. ¶¶ 128, 151.)
The amount converted out of the $650,000 deposited by GRI for the Gas Tech Project varied by Defendant but included the following: Serge Randhava (at least $110,000); Richard Kao (at least $29,000); and Shyam Singh (at least $280,000). (Id. ¶¶ 135-37.) For his part, Randhava used the $150,000*fn12 he diverted for expenses such as his salary, credit card bills, utility bills, health insurance, and other lease payments relating to his office. (Id. ¶¶ 143, Ex. E.) Randhava further caused $20,000 of the funds to be paid to Wayne and Associates, which were later converted to the personal use of Charles Wayne Jones. (Id. ¶ 138.) Barone and Randhava represented to unidentified persons at GRI and others that Wayne and Associates and Charles Wayne Jones were working on the Gas Tech Project and were entitled to the $20,000. (Id. ¶ 147.)
Around March 25, 2000 and April 25, 2000, Shyam Singh caused two checks totaling $185,425 to be paid to Barone & Associates, an entity controlled by Peter Barone, as a kickback for the GRI funds previously deposited in bank accounts controlled by Singh. (Id. ¶ 139.) Singh represented to GRI and others that three entities owned or controlled by Singh, including SS Environmental Energy, Inc. and Thermoplastec Inc., would conduct work on the Gas Tech Project and were entitled to be paid more than $300,000. (Id. ¶ 147.) SS Environmental Energy specializes in processes related to the industries of glass, high temperature firing, petroleum products, textile and food, and Thermoplastec engages in thermoforming tooling and assisting other companies in producing tools and dies. (Id. ¶ 145.) Thus, Plaintiffs allege, neither of these companies conduct research or development related to the work on methane adsorption conducted by Gas Tech LLC. (Id. ¶ 145.)
To further the scheme relating to the Gas Tech Technology, Randhava, Unitel Technologies, and others prepared a written report on May 30, 2002 entitled "Methane Adsorption in Mixed Gas Streams (A Process)." (Id. ¶ 142.) Randhava and others claimed to GRI and others that the report reflected the work done for $650,000 on the Gas Tech Project. (Id.) The report, however, was incomplete and allegedly did not accomplish the goals of the Gas Tech Project. (Id.)
4. Schemes Related to Other Technologies
Plaintiffs also claim losses to GTI of some $1,652,000 as a result of payments made by GTI for work and services relating to various other technologies-the New Acid Removal System, Thermoengines Technology/Autofluff, and the TDP Technology-that were never performed. (Id. ¶¶ 153-56, Ex. F.) As with the schemes previously described, Defendants facilitated this scheme whereby GTI paid for work never performed by concealing the relationships between the Core Group Defendants and the subcontractors and by representing to Plaintiffs that the Defendant entities were authentic operations capable of performing the work related to the technology in the subcontract, that the subcontracts executed with Defendant entities were valid, and that invoices accurately reflected services rendered. (Id. ¶¶ 81-82.)
The claimed $1,652,000 loss includes $409,000 that the Core Group Defendants, Lloyd Lee, and other Defendants caused GTI to pay to Molecular Thermoengines between May 1996 and February 2000 for work on the New Acid Removal System that was never performed. (Id. ¶ 158, Ex. F.) From May 1995 until approximately December 1997, the Core Group Defendants and Lloyd Lee, Charles Wayne Jones, and others also caused GTI to pay $489,000 to Defendants Wayne and Associates and Molecular Thermoengines for work on the Thermogenics Technology/Autofluff project that was not performed. (Id. ¶ 159, Ex. F.) Similarly, the Core Group Defendants, Minaz Rehmat, Jinnet Hemani, Lloyd Lee, Rozy Fazal, and others also caused GTI to pay $616,000 to Defendants EEM, ANE, and Molecular Thermoengines between March 2002 and November 2002 for work and services related to the TDP Technology that were never performed. (Id. ¶ 160, Ex. F.) Defendants converted the $1,652,000 spent by GTI for work relating to the New Acid Removal System, Thermogenics Technology/Autofluff, and TDP Technologyfor their personal use and gain. (Id. ¶ 163.)
Plaintiffs filed this Complaint on May 6, 2005. Count I alleges substantive racketeering by Amir Rehmat, Peter Barone, and Tony Lee under 18 U.S.C. §§ 1962(c) and 1964. Plaintiffs allege a pattern of racketeering activity conducted through an "enterprise" comprised of these three individual Defendants that also had the legitimate purpose of developing, marketing, and testing various technologies. (Id. ¶¶ 165, 169.) The alleged ongoing pattern of racketeering activity included acts of mail fraud, and the transportation, possession, and receipt of stolen goods through interstate and foreign commerce. It allegedly began around 1993 and continued until at least early 2005. (Id .¶¶ 165, 167-68.) Count II alleges, under 18 U.S.C. §§ 1962(d) and 1964, that all Defendants have conspired to conduct or participate in the affairs of the enterprisewith the objective of participating in a pattern of racketeering activity to defraud Plaintiffs of money. (Id. ¶¶ 178-79.)These acts also give rise to a claim of civil conspiracy to commit fraud against all Defendants in Count VI. (Id. ¶ 210.) In Count III, Plaintiffs allege that Defendants Amir Rehmat, Tony Lee, Peter Barone, and Serge Randhava each had fiduciary duties arising out of their positions or association with Plaintiffs and breached their fiduciary duties and duty of loyalty by engaging in certain wrongful conduct, including the diverting of Plaintiffs' money and self-dealing. (Id. ¶ 183.) Count IV alleges common law fraud against Amir Rehmat, Minaz Rehmat, Peter Barone, Tony Lee, Michael Morin, Lois A. Barone, Charles Wayne Jones, Kathreen L. Jones, Jinnet Hemani, Zuli Rehmat, and Rozy Fazal arising out of Defendants' intentional omissions or failures to disclose to Plaintiffs, among other acts, their participation in the TEFES trust, the preparation and submission of invoices for work not performed, and the execution of subcontracts with entities that were not qualified and would not complete the work under the subcontract. (Id. ¶¶ 186-204.) Count V also alleges common law fraud against Shyam Singh, Peter Barone, Serge Randhava, and Richard Kao for omissions and misrepresentations causing GRI to pay these Defendants and Unitel Technologies $530,000 for work not performed. (Id. ¶¶ 206-08.) Finally, Count VII seeks an equitable accounting from Serge Randhava and UT/GT LLC based on their refusal to provide GRI with accounting information regarding the disposition of funds paid by GRI for the Gas Tech Project. (Id. ¶¶ 213-16.)
Federal Rule of Civil Procedure 8(a) requires, in relevant part, that a complaint provide a "short and plain statement of the claim" to give the defendant "fair notice" of the plaintiff's claim and the grounds upon which it rests. FED. R. CIV. P. 8(a); Cler v. Illinois Educ. Ass'n, 423 F.3d 726, 729 (7th Cir. 2005) (citations and internal quotations omitted).On a motion to dismiss, the court accepts the complaint's well-pleaded allegations as true and draws all reasonable inferences in the plaintiff's favor. Shawnee Trail Conservancy, 222 F.3d at 385. Dismissal is proper only if no set of facts, even hypothesized, would entitle the plaintiff to relief. Massey v. Merrill Lynch & Co., Inc.,464 F.3d 642, 645 (7th Cir. 2006).Thus, a complaint will survive a 12(b)(6) motion to dismiss as long as it "narrates an intelligible grievance that, if proved, shows a legal entitlement to relief."U.S. Gypsum Co. v. Indiana Gas Co., 350 F.3d 623, 626 (7th Cir. 2003)(citations omitted). If matters outside of the complaint are presented and not excluded by the court in a motion to dismiss under 12(b)(6), however, the court must treat the motion as a motion for summary judgment under Federal Rule of Civil Procedure 56. FED. R. CIV. P. 12(b); Woods v. City of Chicago, 234 F.3d 979, 986 (7th Cir. 2000).
This opinion addresses nine motions to dismiss, some of which also seek, in the alternative, summary judgment. Defendants Amirali Rehmat, Anar Rehmat, Zulfikar Rehmat, Jinnet Hemani, ANE Research, Inc., and Resource Recovery (collectively, "the Rehmat Defendants") move to dismiss Plaintiffs' complaint on the ground that Plaintiffs lack standing. They argue, further, that Counts I and II fail to state RICO claims, that Count III for breach of fiduciary duties is barred by the statute of limitations and fails to state a claim, and that Counts IV for common law fraud and Count VI for civil conspiracy to commit fraud fail to state a claim. The Rehmat Defendants also contend that Count VI is duplicative, and that a release executed on behalf of GTI and its agents with Amir Rehmat exonerates the Rehmat Defendants from all liability.
Defendant Tony Lee joins in the arguments of the Rehmat Defendants and moves to dismiss Counts I, II, III, IV, and VI as against him. Tony Lee further contends that, as an alleged co-conspirator with Amir Rehmat, he, too, is released from liability by Plaintiffs' alleged release of their claims against Amir Rehmat. Defendant Lloyd Lee also joins the Rehmat Defendants' arguments and moves to dismiss Counts II and VI as they apply to him, and seeks enforcement of Plaintiffs' alleged release of Amir Rehmat on his behalf as an agent of Amir Rehmat. Defendants Susan Lee and Reaction Kinetics also adopt the arguments set forth by the Rehmat Defendants and Lois Barone and move to dismiss Counts II and VI for failure to state RICO conspiracy or civil conspiracy claims against them. Susan Lee further argues that she, like Tony and Lloyd Lee, is entitled to dismissal by virtue of the alleged release of co-conspirator Amir Rehmat.
Defendants Peter Barone and Barone Consulting Group, Inc. move to dismiss all Plaintiffs' claims as against them for lack of standing. They further contend that Plaintiffs' RICO claims are time-barred or fail to state a claim, and that Plaintiffs' allegations are insufficient to state claims of breach of fiduciary duties or common law fraud against Peter Barone, or civil conspiracy against both Peter Barone and Barone Consulting. Defendant Lois Barone moves to dismiss Counts II, IV, and VI for failure to state RICO, civil conspiracy, or common law fraud claims against her.
Defendants Charles Wayne Jones, Kathreen Jones, Homatex, Inc. and Wayne and Associates (collectively, "the Jones Defendants") also seek dismissal of Counts II, IV, and VI for lack of standing and failure to state a claim. They urge that Plaintiffs' claim of civil conspiracy to commit fraud must be dismissed as duplicative. Defendant Shyam Singh moves to dismiss Counts II, V, and VI for failure to adequately state RICO, common law fraud, and civil ...