In 2006, insurance executive Steven Menzies (“Menzies”) sold over $64 million worth of his company’s stock without reporting any capital gains on his federal tax return. He alleged that this was due to a fraudulent tax shelter presented to him and others by tax attorney Graham Taylor (“Taylor”), Taylor’s law firm Seyfarth Shaw (“Seyfarth”), and two financial services firms: Northern Trust and Christiana Bank. Menzies brought claims against all four defendants under the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and Illinois law. The defendants moved successfully to dismiss all counts, and Menzies appealed. The Seventh Circuit affirmed in part, reversed in part, and remanded. With respect to Menzies’ RICO claim, it held that it “falls short on the statute’s pattern-of-racketeering element” in that Menzies “failed to plead not only the particulars of how the defendants marketed the same or similar tax shelter to other taxpayers, but also facts to support a finding that the alleged racketeering activity would continue.” Id. at 332. The Court added that finding otherwise would allow “an ordinary (albeit grave) claim of fraud to advance in the name of RICO.” Id. Conversely, Menzies’ state law claims against Taylor and Seyfarth were barred by the Illinois’ two-year statute of limitations for attorney misconduct. Id. at 346. However, his claims against Northern Trust and Christiana Bank were allowed to proceed on remand. Id. The court did not address whether the RICO claims against Taylor and Seyfarth would be barred by the two-year attorney statute as well.
(This is for informational purposes and is not legal advice.)