ePlus Technology Inc v. Aboud ( 2002 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
EPLUS TECHNOLOGY, INCORPORATED, 
Plaintiff-Appellee,
v.
PATRICIA ABOUD, a/k/a Carole
Girard,
Defendant-Appellant,  No. 02-1197
and
DANIEL JACQUES AKERIB; JEAN-MARIE
CHARTUNY; GEORGE BERNACHAWY;
JOHN DOE,
Defendants.

Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
T. S. Ellis, III, District Judge.
(CA-00-699-A)
Argued: September 25, 2002
Decided: December 3, 2002
Before WILKINS, MICHAEL, and KING, Circuit Judges.
Affirmed by published opinion. Judge King wrote the opinion, in
which Judge Wilkins and Judge Michael joined.
COUNSEL
ARGUED: John Francis Cahill, CARTER, LEDYARD & MIL-
BURN, Washington, D.C., for Appellant. Michael Edward Geltner,
2 EPLUS TECHNOLOGY v. ABOUD
GELTNER & ASSOCIATES, P.C., Washington, D.C., for Appellee.
ON BRIEF: Patrick C. Smith, LAW OFFICE OF PATRICK C.
SMITH, P.C., Baltimore, Maryland, for Appellant. Erica S. Stoecker,
Herndon, Virginia, for Appellee.
OPINION
KING, Circuit Judge:
During the technology boom of the late 1990s, Patricia Aboud
organized several credit scams to defraud computer equipment suppli-
ers. To recover losses resulting from one of these scams, ePlus Tech-
nology, Inc. ("ePlus") filed a civil action in the Eastern District of
Virginia, asserting that Aboud had violated state tort law and the
Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.
§§ 1961-1968 ("RICO"). Following a bench trial in 2001, the district
court found Aboud liable on both state and federal claims, and it
awarded ePlus $891,423 in damages, plus attorneys’ fees and costs.
ePlus Tech., Inc. v. Aboud, CA-00-699-A, Memorandum Opinion, at
20-21 (E.D. Va. Dec. 5, 2001) (the "Opinion").
In this appeal, Aboud raises several challenges to the court’s judg-
ment in favor of ePlus. She primarily insists that the court lacked
jurisdiction over her, that her trial was tainted by the court’s consider-
ation of material not admitted into evidence, and that the evidence
was insufficient to establish the "pattern of racketeering activity" nec-
essary for a civil RICO violation. 18 U.S.C. § 1961(1), (5). Because
Aboud’s contentions are unavailing, we affirm the district court.
I.
A.
From the summer of 1999 until the spring of 2000, Aboud used a
Canadian corporation to swindle computer equipment suppliers
through what is known as a "bust-out scheme."1 In a typical bust-out
1
We recite the facts in the light most favorable to ePlus, the party that
prevailed below. Randall v. Prince George’s County, 302 F.3d 188, 201
(4th Cir. 2002). The district court, in its Opinion, made explicit findings
of fact, which we review for clear error. Fed. R. Civ. P. 52(a).
EPLUS TECHNOLOGY v. ABOUD 3
scheme, promoters form a seemingly legitimate corporation. At the
outset of the scheme, the corporation’s bills are paid, and its creditors
are lured into extending larger and larger lines of credit. The schemers
then use these inflated credit lines to obtain merchandise from suppli-
ers, sell the merchandise at fire sale prices, and loot the corporation
of its assets. Ultimately, the debtor corporation files for bankruptcy,
and creditors can lose millions from unpaid and uncollectible debts.
See United States v. Crockett, 534 F.2d 589, 592 (5th Cir. 1976)
(describing typical bust-out scheme).
1.
Aboud orchestrated such a bust-out scheme through her ownership
and control of Micro Business Technology ("MBT"), a Canadian cor-
poration ostensibly in the business of buying, assembling, and resell-
ing computer components.2 Opinion at 3. Aboud used MBT to
establish credit lines with various wholesalers of computer equip-
ment. Id. at 4. Just before MBT filed for bankruptcy in Canada,
Aboud and her co-schemers charged large orders of computer equip-
ment, sold the equipment at artificially-discounted prices, and stole
the proceeds from MBT, leaving MBT with neither assets nor records.
By the time MBT filed for bankruptcy in March of 2000, Aboud and
her co-schemers had defrauded MBT’s creditors out of millions of
dollars. Id. at 5, 7-8, 14. As the district court found, "[t]he scope of
the bust out scheme perpetrated by Aboud and her coconspirators is
highlighted by the number of victims and the magnitude of their
losses." Id. at 14.
MBT’s business with ePlus commenced in a seemingly innocent
fashion during the summer of 1999. In July of that year, George
Bernachawy, "representing MBT and acting in furtherance of
Aboud’s scheme and conspiracy," placed two small orders for com-
puter equipment with International Computer Networks ("ICN"). Id.
at 6. These orders totaled between $15,000 and $20,000, and MBT
paid for them with a credit card. Id. Within weeks after these orders
were placed, ePlus acquired ICN. Thereafter, Bernachawy "pressed
[ePlus] to allow MBT to purchase larger orders of computer compo-
2
Micro Business Technology is incorporated in Canada under the name
"3099 2119 Quebec Incorporated."
4 EPLUS TECHNOLOGY v. ABOUD
nents on credit from plaintiff, purportedly for use in connection with
MBT’s manufacture and assembly of clone PCs." Id. Bernachawy
represented to ePlus that MBT needed computer parts to use in its
Canadian computer assembly factory, which he claimed employed
thirty workers. In truth, there was no MBT factory, MBT never had
more than six employees, and fraud — not computer assembly — was
MBT’s business. Id. at 4.
During the latter part of 1999, Bernachawy, representing MBT and
acting on behalf of Aboud, continued to order computer equipment
and supplies from ePlus. With an initial thirty-day credit limit of
$25,000, Bernachawy ordered, and MBT timely paid for, over
$450,000 in computer components. Id. at 7 n.8. The business relation-
ship between MBT and ePlus progressed without incident until
December 1999, when MBT was late on a payment. Id. at 7. At this
point, ePlus contacted Bernachawy regarding the unpaid bill, and
Bernachawy falsely told ePlus that the payment was late because
MBT could not obtain a certified check while Canadian banks were
closed over the holiday season.3 During this telephone conversation,
Bernachawy attempted to order additional computer components, but
ePlus declined to extend MBT’s credit because of its outstanding debt
to ePlus. Ultimately, MBT made the overdue payment to ePlus, but
the payment was approximately two weeks late. Id.
Following this late payment, "plaintiff increased MBT’s credit line,
reasonably relying on the false statements and promises of Aboud and
her agents." Id. Thereafter, in March 2000, MBT was late on another
payment to ePlus for approximately $129,000. When ePlus contacted
MBT, Bernachawy asserted that the payment had been delayed
because Aboud was selling MBT to a Chicago company owned by a
Daniel Akerib. Id. Aboud did in fact transfer her MBT stock to
Akerib, one of her co-schemers, on February 23, 2000. According to
the district court, however, "[i]t is clear that the alleged ‘purchase’ of
MBT was executed to allow Aboud to deny she had anything to do
3
Apparently, Canadian banks cannot close during the holiday period at
issue. According to Herbert Davis, the Canadian Bankruptcy Trustee
handling MBT’s bankruptcy, a Canadian bank might close briefly on
Christmas Day, but it cannot remain continuously closed for more than
72 hours.
EPLUS TECHNOLOGY v. ABOUD 5
with the bust out scheme, although she continued in fact to be part of
the scheme." Id. at 7 n.9. Aboud, using the alias "Carole Girard," con-
tinued to control MBT after transferring her MBT stock. Id. As the
nominal owner of MBT, Akerib functioned as Aboud’s front-man and
accomplice in the bust-out scheme, and he became the "fall guy" in
MBT’s bankruptcy. Id. at 3.
When Bernachawy falsely advised ePlus about the change in
MBT’s control, he also attempted to place another order for more than
$120,000 of computer equipment. Id. at 8. Because of the debt owed
by MBT, however, ePlus refused to ship any additional orders. Id.
Bernachawy then promised ePlus that MBT would immediately pay
the outstanding bill, and ePlus received a check, in the sum of
$129,000, on March 20, 2000. Id. Relying on this tender of payment,
ePlus shipped MBT half of the new order, valued at $66,420. Id. As
the court found, however, "Aboud and her co-conspirators knew full
well that the $129,000 check would not be paid and they also never
intended to pay for the new shipment." Id.
On March 23, 2000, MBT filed for bankruptcy in Montreal, Can-
ada. On that same day, Bernachawy called ePlus to request that it ship
the other half of the $120,000 order. Id. In this conversation,
Bernachawy concealed MBT’s bankruptcy filing, and he failed to
advise ePlus that the $129,000 check was drawn on insufficient funds.
In this conversation, ePlus advised Bernachawy that no additional
shipments would be sent to MBT until its account with ePlus was
cleared. In response, Bernachawy stated that MBT was sending yet
another check. Id. at 8-9.
2.
In the execution of this scheme, Aboud played a central role. She
"acted as MBT’s president and was the leader of the conspiracy," and
MBT’s employees acted as her agents and co-conspirators in conduct-
ing the fraudulent affairs of MBT. Id. at 6. Furthermore, Aboud per-
sonally prepared and faxed to potential suppliers several credit
applications that contained misleading credit references and false
statements regarding MBT’s business. Id. at 4-6. For example, "[i]n
furtherance of the scheme, to persuade plaintiff to allow MBT to pur-
chase larger orders on credit, in August 1999, Aboud transmitted to
6 EPLUS TECHNOLOGY v. ABOUD
plaintiff by facsimile a credit application falsely stating that MBT
upgraded and built computer systems." Id. at 6. Aboud also listed a
company affiliated with MBT, Olympique Transport, as an indepen-
dent credit reference. In truth, Olympique Transport was "a company
that was located next door to MBT and was in fact not independent
of MBT." Id.
Similarly, Aboud, as part of the scheme, provided false information
to Dun & Bradstreet in connection with its preparation of two reports
on MBT, a Business Information Report and a Supplier Evaluation
Report (collectively, the "D&B Reports"). Id. at 9. Such reports are
routinely used by creditors in assessing whether to extend credit to
other businesses. In submitting information to Dun & Bradstreet,
Aboud misrepresented the number of MBT’s employees, the nature
of MBT’s business, and the fact that she and Girard were the same
person. Significantly, Aboud’s false statements to creditors and to
Dun & Bradstreet gave the appearance that MBT was a legitimate
company. Id. at 4-5, 17 n. 15.
In addition to the misrepresentations she made to Dun & Brad-
street, Aboud lied to MBT’s creditors about her identity. She fre-
quently used her alias, Carole Girard, to distance herself from the
scheme she was orchestrating. Id. at 3. For example, acting in her role
as Girard, Aboud often answered MBT’s telephone and advised its
creditors that Aboud was unavailable or no longer connected to MBT.
Id. at 9-13. On April 5, 2000, a private investigator hired by ePlus
confronted Aboud about her double identity. On this occasion, she
initially insisted that Aboud and Girard were different persons. When
challenged, however, she acknowledged the duplicity, but explained
that "Carole Girard" was her married name and "Patricia Aboud" was
her maiden name. In this appeal, Aboud admits that she used both
names, but she maintains that such activity was not misleading. The
district court found, however, that "Aboud’s misrepresentations about
her true identity were used to avoid and frustrate vendors’ collection
efforts." Id. at 14.
3.
In addition to victimizing ePlus, Aboud and her co-schemers swin-
dled several other computer equipment suppliers in the MBT scam.
EPLUS TECHNOLOGY v. ABOUD 7
Id. For example, Aboud used MBT to defraud Distributive Systems
Services, Inc. ("DSS"), a Pennsylvania supplier of computer equip-
ment. In order to establish credit for MBT, Aboud sent DSS a credit
application, "falsely representing that she and Girard were different
individuals and falsely describing MBT’s nonexistent personal com-
puter factory." Id. at 9. DSS relied on Aboud’s false statements,
which were also reflected in the D&B Reports. Id. Because of these
misrepresentations, DSS extended MBT a substantial line of credit
beginning in August 1999. Id. Over the course of MBT’s relationship
with DSS, Akerib, working with Aboud and nominally on behalf of
MBT, sent DSS fourteen separate checks that failed to clear. Id.
In February 2000, with MBT’s account in arrears, James Sweeney,
the President of DSS, traveled to Montreal to visit MBT’s factory. Id.
at 9. As the court found, "Sweeney’s previous attempts to travel to
Montreal to visit the factory were deliberately discouraged, frustrated,
or postponed by Aboud and Bernachawy, all in a concerted effort to
conceal from Sweeney that MBT had no factory and was a sham
enterprise used in their bust out scheme." Id. at 9 n.10. In Montreal,
Bernachawy and Aboud (acting as Girard) literally gave Sweeney the
runaround. Id. at 9-10. They scheduled a visit for Sweeney to see the
non-existent MBT factory, but Bernachawy got lost driving Sweeney
around Montreal. Id. at 10. Once they were late for the factory
appointment, Bernachawy took Sweeney back to the MBT office.
After allegedly speaking to factory employees, Bernachawy informed
Sweeney that MBT’s non-existent factory was too busy for their visit.
Id.
Based on incidents such as these, the court concluded that MBT
had defrauded DSS, using deception to induce DSS to ship MBT
computer equipment on credit. Id. Although MBT initially paid DSS
for certain orders, its debt to DSS had grown to more than $1,500,000
by February 2000. Id.
At trial, representatives of five other computer equipment suppliers
told similar stories.4 According to the representatives of these compa-
4
These other creditors providing trial evidence included: Theta Sys-
tems, Inc.; Gemini Digital Products Corp.; TJS Electronics and Peripher-
als, Inc.; Emtec, Inc.; and Intelligent Decisions, Inc., a Virginia
corporation. Id. at 10-13.
8 EPLUS TECHNOLOGY v. ABOUD
nies, Aboud sent them falsified credit applications, in which she lied
about MBT’s non-existent factory and used her alias in a misleading
way. Id. at 14. Further, these companies relied on the false informa-
tion that Aboud had provided to Dun & Bradstreet. Finally, Aboud
frequently misrepresented her identity when creditors called to inquire
about unpaid bills. The district court concluded that "the course of
dealings between various computer component vendors whose
employees testified and MBT reveal a similar pattern of fraudulent
conduct by Aboud and her agents and coconspirators." Id.
All told, more than fifty creditors lost money from MBT’s bank-
ruptcy. MBT accumulated roughly $10,000,000 in debt to buy com-
puter components, but it had no assets when it filed for bankruptcy
in March 2000. When Herbert Davis, MBT’s Bankruptcy Trustee,
assumed control of the business, he found no equipment, no money,
and no records. As the court concluded, "once the conspirators had
extracted all the money from MBT, they caused the enterprise to
declare bankruptcy, leaving plaintiff and the other vendor-victims to
pick over MBT’s meatless carcass." Id. at 5.
4.
The trial evidence revealed that Aboud had previously orchestrated
bust-out schemes using two other companies, Gold Copy and Colis-
Pac. In these other schemes, like the MBT scheme, Aboud extracted
large quantities of merchandise from suppliers, sold the goods, and
hid the proceeds before the corporate entities filed for bankruptcy. Id.
at 13. Like MBT, these entities wound up with neither assets nor
records when the Trustee took control. As the court found, "after
bankruptcy, both Gold Copy and Colis-Pac, like MBT, did not coop-
erate with the bankruptcy trustee, claiming that missing records were
either lost or did not exist." Id. Further, "Aboud removed large sums
of money from Gold Copy and Colis-Pac and paid unjustified corpo-
rate money to third-parties." Id. Notably, the same individuals —
Aboud, Akerib, Bernachawy, and Jean-Marie Chartouni — operated
MBT, Gold Copy, and Colis-Pac. Id.
EPLUS TECHNOLOGY v. ABOUD 9
B.
In all likelihood, Aboud defrauded MBT creditors out of more than
$10,000,000. Id. at 14. Seeking to recover its part of these losses,
ePlus filed this action on April 27, 2000, in the Eastern District of
Virginia, asserting fraud and civil RICO claims against Aboud,
Akerib, Bernachawy, and Chartouni. Id. at 1. The court entered a
default judgment against Akerib when he failed to file an answer. Id.
Because Bernachawy and Chartouni were not served in accordance
with the Federal Rules of Civil Procedure and the Hague Convention,5
the claims against them were dismissed without prejudice. Id. There-
fore, Aboud is the only remaining defendant.
The court conducted a three-day bench trial on August 20, 21, and
October 4, 2001. Id. at 2. After considering the evidence, it found
Aboud liable to ePlus for fraud under Virginia law and for violating
the RICO statute. Id. at 20-21. At trial, ePlus presented the testimony
of eight witnesses and related documentary evidence, while Aboud
presented no evidence and did not attend the trial. Indeed, she stipu-
lated that, had she been called to testify, she "would refuse to answer
any and all substantive questions in this matter on the grounds that
such answers might be used against [her] in a possible criminal prose-
cution or proceeding." Id. at 2-3.
In its Opinion, the court concluded that Aboud had conspired and
schemed with Akerib, Bernachawy, and Chartouni to defraud ePlus.
Id. at 3-4. It awarded ePlus compensatory damages in the sum of
$297,141, and it then trebled the award under RICO, pursuant to 18
U.S.C. § 1964(c).6 The judgment against Aboud totaled $891,423,
plus attorneys’ fees and costs. Id. at 20-21. Aboud filed this appeal,
and we possess jurisdiction pursuant to 28 U.S.C. § 1291.
5
As the court noted, the Hague Convention is the common name for
the Convention on Service Abroad of Judicial and Extrajudicial Docu-
ments in Civil and Commercial Matters, 20 U.S.T. 362 (1964). See Opin-
ion at 2 n.4; see also Fed. R. Civ. P. 4(f)(1).
6
Section 1964(c) of Title 18 of the United States Code provides, in rel-
evant part, that an injured party "shall recover threefold the damages he
sustains and the cost of the suit, including a reasonable attorney’s fee."
18 U.S.C. § 1964(c).
10 EPLUS TECHNOLOGY v. ABOUD
On appeal, Aboud challenges the court’s judgment on several
bases. First, she maintains that the court lacked personal jurisdiction
over her. Second, according to Aboud, the trial was irrevocably
tainted because the court considered material not admitted into evi-
dence. Third, Aboud contends that the intracorporate immunity doc-
trine precludes the finding that she conspired with other employees of
MBT. Fourth, she challenges the sufficiency of the evidence support-
ing the fraud award. Finally, Aboud insists that ePlus failed to present
sufficient evidence of the "pattern of racketeering activity" necessary
to support its civil RICO claim. We address each of these contentions
in turn.7
II.
We first assess whether the district court properly exercised juris-
diction over Aboud, a Canadian citizen. According to Aboud, ePlus
only connected her to Virginia through a single telephone call, and the
court found that this call was made by Bernachawy. Aboud also con-
tends that, even if she directed MBT’s operations, jurisdiction over
her cannot be predicated on the Virginia contacts of MBT or its
agents. On the other hand, ePlus asserts that the actions of Aboud’s
agents and co-conspirators can be the basis for the court’s exercise of
jurisdiction. As explained below, we conclude that Aboud had suffi-
cient contacts with the forum to support the court’s exercise of juris-
diction.
A.
In assessing the jurisdictional issue, we observe that ePlus, as
plaintiff, bore the burden of establishing the basis for jurisdiction in
the district court. See Combs v. Bakker, 886 F.2d 673, 676 (4th Cir.
1989). In considering whether the court properly exercised jurisdic-
tion over Aboud, we review relevant findings of fact for clear error,
while we review de novo its legal determinations. See ALS Scan, Inc.
v. Digital Serv. Consultants, Inc., 293 F.3d 707, 710 (4th Cir. 2002),
7
Aboud also maintains that the district court should not have held her
personally liable for the corporate obligations of MBT. In fact, however,
the court held her liable to ePlus for her personal wrongdoing, not for the
actions of MBT.
EPLUS TECHNOLOGY v. ABOUD 11
petition for cert. filed, 71 U.S.L.W. 3247 (U.S. Sept. 12, 2002) (No.
02-463).
B.
In general, the federal district courts exercise personal jurisdiction
in the manner and to the extent provided by state law. Id. In other
words, a district court has personal jurisdiction over a defendant if the
state courts where the federal court is located would possess such
jurisdiction. Fed. R. Civ. P. 4(k)(1)(A); Combs, 886 F.2d at 675 (rec-
ognizing that "personal jurisdiction of federal courts of course may be
grounded in state long-arm (or other) jurisdiction statutes in civil
RICO cases"). Here, the district court possessed jurisdiction over
Aboud because she was subject to the jurisdiction of the Virginia
courts.
For state courts to possess personal jurisdiction over a defendant,
a state statute must confer jurisdiction, and the exercise of jurisdiction
must be consistent with due process requirements. Like most other
states, Virginia has a long-arm statute that extends the jurisdiction of
its courts as far as federal due process permits. Va. Code Ann. § 8.01-
328.1(A);8 John G. Kolbe, Inc. v. Chromodern Chair Co., 180 S.E.2d
664, 667 (Va. 1971). Therefore, "‘the statutory inquiry necessarily
merges with the constitutional inquiry, and the two inquiries essen-
tially become one.’" ALS Scan, Inc., 293 F.3d at 710 (quoting Stover
v. O’Connell Assocs., Inc., 84 F.3d 132, 135-36 (4th Cir. 1996)). As
a result, we need only assess whether subjecting Aboud to jurisdiction
in Virginia was consistent with due process.
8
The Virginia long-arm statute provides in relevant part as follows:
A court may exercise personal jurisdiction over a person, who
acts directly or by an agent . . . : 1. Transacting any business in
this Commonwealth; . . . 4. Causing tortious injury in this Com-
monwealth by an act or omission outside this Commonwealth if
he regularly does or solicits business, or engages in any other
persistent course of conduct, or derives substantial revenue from
goods used or consumed or services rendered, in this Common-
wealth.
Va. Code Ann. § 8.01-328.1(A).
12 EPLUS TECHNOLOGY v. ABOUD
In order for a court’s exercise of jurisdiction to satisfy due process
requirements, a defendant must have "certain minimum contacts with
[the state] such that the maintenance of the suit does not offend tradi-
tional notions of fair play and substantial justice." Int’l Shoe Co. v.
Washington, 326 U.S. 310, 316 (1945) (internal quotes omitted). In
applying this standard, the constitutional benchmark is "whether the
defendant purposefully established minimum contacts in the forum
State." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)
(internal quotes omitted). Furthermore, a defendant should be able to
anticipate being brought to court in the forum, in that contacts "must
be directed at the forum state in more than a random, fortuitous, or
attenuated way." ESAB Group, Inc. v. Centricut, Inc., 126 F.3d 617,
625 (4th Cir. 1997); see also World-Wide Volkswagen Corp. v. Wood-
son, 444 U.S. 286, 297 (1980). In essence, a defendant must have
minimum contacts with the forum state, and a court’s exercise of
jurisdiction must be reasonable.
C.
While the fact that Aboud’s contacts with Virginia were made on
behalf of MBT complicates the traditional due process inquiry, her
connection to the Commonwealth is sufficient to support the court’s
exercise of jurisdiction.9 In the typical case, the contacts of a company
are not attributed to a corporate agent for jurisdictional purposes. See
Calder v. Jones, 465 U.S. 783, 790 (1984) (holding that employees’
"contacts with [the forum] are not to be judged according to their
employer’s activities there"). On the other hand, Aboud is not
immune from jurisdiction in Virginia merely because her contacts
with the Commonwealth were made ostensibly on behalf of MBT. Id.(noting that employees’ "status as employees does not somehow insu-
late them from jurisdiction"). Therefore, the court’s exercise of juris-
diction was proper if Aboud had sufficient contacts with Virginia,
even if those contacts were made ostensibly on behalf of MBT.
9
The court may also have asserted jurisdiction over Aboud because she
was the principal of MBT, and Bernachawy and the other employees of
MBT acted as her agents. The Virginia long-arm statute explicitly per-
mits jurisdiction to be based on the acts of agents. See Va. Code Ann.
§ 8.01-328.1(A).
EPLUS TECHNOLOGY v. ABOUD 13
In order to obtain credit for MBT from Virginia corporations,
Aboud submitted false information to Dun & Bradstreet, and she
faxed credit applications to ePlus and Intelligent Decisions, Inc. in
Virginia. Because ePlus’s claims involve credit fraud, these acts alone
are sufficient to justify the court’s exercise of jurisdiction over
Aboud. See English & Smith v. Metzger, 901 F.2d 36, 38 (4th Cir.
1990) ("[A] single act by a nonresident which amounts to transacting
business in Virginia and gives rise to a cause of action may be suffi-
cient to confer jurisdiction upon [Virginia] courts.") (internal quotes
omitted) (second alteration in original); see also ESAB Group, Inc.,
126 F.3d at 625 ("[C]ontacts related to the cause of action must create
a ‘substantial connection’ to the forum state.") (quoting McGee v.
Int’l Life Ins. Co., 355 U.S. 220, 223 (1957)).
Furthermore, the exercise of jurisdiction over Aboud does nothing
to "offend traditional notions of fair play and substantial justice." Int’l
Shoe Co., 326 U.S. at 316. Put simply, there is nothing unreasonable
about subjecting her to jurisdiction in Virginia. Aboud could reason-
ably have assumed, based on her contacts with the Commonwealth,
that she would be sued there. She had submitted false information on
credit applications to two Virginia companies, and she had provided
false information to Dun & Bradstreet in connection with its Reports
on MBT, intending for Virginia businesses to rely on this information.
Considering these facts, Aboud knew or should have known that she
could be sued in Virginia. We therefore see the court’s exercise of
jurisdiction over Aboud as eminently reasonable and consistent with
due process.10
10
The fact that Aboud is a Canadian citizen does not deprive the dis-
trict court of jurisdiction. While the Supreme Court, in Asahi Metal
Industry Co. v. Superior Court, 480 U.S. 102, 113 (1987), cautioned fed-
eral courts against reaching out to exercise jurisdiction over foreign enti-
ties, our national interest in foreign affairs does not outweigh ePlus’s
interest in obtaining relief from Aboud, or Virginia’s interest in adjudi-
cating ePlus’s claims. Aboud intended to defraud Virginia corporations
of substantial amounts of valuable property, and she cannot rely on the
border between Canada and the United States as a shield for her illegal
activities.
14 EPLUS TECHNOLOGY v. ABOUD
III.
In addition to her jurisdictional contention, Aboud maintains that
she did not receive a fair trial because the court, in finding for ePlus,
considered exhibits that were not admitted into evidence.11 Indeed, in
its Opinion, the court mistakenly referenced two documents that were
not part of the evidentiary record. Opinion at 13 n.11. The first such
document was the Trustee’s Report from Gold Copy’s bankruptcy
proceeding, describing how Gold Copy possessed no books, no
records, and no inventory when it filed for bankruptcy. It also dis-
cussed unusual transfers of money from Gold Copy to Colis-Pac and
investigations by the FBI and Canadian authorities. The other docu-
ment was a letter from Mr. Davis, the Trustee, to the creditors of Gold
Copy and Colis-Pac. In this letter, Mr. Davis concluded that Aboud
had orchestrated bust-out schemes through these companies. Overall,
Mr. Davis’s Report and letter (collectively, the "Trustee Documents")
connect Aboud to bust-out schemes similar to the MBT scheme, and
they support ePlus’s claim that Aboud engaged in a pattern of racke-
teering activity.
Based on the mistaken reference to the Trustee Documents, Aboud
moved for a new trial. Aboud insisted that the Trustee Documents
prejudiced the court against her, and that the court’s consideration of
these documents entitled her to a new trial. In assessing this motion,
the court agreed that the Trustee Documents had not been admitted
into evidence, but it concluded that the testimony of Mr. Davis and
other witnesses provided an alternate foundation for its factual find-
ings and legal conclusions. On this basis, the court refused to award
Aboud a new trial. ePlus Tech., Inc. v. Aboud, CA-00-699-A, Order,
at 2-3 (E.D. Va. Jan. 11, 2002).
11
On appeal, ePlus asks us to consider new material that was not in evi-
dence. According to ePlus, after the trial was concluded, Aboud was con-
victed of violations of Canadian criminal law for her involvement with
Gold Copy and Colis-Pac. In this regard, ePlus has moved on appeal to
file "an addendum" in order to have us consider evidence of these con-
victions. However, ePlus has provided no authority allowing us to con-
sider such additional evidence at this stage. We therefore deny the
motion to file the addendum and do not rely on the materials therein.
EPLUS TECHNOLOGY v. ABOUD 15
Contrary to Aboud’s contention, the court’s fleeting reference to
the Trustee Documents in its Opinion does not entitle Aboud to any
relief. First, Aboud relies on authorities pertaining only to extrajudi-
cial juror contact. In those cases, jurors (not judges) relied on infor-
mation not in evidence. See, e.g., Stephens v. South Atlantic Canners,
Inc., 848 F.2d 484, 486-87 (4th Cir. 1988). Aboud provides no satis-
factory explanation of how these authorities support her claim for
relief here. In decisions more directly on point, we have granted a
new trial "only in the most extreme of cases" where a judge demon-
strated personal bias against a litigant because of reliance on extraju-
dicial sources. Aiken County v. BSP Div. of Envirotech Corp., 866
F.2d 661, 678 (4th Cir. 1989); see generally Crandall v. United
States, 703 F.2d 74, 75-76 (4th Cir. 1983).12 And a court’s consider-
ation of material outside the record does not generally raise issues of
constitutional magnitude. See Aiken County, 866 F.2d at 678 ("We do
not think, however, that the two memoranda received by the judge
and the ancillary ex parte contacts in this case approach the magni-
tude of constitutional error."). Similarly here, the court’s mistaken
citation to the Trustee Documents does not demonstrate any personal
bias and does not warrant awarding Aboud a new trial.
Second, the district court’s findings and conclusions do not depend
on the Trustee Documents. Even where jurors rely on material not in
evidence, a verdict must be sustained when such reliance is "innocu-
ous." Stephens, 848 F.2d at 487. And where a court acts as fact-finder,
as it did here, the judgment will be upheld where erroneous consider-
ation of non-record material was harmless, as it was here. In this situ-
ation, Mr. Davis testified to the incriminating nature of the Gold Copy
and Colis-Pac enterprises. In addition, Aboud asserted the Fifth
Amendment to avoid answering any substantive questions at trial. In
a civil proceeding, a fact-finder is entitled to draw adverse inferences
from a defendant’s invocation of the privilege against self incrimina-
tion. Baxter v. Palmigiano, 425 U.S. 308, 319 (1976) ("[S]ilence in
the face of accusation is a relevant fact not barred from evidence by
12
Although courts do not generally address the standard of review
applicable to assessing judicial bias, we should conduct a plenary review
of such an issue because it raises due process concerns. See Aiken
County, 866 F.2d at 678 ("Bias or prejudice on the part of a judge also
can be sufficiently pervasive as to implicate due process concerns.").
16 EPLUS TECHNOLOGY v. ABOUD
the Due Process Clause."). Given this evidence, the court was entitled
to conclude that Aboud used Gold Copy and Colis-Pac to operate
similar bust-out schemes. Therefore, the court’s reference to the
Trustee Documents in a footnote of its Opinion was harmless.
IV.
Aboud next contends that she could not, as a matter of law, con-
spire with other MBT employees because of the intracorporate immu-
nity doctrine.13 On this issue, Aboud raises both issues of law, which
we review de novo, and issues of fact, which we review for clear
error. See ALS Scan, Inc., 293 F.3d at 710.
As Aboud suggests, it is generally true that, under the intracorpor-
ate immunity doctrine, acts of corporate agents are acts of the corpo-
ration itself, and corporate employees cannot conspire with each other
or with the corporation. Bowman v. State Bank of Keysville, 331
S.E.2d 797, 801 (Va. 1985). We have recognized, however, that the
intracorporate immunity doctrine does not apply where a corporate
"officer has an independent personal stake in achieving the corpora-
tion’s illegal objectives." Greenville Pub. Co. v. Daily Reflector, Inc.,
496 F.2d 391, 399 (4th Cir. 1974). In recent years, this "personal
stake exception" has been limited, such that it applies only where a
co-conspirator possesses a personal stake independent of his relation-
ship to the corporation. See Oksanen v. Page Mem’l Hosp., 945 F.2d
696, 705 (4th Cir. 1991).
Nevertheless, the "personal stake exception" to the intracorporate
immunity doctrine plainly applies here. Aboud stood to gain from the
MBT bust-out scheme, and her personal stake was wholly separate
from her connection to MBT. In fact, Aboud had no interest in seeing
13
In addition to maintaining that the intracorporate immunity doctrine
precludes the finding of a conspiracy, Aboud insists that ePlus did not
introduce sufficient evidence to establish a conspiracy. The record, how-
ever, contains ample support for the district court’s ruling that Aboud
was involved in a conspiracy with Akerib, Bernachawy, and Chartouni.
As a result, it was appropriate to admit their statements under the co-
conspirator exception to the hearsay rule. See Fed. R. Evid. 801(d)(2)(E);
see generally Bourjaily v. United States, 483 U.S. 171 (1987).
EPLUS TECHNOLOGY v. ABOUD 17
MBT profit: the point of the MBT bust-out scheme was to send the
corporation into bankruptcy. In siphoning money out of MBT, Aboud
personally profited at MBT’s expense. In such a situation, the "per-
sonal stake exception" squarely applies, and it was entirely permissi-
ble for the court to conclude that Aboud had conspired with Akerib,
Bernachawy, and Chartouni.
V.
Aboud also maintains on appeal that the evidence was insufficient
to support the court’s fraud ruling. Aboud, of course, contends that
she never personally misled ePlus in any way. Although she acknowl-
edges that she used two names, she claims that the court made no
finding that ePlus had relied on her misrepresentations. In reviewing
a court’s judgment for sufficiency of evidence, we review its findings
of fact for clear error and its legal conclusions de novo.14 See North-
east Drilling, Inc. v. Inner Space Servs., Inc., 243 F.3d 25, 37 (1st Cir.
2001); Colonial Penn Ins. v. Market Planners Ins. Agency Inc., 157
F.3d 1032, 1037 (5th Cir. 1998).
In order to prevail on its fraud claim, ePlus was required to show,
by clear and convincing evidence, the following elements: (1) a false
representation; (2) of material fact; (3) made intentionally or know-
ingly; (4) with the intent to mislead; (5) reliance; and (6) resulting
damages. Richmond Metro Auth. v. McDevitt St. Bovis, Inc., 507
S.E.2d 344, 346-47 (Va. 1998). These elements may be satisfied
either by a principal acting alone, or through the acts of agents. Dud-
ley v. Estate Life Ins. Co. of Am., 257 S.E.2d 871, 875 (Va. 1979) ("A
principal who puts a servant or other agent in a position which
enables the agent . . . to commit a fraud upon third persons is subject
to liability to such third persons for the fraud.").
14
On appeal, Aboud has moved to compel ePlus to comply with Rule
30(b)(2) of the Federal Rules of Appellate Procedure, which is an effort
to require ePlus to pay for the Joint Appendix. She claims that ePlus des-
ignated an unjustifiably large portion of the record for inclusion in the
Appendix. Because Aboud challenged the sufficiency of the evidence on
the fraud and RICO claims, the evidence relating to these claims is rele-
vant to the issues on appeal. Noting that Aboud has done little to identify
any truly extraneous aspects of the Joint Appendix, we deny her motion
to compel.
18 EPLUS TECHNOLOGY v. ABOUD
As the court found, there was ample evidence supporting each ele-
ment of the fraud claim, without regard to the acts of Aboud’s agents.
Opinion at 15-17. Aboud misrepresented material facts to ePlus in
seeking to establish credit for MBT. Notably, she prepared and sent
ePlus a falsified credit application, on which Aboud lied about MBT’s
non-existent factory, the number of its employees, and her identity.
As part of the scheme, Aboud also submitted false information to Dun
& Bradstreet. The court found that "[a]ll of these fraudulent acts and
representations were done to induce reliance on the part of plaintiff
in furtherance of Aboud’s bust out conspiracy scheme." Id. at 6; see
also id. at 17. Furthermore, ePlus relied on these misrepresentations
and lost money on goods it shipped to MBT. On this evidence, the
court was entitled to conclude that ePlus had proven the elements of
its fraud claim.
VI.
Finally, Aboud maintains that ePlus failed to establish the "pattern
of racketeering activity" necessary to prevail on its civil RICO claim.
18 U.S.C. § 1961(1), (5). Aboud suggests that the losses suffered by
ePlus resulted from an ordinary business debt, which does not nor-
mally lead to RICO liability. She maintains that ePlus did not estab-
lish that the Gold Copy and Colis-Pac enterprises were sufficiently
similar to the MBT scheme for RICO to apply, and that the MBT
scheme was too circumscribed to warrant the imposition of RICO lia-
bility. Since Aboud has challenged the sufficiency of the evidence on
this issue, we review the court’s factual findings for clear error and
its legal conclusions de novo. See Northeast Drilling, Inc., 243 F.3d
at 37; Bennun v. Rutgers State Univ., 941 F.2d 154, 170 (3d Cir.
1991).
A.
In order to prevail on its RICO claim, ePlus was required to prove
that Aboud had engaged in a "pattern of racketeering activity." 18
U.S.C. § 1962; H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229,
232-33 (1989). Under RICO, "racketeering activity" is defined as
"any act or threat" involving specified state law crimes, such as mur-
der or bribery, or an "act" indictable under various federal statutes,
such as mail and wire fraud. 18 U.S.C. § 1961(1). To have a "pattern"
EPLUS TECHNOLOGY v. ABOUD 19
of such activity, two or more predicate acts of racketeering must have
been committed within a ten year period. Id. § 1961(5). These
requirements are designed to prevent RICO’s harsh sanctions, such as
treble damages, from being applied to garden-variety fraud schemes.
See H.J. Inc., 492 U.S. at 233; see also Menasco, Inc. v. Wasserman,
886 F.2d 681, 683 (4th Cir. 1989) ("The pattern requirement in
§ 1961(5) thus acts to ensure that RICO’s extraordinary remedy does
not threaten the ordinary run of commercial transactions.").
1.
The first question we must address is whether, on this evidence,
Aboud engaged in racketeering activity. Because the statutory defini-
tion of racketeering activity does not include common law fraud, such
activity must be predicated on violations of the mail and wire fraud
statutes. 18 U.S.C. §§ 1341, 1343. In order to prove that Aboud com-
mitted mail or wire fraud, ePlus needed to show (1) a scheme to
defraud and (2) use of a mail or wire communication in furtherance
of that scheme. United States v. ReBrook, 58 F.3d 961, 966 (4th Cir.
1995). As the court found, the fraudulent credit applications sent by
Aboud to MBT’s suppliers, and the telephone conversations between
MBT employees and its creditors, violated the wire fraud statute.
Opinion at 19. Similarly, the phony checks mailed to ePlus by MBT
representatives qualify as separate acts of mail fraud. See United
States v. Murr, 681 F.2d 246, 248-49 (4th Cir. 1982). Therefore, ePlus
plainly established the required acts of "racketeering activity." 18
U.S.C. § 1961(1).15
2.
We must next assess whether, under the evidence adduced, RICO’s
pattern requirement has been satisfied. To establish such a pattern, "a
plaintiff . . . must show that the racketeering predicates are related,
15
We have cautioned against imposing civil RICO liability for garden-
variety violations of the mail and wire fraud statutes "because it will be
the unusual fraud that does not enlist the mails and wires in its services
at least twice." Al-Abood v. El-Shamari, 217 F.3d 225, 238 (4th Cir.
2000). As the district court recognized, however, the scheme in this case
represents more than run-of-the-mill fraud. Opinion at 19-21.
20 EPLUS TECHNOLOGY v. ABOUD
and that they amount to or pose a threat of continued criminal activ-
ity." H.J. Inc., 492 U.S. at 239 (first and third emphasis added). In
essence, the pattern requirement has been reduced to a "continuity
plus relationship" test. Id. As we have observed, there is no mechani-
cal formula to assess whether the pattern requirement has been satis-
fied; it is a commonsensical, fact-specific inquiry. Id. at 237-38, 242;
Anderson v. Found. for Advancement, Educ., and Employment of Am.
Indians, 155 F.3d 500, 506 (4th Cir. 1998) ("These criteria are not
always easily applied and depend on the facts of each particular
case."); Int’l Data Bank, Ltd. v Zepkin, 812 F.2d 149, 155 (4th Cir.
1987) (noting that "no mechanical test can determine the existence of
a RICO pattern").
In its decision in H.J. Inc., the Supreme Court addressed the "conti-
nuity plus relationship" test. For the predicate acts to be related, they
must have "‘the same or similar purposes, results, participants, vic-
tims, or methods of commission, or otherwise [be] interrelated by dis-
tinguishing characteristics and [not be] isolated events.’" H.J. Inc.,
492 U.S. at 240 (quoting 18 U.S.C. § 3575(e)). The continuity aspect,
in turn, refers "either to a closed period of repeated conduct, or to past
conduct that by its nature projects into the future with a threat of repe-
tition." Id. at 241. Significantly, "[p]redicate acts extending over a
few weeks or months and threatening no future criminal conduct do
not satisfy this requirement: Congress was concerned in RICO with
long-term criminal conduct." Id. at 242. Thus, it is clear that predicate
acts of racketeering activity must be part of a prolonged criminal
endeavor.
B.
While the predicate acts of mail and wire fraud in this case relate
to each other, it is less clear whether ePlus established the necessary
continuity. The MBT bust-out scheme lasted only a few months, and
its fraudulent activity centered around MBT, its credit rating, and its
bankruptcy. Simply put, the fact that the MBT scheme and its under-
lying conspiracy victimized numerous creditors does not necessarily
establish the requisite pattern of racketeering activity. See GE Inv.
Private Placement Partners II v. Parker, 247 F.3d 543, 549 (4th Cir.
2001) ("GE Investment"). In GE Investment, insiders, similar to the
MBT schemers, were engaged in a scheme "to defraud potential
EPLUS TECHNOLOGY v. ABOUD 21
investors and plaintiffs by misleading them into believing that [the
company] was a thriving, financially successful business." Id. (inter-
nal quotes omitted). Even where many investors had been misled, we
concluded that the required continuity had not been established.
If the MBT bust-out scheme had operated over a longer period or
employed a variety of predicate offenses, it might have involved the
required pattern of racketeering activity. See H.J. Inc., 492 U.S. at
237 (rejecting idea that RICO must involve more than one scheme);
Morley v. Cohen, 888 F.2d 1006, 1010 (4th Cir. 1989) (finding requi-
site continuity from single scheme where predicate offenses continued
for nearly five years); Ashland Oil, Inc. v. Arnett, 875 F.2d 1271,
1279 (7th Cir. 1989) (finding necessary continuity where bust-out
scheme involved many different types of predicate offenses). How-
ever, a bust-out scheme does not easily support RICO liability
because it has a built-in ending. For such a scheme to succeed, the
corporation must go bankrupt. See GE Inv., 247 F.3d at 549 ("Where
the fraudulent conduct is part of the sale of a single enterprise, the
fraud has a built-in ending point, and the case does not present the
necessary threat of long-term, continued criminal activity.").
In any event, Aboud was involved in other credit scams, and we
need not decide whether the MBT scheme, standing alone, would suf-
ficiently establish a pattern of racketeering activity. At trial, Mr.
Davis — the Trustee who handled the bankruptcies of Colis-Pac,
Gold Copy and MBT — demonstrated that Aboud was involved with
other, similar bust-out schemes. In particular, he testified that Gold
Copy and Colis-Pac went into bankruptcy under circumstances simi-
lar to those surrounding the MBT bankruptcy. Indeed, he found empty
warehouses, no assets, and no records when he assumed control of
each of the three companies. Of all of the businesses, Gold Copy had
the most significant remnants of a folded business: in its warehouse,
Mr. Davis found an orange juice container and damaged reams of
paper. Furthermore, he described an eerily similar scene at each of the
corporate offices. The same individuals — Aboud, Bernachawy, and
Akerib (the schemers) — would be sitting in an office with empty file
cabinets. And they were consistently hostile and recalcitrant — refus-
ing to cooperate with Mr. Davis — when he asked about the absence
of business records.
22 EPLUS TECHNOLOGY v. ABOUD
According to Mr. Davis, all three businesses engaged in unusual
and similar transactions involving large sums of money. For inexpli-
cable reasons, Aboud cashed a check written to Gold Copy in the
amount of $137,000, and Gold Copy issued a check to Colis-Pac in
excess of $400,000. In addition to the money it transferred to Aboud
and Colis-Pac, Gold Copy wrote large checks, totaling more than
$500,000, to Aboud’s father, to a loan shark, to the company book-
keeper, and to other individuals — all without any business justifica-
tion. In general, Mr. Davis testified to locating "a trail of checks going
from one company to the other . . . with checks going back and forth
from each company for large amounts." He also testified about sev-
eral inexplicable transfers of MBT property. For example, Aboud
cashed checks written to MBT worth more than $1.3 million.16 Mr.
Davis considered such a state of affairs to be "strange" for businesses
that file for bankruptcy.
From Mr. Davis’s testimony, the court was entitled to conclude that
Aboud had operated similar bust-out schemes through Gold Copy and
Colis-Pac. Bust-out schemes typically involve the modus operandi
discussed by Mr. Davis, including the utilization of unusual monetary
transfers between corporate and personal accounts. See United States
v. Mohammed, 53 F.3d 1426, 1430-31 (7th Cir. 1995) (concluding
from unusual transfers of money that defendants operated bust-out
scheme); see also Ashland Oil, Inc., 875 F.2d at 1275 (same). Simi-
larly, when conspirators have used a corporate entity to conduct a
bust-out scheme, they usually leave the corporation without assets or
records when it files for bankruptcy. See id. Finally, Mr. Davis estab-
lished the unmistakeable and fraudulent affiliations between Gold
Copy, Colis-Pac, MBT, and Olympique Transport. See United States
v. Hewes, 729 F.2d 1302, 1311 (11th Cir. 1984) ("The jury’s conclu-
sion . . . is bolstered by the network of mutual, fraudulent credit refer-
ences that existed among and helped support the various bustout
companies."). With this evidence, the district court was entitled to
16
With respect to the checks written to MBT and cashed by Aboud,
Mr. Davis testified: "[T]here were too many to photocopy, but I saw the
checks. I made sure I saw them. They were signed by Patricia. They were
payable either to cash, endorsed by Patricia Aboud, or payable to Patricia
Aboud."
EPLUS TECHNOLOGY v. ABOUD 23
conclude that Aboud had used Gold Copy and Colis-Pac to conduct
separate credit scams similar to her MBT bust-out scheme.
Finally, Aboud’s assertion of her Fifth Amendment privilege pro-
vides additional, and quite substantial, support for the determination
that Aboud engaged in a pattern of racketeering activity. See Baxter,
425 U.S. at 317-18. Simply put, the court was entitled to premise its
finding of a pattern of racketeering activity on the evidence, particu-
larly Mr. Davis’s testimony and the adverse inferences it was entitled
to draw from Aboud’s assertion of the Fifth Amendment.
VII.
Pursuant to the foregoing, we affirm the district court’s judgment
in favor of ePlus on its fraud and civil RICO claims.
AFFIRMED