Full opinion text
MEMORANDUM & ORDER HOEYELER, District Judge. THIS CAUSE comes before the Court on numerous motions to dismiss filed by various Defendants in six of the consolidated actions bearing the master file number 89-6308-CIV-HOEVELER. FACTUAL BACKGROUND Prior to 1986, Sahlen & Associates, Inc. (“SAI” or “the Company”), a Delaware corporation with its principal place of business in Deerfield Beach, Florida, was a relatively small company primarily involved in providing private investigative services to the insurance industry, attorneys and other corporate clients. In 1986, however, SAI undertook an aggressive expansion campaign geared toward offering a broader range of security-related services in a wider range of locations. In order to carry out its plan for massive growth, SAI acquired several security-related businesses, obtaining funding essentially from the investing public through both private and public security offerings. SAI ultimately became one of the largest uniformed security guard and private investigative service companies in the world. It was not long, however, before the sweet SAI success turned sour. On April 12, 1989, the Company Board of Directors announced that the Security Exchange Commission (“SEC”) had begun an informal investigation into certain revenue recognition and accounting practices of the Company. In conjunction with this investigation, the Board launched a probe of its own and decided to withdraw its proposed public offering of securities and postpone the registration of common shares held by shareholders pending completion of the investigations. It took the Company’s investigating committee merely a day to discover that SAI’s financial statements contained extensive overstatements of the accounts receivable and revenues, ultimately requiring SAI to “writedown” approximately $45 million in its accounts receivable. Shortly thereafter, the Board dismissed its top executive officer, Harold F. Sahlen, and three Executive Vice Presidents — Lawrence E.C. Bodden, Aarif Dahod and Nelson H. Logal — for their alleged misconduct in connection with a scheme to manipulate profits and overstate assets. Moreover, as a result of SAI’s disclosures, KPMG Peat Marwick Main & Company (“PMM”), the public accounting firm which served as an independent auditor for SAI, withdrew its previous audit opinions and interim review letters for fiscal years 1986, 1987 and 1988, and informed stockholders and the investing public that they should not rely on these statements. As would be expected, the price of SAI common stock, in reaction to these disclosures, plunged dramatically. The stock is now virtually worthless. On May 30, 1989, SAI filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Following the Board’s announcements beginning April 12, 1989, numerous corporate and individual investors who had purchased SAI securities filed suit against the Company, various officers and directors referred to as the “Individual Defendants” , PMM and McKinley, Allsopp & Company (“McKinley Allsopp”), a broker-dealer that participated in a 1987 private placement of SAI securities. On June 11, 1990, in response to the myriad actions which had been and were anticipated to be filed, the undersigned entered an Order (“Pretrial Order No. 1”) consolidating the various class-action and individual cases for pretrial purposes. While differing in some respects, the complaints before the Court, bearing Master File No. 89-6308, allege that the defendants conspired in a grand scheme (known as “the Project”) to falsely portray the true financial condition of SAI, thereby inducing the plaintiffs to invest in the Company. Plaintiffs assert that SAI employees, in furtherance of this deceptive scheme, inflated billings by writing up false invoices for work not actually done, forged clients’ names, tampered with confirmation letters sent out by the accountants, and implemented a computer software program reflecting the spurious information. In addition, Plaintiffs complain that the defendants circulated false and misleading statements concerning SAI’s overinflated accounts receivable and revenues in the reports and financial statements of the Company and in press releases in order to produce the illusion that the Company was rapidly growing and highly successful and to entice the investing public into providing the Company with capital for its rapid expansion. Moreover, Plaintiffs contend, Defendants were motivated to conceal the true financial condition of SAI in order to protect their management positions with the Company, hide their own misconduct and mismanagement, and enhance the value of their own stock. These complaints before the Court assert a panoply of claims under both state and federal law, including (1) violations of § 10(b) and § 20 of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b) and 78t, and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5 (1990), (2) violations of § 12(2) and § 15 of the Securities Act of 1933,15 U.S.C. §§ 77Z(2) and 77o, (3) aiding and abetting federal securities violations, (4) violations of the Racketeering Influenced and Corrupt Organizations Act (“RICO”) 18 U.S.C. § 1962(a), (b), (c), and (d), (5) common law fraud and deceit, (6) negligent and reckless misrepresentation, (7) ordinary and gross negligence, (8) violations of § 517.211 and § 517.301 of the Florida Securities and Investor Protection Act (“FSIPA”), Fla.Stat. §§ 517.211 and 517.301, and (9) common law conspiracy. Defendants move to dismiss the various counts of the complaints pursuant to Rule 12(b)(6) and Rule 9(b) of the Federal Rules of Civil Procedure and for lack of pendent jurisdiction. It is well-established that a “complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-56, 78 S.Ct. 99, 102, 2 L.Ed.2d 80, 84 (1957). Moreover, a court must assume all allegations of a complaint are true for purposes of a motion to dismiss. St. Joseph’s Hosp., Inc. v. Hospital Corp. of America, 795 F.2d 948, 953 (11th Cir.1986); Stone Mountain Game Ranch, Inc. v. Hunt, 746 F.2d 761, 763 n. 4 (11th Cir.1984). It is with this standard in mind that the Court proceeds. DISCUSSION I. § 10(b) OF THE SECURITIES EXCHANGE ACT OF 1934 In each of the cases at issue, Plaintiffs have brought a claim against all Defendants for violations of § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5 (1990), alleging that the defendants intentionally made misrepresentations or omissions of material fact on which Plaintiffs detrimentally relied. In order to state a cause of action under § 10(b) and Rule 10b-5, a plaintiff must allege: (1) a misstatement or omission (2) of a material fact (3) made with scienter, (4) on which the plaintiff relied (5) that proximately caused the plaintiffs injury. Ross v. Bank South, N.A., 885 F.2d 723, 728 (11th Cir.1989) (en banc), cert. denied, — U.S. -, 110 S.Ct. 1924, 109 L.Ed.2d 287 (1990); Gochnauer v. A.G. Edwards & Sons, Inc., 810 F.2d 1042, 1046 (11th Cir.1987). Defendants move to dismiss those counts of the complaints asserting federal securities fraud, arguing, among other contentions, that Plaintiffs have failed to adequately set forth reliance, scienter and loss causation. Each of these arguments will be considered in light of Rule 9(b)’s requirement of pleading fraud with particularity. Rule 9(b) provides that when fraud is pled in federal court, “the circumstances constituting fraud ... shall be stated with particularity,” but that allegations concerning a defendant’s state of mind “may be averred generally.” Fed.R.Civ.P. 9(b). Pleading fraud with greater specificity than is normally required by the federal rules is necessary in order to (1) provide defendants with sufficient notice of the acts of which the plaintiff complains to enable them to frame a response, (2) prevent fishing expeditions to uncover unknown wrongs and (3) protect defendants from unfounded accusations of immoral and otherwise wrongful conduct. Knight v. E.F. Hutton and Co., Inc., 750 F.Supp. 1109, 1114 (M.D.Fla.1990). This rule does not abrogate notice pleading under Rule 8 of the Federal Rules of Civil Procedure, however. “[A] court considering a motion to dismiss for failure to plead fraud with particularity should always be careful to harmonize the directives of rule 9(b) with the broader policy of notice pleading.” Friedlander v. Nims, 755 F.2d 810, 813 n. 3 (11th Cir.1985). See also Durham v. Business Management Associates, 847 F.2d 1505, 1511 (11th Cir.1988). Therefore, while mere conclusory allegations of fraud will not satisfy Rule 9(b), allegations which provide a reasonable delineation of the underlying acts and transactions allegedly constituting the fraud are sufficient. First Union Brokerage v. Milos, 717 F.Supp. 1519, 1522 (S.D.Fla.1989). See also Durham, 847 F.2d at 1512 (“Allegations of date, time or place satisfy the Rule 9(b) requirement that the circumstances of the alleged fraud must be pleaded with particularity, but alternative means are also available to satisfy the rule.”). Additionally, the degree of specificity required by Rule 9(b) may vary according to the background of the parties and the information available to them at the time of pleading. Summer v. Land & Leisure, Inc., 571 F.Supp. 380, 384 (S.D.Fla.1983). In securities fraud cases, for instance, courts have determined that strict application of Rule 9(b) could result in substantial unfairness to private litigants who could not possibly have detailed knowledge of all the circumstances surrounding the alleged fraud. Id.; In re U.S. Oil & Gas Litig., 1988 WL 28544 at * 1, 1988 U.S.Dist. LEXIS 2217 at 3 (S.D.Fla. Feb. 8, 1988). A. Reliance 1. Actual Reliance Reliance is an essential element of a Rule 10b-5 action as it “establishes the causal link between the defendant’s activities and the plaintiff’s injuries and prevents federal securities law from affording unlimited liability.” Ross, 885 F.2d at 728. In order to recover in this Circuit, a plaintiff generally must show that he “reasonably” relied upon a misrepresentation or omission made by the defendant. Reasonable reliance is determined by asking, first, whether the individual actually relied and then by ascertaining whether he was duly diligent in having done so. Huddleston v. Herman & MacLean, 640 F.2d 534, 548 (5th Cir.1981), aff'd in part, rev’d in part on other grounds, 459 U.S. 375, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983); Gochnauer, 810 F.2d at 1047. Thus, a plaintiff’s reliance must be actual as well as “justifiable,” meaning that “with the exercise of reasonable diligence one still could not have discovered the truth behind the fraudulent omission or misrepresentation.” Id. Principally relying on the particularity requirement of Rule 9(b), Defendants contend that the allegations of the various complaints are insufficient as they do not specify which plaintiffs received which documents, whether any particular plaintiff read any particular document, nor whether Plaintiffs’ reliance was “reasonable” if in fact they did read the documents. Accordingly, the defendants argue, Plaintiffs have not properly alleged an essential element of their cases. Each of the complaints at issue details at great length the allegedly deceptive scheme by which Defendants defrauded them. They set forth the allegedly misleading prospectuses, annual and interim reports, certification letters of PMM, press releases, SEC filings and other public documents issued by SAI, describing the dates of issuance, the misleading nature of the documents and the persons responsible for their dissemination. Plaintiffs then contend that in reliance on the veracity of these statements and reports, they purchased SAI’s securities at artificially inflated prices. Despite these lengthy allegations, however, Defendants in Feld and Adler are correct in noting that Plaintiffs have not stated which particular documents were read or reasonably relied upon by which Plaintiffs. Consequently, Plaintiffs have failed to sufficiently plead actual reliance. Plaintiffs in the remaining three cases, however, have adequately set forth direct reliance. In B.F. Enterprises, Plaintiffs state whether they purchased SAI securities at the 1987 Private Placement or participated in the 1987 Bridge Financing or the 1988 Exchange Offering. They then claim that they relied on the specific document circulated by Defendants to encourage investors to engage in the particular transaction involved. Therefore, the defendants have sufficient notice as to which plaintiff allegedly relied upon which particular document. In addition, Plaintiffs state that further action on their part would not have alerted them to the Project, thus satisfying the “due diligence” requirement. Similarly, the allegations in Franklin and Revere are sufficient. Both are actions brought by one individual investor, who claims that it relied on the contents of the various documents named throughout the complaint. As in B.F. Enterprises, Defendants are aware of which misstatements Plaintiffs allegedly relied upon. Moreover, although neither the Revere Fund nor the Franklin Corp. explicitly plead “reasonable” reliance, it is inferable from the allegations of the complaints read as a whole that Plaintiffs could not have discovered the fraud despite any additional inquiries they may have made. Cf. Sanders v. Robinson Humphrey/American Express, Inc., [1985-1986 Transfer Binder] Fed.See. L.Rep. (CCH) p 92,450 at 92,739, 1985 WL 6294 (N.D.Ga. Sept. 11, 1985); Chandler v. Drexel Burnham Lambert, Inc., [1985—1986 Transfer Binder] Fed.Sec.L.Rep. (CCH) p 92,447 at 92,724, 1985 WL 5835 (N.D.Ga. Sept. 11, 1985); Kolin v. American Plan Corp., [1984-1985 Transfer Binder] Fed.Sec.L.Rep. (CCH) p 92,051 at 91,-240, 1985 WL 6422 (E.D.N.Y. April 30, 1985) (all holding that a simple allegation of reliance was sufficient for purposes of Rule 9(b)). Accordingly, the allegations of actual reliance are pleaded with the particularity required by Rule 9(b). 2. Presumed Reliance While proof of actual reliance is required in most cases brought under Rule 10b-5, courts have recognized that in certain circumstances — where inability to prove actual reliance would essentially preclude recovery although the fraud in fact ■caused the plaintiffs injury — reliance may be presumed. The Supreme Court first acknowledged a presumption of reliance in security fraud cases in Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 153, 92 S.Ct. 1456, 1472, 31 L.Ed.2d 741, 761 (1972). In that case, which was based primarily on omissions rather than on misstatements, the Court held that affirmative proof of reliance is unnecessary where the defendants fail to disclose material facts that reasonably could have been expected to influence the plaintiffs course of action. Under such circumstances “[a]ll that is necessary is that the facts withheld be material in the sense that a reasonable investor might have considered them important in the making of the decision____” Of course, should the defendant establish that the plaintiffs decision to purchase or sell would not have been any different even had the defendant disclosed the material facts, then the plaintiff cannot recover. Lipton v. Documation, Inc., 734 F.2d 740, 742 (11th Cir.1984), cert. denied 469 U.S. 1132, 105 S.Ct. 814, 83 L.Ed.2d 807 (1985); Shores v. Sklar, 647 F.2d 462, 468 (5th Cir.1981) (en banc), cert. denied, 459 U.S. 1102, 103 S.Ct. 722, 74 L.Ed.2d 949 (1983); Huddleston, 640 F.2d at 547-48. Although Plaintiffs in Feld suggest that they are entitled to the Affiliated Ute presumption because they allege that the documents disseminated by SAI and the other defendants contain material omissions, the Court cannot agree. Plaintiffs complain that the prospectuses, annual reports, interim reports, press releases, SEC filings and other public documents issued by SAI and the other defendants overstated the Company’s sales, earnings, assets and net worth, understated its liabilities and omitted to provide information material to an investor’s decision to purchase or sell. Consequently, this is a “mixed” ease in that it asserts both misrepresentations and omissions. Kirkpatrick v. J.C. Bradford & Co., 827 F.2d 718, 722 (11th Cir.1987), cert. denied, 485 U.S. 959, 108 S.Ct. 1220, 1221, 99 L.Ed.2d 421 (1988); Cavalier Carpets, Inc. v. Caylor, 746 F.2d 749, 757 (11th Cir.1984). As stated by the court in Huddleston — a case where the allegations were virtually identical to those asserted here: The defendants did not “stand mute” in the face of a duty to disclose as did the defendants in Affiliated Ute. They undertook instead to disclose relevant information in an offering statement now alleged to contain certain misstatements of fact and to fail to contain other facts necessary to make the statements made, in light of the circumstances, not misleading. 640 F.2d at 548 (citation omitted). Where defendants are charged both with material misrepresentations and omissions, the Affiliated Ute presumption of reliance does not apply. Id.; Kirkpatrick, 827 F.2d at 722; Cavalier, 746 F.2d at 756-57. Plaintiffs in Feld and Adler, however, contend that they are entitled to invoke a presumption of reliance under the “fraud on the market” theory. This theory is based on the efficient capital market hypothesis which assumes that material information about a company is immediately reflected in the price of the stock. Because the market is interposed between the buyer and seller, there is no need to prove subjective reliance. Moskowitz v. Lopp, 128 F.R.D. 624, 630 (E.D.Pa.1989). In this Circuit, the fraud on the market theory was first recognized in Shores v. Sklar, 647 F.2d 462 (5th Cir.1981) (en banc), cert. denied, 459 U.S. 1102, 103 S.Ct. 722, 74 L.Ed.2d 949 (1983) , which involved a purchase of securities in the undeveloped, primary market context. The former Fifth Circuit in Shores held that, in a fraud case brought under sections (1) or (3) of Rule 10b-5, reliance may be established by proof that the plaintiff relied on the integrity of the market rather than on specific misrepresentations. The court distinguished claims brought under Rule 10b-5(2) from those brought under Rule 10b-5(l) or (3), stating that proof of actual reliance is required under section (2), as liability under this provision is premised directly upon the misstatements or omissions, while proof of direct reliance is not required under sections (1) and (3), which are aimed at broader schemes of securities fraud. Id. at 469. However, in order for the presumption to apply to the primary market context, a plaintiff must show that the securities could not have been offered on the market at any price “but for” the fraudulent scheme. Id. at 464 n. 2; Ross, 885 F.2d at 729. “[T]he fraud must be so pervasive that it goes to the very existence of the bonds and the validity of their presence on the market.” Ross, 885 F.2d at 729. If the plaintiff “proves no more than that the bonds would have been offered at a lower price or a higher rate, rather than that they would never have been issued or marketed, he cannot recover.” Shores, 647 F.2d at 470. In Lipton v. Documation, Inc., 734 F.2d at 747, the Eleventh Circuit expanded the application of the fraud on the market theory to the open and developed market context, noting that the presumption is most justified in the class action setting where the plaintiffs allege that misrepresentations or omissions affected security prices in a secondary market. In such cases, “it is reasonable to assume that misinformation disseminated into the marketplace will affect the market price.” Id. at 745-46. Because the stock price is artificially inflated by the alleged misstatements or omissions, the purchasers or sellers of the securities who rely upon this price are defrauded because they buy or sell assuming the stock is based on proper market information. In an action brought in the open market context, a plaintiff may recover simply by a showing that the securities’ value has diminished. He need not show that the securities could not have been sold but for the fraud as he must in the primary market context under Shores. Id. at 746. The Supreme Court recently has endorsed the application of the fraud on the market presumption in the open and developed market. Basic Inc. v. Levinson, 485 U.S. 224, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988). In Basic, shareholders of a publicly traded company sold their stock on the New York Stock Exchange following the company’s first misleading public statement denying it was involved in merger negotiations. Following the merger which subsequently occurred, the shareholders brought a class action against the corporation and its directors, alleging that the defendants had issued three false or misleading public statements in violation of § 10(b) of the 1934 Act and Rule 10b-5. Without distinguishing section (2) of the Rule from sections (1) and (3), the Court held that “[bjecause most publicly available information is reflected in market price, an investor’s reliance on any public material misrepresentations [] may be presumed for purposes of a Rule 10b-5 action.” Id. at 247, 108 S.Ct. at 992, 99 L.Ed.2d at 218. Plaintiffs in Feld and Adler allege that they relied on the integrity of the market in purchasing the SAI securities. Relying on Shores, Defendant PMM contends, however, that reliance may not be presumed in these cases under the fraud on the market theory as Plaintiffs’ Rule 10b-5 claim states a cause of action only under section (2) of the Rule. To begin with, a review of the complaints in this case reveals that Plaintiffs are not seeking to recover merely for the fraudulent statements and omissions of Defendants pursuant to section (2). Rather, the allegations read as a whole clearly portray a far-reaching scheme to defraud based not only on specific statements and omissions but also on acts, practices and a general course of business conducted by SAI and the defendants, thus implicating both sections (1) and (3). Moreover, even if Plaintiffs were relying solely on Rule 10b-5(2), it is alleged that the SAI securities were traded on a secondary, developed market, not on a primary one like in Shores. Under the Supreme Court’s analysis in Basic, the fraud on the market theory applies to actions asserting the presence of false or misleading statements in documents disseminated to the investing public. The opinion did not distinguish between the various liability provisions of Rule 10b-5. Thus, while it remains unclear whether the Shores court’s holding, refusing to apply the fraud on the market theory to 10b-5(2) cases in a primary market, remains intact after Basic, the presumption is certainly available in section (2) cases where an open market is involved. See also Lipton, 734 F.2d 740. Accordingly, the Court concludes that a presumption of reliance may be available to Plaintiffs in Feld and Adler. Defendants PMM and Bodden further argue that even if the fraud on the market theory is available in a Rule 10b-5(2) situation, it does not apply to these cases as Plaintiffs have not sufficiently alleged that the SAI stock was traded on an efficient market. An efficient market has been defined as one that obtains material information about a company and rapidly reflects that new information in the price of the stock. Hurley v. Federal Deposit Ins. Corp., 719 F.Supp. 27, 34 (D.Mass.1989). Defendants correctly point out that a plaintiff seeking to invoke the fraud on the market theory must allege either that the stock they purchased or sold was actively traded on a well-developed, efficient market or facts which give rise to such an inference. Greenberg v. Boettcher & Co., 755 F.Supp. 776, 781 (N.D.Ill. 1991); Cammer v. Bloom, 711 F.Supp. 1264, 1278 (D.N.J.1989); Hurley, 719 F.Supp. at 34. In the absence of an allegation of efficiency, however, courts are divided as to what extent a plaintiff must specifically plead facts of a well-developed market. In Hurley, for example, the district court, requiring a rather minimal showing, held that allegations that a bank issued approximately five million shares of stock which were traded on an over-the-counter market with a volume of more than 19.3 million shares traded during the class period were sufficient. 719 F.Supp. at 34. Other courts, to the contrary, have demanded a far more detailed factual statement regarding the nature of the market. In Cammer, the district court, discussing the concept of market efficiency at great length, mentioned several examples of facts which, if alleged, would prove helpful in meeting the efficient market requirement: (1) there exists an average weekly trading volume during the applicable period in excess of a certain number of shares, (2) a significant number of securities analysts followed and reported on the company’s stock during the applicable period, (3) the stock had numerous market makers and arbitrageurs, (4) the company was entitled to file an S-3 Registration Statement in connection with public offerings or, if ineligible, the ineligibility was the result of timing factors and not because the minimum stock requirements set forth in the Form S-3 instructions were not met, and (5) an historical showing of immediate price response to unexpected corporate events or financial releases. Id. at 1285-87. Noting that the main inquiry under the fraud on the market theory “is whether the stock price, at the time a plaintiff effected a trade, reflected the ‘misinformation’ alleged to have been disseminated,” the court rejected the defendant’s contention that over-the-counter stock per se could not be traded on an efficient market. Id. at 1282 (emphasis in original). The Court explained: It is not logical to draw bright line tests — such as whether a company is listed on a national exchange or is entitled to register securities on SEC From S-3— to assist fact-finders in determining whether a stock trades in an “open and efficient market.” A well established and widely followed company may choose for any number of unrelated reasons not to list itself on a national exchange. Furthermore, there may be a company whose stock trades in an efficient market, but which just missed or recently failed to meet the qualifications for Form S-3 registrants. Id. at 1287. See also Hurley, 719 F.Supp. at 33 (“Where the stock is traded is not the crucial issue. The important question is whether the stock is traded in a market that is efficient ...”); Harman v. LyphoMed, Inc., 122 F.R.D. 522, 525 (N.D.Ill. 1988) (“While some over-the-counter stocks no doubt trade in a less developed market than some New York Stock Exchange issues, the inquiry in an individual case remains the development of the market for that stock, and not the location where the stock trades.”). However, reviewing the complaint before it, the court held that allegations that the stock was traded over-the-counter and had approximately 19,000,-000 shares outstanding, held by approximately 1,200 holders, were insufficient to plead market efficiency. Id. at 1285. See also Stinson v. Van Valley Development Corp., 714 F.Supp. 132, 137 (E.D.Pa.1989), aff'd, 897 F.2d 524 (3d Cir.1990) (where securities traded were a new issue, allegations that the bonds were publicly offered throughout the United States in a diverse market were insufficient to show an open and developed market warranting application of fraud on the market theory); Greenberg, 755 F.Supp. at 782 (allegation that secondary market for municipal bonds is efficient did not show an efficiency for the particular bonds purchased). Considering the pleadings at issue, the plaintiffs in Adler claim that they relied on the integrity of the market in purchasing the SAI stock, yet no where do they allege market efficiency or any other characteristic about the market in which they traded. Even under the more lenient pleading standard employed by the court in Hurley, Plaintiffs have not met their burden and, thus, may not rely on the fraud on the market theory. Accordingly, as they have failed to plead actual reliance with the requisite specificity and as they are not entitled to a presumption of reliance, their Rule 10b-5 claims must be dismissed. The allegations in Feld, on the other hand, are sufficient: As of March 1989, SAI had over 21,000,-000 million shares of common stock outstanding which were actively traded on the NASDQ [National Association of Securities Dealers Automated Quotation System] over-the-counter National Market System. During the Class Period ... over 55,000,000 shares of SAI were traded and investors had access to information including “real time” prices at which transactions were actually executed which information is characteristic of, and ensures the development of, an efficient market for a company’s stock. In addition, SAI disseminated numerous press releases and announcements to the investing public during the Class Period which were carried by the wire services and financial press. Research analysts prepared and disseminated over thirty research reports on SAI during the Class Period. Consolidated Amended Class Action Complaint, p 5. Not only do Plaintiffs specifically state that the market was efficient, but they also set forth several of the indicia of a well-developed, efficient market mentioned in Cammer. Accordingly, at least at this juncture in the proceedings, the plaintiffs in Feld may proceed on the fraud on the market theory of presumed reliance. B. Scienter The Supreme Court has defined scienter as “a mental state embracing intent to deceive, manipulate, or defraud.” Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n. 12, 96 S.Ct. 1375, 1381 n. 12, 47 L.Ed.2d 668, 677 n. 12 (1976). In this Circuit, scienter may be established by proof of misconduct which is knowing or extremely reckless in that it reflects an extreme departure from the standards of ordinary care. Huddleston, 640 F.2d at 545. Although Rule 9(b) provides that the state of mind of a defendant in a fraud case may be averred generally, courts have required plaintiffs nevertheless to supply some factual basis in support of their allegation of intent. See Ross v. A.H. Robbins Co., 607 F.2d 545, 558 (2d Cir.1979), cert. denied, 446 U.S. 946, 100 S.Ct. 2175, 64 L.Ed.2d 802 (1980); Posner v. Coopers & Lybrand, 92 F.R.D. 765, 769 (S.D.N.Y.1981), aff'd, 697 F.2d 296 (2d Cir.1982). PMM and the Outside Directors argue that Plaintiffs have failed to adequately set forth scienter in their complaints. The Court cannot agree. As for PMM, Plaintiffs state that PMM knowingly or recklessly failed to audit and review SAI’s financial statements in accordance with generally accepted auditing standards (“GAAS”) and generally accepted accounting principles (“GAAP”) and then go on to explain in detail the exact standards violated and the adverse effects of the violations. These opinions and reports ultimately were included in SAI’s 10-K Reports filed with the SEC and SAI’s Annual Reports distributed to stockholders for fiscal years 1986,1987 and 1988. While allegations that an accounting firm violated GAAS or GAAP do not of themselves create an inference of scienter in the absence of other facts suggesting the accountants knew or were reckless in not knowing of the fraud, Friedman v. Arizona World Nurseries Ltd. Partnership, 730 F.Supp. 521, 532 (S.D.N.Y.1990), the Court concludes that Plaintiffs have alleged' ample facts from which one may infer that PMM intended to participate in the Project. The Feld Complaint is representative: PMM knew or was reckless is not knowing, based upon its annual audits or SAI and its quarterly reviews of SAI’s interim financial statements and based upon the growth of SAI’s accounts receivable in its investigative services activities as a percentage of overall receivables and as compared to the growth of SAI’s investigative services revenues that SAI’s statements of revenues and receivables were overstated. In its audits and reviews, PMM failed to perform sufficient tests of “collectibility” [sic] of the reported accounts receivable ... The facts known to PMM gave PMM reason to believe that there were a substantial number of accounts receivable with inaccuracies or irregularities____ The huge amount of accounts receivable SAI must write off, at least $45 million, indicates the scope of defendants’ fraud. PMM was, at the minimum, grossly reckless in its failure to discover that nearly two-thirds of SAI’s accounts receivable were required to be written off. Consolidated Amended Class Action Complaint, p 64(a), 65 (emphasis in original). These allegations clearly suggest that PMM may indeed have had a strong indication that something was seriously amiss at SAI and certainly provide PMM with fair notice of Plaintiffs’ claims. The allegations asserted against the Outside Directors are similarly well-pleaded. Plaintiffs assert that these defendants were an integral part of the fraudulent scheme in that they rendered substantial assistance in preparing, reviewing and approving the false and misleading documents of SAI which were provided to the plaintiff-investors. In addition, by virtue of their Board membership, they are alleged to have known or to have been reckless in not knowing of the Project. Moreover, in each case, with the exception of B.F. Enterprises, Plaintiffs allege that the Outside Directors were “controlling persons” within the meaning of § 20 of the 1934 Act. Where a plaintiff alleges controlling person liability, he need not plead scienter. Polycast Technology Corp. v. Uniroyal, Inc., [1988-1989 Transfer Binder] Fed.Sec.L.Rep. (CCH) p 94,005 at 90,-696, 1988 WL 96586 (S.D.N.Y. Aug. 25, 1988). Finally, as each of these individuals was a member of the Board and owned stock in the Company, each conceivably desired the success of the fraudulent scheme. While motive is not required to establish scienter, proof of motive is one means of showing that intent was in fact present. Beck v. Manufacturers Hanover Trust Co., 820 F.2d 46, 50 (2d Cir.1987), cert. denied, 484 U.S. 1005, 108 S.Ct. 698, 98 L.Ed.2d 650 (1988). C. Loss Causation Defendant Bodden asserts that Plaintiffs in Feld, Adler and B.F. Enterprises have failed to allege the requisite causation between his alleged perpetration of the fraud and Plaintiffs’ losses. His argument is without merit. In this Circuit, a plaintiff must prove both actual causation (“transaction causation”) and proximate causation (“loss causation”) in order to prevail on his § 10(b) claim. Bruschi v. Brown, 876 F.2d 1526, 1530 (11th Cir.1989); Rousseff v. E.F. Hutton Co., 843 F.2d 1326, 1329 & n. 2 (11th Cir.1988). Transaction causation is demonstrated by proof that the defendant’s misrepresentations induced the plaintiff to make the investment. Bruschi, 876 F.2d at 1530. Loss causation, on the other hand, requires the plaintiff to “prove not only that, had he known the truth, he would not have acted, but in addition that the untruth was in some reasonably direct, or proximate, way responsible for his loss.” Id. (quoting Huddleston, 640 F.2d at 549). Thus, a supervening factor, such as a general decline in the market that reduces the plaintiff’s investment unrelated to the defendant’s misconduct, will destroy causation. A plaintiff need not show that the defendant’s conduct was the sole and exclusive cause of his injury, but merely must establish that it was a substantial factor. Id. at 1531. Plaintiffs here have stated both loss and transaction causation. They claim that they bought the SAI stock as a result of Defendants’ misrepresentations and omissions, thus pleading transaction causation. In addition, they assert that, as a result of the Board-appointed Special Committee’s announcement that receivables and revenues were grossly overstated and PMM’s subsequent withdrawal of its reports issued in connection with its audits, the stock plummeted and ultimately became virtually worthless. Although Defendants may attempt to show during the course of discovery that the stock price plunged due to general market conditions or for some other reason unrelated to their allegedly wrongful conduct, Plaintiffs’ allegations are more than sufficient to connect the fraudulent scheme to the decline in the value of their stock for purposes of a motion to dismiss. D. Aiding and Abetting Claim Against PMM In addition to charging PMM with a primary violation of Rule 10b-5, three of the six complaints allege that PMM aided and abetted the officers and directors in carrying out the overall fraudulent scheme. Aiding and abetting is established by showing that (1) another party violated the securities laws, (2) the accused is generally aware of his role in the improper activity, and (3) the accused aider and abettor knowingly rendered substantial assistance. Rudolph v. Arthur Andersen & Co., 800 F.2d 1040, 1045 (11th Cir.1986), cert. denied, 480 U.S. 946, 107 S.Ct. 1604, 94 L.Ed.2d 790 (1987); Woodward v. Metro Bank of Dallas, 522 F.2d 84, 97 (5th Cir.1975). Whether the assistance was “substantial” depends on the totality of the circumstances. Woods v. Barnett Bank of Ft. Lauderdale, 765 F.2d 1004, 1010 (11th Cir.1985). Conceding that Plaintiffs have alleged the securities violations of the SAI officers and directors, PMM argues that Plaintiffs’ have failed to plead that PMM possessed the requisite state of mind or that PMM rendered knowing and substantial assistance in furtherance of the fraud. Defendant correctly notes that in order for one to be secondarily liable for a Rule 10b-5 violation, he must have an actual awareness of his part in the fraud. As explained by the court in Woodward: “Knowledge may be shown by circumstantial evidence, or by reckless conduct, but the proof must demonstrate actual awareness of the party’s role in the fraudulent scheme.” 522 F.2d at 96. Here, Plaintiffs allege that PMM knowingly or recklessly disregarded generally accepted accounting and auditing standards, causing it to issue grossly misleading reports and opinions concerning SAI’s financial statements. If these allegations are proven, a fact-finder may, considering all the circumstances, conclude that PMM had actual awareness that its actions furthered an overall improper activity. As to pleading that PMM knowingly and substantially assisted the securities violations, the complaints state: PMM participated in or gave substantial aid and assistance to the fraud by SAI and the Individual Defendants ... by knowingly permitting SAI to maintain improper accounting practices and financial reporting practices ... [and by] issuing opinions on audited financial statements and reports on reviews of SAI’s interim financial statements, thereby enabling SAI and the Individual Defendants to misrepresent the facts as to SAI’s reported operating results for FY 1986, FY 1987 and FY 1988 and for each interim quarter thereof and for the quarters ended September 30, 1988 and December 31, 1988. Feld Consolidated Amended Class Action Complaint at p 84; Franklin Complaint at p 81; Revere Fund Complaint at p 81. It is conceivable that a fact-finder hearing evidence supporting these allegations of affirmative conduct on PMM’s part may conclude that the accounting firm acted with the desire to aid the success of the Project and, in fact, substantially assisted the fraud by its actions. See Abell, 858 F.2d at 1127 (interpreting the Woodward scienter requirement as compelling proof both that the alleged aider and abettor generally understood how its actions aided in promoting the fraud and that the offender desired to help the fraud succeed). Thus, the complaints sufficiently set forth a cause of action for secondary liability under Rule 10b-5. E. Outside Directors’ Duty to Disclose The Outside Directors argue that Plaintiffs’ Rule 10b-5 claims in Revere and Franklin should be dismissed against them as they had no duty disclose the alleged misrepresentations of the Management Defendants. Specifically, Defendants contend that a duty to disclose arises under Rule 10b-5 only when one is a fiduciary; since they are not fiduciaries of Plaintiffs, as Plaintiffs are creditors of SAI, no duty arises. While Defendants are correct in noting that directors of a corporation do not stand in a fiduciary relationship with the company’s creditors, and thus owe them no duty of disclosure, Metropolitan Securities v. Occidental Petroleum, 705 F.Supp. 134, 141 (S.D.N.Y.1989); S.E.C. v. Rogers, 790 F.2d 1450, 1459 (9th Cir.1986) (citing Strong v. France, 474 F.2d 747, 752 (9th Cir.1973)), the Outside Directors have mistakenly characterized Plaintiffs’ case as one involving solely the failure to disclose. Contrary to Defendants’ position, the allegations supporting Plaintiffs’ Rule 10b-5 claims are not based exclusively on the Outside Directors’ failure to discover the fraud and take steps to provide accurate, correcting information to Plaintiffs. Rather, these defendants are accused of actively participating in the fraudulent scheme to the same extent as the Management Defendants. An outside director may be liable under Rule 10b-5 for actively participating in securities fraud. See, e.g., Decker v. Massey-Ferguson, Ltd., 681 F.2d 111, 119 (2d Cir.1982); Lanza v. Drexel, 479 F.2d 1277, 1289 (2d Cir.1973) (en banc). See generally Robinson v. Heilman, 563 F.2d 1304 (9th Cir.1977). Should Plaintiffs’ proof of their security claims ultimately rest on the Outside Directors’ failure to discover and disclose the illegal actions of the other defendants to Plaintiffs, they will not succeed in their actions against the Outside Directors. At this stage, however, their claims are sufficient. F. Role of Each Defendant Defendants all urge the Court to dismiss the federal securities law counts against them for Plaintiffs’ failure to allege each individual defendant’s involvement in the fraud with sufficient particularity to satisfy Rule 9(b). Accusing Plaintiffs of “tarring everyone with the same brush,” they claim that Plaintiffs must inform each of them of the specific wrongful acts they allegedly committed in furtherance of the Project. Defendants’ recitation of the law is not altogether accurate. While the general rule is that where multiple defendants are involved, the complaint must distinguish among them and specify their respective roles, First American Bank and Trust by Levitt v. Frogel, 726 F.Supp. 1292, 1295 (S.D.Fla.1989), no specific connection between the fraudulent representations and particular defendants is necessary in cases of corporate fraud brought against insiders and affiliates where the false information is disseminated in group-published documents. As long as the complaint describes the fraudulent acts in detail and provides the defendants with sufficient information to respond, a court may presume that these acts have been committed collectively by the officers and directors. Id.; In re U.S. Oil and Gas Litig., 1988 WL 28544 at * 2, 1988 U.S. Dist. LEXIS 2217 at 6; Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1440 (9th Cir.1987); Luce v. Edelstein, 802 F.2d 49, 55 (2d Cir.1986). This relaxed standard for Rule 9(b) purposes has arisen because of the recognition that it may be exceedingly difficult to attribute particular fraudulent conduct to each individual defendant. Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 540 (9th Cir.1989). Thus, in corporate fraud cases involving group-published information, a plaintiff need only plead the alleged misrepresentations with particularity and, where possible, each individual defendant’s role in the misrepresentations. Id.; Frogel, 726 F.Supp. at 1295. In the cases at issue, Plaintiffs have described in exacting detail the misrepresentations allegedly made in the public documents and SEC filings, including the date the documents were issued. The complaints, therefore, are more than sufficient as to the Management Defendants — Bodden and Logal. The Court does note, however, that where outside directors are concerned, as here, some courts require plaintiffs to plead additional facts demonstrating that the group-published information presumption should apply to these individuals. See, e.g., In re Rospatch Securities Litig., 760 F.Supp. 1239, 1255 (W.D.Mich.1991); Klein v. King, 1990 WL 61950 at 13, 1990 U.S. Dist. LEXIS 5392 at 34-35 (N.D.Cal. Mar. 27, 1990); Daisy Systems Corp. v. Fine-gold, 1988 WL 166235 at 5, 1988 U.S. Dist. LEXIS 16765 at 12-13 (N.D.Cal. Sept. 20, 1988). Courts following this approach have applied the presumption where the outside directors stand in a special relationship with the corporation, such as where they are considered “control persons” under the federal securities laws. See, e.g., Klein, 1990 WL 61950 at 13, 1990 U.S. Dist. LEXIS 5392 at 34-35. Under § 20 of the 1934 Act, 15 U.S.C. § 78t(a), and § 15 of the 1933 Act, 15 U.S.C. § 77o, one who “controls” a person who has violated the applicable Act may himself be held jointly and severally liable for the alleged violation. A director of a corporation is not automatically liable as a controlling person by virtue of his position. Wool, 818 F.2d at 1441; Burgess v. Premier Corp., 727 F.2d 826, 832 (9th Cir.1984); Herm v. Stafford, 663 F.2d 669, 684 (6th Cir.1981); Hemming v. Alfin Fragrances, Inc., 690 F.Supp. 239, 245 (S.D.N.Y.1988). Rather, there must be some showing that the defendant had power, directly or indirectly, to influence the policy and decisionmaking process of one who violated the Act, such as through ownership of voting stock, by contract or through managerial power. Wool, 818 F.2d at 1440. Cameron v. Outdoor Resorts of America, Inc., 608 F.2d 187, 195 (5th Cir.1979), modified on other grounds, 611 F.2d 105 (5th Cir.1980); Ferland v. Orange Groves of Florida, Inc., 377 F.Supp. 690, 707 (M.D.Fla.1974); Burgess, 727 F.2d at 832. Where the defendants are a narrowly-defined group of corporate officers charged with the day-to-day operations of a public corporation, however, it is reasonable to presume that they had the ability to control those transactions giving rise to a securities violation. Wool, 818 F.2d at 1441. Accordingly, it is sufficient for the plaintiff to allege who the defendants allegedly controlled and what acts or status demonstrate their ability to control. Id. at 1441-42. In the case of outside directors, on the other hand, a plaintiff must plead the outside director’s authority to control the primary violation. See Bailan v. Wilfred Amerian Educational Corp., 720 F.Supp. 241, 254 (E.D.N.Y.1989); Index Fund, Inc. v. Hagopian, 609 F.Supp. 499, 506 (S.D.N.Y.1985). Recognizing the policy concerns in favor of encouraging individuals to serve on the board of directors of corporations, this Court endorses the view that additional facts must be alleged in order to group outside directors with management defendants for purposes of relaxing the Rule 9(b) particularity pleading requirement. Even under this more stringent standard, however, the allegations pled here are sufficient. Plaintiffs in each case have stated that the Outside Directors were control persons of SAI who directly or indirectly controlled the conduct of the Company’s business as well as the contents of the various financial statements and reports disseminated to Plaintiffs. In addition they have stated that the Directors knew of, or were reckless in not knowing of, the misstatements contained in the financial statements, other documents and press releases, and that they perhaps rendered assistance in drafting, reviewing and approving these misrepresentations. The roles of the Outside Director Defendants need not be set forth with any greater specificity than Plaintiffs have done here in order to satisfy Rule 9(b). II. § 12(2) OF THE SECURITIES ACT OF 1933 Plaintiffs in B.F. Enterprises and ILP have brought a claim against all Defendants for violations of § 12(2) of the Securities Act of 1933. Liability under this statute is limited to persons who offer or sell a security by means of a prospectus, registration statement, or other oral communication related to a security offering. Courts interpreting this provision have confined its application to initial offerings of securities, finding that it was not intended to pertain to secondarily traded securities. See, e.g., Leonard v. Stuart-James Co., 742 F.Supp. 653, 658 (N.D.Ga.1990); Milos, 717 F.Supp. at 1522; Strong v. Paine Webber, Inc., 700 F.Supp. 4, 5 (S.D.N.Y.1988); Ralph v. Prudential-Bache Securities, Inc., 692 F.Supp. 1322, 1324 (S.D.Fla.1988). Defendants Bodden, Schaefer and PMM each move to dismiss the § 12(2) counts. Bodden moves to dismiss these claims, contending that he is not a “seller” under the Act. The Supreme Court, in Pinter v. Dahl, 486 U.S. 622, 108 S.Ct. 2063, 100 L.Ed.2d 658 (1988), held that one may be a “seller” under § 12(1) of the 1933 Act if he passes title or other interest in a security to a buyer for value or solicits a purchase of a security. Id. at 642-43, 108 S.Ct. at 2076-77. While not defining “solicit” in detail, the Court did say that one who is “motivated at least in part by a desire to serve his own financial interests or those of the securities owner” may be liable. Id. at 647, 108 S.Ct. at 2079. On the other hand, a person whose sole motivation is to benefit the buyer is not subject to liability. Id. Courts reviewing the Supreme Court’s analysis in Pinter have determined that the standard for ascertaining liability as a “seller” under § 12(1) applies equally to liability under § 12(2) of the Act. See, e.g., Craftmatic Securities Litig. v. Kraftsow, 890 F.2d 628, 635 (3d Cir.1989); Moore, 885 F.2d at 536; Beltram v. Shackleford, Farrior, Stallings & Evans, 725 F.Supp. 499, 500 (M.D.Fla.1989). Applying this analysis, the Court finds that the complaint in ILP adequately alleges that Bodden was a seller of the SAI securities. Plaintiff details Bodden’s positions with the Company and states that he maintained control over the day-to-day management of the business, including involvement with various financial statements and reports. In addition, Plaintiff contends that Bodden was present at two meetings held in March and June of 1988 where false representations were made to induce ILP to purchase SAI common stock and warrants and certain notes for $25 million. Moreover, Plaintiff states that the Individual Defendants (including Bodden) solicited the above purchase in order to serve their own financial interests as well as those of SAL As for the § 12(2) claim in B.F. Enterprises, Bodden’s argument that the claim must be dismissed because Plaintiffs fail to assert that he is a seller is without merit. Plaintiffs seek recovery against the Individual Defendants under § 12(2) on the basis that they were “controlling persons” of SAI, the seller of the securities, under § 15 of the Act. One may be liable for a § 12(2) violation as a “controlling person” even though he himself is not a “seller” under that provision. See, e.g., Hollinger v. Titan Capital Corp., 914 F.2d 1564, 1578 & n. 32 (9th Cir.1990), cert. denied, — U.S. -, 111 S.Ct. 1621, 113 L.Ed.2d 719 (1991). The Court concludes that the allegations of Bodden’s control status are sufficient. Plaintiffs allege that he was the Chairman of the Board of Directors and Secretary of SAI and that, because of his position as an officer and director of SAI, he was “able to and did, directly or indirectly, control the conduct of its business as well as the contents of the various financial statements and reports disseminated to plaintiffs.” Complaint at p 12. Similarly, despite Defendant Schaefer’s argument to the contrary, the allegations of control concerning this Outside Director are sufficient as the Court concluded in the preceding section. In addition to the general allegations of control made in reference to the Outside Directors as a group, Plaintiffs further assert that Defendant Schaefer was a member of the Audit Committee of the Board who oversaw and supervised the activities of the other directors and was personally charged with examining the Company’s accounting, reporting and disclosure practices and for reviewing the financial statements. Thus, Plaintiffs’ § 12(2) claim against Bodden and Schaefer shall not be dismissed. Finally, the Court considers PMM’s argument that it cannot be liable as an aider and abettor under § 12(2). Courts have routinely held that aiding and abetting liability does not exist under this statute. See, e.g., Craftmatic Securities Li tig., 890 F.2d at 636-37; Royal American Managers, Inc. v. IRC Holding Corp., 885 F.2d 1011, 1017 (2d Cir.1989); Schlifke v. Seafirst Corp., 866 F.2d 935, 942 (7th Cir. 1989); Abell, 858 F.2d at 1114-15; In re VMS Securities Litig., 752 F.Supp. 1373, 1402 (N.D.Ill.1990); Dawe v. Main Street Management Co., 738 F.Supp. 36, 38 n. 6 (D.Mass.1990). But see Drexel, Burnharm, Lambert, Inc. v. American Bankers Ins. Co. of Florida, Inc., [1989-1990 Transfer Binder] Fed.Sec.L.Rep. (CCH) p 94,835 at 94,532,1989 WL 168012 (E.D.N.C. Nov. 8, 1989). Accordingly, Count II of B.F. Enterprises is dismissed to the extent that it seeks recovery from PMM. III. RICO The Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968, permits “any person injured in his business or property by reason of a violation of [18 U.S.C. § 1962]” to bring a civil suit against the violator. Section 1964(c). One may be liable under the RICO statute if he uses or invests income derived “from a pattern of racketeering activity” to acquire an interest in or to operate an enterprise engaged in interstate commerce, § 1962(a); if he acquires or maintains an interest in or control of such an enterprise “through a pattern of racketeering activity,” § 1962(b); if, while employed by or associated with such an enterprise, he conducts or participates in the conduct of its affairs “through a pattern of racketeering activity,” § 1962(c); or if he “conspir[es] to violate any of the provisions of subsections (a), (b), or (c),” § 1962(d). RICO defines “racketeering activity” to mean “any act or threat involving” enumerated state-law crimes, any “act” indictable under certain specified federal statutes, and various federal “offenses.” Section 1961(1). In order to establish a “pattern of racketeering activity,” the statute requires proof of “at least two acts of racketeering activity” within a 10-year period. Section 1961(5). A person found to have violated RICO in a civil action is liable for treble damages, costs and attorney’s fees. Section 1964(c). In the actions pending before the Court, Plaintiffs allege that certain defendants violated either some or all of the four provisions of § 1962. Defendants move to dismiss these Counts in their entirety on various grounds. A. Predicate Acts and “Pattern of Racketeering Activity” The Management Defendants move to dismiss the RICO counts of the pending complaints on the grounds that they fail to set forth the requisite predicate acts and pattern of racketeering activity. Section 1961(1) defines “predicate acts” to include mail fraud, 18 U.S.C. § 1341, wire fraud, 18 U.S.C. § 1343 and fraud in the sale of securities. In order to plead a cause of action for mail fraud, a plaintiff must allege that the defendant (1) intentionally participated in a scheme to defraud him of his property, and (2) used the mails in furtherance of that scheme. U.S. v. Downs, 870 F.2d 613, 615 (11th Cir.1989). Similarly, in order to state a claim for wire fraud, a plaintiff must allege (1) a scheme to defraud, and (2) the use of an interstate wire communication in furtherance of that scheme. Belt v. U.S., 868 F.2d 1208, 1211 (11th Cir.1989). Intent to defraud is an essential element of both causes of action. See, e.g., O’Brien v. National Property Analysts Partners, 719 F.Supp. 222, 226 n. 7 (S.D.N.Y.1989) (mail and wire fraud); Grant v. Union Bank, 629 F.Supp. 570, 576 (D.Utah 1986) (mail and wire fraud); Beck, 820 F.2d at 49-50 (mail and wire fraud). The elements for a security violation under § 12(2) of the 1933 Act and § 10(b) of the 1934 Act are described in detail above. Despite Defendants’ urging to the contrary, the complaints at issue set forth, in a manner sufficient to meet Rule 9(b)’s particularity requirement, that Defendants violated each of these provisions on numerous occasions. Similarly, the allegations satisfactorily state a pattern of racketeering activity. While the statutory definition of this term does not offer much guidance, the Supreme Court has recently advanced that “to prove a pattern of racketeering activity a plaintiff ... must show that the racketeering predicates are related, and that they amount to or pose a threat of continued criminal activity.” H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 239, 109 S.Ct. 2893, 2900, 106 L.Ed.2d 195, 196 (1989). This two prong analysis is referred to as the “continuity plus relationship” test. Id. Although once thought otherwise by certain judges and commentators, it is now clearly the law that the presence of one scheme alleging two or more underlying predicate acts may constitute a pattern under RICO. One may satisfy the “relatedness” prong of the two-part test by showing “ ‘criminal acts that have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events.’ ” Id. 109 S.Ct. at 2901 (quoting 18 U.S.C. § 3575(e)). Defendants do not dispute that Plaintiffs have met the relatedness requirement. Rather, in arguing that no pattern of racketeering exists, they contend that Plaintiffs fail to allege the requisite “continuity.” A continuity of predicate acts may be established by showing either that the acts in themselves have been continuous — “closed-ended” continuity — or that the defendant’s conduct poses “a threat of repetition” in. the future — “open-ended” continuity. Id. at 2902. Closed-ended continuity is demonstrated by a showing of a “series of related predicates extending over a substantial period of time.” Id. Acts committed over a few weeks or months without a future threat, however, are not sufficient. Id. In order to establish open-ended continuity, on the other hand, a party must show that past criminal conduct is likely to occur in the future. This threat of illegal action may be demonstrated in a variety of ways. For example, if the predicate acts “involve a distinct threat of long-term racketeering activity, either implicit or explicit,” continuity may exist. Id. Similarly, where the “predicates are a regular way of conducting defendant’s ongoing legitimate business” or “are part of an ongoing entity’s regular way of doing business,” such as “where the predicates can be attributed to a defendant operating as part of a long-term association that exists for criminal purposes,” they may establish the presence of an open-ended scheme. Id. Plaintiffs here have alleged continuity of both a closed-ended as well as an open-ended nature. Each dissemination of an allegedly false financial statement, press release or offering circular and each fraudulent statement made in a face-to-face setting constitutes a violation of one or more predicate acts. These alleged misstatements to public and private investors occurred repeatedly over a several year period, all in furtherance of the Project. In addition, had the alleged scheme not been uncovered, it is reasonable to infer that it would have continued for quite some time into the future. Accordingly, the RICO counts sufficiently plead a pattern of racketeerin