Full opinion text
OPINION AND ORDER FUSTE, District Judge. After eight years of litigation and a seven-week jury trial, the court now faces defendants’ motion for a directed verdict pursuant to Fed.R.Civ.P. 50. A full history of the case can be culled from two published opinions, Rodríguez v. Banco Central, 727 F.Supp. 759 (D.P.R.1989), and Rodri guez v. Banco Central, 917 F.2d 664 (1st Cir.1990). Two unpublished opinions, docket entries numbers 535 and 566, will assist the reader in getting the pulse of the case. See Appendices A and B to this Opinion and Order. At the close of evidence, and after the court allowed adequate time for preparation, both sides argued extensively on the motion. One hundred and fifty-two plaintiffs claim that an unscrupulous development company, along with the banks and individuals who financed the deals, promised them a chance to buy a lot in a beautiful residential subdivision near Disney World in Florida. Plaintiffs claim that the property was to be developed with schools, churches, and recreational facilities. What they were actually sold were one and one-quarter acre parcels of unimproved acreage, or what was described by witnesses as undeveloped swampland. It was perhaps a classic case for recovery • under the Interstate Land Sales Full Disclosure Act, 15 U.S.C. §§ 1701 et seq., which prohibits false statements made in connection with the sale of subdivided lots. It might also have made a cognizable contract, fraud, or unjust enrichment case under the Puerto Rico Civil Code, 31 L.R.P.A. §§ 3741-3891. But the Land Sales Act case fell to the statute of limitations, and the Puerto Rico law claims were never pled. The case which finally made it before the jury was under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c), fraud in the sale of securities, in which plaintiffs alleged violations of section 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j(b), and Rule 10(b)(5), 17 C.F.R. § 240.10b-5, as the “predicate acts” making up the pattern of racketeering. Proceeding in this manner requires that plaintiffs prove as a threshold matter that the lots purchases in this case were “securities” within the meaning of the securities laws, and then that the defendants here all participated in the fraudulent misrepresentations connected to the sale of those securities, or at least knowingly aided and abetted in those misrepresentations. Plaintiffs have tried every twist and contortion to fit their round peg into a square hole, often with the help and indulgence of the court. Ultimately, plaintiffs had the burden of proving a case consistent with the legal constraints of the law under which the case was actually tried, and not under a theory predicated on impermissible twists and bends to reach a deep pocket among otherwise judgment-proof defendants. Events Leading Up to the Purchase of the Land In 1969, Miguel and Jaime Carlo, brothers, along with Jorge Palacios, incorporated a company known as JC Investments, Inc. (“JC Investments”) for the purpose of selling land in Florida. In early 1970, Jaime Carlo approached Luis Martínez Al-modóvar (“Martínez Almodóvar"), then president of Banco Economías, with a request for financing from Banco Economías which would allow JC Investments to acquire certain properties in Florida which could then be subdivided and resold, primarily to persons living in Puerto Rico. At first the parties expected that the bank might be willing to provide a half million dollars in startup money for the project, but later the amount was reduced, since JC Investments could not provide the kind of security that the bank would require on a loan of that size. Instead, Martínez Almo-dóvar steered Carlo to an investors group in which he, Martínez Almodóvar, participated. The group, known as Empresa Fi-nanciera (“Empresa”), was a group of wealthy individuals willing to make high-risk, high-return investments to entrepreneurs in need of capital. Empresa was made up of Jorge Colón Nevares (“Colón Nevares”), Juan Martínez Echevarría (“Martínez Echevarría”), William de la Cruz (“de la Cruz”), Martínez Almodóvar, and others. At the time, Colón Nevares was a director of Banco Economías, Mar-tínez Echevarría was Executive Vice-President of the bank, and, as stated above, Martínez Almodóvar was president. A deal was worked out around January 15,1970, whereby Banco Economías agreed to lend $238,000 and Empresa agreed to lend $100,000 to finance the JC Investments project. The loans were to be used for the down payment on the first parcel of land to be bought and was secured by a first mortgage for the portion of the land actually purchased by the lent money (assuming segregation and, therefore, an unencumbered portion of the land), and an additional mortgage on the rest of the land. In exchange for the agreement to make the loan, Empresa received 33% of the stock of JC Investments, which was distributed to the principals in Empresa. In addition, JC Investments was required to accept two of its five directors from the Empresa group. Colón Nevares and Martínez Almodóvar took the two JC Investments directorships. The Land Itself — At Purchase Time and Throughout the Sales Period JC Investments purchased the land which consisted of three tracts. Sunrise Acres was purchased first, followed by Sunrise East and Sunrise West. An architect/land-use planner testified for plaintiffs that as of 1970 in all of Florida there existed a regulation requiring that homes could not be built in flood prone areas since septic tanks could not be authorized in such areas. In view of this, flood prone areas needed extensive draining and water control infrastructure development before homes could be constructed. The experts seemed to agree that this is standard procedure in Florida, where draining land for homesite use is the rule rather than the exception. In 1971, Polk County, where the subject properties lie, adopted an ordinance requiring that property, before it could be built on, have frontage on highway or a county road. The ordinance applied to all property sold on or after June 25, 1971. The buildable lots, therefore, were reduced from all those not in the flood prone area to only those lots not in the flood prone area which also abutted a county road. In September 1974, Polk County adopted an ordinance specific to property in the Green Swamp areas (where all the subject properties lie) requiring that septic tanks, if such an alternative was considered in lieu of trunk sewer, would be limited to one per ten acres. The combined result of these restrictions meant that at the time of the purchase of the first parcel, Sunrise Acres, only the lots not in a flood prone area could even conceivably have been built on as is, which amounted to only about 25% of the total. Each successive restriction reduced the number of buildable lots. According to plaintiffs’ experts, at present only about 145 out of 2,400 lots could be built on in Sunrise Acres legally, 15 out of 282 in Sunrise West, and 4 out of 167 in Sunrise East. A second expert testified that even absent a legal prescription against building, it would be completely unfeasible, from a purely engineering standpoint, to attempt any kind of broad-scale housing, roads, or commercial development, since the water table in the area is so close to the surface. One of the experts who testified was primarily engaged in the business of assisting developers with the physical, engineering, zoning, and other requirements for a given project. After examining the steps taken by JC Investments, and in light of the normal preparation that one would expect from a developer serious about planning a major development, it was the expert’s opinion that no one involved with JC Investments at any time seriously considered providing roads, recreational facilities, schools, shopping centers or even the basic infrastructure to make a housing development possible. The sales campaign A third Carlo brother, Ralph, joined JC Investments to assist with the sales campaign. The brothers carried out the campaign through a Puerto Rico corporation called JC Properties, Inc. (as opposed to the parent Florida corporation of JC Investments, Inc.). The sales people were set up as independent “brokers” who were paid commissions for the sales of lots. Testimony regarding the sales campaign was remarkably similar. Most persons were approached by a relative, friend or coworker who introduced them to a JC Properties salesperson. Often the friend or relative had recently purchased a lot and was enthusiastic about the project. The potential buyer was then told about the virtues of the project. Plaintiffs testified that they were told that streets would be built, that tennis, riding stables, water sports, schools, shopping facilities, and other improvements would be provided in the project, and that the buyer could build a home there. The slick promotional materials used by the salespeople show golfing, boating, hiking, fishing, tennis, and shopping. The court’s own review of the promotional material reveals that while it is true that the materials give a generally rosy view of the area, and show people engaging in sports, going to water shows, and the like, each of these photos is clearly marked as depicting a place near but not on the subject land, along with a notation of the mileage to the touted site from Sunrise Acres. Plaintiff’s Exhibit No. 6, for instance, is a glossy 11" by 14" foldout. The front cover shows a house and is titled by the inscription “Property with Potential in the Heartland of Florida’s Future ...!” Lower on the page it states in Vsth inch letters that “[tjhough not a homesite offering Sunrise Acres has a Lodge as shown above.” Inside the foldout are photos. Next to a photo of fishing is the inscription: “Fishing in Lake Agnes (Polk City) 4 miles from property.” Next to the photo of golf it states: “Lone Palm Golf — 16 miles.” Next to a couple playing tennis: “Tennis (Lakeland 16 miles from property).” The sales people had maps which appeared to show plans for roads running throughout the project. They showed maps which divided the land into “commercial” and “residential” areas. Along with the upbeat side of the promotional materials was a constantly reiterated cautionary statement that the land was undeveloped and that the offer did not include development. In the slick photo foldout referred to above, for instance, it states that: Like much of Florida land being offered to perceptive purchasers today, the property comprising SUNRISE ACRES is in a natural, undeveloped, unimproved, un-surveyed state. Improvements such as roads and drainage are not presently on the property and are not contemplated. The property described herein is not usable for building purposes. It is undeveloped, unimproved, unsurveyed acreage without roads, drainage or other improvements. The seller is not obligated to provide any improvements. 35% is marsh or swampy, it is located in an area known as green swamp and it is subject to flooding. Essentially the same message is set out in the sales contract and in the “Florida Land Sales Board Offering.” The cautionary statement and contract documents were required by a government agency, the Florida Land Sales Board, and were approved by the Board prior to their use. As stated, the warnings also appear on the face of the sales contract itself, in both Spanish and English, in type larger than the rest of the type used in the contract, and highlighted by a small box. The evidence shows that few plaintiffs ever read the contract, the offering statement or any other red-flag language in the promotional materials. The standard response from sales people to a query about the cautions contained in the contract and offering statement was that it was merely a government requirement to provide it, and that it accompanies all land sales in Florida, since all of Florida land is low. Another response was that although 35% of the land was indeed low land, the particular lot being sold was a high lot and, therefore, not a problem. Finally, many purchasers were told that although some of the land is currently marshy, the proposed development would provide for drainage, and the water would be collected in ponds or lakes. In the sales training manual, the following suggested answer to an objection about the “35% swampy” warning was as follows: OBJECTION: ... But it says here that this has 35% of low zones; what does that mean. ANSWER: Mr. Prospect, you must sign this document because in this way we make known the seriousness of our operation. Sunrise Acres is an extremely big extension of land 3,000 acres with levels of 120' and 150' above sea level ... it’s natural that there is a part lower than the rest. Knowledge on the Part of the Financiers of Marketing Techniques The record is devoid of any information which might shed light on how much the financiers knew at the time of the initial investment about the utility of the land itself or the manner in which JC Investments planned to market the land. In fact, there is nothing in the record to suggest that at the time of the original loans the Carlo brothers themselves or persons under their direction had yet devised the sales scheme and marketing tactics which the plaintiffs complain of here. Colón Ne-vares, the financier whp plaintiffs’ evidence most clearly targeted as one with knowledge, testified that he had nothing to do with the sales campaign and attended no board of directors meetings after the initial loans were made. Instead, he testified that he met informally and infrequently with the Carlo brothers as to financing matters only. Nothing in the record substantially undermines that testimony. No testimony shows that Martinez Almodovar, although on the Board of JC Investments’ directors as a result of the original loan agreement, had any direct contact with the Carlo brothers regarding the operation and sales of the project whatsoever. Although there was testimony that bank officers visited the land in 1971 or 1972, there was no evidence to suggest that a mere visual inspection would have revealed the unsuitability of the land for development. In fact, many of the purchasers themselves testified to visiting the land before or shortly after purchasing and being delighted because it was a beautiful tract. Bank personnel, like Martinez Echevarria, testified that at some time early on in the process they saw the Florida Public Offering statement. They had no reason to be alarmed at the warning of “undeveloped, 35% swampy,” since they believed that what they were financing was precisely that, undeveloped lots of land. The critical “knowledge” on the part of the financiers that plaintiffs must prove is knowledge of the sales campaign, and the way in which it diverged from the reality of what was being sold. This they failed to do. On March 2,1978, the Florida Land Sales Board issued a temporary cease and desist order against the sale of lands by JC Investments after a Mr. Dail, an investigator for the agency, determined that the company was misrepresenting that the lots could be utilized for homesites when that was not the case. Dail came to Puerto Rico, met with the Carlo brothers, and also, separately, with Edwin Vélez, who at the time was Real Estate Manager for Banco Central & Economías. Dail told Vélez of the result of the investigations, and the concern that fraudulent practices were being made in connection with the sales. After the Carlo brothers attributed the misleading information to a few “bad apple” sales representatives, the cease and desist order was lifted with the consent of a federal bankruptcy court. Financing of the Individual Sales At the outset, JC Investments sold lots directly to buyers “financing” the transaction by taking a deposit and having the individual sign a sales contract with JC Investments for monthly payments to pay off the balance. Title was to be transferred after the full contract price with interest was paid off and a warranty deed was issued. By July of 1970, JC Investments and Banco Economías had reached an agreement whereby the bank agreed to set up an escrow account to receive the payments to JC Investments on the lots. The bank issued coupon booklets and charged JC Investments $1.50 for each payment processed in this way. JC Investments’ financial situation in the first two years of operation was not good. In addition to the original financing, JC Investments had to look to Empresa Finan-ciera for additional financing throughout 1971 and 1972. By late 1972, JC Investments had ceded 56% of its stock to the Empresa group, or its members, as additional security for additional loans. In November of 1972, JC Investments repurchased all of its own stock and issued promissory notes to Empresa and its principals for some $400,000. See Plaintiffs’ Exhibits 71, 72. Sales contracts were held as collateral and an escrow account was set up for payment on those contracts so that in the event JC Investments failed to pay on the notes, the Empresa group could look to the payment on sales contract to recover their debt. Empresa members also received land in Sunrise Acres in partial payment of the debt owed to them. The November 1972 deal marked the end of Colón Nevares’ and Martinez Almodovar’s roles as directors and stockholders of JC Investments. In addition to drawing on the resources of the Empresa group, JC Investments sought to better its cash flow by drawing on the personal loan capacity of the bank. Whereas the first sales contracts were financed by JC Investments itself and merely serviced in an escrow account at the bank, by 1973 the bank was actually financing sales and refinancing sales already made, through a personal loan program. For refinancing, JC Investments would contact a purchaser who already had a land sales contract and offer the person a better deal through a personal bank loan to finance the portion remaining. If the bank approved the buyer’s loan application, the buyer would sign a new sales contract with JC Investments and a note to the bank for the remainder of the amount due would issue. The bank would then forward to JC Investments the amount financed. JC Investments cosigned all the personal loan notes as guarantor. As to new sales, the bank would finance 50% of the initial sales price, paying the amount financed to JC Investments, taking a $200 payment from JC Investments for making the loan, and looking to the buyer for repayment, along with a JC Investments cosignature. Any remaining balance would be owed to JC Investments directly and paid in installments at the end. Dissolution of Banco Economías, Creation of Banco Central Corp. The situation of sales, financing, and refinancing continued through the mid 1970’s. By 1977, Banco Economías, like a few other banks in Puerto Rico at the time, was in a precarious financial condition. The Federal Deposit Insurance Corporation (FDIC), in connection with the Department of the Treasury of Puerto Rico, sought a buyer for Banco Economias as a method of avoiding a full scale failure of the bank and the concomitant economic fallout that would result from such a closure. The two governmental entities agreed to a plan whereby the FDIC would take over $15 Million worth of bad loans in exchange for an agreement by a healthy bank to purchase Banco Economías and restore it to a profitable banking entity. The bank which answered the call was Banco Central, S.A., a Spanish bank. In a transaction veiled in secrecy and carried out with the utmost haste, Banco Central, S.A. agreed to purchase the “assets and liabilities” (the meaning of which we will discuss later) of Banco Economías in exchange for the FDIC’s taking over the bank’s worst loans. Banco Central, S.A. also agreed to invest a large sum in the new bank to recapitalize, and to keep on virtually all of the Puerto Rican staff of Banco Economías. On September 2, 1977, the new bank was born and named Banco Central & Economías, later changed to Banco Central Corp. After the date of the creation of Banco Central Corp., only nine refinancings of prior purchases occurred and no new sales were financed. The last refinancing occurred on February 10, 1978. Mr. Vélez, Banco Central’s Real Estate Manager, testified that Mr. Campos, the new president of the bank, felt that the bank should not be in the consumer loan business, and the funding for loans in that area, including the JC Investments purchases, dried up under the new bank president. Directed Verdict Standard The standard to be applied for determining whether a directed verdict is warranted is well settled. We must decide whether: “[V]iewing the light most favorable to the nonmoving party, reasonable jurors could come to but one conclusion. We must give plaintiff every benefit of every legitimate inference. However, such inferences may not rest on conjecture or speculation, but rather the evidence offered must make “the existence of the fact to be inferred more probable than its nonexistence.” DiPalma v. Westinghouse Electric Corp., 938 F.2d 1463, 1464 (1st Cir.1991), quoting from Goldstein v. Kelleher, 728 F.2d 32, 39 (1st Cir.), certfdenied, 469 U.S. 852, 105 S.Ct. 172, 83 L.Ed.2d 107 (1984). Particularly relevant to the case at bar, focusing for a moment on the issue of whether the financiers had knowledge of the nature of the sales campaign carried out by JC Investments, is the adage that: The party with the burden of proof does not make an issue for the jury by relying on the hope that the jury will not trust the credibility of the witnesses. If all of the witnesses deny that an event essential to plaintiffs case occurred, he cannot get to the jury simply because the jury might disbelieve these denials. There must be some affirmative evidence that the event occurred. 9 C. Wright & A. Miller, Federal Practice and Procedure § 2527 (1971). We keep these standards ever present as we view the evidence adduced at trial, indulging marginal situations in favor of the plaintiffs. Association-in-Fact Defendant Banco Central urges that the plaintiffs have failed to identify an association-in-fact separate from the “persons” who can be the defendants under the statute. We note at the outset that plaintiffs had been proceeding, until trial, on two alternative theories of who was the enterprise. The first theory discerned by us held JC Investments as the enterprise with which all the defendants (JC Investments excluded) associated. The second identified an assoeiation-in-faet including all the defendants. During argument of the Rule 50 motion, on direct questioning from the court, plaintiffs’ attorney surprisingly adopted the second theory and abandoned the first, easier to deal with, classical, logical theory. Section 1962(c) makes it unlawful “for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly in the conduct of such enterprise’s affairs through a pattern of racketeering activity....” The term “enterprise” is defined as including “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” Section 1961(4) (emphasis added). The phrase “group of individuals associated in fact” has been interpreted to include organizations of associated in fact corporations, natural persons and other entities. Yellow Bus Lines Inc. v. Drivers, Chauffeurs & Helpers Local Union 639, 883 F.2d 132,141 (D.C.Cir.1989), decision unaffected by en banc decision, 913 F.2d 948 (D.C.Cir.1990) (en banc), cert. denied, — U.S.-, 111 S.Ct. 2839, 115 L.Ed.2d 1007 (1991); Pyramid Securities Ltd. v. IB Resolution, Inc., 924 F.2d 1114 (D.C.Cir.1991); United States v. Hughes, 895 F.2d 1135, 1142 (6th Cir.1990); Atlas Pile Driving Co. v. DiCon Financial Co., 886 F.2d 986, 995 (8th Cir.1989). Under 1962(c), the enterprise and the “person” who violates the statute must be distinct from each other, the former being exempt from liability, the latter being the targeted defendant. Schofield v. First Commodity Corp. of Boston, 793 F.2d 28 (1st Cir.1986). The distinction requirement is not satisfied by merely naming a corporation and its employees, affiliates, and agents as an association-in-fact, since a corporation acts through its employees, subsidiaries and agents, and would thereby be merely associating with itself. Odishelidze v. Aetna Life & Casualty Co., 853 F.2d 21 (1st Cir.1988); Roeder v. Alpha Industries, Inc., 814 F.2d 22 (1st Cir.1987); Brittingham v. Mobil Corporation, et al., 943 F.2d 297 (3rd Cir.1991); Yellow Bus Lines, 883 F.2d at 141 (collected cases); Petro-Tech, Inc. v. Western Co. of North America, 824 F.2d 1349 (3rd Cir.1987); Hirsch v. Enright Refining Co., 751 F.2d 628 (3rd Cir.1984); Langley v. American Bank of Wisconsin, 738 F.Supp. 1232, 1241 (E.D.Wis.1990). Where the plaintiffs have suffered harm at the hands of an enterprise that consists only of a single corporation and its employees, subsidiaries or agents, the plaintiffs “must choose between the corporation and its constituents as persons liable.” Langley, 738 F.Supp. at 1241. If the plaintiff chooses to identify the corporation as the enterprise through which its employees, as persons, conducted the RICO activity, the corporation is insulated from liability. Id. It is for this reason that plaintiffs often try to prove the more intricate association-in-fact, in order to save as defendants all the corporate entities in the scheme, often the deep pockets. The association-in-fact route, however, provides its own hazards. Whereas the “legal” entity like a corporation or partnership is deemed to be a continuing organization with an identifiable structure as a matter of law, the plaintiff alleging an association-in-fact must prove the ongoing associative nature of the relationship. The association-in-fact enterprise “must have an ongoing organization or be a continuing unit, such that the enterprise has an existence that can be defined apart from the commission of the predicate acts.” Montesano v. Seafirst Commercial Corp., 818 F.2d 423, 427 (5th Cir.1987); Atlas, 886 F.2d at 995. “Continuity or the ongoing nature of an association-in-fact is the linchpin of enterprise statutes.” Ocean Energy II, Inc. v. Alexander & Alexander, Inc., 868 F.2d 740, 749 (5th Cir.1989). The “enterprise” can be one with primarily legitimate or illegitimate ends. United States v. Turkette, 452 U.S. 576, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981). In proving a RICO case, a plaintiff must show not only the existence of a pattern of racketeering, but must also prove the existence of the enterprise as a functioning unit with a structure apart from the mere coming together of the participants for purposes of committing the criminal predicate acts. Id. at 583, 101 S.Ct. at 2528. “The enterprise is an entity, for present purposes a group of persons associated together for a common purpose of engaging in a course of conduct.” Id. While the predicate illegalities may often overlap with the common purpose for which the associates came together in the first place, they need not. A plaintiff could conceivably prove an association-in-fact that is completely legitimate except for the fact that one of its associates is using the entity, even perhaps without the knowledge of any of the other associates, for the purpose of engaging in the RICO predicate act pattern, in the same way that the associated-in-fact enterprise, just like its legally-constituted corporate or partnership analog from the “legal entity” phrase in the statute, may merely be an innocent tool used by the evil RICO actor. Therefore, in searching the record for proof of the existence of the enterprise in this case, we must search for an “organization” created among the defendants here which is apart from the alleged co-participation in the RICO acts which allegedly make up the pattern. Defendant Banco Central argues that plaintiffs have failed to adduce at trial any proof sufficient to support a finding that the defendants have proven an association-in-fact of the various defendants in this case. Essentially, Banco Central argues that the financing “wing” of the supposed enterprise, Banco Economí-as, Empresa Financiera, Jorge Colón Ne-vares, Juan Martínez Echevarría, Luis Mar-tínez Almodovar, William de la Cruz, and others connected to JC Investments through those entities and individuals are really merely “agents” of JC Investments. If that were so, then the plaintiffs would really be alleging an association-in-fact which was no more than JC Investments and its own employees and agents, a position which is precluded by the distinction rule. Banco Central supports its argument with reference to the fact that the plaintiffs had admitted that none of the financiers (organizations or natural persons) could possibly be held as principals in their own right, since none actively participated in the development or distribution of the allegedly false sales material. Instead, their liability lies, if at all, as aiders and abettors. Therefore, reasons Banco Central, the liability of those parties, if at all, would be vicariously asserted through the persons whom the financiers aided and abetted. If their liability is purely “vicarious”, they cannot be said to be individuals at the association-in-fact table. Taking away all those from the financing side of the deal, we are left only with JC Investments and its various agents as the association-in-fact, a legally unsustainable position. This argument, that aider and abettor liability is not enough to win a place at the association-in-fact table, is wrong because the identification of individuals who associate in fact for purposes of identifying the enterprise need not have anything to do with whether or not those individuals are the persons who committed predicate acts. Atlas, 886 F.2d at 996 (legitimate enterprises make up association-in-fact). Since the association-in-fact itself can be completely innocent, just like the corporation in the case of a single corporation identified as the enterprise, we see no reason to assume that it cannot be constituted of individuals, apart from one or a few RICO violators, who are totally innocent of wrongdoing. Therefore, not only do plaintiffs fail to defeat their own attempt to portray an association-in-fact by admitting that the connection of the financiers, if at all, was purely vicarious through aiding and abetting, even an admission by plaintiffs that the financiers were completely ignorant and innocent of any wrongdoing would still not be dispositive of the association-in-fact question. Even if only a single corporation and its own employees are the only wrongdoers, plaintiffs seeking to hold them responsible can satisfy the association-in-fact requirement so long as the wrongdoers had entered into an association of individuals other than themselves, and that the RICO activity grew out of the wrongdoers’ manipulation of the association-in-fact organization. Having dismissed defendant’s argument that an assoeiation-in-fact must be an association of wrongdoers, we go on to see whether an association of any kind was formed. The existence of an enterprise “is proved by evidence of an ongoing organization, formal or informal, and evidence that the various associates function as a continuing unit.” Turkette, 452 U.S. at 583, 101 S.Ct. at 2528. Even if we take out of our consideration any of the allegedly nefarious agreements, a reasonable factfinder could conclude that JC Investments, Empresa, and at least Banco Economías had a long standing association that transcended that of ordinary borrower/lender. Shared personnel, repeated deals, financing and refinancing, struggles for the control of JC Investments stock, multiple infusions of capital, and other indicia of the links between the various associates all point to a structure other than that formed by JC Investments and its employees. Defendant Banco Central urges us to adopt the rule in Foval v. First National Bank of Commerce, 841 F.2d 126 (5th Cir.1988), which defendant says would preclude the finding of an association-in-fact in the case at bar. In Foval, a company had a loan from a bank, which was secured by company stock and a guarantee of the stockholders. One of the co-owner stockholders sold his share of the company to a third person in exchange for cash and a promissory note. The bank agreed to release the former co-owner from the guarantee for an agreement that the promissory note to the former co-owner would be subordinated to the payments by the company on the bank’s loan. The Foval court refused to find an association-in-fact between the bank, the selling co-owner, the company, and the purchasing co-owner. The court found that the arrangement amounted to no more than a one time loan and a subsequent refinancing of the loan when the situation in the company shifted. The case at bar has a record of interaction between JC Investments, Empresa, and all the various natural persons over a many year period which goes far beyond the single-loan arrangement in Foval. Although the presence of financiers will not always serve to create an association-in-fact between themselves and the financed company, we believe that where the relationship is multifaceted, long-standing, involves shared personnel, resources, and control, a fact-finder would be within the range of reasonableness to conclude that the locus of operations was sited not merely in the financed corporation, but in the association of both financiers and financed that allowed the deal to happen. But finding an adequately pled enterprise only leads to the question of whether the violation has occurred. Defendant Banco Central’s next line of defense is that even if there was an enterprise of which the financiers constituted a part, no predicate act occurred, since there was no security and, therefore, no fraud in the sale of securities. That failing, they argue that at most the Carlo brothers and JC Investments only are liable since there is no proof to support a finding of aiding and abetting liability by any of the individuals other than the Carlo brothers, nor by any of the corporations besides JC Investments and its affiliates. We agree with Banco Central on all counts. Is it a Security? In our November 1989 summary judgment decision we held that the record needed fuller factual development before it could be determined whether the land sales contracts in this case amounted to “securities” triggering the predicate securities law provisions which constitute the predicate acts of the RICO claim before the court. Rodríguez v. Banco Central, 727 F.Supp. 759 (D.P.R.1989). We now review the standard in light of the evidence produced at trial. The Securities Act of 1934 defines “security” to include, inter alia, an “investment contract”. 15 U.S.C. § 78c(a)(10). The Supreme Court has defined an investment contract to include any “[1] contract, transaction or scheme whereby a person invests his money in a common enterprise and [2] is led to expect profits [3] solely from the efforts of the promoter or a third party.” S.E.C. v. W.J. Howey Co., 328 U.S. 293, 298-99, 66 S.Ct. 1100, 1102-03, 90 L.Ed. 1244 (1946). The concept is to be applied flexibly. Id. at 299, 66 S.Ct. at 1103. In examining real estate sales contracts to determine whether they can qualify as investment contracts, and therefore securities, “[t]he touchstone is the presence of an investment in a common venture premised on a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.” United Housing Foundation, Inc. v. Forman, 421 U.S. 837, 852, 95 S.Ct. 2051, 2060, 44 L.Ed.2d 621 (1975) (emphasis added). In the classic land “investment contract”, the sale of the land by the promoter is merely incidental to the primary reason for the sale, which is to open the way for the operation of a commercial enterprise on the land financed through the sales but carried out by the developer or a third party. The inducement to the land purchaser is not the intrinsic value of the land per se, but rather the expected profits from the efforts of the seller of the land. In Howey, for instance, the Court found an investment contract where the seller of citrus groves also sold along with the land a service contract for the cultivation and marketing of the fruit, along with an agreement that a portion of the profits from the sales would inure to the buyer of the property. In S.E.C. v. C.M. Joiner Leasing Corp., 320 U.S. 344, 64 S.Ct. 120, 88 L.Ed. 88 (1943), the Supreme Court found a security to exist in the sale of plots of land where the sales were effectuated to provide the financing necessary to enable the sellers to drill a test oil well on the land sold. “[T]he undertaking to drill a well runs through the whole transaction as the thread on which everybody’s beads were strung.” Id. at 348, 64 S.Ct. at 122. Real estate sales of residential space have been more problematic for courts, since the issue of whether the purchaser is “investing” or merely “consuming” can be very murky. In United Housing Foundation, Inc. v. Forman, 421 U.S. 837, 95 S.Ct. 2051, 44 L.Ed.2d 621 (1975), the Court found no investment contract in the sale of apartment ownership shares in a low-income cooperative. The shares were sold to persons on the basis of their income and enabled them to become the owners of the apartment which they could then occupy. The entire enterprise was not-for-profit, the tenant/owner could not rent out the space to another, and if the tenant/owner wished to sell and move out, the Cooperative had the right to purchase the apartment back at the original purchase price, thereby precluding the possibility of profit realization for the tenant. The Court wrote that “[w]hat distinguishes a security transaction — and what is absent here — is an investment where one parts with his money in the hope of receiving profits from the efforts of others, and not where he purchases a commodity for personal consumption or living quarters for personal use.” United Housing Foundation, 421 U.S. at 858, 95 S.Ct. at 2063. While the Supreme Court has delineated the two ends of the land sale spectrum, with Howey’s pure “profit-from-efforts-of-another” driven investment on the one side and United Housing’s pure personal consumption on the other, lower courts have had to develop a conceptual framework to parse the mixed motive situations that litter the middle of the continuum. Several leitmotifs have surfaced which help to guide the inquiry. First, “where those who purchase something with the primary desire to use or consume it, the security laws do not apply.” Rice v. Branigar Organization, Inc., 922 F.2d 788 (11th Cir.1991) (Powell, Associate Justice (Retired), United States Supreme Court, sitting by designation); Aldrich v. McCulloch Properties, Inc., 627 F.2d 1036, 1040 (10th Cir.1980); Fogel v. Sellamerica, Ltd., 445 F.Supp. 1269, 1277 (S.D.N.Y.1978). Second, expectation of profit from the general appreciation in the value of land must be disregarded for purposes of identifying a “security”. McCown v. Heidler, 527 F.2d 204, 208 (10th Cir.1975); Aldrich, 627 F.2d at 1039, n. 1 (“[c]apital appreciation through development should be distinguished from a general increase in land values concurrent with neighborhood growth and improvements”). Third, the purchasers must show that they purchased at least in substantial part in reliance on a collateral agreement in which the developer or third party’s managerial or entrepreneurial obligations are set out. Dumbarton Condominium Assoc. v. 3120 R Street Associates Ltd. Partnership, 657 F.Supp. 226 (D.C.1987). Fourth, the collateral agreement must have some degree of “horizontal commonality", meaning that the fates of the investors are intertwined through the pooling of common funds to be used for the common development to benefit all. The fate of each investor must rise or fall together. Vertical commonality, defined as a developer’s individual promise to a purchaser to make improvements, is not enough. Hart v. Pulte Homes of Michigan Corp., 735 F.2d 1001 (6th Cir.1984). In Woodward v. Terracor, 574 F.2d 1023 (10th Cir.1978), the Tenth Circuit faced a factual scenario very similar to the one in the case at bar. The defendants sold lots in what was promoted as a planned residential community. “Included in the plans were shopping centers, health and cultural facilities, transportation facilities, and abundant recreational opportunity, including a golf course and a lake.” Woodward, 574 F.2d at 1025. Most of the plaintiffs purchased the lots with the intention of building on them, although several did not intend to build and bought the land as an “investment”. A land sales contract was entered into which provided for the sale of the lot along with some rudimentary developments such as underground sewage, water, and a curb. The court found that the planned community facilities which were a part of the promotional materials did not turn an ordinary land sales contract into a security. The court looked to the actual obligations of the developer vis-a-vis the group of purchasers as a whole, and found that a collateral agreement to engage in wide scale development through the use of common funds that would then generate a return on investment to the purchasers was missing. [The developer] itself was involved in a business venture. [The developer] was developing a new residential community. As part of its venture [the developer] sold lots to persons who either intended to build a house thereon, or intended to resell to others who would so build. But the mere fact that the plaintiffs bought lots from [the developer] does not mean that by such acquisition they were thereafter engaged in a common venture or enterprise with [the developer] The only contractual agreement between plaintiffs and [the developer] was the Uniform Real Estate Contract. [The developer] was under no contractual obligation to the plaintiffs other than to deliver title once purchase terms were met. Unlike Howey, [the developer] was not under any collateral management contract with the purchasers of its land. Woodward, 574 F.2d at 1025. In De Luz Ranchos Inv. v. Coldwell Banker & Co., 608 F.2d 1297 (9th Cir.1979), the Ninth Circuit applied the same reasoning to find that a sale of subdivided, undeveloped land could not be considered an investment contract despite promotional material speaking generally about the developer’s plans for further development of common facilities within the project where the contract obligated the seller to do no more than transfer title to the property. As stated succinctly by the court in Hart, 735 F.2d at 1004, “[t]he mere fact that an assurance of development to each investor may have come from the same seller does not satisfy the requirement of horizontal commonality.” This position is not inconsistent with the holding of the Tenth Circuit in McCown v. Heidler, 527 F.2d 204 (10th Cir.1975), a case we relied on heavily in our November 1989 opinion in which we refused to rule on the securities issue strictly on the papers. In McCown, the court found that summary disposition was inappropriate where the facts pled allowed for the possibility that the plaintiffs could prove at trial “the sale of a contractual promise by [the developer] to improve the project, including the construction of a country club, an 18-hole championship golf course, stables, equestrian center, tennis courts, clubhouse and swimming pools.” McCown, 527 F.2d at 209. As the Tenth Circuit itself pointed out in Woodward, 574 F.2d at 1026, McCown stood only for the proposition that such an issue required a more full fleshing out of the facts than mere motions could provide. In following McCown we were merely providing plaintiffs with the opportunity to prove the sale of a contractual promise of common horizontal development. We leave the McCown decision behind when we come to the point of deciding whether they have done so. In reviewing the facts of the ease set before us, we note that we do not look only to the four corners of the land sales contract in determining the existence or absence of an investment contract. Promotional materials, oral assurances, and merchandising approaches are all relevant. Aldrich, 627 F.2d at 1039. “Characterization of the inducement cannot be accomplished without a thorough examination of the representations made by the defendants as the basis of the sale.” Id. “[BJoilerplate disclaiming inducements to purchase land as an investment should not deter the court from considering all the evidence bearing upon the true nature of the purchase.” Timmreck v. Munn, 433 F.Supp. 396, 401 (N.D.Ill 1977). We read Woodward and De Luz not to be inconsistent with that position. Although both courts relied in part on the fact that the contract of sale required no more than the passing of title, we think that neither court set a rule precluding a court from considering the oral statements which accompany a sale. Indeed, both courts examined the oral aspects of the sale and the general sales atmosphere in the cases before them. In holding that no collateral managerial or entrepreneurial contract sufficient to satisfy the horizontal commonality requirement existed, the courts in both Woodward and De Luz were evaluating the dubious nature of the development “promises”. The driving force behind the refusal to find agreements seems to lie not in the fact that they were oral, but rather in the fact that they were so general, not time specific, and contained none of the parameters that one would ordinarily expect from a legally binding agreement. Secondly, in both cases, even if development promises were made, there was no commonality to the plan which would result in fund pooling or subsequent management by the developer. Although we do not necessarily think that for a collateral management or development agreement to qualify as such for the purposes of finding a security the agreement must stand up to the technicalities of contract law and its corollary evidentiary rules such as the statute of frauds, at least the proof of the agreement must be more than general assurances or lofty optimism. We believe, therefore, that a plaintiff might well prove the existence of a security despite a written land sales contract which does no more than require the transfer of title where the plaintiff can show that the sales pitch made specific promises of development within a given time frame and which specifically recited the common nature of the financing and so forth. We go on to examine whether plaintiffs here have brought out facts sufficient to make out a case for the existence of a security. We start by noting that the vast majority of the plaintiffs testified that while they considered the purchase an “investment” in that it would increase in value with the passage of time, they ultimately hoped to build on the land. Many purchased the land with the hope of retiring there. While purchase for personal use tends in the direction of not finding an investment contract, we do not give it too much weight for two reasons. First, at least some plaintiffs did not intend the land for purely personal use, particularly those who bought multiple parcels. Second, the defendant Carlo brothers, in asserting that they defrauded no one, have argued from the start that the land was never offered as a “homesite” offering. It would indeed be ironic if defendants could now defend against the finding of a security by alleging that plaintiffs purchased the lots planning to build homes when at the same time vigorously denying that the sale of lots was intended for the purpose of building homes, and denying that the impression was given that the lots could be used for homesites. We therefore find that the emphasis by many of the buyers on the desire to build a home, although ordinarily signifying the absence of a security, is not fatal under these circumstances. We go on to the other necessary elements, however, and we find that no amount of generosity to plaintiffs in light of the facts elicited can construct an adequate foundation to support the investment contract theory. Just as in Woodward and De Luz, the best that the plaintiffs can hope to argue from their facts is that the developers made some “vertical” promises to provide the basic improvements expected in a residential development. The “usual” improvements that go along with a residential project, even when specifically set out in the contract of sale, do not amount to an investment contract. Here the contract specifically negates such a promise, but we indulge the plaintiffs’ case at every juncture. Woodward, 574 F.2d at 1023. Even the promise to build roads and other improvements consistent with a residential development does not amount to the “type of managerial service contemplated in Howey,[ ] or United Housing, ” Davis v. Rio Rancho Estates Inc., 401 F.Supp. 1045 (S.D.N.Y.1975) (citations omitted). Plaintiffs have perhaps also extracted the evidence to prove that the developer’s salespeople pushed the project with the vision of future construction of schools, stores, and recreational facilities. As the case law shows, however, without some specificity in those “promises” as to time frame and the promise or actuality of pooled financing, the developer’s own lofty generalized predictions as to plans to engage in commercial or common facilities development does not constitute the kind of cognizable collateral agreement of horizontal commonality that can trigger the protection of the securities laws. Nor do we think that the result is altered by either the $10 annual per lot “fee” which was charged for “maintenance”, Timmreck v. Munn, 433 F.Supp. 396, 400 (N.D.Ill.1977), or the supposed promise that there would be a country club for use of the purchasers through purchases of memberships. Rice, 922 F.2d at 790-91. As to the lot fee, the amount is so insignificant in comparison to a multi-million dollar project that the purchasers cannot fruitfully argue that they expected a common development company to be born of that sum. Since we are required to exalt substance over form, and endeavor to make a decision based on the economic realities of the relationship between buyer and seller, as a matter of law we do not believe that a $10 per year lot maintenance fee creates the existence of a horizontal common scheme of development. As to a country club membership, (which incidentally was paid by only two of hundreds of buyers, neither a plaintiff before this court), Justice Powell, sitting on the Eleventh Circuit, recently rejected the argument that the sale of undeveloped land along with a right to purchase a country club membership turned the ordinarily land sales contract into an investment contract. Rice, 922 F.2d at 790-91. In light of the facts fully developed at trial, viewed in the light most favorable to plaintiffs, we cannot see that any reasonable factfinder could find that what was sold to the plaintiffs in this case on written documents or oral promises amounted to an investment contract and, therefore, a security for purposes of securities law protection. Since there is no security, there can be no securities law violations as predicate acts, and no RICO action may lie against any of the defendants here. Aiding and Abetting of the Financiers Even assuming the existence of a security and a pattern of securities fraud predicate acts on the part of the Carlo brothers and JC Investments and its affiliates, Ban-co Central argues that there is no proof on this record to implicate the financiers, Jorge Colón Nevares, Juan Martínez Eche-varría, Luis Martínez Almodovar, William de la Cruz, and the financing institutions Banco Economías, Empresa Financiera, and Banco Central as aiders and abettors of the primary violations. We agree. Civil RICO liability can be based on aiding and abetting the commission of the predicate acts by the primary offender. Petro-Tech, 824 F.2d at 1356; Zola v. Gordon, 685 F.Supp. 354, 375 (S.D.N.Y.1988). In order to prove aiding and abetting in the context of a securities law violation, there must be a primary securities law violation, knowledge of the violation on the part of the aider and abettor, and substantial assistance on the part of the aider and abettor to help bring about the primary violation. Abell v. Potomac Ins. Co., 858 F.2d 1104 (5th Cir.1988); Jett v. Sunderman, 840 F.2d 1487 (9th Cir.1988) (financing bank not liable absent proof of actual involvement in the fraudulent sale which their financing helped to bring about); Metge v. Baehler, 762 F.2d 621 (8th Cir.1985), cert. denied, 474 U.S. 1057, 106 S.Ct. 798, 88 L.Ed.2d 774 (1986); Zola, 685 F.Supp. at 375-76. In the absence of a duty to disclose, the scienter requirement for securities fraud and, therefore, the scienter requirement attributed to the aider and abettor, is elevated to that of “high conscious intent.” IIT, An International Investment Trust v. Cornfeld, 619 F.2d 909 (2nd Cir.1980); In re Union Carbide Corp. Consumer Products Business Securities Litigation, 666 F.Supp. 547 (S.D.N.Y.1987). The fact that Colón Nevares and Martínez Almodovar acted as directors of JC Investments for a time and with the purpose of keeping an eye over the corporation they had lent money to does not make them either per se liable to purchasers of “securities” sold through the misrepresentations of JC Investments since “[i]t is an established principle of corporations law that corporate directors are not liable merely be virtue of their office for fraud or other tortious wrongdoing committed by the corporation or its officers,” L.B. Industries, Inc. v. Smith, 817 F.2d 69, 71 (9th Cir.1987), nor does it create a duty to disclose to purchasers which would in turn lower the level of scienter required, as set out in the preceding paragraph. It is the law of the Second Circuit, highly regarded in the area of securities law, that “in the absence of direct participation in a securities violation, an outside director of a corporation has no duty to disclose adverse material facts or information to those prospective purchasers.” In re Union Carbide, 666 F.Supp. at 561, citing to circuit precedent in Lanza v. Drexel & Co., 479 F.2d 1277, 1289 (2nd Cir.1973) (en banc); Decker v. Massey-Ferguson, Ltd., 681 F.2d 111, 119 (2nd Cir.1982); Di Vittorio v. Equidyne Extractive Industries, Inc., 822 F.2d 1242 (2nd Cir.1987) (officers and directors of partnership not liable for misrepresentations in offering issued by partnership the preparation of which they had no part in). Under these rules, then, we see that plaintiffs cannot rely on legal constructs by which the non-Carlo individual defendants may be held. Plaintiffs have the burden of actually proving that the assistance was given with knowledge of the primary violations and the intent to bring about their completion. We start by noting that there is absolutely no evidence, no smoking gun, to link Colón Nevares, Martínez Almodovar, Martínez Echevarría or any of the other natural person defendants involved in financing, with knowledge of the fraudulent land sales campaign. None of the many witnesses testified that those persons were ever told about how the land would be marketed, or about the actual suitability of the land for development, or about the kind of promises that would be made along with sales. No memos, letters or documents evidence that the fraudulent nature of the sales was disclosed to the individual participants. Instead, the record shows that the deal was a relatively minor one for the financiers. They took little interest in the project itself, and attended a few meetings on the matter and no more. It became clear from the testimony that Colón Nevares’ interest was to do all in his power to leverage for himself and the other investors as much from JC Investments as possible, and to play on the financial vulnerability of JC Investments to extract very favorable terms for the financiers. That, however, only evidences an extremely aggressive business dealings manner, it has nothing to do with knowledge on the part of the financiers as to the manner in which the land was being marketed. Of course, participation in and knowledge of a fraudulent scheme can be proved by purely circumstantial evidence, United States v. Cincotta, 689 F.2d 238 (1st Cir.1982), but the evidence must be more than mere conjecture. In Cincotta, the court held that a jury could have found sufficient evidence to convict the president of a corporation for fraudulent acts of the corporation on evidence that no major decisions in the corporation were ever made without his direct input, along with proof that the decisions leading to the corporate fraud could only have been the result of major corporate decision making. Hence, the court reasoned, there was a significant basis for a fact-finder to conclude that the president indeed knew about the fraudulent acts. After watching all the evidence in this case carefully, this court cannot in good conscience believe that any reasonable fact-finder could support a decision that Colón Nevares, Martinez Almodovar Martinez Echevarria or any of the non-Carlo individual defendants knew of the predicate acts and offered their assistance to further those acts. Even the proof that they were corporate directors of JC Investments during the first two years of sales, the circumstantial evidence most damning to them, shows only that they held the title, but had little or no connection to actual operations. For us to allow a verdict to issue against these individuals on this evidence would be to hold them in a constructive knowledge theory solely for their holding the position of director, an imputation clearly rejected by the precedent cited above. If there can be no knowledge attributed to either Colón Nevares, Martinez Almodo-var or Martinez Echevarria, then neither Banco Economías nor Empresa Financiera can derive any aiding and abetting respon-deat superior liability. See Ashland Oil Inc. v. Arnett, 875 F.2d 1271, 1281 (7th Cir.1989) {respondeat superior liability may lie to hold corporation liable under RICO where employee acts on behalf of corporation, with authority, and in the corporation’s interest, so long as the corporation held liable on the theory is not also the enterprise, since respondeat superior liability in that context would circumvent the “distinct identity” rule); Liquid Air Corp. v. Rogers, 834 F.2d 1297 (7th Cir.1987); Gruber v. Prudential-Bache Securities Inc., 679 F.Supp. 165 (D.Conn.1987). In addition to trying to impute knowledge and therefore willing participation as an aider and abettor through Colón Nevares and Martinez Almodovar, plaintiffs also point to the fact that in March of 1978 Mr. Edwin Vélez, Real Estate Manager of Banco Central, was informed of the allegations of fraud by Mr. Dail, from the Florida Land Sales Board. Even if we assume that this was knowledge on the part of Banco Central that a fraud had occurred, plaintiffs still fail to prove willing participation in the fraudulent sale of securities, because the bank completely stopped making loans for land sales, even mere refinancings, in February of 1978. Therefore, even if the bank became aware in March of 1978 that a fraud had been committed, they failed to “participate” in any activity past that date which could be construed as a predicate act. We reject plaintiffs’ theory that somehow continuing to collect on the personal loans which had already been made is “aiding and abetting” in the fraudulent sale of a security. The Supreme Court has