Full opinion text
OPINION SAND, District Judge. This action arises out of failed tax shelters. Plaintiffs are investors who claim they were defrauded in connection with their purchases of limited partnership interests in one or more of eleven limited partnership tax shelters marketed and managed by defendants. Plaintiffs also claim they were defrauded in connection with their investment in discretionary trading accounts maintained and managed by defendants. Plaintiffs base their suit on alleged violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq., as well as on claims of state law fraud. The moving defendants assert, inter alia, that the statutes of limitations have lapsed on the various claims, that the complaint fails to allege facts from which it could be inferred that some of the defendants perpetrated or participated in the alleged acts of fraud, and that plaintiffs have failed to plead fraud with particularity. BACKGROUND The financial transactions at the heart of this action are described in detail in both United States v. Manko, 979 F.2d 900 (2d Cir.1992), cert. denied, — U.S. -, 113 S.Ct. 2993, 125 L.Ed.2d 687 (1993), and Greenwald v. Manko, 840 F.Supp. 198 (E.D.N.Y.1993). What plaintiffs essentially allege is that, beginning in or around 1977, defendants embarked on a scheme to induce individual investors to invest in what purported to be two types of tax-advantaged investment vehicles: discretionary trading accounts and limited partnerships. Defendants allegedly represented to potential investors that they, or the limited partnerships to be established by them, would enter into profit-motivated transactions in the field of government-backed securities, and that these transactions, precisely because they would be profit-motivated and carry risk, would generate losses that the investors could successfully claim as loss deductions on their individual tax returns. In making their decisions to invest in the trading accounts and the limited partnerships, plaintiffs maintain that they relied upon representations contained in private placement memoranda issued by defendants to the effect that no security transactions would be entered into unless they had enough economic substance to be capable of producing a pre-tax profit. Amended Complaint, dated May 24, 1993 (“Am.Compl.”), ¶¶ 55-58. The fraud in the sale of these tax-deferral investments lay in the fact that defendants allegedly never had any intention of conducting bona fide, profit-driven transactions in the securities markets. Rather, it is alleged that defendants, on their own and through secret oral agreement with a third-party trading entity, orchestrated billions of dollars worth of prearranged and fictitious trades in put options, Treasury Bill straddles, and repurchase agreements. Am.Compl. ¶¶ 59, 66, 73. These paper transactions, which, as one court has put it, consisted of “typing, not trading,” were allegedly rigged from the outset to generate nothing but losses for the trading accounts and the partnerships, which losses were then passed through to the individual investors, who wrongfully (albeit unwittingly) claimed them as deductions on their tax returns. It is further alleged that defendants looted the money that plaintiffs invested in the trading accounts and partnerships by way of the commissions they awarded themselves for their trading account activity; by way of the incentive compensation they paid themselves as managers of the investment vehicles; by way of “fees,” disguised as interest expenses, they paid to the third-party trading counterpart of the partnerships; and by way of the wasted operating expenses of the trading accounts and the partnerships. Am.Compl. ¶¶ 106-08, 110. Plaintiffs’ claim that defendants’ pattern of fraudulent misrepresentations and bogus trading activity caused them to lose their investments, to lose any chance of earning profit on their investments, to incur large income tax deficiencies and interest penalties as a result of the IRS’s disallowance of their tax deductions, and to incur expenses in defending themselves from the IRS’s challenges to their tax filings. Am.Compl. ¶ 105. DISCUSSION A. Statute of Limitations All of the defendants challenge plaintiffs’ claims as time-barred. As noted above, we will treat defendants’ limitations defense as one brought on a motion for summary judgment. This means that, in order to prevail, defendants must prove that there is no genuine issue of material fact regarding the timeliness of plaintiffs’ action, and that defendants are entitled to dismissal of the Amended Complaint as a matter of law. More specifically, defendants must show that no genuine issue of material fact exists as to whether plaintiffs discovered, or by the exercise of reasonable diligence would have discovered, the facts triggering accrual of the relevant statutes of limitations by the dates identified by the defendants. In re Integrated Resources Real Estate Sec. Lit., 815 F.Supp. 620, 638 (S.D.N.Y.1993). 1. RICO General Principles. The parties are right in emphasizing to the Court that the statute of limitations for RICO actions is somewhat unique. Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143, 107 S.Ct. 2759, 97 L.Ed.2d 121 (1987), established that a four-year limitations period governs civil RICO claims. Bankers Trust Co. v. Rhoades, 859 F.2d 1096 (2d Cir.1988), cert. denied, 490 U.S. 1007, 109 S.Ct. 1642, 1643, 104 L.Ed.2d 158 (1989), made clear that the four-year period begins to run not, as in ordinary fraud actions, from the date a plaintiff discovered or should have discovered the “bad acts” causing him injury, but from the date a plaintiff discovers or should have discovered the specific injury itself. 859 F.2d at 1103. “[A] plaintiff may sue for any injury he discovers or should have discovered within four years of the commencement of his suit, regardless when the RICO violation causing such injury occurred.” Id. This rule of accrual flows logically from civil RICO’s standing criterion, under which only persons “injured in [their] business or property by reason of a violation of section 1962” can bring a civil RICO action. Id. at 1102. “Until such injury occurs, there is no right to sue for damages ... and until there is a right to sue ..., a civil RICO action cannot be held to have accrued.” Id. To say that RICO injury triggers the running of the four-year limitations period does not mean, however, that a plaintiffs discovery of his RICO injury, be it actual or constructive, is a sufficient prerequisite of accrual. Rather, in the wake of Bankers Trust, it is only a necessary prerequisite of accrual. A plaintiff must obviously still have, in addition to knowledge of his injury, actual or constructive knowledge of the “bad acts” causing the injury in order for the limitations period to accrue. Were it otherwise, suit would be foreclosed to injured parties who through no fault of their own had no reason to suspect that their financial setbacks were caused by violations of RICO. Accord Dayton Monetary Assocs. v. Donaldson, Lufkin, & Jenrette Secur. Corp., No. 91-2050, 1992 WL 204374, at *4-*5 (S.D.N.Y. Aug. 11, 1992); Amendolare v. Schenkers Int’l Forwarders, Inc., No. CV-87-3023, 1989 U.S. Dist. LEXIS 17215, at *20 (E.D.N.Y. Dec. 17, 1989); Long Island Lighting Co. v. General Elec. Co., 712 F.Supp. 292, 302 (E.D.N.Y. 1989). Accordingly, to assess defendants’ statute of limitations defense in this case, we must inquire into two things: when did plaintiffs have actual or constructive notice of the alleged fraud, and when did plaintiffs have actual or constructive notice of their claimed injuries. For plaintiffs’ RICO claims to be time-barred, plaintiffs must have learned of both the fraud and the injuries flowing from the fraud prior to February 8, 1989 — the date that is exactly four years prior to the commencement of their lawsuit. Actual or constructive discovery of either the fraud or the injury on or after February 8,1989 would mean, in the eyes of the law, that plaintiffs were not in a position to bring their lawsuit prior to that date, and that their RICO claims are timely. Before proceeding to this two-part inquiry, we would make two additional points. The first is that questions regarding actual or constructive notice of facts that start the running of the limitations period usually depend for their answers on inferences that are drawn from the facts of each particular case and that are similar “to the type of inferences that must be drawn in determining intent and good faith....” Robertson v. Seidman & Seidman, 609 F.2d 583, 591 (2d Cir.1979). What this means in practice is that per se rules of actual or inquiry notice— such as a rule that notices of disallowances from the IRS are always enough to put an investor on notice of fraud in the marketing and management of his tax-shelter investment — are not very helpful. Sometimes IRS disallowance notices will convey the information necessary to provide notice, sometimes they will not — it all depends on the content of the notice, the nature of the loss, and the nature of the fraud. The second point relates to the date of the occurrence of one’s RICO injury. Bankers Trust held that an injury occurs for statute of limitations purposes only when the damages have become definite and provable, rather than conjectural. “[R]efusal to award damages as too speculative is equivalent to holding that no cause of action has yet accrued. When damages do become definite, a claim will accrue, and plaintiff will have four years to bring an action for recovery.” 859 F.2d at 1106 (citations omitted). Contrary to the suggestions of the defendants, we do not read the recent Second Circuit decision in Long Island Lighting Co. v. Imo, 6 F.3d 876 (2d Cir.1993), as altering or even refining this decisional rule. In Imo, the plaintiff had constructive knowledge of the fact that it had been sold faulty generators no later than 1977; one of the generators failed in 1983; plaintiff brought suit against the manufacturer of the generators in 1985. The Court of Appeals, relying on Bankers Trust, held that plaintiff’s RICO claims were time-barred because plaintiff “should have known in 1977 that [the defendant] had delivered defective Generators ... [and plaintiffs] injury was not in any sense speculative at that juncture. ...” 6 F.3d at 887. In our view, this holding stands only for the unremarkable proposition that a party to a commercial venture can be injured not only when his purchase actually fails in the field but also when he learns that he has received something less than what he paid for. The holding does not stand, as defendants suggest, for the proposition that one’s injury need not be ascertainable or quantifiable; nor does it stand for the proposition that “injury” is coextensive with knowledge of “bad acts.” We will therefore analyze the question of when plaintiffs’ RICO injuries occurred in this case on the basis of the analysis of Bankers Trust. Notice of Injury. As noted above, plaintiffs claim to have suffered three types of injury from defendants’ fraud: liability to federal, state and/or local tax authorities; expenses incurred in defending themselves against challenges to their tax filings; and the depletion of the financial base of the tax-shelter investments themselves. As regards the first alleged injury, defendants have submitted evidence showing that as early as 1985 the IRS was examining the books of the limited partnerships and finding grounds to challenge the declarations of income and losses contained in them. See Exh. D to the Affidavit of Jon Edelman, dated November 27, 1992 (“Edelman Aff.”). Defendants have also submitted evidence showing that as early as 1985, the IRS had preliminarily decided to disallow certain income and expense items reported by the partners in connection with one of the limited partnerships, see Exh. J to the Edelman Aff., and a genéral partnership that served as the agent of the limited partnerships in trades with third parties, see id.; that by 1986 the IRS had audited and determined to disallow certain reported items on the books of an additional partnership, see Exh. H to the Edelman Aff.; that by 1986 New York State had begun to issue deficiency notices to seven of the limited partnerships, Exh. F to the Edelman Aff.; that the IRS’s pattern of audit and disallowance of partnership income and expense items continued into 1987 and 1988, see Exhs. K, L to the Edelman Aff.; Exh. B to the Affidavit of Barry Lyman, dated September 29, 1994; and finally, that by late December 1987, the IRS and counsel for all of the partners of all of the limited partnerships had worked out a global settlement, the terms of which fixed the allowable losses and reportable gains for all of the partnerships and the way in which interest penalties would be calculated, Exh. F to the Affidavit of Allan Lazaroff, dated January 28, 1994 (“Lazaroff Aff.”), at 26-27,48-50; Transcript of Trial Proceedings, United States v. Manko, 979 F.2d 900 (“Manko Trial Transcript”), at 5189-90 (testimony of Barbara Kaplan). Through a letter from counsel to the IRS dated January 15, 1988, roughly two hundred partners expressed their intention to accept the terms of this settlement. Exh. M to the Edelman Aff; Exh. F to the Laza-roff Aff. at 43. On February 25, 1988, counsel for the partners and the IRS informed the tax court that a settlement had been reached. Exh. F to the Lazaroff Aff. at 50. All of this evidence indicates that plaintiffs’ tax-related injuries occurred prior to February 8,1989, and that plaintiffs knew of their extent. The very disallowances of which plaintiffs complain were made by the IRS over the course of the years 1985-88, and agreement on the formula by which the partners’ tax deficiencies would be computed was reached by the end of 1987. A number of partners accepted the terms of the agreement in January 1988. By January 1988, then, all of the partners — plaintiffs included — knew that they had incurred tax-related expenses of a provable amount. And it was the partners’ obligation to pay those expenses, not the actual payment as such, that counted as an economic injury for purposes of the accrual of RICO’s statute of limitations. See Bankers Trust, 859 F.2d at 1105 (RICO plaintiff suffers injury as to each expense when he becomes obligated to pay that expense, not at some later date when he actually makes payment). Plaintiffs do not dispute that the IRS began to scrutinize and disallow items on their tax returns well before February 8, 1989. They argue, however, that their tax-related injuries did not materialize until sometime after February 8, 1989 because the global settlement agreement with the IRS was not finalized until December 1989, when certain issues pertaining to its implementation were resolved, and because it was only after December 1989 that individual partners signed binding closing agreements with the IRS. Plaintiffs add that the IRS would not issue final notices of disallowance to any of the partners during the pendency of the criminal investigation and prosecution of two of the ringleaders of the tax shelter investment scheme, Bernhard Manko and Jon Edelman. Affidavit of Alan J. Dlugash, dated December 29, 1993 (“Dlugash Aff.”), ¶24. Manko and Edelman were indicted for tax fraud on February 8, 1989 and convicted on February 4, 1991. We do not find plaintiffs’ arguments convincing. To begin with, they rest tacitly (and erroneously) on the premise that we should gauge the actuality of an economic injury for statute of limitations purposes by the same standards we use to determine whether a binding contract has been executed. It often matters in the law of contracts, for example, whether the parties to an agreement have reduced their agreement to a signed writing. But the fact of a signed writing has no necessary bearing on the issue of the accrual date of a limitations period. The fact that any one of the plaintiffs herein may have been within his contractual rights, before signing a closing agreement, to walk away from a settlement with the IRS on the terms reached in December 1987 does not mean that plaintiffs were incapable of quantifying their economic losses for purposes of prosecuting a civil RICO lawsuit. Knowledge of an ascertainable economic injury, not possession of an enforceable action at common law, is what Bankers Trust requires for purposes of notice. Second, the fact that problems relating to the implementation of the global settlement agreement remained outstanding until December 1989 does not mean that plaintiffs’ tax-related injuries had yet to occur. Only one of the two implementation problems identified by plaintiffs would arguably have had an impact on the amount of a given partner’s tax liability, namely, the question of whether the IRS would allow the partners to net the interest due on refunds owed to them against the interest on their deficiencies. Whatever the sum of money that hung in the balance as a result of this implementation issue, it did not render plaintiffs’ injuries incalculable. Bankers Trust does not say that a potential plaintiff must be able to calculate his loss down to the last penny before his RICO injury can be said to exist; all that is required is that the injury not be “speculative.” 859 F.2d at 1106. As a result of the December 1987 accord with the IRS, plaintiffs’ injuries were ascertainable; indeed, they had in hand an agreed-upon formula for calculating their tax arrears. The only question remaining was how to minimize their losses by getting the IRS to exercise its discretion and give them a “good deal” on the mechanics of their deficiency payments. Third, plaintiffs’ claim that the IRS refused to enter into definitive settlements with the partners until the prosecutions of Manko and Edelman had run their course is belied by the fact that at least one of the partners signed a closing agreement with the IRS in June 1989, well before the trial and convictions of these two men. See Danzer Aff. ¶ 5. The claim is also at odds with the concession plaintiffs made at oral argument that, for purposes of these motions, they were put on notice of their fraud claims on February 8, 1989, the day the Manko/Edelman indictment came down. See Transcript of Oral Argument, dated January 26, 1995, at 35. We conclude that plaintiffs’ tax-related injuries occurred prior to February 8, 1989, and that plaintiffs had actual knowledge of those injuries prior to that date. We reach the same conclusion with regard to the two other types of claimed injury. Plaintiffs clearly incurred expenses in defending their interests from challenge by the tax authorities prior to February 8, 1989. Any expenses incurred after February 8, 1989 would amount only to further damages, not to a new, independent injury. See Bankers Trust, 859 F.2d at 1103 (“[W]here the plaintiff has already suffered injury and will continue to suffer that same injury in the future, an award of past and future damages may be entirely appropriate, subject of course to the normal standards governing such awards.”) (emphasis in original). The losses associated with the depletion of the money invested in the trading accounts and limited partnerships and the lost opportunity to earn a profit occurred, according to the Amended Complaint, every time defendants paid themselves trading commissions and incentive compensation, every time they paid bogus fees to the third-party trading counterpart of the investment partnerships, and every time the operating expenses of the trading accounts and partnerships were wasted on the bogus trading activity. Because plaintiffs maintained their investments in the trading accounts only until 1981, Am. Compl. ¶3, and because plaintiffs do not allege any trading on the part of the limited partnerships beyond 1983, see Am.Compl. ¶ 76, the injuries to the integrity and profitability of their investments must be deemed to have occurred no later than the end of 1983. Plaintiffs have not alleged when they first learned of these losses, and there is nothing in the summary judgment record to counter defendants’ contention that they learned of them at or around the same time they learned of the disallowances and their deficiency liabilities. It may be concluded, then, that plaintiffs had notice of this third type of injury prior to February 8, 1989. Having determined as a matter of law that plaintiffs had notice of each of their injuries prior to February 8, 1989, we next consider when they first had notice of the alleged fraud. Notice of Fraud. Defendants argue that plaintiffs had actual notice, or at the very least inquiry notice, of the alleged fraud well before February 8, 1989. In particular, defendants point to a series of communications from the management of the partnerships to the limited partners over the course of the 1980’s, which they claim unequivocally conveyed to the partners the probability that they were being defrauded. Plaintiffs claim that the earliest possible date they learned of the fraud was February 8, 1989, the day the Manko/Edelman indictment came down. It is clear that tax shelters can be risky ventures for reasons wholly unrelated to fraud. As Judge Stanton pointed out in Dayton Monetary Assocs., 1992 WL 204374, at *4, “[t]here are many reasons, other than fraud on the part of [a tax shelter’s] managers and trading partners, for an investment in a tax shelter limited partnership to become worthless and for its associated tax deductions to be disallowed by the IRS.” One common reason, litigated in case after case before the tax courts, is that the tax authorities simply disagree with the taxpayer that a given transaction falls within the meaning of one of the tax code’s terms of art, such as “income” or “loss.” This potential for disagreement over the merits of a given transaction for tax purposes arises out of the so-called “sham-in-substanee” doctrine, which requires courts and the tax authorities to look beyond the form of a transaction and to determine whether its substance is of such a nature that expenses or losses incurred in connection with it are deductible under an applicable section of the Internal Revenue Code. If a transaction’s form complies with the Code’s requirements for deductibility, but the transaction lacks the ... economic substance that form represents, then expenses or losses incurred in connection with the transaction are not deductible. Kirchman v. Commissioner of Internal Revenue, 862 F.2d 1486, 1490 (11th Cir.1989). Of course, there is always the possibility that the tax authorities will challenge a reported item, not because they dispute the taxpayer’s characterization of the underlying transaction for tax purposes, but because the transaction itself is not what the taxpayer represents it to be. It is one thing, for example, for the IRS to say that an “option straddle transaction,” involving prerogatives to buy and sell commodities, was not sufficiently profit-motivated to merit the claimed tax treatment. It is another thing for the IRS to say that the claimed sales and purchases of commodities cannot be recognized because they never in fact occurred. Things being other than what they are claimed to be is not a matter of differing interpretations; it is the essence of fraud. In our view, the notice-of-fraud issue in this case turns on this distinction between sham-in-substance and sham-in-fact. It is undisputed that the limited partners were notified early on that the IRS might challenge the deductions on losses claimed by the partnerships. The prospectuses promoting the partnerships warned that: The IRS has announced its intention to increase its emphasis on tax shelter partnership audits. Partnerships engaging in spread or straddle transactions are of particular interest to the IRS. The IRS has indicated to the Managing Partners that it is examining the 1978 tax returns of two partnerships with which the Managing Partners are affiliated as general partners or consultants_ [Prospective investors should note that the business activities of the two entities being examined by the IRS are substantially similar to the proposed business activities of the Partnership. Exh. 9 to the Affidavit of Claude M. Tusk, dated October 29, 1993, at 38. The question is not whether the limited partners knew of the risk that the trading activity in which they had invested would fail to achieve the tax advantages they hoped for; they did know or are presumed to have known this. Rather, the question is whether the limited partners knew of the risk that the trading activity itself would not occur as promised by the promoters and managers of the limited partnerships. We do not believe that we can say, as a matter of law, that they were so apprised. In March 1984, the management of the partnerships notified all of the limited partners that the IRS was questioning the substance of certain transactions similar to the ones engaged in by the partnerships. Exh. C to the Edelman Aff. The notification suggested that the threat to the tax positions of the partnerships arose as a result of rapid changes in the tax laws and tax regulations and the interpretation given them by the IRS. Id. In June 1985, the management of the partnerships notified all of the limited partners that the IRS had proposed adjustments to the partnerships’ tax returns. Exh. D to the Edelman Aff. The notification stated that the proposed adjustments were based primarily on Fox v. Commissioner, 82 T.C. 1001, 1023, 1984 WL 15588 (1984), a tax court opinion holding that a deferral scheme involving options transactions was insufficiently motivated by a desire for economic profit to generate recognizable losses. There was no allegation in Fox that the transactions at issue did not occur as claimed; the opinion even conceded that all but one of the transactions had some potential for profit after commissions. Id. at 1021. In our view, neither one of these correspondences to the partners need be read as communicating circumstances suggesting the probability of fraud. They more readily suggest IRS concern with the tax treatment to be accorded trades which were in fact transacted than challenges to trades which fraudulently never took place. In April 1986, all of the limited partners received a status report from Saltzman & Holloran, a law firm that had been retained by the management of the partnerships to defend the partnerships against the IRS’s inquiries. Saltzman & Holloran advised that the IRS’s basis for disallowing losses on certain option transactions, and interest expenses on certain repo transactions, was that the transactions had not been engaged in primarily for profit within the meaning of the Internal Revenue Code. In a passage strongly relied upon by defendants, Saltzman & Holloran then advised the partners that [t]he other stated ground for disallowance of both the options and repo transactions is the allegation that the transactions did not occur as claimed, had no economic substance and were prearranged.... [W]e will demonstrate from the books and records of the partnerships that the transactions occurred as claimed and that they were not prearranged or economically irrational. . The partnerships purchased and sold government securities and entered into repo transactions with independent third parties.... Exh. F. to the Edelman Aff. (Memorandum from Barbara T. Kaplan to Jon Edelman) at 3, 5. The partners of one of the limited partnerships — Conarbeo—also received in April 1986 a letter from Saltzman & Holloran advising of the IRS’s charge that the transactions engaged in by Conarbeo did not actually occur and were not at arm’s length with independent third parties. Exh. H to the Edelman Aff. (Memorandum from Barbara T. Kaplan to Jon J. Edelman) at 1-2. Attached to the letter was a copy of the IRS Summary Report on Conarbco for the tax years 1982 and 1983. In the Summary Report, dated January 17, 1986, the IRS concluded that “[t]he information received does not establish that the transactions [of Co-narbco] actually occurred.” Other IRS Summary Reports on some of the other limited partnerships, completed well before February, 1989, reached similar conclusions. Defendants argue that the status reports from Saltzman & Holloran, coupled with the Summary Reports issued by the IRS and relayed to the limited partners, put plaintiffs on notice of the fraud. And they have a point: these reports depict the partnerships’ transactions as not merely preconceived or prearranged with an eye to tax advantages, but as fictitious. They depict “shams-in-fact” — “typing” not “trading” — and on their face would seem to establish inquiry notice of the fraud to plaintiffs well before February 1989. Plaintiffs, however, have an explanation for these reports, and for why they did not trigger inquiry notice. Plaintiffs first point out, rightly enough, that the transactions analyzed in these reports were transactions between the partnerships, on the one hand, and the entities established by defendants to serve as the partnerships’ agents in trades with third parties — Government Clearing Company (“GCC”) and Government Securities Trading Corporation (“GSTC”)— on the other hand. Plaintiffs then contend that GCC and GSTC were intended and known to be entities controlled by the partnerships, and that the trading between the partnerships and GCC/GSTC was intended to be managed, rather than at arm’s length. According to plaintiffs’ expert Alan Dlugash: GCC and GSTC were, and were openly intended to be, related entities created by [the management of the partnerships] to channel the trading activities of the investment partnerships with “the street.” In other words, rather than arrange for trades to take place between each of the fourteen or so investment partnerships (which were separately constituted at different times and through different promoters) and third-party entities, the process was simplified by conducting master trades between GCC and GSTC and an outside trading house, and then breaking the effect of these trades down through “mirror transactions” allocated among the investment partnerships. So long as the master trades of GCC or GSTC with “the street” were at arm’s length and legitimate, the “mirror transactions” of GCC or GSTC with the investment partnerships were irrelevant. Dlugash Aff. ¶20. Thus, say plaintiffs, knowledge of the fact that the IRS was challenging as fictitious the trading activity between the partnerships and GCC/GSTC did not entail knowledge of the fraud that is at the heart of the Amended Complaint — namely, the fraudulent trading activity between GCC/GSTC and a third-party trading counterpart which generated billions of dollars in bogus interest expenses. We find this explanation plausible, if not air-tight. It goes some way toward explaining how the IRS could have found the partnerships not to have owned or traded in the amount of securities listed on their books without also impheating the partnerships in a scheme of fraudulent trading. More importantly, defendants have not tried to rebut the explanation with a showing, or even an allegation, that there was no such tacit understanding among the partners that the partnerships and GCC/GSTC were all in the same family. On the basis of the foregoing, we conclude that there are genuine issues of material fact regarding the meaning and significance of the information conveyed to plaintiffs by the management of the limited partnerships (and by Saltzman & Holloran) over the course of the 1980’s. We cannot conclude as a matter of law that the information was of such an unambiguous nature as to put plaintiffs on notice of the probability that they were defrauded. And, because there appears to be no other basis for finding actual or inquiry notice of the fraud prior to the February 8, 1989 indictment, we accept at this stage of the litigation plaintiffs’ claim that they first learned of the fraud on that date. We accordingly hold that for purposes of these motions, plaintiffs’ RICO claims did not accrue until February 8, 1989, and thus that they are timely. Finally, we may quickly respond to two points raised by defendants in connection with their RICO limitations defense. First, defendants argue that plaintiffs have faded to successfully allege a RICO claim because they have failed to allege timely securities fraud claims as predicate acts to support it. We disagree. As Judge Keenan recently noted in Toto v. McMahan, Brafman, Morgan & Co., No. 93 Civ. 5894, 1995 WL 46691, at *5-*6 (S.D.N.Y. Feb. 7, 1995), to hold that an untimely securities fraud predicate renders a RICO action untimely would subvert the four-year statute of limitations applicable to a RICO action. It would also effectively nullify the rule that it is the injury, rather than the racketeering activity itself, which triggers civil RICO’s statute of limitations. Defendants’ reliance on Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991), is misplaced. Lampf held only that a one year-three year limitations period governs securities fraud actions; it did not even address whether securities fraud claims brought after the expiration of the three-year period of repose are substantively defective for purposes of serving as predicates for claims brought under other federal statutes. Second, defendants contend that even if the original complaint in this action was timely filed (it was filed on February 8,1993), the thirty-six plaintiffs who were added in the Amended Complaint which was filed several months after the original complaint should not get the benefit of the earlier filing. In other words, the claims of the “latecomer plaintiffs” should not be deemed to relate back to the claims of the original plaintiffs. Defendant Palisades Planning Corp., which was not party to the original complaint, appears also to argue that none of the plaintiffs is entitled to rely on the filing date of the original complaint with respect to it. Again, we disagree. The Second Circuit’s recent decision in Benfield v. Mocatta Metals Corp., 26 F.3d 19 (2d Cir.1994), indicates that late-filed claims properly relate back to timely-filed claims as long as the amendment does not produce an unfair surprise to the defendant. Given that the added plaintiffs’ claims in this case are identical to those of the original plaintiffs, defendants have not been prejudiced in their ability to mount a defense. The claims of the latecomer plaintiffs are therefore timely. Palisades’ argument fails for the simple reason that Barry Lyman, one of the original defendants, is alleged to have been one of its principals and a majority stockholder. Am. Compl. ¶ 11. See Koal Indus. Corp. v. Asland, S.A., 808 F.Supp. 1143, 1157 (S.D.N.Y.1992) (“plaintiffs have been allowed to add or substitute parties where there is an extremely close corporate or other relationship between the original and the added defendant”) (quoting 3 James W. Moore, Moore’s Fed. Practice, ¶15.08[5] (1992)). 2. State Law Fraud The New York statute of limitations for fraud is six years from the date of the commission of the fraud, see N.Y.Civ.Prac.Law & R. (“NYCPLR”) § 213(8) (McKinney 1990), or two years from the date the plaintiff discovered, or should have discovered, the fraud, whichever is longer, id. § 203(f). Six years from the date of plaintiffs’ last investments in the tax shelters is 1989, see Am. Compl. ¶¶3, 4; two years from the date plaintiffs concede they learned of their fraud claims for purpose of these motions (February 8, 1989) is February 8, 1991. Given that plaintiffs filed their original complaint in this action on February 8, 1993, their state law fraud claims are time-barred. Of the moving defendants, only defendants Bryant, Carloek, Devlin, and Goudreau rely exclusively on the statute of limitations defenses; the other moving defendants defend against the action on alternative grounds. We will now proceed to address the defenses that are particular to individual defendants. B. Defendant Manko Bernhard Manko (“Manko”) moves to dismiss the Amended Complaint on grounds of improper service of process. Plaintiffs respond by moving for entry of a default judgment against Manko for failure to file a timely answer. Because these motions are interrelated, we will address them in tandem. As noted, plaintiffs filed their original complaint in this case on February 8,1993. Under the Federal Rules of Civil Procedure, they had 120 days, or until June 8, 1993, to effect service of process. Fed.R.Civ.P. 4(j). Plaintiffs claim that on June 1, 1993, a process server in their employ served a copy of the summons and complaint on the doorman of an apartment building in which Manko was believed to reside, and that on the following day, the process server mailed a copy of the summons and complaint to Manko at the address of this building (425 East 63rd Street, New York, New York (hereinafter “425 E. 63rd”)). Manko did not make an appearance in the action during the twenty days following this substitute service, as required by Fed.R.Civ.P. 12(a). Indeed, he claims he could not have made an appearance because he never received the complaint in this case “from any doorman or anyone else at the building at 63rd Street in June 1993 or at any other time.” Affidavit of Bernhard F. Manko, dated January 31, 1994, ¶ 3. Manko does concede, however, that at some unspecified time, after the deadline for filing an answer had passed, he received the mailed copies of the summons and complaint. See id. ¶4 (“I am aware that a copy of the complaint in this case was mailed to me in an envelope ... at 425 East 63rd Street_ I did not receive anything further in this action until I was handed a summons and complaint on September 30, 1993 in a Florida prison.”); Defendant Bernhard F. Manko’s Memorandum of Law in Reply to Plaintiffs’ Opposition to his Motion to Dismiss and in Opposition to Plaintiffs’ Cross-Motion for Default Judgment (“Def.’s Reply Mem.”) at 8 n. 9, 15. On July 30, 1993, plaintiffs wrote a letter to the Court requesting sixty additional days in which to serve five defendants, of whom Manko was one, who plaintiffs claimed had already been served through substitute means but had yet to appear in the action. Plaintiffs made this request because they feared that: Given these defendants’ failure to appear after substitute service ... they will contend that service of process upon them was not proper.... Plaintiffs do not hereby concede or even suggest that the prior service on these five was in any way defective, but in an abundance of caution now seek to reserve this option. Plaintiffs’ Letter to the Court, dated July, 30, 1993, at 2. The Court granted plaintiffs’ request for a sixty-day extension. On September 30, 1993, plaintiffs personally served Manko in prison in Florida. On November 1, 1993, the last day of the thirty-day time limit for answering an out-of-state summons and complaint, see Fed.R.Civ.P. 4(e), 12(a); NYCPLR §§ 313, 320(a), Manko served the instant motion. Manko contends that the substitute service attempted by plaintiffs on June 1-2, 1993 in New York City was defective in several respects. Because the substitute service was defective, he says, plaintiffs’ July 1993 request for an extension of time in which to reserve Manko and others was based on an erroneous assumption of a prior, effective service; it was therefore improperly granted and cannot now serve as a basis for claiming that service was timely made. Plaintiffs argue that the substitute service effected in June 1993 was valid under the terms of Rule 4(d)(1) of the Federal Rules of Civil Procedure, and that Manko defaulted in both failing to answer within twenty days of the June service and failing to answer within twenty days of the September service. The first issue before us is the validity of the substitute service attempted by plaintiffs on June 1, 1993. Rule 4(d)(1) permits service to be made by leaving copies of the summons and complaint at “the individual’s dwelling house or usual place of abode with some person of suitable age and discretion then residing therein_” Three questions arise out of this standard: (1) did 425 E. 63rd serve as Manko’s “dwelling house” or “usual place of abode”?; (2) was the doorman with whom the summons and complaint were left a person of “suitable age and discretion”?; and (3) was it necessary that the doorman actually “reside” at 425 E. 63rd? We believe we can answer the first question on the basis of facts that the parties either concede or at the very least do not contest. First, Manko’s former attorney, Earl Nemser, states that since at least 1979, Manko stayed at 425 E. 63rd whenever he was in New York City (other than when he stayed at a summer rental on Long Island). Affidavit of Earl Nemser, dated October 27, 1993, ¶ 4. Second, Robert Manko, a nephew of Manko who owns a share in several apartments at 425 E. 63rd, states that one of the apartments — “Penthouse B” — is frequently used by his relatives and “from time to time by my uncle, Bernhard.” Affidavit of Robert Manko, dated February 3, 1994, ¶ 3. Third, we know by way of negative inference from Robert Manko’s affidavit that Manko may have been spending “most of his time” in New York City as late as May 1993; and we know from a modification of Manko’s bail conditions that he was in New York City in mid-June, 1993. Exh. A to Plaintiffs’ Reply Memorandum of Law in Support of Plaintiffs’ Cross-Motion for a Default Judgment Against Defendant Bernhard F. Manko. Fourth, Eugene Healy, the doorman of 425 E. 63rd who claims to have refused service on June 1, 1993, assumes in his affidavit to the Court that Manko was a resident of 425 E. 63rd during that time period. Fifth, Manko was listed under the address “425 E 63” in the Manhattan Telephone directory for the years 1985 through 1991. Reply Affidavit of Lyn M. Montgomery in Support of Cross-Motion for Default Judgment, dated February 25, 1994, ¶ 6 & Exh. A. Sixth, Manko currently has a valid New York State driver’s license issued to him under the address “425 E 68 St, New York City NY 10021.” The license was issued effective February 1992 and is due to expire in February 1996. Reply Affidavit of Thomas M. Tolan in Support of Cross-Motion for Default Judgment, dated February 23, 1994, ¶¶ 3-4 & Exh. A. On the other hand, Manko has no ownership interest in Penthouse B; he does not pay rent for the apartment; and for the past 14 years he has maintained a residence in Florida at which he began to spend “most of his time” in May 1993. Affidavit of Robert Manko ¶¶4, 6. Having considered all of the foregoing facts, we are left with the firm impression that Manko used the apartment known as “Penthouse B” at 425 E. 63rd as his place to stay in New York City, and that he visited New York City with considerable frequency and regularity during the 1980’s and 1990’s, all the way up to the point of his imprisonment in Florida in September 1993. In our view, this is enough to support a finding that 425 E. 63rd served as a “dwelling place” or “usual place of abode” for Manko in June 1993 for purposes of service of process under Rule 4(d)(1). While it is true that Manko’s presence at 425 E. 63rd was episodic rather than constant, his association with 425 E. 63rd was far from haphazard. It was attested to by his own representations, disinterestedly made. And while it is true that Manko had at least one long-standing residence outside of New York City, it cannot be said that the permanence Manko enjoyed at 425 E. 63rd was lessened by the fact that he enjoyed permanence elsewhere. “[I]n a highly mobile and affluent society, it is unrealistic to interpret Rule 4(d)(1) so that the person to be served has only one dwelling house or usual place of abode at which process may be left.” National Development Co. v. Triad Holding Corp., 930 F.2d 253, 257 (2d Cir.) (quoting 4A C. Wright & A. Miller, Federal Practice and Procedure § 1096, at 79-80 (2d ed. 1987)) (holding that defendant, a citizen and domiciliary of Saudi Arabia, was properly served at his apartment complex in New York City despite having spent only thirty-four days of the calendar year there), cert. denied, 502 U.S. 968, 112 S.Ct. 440, 116 L.Ed.2d 459 (1991); see also Palandjian v. Pahlavi 586 F.Supp. 671, 676 (D.Mass.1984) (under NYCPLR § 308(2), which contains the same “dwelling place or usual place of abode” standard as Rule 4(d)(1), defendant whose “principal residence” was in France was properly served at her New York City apartment, where she spent approximately four months per year); Karlin v. Avis, 326 F.Supp. 1325, 1329-30 (E.D.N.Y.1971) (under NYCPLR § 308(2), defendant, a resident and domiciliary of Michigan, was properly served at his New York City apartment, despite only using it sporadically, in lieu of a hotel room, when he was in New York City); Pickford v. Kravetz, 17 Fed.Rules Serv. 4d.121, case 1, at 20 (S.D.N.Y.1952) (hotel where defendant stayed for approximately one week was a “dwelling place” within the meaning of Rule 4(d)(1)). We next consider whether Eugene Healy, the doorman with whom the summons and complaint were left, was a person of “suitable age and discretion.” We conclude that he was. There is nothing in the record before us to suggest that the duties of Eugene Healy differed in any way from those of a regular apartment house doorman, i.e., to screen and announce visitors to the building and to accept messages and packages for delivery to the tenants. Because it was this doorman’s job to serve as a link between the outside world and the tenants of 425 E. 63rd, he was an objectively reliable third party with whom to leave legal papers. What has been said of hotel managers and landlords applies equally to doormen: Arguably, since hotel managers and landladies normally are under an obligation to transmit all incoming messages and mail to guests and tenants, there appears to be no valid objection to permitting delivery to such persons, at least in terms of questioning the likelihood of notice or fairness to [a] defendant. This obligation to relay information to guests and occupants should be a sufficient basis for distinguishing those cases in which service has been disallowed when left with a resident of a multiple unit dwelling who is not living in defendant’s place of abode. Wright & Miller, supra, § 1096, at 82-83. See also Hartford Fire Ins. Co. v. Perinovic, 152 F.R.D. 128, 131 (N.D.Ill.1993) (doorman was of “suitable age and discretion” given that he was authorized to accept and sign for all deliveries for the tenants of the building, including legal documents); F.I. duPont v. Chen, 41 N.Y.2d 794, 396 N.Y.S.2d 343, 345, 364 N.E.2d 1115, 1117 (N.Y.1977) (interpreting NYCPLR § 308(2)) (same). Moreover, where, as here, the process server is not permitted to proceed to the actual apartment by the doorman or some other employee, see Supplemental Affidavit of Raymond Perri-cone, dated December 21,1993, ¶ 2, the doorman becomes all the more “suitable” as a repository of the papers because he is in effect the only accessible party. We recognize that it was the doorman’s practice in this case not to accept legal papers for tenants of 425 E. 63rd unless he was authorized by them to do so. Healy Aff. ¶ 6. But we do not believe this changes matters. The question is not whether an individual has demonstrated, through instructions given to a third party, that he is willing to be served with legal papers, but whether the third-party occupies a position the nature of which ensures that substitute service will result in actual service. A different rule would allow potential defendants to evade legal process simply by choosing their living quarters strategically. The third and final question is whether the doorman service attempted here was invalid because Healy himself did not reside at 425 E. 63rd. See Healy Aff. ¶ 1. We conclude that the service was valid. In Pickford v. Kravetz, supra, the court, finding “nothing in common sense to forbid a single address from being the dwelling place of one person and the ‘business residence’ of another,” construed Rule 4(d)(l)’s phrase “residing therein” to encompass business residences as well as personal residences. The court then concluded that a hotel manager who spent all day almost every day in the hotel as a duty and familiar with all of its guests and where and when they can ordinarily be found there, and operating under the obligation of his office to transmit all information to every guest, was precisely the man envisaged as a resident by the rule. Kravetz, 17 Fed.Rules Serv. at 21. We agree with this construction of “residing therein,” and see no reason why it would not apply to an apartment building doorman as much as to the manager of a hotel. We accordingly hold that the June 1993 substitute service on Manko, as effected through Eugene Healy, the doorman of 425 E. 63rd, was valid under Rule 4(d)(1). Because it was valid, plaintiffs’ July 30 request for an extension of time in which to re-serve Manko was properly granted. Manko’s motion to dismiss the complaint on grounds of improper service is therefore denied. The remaining question is whether default judgment should be entered against Manko. On the one hand is the fact that Manko did not timely answer the summons and complaint that were successfully served on him on June 1, 1993. On the other hand is the fact that plaintiffs asked for and received an extension of time in which to reserve Manko, this time personally, in prison, and that Manko responded in a timely fashion to this second service. While we recognize that plaintiffs sought to re-serve Manko only out of “an abundance of caution” and did not mean to suggest with their request that the first service was in any way defective, we do not think plaintiffs can have it both ways: rely on a court-sanctioned second service to protect themselves from later allegations of improper service, yet urge disregard of the second service after the defendant has timely responded to it. The legal effect of a served summons and complaint simply cannot be turned on and off again according to the particular conveniences of a party. Given that the second service on Manko was valid, and that Manko filed a timely response to it, plaintiffs are not entitled to a default judgment. C. Defendants Tese & Sinclair In their first claim for relief, plaintiffs allege that defendants violated section 1962(c) of 18 U.S.C., which 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.... To establish a civil RICO claim for violation of this section, a plaintiff must show that (1) the defendant (2) through the commission of two or more predicate acts (3) constituting a pattern (4) of racketeering activity (5) directly or indirectly conducts, or participates in the conduct of (6) an enterprise (7) the activities of which affect interstate or foreign commerce. Moss v. Morgan Stanley, Inc., 719 F.2d 5, 17 (2d Cir.1983), cert. denied, 465 U.S. 1025, 104 S.Ct. 1280, 79 L.Ed.2d 684 (1984). Defendants Vincent Tese and James Sinclair contend that the Amended Complaint does not adequately allege elements (2) — (6) with respect to them, and move pursuant to Rules 9(b) and 12(b)(6), Fed.R.Civ.P., to have it dismissed. The Amended Complaint is sixty-two pages long. It contains detailed factual allegations about the fraudulent trading scheme — how the scheme was marketed, how it was operated, how it was structured, how it was concealed. What’s more, the Amended Complaint makes these allegations, not in a vacuum, but against the backdrop of the criminal convictions of two of the defendants in this ease for the same acts that form the basis of plaintiffs’ civil claims. In light of the Amended Complaint’s comprehensiveness and context, there is little reason to suspect that this lawsuit is a “strike suit,” brought for the purpose of extracting a “nuisance value” settlement. The Amended Complaint certainly does not deserve Tese and Sinclair’s characterization of it as possessing not a “shred of factual detail,” and as alleging “in some unspecified way” violations of the federal securities, mail fraud and wire fraud statutes, all for the calculated purpose of catching defendants “within the maw of RICO.” Memorandum of Law in Support of the Motion by Vincent Tese and James Sinclair to Dismiss the Amended Complaint Pursuant to Federal Rules of Civil Procedure 12(b) and 9(b) and for Rule 11 Sanctions at 9. That said, Tese and Sinclair’s motion to dismiss requires us to focus not so much on the Amended Complaint’s overall merit as on the sufficiency of its allegations against particular defendants. As has already been noted, the heart of the Amended Complaint is the allegation that the managing general partners of the partnerships — Bernhard Manko, Jon Edelman, and Robert Bushnell — created the false appearance that the limited partnerships, through GCC and GSTC, engaged in billions of dollars worth of trades in government-backed securities with third-party trading counterparts. In reality, there was only one trading counterpart — T.S.M. Holding Corp. (“TSM”) — a corporation set up by Tese and Sinclair in June 1982 and owned by them until October 1982, when they transferred ownership, gratuitously, to defendants Robert Mauras and Charles Genovese. United States v. Manko, 979 F.2d at 903-04; Am. Compl. ¶ 39. The Amended Complaint alleges that Tese and Sinclair, both former business associates of Manko, 979 F.2d at 903; Am.Compl. ¶ 80, “encouraged the use of TSM as a counterpart to fictitious and prearranged trades among the investment partnerships, GCC and GSTC,” when they “knew, or recklessly disregarded the fact, that Manko and Edelman would use TSM to create bogus tax losses to be passed on to plaintiffs and other investors.” Am.Compl. ¶¶40, 41, 94(a). The Amended Complaint alleges facts showing that Tese and Sinclair stood to profit from the “loan” of their corporation to Manko and Edelman, Am.Compl. ¶¶ 84, 91, 94(e)-(e); that for the tax years 1982 and 1983, Manko, Edelman and their staff created false trade confirmations for more than $38 billion worth of fraudulent transactions between TSM and GCC/GSTC, Am.Compl. ¶¶ 89-90; and that the financial boon to the partnerships from these bogus transactions with TSM, as reflected in the partnerships’ financial statements, attracted new investors and caused old investors to retain their investments, Am.Compl. ¶ 75(b). We believe that these allegations, in conjunction with some others that we will presently discuss, are enough to state a claim against Tese and Sinclair under § 1962(c). 1. Enterprise. To begin with, plaintiffs adequately allege a RICO “enterprise” when they claim that an “association-in-fact” existed among (1) the defendants involved in promoting the discretionary accounts and the limited partnership interests, (2) the defendants involved in the process of actually conducting the fictitious trading activity, and (3) the defendants involved in looting the discretionary accounts and the partnerships. See Am.Compl. ¶ 120; 18 U.S.C. § 1961(4) (defining “enterprise” to include “any union or group of individuals associated in fact although not a legal entity”). An “association in fact” may consist of a “group of persons associated together for a common purpose of engaging in a course of conduct.” United States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 2528, 69 L.Ed.2d 246 (1981). It is proved by evidence “of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit.” Id. Here, the allegation is that a group of persons, orchestrated by Manko, Edelman, and Bushnell, informally associated over a period of roughly five years for the common, illegal purpose of operating a trading program on a phony basis and thereby garnering substantial financial rewards. See Am.Compl. ¶¶ 55-60. The Amended Complaint alleges that defendants attempted to run the illicit enterprise in a variety ways: trading through discretionary accounts, trading through the limited partnerships, trading through GCC, trading through GSTC, trading through so-called “mirror transactions,” etc. But the common goal of defrauding the investor/partners and deceiving outside auditors and tax authorities was constant, and it existed independently of the discrete actions taken by the defendants to further it. See Turkette, 452 U.S. at 583, 101 S.Ct. at 2528. Moreover, although some of the enterprise’s members — such as Tese and Sinclair — came on the scene after the enterprise had been formed, and left the scene before the enterprise had ended, Manko, Edelman, and Bushnell are painted as having formed a core group of personnel which lent the enterprise the continuity and unity of purpose indicative of a RICO “enterprise.” 2. Participation. Plaintiffs have also alleged facts from which it could reasonably be inferred that Tese and Sinclair participated in the conduct of this illicit enterprise. To participate in a RICO enterprise, “some part in directing the enterprise’s affairs is required.” Reves v. Ernst & Young, — U.S. -, -, 113 S.Ct. 1163, 1170, 122 L.Ed.2d 525 (1993). A defendant must have participated “in the operation or management of the enterprise itself.” Id. at -, 113 S.Ct. at 1172. While this operation-or-management rule is intended to spare from RICO liability true enterprise outsiders (such as outside accounting firms), we do not think it is so narrow as to spare the kind of key, if passive, insiders that Tese and Sinclair are alleged to be. For though Tese and Sinclair did not operate or manage the enterprise in the sense of involving themselves in the day-to-day processing of fraudulent trades and communications with investors and outside auditors, neither were they the sort of unwitting footsoldiers whose liability was at issue in United States v. Viola, 35 F.3d 37 (2d Cir.1994), cert. denied, - U.S. -, 115 S.Ct. 1270, 131 L.Ed.2d 148 (1995). They allegedly enabled the partnerships to function effectively by providing their own company, TSM, as the partnerships’ corporate trading partner. In so doing, they helped determine the enterprise’s modus op-erandi, and can be said to have “managed” its basic structure. Moreover, it is not unreasonable to assume that Tese and Sinclair exercised a degree of control over the enterprise as a whole because of TSM’s centrality to the scheme. The Second Circuit recently upheld a § 1962(c) claim against a defendant whose only alleged participation in a real estate tax shelter was that of allowing his name to be used on a bogus contract and showing up at the closing of the fraudulent property sale. See Azrielli v. Cohen Law Offices, 21 F.3d 512, 515, 521 (2d Cir.1994). In light of this decision, and for the reasons just given, we find little difficulty in concluding that plaintiffs have adequately alleged that Tese and Sinclair participated in the conduct of the RICO enterprise conceived and headed by Manko, Edelman, and Bushnell. 3. Predicate Acts. Plaintiffs allege that Tese and Sinclair engaged in three types of predicate acts: aiding and abetting securities fraud, mail fraud, and wire fraud. Am. Compl. ¶¶ 94, 121, 129. Tese and Sinclair argue that plaintiffs have not set forth facts from which it could be inferred that they acted with the intent to commit any acts of fraud, or that they even knew of the existence of the fraudulent tax shelter scheme. They invoke Ru