The case is Sarah Edmondson et al, v Keith Raniere et al. The venue is the US District Court in the Eastern District of NY. The judge is US District Court Judge Eric R. Komitee.
A hearing was held on February 1, 2023 to hear oral arguments for motions to dismiss against defendants, Clare and Sara Bronfman, Nicki Clyne, Brandon Porter and Danielle Roberts.
Defendants Raniere and Kathy Russell made no appearance.
Judge Eric Komitee is presiding in the civil case against Raniere.
In part 1, we left off with the plaintiff’s attorney discussing how Clare Bronfman’s criminal immigration fraud against Sylvie Lloyd is one of two predicate acts required for civil RICO.
Craig Martin of Willkie Farr & Gallagher, LLP of Chicago appeared for Clare Bronfman.
Bronfman’s attorney Craig Martin addressed this issue.
MARTIN: … RICO injury is different than just any injury. It’s got to be injury to business or property. RICO requires you to connect the dots from the common purpose of the [racketeering] enterprise through the predicate acts to causation and to injury for business and property.
THE COURT: That could be true… [the plaintiffs allege] your client entered a plea of guilty before Judge Garaufis on this [immigration] crime, albeit as to a different person [Sylvie, who is not a plaintiff in this civil case]. And the allegations in the [civil] complaint here are substantially identical, even though they relate to different people. If it’s enough to make the criminal violation for Judge Garaufis….
MARTIN: … [Clare’s] plea is to a particular person [Slyvie], who is not a plaintiff in this case and doesn’t qualify as a predicate act in this case.
THE COURT:…. [Clare in her criminal pleading] says ‘I facilitated this person’s [Sylvie’s] ability to live and work in our country in a way that would be undetected.’ And Judge Garaufis says, ‘okay, that suffices to make it a violation of [immigration law] §1324.’
That factual statement of ‘facilitated someone’s ability to live and work’ in our country in a way that’s undetected, I’m not seeing a categorical difference between that and what’s alleged in the complaint. Yes, as to different people, but same factual substance. No?
MARTIN: … When you look at the three people that there’s allegations about, which are Camila, Adrian, and Daniela, I don’t think that that matches up to what she was pleading to [with Sylvie] in the criminal case… there’s a reason that Ms. Bronfman pled to one and not the others…. I do not think that the allegations with regard to Camila… or Adrian, or Daniela match that particular issue in the same way. …as best I can tell, there’s a conversation that goes on …in which Ms. Bronfman allegedly says that I’m not going to give you access to my lawyer…
THE COURT: Well, then why isn’t saying ‘I’ll help you support yourself, I’ll give you access to this …T-shirt company [Raniere and Clare allegedly promised Adrian an opportunity to stay in the USA and run a T-shirt company] and its equipment. And you can keep a share of the profits.’ Why isn’t that substantially the same as alleging that ‘I substantially facilitated her ability to live and work in our country in a way that would be undetected?’
MARTIN: I don’t know what ‘undetected’ means….from the sentencing hearing…. but I do know from the guilty plea… there’s a huge difference between giving somebody the opportunity to participate in a T-shirt company and harboring or concealing or shielding from detection.
In fact, that seems exactly the opposite to me… if you’re going to work at a T-shirt company, you’re going to be out there working. That’s not concealing or harboring or shielding from detection.
THE COURT: … This is a legal question. Maybe if you say to somebody you can work indoors and print T-shirts and make money, they’re less likely to be detected by the immigration authorities than… if they’re out on the street begging for money…
MARTIN: … there’s nothing in the [civil complaint] allegations that is talking about ‘shielding from detection’… There’s… no allegation that [Adrian] was put in a basement, they were printing T-shirts, they were not allowed to leave the basement. They had to put the T-shirts on a dumbwaiter to go upstairs for somebody else to sell.
THE COURT: Yeah, but there’s no factual statement about any of that stuff in [Clare’s criminal] plea allocution either. And we have a determination that that was legally sufficient to make out a §1324 violation, yes, albeit as to other people..: I think it would be helpful… to bear down on the legal question of whether giving someone… an equity stake in this T-shirt venture and promising them a share in the profits, suffices to establish concealment, harboring, or shielding from detection…. I think [this] might be where the rubber meets the road…
[Later in the proceedings]
THE COURT: we were talking about whether or not the complaint established a pattern of racketeering by Ms. Clare Bronfman and that the pattern has to be established by two predicate acts within 10 years.
Aiten Goelman, the attorney for the plaintiffs spoke.
GOELMAN: Jane Doe 12 [Sylvie] is the one that Ms. Clare Bronfman pled guilty to harboring.
THE COURT: And that’s the alleged predicate act?
MR. GOELMAN: That is one of many predicate acts that is alleged in the complaint.
THE COURT: Okay, so take that as a given that [it is] a predicate act… ou still need a second one. … who else has Clare Bronfman concealed, harbored, or shielded from detection, and how? And when we talked about Adrian and whether he qualifies or not, I think I still have a legal question about whether giving somebody a job, knowing that they’re in the country illegally, constitutes a federal crime of shielding somebody from detection….
Or is something more than just giving somebody a job required?… let’s say there was a predicate act committed as to Adrian, Adrian also has to show injury…. And… does his injury have to emanate from the predicate act…? And if that’s the case, how is he injured by being harbored?
GOELMAN… With respect to Ms. Bronfman and the difference between what she pleaded guilty to and what happened not just to Adrian, but also to Lindsay, and also to Camila, there’s really not any principle difference…. Your Honor, it’s not just that [Adrian] wasn’t out there begging on the street … it’s a whole scheme to hide his presence…. He’s not given a W-2. … the books…were cooked… in order to deceive immigration authorities.
And it’s not just ‘I’ll give you a job.’ It’s also ‘don’t go to the authorities. Don’t get legal. Don’t go back to Mexico and apply for a visa.’ I mean, that is actively concealing the detection of somebody who’s here illegally….
THE COURT:… There’s no specific… allegations against Clare Bronfman that would cause mail or wire fraud, is there?
MR. GOELMAN: Well, there are…. all Defendants actually were defrauding members of NXIVM.
THE COURT: …. Point me to the complaint where we see what Clare Bronfman is doing that would satisfy that standard?
GOELMAN: …all the different positions [Clare] held… on the executive board, founder of ESF [Ethical Science Foundation], part of the inner circle….
THE COURT: Okay. Companies commit securities fraud all the time. And they have boards of directors who oversee everything happening at the company. And it doesn’t mean that every member of the board of directors is criminally liable for securities fraud, right?… just because she held positions of authority… if there was a fraud committed somewhere [in] the organization, she’s automatically responsible, right?… where does the complaint speak with particularity to Clare Bronfman’s… knowledge of and participation in mail or wire fraud other than just by reference to her high ranking position?
GOELMAN: … there are directors who are sued by the SEC or CFDC or sued civilly that have… far less involvement in the actual crime than Ms. Clare Bronfman did here…
THE COURT: But you have to have some involvement and you have to have knowledge…. I think there’s literally nothing alleged about her specific participation or knowledge….
GOELMAN: …I bring up Clare Bronfman’s title … because it is not just a title. It is also a position that confers authority…. she was Raniere’s righthand man in developing the curriculum. And the curriculum was based on lies. It was designed to and did entice people to pay a lot of money for basically garbage. And if somebody is on the executive board and in charge of finance and in charge of legal I don’t think you can say.. she had [no] idea about the multi-level marketing scheme.
THE COURT: Well, if I matriculated into college on the basis of representations on that I’m going to get a world class education and have all kinds of job prospects, and then, it turns out that my professors were all terrible and I don’t get a job,.. that’s not enough to allege fraud with particularity…. there’s got to be some concrete misrepresentation or omission…
GOELMAN: … …But here, we’re talking about a much smaller organization –
THE COURT: What’s the lie?
MR. GOELMAN: That this rational inquiry is this patented wonderful –
One of Keith Raniere’s patent applications was for a treadmill of a unique style.
THE COURT: There’s a patent pending. …I would think you’d have to allege that there’s no patent pending.
GOELMAN: …I believe that there were misrepresentations about whether the technology was …patent… pending. There were definitely misrepresentations about how this could change your life. And there’s basically repackaged cognitive therapy. And it was sold to these people as this brainchild of the smartest man in the world.
THE COURT: And you say he’s not actually the smartest person in the world? I’m just kidding. But… there are psychotherapists up and down the West side of Manhattan making grandiose claims about how psychotherapy can change a person’s life. And some people surely come out of therapy believing that it has not lived up to those aspirations. And so, again, … [where] in the 200-plus page complaint … are the misrepresentations that we’re going to tag Clare Bronfman with responsibility for.
GOELMAN: … paragraphs 593 …., talks about the misrepresentations… about why Rational Inquiry was not eligible for patent protection.
THE COURT: Okay. … so paragraph 593 actually refers to a bogus patent application. … you allege that that patent application was destined to fail.
GOELMAN: As all of them beforehand, yes.
THE COURT: All of NXIVM’s applications?
GOELMAN: All of Raniere’s patent applications, yes.
THE COURT: Okay.
GOELMAN: And then, Your Honor, the following paragraphs talk about some of the other lies that Raniere is the world’s smartest person with an IQ of 240.
THE COURT: … is that actionable as mail or wire fraud that somebody says I’m the smartest person in the world? Like there’s no basis on which somebody to credibly make that claim –… unless they knew all 7 or 8 billion people and had them all IQ tested. Like nobody could be injured by that claim, it seems to me.
Corporate Books for several of the NXIVM-related corporations that owned the technology..
GOELMAN: Your Honor, if I am… looking for a religion or a philosophy to help me make sense of my life, and I… walk by the NXIVM or ESP storefront and they say here’s this wonderful technology, patent pending, and it’s … from this smartest man in the world, Keith Raniere, who is an ascetic. He doesn’t care at all about worldly things. And he’s celibate. And he has been inventing things since he was… six [years old]. Those are all lies.
Now, Your Honor, you may not fall for it. You might keep walking but those are statements that are designed to induce someone to come in and give their credit card and take an intensive … that cost them thousands of dollars. That’s fraud.
THE COURT: Okay, what’s the best mail or wire fraud case for the proposition that statements like I’m the smartest person in the world and my program will change your life are actionable bases for a mail or wire fraud prosecution?
GOELMAN: For securities fraud… there’s a line between puffery and… actionable, misleading, or false statements. …
THE COURT: Well, and also [a line] between [facts and] statements of opinion. ‘this program will change your life,’ that’s not really falsifiable other than by reference to the subjective experience of the person who feels their life was or was not changed, right? The initial presentation has to be something that is susceptible to being proven true or false…. You may be … able to prove at trial that Mr. Raniere was not the smartest person in the world. That seems…. falsifiable maybe. But claims about the psychic effects in terms of self-esteem and well-being… have you seen a mail or wire fraud case where that was the ….subject matter of the misrepresentations?
In the 1989 Australian edition of the Guinness Book of Records, Raniere is listed as tied with one other for holding the highest IQ for a certain IQ test.
GOELMAN: …, I can get back to you about the best mail or wire fraud cases we have. … it’s not just ‘this is going to change your life and we’re awesome.’ It’s also based on Keith Raniere. I mean, he’s the brand… kind of godhead figure and all the qualities that he says he had weren’t true. I mean, they are falsified. He wasn’t an ascetic. He wasn’t celibate. He was sleeping with 15 year olds. And if that fact had been told to the person walking down the street in… whatever city, I think that would be pretty material.
THE COURT: Okay.
Stay tuned for Part 3.
