Restatement (Third) of Torts § 12 (1999). Section 1955 and RICO were enacted together as part of the Organized Crime Control Act of 1970, Pub. L. 91-452, 84 Stat. 922 (the “OCCA”). The statement of findings that prefaces the OCCA expressly refers to “harm to innocent investors” Case 1:10-cv-06234-LBS Document 33 Filed 03/25/11 Page 40 of 49 34 and the corruption of “legitimate businesses” in connection with “syndicated gambling.

See United States v. Loder, 23 F.3d 586, 591 (1st Cir. 1994). And a general suspicion on a defendant’s part that his participation in certain conduct was “for some nefarious purpose” is not enough to make such a defendant guilty of aiding and abetting an alleged violation of Section 1955.

Plaintiff selectively quotes language from the preface of the Organized Crime Control Act of 1970 (“OCCA”)—the law that enacted Section 1955 and RICO—to argue that these statutes were designed to protect “innocent investors” such as herself.

See supra Section I. Similarly, plaintiffs’ own Complaint and stipulation dismissing AllianceBernstein establish that the alleged predicate acts consist merely of the purchase of publicly traded shares in lawful European companies, which cannot sensibly be viewed as a violation of Section 1955. Case 1:08-cv-07650-DLC Document 46 Filed 10/27/08 Page 22 of 25 18

Just as in Liparota where the Court held that the defendant must have knowledge of the fact that the food stamps he possessed were "unauthorized by statute or regulations," 471 U.S. at 425, 105 S. Ct. at 2088 (citing 7 U.S.C. § 2024(b)(1)), under IGBA's knowledge requirement, defendants must know that their otherwise lawful payment processing activity was in connection with a "gambling business which . . . is a violation of the law of a State of political subdivision in which it is conducted." 18 U.S.C. § 1955(b)(1)(i). Therefore, the government must prove that defendants knew that online peer-to-peer poker, for which they were processing payments, was illegal under state law and defendants should be permitted to introduce evidence that they did not have such knowledge.

Similarly, although not directly concerning what constitutes a predicate act per se, United States v. Indelicato, 865 F.2d 1370, 1384-85 (2d Cir. 1989) (cited by plaintiff) Case 1:08-cv-08857-DLC Document 45 Filed 09/18/09 Page 21 of 24 -17- involved three murders, each of which constituted a separately indictable murder, even though they occurred virtually simultaneously. Each of these cases, then, supports the argument that Plaintiff has alleged but one RICO predicate act: the ownership of PartyGaming stock, which Plaintiff argues is a violation of 18 U.S.C. § 1955. The purchase of an ownership interest in an illegal gambling operation is not one of the enumerated violations in section 1955, and each separate purchase would not be separately indictable, since the proof required (illegal gambling operation plus ownership) would not differ.

Finally, plaintiffs argue that Rule 8(a)(2) does not require them to plead the individual state laws that were allegedly violated. To the contrary, “the particular state statute alleged to have been violated is an essential and substantive element of a violation of 18 U.S.C. section 1955.” United States v. Miller, 774 F.2d 883, 885 (8th Cir. 1985).5 III. AS AN ADDITIONAL BASIS FOR DISMISSAL, PLAINTIFFS’ CLAIMS ARE DERIVATIVE, AND PLAINTIFFS HAVE FAILED TO PLEAD DEMAND FUTILITY Plaintiffs have no ability to bring direct claims under RICO to redress injury to the Funds, a principle they concede.

To be an “illegal gambling business” under the Gambling Act, the gambling business must have violated at least one state anti-gambling law. 18 U.S.C. § 1955(b)(1). Here, the illegal gambling businesses 19 Defendants’ reliance on Morrison v. Nat’l Aus.

at 25-26. Those paragraphs, however, merely contain conclusory allegations that the Funds “purchase[d] shares in ‘illegal gambling businesses as that term is used in 18 U.S.C. § 1955,” Compl. ¶ 37, or recite almost verbatim the elements set forth in Section 1955.

Vanguard Memorandum at pp. 14-15. Section 1955 should be read narrowly, see United States v. Bridges, 493 F.2d 918, 922 (9th Cir. 1974), and no court has read 18 U.S.C. § 1955 to impose liability merely for purchasing publicly traded shares with no other involvement in the company. In sum, the Complaint fails to adequately alleged any RICO predicates acts.