United States District Court, D. Minnesota
DeWayne A. Johnston, Esq., Johnston Law Office, Grand Forks, ND, on behalf of Plaintiff.
Kip M. Kaler, Esq., Kaler Doeling PLLP, Fargo, ND, on behalf of Defendant James Nelson; Todd E. Zimmerman, Esq., Fredrikson & Byron PA, Fargo, ND, on behalf of Defendants Chris Feller, Randy Skjerven, and AgCountry Farm Credit Services, ACA.
MEMORANDUM OPINION AND ORDER
ANN D. MONTGOMERY, District Judge.
On April 21, 2015, the undersigned United States District Judge heard oral argument on Defendant James Nelson's Motion to Dismiss [Docket No. 30] and Defendants Chris Feller ("Feller"), Randy Skjerven ("Skjerven"), and AgCountry Farm Credit Services, ACA's ("AgCountry") Motion to Dismiss [Docket No. 34]. Plaintiff Steven Nelson opposes the motions. For the reasons set forth below, both motions are granted.
Steven Nelson ("Steven") brings civil claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., against James Nelson ("James"), the AgCountry financial institution, and two of AgCountry's employees, Feller and Skjerven (collectively, the "Defendants"). Steven alleges the Defendants conspired and engaged in racketeering activities through a pattern of false financial reporting, fictitious financial transactions, tax evasion, theft, and other conduct.
A. The Parties and Legal Entities
Steven and James are brothers. Together they operated J&S Nelson Farms, LLP ("J&S" or the "Partnership"), a Minnesota and North Dakota registered farming partnership in which Steven and James each owned an equal share. Am. Compl. [Docket No. 29] ¶¶ 12, 13, 20. J&S was formed in 1998 and farmed grain and sugar beets in the Red River Valley. Id . ¶ 29. At all relevant times, J&S was governed by a written partnership agreement. Compl. [Docket No. 1] Ex. 1 ("Partnership Agreement"). The Partnership Agreement designates Steven and James as 50/50 partners in J&S's profits or losses. Am. Compl. ¶ 51. James was responsible for the Partnership's financial matters; he managed the Partnership's books, accounting, and taxes. Id . ¶ 52. All Partnership organizational and financial documentation was kept in his home. Id . ¶¶ 52-53. Steven is no longer involved in the Partnership. Mem. Opp'n. Mot. Dismiss [Docket No. 38] 7. The current state of the Partnership and its ownership structure is not reflected in the record.
AgCountry is a federally chartered, member or borrower owned cooperative regulated by the Farm Credit Administration pursuant to the Farm Credit Act of 1971, 12 U.S.C. § 2000, et seq.  At all relevant times AgCountry performed accounting and tax return services for J&S. Am. Compl. ¶ 54. Feller is a Senior Tax Specialist with AgCountry who provided tax planning, preparation, and book-keeping services to J&S. Id . ¶ 6. Skjerven is a banker with AgCountry who assisted J&S with loans and other banking transactions. Id . ¶ 15.
While not named as defendants, the Amended Complaint generally alleges that James' sons, Brian and David, are also involved in the events underlying this dispute. Brian is a farming partner of his father and with J&S, is an employee of AgCountry, and barters with the Partnership through his father. Id . ¶ 61. Feller is a co-worker and a superior at AgCountry. Id . ¶ 36. David also farms individually and with his father, and barters with the Partnership through his father. Id . ¶ 62. In addition, other partnerships and legal entities are alleged to serve roles in the alleged conspiracy. These entities include James M. Nelson Limited, the James M Nelson & Steven B Nelson Partnership, the J&S Nelson Farms LLP & Steven Nelson Partnership, the J&S Nelson Farms LLP & James M Nelson Partnership, and the Nelson-Freeland Limited Partnership (collectively, the "Other Entities"). Id . ¶ 5.
B. The Scheme
Steven alleges the Defendants committed mail and wire fraud, tax evasion, forgery, bank fraud, and money laundering. According to Steven, beginning in 1998, James, in concert with AgCountry employees Feller and Skjerven, diverted J&S funds for the economic benefit of the Defendants. Steven alleges James used income and estate planning techniques that primarily benefitted him and his family at the expense of Steven and J&S. According to Steven, this conduct increased James' distributions, while decreasing J&S's income and the funds available for distributions to Steven. Steven also alleges James withdrew money from J&S to pay personal expenses-bills, taxes, loan obligations, home improvements, and more-and to purchase land for personal use. Steven maintains Feller participated in the scheme by using his accounting expertise to hide James' expenses as legitimate J&S business expenses by preparing and filing false Partnership tax documents with the IRS. Steven alleges Skjerven participated in the scheme by initiating wire transfers from the J&S account at James' request, filing false and forged loan applications, structuring high interest loans that benefited AgCountry and harmed J&S, and employing loan manipulation techniques to disguise the scheme from the Federal Farm Program and from Steven.
A. Motion to Dismiss ...