Working PIby Tony Jones, Senior Editor
Some of the biggest court cases in American history have been pursued under the Racketeer Influenced and Corrupt Organization (RICO) Act. Federal prosecutors have gone after the Hells Angels, John Gotti, Bernie Madoff conspirators, Enron and many others by applying this far-reaching federal law that provides for extended criminal penalties for acts performed as part of an ongoing criminal organization or enterprise.
RICO is the stuff of big-budget motion pictures, true crime dramas and what most of us envision when we think about organized crime, the mafia, drug trafficking and offenses like blackmail, bribery and extortion. But while the criminal application of RICO may garner headlines and be well-known to private investigators, there’s also a civil component that should draw your interest because it allows a private individual to file suit if they can show their business or property sustained injury from a racketeer.
One recent lawsuit in Alabama serves as an excellent example. In what was essentially a case involving a breach of corporate non-compete and non-solicitation agreements, Ketwork Investigations LLC, an Alabama-based PI firm that specializes in undercover work, played an integral role in building a case utilizing civil RICO and bringing about a speedy and positive resolution for its client.
Here’s an inside look into what spurred the lawsuit and the investigative techniques Ketwork used to assemble compelling evidence that led to a preliminary injunction against the defendant and spurred a sizable settlement in their client’s favor.
Backstory
In August 2020, Justin Taylor sold BT Holdings LLC (BTH), including its three subsidiaries and book of business—the term insurance companies use to describe their insureds—to Align Insurance Group LLC for $400,000 and a 20 percent stake in Align. As part of the deal, Taylor’s employees who had worked for BTH and its subsidiaries, including Harper Kranz, came to work for Align.
On July 22, 2022, Taylor sold his 20 percent interest in Align and signed an employment agreement with the company that included covenants “not to compete, not to solicit customers or employees, and not to disclose confidential information. The agreement also contained a clause prohibiting the disclosure of Align’s confidential information,” according to court documents.
Then, two months after signing his employment agreement with Align, Taylor left the company. Before long, the former BTH employees who had followed Taylor to Align, including Kranz, also quit. Taylor and Kranz then began working for Platinum Global Insurance Agency Inc. (PGIA), a Louisiana-based company that competed with Align in Alabama and Florida. According to the complaint, Taylor and Kranz contacted Align’s customers, “spread disparaging information about Align” to them and convinced several of the insureds to switch their business to PGIA.
The red flag for Align was a sudden proliferation of customers changing their insurance agent of record (AOR) from Align to PGIA. Align maintains that Taylor and Kranz personally helped Align’s customers complete their change of AOR forms necessary to move their business. When asked by Align why they had moved to PGIA, “the customers replied that they followed Justin Taylor or Harper Kranz there,” according to the complaint.
Investigation Launched
The large exodus of customers concerned Align and prompted it to investigate. Its parent company, 68 Ventures, contracts with Ketwork Investigations, which was called in to look into the matter. The PI firm initially looked at the case as a breach of contract that would be pursued through state court, but it quickly uncovered evidence that would allow civil RICO to come into play.
Ketwork began by doing a forensic analysis of Align’s books and found a single wire transfer of nearly $105,000 that Taylor allegedly sent from an Align bank account to his personal account. At that point, Ketwork reached out to law enforcement to see if they wanted to pursue a criminal case.
“Oddly enough, we couldn’t get enough interest,” says Ketrick Kelley, managing partner of Ketwork. “It was one count of wire fraud—pretty easy, low-hanging fruit—but we couldn’t get anybody interested in it.”
Kelley is a retired special agent with the FBI who has more than 30 years of investigative experience.
With still no interest from prosecutors to take up the case, Ketwork and Align began looking at the case differently. “Number one, we knew we had criminal activity,” notes Kelley. “And number two, how could we do this without being tied up in court for so long that it doesn’t make it worthwhile for the client? That’s when we started looking at civil RICO.”
One of the problems with breach-of-contract and similar corporate cases is they can take a long time to move through state court. In fact, Kelley says it’s not unusual for such a case in Alabama to drag on for six to eight years before it’s resolved.
“It’s been our experience in South Alabama that federal cases get fast-tracked,” says Kelley. “When we put together this case, by the time our client filed a complaint to the time the case was finished, it was between eight and 10 months before we had a resolution.”
Kelley attributes the speed partly to the federal system and partly to the amount of evidence that ultimately led to the plaintiff receiving a preliminary injunction order from the judge.
Applying Civil RICO
Two of the key aspects to this case as it applies to civil RICO are racketeering, which is essentially when someone obtains money via an illegal enterprise, and interstate commerce—the movement of money, goods, services or people between states, which includes transactions conducted across state lines electronically or through the mail. Given the increasingly interconnected nature of email servers and payment networks, demonstrating interstate commerce is easier. “If you send an email in Alabama, it might travel to an email server in Seattle, Washington, then back here to Alabama. The same thing happens with online payments,” observes Kelley.
Another important consideration in lining up a case to meet RICO requirements is how wide-reaching the statute was designed to be. “The federal government knew what they were doing when they put together RICO,” says Kelley. “It is so broad. There’s a list of 35 crimes—27 federal and eight state crimes. If you can prove that these crimes—in a pattern of activity of two in a 10-year period—occurred through an enterprise, you can pursue a civil RICO charge. Even though you’re proving fraud and wire fraud, you’re suing civilly for them committing those acts.”
And as Kelley points out, “In the civil arena, as far as contracts go, most everything is through an enterprise. [The distinction for PIs is] you’re not enforcing. We don’t have the authority as private investigators to enforce the fraudulent act, but we can sue you for committing it. We just have to prove it.”
The Scheme
In its lawsuit, Align accused Taylor of selling BTH’s insurance book of business to Align for $400,000 and then stealing it back after he left the company for PGIA. As it investigated and conducted interviews, Ketwork discovered that “Taylor has, on at least three other occasions, sold his book of business to buyers for a substantial sum of money and then took the customers back after the sale was completed,” according to the complaint.
As they continued to dig, Kelley and his team argue that they uncovered a multigenerational fraud operation. “Basically, the scheme was that this group would sell their book of business about every eight to 15 months. The underwriter remained the same, so the clients didn’t really know any different,” explains Kelley. “This book of business was handed down from father to son, so the customers were long-standing clients. They would sell the book of business, and then they would be hired on as managers to manage the clientele and make their transition smooth to the new company.”
In each case, Taylor is alleged to have brought his staff along to help oversee the process. For example, before they quit Align, Taylor’s employees—essentially a group of office workers who had not signed non-compete and non-solicitation agreements—sent internal Align documents from Align email accounts to their personal email accounts. The documentation included client lists with associated policy and premium information, client payment lists, customer certificates of insurance, invoices and other items that Align argued amounted to trade secrets and other proprietary information.
Ketwork’s investigation also uncovered emails sent by these staffers to customers informing them that the “team” had left Align due to an “awful” and “stressful” environment, and encouraged the insureds to follow others to the new agency.
Though PGIA was set up as a legitimate business, it allegedly began to work with and became part of the conspiracy with Taylor and Kranz. “Further, the two main guys [Taylor and Kranz] had some shell companies that they were using as transitional companies, which worked with PGIA,” says Kelley.
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Investigative Techniques
In addition to the $105,000 wire transfer, the other important crime to help tie this case to civil RICO was theft of trade secrets and proprietary information. To meet RICO requirements, Ketwork needed to prove illegal acts were conducted through an enterprise, which in this case were shell companies tied to Taylor.
To build the case evidence, Ketwork deployed a slew of different investigative techniques including researching the different companies connected to Taylor, data collection, digging into associations with businesses and people, surveillance, trash covers, subpoenas for records, conducting interviews and taking affidavits.
Surveillance played a key role because Ketwork wanted to prove that Taylor, Kranz and the other staffers were still working together. Initial surveillance was conducted at a house where the group met because they didn’t have an office. Documentation included pictures of their vehicles parked at the house during normal business hours, with registration tags matching the defendants and their associates.
During this time, Ketwork also performed a legal trash cover (confiscation of garbage placed by the curb), which uncovered handwritten notes that included some to-do items like “new logo” and “new website,” along with mention of two former Align clients and the PGIA acronym. This helped document that these staffers were still working together as well as contacting Align customers to solicit them to move to PGIA, notes Kelley.
In addition to the emails found on Align’s servers, subpoenaed emails revealed the staffers were communicating about the customer contracts they had downloaded. For example, one email from October 2022, with “signed align agreements” as the subject, says, ” Here are the agreements I pulled off the computer. I’m going to forward anything else I have in this email from when we were starting.”
By this time, Taylor and Kranz were working out of a business office. Court documents indicate the space was paid for by PGIA and leased to Taylor doing business as Tidewater Insurance Agency. Ketwork wanted to show Taylor and Kranz coming and going from the office, so it set up a “ghost” surveillance using a vehicle with a camera that was hooked up to an external battery source. The vehicle was parked on the street in a legal parking space, with the camera pointed toward the front door of the building. “We got them over the course of a week coming and going either together or separately,” says Kelley. “They both had keys. They both put their keys in the door and walked in.”
At this point, the case was coming together “like bricks to a house,” including signed affidavits by people from some of the businesses that had previously fallen victim to the same scheme, but Ketwork wanted to “close the loop” on everything it had gathered and prove the case definitively.
A Big Decision
Ketwork suspected that the office Taylor was renting likely housed the customer and policy documents from Align, so at the request of Align’s attorneys, the court issued a subpoena duces tecum, which under federal rules allows for an inspection of premises for the purpose of copying and photographing documents. However, after a week, the investigators received no response from the defendants, which had become customary over the course of the investigation. In fact, they ignored 12 different subpoenas over several weeks, according to an Align court filing.
With little recourse and much internal debate, Ketwork decided to also subpoena the landlord of the office building. It issued a third-party subpoena to get a copy of the office lease agreement as well as a subpoena to inspect the premises, which would allow investigators to “inspect, measure, survey, photograph, test, or sample the property of any designated object or operation on it,” according to the description on the document. In addition, Ketwork included an attachment that identified and described the items it wanted to photograph, “documents that fit specifically into one of four categories related to invoices, contact lists, anything to do with Align Insurance,” says Kelley.
“We want to operate in a realm that’s legal, that’s ethical and that is admissible. If you’re not hitting on all three of those, you’re wasting your time; you’re potentially getting yourself in trouble; and you’re certainly wasting the clients’ time and money,” explains Kelley. “So, we decided to issue a subpoena for a premises inspection and attach specifically what we were looking for on the premises.”
After confirming that the lease agreement allowed him to enter the office space as well as conferring with his attorney about the premises inspection, the landlord arranged for Ketwork to gain access to the office. Once inside, there were two desks, and “on one of the desks, immediately we could see our client’s proprietary information,” says Kelley, including paperwork for former Align customers that was adorned with the PGIA logo. There were also file folders of contracts and invoices that included all of the customer contact information that had been taken from Align as well as a PGIA checkbook for an account on which Taylor had been designated an authorized signer.
“So, we photographed all of that, put it back, and we left as we came,” recalls Kelley. “We knew it was an aggressive move, especially from a civil standpoint, but we were really left with no option. They were ignoring our request for document production, and we felt based on all the other evidence that we had gathered throughout the investigation that we could justify what we did. And, as it turns out, not only was it admissible, but it was also sort of the nail in the coffin for them, and that’s why we were able to get the preliminary injunction.”
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Court Ruling
Indeed, Chief U.S. District Judge Jeffrey U. Beaverstock granted Align’s motion for a preliminary injunction, opining there would be a “substantial likelihood” that Align would succeed on the merits of its claims for breach of contract and tortious interference. As a result, he ruled that Taylor, and anyone acting in concert with him (including Kranz and PGIA), is prohibited from soliciting or providing insurance services to customers that were Align insureds while Taylor was employed at Align as well as potential clients in areas where Align conducts business. The preliminary injunction does not apply to the former Align customers that switched to PGIA prior to the court’s ruling.
All defendants are also prohibited from “disclosing, using or otherwise seeking benefit from Align’s confidential, proprietary and trade secret information taken from Align by them or anyone in concert with them,” according to the court order.
After the judge’s ruling, a confidential settlement was reached.
Importance of Documentation
Besides highlighting the possibility of applying the RICO statute to civil suits, one of the key takeaways for private investigators in this case is the importance of documentation. Ketwork’s meticulous and methodical gathering of evidence played a key role in helping Align’s attorneys convince the judge to grant the preliminary injunction.
Documentation of investigative actions is also critical in protecting your business. During a trash cover, for example, Ketwork will try to take timestamped photographs of the garbage that show a mailbox in the foreground to prove it was by the curb at a specific address. Investigators also videotape themselves as they take the garbage bags to a separate location to go through them, says Kelley.
Recording interactions with people connected to a case is also important whenever possible. For example, the day after Ketwork performed the premises inspection, attorneys for Taylor and Kranz filed a motion for an emergency evidentiary hearing to temporarily stay discovery. The defendants argued that the court’s order permitting Align limited expedited discovery “did not squarely address” Align’s request for using “subpoenas duces tecum on third parties,” which Ketwork used to compel the office-building landlord to provide access. They also claimed the subpoena left unchecked the box indicating a premises inspection.
In addition, they accused Ketwork of misrepresenting themselves as FBI agents, including the flashing of an FBI badge, when issuing subpoenas in person and claimed Kelley had threatened the building landlord with an FBI raid if he didn’t comply with the subpoena.
In counter arguments, Align attorneys showed that the subpoena issued for the premises inspection had its checkbox marked and suggested the unchecked example submitted by defense counsel had been doctored.
The accusations of Ketwork investigators misrepresenting themselves as FBI agents were also dispelled. Kelley notes that the government takes away agents’ badges when they retire. “We have NEVER threatened or insinuated an FBI raid, or any current connection with the FBI,” Kelley said in his sworn affidavit. “While our retired FBI status is on our business cards and can be a rapport builder, we’ve never, ever used it to intimidate, threaten, insinuate, etc.”
As to threatening the building landlord with an FBI raid, “I recorded the entire encounter with the landlord and all other witnesses that we interviewed,” notes Kelley.
“[The defendants] actually brought the landlord into the emergency hearing,” recalls Kelley. “I think he was the first witness to be called under direct examination. As he’s walking up to the stand, our counsel said, ‘Just to let the court know, we recorded all of the conversations that happened with this witness while he was being served and at the site when the subpoena was served. And we’ll be using it for purposes of cross examination.’ The guy stopped dead in his tracks.”
As a result, Kelley says Align’s attorneys were able to parry off the defense attorneys’ accusations and get all their evidence admitted to the court.
While it helps that Alabama, where Ketwork operates, is a one-party state in which only one person needs to know a recording is happening (as long as the consenting individual is a participant in the conversation), thorough documentation can cement a case and protect the integrity of your business.
“It doesn’t matter what happened; it matters if you can prove it happened. If you don’t document it, it didn’t happen,” asserts Kelley. “Everything must be corroborated as many times as you can. You and I can talk about having this conversation, but we may not recall it unless somebody pulls out the recording of it. Everything that we do has to be lawful, ethical and admissible. It’s like a three-legged stool.”
Ultimately, whether a case can be applied to civil RICO depends on several factors, but private investigators should be aware that cases that qualify could speed up resolution in many jurisdictions.
“If you’re confident and you can prove it, you can put together a case like this to get some resolution faster for your client. It can be a powerful tool in a PI’s toolkit,” says Kelley.
About the Author
Tony Jones is the former Senior Editor of Working PI magazine, published by OREP, a leading provider of E&O insurance for real estate professionals. Based in San Jose, California, he has nearly 30 years of business publishing experience and graduated with a bachelor’s degree in journalism from the University of Arizona.
We’re always listening. Send your story submission/idea to the Editor: kendra@orep.org.
