Dechert’s Alleged Hacks Draw Uncommon Civil Racketeering Claims

Two lawsuits against Dechert LLP for its alleged role in an international “hack and dump scheme” will likely face challenges in proving the global law firm is civilly liable under a racketeering law, an unusual claim in cyberattack cases, attorneys say.

Last month, an Iranian American aviation executive and a former Wall Street Journal reporter separately sued Dechert and a litany of other entities, both claiming civil violations of the federal Racketeer Influenced and Corrupt Organizations Act after the firm allegedly led a hacking campaign to steal and reveal documents and communications that damaged their respective businesses.

That statute is most commonly used in the non-criminal context to address business disputes, and civil RICO cases over computer hacking are uncommon, attorneys say.

Despite the fact-specific nature of the Dechert litigation, RICO could be attractive to plaintiffs because it offers triple damages and attorneys’ fees, lawyers said. However, RICO litigation is highly complex and difficult to win, they added.

“Because the civil RICO claims have these draconian penalties, courts look at civil RICO claims very strictly,” said David Stander, a solo practitioner who spent two decades as a trial attorney for the Department of Justice’s Organized Crime and Racketeering Section.

Defendants seeking dismissal of civil RICO claims “usually” prevail, he said. “If I were to give a percentage, I’d say maybe 80% of the time they’re successful,” Stander said.

Hacking Allegations

Both cases claim that Dechert partner Neil Gerrard, the firm’s former co-head of white-collar litigation, helped orchestrate an effort that began as early as 2015 to hack aviation executive Farhad Azima’s email accounts and publish his messages, photos, financial records, and other information on behalf of Gerrard’s alleged client, the Ras Al Khaimah Investment Authority.

RAKIA, which is the sovereign wealth fund of a member of the United Arab Emirates, and Azima were embroiled in litigation over a hotel sale, and the “hack and dump scheme” was intended to give the emirate leverage, according to the two lawsuits.

Dechert and others are accused of engaging in various racketeering activities related to the hacks and attempts to cover them up. Azima is seeking over $100 million in damages. He also filed suit in the UK over the hack, bringing various proceedings in the US to gather more evidence for the case across the pond.

Former WSJ reporter Jay Solomon said in his lawsuit that his communications with Azima, who he considered a source, were stolen by the hackers and shared with his employer in an effort to discredit his work.

Azima reportedly offered Solomon a small stake in one of his businesses, and the journalist was subsequently fired from the WSJ, “blackballed” by the journalism industry, and lost money on book publishing contracts, according to the lawsuit. Solomon is seeking at least $75,000 in statutory damages and “and further monetary damages in an amount to be proven at trial.”

Dechert LLP denied the claims in both lawsuits in an emailed statement, and attorneys for Gerrard and Azima did not respond to multiple emailed requests for comment.

Cases’ Strengths, Weaknesses

Illegal hacking doesn’t qualify as a predicate RICO crime, but it could be associated with other acts that are applicable under RICO like theft of trade secrets or economic espionage, former DOJ attorney Stander said.

Based on the facts presented in Azima’s complaint, the lawyers missed an opportunity to cite two federal laws that address hacking activity and qualify for civil RICO claims, said Jay Bogan, a Kilpatrick Townsend & Stockton LLP partner who represents businesses in civil RICO litigation.

The alleged hacking and stealing of trade secrets for the benefit of a foreign actor would fall under both the Federal Defend Trade Secrets Act and the Federal Espionage Act, Bogan said. The most common statutory method of addressing hacking, the Computer Fraud and Abuse Act, does not fall under RICO, he added.

Azima’s lawsuit includes a litany of other allegations—like obstruction of justice and witness tampering related to covering up the hack—that are predicate crimes under RICO and are better suited to implicate the wide umbrella of that statute, according to Bogan.

But while the Azima lawsuit is well organized and presents compelling details to tie its allegations to civil RICO violations, the case presented by Solomon contains less direct evidence to support its RICO claims, he said.

Solomon’s lawsuit is less likely than Azima’s to survive a motion to dismiss, said Bridget DuPey, an associate at Brownstein Hyatt Farber Schreck LLP who penned a blog post series on civil RICO law for the firm.

“I was struck by kind of a lack of detail in the Solomon complaint that was present in the Azima complaint, not in a way that necessarily makes it fatal,” DuPey said. “But pleading particulars as in dates and times and who participated in conversations, where they occurred, things of that nature, did seem to be a bit lacking in that regard, which could make it more susceptible to such a challenge.”

The ties to RICO violations in Solomon’s lawsuit are “sloppy,” and fail to provide enough details that establish a pattern of racketeering activity to the standard civil RICO claims requires, Bogan said.

Litigation Implications

DuPey also pointed out that Solomon’s claims may fall outside of the four-year statute of limitations for bringing civil RICO claims. Solomon was fired from the WSJ in June 2017.

Courts have handled the issue of when the limitations countdown starts differently, so a ruling on that aspect of Solomon’s case could set new precedent, DuPey said.

A key focus of Solomon’s lawsuit is the reputational damage he suffered after the publication of his communications with Azima and firing from the WSJ. Whether that qualifies as a harm to business sufficient to bring a civil RICO violation claim is an open question that could be answered by the courts, DuPey said.

The level to which Dechert LLP is held liable for the conduct of an employee also remains to be seen, Dupey said. Both lawsuits accuse the firm of being “willfully blind” to actions pursued by Gerrard and others.

Solomon, in an emailed statement shared by his lawyer, said hacking campaigns like this are a threat to press freedom and called for steps to protect journalists and their reporting abilities.

“This case illustrates how powerful individuals and entities can deploy vast resources and spend vast sums with the aim of silencing a journalist,” he said. “And it’s a trend that’s becoming a greater threat to journalism and media, as digital surveillance and hacking technologies evolve and become more potent and pervasive.”