White Collar Crime Prof Blog

More on Boyle

The Supreme Court's decision in Boyle clarifies the law on association-in-fact enterprises in RICO.  (See here). For an in-depth analysis of this decision, see Hugh Kaplan's piece in BNA's Criminal Law Reporter & White Collar Crime Report -  Reproduced with permission from Criminal Law Reporter, 85 CrL 347 (June 10, 2009). Copyright 2009 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com

-Download Boyle.BNA.

(esp)(with thanks to Mike Moore and BNA for the reprint permission)

Supreme Court Decides Boyle - RICO Enterprise Case

In a 7-2 decision, the Supreme Court held that yes - RICO association-in-fact enterprises require an "ascertainable structure beyond that inherent in the pattern of racketeering activity in which it engages, but no - "an instruction framed in this precise language is not necessary." (Boyle v. United States). In the first part of the decision, the Court looks are three questions - "First, must an association-in-fact enterprise have a 'structure'? Second, must the structure be 'ascertainable'? Third, must the 'structure' go 'beyond that inherent in the pattern of racketeering activity' in which its members engage?"  The decision relies heavily on Turkette.

The Court held that an association-in-fact enterprise needs to have "three structural features: a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise's purpose."  But despite the Court stating that these three features are needed, it does not require that the jury be told many specifics. The Court found that the instruction given "properly conveyed the point [  ] made in Turkette, that proof of a pattern of racketeering activity may be sufficient in a particular case to permit a jury to infer the existence of an association-in-fact enterprise.

This decision is very helpful for government prosecutions in that it allows RICO cases to be brought with the jury being told a minimal amount of what is required for a RICO enterprise.  The Court states:

Such a group need not have a hierarchical structure or a "chain of command"; decisions may be made on an ad hoc basis and by any number of methods—by majority vote, consensus, a show of strength, etc. Members of the group need not have fixed roles; different members may perform different roles at different times. The group need not have a name, regular meetings, dues, established rules and regulations, disciplinary procedures, or induction or initiation ceremonies. While the group must function as a continuing unit and remain in existence long enough to pursue a course of conduct, nothing in RICO exempts an enterprise whose associates engage in spurts of activity punctuated by periods of quiescence.

The question likely to be asked now is - what is not an association in fact enterprise for RICO. In this regard, the Court gives an example in footnote 4 (why are the best footnotes always numbered 4), where the Court states:

It is easy to envision situations in which proof that individuals engaged in a pattern of racketeering activity would not establish the existence of an enterprise. For example, suppose that several individuals, independently and without coordination, engaged in a pattern of crimes listed as RICO predicates—for example, bribery or extortion.Proof of these patterns would not be enough to show that the individuals were members of an enterprise.

A two-person dissent (Stevens and Breyer) offers a more limited and structured view of what should be included within the word "enterprise." They state that "Congress intended the term 'enterprise' as it is used in [RICO] to refer only to business-like entities that have an existence apart from the predicate acts committed by their employees or associates."

See also Scotus Blog here

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NACDL Files Amicus Brief in Boyle Case

The National Association of Criminal Defense Lawyers (NACDL) filed an amicus brief in the RICO case, Boyle v. United States, a case before the Supreme Court.  It is argued that,

"This Court should reverse and hold definitively that a RICO enterprise requires structure apart from a random association of individuals to commit crime. RICO did not and could not create a federal felony for “a pattern of racketeering activity.” If an alleged RICO enterprise need not have structure, then the statute’s explicit enterprise requirement is meaningless."

For background and commentary on this issue, see the prior post here.

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Podcast on RICO Case By Interim Dean Alan Michaels

Brian Leiter on his blog links to the May 28, 2008 appointment of Alan Michaels as Interim Dean at Ohio State. Michael's appointment results from Dean Nancy Rogers stepping down as dean to serve as the Interim Ohio Attorney General. It reminded me that Dean Michaels, who teaches white collar crime, has a link to a thoughtful podcast on his webpage that discusses the RICO decision - Wilkie, Charles, et al. v. Robbins, Harvey.  Check it out here.

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The Boyle Case & RICO Enterprises

Although the Racketeer Influenced and Corrupt Organization Act (RICO), enacted in 1970, was focused on organized crime, its use in the white collar sphere is common. One finds RICO charges in many corruption and fraud prosecutions. The United States Supreme Court recently accepted on certiorari a RICO case that will hopefully resolve one of the nagging issues that pervades this area of the law. The Court, in the case of Boyle v. United States, will look at the issue: "does proof of an association-in-fact enterprise under the Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. §§ 1962 (c) - (d), require at least some showing of an ascertainable structure beyond that inherent in the pattern of racketeering activity in which it engages?"

The federal circuits have been all across the board on what is required for a 1961(4) enterprise. If it is a legal structure, person, or corporation, the process is easy. In this regard prosecutors have used an Office of a Governor, Prosecutor’s Office and other entities as the enterprise for a RICO prosecution.

Less clear is when the prosecution is premised upon "any union or group of individuals associated in fact although not a legal entity."

The Second Circuit has permitted prosecutions that have an "association-in-fact" form of enterprise that merely uses the predicate acts. Other circuits have required some "ascertainable structure." In some cases they require that the ascertainable structure be "distinct from the pattern of racketeering," with other cases looking at whether it is "an on-going structure."

Hopefully, the Supreme Court will offer some guidance on how to interpret this aspect of the RICO statute.

Question Presented - here

See Scotus Blog for Petition for Certiorari here

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Commentary on Bridge Case

The Supreme Court ruled in  Bridge et al. v. Phoenix Bond & Indemnity Co. et. al., on the role of reliance when RICO is premised on a predicate act of mail fraud (see here).  The Court's opinion is not surprising. Here are some thoughts -

• Since its passage in 1970, the Court has been reluctant to restrict the reach of the RICO Act. And although the statute has long left its initial roots as a tool to combat organized crime to become a statute that is regularly used by both prosecutors and civil litigants in common cases of fraud, the Court has reigned it in.
• Even when interstate commerce was restricted in Lopez, the Court came back in the Robertson decision and held that RICO had an alternative way of proceeding - either "engaged in" or "substantially affect" interstate commence.
• The two key cases that restricted RICO, H.J. Inc. v. Northwestern Bell Telephone Co. and Reves v. Earnst & Young, both were interpreting the statutory language.
• The Court has ruled in several cases to restrict the constantly expanding mail fraud statute.  Mail fraud is a commonly used predicate offense in RICO.
• Although the Court often refers to common law  concepts when discussing fraud statutes, it won't help the party being subjected to a RICO claim as the Court firmly notes that "Congress chose to make mail fraud, not common-law fraud, the predicate act for a RICO violation."
• The Court sends a clear message to Congress that if you don't like this decision, then its up to you to correct it.  And Congress may want to consider this challenge as this decision opens the door to increased civil litigation using RICO.

(esp)

Ready to Roll in the Black Trial

U.S. District Court Judge Amy St. Eve. narrowed the jury pool to twenty, from which a twelve-person jury with six alternates will be chosen to hear opening arguments on March 19 in the conspiracy, securities fraud, and RICO prosecution of Lord Conrad Black and three former senior executives of Hollinger International (now Sun-Times Media Group).  The jury will have a blue-collar tint, according to an article in Canadian Business (here).  Black's three co-defendants are John Boultbee, Hollinger's former CFO, former executive vice president Peter Atkinson, and former general counsel Mark Kipnis, and they have been largely ignored in the media's focus on Black.  It will be interesting to see if they will present a united front at trial, and whether any (or all) will testify.  While Black is reputed to have a rather imperial manner, little is known about the other three defendants, who may be able to connect with the jury better than the former CEO.

The government's key witness, former Hollinger chief operating officer and long-time Black lieutenant David Radler, settled the SEC's civil securities fraud action by agreeing to pay disgorgement (plus interest) of $23.7 million, a $5 million civil penalty, and a lifetime officer/director bar (SEC Litigation Release here).  Radler earlier entered a guilty plea, and the SEC settlement may be a means to bolster his credibility by allowing prosecutors to point to the costs of his agreement to cooperate, which will also include a prison term.  Of course, given the long relationship between Black and Radler, it's unlikely that either has many secrets the other does not know, so look for Radler's cross-examination to be particularly lively. (ph)

Government Files Brief in Ryan Case

While Patrick J. Fitzgerald is busy prosecuting I. Lewis "Scooter" Libby, his office back home in Chicago filed its brief in the case U.S. v Ryan.  Former Governor Ryan had been convicted of fraud and other charges (see here).  The brief responds to defense claims including arguments that "[t]he district court properly dismissed two jurors and replaced them with alternates," the mail fraud "honest services" provision was not vague, and that the RICO charge was proper.  In the last argument, the government claims that the State of Illinois can be a proper  RICO Enterprise.  Although this last point has been held acceptable by other courts, it raises interesting federalism concerns that may at some point be addressed by higher courts.

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Former Illinois Governor Ryan Receives 66-Month Sentence

Former Illinois Governor George Ryan was sentenced to serve 6 and one-half years in federal prison for his convictions on corruption and RICO charges following a seven-month trial.  The charges related to conduct when Ryan was the Illinois Secretary of State and involved gifts related to the issuance of drivers licenses and other government contracts.  A number of former aides have been convicted, and Ryan received the same sentence as his top aide.  The government sought a sentence within the Guidelines range of 8-10 years, and the defense argued for a 30-month sentence due to Ryan's poor health.  Although U.S. District Judge Rebecca Pallmeyer did not impose the sentence called for by the Sentencing Guidelines, the term of imprisonment is significant and means that Ryan will not be released until he is at least 78 years old, assuming the conviction is upheld on appeal.  A Chicago Tribune story (here) discusses the sentencing.

Lord Black's Assets Frozen

A judge of the Ontario Superior Court of Justice issued an order freezing the Canadian assets of Lord Conrad Black, former CEO of Hollinger International and a defendant (along with three other former Hollinger executives) in a federal court indictment charging fraud, conspiracy, and RICO related to transactions with the company.  Black is out on a $20 million bond secured by a home in Florida and, more recently, $1 million in cash because of certain disclosure "problems" in his orignial bail application (see earlier post here).  The order in the Ontario court arises from a civil suit in which Hollinger seeks repayment of approximately $700 million that it accuses Black of looting from the company, involving many of the same issues charged in the U.S. prosecution. 

The judge's order, called a "Mareva injunction" in Commonwealth jurisdictions, allows Black and his wife up to $20,000 per month in living expenses, a mere pittance for the jet-set couple.  According to an article in the Globe and Mail (here), while Mareva injunctions are usually granted ex parte with no involvement by the defendant, the court will allow Black's attorney to challenge the freeze order in a hearing, which they will no doubt contest vigorously.  An earlier agreement between Hollinger and Black requires the company to pay 75% of his attorney's fees in the federal prosecution, but it's unlikely the company will have to pay the lawyer's bills in this action, unless perhaps Black prevails. (ph)

U.S. Wins RICO Case Against Tobacco Companies -- And the Opinion Will Cure Insomnia

U.S. District Judge Gladys Kessler ruled in favor of the federal government in its massive RICO case against the tobacco companies alleging that they engaged in misleading conduct for decades as part of a broad conspiracy (U.S. v. Philip Morris USA, et al. here).  The opinion may be nearly as dangerous to the environment as smoking, coming in at 1,653 pages, not counting the appendices, so that's a whole lot of trees.  The table of contents alone is 29 pages, although there are only 58 footnotes. 

Judge Kessler ruled earlier in the case that the government could not seek disgorgement of the profits made by the defendant cigarette manufacturers under RICO, which was affirmed by the D.C. Circuit (396 F.3d 1190), and the Supreme Court rejected the government's certiorari petition in October 2005.  With disgorgement knocked out, the remedial portion of the opinion comes off as almost anti-climactic:

[T]he Court is enjoining Defendants from further use of deceptive brand descriptors which implicitly or explicitly convey to the smoker and potential smoker that they are less hazardous to health than full flavor cigarettes, including the popular descriptors “low tar,” “light,” “ultra light,” “mild,” and “natural.” The Court is also ordering Defendants to issue corrective statements in major newspapers, on the three leading television networks, on cigarette “onserts,” and in retail displays, regarding (1) the adverse health effects of smoking; (2) the addictiveness of smoking and nicotine; (3) the lack of any significant health benefit from smoking “low tar,” “light,” “ultra light,” “mild,” and “natural” cigarettes; (4) Defendants’ manipulation of cigarette design and composition to ensure optimum nicotine delivery; and (5) the adverse health effects of exposure to secondhand smoke.

As a reformed smoker, these don't mean very much to me.  For those interested in reviewing documents related to the tobacco litigation -- assuming the opinion just whets your appetite -- the Department of Justice has a webpage with links to documents and testimony (here).  (ph)

Supreme Court Imposes Stricter Proximate Cause Requirement for Civil RICO

The Supreme Court reemphasized that private RICO claims must meet a fairly high standard of proximate causation if they will survive a motion to dismiss in its decision in Anza v. Ideal Steel (here).  The civil cause of action granted under RICO is unique in federal law by providing private parties a means to recover treble damages plus attorney's fees for a claim based on conduct by defendants that can be shown to violate a variety of federal criminal laws, most importantly the mail and wire fraud statutes.  The "catch-all" provision of RICO, Sec. 1962(c), arguably allows almost every business dispute to be turned into a RICO claim because the plaintiff only needs to show that the defendants conducted or participated in the conduct of the enterprise through a pattern of racketeering activity.  Because the pattern requirement is fairly minimal -- only two illegal acts, one of which is within the past ten years -- a creative lawyer can make most contractual claims into possible RICO actions because there will be mailings, faxes, e-mails, and the like in most of them that can support a complaint. 

A key limitation on the civil claims is Sec. 1964(c), which requires that the plaintiff be "injured in his business or property by reason of a violation of" RICO, which the Court has interpreted as requiring proof of proximate cause.  Anza involves a fairly straightforward scheme by the defendant, National Steel (owned by the Anzas), in which it did not charge customers who paid cash the applicable (and purportedly exorbitant) New York City and State sales taxes on purchases, a rather substantial discount for purchasers.  The plaintiff, Ideal Steel,  was a competitor of National, and filed the RICO suit alleging that the Anzas and National engaged in mail and wire fraud by not paying the requisite taxes, which resulted in an injury to the plaintiff's business.  Simple enough, but the Supreme Court rejected the claim, holding that the plaintiffs were not harmed by the racketeering activity directly, applying its earlier decision in Holmes v. SIPC.  The Court stated in Anza:

The proper referent of the proximate-cause analysis is an alleged practice of conducting National’s business through a pattern of defrauding the State. To be sure, Ideal asserts it suffered its own harms when the Anzas failed to charge customers for the applicable sales tax.  The cause of Ideal’s asserted harms, however, is a set of actions (offering lower prices) entirely distinct from the alleged RICO violation (defrauding the State).

The Court also considered who was better able to vindicate their interests, the state which was directly affected by the harm and a competitor only indirectly harmed.  The Court noted that RICO is not the proper vehicle protecting the indirect victim:

Ideal accuses the Anzas of defrauding the State of New York out of a substantial amount of money. If the allegations are true, the State can be expected to pursue appropriate remedies. The adjudication of the State’s claims, moreover, would be relatively straightforward; while it may be difficult to determine facts such as the number of sales Ideal lost due to National’s tax practices, it is considerably easier to make the initial calculation of how much tax revenue the Anzas withheld from the State.  There is no need to broaden the universe of actionable harms to permit RICO suits by parties who have been injured only indirectly.

The Court did not consider the application of the proximate cause analysis to a Sec. 1962(a) claim, which requires proof of different elements than Sec. 1962(c), and remanded the case to the Second Circuit to consider that claim. 

Interestingly, Justice Thomas dissented from the majority's proximate cause analysis, arguing that Ideal Steel also was directly harmed in addition to the state, and that "[t]he Court’s reliance on the difficulty of ascertaining the amount of Ideal’s damages caused by petitioners’ unlawful acts to label those damages indirect is misguided."  Justice Breyer offered a slightly different analysis of causation, dissenting from the majority's analysis although not the final result (I think).  He stated:

In my view, the “antitrust” nature of the treble-damage provision’s source, taken together with both RICO’s basic objectives and important administrative concerns, implies that a cause is “indirect,” i.e., it is not a “proximate cause,” if the causal chain from forbidden act to the injury caused a competitor proceeds through a legitimate business’s ordinary competitive activity. To use a physical metaphor, ordinary competitive actions undertaken by the defendant competitor cut the direct causal link between the plaintiff competitor’s injuries and the forbidden acts.

The Court's analysis in Anza now imposes a higher pleading burden on plaintiffs to establish at least the rough outlines of a direct link between the racketeering activity and the injury to their business.  Anza is typical of most RICO cases in that the decision came at a preliminary stage, either in a Rule 12(b)(6) motion to dismiss for failure to state a claim or a Rule 56 summary judgment, and not after a trial.  Therefore, all the plaintiff's allegations here are accepted as true, and the decision means that there is another basis to dismiss civil RICO claims before trial on the basis of the failure to plead adequately the proximate cause element.  The premium for both sides is on the pleadings in the case and the sufficiency of the evidence at summary judgment, because if the plaintiff surmounts those two hurdles then the pressure on the defendant to settle will be enormous because of the possibility of treble damages.  The Court's decision does not affect criminal RICO actions, such as those filed against class action firm Milberg Weiss or former Hollinger International CEO Lord Conrad Black.  (ph)

Milberg Weiss and Two Partners Indicted

Leading plaintiff securities class action firm Milberg Weiss and two of its name partners, Steven Schulman and David Bershad, were indicted on mail fraud, conspiracy, and RICO conspiracy charges in the Central District of California (indictment below).  The defendants were added in a superseding indictment to the earlier prosecution of Seymour Lazar and another attorney related to alleged payments by Milberg Weiss to Lazar when he (and members of his family) served as a representative plaintiffs in a variety of class action suits in which the law firm served as lead counsel.  The indictment sets forth payments to three different plaintiffs, including Howard Vogel, who entered into a guilty plea in April 2006 related to making false statements in federal court that he had not received any payments for serving as the representative plaintiff while admitting to receiving money from Schulman and Bershad.  The new indictment adds the lawyers and firm as participants in an alleged general conspiracy and the scheme to defraud.  Interestingly, Milberg Weiss is not named in the RICO conspiracy count, instead serving as the so-called RICO enterprise operated by Schulman, Bershad, and Lazar.  As a technical pleading matter, an organization cannot be both the enterprise and the defendant under Sec. 1962(c), and for a conspiracy under Sec. 1962(d) to violate that provision, so Milberg Weiss could not be charged in this count under the government's theory.  The indictment also seeks forfeiture of assets from the defendants, including the law firm.

This case certainly marks a new phase in the use of criminal laws against business organizations.  I am not aware of a law firm of this size being charged in a criminal case.  In the early 1990s, Kaye Scholer settled civil charges related to its representation of Charles Keating and Lincoln Savings & Loan, but as a civil matter that did not implicate the same concerns as a criminal prosecution.  Milberg Weiss issued a statement (available below) asserting that the government's demands during plea negotiations made it impossible to reach an agreement.  The firm states:

The firm has held intense negotiations with government officials in Los Angeles and Washington over the past six months in an effort to avoid this unjust result. The government’s insistence that the firm waive attorney-client privileges as a condition to avoiding indictment is in derogation of one of the bedrock principles of American law and extended to parties the firm did not control. Governmental insistence on such broad waivers has been criticized by the American Bar Association and the U.S. Chamber of Commerce, and is currently being reviewed by Congress. The prosecutors also insisted that the firm make unfounded statements accusing its own partners of crimes and otherwise become an agent for the government. Unfortunately, the prosecutors insisted on indicting the firm unless it made these impossible concessions.

A key issue will be whether the law firm can survive a criminal indictment, and issue considered in an earlier post (here).  (ph)

Download milberg_weiss_indictment.pdf

Download milberg_weiss_statement.pdf

Fallout From the Ryan Corruption Trial

Although former Illinois Governor George Ryan and a codefendant were convicted on corruption and RICO charges a couple weeks ago, collateral proceedings from the case remain in the news.  One defense witness was Edward McNally, who represented Ryan in 2001 during the investigation before serving as the former United States Attorney for the Southern District of Illinois; he is now in the Criminal Division at the Department of Justice.  An issue raised by the government after McNally's testimony was the fact that a number of former partners at a firm he was at that went bankrupt were being sued by the trustee in bankruptcy for certain firm debts.  Counsel to the trustee was Winston & Strawn, the same firm that represented Ryan, and one partner not sued over the debt was none other than McNally.  Prosecutors protested the potential conflict from that situation, and also claimed that McNally may have tape recorded a meeting between Ryan and FBI agents that McNally attended as counsel.  The Chicago Sun-Times reports (here) that the Office of Professional Responsibility in the Department of Justice has begun an investigation of the taping allegation against McNally, according to a letter sent to Illinois Senators Durbin and Obama.

On another front, defense attorneys have asked the court to have the jury forewoman testify under oath regarding whether she gave false answers on her juror questionnaire.  During the jury deliberations, U.S.  District Judge Pallmeyer dismissed two jurors because of questions raised in the media about prior convictions they did not disclose.  According to an AP story (here), Ryan's attorneys claim that the forewoman did not disclose her divorce proceeding and two domestic violence complaints in answering questions about whether she had ever been a crime victim or her involvement in legal proceedings.  Post-verdict challenges for juror bias or deception are very difficult to win, as was shown in the defense challenge to a juror in the Martha Stewart case that was rejected by the Second Circuit.  Ryan's sentencing is set for August 4, 2006, and juror issues are much more likely to come up during the appeal of the conviction.  (ph)

Former Governor Ryan Is Convicted

The Chicago Tribune (here) and Wall Street Journal (here) are reporting that former Illinois Governor George Ryan and Larry Warner have been convicted on all counts.This trial lasted over six months, with the jury being out for 11 days.  Alternates were used in the deliberation.   

For Ryan this means sentencing on charges including a RICO Conspiracy charge. There will no doubt be some interesting issues for appeal. 

The former Illinois Governor made a statement following the verdict in which he thanked his legal counsel.

More to come....

(esp)

Two Jurors Dropped From Ryan Jury

The RICO corruption trial of former Illinois Governor George Ryan and a co-defendant remained on hold as U.S. District Judge Rebecca Pallmeyer dismissed two jurors because they failed to disclose criminal convictions on their juror questionnaire.  The judge said she would meet with the jury to determine whether to seat two alternates and have them restart their deliberations from the beginning.  The defense attorneys have objected to the judge's decision and likely have requested a mistrial.  Under Federal Rule of Criminal Procedure 24(c)(3) (here), "The court may retain alternate jurors after the jury retires to deliberate. The court must ensure that a retained alternate does not discuss the case with anyone until that alternate replaces a juror or is discharged. If an alternate replaces a juror after deliberations have begun, the court must instruct the jury to begin its deliberations anew."  The trial judge has fairly broad discretion to remove a juror and seat an alternate, so this is a difficult issue to win on appeal if the jury were to return a guilty verdict. 

A recent example in which the judge removed a juror well into the deliberations was the corruption prosecution of former Philadelphia City Treasurer Corey Kemp and other defendants in 2005.  In that case, the judge removed a juror who was refusing to deliberate, and after seating the alternate, the jury returned a guilty verdict on many of the counts.  That situation may present a stronger basis for an appeal rather than removing a juror for misconduct unrelated to the case.  In Ryan's case, however, if the removed jurors were the holdouts for an acquittal, then a substantial constitutional claim can be raised if there is a guilty verdict.  This is an area in which the broad discretion of the district court, and the lack of information about the jury deliberations and the reasons for the removal, make it difficult to predict what will happen next, or even down the line.  An AP story (here) discusses Judge Pallmeyer's decision to remove two jurors. (ph)

Ryan Jury Bogging Down

The jury considering the RICO corruption charges against former Illinois Governor George Ryan and co-defendant Lawrence Warner has finished its eighth day of deliberations, and sent two notes to the judge about having "personal difficulties" in reaching a verdict.  To make matters even more complicated, U.S. District Judge Rebecca Pallmeyer dismissed the jury early and said she is conducting an investigation of a "personal matter" involving a juror.  A Chicago Tribune story (here) notes that the paper raised questions about whether one of the jurors answered a questionnaire truthfully during voir dire, although there are no further details and the court has sealed the records of its meetings with counsel for now.  If one of the jurors has to be dismissed, then an alternate can be brought in, assuming one is available.  That would require the jury to begin its deliberations all over, which will drag out the process even further.  Deliberations will resume on Monday, when Judge Pallmeyer will most likely have completed her investigation of the juror issue and the question of whether an alternate will be used should be answered.  Don't anyone hold their breath waiting for a verdict, at least not yet. (ph)

The Campbell Trial Takes a Sordid Turn

The RICO corruption trial of former Atlanta Mayor Bill Campbell took a sordid turn when the government called Marion Brooks, who had been a television anchor in Atlanta in the late 1990s, to discuss Campbell's lavish spending during their secret four-year affair.  The government is trying to establish that Campbell took large sums of cash from businesses with city contracts, and Brooks testified about his cash expenditures for various trips they made during the affair.  Prosecutors showed photographs of the two from a trip to Paris that the government alleges was paid for in part by a contractor, United Water, that had a $21 million-a-year contract with the city to privatize its water system.  In response to the defense contention that Campbell had the cash from his gambling winnings, Brooks testified that Campbell told her he mostly broke even.  According to the Atlanta Journal-Constitution (here), the defense did not dispute the fact of the affair and conducted only a limited cross-examination of Brooks.  The testimony certainly enlivened what the newspaper described as the "tedious" pace of a trial in which the government is essentially taking a net worth approach usually seen in tax evasion cases to establish its corruption allegations by showing that Campbell spent far more than he is supposed to have made from his job as Mayor. (ph)

Supreme Court Rejects "Honest Services" Case

The United States Supreme Court denied certiorari in a racketeering case involving mail fraud's honest services provision. (See Chicago Tribune here).

Betty Loren-Maltese was the President of the Town of Cicero, Illinois, appointed upon the death of husband, who died from cancer. She was charged with RICO conspiracy and five counts of mail and wire fraud. Despite the fact that the government failed to show any money going to her, she was convicted of these crimes. One of the arguments she made in her Petition for Certiorari was that the Court needed "to decide whether the ‘honest services’ statute is unconstitutionally vague and to resolve a conflict in the circuits over how to interpret the statute so that it complies with due process."

This is not the first time that the Supreme Court has denied certiorari on a claim involving 18 U.S.C. sec. 1346, the section that allows for mail and wire fraud to be premised on a "right to honest services."  This denial reminds one of the many cases that had a similar argument rejected prior to the Supreme Court's acceptance of the case of McNally v. United States, a case that reversed the government's use of an "intangible rights" doctrine and destroyed many of the convictions that had been obtained by the government. 

Will it take a long line of cases being denied cert. before the Supreme Court eventually takes a case to resolve whether a statute premised on the clause "honest services" is too vague to be constitutionally sound?

(esp) 

Lord Black Enters His Second Not Guilty Plea This Month

Lord Conrad Black entered a not guilty plea to the superseding indictment that added RICO, obstruction of justice, wire fraud, and money laundering charges to the list of mail/wire fraud charges already in place alleging the diversion of assets from Hollinger International. A RICO charge is relatively rare in white collar cases, at least when the conduct does not involve la arge-scale fraud, such as a ponzi scheme.  Black's attorney assailed the new charges as a "blatant example of overreaching" -- but then, aren't they all?  The district judge set a tentative trial date of March 5, 2007, which seems like a long time but prosecutors claim to have given the defense CD-ROMs with over 1.3 million pages of documents, with another 500,000 pages to come.  Nothing like the deluge approach to discovery. An AP story (here) discusses the case. (ph)