Thursday, May 18, 2006

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

May 18, 2006 in Fraud, Legal Ethics, Prosecutions, RICO | Permalink | Comments (0) | TrackBack (1)

Wednesday, May 3, 2006

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)

May 3, 2006 in Corruption, Prosecutions, RICO | Permalink | Comments (0) | TrackBack (0)

Monday, April 17, 2006

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....


April 17, 2006 in Fraud, Prosecutions, RICO, Verdict | Permalink | Comments (0) | TrackBack (0)

Monday, March 27, 2006

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)

March 27, 2006 in Corruption, Prosecutions, RICO | Permalink | Comments (0) | TrackBack (0)

Thursday, March 23, 2006

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)

March 23, 2006 in Corruption, Prosecutions, RICO | Permalink | Comments (0) | TrackBack (0)

Thursday, February 9, 2006

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)

February 9, 2006 in Corruption, Prosecutions, RICO | Permalink | Comments (0) | TrackBack (0)

Monday, January 9, 2006

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?


January 9, 2006 in Fraud, Judicial Opinions, Prosecutions, RICO, Sentencing | Permalink | Comments (0) | TrackBack (0)

Saturday, December 17, 2005

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)

December 17, 2005 in Prosecutions, RICO | Permalink | Comments (0) | TrackBack (0)

Thursday, December 15, 2005

Supreme Court Grants Certiorari in Another Civil RICO Case

After having one civil RICO case dropped from its calendar in mid-November, the Supreme Court has now added a second RICO case to its docket in the past two weeks.  The Court granted certiorari in Mohawk Industries, Inc. v. Williams, involving a putative class-action against the company and third-party temporary-worker agencies alleging that workers illegally in the U.S. were employed to suppress wages of other workers at Mohawk Industries.  The district court dismissed the RICO claims under a Rule 12(b)(6) motion for failure to state a claim, and the Eleventh Circuit reversed (411 F.3d 1252 -- opinion here).  The question presented is whether a corporation and its agents can constitute an "enterprise" under RICO Sec. 1962(c) when the conduct of the enterprise takes place through the corporation's agents only. 

The issue is one that the Court did not address in its opinion in Cedric Kushner Promotions v. King, 533 U.S. 158 (2001), which held that a corporation is separate from its sole shareholder for the purpose of meeting the "person-enterprise rule" for a Sec. 1962(c) claim.  Under the statute, a "person" must operate the "enterprise" to be liable, so that a corporation (or other organization) cannot be both the enterprise and a defendant in the case.  Mohawk Industries will have to resolve a split in the circuits regarding whether a corporation is distinct from its agents whose conduct is attributed to it for the purpose of deciding whether the corporation conducted or participated in the conduct of the RICO enterprise. 

If this seems hopelessly complex, welcome to the wonderful world of RICO.  As with many decisions in this area, the procedural posture is the key because defendants seek to dismiss cases at the pleading or summary judgment stage rather than risk going to trial when faced with the prospect of treble damages and attorney's fees (the holy grail of all litigation).  If the corporation is successful on this issue, then it will make it more difficult to file RICO complaints against businesses as defendants based solely on the conduct of their agents that can survive pre-trial dismissal.

The Court's other RICO case is Anza v. Ideal Steel Supply Corp. (see earlier post here), which involves the "injury to business or property" requirement for a civil case that also was dismissed before trial.  The cases will be closely watched to see if the Court will continue a recent trend toward reading RICO more narrowly and making it more difficult to plead a claim under the statute. (ph)

December 15, 2005 in RICO | Permalink | Comments (0) | TrackBack (0)

Tuesday, November 29, 2005

Certiorari Granted In Civil RICO Case

The Supreme Court granted certiorari in Anza v. Ideal Steel Supply Corp., a Second Circuit case.  The question presented is: "Is a competitor 'injured in his business or property by reason of a violation' of the Racketeer Influenced and Corrupt Organizations Act when the alleged predicate acts of racketeering activity were mail fraud but the competitor was not a party defrauded and did not rely on the alleged fraudulent behavior?"  The case involves a scheme by one company to avoid paying sales taxes and submitting fraudulent sales tax returns, which constitutes mail fraud, in order to harm a competitor, who sued under RICO alleging that the scheme caused injury to the plaintiff's business.  The Second Circuit held that a competitor whose business is the target of the scheme has standing to sue even though the racketeering activities defrauded a third party and the harm is only indirect to the plaintiff-competitor through the mail fraud (373 F.3d 251 (2d Cir. 2004)). The Second Circuit held:

[T]he principle governing the present case is that where a complaint contains allegations of facts to show that the defendant engaged in a pattern of fraudulent conduct that is within the RICO definition of racketeering activity and that was intended to and did give the defendant a competitive advantage over the plaintiff, the complaint adequately pleads proximate cause, and the plaintiff has standing to pursue a civil RICO claim. This is so even where the scheme depended on fraudulent communications directed to and relied on by a third party rather than the plaintiff.

On Nov. 15, the Court dismissed another RICO case, Bank of China v. NBM, L.L.C. after the Bank of China moved to dismiss the case because it had won a retrial from the Second Circuit.  Anza may allow the Court to clarify the standing requirements for a RICO claim, although if past performance is any indication of future decisions, the opinion will not be particularly helpful in explaining a statute that is hardly pellucid. (ph)

November 29, 2005 in RICO | Permalink | Comments (0) | TrackBack (0)

Friday, October 28, 2005

Eleventh Circuit Upholds 135 Year Sentence for RICO Conviction

The Eleventh Circuit upheld the RICO conviction of Dwight York, head of the so-called Nuwaubian tribe, a religious sect that claimed various roots, including Native American, Islamic, and Hebrew foundations.  The charges involved violations of the Mann Act for transporting children across state lines for the purpose of engaging in sexual relations and money laundering arising out of York's role as leader of the cult-like organization.  The whole sordid tale is recounted in United States v. York (here), and the court upheld the district judge's sentence of a 1,620-month term of imprisonment (that's 135 years) that was reached by imposing the maximum term under the Sentencing Guidelines for each count to be served consecutively.  The Eleventh Circuit found no plain error in the sentence.  Mike has an interesting post on the case and more generally RICO over on Crime and Federalism (here). (ph)

October 28, 2005 in Judicial Opinions, RICO | Permalink | TrackBack (0)

Friday, October 21, 2005

RICO Charges Filed Against Former Maryland State Senator

The U.S. Attorney for the District of Maryland announced the indictment of former state Senator Thomas Bromwell, his wife Patricia, and the CEO of a corporation, David Stoffregen, for using his office to conduct a RICO enterprise involving mail/wire fraud and extortion related to the award of state contracts to Stoffregen's company. Outside of the organized crime and drug areas, the main use of RICO these days seems to involve political corruption cases (e.g. Atlanta's former mayor Bill Campbell and former Illinois Governor George Ryan).  According to the press release (here) issued by the USAO:

The indictment alleges that during the late 1990s and early 2000s, Stoffregen provided various benefits to Senator Bromwell in exchange for Bromwell’s agreement to use his influence and official position as a state senator to assist Stoffregen and his company, Poole and Kent. Alleged benefits that Bromwell received include construction work valued at more than $85,000 on a new house built in Baltimore County in 2000 to 2001 that was provided by Stoffregen for free or at a reduced cost; and more than $192,000 in payments provided to Mary Patricia Bromwell from January 2001 to May 30, 2003 for a no-show job at Namco Services Corporation.

The indictment further alleges that Senator Bromwell, who was chair of the Senate Finance Committee, used his influence to help Poole and Kent win a multi-million dollar bid to perform the mechanical subcontract on the University of Maryland Medical System’s (UMMS) Weinberg Building in downtown Baltimore. Bromwell also allegedly intervened in various business disputes on Poole and Kent’s behalf, including contract disputes with UMMS and the State of Maryland regarding the Juvenile Justice Center construction project.


October 21, 2005 in Corruption, Prosecutions, RICO | Permalink | TrackBack (0)

Wednesday, June 29, 2005

Two Cert. Grants of Interest

The Supreme Court granted cert. at the end of the term earlier this week in two civil RICO cases that are of interest.  On Monday, the Court granted cert in Bank of China v. NBM LLC, on the following question: Did the Court of Appeals for the Second Circuit err when it held that civil RICO plaintiffs alleging mail and wire fraud as predicate acts must establish "reasonable reliance" under 18 U.S.C. §1964(c)?  The plaintiff, Bank of China, won a $106 million RICO verdict in the district court based on claims of mail and wire fraud related to a scheme to defraud the bank.  The defendants alleged that employees and officers of the bank were aware of the false statements, and therefore the reliance element for a common law fraud could not be met.  The Second Circuit held (opinion below) that the proximate cause requirement to prove a RICO injury to business or property under § 1964(c), when based on mail or wire fraud, requires proof that the plaintiff reasonably relied on the misstatements or omissions, and the trial judge's instructions did not include that requirement, and therefore the verdict had to be vacated.  Although the Supreme Court held in Holmes v. SIPC that RICO requires proof of proximate cause from the pattern of racketeering activity, it has not explained that position in any detail, and the circuits have taken different approaches to that requirement.  Interestingly, the Solicitor General opposed the cert. grant, a position the Court chose to ignore after inviting the Government's view on the petition (SG Brief here).

On Tuesday, the Court announced the cert. grant in a familiar case, the third trip to the Supreme Court in the civil RICO abortion clinic access case, Scheidler v. NOW.  Earlier opinions in 1994, on whether RICO requires an economic motive or purpose (it does not), and whether extortion under the Hobbs Act (as a predicate RICO racketeering act) requires that the defendants obtain or attempt to obtain property from the victim (it does).  The question presented in the third iteration of the case is: Did the Seventh Circuit err when it  held, on remand from the Supreme Court, that properly tailored injunctive relief may be available to redress Racketeer Influenced and Corrupt Organizations Act violations by abortion protesters based on jury findings that they committed predicate acts of violence and threats of violence in violation of the Hobbs Act?  This round takes us to the remedy portion of RICO, outside of treble damages and attorney's fees that are provided in the statute, to the issue of the court's power to issue equitable relief even when it is not mentioned in the statute.  An earlier post (here) discusses the cert. petition and contains a link to the petition filed by Scheidler. 

In case anyone knows the answer to this trivia question, how many cases have gone to the Supreme Court three times?  The winner gets my heartfelt congratulations on being a bigger geek than I am. (ph)

Download bank_of_china_v. NBM.pdf

June 29, 2005 in RICO | Permalink | TrackBack (0)

Friday, June 17, 2005

Cianci Resentencing a Non-Event

The resentencing of former Providence, RI, Mayor Vincent (Buddy) Cianci turned out to be a non-event, as Doug Berman notes on the Sentencing Law & Policy blog (here).  Cianci was convicted in June 2002 on RICO and corruption charges, and sentenced to a 64-month term of imprisonment, but after Booker the First  Circuit remanded the case for the judge to reconsider in light of the now-advisory nature of the Guidelines.  U.S. District Judge Ernest Torres did not disturb the sentence and followed the Guidelines.  Judge Torres did reduce by seven months the sentence of one of Cianci's co-defendants, Frank Corrente, who was the chief of admininstration under Cianci, but did not change the sentence of another defendant, Richard Autiello. (ph)

June 17, 2005 in Corruption, RICO, Sentencing | Permalink | TrackBack (0)

Wednesday, June 15, 2005

Convictions in Second Philadelphia Corruption Trial

A second corruption trial in Philadelphia arising out the FBI bugging of Mayor Street and those with close ties to him resulted in a guilty verdict on most charges for the principal defendant, Imam Shamsud-din Ali, and businessman John Johnson, and an acquittal for attorney John Christmas, a former aid to the Mayor's chief of staff.  Last month, former City Treasurer Corey Kemp and four other defendants were convicted of corruption and perjury charges. The government charged the Imam, a prominent Muslim cleric and long-time supporter of the Mayor, with RICO and fraud counts related to fraudulent schemes to obtain money from government programs that went to his personal use; Johnson was charged with extortion and attempted extortion related to one of the schemes. Interestingly, Christmas was the only defendant to testify at trial, and the only one acquitted of all counts.  A Philadelphia Inquirer story (here) discusses the verdicts. (ph)

June 15, 2005 in Corruption, Prosecutions, RICO, Verdict | Permalink | TrackBack (0)

Thursday, April 21, 2005

DC Circuit Denies Rehearing En Banc in Tobacco RICO Cases

The DC Circuit refused the government's petition for a rehearing en banc of the panel's decision on Feb. 4 that threw out the government's request that the tobacco company defendants be ordered to disgorge $280 billion in profits from their alleged RICO enterprise.  An excellent post on the SCOTUS Blog has a thorough review of the case (here), with the trial continuing in District Court at Day 95.  (ph)

April 21, 2005 in RICO | Permalink | TrackBack (0)

Friday, April 15, 2005

Round Three for Scheidler v. NOW

The long-running RICO lawsuit between NOW and anti-abortion activists has made it to the Supreme Court twice, with decisions in NOW v. Scheidler, 510 U.S. 249 (1994) (RICO does not require proof of an economic motive) and Scheidler v. NOW, 537 U.S. 393 (2003) (the Hobbs Act [as a RICO predicate racketeering activity] requires that the defendants gain property through extortion).  After a remand to the Seventh Circuit and another decision, a petition for cert. has been filed (available here) by the defendants below (Scheidler) for review on three issues:

1. Whether the Seventh Circuit, on remand, disregarded this Court’s mandate by holding that "all" of the predicate acts supporting the jury’s finding of a RICO violation were not reversed, that the "judgment that petitioners violated RICO" was not necessarily reversed, and that the "injunction" issued by the District Court not need to be vacated.

2. Whether the Seventh Circuit correctly held, in conflict with decisions of the Sixth and Ninth Circuits, that the Hobbs Act, 18 U.S.C. § 1951(a), can be read to punish acts or threats of physical violence against "any person or property" in a manner that "in any way or degree * * * affects commerce," even if such acts or threats of violence are wholly unconnected to either extortion or robbery.

3. Whether this Court should again grant certiorari to resolve the deep and important intercircuit conflict over whether injunctive relief is available in a private civil action for treble damages brought under RICO, 18 U.S.C. § 1964(c).

The third question was before the Court in Scheidler v. NOW but not reached, and would allow consideration of whether the maxim that equity should not enjoin a criminal act applies to RICO--imagine the fun the court will have with that one.  A third trip would also give the Court an opportunity to resolve a circuit split on the Hobbs Act issues, which have proven difficult for the lower courts because of the rather vague wording used by the Court in Scheidler v. NOW for the definition of extortion. Thanks to Alan Untereiner of Robbins, Russell, Englert, Orseck & Untereiner LLP for the cert. petition. (ph)

April 15, 2005 in RICO | Permalink | TrackBack (0)

Sunday, February 20, 2005

RICO - Who is an Outsider?

A recent Seventh Circuit decision, United States v. Cummings, highlights a key limit to the RICO statute. 

For starters this is wonderful case to learn what skip tracing is and the role these individuals serve in finding debtors. The case notes that "Although skip tracing is not necessarily illegal, some skip tracers stray across the line in their efforts to track down  their quarry."

The reversal here is upon a failure by the government to follow the mandates of the case of Reves v. Ernst & Young. Reves clearly holds that one must "conduct or participate" in the "operation or management" of the enterprise. The only exception provided in the case is when the "enterprise might be operated or managed by others associated with the enterprise who exert control over it as, for example, by bribery."  As the accused was an "outsider," the court in the Cummings decision reversed.

For more on how this limitation to RICO operates, see White Collar Crime: Law and Practice, 2nd ed. by Israel, Podgor, Borman & Henning.


February 20, 2005 in RICO | Permalink

Saturday, February 5, 2005

DC Circuit Rejects Government Disgorgement Claim Against Tobacco Companies

The D.C. Circuit issued an opinion on Feb. 4 (here) rejecting the government's disgorgement claim under RICO against the leading tobacco companies (U.S. v. Philip Morris USA et al.).  The court's 2-1 decision reverses the district court, which had permitted the government's claim to go forward in seeking disgorgement of $280 billion (which would be real money even to Everett Dirksen).  The court held "The relevant section of RICO, 18 U.S.C. § 1964(a), provides the District Courts jurisdiction only for forward-looking remedies that prevent and restrain violations of the Act. Because disgorgement, a remedy aimed at past violations, does not so prevent or restrain, we reverse the decision below . . . "

Not surprisingly, the shares of the tobacco companies rose rather sharply in response to the news.  It wouldn't be surprising either if the government appealed to the Supreme Court. (ph)

February 5, 2005 in RICO | Permalink | TrackBack (0)

Thursday, February 3, 2005

Sports Conviction-Should this be RICO?

Logan Young Jr., an investment banker, was convicted of paying a high school football coach, Lynn Lang, in order to recruit a star player to the Alabama team.  Find out more here, herehere (subscription required),  The case proceeds into the forfeiture portion of the trial today.  We previously reported on this case here.

Why was RICO used in this prosecution?  Would bribery charges have been sufficient?  RICO is an easy choice for prosecutors when they have two or more predicate acts that operate with continuity and are related to each other.  RICO usually allows for higher sentences.

But RICO, because of the ease with which it can be used requires approval above the individual United States Attorney's Office.  In the past, sports prosecutions of this nature have been charged using the mail fraud statute.  RICO sends a very strong message to everyone that paying for the recruitment of college athletes will not be tolerated.  But was it necessary here?

This case is a perfect example of the prosecutorial discretion that can operate to determine the sentence a defendant receives. If the predicate acts had been prosecuted, then the court would be sentencing premised upon those specific charges.  By adding RICO, the prosecution places before the court additional conduct that increases the potential sentence of the defendant. The prosecutor had the choice of what charges to bring and thus the choice of controlling the sentence. Deputy Attorney General James Comey in his memo discussed here (and in detail on the Berman Sentencing Blog) calls it "challenging times" now that judges have some oversight of prosecutorial discretion as a result of the Supreme Court's decision in Booker.  It is unfortunate that DAG Comey thinks that an appropriate balancing of power between the prosecution and judiciary is a "difficult time."   


February 3, 2005 in Prosecutions, RICO | Permalink