683 F. Supp. 1411, *; 1988 U.S. Dist. LEXIS 2604, **
United States of America, Plaintiff, v. The Bonanno Organized
Crime Family of La Cosa Nostra, Joseph Bonanno, Philip Rastelli, Joseph Massino,
Anthony Spero, Louis Attanasio, Alfred Embarrato, Gabriel Infanti, Frank Lino,
Nicholas Marangello, Anthony Riella, Michael Sabella, Anthony Graziano, Benjamin
Ruggiero, Ignatius Bracco, James Vincent Bracco, William Rodini, Vito Gentile,
International Brotherhood of Teamsters, Local 814 Van Drivers, Packers and
Furniture Handlers, Warehousemen's and Appliance Home Delivery Union, Executive
Board of International Brotherhood of Teamsters Local 814 Van Drivers, Packers
and Furniture Handlers, Warehousemen's and Appliance Home Delivery Union,
International Brotherhood of Teamsters Local 814 Van Drivers, Packers, and
Furniture Handlers, Warehousemen's and Appliance Home Delivery Union Welfare
Fund, International Brotherhood of Teamsters Local 814 Van Drivers, Packers and
Furniture Handlers, Warehousemen's and Appliance Home Delivery Union Pension
Fund, International Brotherhood of Teamsters Local 814 Van Drivers, Packers, and
Furniture Handlers, Warehousemen's and Appliance Home Delivery Union Annuity
Fund, Defendants; United States of America, Plaintiff, v. Certain Buildings and
Properties Located at 58-23 58th Road, Maspeth, New York, 405 Myrtle Avenue,
Brooklyn, New York, 78-80 East 4th Street, New York, New York, Defendants
No. CV-87-2974
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW
YORK
683 F. Supp. 1411; 1988 U.S. Dist. LEXIS 2604
March 24, 1988, Decided
CORE TERMS:
forfeiture, racketeering, predicate, divestiture, gambling, predicate
act, organized crime, real property, collection, pattern of racketeering
activity, plead, Clayton Act, racketeering activity, Act of Racketeering,
disgorgement, conspiracy, usury, Fifth Amendment, indictment, legislative
history, extortion, antitrust, civil remedies, equitable relief, remedial,
monetary damages, injunctive relief, participated, mail, adverse inference
COUNSEL: [**1] Peter R. Ginsberg, Esq., Assistant U. S. Attorney.
Judd Burstein, P.C., New York, New York, Attorney for Anthony Spero.
Joseph R. Benfante, Esq., New York, New York, Attorney for Gabriel
Infanti.
Gerald B. Lefcourt, P.C., New York, New York, Attorney for
Anthony Riela.
Gustave H. Newman, P.C., New York, New York, Attorney for
Michael Sabella.
Benjamin Ruggiero, Pro Se, Memphis, Tennessee.
Robert M. Simels, Esq., New York, New York, Attorney for Nicholas
Marangello and William Rodini.
Richard Ware Levitt, Esq., New York, New
York, Local Attorney, for Joseph Bonanno.
Michael J. Coyle, Esq.,
Stanley A. Teilter, P.C., New York, New York, Attorney for Philip Rastelli.
Ronald P. Fischetti, Esq., Fischetti & Pomerantz, New York, New
York, Attorneys for Joseph Massino.
Wallace Musoff, Esq., New York, New
York, Attorney for Louis Attanasio.
John J. Pollok, Esq., Todtman,
Hoffman, Epstein, Young, Goldstein, Tunick & Pollok, P.C., New York, New
York, Attorneys for Alfred Embarrato, Frank Lino and Anthony Graziano.
Joel A. Pisano, Esq., Schwartz, Pisano, Simon & Edelstein,
Livingston, New Jersey, Attorneys for Belleville Motor Lodge, Inc.
Sharon A. Flood, Esq., New York, New York, Attorney for James Vincent
Bracco.
JUDGES: Glasser, United
States District Judge.
OPINIONBY: GLASSER
OPINION: [*1419] MEMORANDUM AND ORDER
GLASSER, [**2] United States District
Judge:
The government filed this civil action under the Racketeer
Influenced and Corrupt Organizations Act ("RICO"), 18
U.S.C. §§ 1961-1968 (1982 and Supp. IV 1986), n1 on August 25, 1987, and
filed an Amended Verified Complaint on October 5, 1987. The Amended Complaint
names as defendants "the Bonanno Organized Crime Family of La Cosa Nostra" and
twenty-two additional individuals and entities. The Amended Complaint alleges
that the defendants have engaged in at least 199 acts of racketeering including
gambling offenses, narcotics offenses, trafficking in contraband cigarettes,
transportation of stolen stock certificates, extortion, usury, labor
racketeering, and interference with commerce by threats or violence.
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- -
n1 For convenience, the relevant sections of RICO are included as an
appendix to this decision.
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Footnotes- - - - - - - - - - - - - - - - -
The Amended Complaint alleges
that the defendants, through the enumerated acts of racketeering, have
participated in the affairs of two enterprises, the Bonanno Organized Crime
Family and an enterprise consisting of a union, its executive board, and its
employee benefit funds, in violation of 18
U.S.C. § 1962(c) and that the defendants have invested income [**3] received from the alleged racketeering acts in eight
business enterprises in violation of § 1962(a). In addition, the Amended
Complaint alleges that the defendants have conspired, in violation of 18
U.S.C. § 1962(d), to violate 18
U.S.C. § 1962 (a) and (c).
The Amended Complaint seeks a preliminary
injunction pursuant to 18
U.S.C. § 1964(a) restraining the defendants from, among other things,
engaging in certain racketeering activities, associating with each other "for
any business or commercial purpose," participating in the affairs of the union
defendants or any other labor organization or employee benefit plan, and
transferring property interests in the eight specified businesses. The Amended
Complaint also seeks the appointment of a trustee pendente lite to
oversee the operation of the union defendants and a receiver pendente
lite to oversee the eight businesses.
The ultimate relief sought by
the government includes a permanent injunction prohibiting the defendants from
participating in the union defendants or any other labor organization or
participating in any moving or storage business, from associating with each
other for business or commercial purposes for five [**4] years, and from engaging in certain criminal
activities. The Amended Complaint also seeks treble monetary damages pursuant to
18
U.S.C. § 1964(c) and divestiture of the defendants' interests in the eight
businesses pursuant to 18
U.S.C. § 1964(a). Finally, the government has simultaneously filed a
Verified Complaint in Rem seeking forfeiture of three properties pursuant to 18
U.S.C. § 1955.
On October 8, 1987, the government entered into a
Consent Judgment with defendants International Brotherhood of Teamsters Local
814 Van Drivers, Packers and Furniture Handlers, Warehouseman's and Appliance
Home Delivery Union ("Local 814"), the Executive Board of Local 814, Local 814
Welfare Fund, Local 814 Pension Fund, and Local 814 Annuity Fund (together
"Local 814 Funds"), Ignatius Bracco, and Vito Gentile. The Consent Judgment,
approved by court order, provided for the dismissal of the action as against
those defendants, the appointment of a trustee, an interim executive board, and
an interim board of trustees to oversee the affairs of Local 814 and Local 814
Funds, and for an injunction against Ignatius Bracco's and Vito Gentile's
participation in the affairs of any labor organization, other [**5] than by simple membership or the receipt of employee
benefits, for a period of five years.
The remaining defendants, other
than Michael Sabella, have filed motions to dismiss the Amended Complaint
pursuant to [*1420] Rules 12(b)(3), 12(b)(6),
and 9(b), Fed. R. Civ. P., for a more definite statement under Rule 12(e), Fed.
R. Civ. P., and to strike redundant, immaterial, impertinent, or scandalous
matter under Rule 12(f), Fed. R. Civ. P. The defendants attack the Amended
Complaint on numerous grounds, asserting that it fails to allege legally
sufficient predicate acts for each individual defendant, fails to allege
predicate acts within the statute of limitations period, fails to allege a
pattern of racketeering or collection of an unlawful debt as required by RICO,
fails to plead RICO's requirements with particularity, relies on inapplicable
theories of co-conspirator liability, fails to allege that the defendants
participated as principals in unlawful activity as required by § 1962(a), and
impermissibly names the Bonanno Family as both a defendant and a RICO
enterprise.
The defendants challenge the relief sought in the action,
claiming that the Amended Complaint seeks forfeiture of property [**6] interests which is unauthorized and unconstitutional
in a civil RICO action and injunctive relief which would violate the defendants'
First Amendment right of association. The defendants argue that forfeiture of
real property is not authorized by 18
U.S.C. § 1955 and that the Amended Complaint impermissibly seeks forfeiture
of defendant Rodini's interest in an employee benefit fund. The defendants move
for a denial, without a hearing, of the government's request for preliminary
relief, in particular asserting that the appointment of a receiver pendente
lite would be unnecessary. The defendants also maintain that the government
lacks standing under § 1964(c) to assert claims for money damages and that such
claims are insufficient because they are barred by the statute of limitations
and res judicata.
Defendants Riela and Joseph Bonanno maintain
that the Eastern District of New York is an improper venue for the action, that
the relief sought in this action would amount to the application of an ex
post facto law, and that subjecting Riela and Bonanno, who are elderly and
infirm, to this action would be a violation of their due process rights and an
abuse of process. Defendant [**7] Spero also
moves in limine for a ruling that the Court will not draw an adverse
inference from Spero's invocation of his Fifth Amendment privilege against
self-incrimination. n2
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-Footnotes- - - - - - - - - - - - - - - - - -
n2 The government's
application for review of Magistrate Chrein's order precluding the production of
Spero's tax returns is discussed in a separate decision.
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The defendants have to a large extent divided the responsibility for
briefing each of these arguments among them and then have joined in each other's
motions when applicable. Defendant Sabella had already filed an answer and a
motion to dismiss the original Complaint before the government filed its Amended
Complaint. Thus Sabella's motion to dismiss the original Complaint and the
government's motion to file the Amended Complaint against Sabella are also
before the Court. The arguments raised in the motions concerning Sabella are
similar to those raised in the other defendants' motions. Unless clearly limited
to particular defendants, the following discussion is intended to apply to all
defendants whose motions are before the Court.
The RICO statute was part
of the Organized Crime Control Act of 1970, Pub. L. 91-452, 84 Stat. 922, which
Congress [**8] enacted in an effort to eradicate
organized crime in the United States. The Statement of Findings and Purpose of
the Organized Crime Control Act provides:
The Congress finds that (1) organized crime in the United States
is a highly sophisticated, diversified, and widespread activity that annually
drains billions of dollars from America's economy by unlawful conduct and the
illegal use of force, fraud, and corruption; (2) organized crime derives a
major portion of its power through money obtained from such illegal endeavors
as syndicated gambling, loan sharking, the theft and fencing of property, the
importation and distribution of narcotics and other dangerous drugs, and other
forms of social exploitation; (3) this money and power are increasingly used
to infiltrate and [*1421] corrupt legitimate
business and labor unions and to subvert and corrupt our democratic processes;
(4) organized crime activities in the United States weaken the stability of
the Nation's economic system, harm innocent investors and competing
organizations, interfere with free competition, seriously burden interstate
and foreign commerce, threaten the domestic security, and undermine the
general welfare of the Nation [**9] and its
citizens; and (5) organized crime continues to grow because of defects in the
evidence-gathering process of the law inhibiting the development of the
legally admissible evidence necessary to bring criminal and other sanctions or
remedies to bear on the unlawful activities of those engaged in organized
crime and because the sanctions and remedies available to the Government are
unnecessarily limited in scope and impact.
It is the purpose of this
Act to seek the eradication of organized crime in the United States by
strengthening the legal tools in the evidence-gathering process, by
establishing new penal prohibitions, and by providing enhanced sanctions and
new remedies to deal with the unlawful activities of those engaged in
organized crime.
RICO in particular is aimed at four categories of
"Prohibited Activities": (a) the use of income derived from a "pattern of
racketeering activity or through collection of an unlawful debt" to acquire an
interest in, establish, or operate an enterprise engaged in or affecting
interstate commerce; (b) the acquisition or maintenance of an interest in an
enterprise through a pattern of racketeering activity or collection of an
unlawful debt; [**10] (c) the conduct of or
participation in the conduct of an enterprise through a pattern of racketeering
activity or collection of an unlawful debt; and (d) conspiring to violate any of
these three provisions. 18
U.S.C. § 1962(a)-(d).
RICO violations may result in the criminal
penalties of imprisonment, fines, and forfeiture under 18
U.S.C. § 1963 and may also be the subject of civil actions under § 1964.
Section 1964(a) confers equitable powers on the federal district courts to
prevent and restrain RICO violations. Section 1964(b) authorizes the Attorney
General to institute proceedings under this section. Section 1964(c) authorizes
any "person injured in his business or property" because of a RICO violation to
sue for treble damages. The government has brought this action under § 1964,
seeking both equitable and monetary relief based on the defendants' alleged RICO
violations.
It bears noting at the outset that this case does not
present the problems of statutory application encountered in recent private
civil RICO actions in which courts have expressed a concern that "instead of
being used against mobsters and organized criminals, [RICO] has become a tool
for everyday fraud cases [**11] . . . ." Sedima,
S.P.L.R. v. Imrex Co., 473 U.S. 479, 499, 87 L. Ed. 2d 346, 105 S. Ct. 3275
(1985). This action is directed at the activities of an alleged extensive
organized crime enterprise, the Bonanno Organized Crime Family of La Cosa
Nostra, through which the defendants allegedly participate in numerous
racketeering activities such as gambling, narcotics offenses, loansharking,
extortion, and labor racketeering that are the very types of activity at which
RICO is aimed. See 115 Cong. Rec. 5873-74 (1969) (remarks of Sen.
McClellan) (gambling, narcotics, loansharking, and infiltration of legitimate
businesses and labor unions described as major areas of activity for organized
crime); accord Organized Crime Control Hearings before Subcomm. No. 5,
Comm. on the Judiciary of the House of Representatives on S. 30 and Related
Proposals Relating to the Control of Organized Crime in the United States, 91st
Cong., 2d Sess. ("House Hearings") 96 & 152-53 (1970) (statements of Sen.
McClellan and Attorney General Mitchell). The "families" of "La Cosa Nostra,"
the Bonanno Family in particular, and Joseph Bonanno, Philip Rastelli, Michael
Sabella, and Nicholas Marangello are mentioned in the descriptions of organized
[**12] crime contained in RICO's legislative
history. 116 Cong. Rec. 18913, 18940 (1970) (remarks of Sen. McClellan); S. Rep.
No. 617, 91st Cong., 1st Sess. ("Senate Report") 38, 42 (1969). As [*1422] stated by the United States Court of Appeals
for the Second Circuit: "Indeed, we have no doubt that the conduct for which
[the defendant] was indicted, murder, distributing narcotics, and gambling, all
in furtherance of the Bonanno family enterprise, is precisely the type of
activity Congress sought to reach through RICO." United
States v. Ruggiero, 726 F.2d 913, 923 (2d Cir.), cert. denied sub
nom. Rabito
v. United States, 469 U.S. 831, 83 L. Ed. 2d 60, 105 S. Ct. 118 (1984).
The fact that this action purports to be aimed at the type of activity
and perhaps even one of the very criminal enterprises which Congress had in mind
in enacting RICO does not, obviously, establish whether these particular
defendants may be held liable in a civil RICO action or whether the government's
Amended Complaint sufficiently pleads RICO claims. The parties have briefed
several novel and complex issues of RICO interpretation in connection with the
defendants' motions to dismiss. The Court will address those motions, first,
with respect to the [**13] sufficiency of the
Amended Complaint's RICO allegations and second, with respect to the
appropriateness of the relief requested.
THE SUFFICIENCY OF THE RICO
CLAIMS
The defendants argue that the Amended Complaint fails to state a
claim under § 1962(a), (c), and (d) of RICO because the government has not
adequately alleged the statutory elements of RICO violations under those
sections. Two defendants contend that venue in the Eastern District of New York
is not proper and that this action violates their due process rights and the
prohibition against ex post facto laws. For the reasons stated below,
the defendants' arguments are in certain respects meritorious and the action
will be dismissed as to the Bonanno Organized Crime Family, Joseph Bonanno,
Alfred Embarrato, Frank Lino, Anthony Riela, Michael Sabella and Benjamin
Ruggiero, and dismissed in part as to all other defendants.
The
1962(c) Claims
The Amended Complaint asserts four 1962(c) claims
against the defendants. The first claim for relief alleges that the individual
defendants are employed by and associated with the Bonanno Family, a RICO
enterprise, and have conducted and participated in the Bonanno Family's affairs
[**14] through a pattern of racketeering
activity or collection of an unlawful debt. The second claim for relief alleges
that the individual defendants and the union defendants employed by or
associated with the Bonanno Family Enterprise conspired and agreed to obtain
through collusion and bid-rigging contracts awarded by agencies of the United
States government and unlawfully demanded and received payments in connection
with such bid-rigging. The third claim for relief alleges that individual
defendants, employed by or associated with the Bonanno Family Enterprise, have
conducted or participated in the conduct of the Bonanno Family's affairs through
a pattern of racketeering activity so as to cause Local 814 to be a captive
labor organization. Finally, the twelfth claim for relief alleges that Local
814, Local 814's Executive Board, and the Local 814 Funds constitute an
enterprise which is dominated and exploited as a captive labor organization by
the Bonanno Family and the individual defendants.
Section 1962(c)
provides:
(c) It shall be unlawful for any person employed by or
associated with any enterprise engaged in, or the activities of which affect,
interstate or foreign commerce, [**15] to
conduct or participate, directly or indirectly, in the conduct of such
enterprise's affairs through a pattern of racketeering activity or collection
of unlawful debt.
A violation of § 1962(c) thus requires
that a person engage in the "(1) conduct (2) of an enterprise [by which the
person is employed or with which he is associated] (3) through a pattern (4) of
racketeering activity." Sedima,
S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 87 L. Ed. 2d 346, 105 S. Ct. 3275
(1985) (footnote omitted). As the Supreme Court has noted: "The plaintiff
[*1423] must, of course, allege each of these
elements to state a claim." Sedima,
473 U.S. at 496. The Court will therefore assess the sufficiency of the
first, second, third, and twelfth claims for relief as to each required element
of a § 1962(c) claim.
The RICO Enterprise
The
first three claims for relief designate the Bonanno Organized Crime Family as
the RICO enterprise. The Amended Complaint describes the Bonanno Family as an
organized criminal group connected to a nationwide crime organization known as
the Mafia or La Cosa Nostra. (Amended Complaint para. 4) The Bonanno Family
allegedly was founded by defendant Joseph Bonanno in 1924 and over the years has
operated [**16] and continues to operate illegal
activities including "drug trafficking, gambling, bookmaking and numbers games,
hijackings, robberies and burglaries, loansharking, extortion and racketeering,
and infiltrating, controlling, and corrupting labor unions." (Amended Complaint
para. 4(d) & (e))
The Amended Complaint alleges that the Bonanno
Family operates through groups known as "crews" comprising "made members" or
"soldiers" and associates or "connected people." The crews are allegedly headed
by "Capos" who in turn report to and share profits with a hierarchy consisting
of a Boss, Underboss, and Consigliere. (Amended Complaint para. 4(a)) The
Amended Complaint alleges that the operation of the Bonanno Family is governed
by strict rules requiring that the enterprise's hierarchy approve all illegal
activities and share in all profits. (Amended Complaint para. 4(b))
The
Amended Complaint's description of the Bonanno Family alleges an enterprise
under RICO. Section 1961(4) of RICO defines "enterprise" as "any individual,
partnership, corporation, association, or other legal entity, and any union or
group of individuals associated in fact although not a legal entity." The
Amended Complaint [**17] alleges that the
Bonanno Family consists of "individuals or a group of individuals associated in
fact." (Amended Complaint para. 45)
The Supreme Court has held that
"RICO is equally applicable to a criminal enterprise that has no legitimate
dimension or has yet to acquire one" as it is to a legitimate enterprise. United
States v. Turkette, 452 U.S. 576, 591, 69 L. Ed. 2d 246, 101 S. Ct. 2524
(1981). The courts have recognized that organized crime families, a council
of leaders of organized crime families, or divisions of organized crime families
may qualify as RICO enterprises. United
States v. Persico, 832 F.2d 705 (2d Cir. 1987) (Colombo Family); United
States v. Langella, 804 F.2d 185 (2d Cir. 1986) (the Commission of La
Cosa Nostra); United
States v. Local 560, 780 F.2d 267 (3d Cir. 1985), cert.
denied, 476
U.S. 1140, 90 L. Ed. 2d 693, 106 S. Ct. 2247 (1986) (Provenzano Group of
Genovese Family); United
States v. Santoro, 647 F. Supp. 153 (E.D.N.Y. 1986) (Lucchese Family).
The United States Court of Appeals for the Second Circuit has also specifically
recognized that the Bonanno Crime Family may be a RICO enterprise. United
States v. Ruggiero, 726 F.2d 913, 923 (2d Cir.), cert. denied sub
nom. Rabito
v. United States, [**18] 469 U.S. 831, 83 L. Ed. 2d 60, 105 S.
Ct. 118 (1984).
The Bonanno Family Enterprise as
described in the Amended Complaint is allegedly characterized by "an ongoing
organization, formal or informal." United
States v. Turkette, 452 U.S. at 583; United
States v. Ianniello, 808 F.2d 184, 191 (2d Cir. 1986), cert.
denied,, 483
U.S. 1006, 107 S. Ct. 3230, 97 L. Ed. 2d 736 (1987); see United
States v. Persico, 832 F.2d at 708 (Colombo Family hierarchy consisting
of Boss, Underboss, Consiglieri, Capos, crew soldiers, and associates); United
States v. Ruggiero, 726 F.2d at 916 (Bonanno Family headed by Boss and
organized into crews). The Bonanno Family is also alleged to "function as a
continuing unit," United
States v. Turkette, 452 U.S. at 583; United
States v. Ianniello, 808 F.2d at 191; Furman
v. Cirrito, 828 F.2d 898, 903 (2d Cir. 1987), in its conduct of various
unlawful activities for profit from 1924 to the present. The alleged Bonanno
Family Enterprise thus possesses the qualities of "relatedness and continuity"
which the United [*1424] States Court of
Appeals for the Second Circuit has held must characterize a RICO enterprise. United
States v. Ianniello, 808 F.2d at 191-92 (discussing Sedima,
S.P.L.R. v. Imrex Co., [**19] 473 U.S. 479, 496, 87 L. Ed. 2d
346, 105 S. Ct. 3275 n. 14 (1985)); see United
States v. Benevento, 836 F.2d 60, 72 (2d Cir. 1987) ("so long as the
enterprise is long and elaborate enough to be considered continuing, the
enterprise requirement is satisfied"); cf. Creative
Bath Products, Inc. v. Connecticut General Life Insurance Co., 837 F.2d 561
(2d Cir. 1988); Albany
Insurance Co. v. Esses, 831 F.2d 41 (2d Cir. 1987); Beck
v. Manufacturers Hanover Trust Co., 820 F.2d 46 (2d Cir. 1987),
cert. denied, 484
U.S. 1005, 108 S. Ct. 698, 98 L. Ed. 2d 650 (1988) (all finding alleged
enterprises with limited short-lived goals insufficient).
The twelfth
claim for relief alleges that Local 814, its Executive Board, and the Local 814
Funds collectively constitute an "association or union" under § 1961(4)'s
definition of enterprise. (Amended Complaint para. 99) Although the Amended
Complaint does not elaborate on the nature of the "association or union"
allegedly formed by the union, executive board, and funds, the defendants have
not challenged the designation of enterprise in the twelfth claim for relief.
The Court notes, moreover, that the infiltration of labor organizations, with
the concomitant "theft from union [**20] funds,
extortion through the threat of economic pressure, and the profit to be gained
from the manipulation of welfare and pension funds," was a specific wrong which
Congress sought to address in RICO. Senate Report at 78 (1969); 115 Cong. Rec.
5874 (1969) (remarks of Sen. McClellan). A "captive labor organization"
consisting of a union, union funds, and a severance pay plan was found to be an
appropriate RICO enterprise in United
States v. Local 560, 581 F. Supp. 279, 283 n. 3 (D.N.J. 1984),
aff'd, 780
F.2d 267 (3d Cir. 1985), cert. denied, 476
U.S. 1140, 90 L. Ed. 2d 693, 106 S. Ct. 2247 (1986). While the Local 814
Enterprise should be better defined at a hearing on the merits of this case, the
allegations of the twelfth claim for relief are sufficient to put defendants
upon notice as to the enterprise involved.
The Amended Complaint alleges
that the individual defendants are "employed by or associated with" the Bonanno
Organized Crime Family Enterprise as required by § 1962(c). Not only do the
first three claims for relief expressly allege such employment or association
but each of the individual defendants is described as holding the position of
Boss, Underboss, Acting Boss, Consigliere, Capo, soldier, [**21] made member, and/or associate of the Bonanno
Family. The twelfth claim for relief also alleges that the Bonanno Family and
individual defendants have "infiltrated, dominated and exploited" and are
"employed by or associated with" the Local 814 Enterprise. n3
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n3 The twelfth claim for relief specifically names defendants Rastelli,
Massino, Marangello, Spero, James Vincent Bracco, and Rodini as being employed
by or associated with the Local 814 Enterprise. The Amended Complaint contains
no specific allegations indicating that the other defendants are employed by or
associated with the Local 814 Enterprise. The Court need not address the
sufficiency of the general allegation of employment or association, however,
since as discussed below, the Amended Complaint's allegations of a pattern of
racketeering as to all individual defendants except Rastelli, Massino,
Marangello, James Vincent Bracco, and Rodini are insufficient to sustain the
twelfth claim for relief.
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Defendant Infanti n4 argues
that the Amended Complaint is legally defective because the Bonanno Family
cannot be both a RICO enterprise and a defendant or "person" violating RICO
under § 1962(c). Bennett
v. United States Trust [**22] Co., 770 F.2d 308, 315 (2d Cir.
1985), cert. denied, 474
U.S. 1058, 88 L. Ed. 2d 776, 106 S. Ct. 800 (1986); Cullen
v. Margiotta, 811 F.2d 698, 729 (2d Cir.), cert. denied sub nom.
Nassau
County Republican Committee v. Cullen, 483 U.S. 1021, 107 S. Ct. 3266, 97
L. Ed. 2d 764 (1987). This argument, however, [*1425] is misplaced because the Bonanno Family is not
alleged to fulfill the role of both the enterprise and a "person" violating RICO
in any of the Amended Complaint's § 1962(c) claims. In the first three claims
for relief, the Bonanno Family is alleged to be the enterprise but only the
individual and union defendants are alleged to have conducted or participated in
the conduct of the enterprise's affairs. The twelfth claim for relief alleges
that the Bonanno Family, along with the individual defendants, infiltrated and
exploited the Local 814 Enterprise. The Amended Complaint's § 1962(c) claims are
therefore not defective under Bennett. See Lumbard
v. Maglia, Inc., 621 F. Supp. 1529, 1534 (S.D.N.Y. 1985); United
States v. Local 560, 581 F. Supp. at 329-30 (defendant may be alleged
to be enterprise in some claims and "person" violating RICO in others).
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n4 On January 19, 1988, the government filed a Suggestion
of Death pursuant to Rule 25(a)(1), Fed. R. Civ. P., suggesting that Infanti had
died. The Court, however, will address the motion filed by Infanti because he
is, as of this date, a named defendant and other defendants have joined in
Infanti's arguments.
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Footnotes- - - - - - - - - - - - - - - - - [**23]
Moreover, even if the Bonanno Family were
alleged to be both the § 1962(c) "enterprise" and "person" in a single claim,
that defect in the pleading might be appropriately raised by the defendant
Bonanno Organized Crime Family but it would not be grounds for dismissal of the
claims against the individual defendants. See United
States v. Computer Sciences Corp., 689 F.2d 1181, 1190-91 (4th Cir.
1982), cert. denied, 459
U.S. 1105, 74 L. Ed. 2d 953, 103 S. Ct. 729 (1983); Morris
v. Gilbert, 649 F. Supp. 1491, 1501 (E.D.N.Y. 1986); Rodonich
v. House Wreckers Union Local 95, 627 F. Supp. 176, 180-81 (S.D.N.Y.
1985) (dismissing claims only as to defendant improperly alleged to be both
"person" and "enterprise"). The defendant Bonanno Organized Crime Family has not
moved to dismiss, or even appeared in, this action. It is hard to imagine how
the Bonanno Family could appear since it is not a legal entity and is alleged to
exist only as an "association in fact" enterprise. As such, the Bonanno Family
is not an appropriate RICO defendant. As stated by the United States Court of
Appeals for the Seventh Circuit: "The nebulous association in fact does not
itself fall within the RICO definition of 'person.' We [**24] doubt that an 'association in fact' can, as such,
hold any interest in property or even be brought into court. In the association
in fact situation, each participant in the enterprise may be a 'person' liable
under RICO, but the association itself cannot be." Haroco,
Inc. v. American National Bank & Trust Co., 747 F.2d 384, 401 (7th Cir.
1984), aff'd on other grounds, 473
U.S. 606, 87 L. Ed. 2d 437, 105 S. Ct. 3291 (1985) (per curiam).
Since the Bonanno Organized Crime Family cannot constitute a "person" under RICO
capable of violating § 1962(a), (c), or (d), the Amended Complaint as to that
named defendant is dismissed. See Leonhard
v. United States, 633 F.2d 599, 609 n. 11 (2d Cir. 1980), cert.
denied, 451
U.S. 908, 68 L. Ed. 2d 295, 101 S. Ct. 1975 (1981); 5 C. Wright & A.
Miller Federal Practice & Procedure § 1357 at 593 & n. 43
(1969) (court may dismiss complaint sua sponte for failure to state a
claim).
Pattern of Racketeering Activity
The
RICO offenses listed in § 1962(a)-(c) require that the defendant have engaged in
either a "pattern of racketeering activity" or the "collection of an unlawful
debt." The Amended Complaint sets forth at least 199 "acts of racketeering"
which the government maintains constitute either [**25] racketeering activity or the collection of
unlawful debts by the defendants.
RICO defines "racketeering activity"
as including any act or threat "chargeable" under several types of state
criminal laws and punishable by imprisonment for more than one year; any act
"indictable" under several specifically enumerated federal criminal provisions;
any act "indictable" under 29
U.S.C. §§ 186 and 501(c), relating to labor organizations and union funds;
any bankruptcy fraud, securities fraud, or narcotics offense "punishable" under
federal law; and any act "indictable" under the Currency and Foreign
Transactions Reporting Act. 18
U.S.C. 1961(1); see Sedima,
S.P.R.L. v. Imrex Co., 473 U.S. 479, 481-82, 87 L. Ed. 2d 346, 105 S. Ct.
3275 (1985).
The RICO definition of "pattern of racketeering
activity" provides:
[*1426] "Pattern of
racketeering activity" requires at least two acts of racketeering activity,
one of which occurred after the effective date of this chapter and the last of
which occurred within ten years (excluding any period of imprisonment) after
the commission of a prior act of racketeering activity.
18
U.S.C. § 1961(5). The Second Circuit has held that "two related predicate
acts will suffice to establish a [**26] pattern
under 18
U.S.C. § 1961(5)," Beck
v. Manufacturers Hanover Trust, 820 F.2d 46, 51 (2d Cir. 1987),
cert. denied, 484
U.S. 1005, 108 S. Ct. 698, 98 L. Ed. 2d 650 (1988), and has specifically
rejected a requirement of multiple schemes or episodes for racketeering acts to
constitute a pattern. United
States v. Ianniello, 808 F.2d 184, 192 (2d Cir. 1986), cert.
denied, 483
U.s. 1006, 107 S. Ct. 3230, 97 L. Ed. 2d 736 (1987); accord, e.g.,
United
States v. Benevento, 836 F.2d 60, 72 (2d Cir. 1987); see United
States v. Coonan, 839 F.2d 886 (2d Cir. 1988) ("Two racketeering acts,
if committed in furtherance of the affairs of an enterprise, suffice without
more to constitute a pattern"). For a "pattern of racketeering" to exist under §
1962(c), all that is required is that the defendant commit at least two acts of
racketeering (or "predicate acts") "related to the common purpose of the
enterprise." Albany
Insurance Co. v. Esses, 831 F.2d 41, 44 (2d Cir. 1987); accord
United
States v. Ianniello, 808 F.2d at 191-92.
RICO defines "an
unlawful debt" as a debt incurred in unlawful gambling activity or unenforceable
under state or federal usury laws and which was incurred in connection [**27] with an unlawful gambling business or with the
business of making usurious loans when the usurious rate is at least twice the
enforceable rate. 18
U.S.C. § 1961(6) The statute contains no "pattern" requirement for the
collection of an unlawful debt except to the extent it requires that the
defendant be engaged in a gambling business or a business of making usurious
loans.
Several of the defendants move to dismiss the Amended Complaint
for failure to allege the collection of an unlawful debt or a pattern of at
least two acts of racketeering within the definitional time period for each
defendant. The defendants also argue that the Amended Complaint must be
dismissed because its allegations of a pattern of racketeering activity do not
meet the particularity requirements of Rule 9(b), Fed. R. Civ. P.
The
government has attempted to name each defendant, with the exception of Joseph
Bonanno, in connection with at least two of the 199 or more acts of racketeering
set forth in the Amended Complaint. The sufficiency of those allegations will be
discussed below. The government has also, perhaps in an effort to ensure that
sufficient predicate acts are alleged for each defendant even if some [**28] of the specific acts alleged are found deficient,
alleged that each defendant has aided and abetted the commission of all of the
acts listed even if the defendant is not specifically named in connection with
the predicate act. Paragraph 43 of the Amended Complaint states:
The Bonanno Family, the individual defendants herein, Local 814,
the Local 814 Executive Board and the Local 814 Funds, and others, have
committed and aided and abetted in committing the above-enumerated
racketeering acts and other racketeering and illegal acts, and continue to
commit and aid and abet in committing the above-enumerated racketeering acts
and other racketeering and illegal acts, thereby affecting interstate and
foreign commerce.
The allegations of the predicate acts
themselves contain broad statements that "the individual defendants who are
members or associates of the Bonanno Family" engaged in the predicate acts.
The defendants argue both that these general allegations fail to set
forth each defendant's participation in the predicate acts with particularity
and that the government's aiding and abetting allegation is an improper attempt
to impose co-conspirator liability under Pinkerton
v. United [**29] States, 328 U.S. 640, 90 L. Ed. 1489, 66 S.
Ct. 1180 (1946), on the defendants for the substantive
violation of § 1962(c). While the Court finds Rule 9(b) standards inapplicable
to [*1427] predicate acts not sounding in
fraud, the Court nevertheless holds that the Amended Complaint's broad aiding
and abetting allegation may not be used to meet § 1961(5)'s requirement that at
least two acts of racketeering per defendant be alleged.
Rule 9(b), Fed.
R. Civ. P., n5 by its terms is limited to allegations of fraud or mistake.
See United
States v. Rivieccio, 661 F. Supp. 281, 290 (E.D.N.Y. 1987) (Rule 9(b)
not applicable to breach of fiduciary duty, conversion, and unjust enrichment
claims); Bosio
v. Norbay Securities, Inc., 599 F. Supp. 1563, 1570-71 (E.D.N.Y. 1985)
(Rule 9(b) not applicable to breach of fiduciary duty and conversion claims); 5
C. Wright & A. Miller, Federal Practice & Procedure § 1297 at
405 (1969). Only one of the predicate acts alleged in the Amended Complaint, a
mail fraud predicate act alleged against James Vincent Bracco, is based on
fraud.
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - -
- - - - - - - - - - -
n5 Rule 9(b), Fed. R. Civ. P., provides:
(b) Fraud, Mistake, Condition of the Mind. In all averments of
fraud or mistake, the circumstances constituting fraud or mistake shall be
stated with particularity. Malice, intent, knowledge, and other condition of
mind of a person may be averred generally.
- - - - - - -
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Although Rule 9(b) has frequently been
applied in RICO cases, most RICO cases applying the rule have involved predicate
acts based upon fraud. See, e.g., Beck
v. Manufacturers Hanover Trust Co., 820 F.2d at 49-50 (mail and wire
fraud); Haroco,
Inc. v. American National Bank & Trust Co., 747 F.2d 384, 405 (7th Cir.
1984), aff'd on other grounds, 473
U.S. 606, 87 L. Ed. 2d 437, 105 S. Ct. 3291 (1985) (per curiam)
(mail fraud); Seville
Industrial Machinery Corp. v. Southmost Machinery Corp., 742 F.2d 786, 791
(3d Cir. 1984), cert. denied, 469
U.S. 1211, 84 L. Ed. 2d 327, 105 S. Ct. 1179 (1985) (wire and mail fraud,
transportation of fraudulently obtained goods); Connors
v. Lexington Insurance Co., 666 F. Supp. 434, 450 (E.D.N.Y. 1987) (mail
and wire fraud); Andreo
v. Friedlander, Gaines, Cohen, Rosenthal & Rosenberg, 651 F. Supp. 877,
882 (D. Conn. 1986) (securities, mail, and wire fraud); Newman
v. L. F. Rothschild, Unterberg, Towbin, 651 F. Supp. 160, 162 (S.D.N.Y.
1986) (mail and wire fraud); Rhoades
v. Powell, 644 F. Supp. 645, 668-70 (E.D. Cal. 1986) (securities, mail,
and wire fraud); Frota
v. Prudential-Bache Securities, Inc., 639 F. Supp. 1186, 1192 (S.D.N.Y.
1986) (securities, mail, [**31] and wire
fraud); Levine
v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 639 F. Supp. 1391, 1396
(S.D.N.Y. 1986) (mail, wire, and securities fraud); Ichiyasu
v. Christie, Manson & Woods International, Inc., 637 F. Supp. 187, 189
(N.D. Ill. 1986) (mail and wire fraud); Schnitzer
v. Oppenheimer & Co., 633 F. Supp. 92, 97 (D. Or. 1985) (mail,
wire, and securities fraud); McLendon
v. Continental Group, Inc., 602 F. Supp. 1492, 1507 (D.N.J. 1985) (mail
and wire fraud); Doxie
v. Ford Motor Credit Co., 603 F. Supp. 624, 627 (S.D. Ga. 1984) (mail
fraud); Saine
v. A.I.A., Inc., 582 F. Supp. 1299, 1303 (D. Colo. 1984) (wire fraud);
Slattery
v. Costello, 586 F. Supp. 162, 168 (D.D.C. 1983) (mail and wire fraud);
In
re Sattler's, Inc., 73 B.R. 780, 786 (Bankr. S.D.N.Y. 1987) (mail,
wire, and bankruptcy fraud).
A few courts have, however, suggested that
RICO complaints in general, apparently regardless of whether the predicate acts
involve fraud, should comport with particularity standards of Rule 9(b).
Concerned about the stigma attached to the label of "racketeer" and the
possibility of strike suits, these courts have stated that a "RICO plaintiff
must meet a higher [**32] pleading standard than
that imposed on an ordinary plaintiff." Schnitzer
v. Oppenheimer & Co., 633 F. Supp. at 97; see Plount
v. American Home Assurance Co., 668 F. Supp. 204, 206-07 (S.D.N.Y.
1987) ("Yet all of the concerns that dictate that fraud be pleaded with
particularity exist with even greater urgency in civil RICO actions"); see
also Taylor
v. Bear Stearns & Co., 572 F. Supp. 667, 682 (N.D. Ga. 1983) (Rule
9(b)'s standards apply to RICO claims).
The Court finds no basis for
extending the reach of Rule 9(b) to all RICO cases: "Since the rule is a special
pleading requirement and contrary to the general approach of simplified pleading
adopted by the federal rules, its scope of application [*1428] should be construed narrowly and not extended
to other legal theories or defenses." 5 C. Wright & A. Miller, Federal
Practice & Procedure § 1297 at 405 (1969); see id. § 1221 at
149 (Rule 9 is the only special pleading provision in the Federal Rules of Civil
Procedure). The Court is not persuaded that the fact that a RICO defendant may
be labelled a "racketeer" calls for judicial extension of Rule 9(b)'s scope.
See Sedima,
S.P.R.L. v. Imrex Co. 473 U.S. 479, 492, 87 L. Ed. 2d 346, 105 S. Ct. 3275
(1985) [**33] ("As for stigma, a civil RICO
proceeding leaves no greater stain than do a number of other civil
proceedings"); Rodonich
v. House Wreckers Union Local 95, 627 F. Supp. 176, 178 (S.D.N.Y. 1985)
(questioning propriety of altering RICO's pleading burden). The Court therefore
will not scrutinize the non-fraud RICO allegations of the Amended Complaint
against a heightened particularity standard.
Even though Rule 9(b) is
not generally applicable to RICO allegations, a complaint purporting to allege a
violation of RICO must comply with the notice pleading requirements of Rule
8(a)(2), Fed. R. Civ. P. n6 Rule 8(a) requires that a complaint set forth "'a
short and plain statement of the claim' that will give the defendant fair notice
of what the plaintiff's claim is and the grounds upon which it rests." Conley
v. Gibson, 355 U.S. 41, 47, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). Notice
pleading requirements are applicable to RICO, and "it is imperative that the
court and the defendants be placed on clear notice as to what is being alleged,
and what the substance of the claim is, in order to facilitate a decision on the
merits of the case." Ralston
v. Capper, 569 F. Supp. 1575, 1581 (E.D. Mich. 1983); see Gregoris
[**34] Motors v. Nissan Motor Corp., 630 F. Supp. 902, 913
(E.D.N.Y. 1986) (applying Rule 8(a) to RICO complaint).
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - -
- - - - - - -
n6 Rule 8(a)(2) requires that a pleading setting forth a
claim for relief contain "a short and plain statement of the claim showing that
the pleader is entitled to relief."
- - - - - - - - - - - - - - -
- -End Footnotes- - - - - - - - - - - - - - - - -
A complaint's
insufficiency under Rule 8(a) may provide the basis for a motion to dismiss
under Rule 12(b)(6), Fed. R. Civ. P. See New
York v. Cedar Park Concrete Corp., 665 F. Supp. 238, 246 (S.D.N.Y.
1987); DeFina
v. Latimer, 79 F.R.D. 5, 6 (E.D.N.Y. 1977); 5 C. Wright & A Miller,
Federal Practice & Procedure, § 1203 at 66-67 (1969). A RICO
plaintiff must allege each of RICO's statutory elements, Sedima,
473 U.S. at 496, and a complaint which fails to allege one or more of those
elements, may be dismissed. Albany
Insurance Co. v. Esses, 831 F.2d 41 (2d Cir. 1987) (failure to plead
enterprise); Beck
v. Manufacturers Hanover Trust Co., 820 F.2d 46 (2d Cir. 1987),
cert. denied, 484
U.S. 1005, 108 S. Ct. 698, 98 L. Ed. 2d 650 (1988) (same); Ralston
v. Capper, 569 F. Supp. 1575 (E.D. Mich. 1983) (failure to plead
predicate acts, violation of § 1962, enterprise).
While mindful that a
complaint should not [**35] be dismissed for
failure to state a claim "unless it appears beyond doubt that the plaintiff can
prove no set of facts in support of his claim which would entitle him to
relief," Conley
v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); Goldman
v. Belden, 754 F.2d 1059, 1065 (2d Cir. 1985), the Court is also aware
that it need not assume that conclusory statements as to legal effects or
conclusions, deductions, or opinions as to factual allegations are true. 5 C.
Wright & A. Miller, Federal Practice & Procedure, § 1357 at 597
(1969); 2A J. Moore, J. Lucas, G. Grotheer, Moore's Federal Practice
para. 12.07 [2.-5] at 12.63-64 (2d ed. 1987).
The broad allegation of
aiding and abetting contained in paragraph 43 of the Amended Complaint is not
sufficient under Rule 8 to attribute to each defendant the preceding 199 or more
acts of racketeering. A defendant's aiding and abetting the commission of a
predicate act may constitute a predicate act itself. 18
U.S.C. § 2; Petro-Tech,
Inc. v. Western Co. 824 F.2d 1349, 1356-57 (3d Cir. 1987); First
Federal Savings & Loan Ass'n v. Oppenheim, Appel, Dixon & Co., 629
F. Supp. 427, 445 (S.D.N.Y. 1986); Fireman's
Fund Insurance Co. v. Plaza [**36] Oldsmobile Ltd., 600 F.
Supp. 1452, 1456-57 n. 2 (E.D.N.Y. 1985). The aiding and
abetting allegation of the [*1429] Amended
Complaint, however, is devoid of allegations as to how the defendants associated
themselves with the predicate acts, participated in them as something they
wished to bring about, or sought by their actions to make them succeed. Nye
& Nissen v. United States, 336 U.S. 613, 619, 93 L. Ed. 919, 69 S. Ct.
766 (1949); United
States v. Sigalow, 812 F.2d 783, 785 (2d Cir. 1987). The Amended
Complaint's aiding and abetting allegation also runs counter to Rule 8's
requirement that "actions brought against multiple defendants must clearly
specify the claims with which each particular defendant is charged." 5 C. Wright
& A. Miller, Federal Practice & Procedure, § 1248 at 226
(1969); see Laterza
v. American Broadcasting Co., 581 F. Supp. 408, 412 (S.D.N.Y. 1984)
(must allege how each defendant aided and abetted specific predicate act).
It cannot be discerned from the Amended Complaint which defendants are
alleged to have aided and abetted which predicate acts or in what manner they
aided and abetted the acts. The defendants' alleged association with the Bonanno
Organized Crime Family alone [**37] is not
sufficient to attribute to each defendant all of the predicate acts. Congress
specifically declined to make mere membership in an organized crime organization
a RICO offense. See Moss
v. Morgan Stanley, Inc., 719 F.2d 5, 21 n. 17 (2d Cir. 1983), cert.
denied sub nom. Moss
v. Newman, 465 U.S. 1025, 79 L. Ed. 2d 684, 104 S. Ct. 1280 (1984)
(discussing legislative history). As stated in United
States v. Persico, 832 F.2d 705, 714 (2d Cir. 1987), "the focus of
section 1962(c) is on the individual patterns of racketeering engaged in by a
defendant, rather than the collective activities of the members of the
enterprise." n7
- - - - - - - - - - - - - - - - - -Footnotes- - -
- - - - - - - - - - - - - - -
n7 The defendants have argued at length
that the Amended Complaint seeks to hold each defendant responsible for all the
predicate acts alleged under principles of co-conspirator liability established
in Pinkerton
v. United States, 328 U.S. 640, 90 L. Ed. 1489, 66 S. Ct. 1180 (1946).
The Court believes it is neither necessary nor useful to discuss the possible
application of Pinkerton to RICO cases since the Amended Complaint in
this action does not seek to attribute predicate acts to defendants based upon
Pinkerton and the government has disclaimed any reliance on
Pinkerton in its predicate act allegations. (Government Brief at 35 n.
14)
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - -
- - - - - - - - - [**38]
The government
argues, in support of its aiding and abetting allegation, that the structure of
the Bonanno Family requires all criminal activity to be approved by the Family
hierarchy and that a Bonanno Family member's superiors share in the profits from
the members' criminal activity. The structure of the Bonanno Family as alleged
in the Amended Complaint, however, could also be viewed as inconsistent with
characterizing each individual defendant as an aider and abettor of all the
predicate acts by virtue of his association with the Family. A soldier,
associate, or capo of one crew, for example, may theoretically have no
connection with the activities of another crew.
The aiding and abetting
allegation of paragraph 43 does not give each defendant sufficient notice as to
the predicate acts alleged against him. The Court therefore will disregard the
aiding and abetting allegation in assessing whether the Amended Complaint
alleges a "pattern" of racketeering for each defendant and will instead examine
only those allegations in which the particular defendant is named. For the same
reasons, the Court does not consider general references to "the individual
defendants who are members or [**39] associates
of the Bonanno Family" sufficient to attribute a predicate act to a defendant
not named in connection with the act.
Paragraph 23 of the Amended
Complaint entitled "Act of Racketeering #1" alleges that Gabriel Infanti, Alfred
Embarrato, and Louis Attanasio, together with nine named non-defendants and
unspecified others, have from 1984 to the present operated, participated in, and
shared the profits from an illegal gambling business located at the 4th Street
Cafe, 78-80 East 4th Street, New York, New York. The gambling business is
alleged to be "in violation of New York State Penal Law Sections
225.00-225.401." This allegation in itself is not sufficient to allege an act of
racketeering under 18
U.S.C. § 1961(1)(A) since the sections of the New [*1430] York Penal Law cited include both felony and
misdemeanor offenses n8 and there is no N.Y. Penal L. § 225.401. The Amended
Complaint, however, also alleges that the 4th Street Cafe gambling operation
involves five or more persons and has been or remains in substantially
continuous operation for more than thirty days, or has a gross revenue of $
2,000 in any single day. Paragraph 23 thus alleges the elements of a violation
of 18
U.S.C. [**40] § 1955 n9 and sufficiently
pleads a predicate act attributable to Infanti, Embarrato, and Attanasio under
18
U.S.C. § 1961(1)(B).
- - - - - - - - - - - - - - - - -
-Footnotes- - - - - - - - - - - - - - - - - -
n8 A "felony" under New
York law "means an offense for which a sentence to a term of imprisonment in
excess of one year may be imposed." A term of imprisonment for a misdemeanor may
not exceed one year. N.Y. Penal L. § 10(4) & (5). Section 1961(1)(A) defines
the first category of racketeering activity as including certain offenses,
including gambling offenses, "chargeable under State law and punishable by
imprisonment for more than one year."
n9 18
U.S.C. § 1955 makes it illegal to conduct, finance, manage, supervise,
direct, or own an "illegal gambling business" which is defined as follows:
(1) "illegal gambling business" means a gambling business which --
(i) is a violation of the law of a State or political subdivision in
which it is conducted;
(ii) involves five or more persons who conduct,
finance, manage, supervise, direct, or own all or part of such business; and
(iii) has been or remains in substantially continuous operation for a
period in excess of thirty days or has a gross revenue of $ 2,000 in any
single day.
18
U.S.C. § 1955(b)(1).
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Footnotes- - - - - - - - - - - - - - - - - [**41]
Paragraph 24 entitled "Act of Racketeering
#2" similarly alleges that Attanasio, together with an individual not named as a
defendant and unspecified others, has operated and owned and currently operates
and owns an illegal gambling business or "numbers hole" at 405 Myrtle Avenue,
Brooklyn, New York. The Myrtle Avenue gambling operation is alleged to be in
violation of N.Y. Penal L. §§ 225.00-225-401 [sic], to have operated for more
than thirty days or to have a gross revenue of $ 2,000 in a day and to involve
five or more persons. Paragraph 24 thus sufficiently pleads a violation of 18
U.S.C. § 1955 qualifying as a predicate act attributable to Attanasio under
§ 1961(1)(B).
Paragraph 25 entitled "Act of Racketeering #3" alleges
that Joseph Massino, Attanasio, Infanti, Anthony Graziano, and four named
individuals who are not defendants have operated and owned and continue to
operate and own an illegal gambling operation at J & S Cake, 58-23 58th
Road, Maspeth, Queens, New York. Like the allegations of the 4th Street Cafe and
Myrtle Avenue operations, the allegations concerning the J & S Cake gambling
operation state the elements of a violation of 18
U.S.C. § 1955 and thus sufficiently [**42]
plead a predicate act under 18
U.S.C. § 1961(1)(B) attributable to Massino, Attanasio, Infanti, and
Graziano.
Paragraph 26 entitled "Act of Racketeering #4" alleges that in
1977 Frank Lino was charged with gambling offenses under N.Y. Penal L. §§ 225.05
& 225.30 and that Lino pleaded guilty to violating § 225.05 in 1978. Since
violations of both §§ 225.05 and 225.30 are misdemeanors, the allegations of
paragraph 26 do not plead a predicate act under § 1961(1)(A).
Paragraph
27 of the Amended Complaint entitled "Act of Racketeering #5" alleges narcotics
violations by Salvatore Catalano who is not a defendant in this action. None of
the defendants in this action are mentioned in paragraph 27; nor are any of them
named as defendants or alleged to have committed crimes in the indictment in
United States v. Badalamenti, 84 Cr. 236 (S.D.N.Y.), submitted as
Exhibit B to the Amended Complaint. n10 Paragraph 27 thus fails to plead a
predicate act attributable to any of the defendants and will be stricken from
the Amended Complaint as immaterial under Rule 12(f), Fed. R. Civ. P. Exhibit B
is also stricken.
- - - - - - - - - - - - - - - - - -Footnotes- -
- - - - - - - - - - - - - - - -
n10 The Court is at a loss to understand
the purpose of burdening the record in this case with this 148 page indictment
which makes only passing reference of no substantive significance to three
defendants. This Court looks with askance upon the practice of annexing such an
indictment for the purpose of incorporating it into the complaint rather than
succinctly pleading the facts intended to be alleged.
- - - - - -
- - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - [**43]
[*1431]
Paragraph 28 entitled "Act of Racketeering #6" alleges that approximately once a
week from 1973 to 1976 Massino and unnamed others conspired together and aided
and abetted the transportation of contraband cigarettes from Washington, D.C. to
New Jersey and New York in violation of 18
U.S.C. § 2343(a). This allegation appears to confuse 18
U.S.C.§ 2342, the statute outlawing trafficking in contraband cigarettes,
with § 2343(a), the statute requiring recordkeeping for transactions involving
more than 60,000 cigarettes. Moreover, while aiding and abetting a violation of
§ 2342 or § 2343 may constitute a predicate act, see Fireman's
Fund Insurance Co. v. Plaza Oldsmobile Ltd., 600 F. Supp. 1452, 1457 n. 2
(E.D.N.Y. 1985), conspiracy to violate § 2342 or § 2343 is not "indictable
under" those sections but rather is indictable under 18
U.S.C. § 371 and cannot serve as a predicate act under 18
U.S.C. § 1961(1)(B). See United
States v. Ruggiero, 726 F.2d 913, 920 (2d Cir.), cert. denied sub
nom. Rabito
v. United States, 469 U.S. 831, 83 L. Ed. 2d 60, 105 S. Ct. 118 (1984).
The Court therefore finds that paragraph 28 fails to allege a predicate act
attributable to Massino and grants Massino's motion for a more [**44] definite statement as to paragraph 28. n11
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - -
- - - - - - -
n11 Massino also argues that paragraph 28 fails to meet
the particularity requirements of Rule 9(b). As discussed above, Rule 9(b) is
not applicable to predicate acts not involving fraud. Paragraph 28 is, however,
insufficient under Rule 8 to give Massino notice as to the alleged crime
committed. Paragraph 28 should therefore be eliminated or made more specific if
the government files a second amended complaint.
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Paragraph 29 entitled "Act of Racketeering #7" alleges that Infanti was
convicted of transporting stolen stock certificates in violation of 18
U.S.C. § 2314. See United
States v. Infanti, 474 F.2d 522 (2d Cir. 1973). n12 Paragraph 29
sufficiently alleges a predicate act attributable to Infanti under § 1961(1)(B).
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - -
- - - - - - -
n12 As discussed infra in connection with
paragraph 39, the Court questions whether it is sufficient for a complaint to
refer to judicial decisions, as paragraphs 29, 30, and 31 do to the
Infanti and Rastelli decisions, without submitting them as
exhibits to the complaint under Rule 10(c), Fed. R. Civ. P. Rather than relying
on a general reference to a judicial decision, the government should allege the
facts upon which it relies in its complaint.
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Paragraph 30 entitled "Act of Racketeering
#8" alleges that in 1973 Rastelli was convicted of seven counts of criminal
usury in violation of N.Y. Penal L. § 190.42 and conspiracy to commit criminal
usury, see People
v. Rastelli, 37 N.Y.2d 240, 371 N.Y.S.2d 911, 333 N.E.2d 182, cert.
denied, 423
U.S. 995, 46 L. Ed. 2d 369, 96 S. Ct. 421 (1975), and that by those crimes
Rastelli used, threatened to use, or conspired to use "extortionate means to
collect, attempt to collect, or punish for nonpayment of, an extension of
credit." The criminal usury allegation itself does not plead a predicate act
under § 1961(1)(A), since usury is not a listed offense. The facts stated in the
Rastelli decision, if properly made part of the complaint, would allege
collection of an unlawful debt under § 1961(6), since the interest rates charged
were more than twice twenty-five percent a year. Rastelli, in any event, has not
challenged the sufficiency of the allegations in paragraph 30, n13 and the Court
finds that paragraph 30 sufficiently alleges either the collection of an
unlawful debt or a violation of 18
U.S.C. § 894 (collection of credit by extortionate means) which is a
predicate act under 18
U.S.C. § 1961(1)(B).
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-Footnotes- - - - - - - - - - - - - - - - - -
n13 Rastelli has not filed
a brief in support of his motion to dismiss but instead "join[s] in, adopt[s],
and incorporate[s] by reference each of those arguments [of the other
defendants] as are germane to but not inconsistent with Mr. Rastelli's defense
of this action." (Teitler Affidavit para. 2)
- - - - - - - - - -
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Paragraph 31 entitled "Acts of
Racketeering #9-11" alleges that in 1976 Rastelli was convicted of restraining
trade in violation of 15
U.S.C. § 1 and interfering with commerce by extortion under 18
U.S.C. §§ 1951 and 1952, as set forth in the indictment and judgment and
commitment order submitted as Exhibit C to the Amended Complaint. See
United
States v. Rastelli, 551 F.2d 902 (2d Cir.), cert. denied, 434
U.S. 831, 54 L. Ed. 2d 91, 98 S. Ct. 115 [*1432] (1977). n14 Paragraph 31 also alleges that the crimes for which
Rastelli was prosecuted also were "indictable" under 18
U.S.C. §§ 891-894. Paragraph 31, however, alleges no additional facts such
as an extension of credit, indicating offenses under §§ 891-894. Exhibit C also
fails to indicate that Rastelli was charged with a violation of 18
U.S.C. § 1952. Moreover, a violation of 15
U.S.C. § 1 is not a predicate act under RICO. Rastelli, however, has not
challenged the sufficiency of paragraph 31, and the Court finds that it at least
sufficiently pleads violations of 18
U.S.C. § 1951 which constitute predicate acts under § 1961 (1)(B).
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - -
- - - - - - -
n14 The Amended Complaint states that Rastelli was
convicted on August 27, 1976, while the Second Circuit decision states he was
convicted on April 23, 1976. The Court assumes that the Amended Complaint has
confused Rastelli's date of sentencing with his date of conviction.
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - -
- - [**47]
Paragraph 32 entitled "Act of
Racketeering #12" alleges that in 1980 Embarrato was charged with criminal usury
in the first degree, a violation of N.Y. Penal L. § 190.42, and in 1982 pleaded
guilty to criminal usury in the second degree, a violation of N.Y. Penal L. §
190.40. The indictment and certificate of disposition recording Embarrato's
guilty plea, submitted as Exhibit D to the Amended Complaint, reveal little of
the facts underlying the criminal usury charge but do indicate that, contrary to
the allegations of the Amended Complaint, Embarrato pleaded guilty to attempted
criminal usury in the second degree, a misdemeanor. Criminal usury is not one of
the state law offenses listed under § 1961(1)(A) and therefore does not
constitute a RICO predicate act. Paragraph 32 also fails to allege that
Embarrato engaged in the collection of an unlawful debt as defined in § 1961(6)
because it does not allege either that the debt was incurred in connection with
a gambling business or a business of lending at an interest rate at least twice
the enforceable rate. n15
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-Footnotes- - - - - - - - - - - - - - - - - -
n15 The indictment alleges
that Embarrato was engaged in the "business of making and collecting usurious
loans" but does not indicate the interest rate at which the loans were made
except to state that the rate exceeded the maximum allowable rate of twenty-five
percent per annum.
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Footnotes- - - - - - - - - - - - - - - - - [**48]
Paragraph 33 entitled "Act of Racketeering
#13" alleges that in 1984 Graziano was charged with committing criminal usury in
violation of N.Y. Penal L. § 190.42 and in 1985 pleaded guilty to attempting to
violate N.Y. Penal L. § 190.40. The indictment filed against Graziano alleges
that Graziano was in the business of making usurious loans and made loans at a
rate of 260 percent a year, which is more than twice the maximum allowable rate
under the usury statute of twenty-five percent a year. The indictment, submitted
as Exhibit E to the Amended Complaint, is deemed to be part of the Amended
Complaint. Rule 10(c), Fed. R. Civ. P. While usury is not an act of racketeering
as defined in 18
U.S.C. § 1961(1)(A), paragraph 33, together with the indictment,
sufficiently pleads the collection of an unlawful debt under § 1961(6)
attributable to Graziano. n16
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-Footnotes- - - - - - - - - - - - - - - - - -
n16 The Court does not
find that the fact that Graziano pleaded guilty to attempting to commit criminal
usury in the second degree, a misdemeanor, makes the allegations underlying act
of racketeering #13 defective. First, § 1961(6) does not turn on a distinction
between misdemeanors and felonies. Second, while an attempt to collect an
unlawful debt may not constitute actual collection of that debt, the
government's pleading is not limited to Graziano's guilty plea but also includes
the allegations of the indictment.
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- -End Footnotes- - - - - - - - - - - - - - - - - [**49]
Paragraph 34 entitled "Act of Racketeering
#14" alleges that in 1984 Lino was charged with criminal usury in violation of
N.Y. Penal L. § 190.42 and in 1985 pleaded guilty to the attempted violation of
§ 190.40. Paragraph 34 and the indictment submitted as Exhibit F to the Amended
Complaint, however, fail to allege that the debt involved was incurred in
connection with a gambling business or the business of lending money at a rate
at least twice the enforceable rate. Paragraph 34 therefore pleads neither a
predicate act under § 1961(1) nor the collection of an unlawful debt under §
1961(6).
Paragraph 35 of the Amended Complaint entitled "Act of
Racketeering #15" alleges [*1433] that in 1980
Anthony Spero was charged with criminal usury and in 1982 pleaded guilty to
attempting to violate N.Y. Penal L. § 190.40. The indictment submitted as
Exhibit G to the Amended Complaint, alleges that Spero was engaged in the
business of making usurious loans but does not allege that the loans were made
at a rate of at least twice the enforceable rate. The allegations of "Act of
Racketeering #15" therefore do not amount to a predicate act under § 1961(1) or
collection of an unlawful debt under § 1961(6). [**50]
Paragraph 36 entitled "Acts of
Racketeering #16-194" alleges that in 1985 Rastelli, Marangello, Massino, and
James Vincent Bracco were indicted and charged with numerous racketeering acts
involving Local 814, Local 814 Funds, and several moving and storage companies
in United States v. Rastelli, 85 Cr. 00354 (E.D.N.Y.). The racketeering
acts alleged in the indictment, submitted as Exhibit H to the Amended Complaint,
include violations of 29
U.S.C. § 186 (restrictions on payments and loans to labor organizations) and
18
U.S.C. §§ 1341 (mail fraud), 1951 (interference with commerce by robbery or
extortion), and 1954 (unlawful payments in connection with employee benefit
plans) and felony offenses involving arson and robbery under New York law. These
offenses qualify as predicate acts under § 1961(1)(A), (B), and (C). Paragraph
36, together with the indictment, sufficiently pleads approximately seventy-one
acts of racketeering attributable to Rastelli, forty attributable to Marangello,
eighteen attributable to Massino, and eighty-four attributable to James Vincent
Bracco. n17 The defendants do not dispute the sufficiency of the allegations of
paragraph 36.
- - - - - - - - - - - - - - - - - -Footnotes- - - -
- - - - - - - - - - - - - -
n17 Rastelli, Massino, Marangello, and James
Vincent Bracco were convicted of various offenses alleged in the indictment
including a RICO conspiracy under 18
U.S.C. § 1962(d).
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Footnotes- - - - - - - - - - - - - - - - - [**51]
Paragraph 37 entitled "Act of Racketeering
#195" alleges that in 1982 Rastelli, Massino, Marangello, James Vincent Bracco,
and William Rodini conspired to murder Anthony Giliberti, formerly of Local
814's Executive Board, in violation of both N.Y. Penal L. § 125.27 and 18
U.S.C. § 1951. The defendants do not dispute that paragraph 37 sufficiently
alleges a predicate act attributable to those five defendants under § 1961(1)(A)
& (B).
Paragraph 38 entitled "Act of Racketeering #196" alleges that
Rastelli, Massino, Marangello, James Vincent Bracco, and Rodini have violated 18
U.S.C. § 1951 by conspiring and acting to deprive Paul Poulos, a member of
Local 814, from obtaining employment and exercising labor contractual and union
membership rights. The defendants have not challenged the sufficiency of the
pleading of this predicate act under § 1961(1)(B).
Paragraph 39 entitled
"Act of Racketeering #197" alleges that Ruggiero, Sabella, and Riela have
interfered or attempted or conspired to interfere with commerce by extortion in
violation of 18
U.S.C. § 1951 as reflected in United
States v. Balistrieri, 778 F.2d 1226 (7th Cir. 1985), cert.
denied, 477
U.S. 908, 106 S. Ct. 3284, 91 L. Ed. 2d 573 (1986), a case [**52] in which Ruggiero, Sabella, and others were
prosecuted for conspiring and attempting to carry out a scheme to extort money
and a proprietary interest in a Milwaukee vending machine company from FBI agent
Gail Cobb during the period May 1978 to February 1979. n18 Paragraph 38 of the
original Complaint, which Sabella moves to dismiss, contains the same
allegations as paragraph 39 of the Amended Complaint. Riela was neither charged
in the Balistrieri case nor mentioned in the opinion; paragraph 39
therefore fails to allege a predicate act attributable to him.
-
- - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n18 Ruggiero pleaded guilty to both conspiring and attempting to carry
out the extortion scheme. Sabella was charged only with the conspiracy count of
which he was acquitted.
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Footnotes- - - - - - - - - - - - - - - - -
If the Seventh Circuit
opinion is deemed to be incorporated by reference, paragraph 39 alleges a
predicate act attributable to Sabella and one, or possibly two, predicate acts
attributable to Ruggiero. n19 The Court [*1434] questions, however, the sufficiency of merely
citing a judicial decision in a complaint as a means of incorporating the facts
stated in the decision by reference. See Goldman
v. Belden, 754 F.2d 1059, 1066 (2d Cir. 1985) (selective quotation
[**53] from document does not amount to
incorporation by reference); 5 C. Wright & A. Miller, Federal Practice
& Procedure § 1327 at 494 (1969) (reference to existence of document
not sufficient). Moreover, general reference to a judicial decision does not
serve to give the defendants notice of the facts which the government intends to
allege. If the government chooses to file another amended complaint against
Sabella or Ruggiero, n20 it should describe the predicate acts of which each is
accused in the body of the complaint.
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- - - -Footnotes- - - - - - - - - - - - - - - - - -
n19 Conspiracy to
carry out an extortion scheme and attempting to carry out an extortion scheme
are arguably two different RICO predicates. The Amended Complaint and the
government's brief, however, do not characterize Ruggiero's conspiracy and
attempt as separate acts.
n20 As discussed infra the Court is
granting Ruggiero's motion to dismiss the Amended Complaint and Sabella's motion
to dismiss the original Complaint because the complaints fail to allege at least
two predicate acts each for Sabella and Ruggiero.
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Paragraph 40 entitled "Act of Racketeering #198" alleges that from
January 1978 to December 1980, Ruggiero, Sabella, and Riela extorted, attempted
[**54] to extort, and aided and abetted the
extortion of Gail Cobb in violation of 18
U.S.C. § 1951. Paragraph 40 again cites United
States v. Balistrieri, 778 F.2d 1226 (7th Cir. 1985), cert.
denied, 477
U.S. 908, 106 S. Ct. 3284, 91 L. Ed. 2d 573 (1986), and refers to paragraph
39. Nothing alleged in paragraph 40, which was not contained in the original
Complaint, distinguishes its allegations from those contained in paragraph 39
except that paragraph 40 refers to a time period which is broader than but
includes the time period in paragraph 39. n21 Paragraph 40 therefore appears to
duplicate paragraph 39 and will not be considered separately in assessing the
sufficiency of the predicate acts alleged. n22
- - - - - - - - -
- - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n21 The
government's brief refers to the allegations of paragraph 39 as occurring in
1983. That year, however, is the date of Ruggiero's conviction and not the date
the acts alleged occurred.
n22 The government's brief refers to another
decision entitled United
States v. Balistrieri, 779 F.2d 1191 (7th Cir. 1985), a gambling
prosecution in which Ruggiero was an unindicted co-conspirator. The Complaint
and Amended Complaint, however, do not refer to or incorporate as an exhibit
that decision; nor does the Amended Complaint make any allegations which appear
related to that decision.
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Footnotes- - - - - - - - - - - - - - - - - [**55]
Paragraph 41, which has no heading,
alleges that Rastelli was indicted in 1975 and convicted in 1973 of violating 15
U.S.C. § 1, 18
U.S.C. § 1951, and 18
U.S.C. § 1952. Not only is the allegation that Rastelli was convicted two
years before he was indicted self-contradictory but paragraph 41 also refers
back to paragraph 31, and it is not clear whether the two paragraphs refer to
the same predicate acts. Although Rastelli has not challenged the sufficiency of
paragraph 41's allegations, the Court does not consider the violations of 18
U.S.C. §§ 1951 and 1952 to be adequately pleaded predicate acts.
Paragraph 42 (a)-(f) entitled "Act of Racketeering #199" alleges that
from 1983 to the present Spero has extorted, attempted to extort, aided and
abetted in extorting, and conspired to extort the owner-operators of Big Apple
Car and/or E.Z. Two Way Radio Corp. in violation of 18
U.S.C. § 1951. Subparagraphs (a) through (f) allege "the following act
[sic]" committed through the use or threatened use of violence: (a) forcing
owner-operators to execute a loan agreement, (b) prohibiting owner-operators
from reselling car radios, (c) forcing owner-operators to make extra-contractual
payments [**56] to receive dispatch calls, (d)
refusing to return sums advanced by the owner-operators, (e) forcing
owner-operators to abide by fines and penalties imposed by a "security team,"
and (f) forcing owner-operators to pay for insurance which was not provided. The
government has by letter stated that paragraph 42 was inadvertently given the
wrong heading and should have been entitled "Acts of Racketeering 199-205,"
presumably meaning "Acts of Racketeering 199-204." Spero argues that paragraph
42 fails to provide sufficient details consistent with Rule 9(b), [*1435] Fed. R. Civ. P., as to the acts committed which
on their face appear to be normal incidents of a legitimate business operation.
As discussed above, Rule 9(b) is not applicable to non-fraud predicate acts. The
Court finds that paragraph 42 provides sufficient notice to alert Spero as to
the nature of the predicate acts alleged. The government may correct the heading
of paragraph 42 in any amended complaint it files.
Having examined the
sufficiency of the predicate acts alleged in the Amended Complaint, the Court
will now examine whether a "pattern" of racketeering activity or collection of
an unlawful debt as defined in 18
U.S.C. § 1961(1),(5) [**57] & (6) has
been alleged as to each defendant.
Joseph Bonanno. The Amended
Complaint alleges that defendant Joseph Bonanno was the founder of the Bonanno
Family, remained its boss until October 21, 1964, and "remains a member of the
Bonanno Family." (Amended Complaint para. 4(d) & (e)) The seventy-seven page
Amended Complaint contains no other allegations concerning Joseph Bonanno and he
is not mentioned in any of the alleged acts of racketeering. The first, second,
third, and twelfth claims for relief are therefore dismissed against Joseph
Bonanno because the Amended Complaint fails to allege that Bonanno engaged in a
"pattern of racketeering activity or collection of unlawful debt" as required by
§ 1962(c).
Philip Rastelli. The Amended Complaint alleges that
Rastelli has been at various times and is currently the Boss of the Bonanno
Family. (Amended Complaint paras. 4(f) & 8) The Amended Complaint alleges
approximately seventy-seven sufficient predicate acts attributable to Rastelli
(paragraphs 30, 31, 36, 37, 38) which occurred in each year except 1973 between
1966 and 1983 and one of which is apparently continuing. n23 The Amended
Complaint therefore alleges a "pattern" [**58]
of racketeering activity attributable to Rastelli.
- - - - - - -
- - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n23
Paragraph 38 appears to allege a continuing violation. See also Amended
Complaint para. 63(j).
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Footnotes- - - - - - - - - - - - - - - - -
Joseph Massino.
Massino is alleged to be the current Underboss of the Bonanno Family and to have
also been at various times Underboss and a Capo. (Amended Complaint paras. 4(f)
& 9) The Amended Complaint names Massino in connection with approximately
twenty-one sufficiently pleaded acts of racketeering (paragraphs 25, 36, 37, 38)
occurring in 1981-83 and at the present. The Amended Complaint thus sufficiently
pleads a pattern of racketeering activity attributable to Massino.
Anthony Spero. Spero is alleged to be the current Acting Boss
and Consigliere of the Bonanno Family and to have been at various times Acting
Boss, Underboss, and Capo. (Amended Complaint paras. 4(f) & 10) The only
adequately pleaded predicate acts attributable to Spero are contained in
paragraph 42 which sets forth six categories of predicate acts occurring from
1983 to the present. The Amended Complaint sufficiently alleges a pattern of
racketeering activity attributable to Spero.
Louis Attanasio.
Attanasio is alleged to be a Bonanno Family Capo. [**59] (Amended Complaint para. 11) Paragraphs 23, 24,
and 25 sufficiently allege three predicate acts attributable to Attanasio
occurring from 1984 to the present. The Amended Complaint therefore sufficiently
pleads a pattern of racketeering activity attributable to Attanasio.
Alfred Embarrato. Embarrato is alleged to be a Bonanno Family
Capo. (Amended Complaint para. 12) Only one adequately pleaded predicate act
(paragraph 23) is attributable to Embarrato. The Amended Complaint therefore
fails to allege a pattern of racketeering activity for Embarrato, and the first,
second, third, and twelfth claims for relief must be dismissed as against him.
Gabriel Infanti. Infanti is alleged to be a Bonanno Family
Capo. (Amended Complaint para. 13) Although three predicate acts attributable to
Infanti (paragraphs 23, 25, 29) are pleaded, it is not clear whether act of
racketeering #7 (paragraph 29) may be included in a "pattern" of racketeering
activity for Infanti since act #7 occurred in 1969 and there is no allegation
that either of the other two of Infanti's [*1436] racketeering acts occurred within ten years of
act #7 as required by 18
U.S.C. § 1961(5). The allegations of paragraph 29 therefore [**60] cannot be considered part of a pattern of
racketeering activity attributable to Infanti. Paragraphs 23 and 25, however,
sufficiently plead a pattern for Infanti. n24
- - - - - - - - - -
- - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n24 Infanti
argues that the operation of the two gambling operations alleged in paragraphs
23 and 25 should be deemed to be the same offense. The two paragraphs, however,
allege different locations and participants and therefore on their face do not
allege the same offense. Moreover, even if, as Infanti argues, the two gambling
operations are part of the same scheme, they may still taken together constitute
a pattern. United
States v. Ianniello, 808 F.2d 184, 192 (2d Cir. 1986), cert.
denied, 483
U.S. 1006, 107 S. Ct. 3230, 97 L. Ed. 2d 736 (1987) (rejecting multiple
scheme requirement).
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Footnotes- - - - - - - - - - - - - - - - -
Frank Lino. Lino is
alleged to be a Bonanno Family Capo. (Amended Complaint para. 14) Since the only
alleged predicate acts involving Lino (paragraphs 26 and 34) are not adequately
pleaded, the Amended Complaint fails to allege a "pattern" of racketeering with
respect to Lino and the first, second, third, and twelfth claims for relief are
dismissed as against him.
Nicholas Marangello. Marangello is
alleged to be a current soldier and made member of [**61] the Bonanno Family and to have been at other times
Boss and Underboss. (Amended Complaint paras. 4(f) & 15) The Amended
Complaint names Marangello in connection with approximately forty-two acts of
racketeering (paragraphs 36, 37, 38) occurring during 1975-80 and 1982 and
apparently continuing to the present (paragraphs 38, 63(j)). The Amended
Complaint thus sufficiently alleges a pattern of racketeering activity
attributable to Marangello.
Anthony Riela. Riela is alleged to
be a soldier and made member of the Bonanno Family. (Amended Complaint para. 16)
The only acts of racketeering attributed to Riela (paragraphs 39, 40) are
insufficiently pleaded. The Amended Complaint therefore fails to allege a
pattern of racketeering activity for Riela, and the first, second, third, and
twelfth claims for relief must be dismissed as against him.
Michael
Sabella. Sabella is alleged, in both the original and Amended Complaints,
to be a soldier and made member of the Bonanno Family. (Complaint para. 17;
Amended Complaint para. 17) The original Complaint only mentions Sabella in
connection with one predicate act (paragraph 38) and therefore fails to allege a
pattern of racketeering activity [**62]
attributable to Sabella. For that reason, the 1962(c) claims of the original
Complaint are dismissed as against Sabella. In addition, since the Amended
Complaint fails to allege two predicate acts attributable to Sabella (see
discussion of paragraphs 39 and 40), it also fails to plead a pattern of
racketeering activity for Sabella. The government's motion to serve Sabella with
the Amended Complaint is therefore denied because that complaint would not
withstand a motion by Sabella to dismiss. See Foman
v. Davis, 371 U.S. 178, 182, 9 L. Ed. 2d 222, 83 S. Ct. 227 (1962)
(amendment should not be permitted where it would be futile). The government,
however, will be given leave to file a complaint against Sabella consistent with
this Memorandum and Order.
Anthony Graziano. Graziano is
alleged to be a soldier and made member of the Bonanno Family. (Amended
Complaint para. 18) Although the Amended Complaint sufficiently alleges only one
act of racketeering for Graziano (paragraph 25) and therefore does not plead a
pattern, the Amended Complaint does adequately plead the collection of an
unlawful debt attributable to Graziano (paragraph 33).
Benjamin
Ruggiero. Ruggiero is alleged to be a soldier and made member [**63] of the Bonanno Family. (Amended Complaint para.
19) The Amended Complaint's only allegations of acts of racketeering naming
Ruggiero (paragraphs 39 and 40) fail sufficiently to plead two or more predicate
acts. The Amended Complaint therefore fails to allege a pattern of racketeering
attributable to Ruggiero, and the first, second, third, and twelfth claims for
relief are dismissed as against him.
James Vincent Bracco.
James Vincent Bracco is alleged to be an associate of the [*1437] Bonanno Family and a former president of the
Local 814 Executive Board. (Amended Complaint para. 20) The Amended Complaint
names Bracco in connection with approximately eighty-six sufficiently pleaded
acts of racketeering (paragraphs 36, 37, 38) occurring in each year between 1972
and 1983 and continuing at present. The Amended Complaint thus sufficiently
pleads a pattern of racketeering activity attributable to Bracco.
William Rodini. Rodini is alleged to be an associate of the
Bonanno Family. (Amended Complaint para. 21) Paragraphs 37 and 38 sufficiently
plead two predicate acts attributable to Rodini, one occurring in 1982 and one
apparently continuing to the present. The Amended Complaint therefore [**64] sufficiently pleads a pattern of racketeering
attributable to Rodini.
An examination of the number and dates of the
predicate acts alleged does not end the inquiry into the sufficiency of the
pattern allegations of the Amended Complaint. Not only must the predicate acts
alleged for each defendant form a pattern, but they must also "be related to the
common purpose of the enterprise." Albany
Insurance Co. v. Esses, 831 F.2d 41, 44 (2d Cir. 1987); see United
States v. Ianniello, 808 F.2d 184, 191, 192 (2d Cir. 1986), cert.
denied, 483
U.S. 1006, 107 S. Ct. 3230, 97 L. Ed. 2d 736 (1987).
The same
enterprise, the Bonanno Family, is alleged in the Amended Complaint's first
three claims for relief. The purpose of the enterprise, however, is different
for each claim. Although not explicit, the purpose of the enterprise as alleged
in the first claim for relief appears to be the general purpose of conducting
various illegal activities for profit. The purposes of the Bonanno Family
expressed in the second and third claims for relief, however, are narrower.
The second claim for relief alleges the defendants conspired through the
Bonanno Family to obtain government moving contracts by collusion and
bid-rigging. The [**65] second claim for relief
specifically names Rastelli, Massino, Marangello, James Vincent Bracco, and
Rodini and refers to paragraph 36 of the Amended Complaint and racketeering acts
"63-82 [sic-81]" of the indictment in United States v. Rastelli, 85 CR
00354 (E.D.N.Y.), submitted as Exhibit H to the Amended Complaint. Those
racketeering acts, which are incorporated into the Amended Complaint in
paragraph 36, set forth allegations of at least two acts each by Rastelli,
Massino, Marangello, and James Vincent Bracco. Neither the Rastelli indictment
nor the Amended Complaint, however, contain allegations that Rodini, Spero,
Attanasio, Infanti, or Graziano participated in acts of racketeering related to
the purpose of obtaining government contracts through bid-rigging and collusion.
The second claim for relief should therefore be dismissed as against Rodini,
Spero, Attanasio, Infanti, and Graziano and, as will be discussed in the second
part of this memorandum, is also dismissed on other grounds as to all
defendants. n25
- - - - - - - - - - - - - - - - - -Footnotes- - -
- - - - - - - - - - - - - - -
n25 As discussed infra the
government lacks standing to sue for monetary damages which is the only relief
sought in the second claim.
- - - - - - - - - - - - - - - - -End
Footnotes- - - - - - - - - - - - - - - - -
Similarly, the third claim
[**66] for relief alleges that the defendants
through the Bonanno Family caused Local 814 to be a captive labor organization.
The third claim for relief specifically refers to paragraphs 36-38 of the
Amended Complaint, which are the only alleged acts of racketeering relating to
Local 814. Paragraphs 36-38 allege predicate acts attributable only to Rastelli,
Marangello, Massino, James Vincent Bracco, and Rodini. The third claim for
relief is therefore dismissed as to Spero, Attanasio, Infanti, and Graziano
because the Amended Complaint fails to allege that those defendants engaged in a
pattern of racketeering related to the enterprise's purpose as set forth in the
third claim.
The twelfth claim for relief alleges that the defendants
conducted the affairs of the Local 814 Enterprise so as to make it a captive
labor organization. The twelfth claim for relief specifically refers to
paragraphs 36-38 of the Amended Complaint, as well as the third claim for
relief. Rastelli, [*1438] Massino, Marangello,
James Vincent Bracco, and Rodini are the only defendants alleged to have engaged
in a pattern of racketeering relating to Local 814. The twelfth claim for relief
will therefore be dismissed as against Spero, [**67] Attanasio, Infanti, and Graziano because the
Amended Complaint fails to allege that they engaged in a pattern of racketeering
related to Local 814. n26
- - - - - - - - - - - - - - - - -
-Footnotes- - - - - - - - - - - - - - - - - -
n26 Although Spero is
specifically named in the twelfth claim for relief, the Amended Complaint does
not allege that Spero engaged in any predicate acts relating to Local 814. See
also fn. 3 questioning the sufficiency of the allegation that the defendants
other than Rastelli, Massino, Marangello, James Vincent Bracco, and Rodini were
employed by or associated with the Local 814 Enterprise.
- - - -
- - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
The 1962(a) Claims
The fourth through eleventh claims
for relief allege violations of 18
U.S.C. § 1962(a) and seek divestiture of eight different business
enterprises. Section 1962(a) provides, in relevant part:
(a) It shall be unlawful for any person who has received any
income derived, directly or indirectly, from a pattern of racketeering
activity or through collection of an unlawful debt in which such person has
participated as a principal within the meaning of section 2, title 18, United
States Code, to use or invest, directly or indirectly, any part of such
income, or the proceeds of such income, in acquisition of any interest in, or
[**68] the establishment or operation of, any
enterprise which is engaged in, or the activities of which affect, interstate
or foreign commerce.
Each of the 1962(a) claims for
relief alleges a different enterprise and each alleges that specific defendants
"together with others known and unknown" have received income from the
racketeering activity previously set forth in the Amended Complaint and invested
such income in the enterprise. The 1962(a) claims may be broken down as follows:
|
| Claim |
Enterprise |
Defendants |
|
|
| fourth |
4th Street Cafe Gambling |
Rastelli, |
|
Enterprise |
Massino, Spero, |
|
|
Attanasio, |
|
|
Embarrato, Infanti |
|
| fifth |
Myrtle Avenue Gambling |
Rastelli, Massino, |
|
Enterprise |
Spero, Infanti |
|
| sixth |
J & S Cake Gambling Enterprise |
Rastelli, Massino, |
|
|
Spero, Attanasio, |
|
|
Embarrato, Infanti |
|
| seventh |
Hudson Plaza Hotel |
Rastelli, Massino, |
|
|
Attanasio, |
|
|
Embarrato, Spero, |
|
|
Riela |
|
| eighth |
Newark Airport Motel |
Rastelli, Massino, |
|
|
Attanasio, |
|
|
Embarrato, Spero, |
|
|
Riela |
|
| ninth |
Belleville Motor Lodge |
Rastelli, Massino, |
|
|
Attanasio, |
|
|
Embarrato, Spero, |
|
|
Riela |
|
| tenth |
|
Big Apple Car/E.Z. Two Way |
Rastelli, Massino, |
|
Radio Corp. |
Attanasio, |
|
|
Embarrato, Spero |
|
| eleventh |
Casa Bella Restaurant |
Sabella |
[**69] Enterprise
The fourth through
sixth claims for relief allege enterprises consisting of "groups of individuals
associated in fact" and the seventh through eleventh claims allege enterprises
which are legal entities. [*1439] All of the
enterprises are alleged to be engaged in or to conduct activities affecting
interstate commerce. The enterprise allegations of the fourth through eleventh
claims for relief are sufficient.
Persons
As
with the § 1962(c) claims, the § 1962(a) claims must be restricted to those
defendants actually named in the claims. The references to "others known and
unknown" are insufficient under Rule 8(a) to include in the claims any
defendants not actually named. To the extent the fourth through eleventh claims
purport to assert claims against unnamed defendants, they are dismissed.
Pattern of Racketeering
The patterns of
racketeering activity for the § 1962(a) claims are the same as those alleged for
the § 1962(c) claims. Since the Amended Complaint fails to allege sufficient
predicate acts to constitute a pattern of racketeering for Embarrato and Riela,
the fourth and sixth through tenth claims for relief which name Embarrato and
Riela are also dismissed [**70] as against those
defendants.
The original Complaint did not name Sabella in any of the §
1962(a) claims (the fourth through tenth claims for relief). The Court therefore
grants Sabella's motion to dismiss those claims. The Amended Complaint names
Sabella in the eleventh claim for relief but fails to allege sufficiently that
Sabella committed predicate acts constituting a pattern of racketeering.
Amending the Complaint to assert the eleventh claim for relief as it currently
exists in the Amended Complaint against Sabella would be futile.
The
predicate acts as to the remaining defendants allege that the defendants engaged
in acts of racketeering as "principals" as required by § 1962(a). Each of the
remaining defendants is alleged to have engaged in at least two acts of
racketeering from which unlawful income could be derived, e.g., the
conduct of gambling operations, extortion, and receipt of pay-offs.
Investment of Proceeds
The § 1962(a) claims allege that the
defendants have invested and are investing the proceeds of racketeering activity
in the eight enterprises. The Amended Complaint contains no allegations as to
the amount, form, manner, or timing of the investment. Such [**71] specificity, however, is not required,
particularly in light of the language of § 1962(a) which encompasses both direct
and indirect investment. The § 1962(a) claims sufficiently allege the investment
of racketeering proceeds.
In sum, the fourth through eleventh claims for
relief are dismissed as against Joseph Bonanno, Embarrato, Lino, Marangello,
Riela, Graziano, Ruggiero, James Vincent Bracco, and Rodini. The fifth and
eleventh claims are dismissed as against Attanasio. The seventh through eleventh
claims are dismissed as against Infanti. The eleventh claim is dismissed as
against Rastelli, Massino, and Spero. The fourth through tenth claims for relief
in the original Complaint are dismissed as against Sabella.
The
1962(d) Claim
The thirteenth claim for relief alleges that the
defendants have conspired and are currently conspiring to violate 18
U.S.C. §§ 1962(a) & 1962(c) in violation of 18
U.S.C. § 1962(d). The thirteenth claim further alleges that, by reason of
the conspiracy, the United States has been injured in an amount in excess of $
300,000 and continues to be damaged and hurt by the racketeering acts alleged in
the Amended Complaint. The twelfth claim for relief of [**72] the original Complaint contains an identical
conspiracy allegation.
The claim based on conspiracy is insufficient
under Rule 8, Fed. R. Civ. P., and fails to state a claim under Rule 12(b)(6),
Fed. R. Civ. P. Conclusory allegations or a "bare bones statement" of conspiracy
will not withstand a motion to dismiss, and sufficient facts must be alleged to
allow the defendant to form a response. See Ostrer
v. Aronwald, 567 F.2d 551, 553 (2d Cir. [*1440] 1977) per curiam); Heart
Disease Research Foundation v. General Motors Corp., 463 F.2d 98, 100 (2d
Cir. 1972); Waller
v. Butkovich, 584 F. Supp. 909, 931 (M.D.N.C. 1984); Cairo
v. Skow, 510 F. Supp. 201, 206 (E.D. Wisc. 1981); 2A J. Moore, J.
Lucas, G. Grotheer, Moore's Federal Practice para. 8.17 [5] at 8.123
(2d ed. 1987); 5 C. Wright & A. Miller, Federal Practice &
Procedure, § 1233 at 181 (1969). These principles are equally applicable to
RICO cases, in which plaintiffs are required to "provide some factual basis for
the legal conclusion that a conspiracy existed." Andreo
v. Friedlander, Gaines, Cohen, Rosenthal & Rosenberg, 660 F. Supp.
1362, 1372 (D. Conn. 1987); see Alfaro v. E. F. Hutton
& Co., [**73] 606 F. Supp. 1100, 1117-18 (E.D. Pa.
1985).
Essential to a conspiracy claim is an
allegation that the defendant was party to an unlawful agreement. Waller
v. Butkovich, 584 F. Supp. at 931; Schneider
v. Colegio de Abogados de Puerto Rico, 546 F. Supp. 1251, 1263 (D.P.R.
1982). An allegation of a RICO conspiracy will also be insufficient if it
fails to allege an agreement to engage in criminal activity. Laterza
v. American Broadcasting Co., 581 F. Supp. 408, 413 (S.D.N.Y. 1984); In
re Sattler's, Inc., 73 B.R. 780, 789 (Bankr. S.D.N.Y. 1987).
In
the Second Circuit, a required element of a RICO conspiracy is that the
defendant himself have agreed to commit two or more predicate acts. United
States v. Teitler, 802 F.2d 606, 613 (2d Cir. 1986); United
States v. Ruggiero, 726 F.2d 913, 921 (2d Cir.), cert. denied sub
nom. Rabito
v. United States, 469 U.S. 831, 83 L. Ed. 2d 60, 105 S. Ct. 118 (1984);
see United
States v. Persico, 832 F.2d 705, 713 (2d Cir. 1987). Although the
Amended Complaint has alleged the commission of two or more predicate acts by
some, but not all, defendants, the commission of the acts is distinct from an
agreement to commit them, and a violation of § 1962(d) requires different
[**74] proof from a violation of § 1962(c). United
States v. Benevento, 836 F.2d 60, 73 (2d Cir. 1987); see United
States v. Castellano, 610 F. Supp. 1359, 1394-95 (S.D.N.Y. 1985)
(participation in enterprise not the same as conspiracy). The RICO conspiracy
claim in the instant action is insufficient because it does not allege an
agreement by each defendant to commit two predicate acts.
Moreover,
although the thirteenth claim for relief broadly refers to a conspiracy to
violate §§ 1962(a) & (c), it then seems to limit the conspiracy to acts
which have caused monetary and other unspecified damage to the United States.
Whether the conspiracy is intended to be limited to the bid-rigging violations
alleged in the Amended Complaint is not clear and the nature of the conspiracy
is not adequately pleaded under Rule 8, Fed. R. Civ. P.
The thirteenth
claim for relief is therefore dismissed as to all defendants. The twelfth claim
for relief in the original Complaint is dismissed as to Sabella. Serving the
Amended Complaint on Sabella so as to assert the thirteenth claim would also be
futile.
Due Process, Ex Post Facto Laws, Venue
Riela
and Joseph Bonanno argue that the instant action violates [**75] their due process rights in light of Riela's and
Bonanno's age and mental and physical conditions and the prohibition against
ex post facto laws. Riela and Bonanno also argue that venue in the
Eastern District of New York is improper. The Court need not address these
arguments because the Amended Complaint is being dismissed as against Riela and
Joseph Bonanno. The remaining defendants have not raised the same due process,
ex post facto, and improper venue arguments.
THE
APPROPRIATENESS OF THE RELIEF REQUESTED
The defendants have also moved
to dismiss the Amended Complaint because it seeks inappropriate relief.
Challenging both the constitutionality of and statutory authority for the relief
requested, the defendants argue that the injunctive relief sought would violate
their constitutional [*1441] right of
association, that the "divestiture" of property interests requested would amount
to an improper forfeiture, that the appointment of receivers for the properties
and businesses sought to be divested is unnecessary, that divestiture would
impinge on the rights of third parties, that Rodini's pension benefits may not
be "forfeited," that the government lacks standing to seek monetary [**76] damages under 18
U.S.C. § 1964(c), and that forfeiture of real property is not available
under 18
U.S.C. § 1955(d). The defendants also contend that the divestiture relief
sought by the government transforms this action into a criminal proceeding in
which the Court may not draw adverse inferences from the defendants' invocation
of the Fifth Amendment privilege against self-incrimination.
The Court
holds that, although some of the defendants' arguments may ultimately have
merit, the defendants' challenges to the government's request for relief do not
provide grounds for dismissal of the Amended Complaint, except to the extent it
seeks monetary damages.
Injunctive Relief
The Amended
Complaint seeks a permanent injunction prohibiting all of the defendants from
"associating with any other of the defendants herein for any business or
commercial purpose for five years." The government's request for a preliminary
injunction similarly seeks an order "restraining and enjoining the individual
defendants herein from associating together for any business or commercial
purpose." The government also seeks both permanent and preliminary relief
enjoining the defendants from further participation [**77] in the affairs of the Bonanno Family and from
committing acts of racketeering as defined in 18
U.S.C. § 1961 and violations of 18
U.S.C. §§ 891 et seq. & 1955 and N.Y. Pen.L. §§ 190.40 et
seq. & 225.00-225.40.
Section 1964(a) authorizes the district
courts to:
prevent and restrain violations of section 1962 of this
chapter by issuing appropriate orders, including, but not limited to: ordering
any person to divest himself of any interest, direct or indirect, in any
enterprise; imposing reasonable restrictions on the future activities or
investments of any person, including, but not limited to, prohibiting any
person from engaging in the same type of endeavor as the enterprise engaged
in, the activities of which affect interstate or foreign commerce; or ordering
dissolution or reorganization of any enterprise, making due provision for the
rights of innocent persons.
The Court thus has the power
under RICO to enter reasonable injunctions against RICO violators restricting
their future business activities. Congress intended the courts to grant
injunctive relief to prevent RICO violators from returning to a particular type
of organization or certain lines of business "to [**78] corrupt anew." 116 Cong. Rec. 592 (1970) (remarks
of Sen. McClellan); 115 Cong. Rec. 9568 (1969) (remarks of Sen. McClellan);
Senate Report at 82.
The injunctive relief requested differs from that
specifically contemplated in the statute and RICO's legislative history in that,
rather than enjoining the defendants from engaging in particular business
activities or enterprises, it would enjoin association among specific
individuals. Spero argues that an injunction prohibiting association among the
defendants for any business or commercial purpose would violate the defendants'
constitutional rights to "freedom of intimate association" as well as "freedom
of expressive association." See Roberts
v. United States Jaycees, 468 U.S. 609, 617-18, 82 L. Ed. 2d 462, 104 S.
Ct. 3244 (1984). The government responds that the association sought to be
enjoined is not constitutionally protected, that the injunction would further a
compelling state interest, and that the injunction requested is sufficiently
narrow in subject matter and duration so as not to interfere with protected
constitutional rights.
The defendants may well be able to raise a
weighty constitutional challenge to the injunctive relief sought by the
government. [**79] The challenge, however, is
premature at this stage in the proceedings. The availability [*1442] of any injunctive relief will depend on the
government's proof, and the Court has broad equitable powers under 18
U.S.C. § 1964 to fashion any injunctive relief to avoid constitutional
infirmities.
Even if the relief as demanded in the Amended Complaint is
inappropriate, "a complaint should not be dismissed for legal insufficiency
except where there is a failure to state a claim upon which some
relief, not limited by the request in the complaint, can be granted." Norwalk
CORE v. Norwalk Redevelopment Agency, 395 F.2d 920, 925-26 (2d Cir.
1968); Doe
v. United States Department of Justice, 243 U.S. App. D.C. 354, 753 F.2d
1092, 1104 (D.C. Cir. 1985); Lumbard
v. Maglia, Inc., 621 F. Supp. 1529, 1537 (S.D.N.Y. 1985). Accord
Holt
Civic Club v. City of Tuscaloosa, 439 U.S. 60, 66, 58 L. Ed. 2d 292, 99 S.
Ct. 383 (1978) ("a meritorious claim will not be rejected for want of a
prayer for appropriate relief"); United
States v. Ianniello, 646 F. Supp. 1289, 1290 (S.D.N.Y. 1986),
aff'd, 824
F.2d 203 (2d Cir. 1987); see Rule 54(c), Fed. R. Civ. P. ("every
final judgment shall grant the relief to which the party in whose favor it is
[**80] rendered is entitled, even if the party
has not demanded such relief in the party's pleadings"). The possible
constitutional defects of the injunctive relief requested therefore do not
constitute grounds for dismissing the Amended Complaint.
Divestiture
Defendant Spero argues that the fourth
through eleventh claims for relief, alleging violations of 18
U.S.C. § 1962(a), must be dismissed because they seek relief not authorized
under RICO. Spero argues that those claims, while purporting to form the basis
for the civil remedy of "divestiture," in actuality form the basis for the
government's request for the criminal sanction of "forfeiture" which would be
unauthorized by statute and unconstitutional in the context of this civil
action. In addition, Spero has filed a motion in limine requesting a
ruling that the Court will not draw an adverse inference if Spero asserts his
Fifth Amendment privilege against self-incrimination because the criminal nature
of the sanctions sought by the government in this action would make such an
inference impermissible.
As stated above, a court need not normally
address, in the context of a motion to dismiss, the form and scope of the
ultimate [**81] relief to be granted in an
action. The Court, however, will address Spero's challenge to the "divestiture"
relief sought by the government because the Court is persuaded that Spero and
his codefendants, in deciding whether to assert their Fifth Amendment
privileges, should be aware of the potential scope of the "divestiture" relief
which the Court would entertain and the potential adverse consequences of the
assertion of the privilege.
The "Divestiture" Claims
The fourth through eleventh claims for relief are each entitled "18
U.S.C. § 1962(a) -- Divestiture." Those claims allege that defendants have
violated § 1962(a) because they have "unlawfully received and currently receive
income, directly and indirectly, from the pattern of illegal and racketeering
activity alleged above, and used and invested, and currently use and invest,
directly and indirectly, part of such income, and the proceeds of such income,
in the acquisition of an interest in, and the establishment and operation of"
the following enterprises engaged in and affecting interstate commerce: the 4th
Street Gambling Enterprise, the Myrtle Gambling Enterprise, the J & S Cake
Gambling Enterprise, the Hudson Plaza Hotel, [**82] the Newark Airport Motel Enterprise, the
Belleville Motor Lodge Enterprise, the Big Apple Enterprise, and the Casa Bella
Enterprise.
The section of the Amended Complaint's prayer for permanent
relief entitled "Divestiture" is based on the fourth through eleventh (§
1962(a)) claims as well as the first (§ 1962(c) violations through the Bonanno
Family Enterprise) and thirteenth (§ 1962(d) conspiracy) claims. n27 The
Divestiture section seeks an order that the defendants [*1443] divest themselves of any interest in the
following businesses: 4th Street Cafe, 405 Myrtle Avenue, J & S Cake, Hudson
Plaza Motel, Newark Airport Motel, Belleville Motor Lodge, Big Apple Taxi Two
Way Radio Co., and Casa Bella Restaurant. The Amended Complaint requests that
all proceeds from the divestiture of defendants' interests be placed in funds to
be established for the victims of racketeering acts alleged in this action, with
the amount not dispensed in such fashion to be deposited in the United States
Treasury. The government's suggested method for disposing of the divestiture
proceeds, however, is not an exclusive remedy. The Amended Complaint states that
the proceeds may be disposed of "as the court in its equitable [**83] powers otherwise decrees to be fair and just" and
also states that the amount not paid out to racketeering victims may be
"otherwise awarded or used in a manner deemed appropriate by the court."
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - -
- - - - - - -
n27 As discussed above, the eleventh and thirteenth claims
for relief are being dismissed for reasons unrelated to the nature of the relief
sought.
- - - - - - - - - - - - - - - - -End Footnotes- - - - - -
- - - - - - - - - - -
The Amended Complaint's prayer for preliminary
relief requests an order enjoining the defendants from transferring any interest
in the enterprises sought to be divested and the appointment of receivers to
oversee the operation of the businesses, buildings, and properties at issue.
These requests for preliminary relief are also based on the Amended Complaint's
first, fourth through eleventh, and thirteenth claims for relief.
Spero
argues that the government's request that the proceeds from the sale of
defendants' interests in the enterprises at issue be paid either to racketeering
victims or to the U.S. Treasury transforms the relief denominated "divestiture"
into a forfeiture sanction. Spero distinguishes divestiture, where the owner of
the property retains the proceeds of its sale, from forfeiture, where the
proceeds are retained by the government. [**84]
See Ballentine's Law Dictionary (3d ed. 1969) (defining forfeiture as
"a divestiture of property without compensation, in consequence of a default or
an offense"); United
States v. Eight (8) Rhodesian Stone Statues, 449 F. Supp. 193, 195 n. 1
(C.D. Cal. 1978) ("The term 'forfeiture' is best defined as the divestiture
without compensation of property used in a manner contrary to the laws of the
sovereign.")
Spero maintains that the language of the RICO statute, as
well as its legislative history, mandate the conclusion that forfeiture is
solely a criminal sanction, available only after a criminal conviction, and that
the civil remedy of divestiture should be modelled on the remedy of divestiture
in antitrust actions in which the defendant is compensated for the loss of his
property interest. Spero further argues that divestiture in which the defendant
retains the proceeds of the sale would accomplish the remedial purpose of a
civil RICO action by eliminating the racketeer's interest in or control of an
enterprise without amounting to an unconstitutional punitive sanction.
The government argues that it is seeking an equitable remedy akin to the
remedy of disgorgement available [**85] in civil
securities law actions whereby the defendant is deprived of his ill-gotten
gains. The government maintains that antitrust-style divestiture is only one
form of equitable relief which the court may grant in civil RICO actions, that
RICO should be liberally construed to accomplish its remedial purposes, and that
the courts are given wide discretion in fashioning appropriate equitable relief.
Spero replies that disgorgement in a RICO case would amount to a
forfeiture which is specifically categorized as a criminal sanction under § 1963
and therefore excluded as a civil remedy. Spero also maintains that the
government's request for relief exceeds that which would be available under a
disgorgement order since the government is seeking not only any property
interests obtained through racketeering activities but also any augmentation of
that property interest through legitimate business activities.
For the
reasons set forth below, the Court concludes that both Spero and the government
are to some extent correct in their analyses of the relief available to the
government in a civil RICO action. The Court holds that, although the government
[*1444] would not necessarily be entitled to
all [**86] the "divestiture" relief it seeks,
the government's request for "divestiture" does not in itself transform this
case into a criminal action because it leaves to the Court's discretion the
fashioning of equitable relief which would further the remedial purposes of
civil RICO without amounting to a punitive sanction. The Court further concludes
that an adverse inference may be drawn from a defendant's assertion of his Fifth
Amendment privilege because this action is civil and not criminal in nature.
The Statutory Bases for Forfeiture and Divestiture
Section 1963 of RICO entitled "Criminal penalties" provides that, in
addition to being subject to a fine and imprisonment, a violator of § 1962
"shall forfeit to the United States":
(1) any interest the person has acquired or maintained in
violation of section 1962;
(2) any --
(A) interest in
(B)
security of;
(C) claim against; or
(D) property or contractual
right of any kind affording a source of influence over;
any
enterprise which the person has established, operated, controlled, conducted,
or participated in the conduct of in violation of section 1962; and
(3) any property constituting, or derived from, any proceeds which
[**87] the person obtained, directly or
indirectly, from racketeering activity or unlawful debt collection in
violation of section 1962.
The court is instructed to
order forfeiture as part of the defendant's sentence and may, in lieu of the
specified fine, order the defendant to pay a fine of up to twice the amount of
the proceeds or profits which the defendant received from an offense.
This section was amended by the Comprehensive Crime Control Act of 1984.
The section, as originally enacted, provided in relevant part:
(a) Whoever violates any provision of section 1962 of this chapter
shall be fined not more than $ 25,000 or imprisoned not more than twenty
years, or both, and shall forfeit to the United States (1) any interest he has
acquired or maintained in violation of section 1962, and (2) any interest in,
security of, claim against, or property or contractual right of any kind
affording a source of influence over, any enterprise which he has established,
operated, controlled, conducted, or participated in the conduct of, in
violation of section 1962.
The Attorney General is
authorized to seize the property to be forfeited upon "conviction of a person
under this section."
Section [**88] 1964
of RICO entitled "Civil remedies," provides in part:
(a) The district courts of the United States shall have
jurisdiction to prevent and restrain violations of section 1962 of this
chapter by issuing appropriate orders, including, but not limited to:
ordering any person to divest himself of any interest, direct or indirect, in
any enterprise; imposing reasonable restrictions on the future activities or
investments of any person, including, but not limited to, prohibiting any
person from engaging in the same type of endeavor as the enterprise engaged
in, the activities of which affect interstate or foreign commerce; or ordering
dissolution or reorganization of any enterprise, making due provision for the
rights of innocent persons.
(emphasis added)
As
the Supreme Court has stated: "The legislative history clearly demonstrates that
the RICO statute was intended to provide new weapons of unprecedented scope for
an assault upon organized crime and its economic roots." Russello
v. United States, 464 U.S. 16, 26, 78 L. Ed. 2d 17, 104 S. Ct. 296
(1983). Congress was especially concerned with organized crime's
infiltration of legitimate businesses: "[RICO] is designed to prevent organized
criminals from [**89] infiltrating legitimate
commercial organizations with the proceeds of their criminal activities or with
violent and corrupt methods of operation, and to remove them and their influence
from such enterprises once they have been infiltrated." House [*1445] Hearings at 106 (statement of Sen. McClellan);
see, e.g., Statement of Findings and Purpose, Pub. L. 91-452, 84 Stat.
922 (1970); Senate Report at 76; 115 Cong. Rec. 5874 (1969) (remarks of Sen.
McClellan); 116 Cong. Rec. 602 (1970) (remarks of Sen. Hruska).
Senator
Byrd emphasized that the infiltration of legitimate businesses by organized
crime posed two types of dangers:
First, the economic strength of the underlying illegal operations
of organized crime is perpetuated and made more profitable if tainted proceeds
can be safely invested in legitimate enterprises, even if those enterprises
are operated in a lawful manner.
Second, the free channels of trade
are threatened by organized crime's propensity to obtain for itself monopoly
control of its areas by whatever means are available, including brutal and
strong-arm tactics.
116 Cong. Rec. 607 (1970).
Congress considered the pre-RICO sanctions and remedies available for
use against [**90] organized crime to be
"unnecessarily limited in scope and impact" and emphasized that RICO would
provide "enhanced sanctions and new remedies." Statement of Findings and
Purpose, Pub. L. 91-452, 84 Stat. 922 (1970); Senate Report at 78 ("our present
laws are inadequate to remove criminal influences from legitimate endeavor
organizations"); House Hearings at 106-07 (statement of Sen. McClellan)
(existing criminal laws of little value in combatting organized crime due to
procedural constraints and limited remedies). The point was repeatedly made that
conviction and imprisonment of the perpetrators of organized crime were not
sufficient to deter or curtail organized criminal activities since the
incarcerated individuals were merely replaced with other members of the criminal
enterprise while the economic base of the enterprise remained untouched. Senate
Report at 78; 115 Cong. Rec. 9567 (1969) (remarks of Sen. McClellan); 116 Cong.
Rec. 591, 607, 35193, 36296 (1970) (remarks of Sen. McClellan, Sen. Byrd, Rep.
Poff, Sen. Dole); House Hearings at 107 (statement of Sen. McClellan). As stated
in the Senate Report:
What is needed here . . . are new approaches that will deal
not only with [**91] individuals, but also
with the economic base through which those individuals constitute such a
serious threat to the economic well-being of the Nation. In short, an attack
must be made on their source of economic power itself, and the attack must
take place on all available fronts.
Senate Report at 79.
RICO's new weapons against the economic base of organized crime included
both the penal sanctions of fines, imprisonment, and forfeiture under § 1963 and
the civil remedies under § 1964. Section 1963 differs from previous forfeiture
statutes in that it imposes forfeiture "directly on an individual as part of a
criminal prosecution rather than in a separate proceeding in rem against the
property subject to forfeiture." United
States v. Huber, 603 F.2d 387, 396 (2d Cir. 1979), cert.
denied, 445
U.S. 927, 63 L. Ed. 2d 759, 100 S. Ct. 1312 (1980). As noted in RICO's
legislative history, in personam forfeiture was the first of its kind
since Congress abolished forfeiture of estate and corruption of blood in 1790.
Senate Report at 79-80 (citing Department of Justice comments). See 116
Cong. Rec. 27740 (1970) (statement of Rep. Steiger) ("Criminal forfeiture, which
was used extensively in England and to a [**92]
limited degree in the colonies but has found virtually no application in the
United States, would punish an [sic] criminal found to have violated [RICO]
appropriately by forfeiting his ill-acquired business interests"). Congress
viewed criminal forfeiture as an innovative and powerful weapon against
organized crime. 116 Cong. Rec. 35193 (1970) (remarks of Rep. Poff) ("The use of
criminal forfeiture . . . represents an innovative attempt to call on our common
law heritage to meet an essentially modern problem"); accord Senate
Report at 79.
The reach of the forfeiture sanction under § 1963 has been
held to be very broad, reaching a defendant's entire interest in a racketeering
enterprise even if [*1446] there is no proof
that all of the property forfeited is tainted by criminal activity. United
States v. Walsh, 700 F.2d 846, 857 (2d Cir.), cert. denied, 464
U.S. 825, 78 L. Ed. 2d 102, 104 S. Ct. 96 (1983). The Eighth Amendment may
circumscribe to some extent the scope of a forfeiture order, see id.;
United
States v. Huber, 603 F.2d at 397, but the property forfeited need only
be "roughly proportional" to the offense. United
States v. Lizza Industries, Inc., 775 F.2d 492, 498 (2d Cir. 1985),
cert. denied, [**93] 475
U.S. 1082, 89 L. Ed. 2d 716, 106 S. Ct. 1459 (1986). As the United States
Court of Appeals for the Second Circuit has stated: "Forfeiture under RICO is a
punitive, not a restitutive, measure." Id.
RICO's legislative
history indicates that Congress envisioned "forfeiture" as a criminal penalty
separate and distinct from the civil equitable remedies available under § 1964.
116 Cong. Rec. 591, 18939 (1970) (remarks of Sen. McClellan) (RICO "uses three
primary devices . . . criminal forfeiture, civil remedies which have proven
successful in the antitrust area, and a number of civil investigative
procedures"); 116 Cong. Rec. 35227 (1970) (remarks of Rep. Steiger) (RICO
"provided two types of remedies for violations of its provisions: the criminal
penalties of imprisonment, fine, and forfeiture, and the civil, equitable
remedies brought to their fullest development under the antitrust laws").
Senator McClellan described the forfeiture sanction as follows: "Since the
convict would not be compensated for the forfeited interest, the forfeiture
would be a criminal one, and could be applied only if the individual's guilt
were proven beyond a reasonable doubt in a criminal trial." House Hearings at
107.
The equitable [**94] remedies under
§ 1964, on the other hand, were explicitly intended to be remedial and not
punitive and were therefore made available in civil actions. House Hearings at
107 (statement of Sen. McClellan); 115 Cong. Rec. 9568 (1969) (remarks of Sen.
McClellan); Senate Report at 81, 82, 160. The Supreme Court has described the
purpose of RICO's civil remedies as follows: "The civil remedies could be useful
in eradicating organized crime from the social fabric, whether the enterprise be
ostensibly legitimate or admittedly criminal. The aim is to divest the
association of the fruits of its ill-gotten gains." United
States v. Turkette, 452 U.S. 576, 585, 69 L. Ed. 2d 246, 101 S. Ct. 2524
(1981).
The remedies of divestiture, injunction, reorganization, and
dissolution specifically enumerated in § 1964 were derived from "time-tested
antitrust remedies." 116 Cong. Rec. 602 (1970) (remarks of Sen. Hruska).
See Senate Report at 81 (RICO "brings to bear on the infiltration of
organized crime into legitimate business or other organizations the full panoply
of civil remedies . . . now available in the antitrust area"); 115 Cong. Rec.
9567 (1969) (remarks of Sen. McClellan) ("The bill draws heavily upon the
remedies developed [**95] in the field of
antitust"); House Hearings at 157 (testimony of Attorney General Mitchell) ("the
tried and tested remedies of the antitrust laws, including injunctions and
divestiture"); House Hearings at 171 (comments of Department of Justice) ("a
variety of civil remedies closely modelled upon the antitrust laws"). Congress
intended that remedies developed in the antitrust field be used to remove
members of organized crime from particular organizations and to prevent them
from returning to regain control. 115 Cong. Rec. 9568 (1969) (remarks of Sen.
McClellan); 116 Cong. Rec. 607, 18940, 27740 (1970) (remarks of Sen. Byrd, Sen.
McClellan, statement of Rep. Steiger).
As Congress recognized, the
Supreme Court has upheld divestiture as an equitable remedy in civil actions. United
States v. E. I. Du Pont de Nemours & Co., 366 U.S. 316, 326, 6 L. Ed.
2d 318, 81 S. Ct. 1243 (1961) ("Divestiture is itself an equitable remedy
designed to protect the public interest"). See Senate Report at 81; 115
Cong. Rec. 9567 (1969) (remarks of Sen. McClellan). Divestiture may be an
appropriate remedy even if it results in severe economic hardship. United
States v. E. I. Du Pont de Nemours & Co., 366 U.S. at 326, 327
("courts [**96] are authorized, indeed required,
to decree relief effective to redress the violations, whatever [*1447] the adverse effect of such a decree on private
interests"; if "complete divestiture is a necessary element of effective relief,
the Government cannot be denied the . . . remedy because economic hardship,
however severe, may result"). As stated in Utah
Public Service Commission v. El Paso Natural Gas Co., 395 U.S. 464, 472, 23
L. Ed. 2d 474, 89 S. Ct. 1860 (1969), "the pinch on private interest is not
relevant to fashioning an antitrust decree, as the public interest is our sole
concern."
Spero has pointed out that divestiture in the area of
antitrust requires the defendant to give up his interest in a commercial
enterprise, normally through the sale of that interest. See Utah
Public Service Commission v. El Paso Natural Gas Co., 395 U.S. at 472
(contemplating a "cash sale"). The defendant receives compensation for the loss
of the interest although he may suffer some economic hardship as a result of the
divestiture. The government has not cited any antitrust cases to the Court in
which the defendant was required to divest himself of his interest in a
commercial enterprise without receiving any compensation, a remedy [**97] which Spero argues would be tantamount to a
forfeiture.
Congress also expected that a RICO defendant could be
required, in a civil action, to sell his interest in an enterprise. As stated by
Representative Steiger:
Using [RICO's] civil provisions, the government, by providing
[sic] by a preponderance of the evidence that a racketeer had used a pattern
of specified felonies to acquire or operate an interstate business, or had
purchased his controlling interest with the proceeds of his pattern of
felonies, could obtain a court order requiring the racketeer to sell his
interest in the business and to refrain from re-entering the enterprise either
directly or through nominees.
House Hearings at 520. The
statute's legislative history, however, does not contain any references to
"disgorgement" as a civil remedy and there is no indication that Congress
specifically envisioned a civil equitable RICO remedy which would deprive a
defendant of his interest without any compensation.
Nevertheless,
Congress did not intend the equitable remedies listed in § 1964 to be exclusive.
The statute expressly authorizes the courts to issue "appropriate orders,
including, but not limited to" the listed [**98]
equitable remedies. The legislative history also makes it clear that antitrust
remedies were not the only remedies available under § 1964. As stated by Senator
McClellan:
The many references to antitrust cases are necessary because the
particular equitable remedies desired have been brought to their greatest
development in this field, and in many instances they are the primary
precedents for the remedies in this bill. Nor do I mean to limit the remedies
available to those which have already been established. The ability of our
chancery courts to formulate a remedy to fit the wrong is one of the great
benefits of our system of justice. This ability is not hindered by the
bill.
115 Cong. Rec. 9567 (1969). See Senate
Report at 79 (RICO envisions a "civil law approach of equitable relief broad
enough to do all that is necessary to free the channels of commerce from all
illicit activity").
The courts are given broad powers in fashioning
equitable relief to further § 1964's remedial purposes:
Nevertheless, it must be emphasized that these remedies are
not exclusive, and that [RICO] seeks essentially an economic, not a punitive
goal. However remedies may be fashioned, it is necessary [**99] to free the channels of commerce from predatory
activities, but there is no intent to visit punishment on any individual; the
purpose is civil. Punishment as such is limited to the criminal remedies,
noted above.
Senate Report at 81.
Again, the
Senate Report emphasized the flexible nature of the relief authorized by § 1964:
Although certain remedies are set out, the list is not
exhaustive, and the only limit on remedies is that they accomplish the aim set
out of removing the corrupting [*1448]
influence and make due provision for the rights of innocent
persons.
Senate Report at 160; accord H.R. Rep.
No. 1549, 91st Cong., 2d Sess. 57, 1970 U.S. Code Cong. & Admin. News 4007,
4034.
Moreover, the RICO statute in general is to "be liberally
construed to effectuate its remedial purposes." Pub. L. 91-452, § 904(a), 84
Stat. 947 (1970); Sedima,
S.P.R.L. v. Imrex Co., 473 U.S. 479, 498, 87 L. Ed. 2d 346, 105 S. Ct. 3275
(1985). As emphasized in Sedima: "Indeed, if Congress'
liberal-construction mandate is to be applied anywhere, it is in § 1964, where
RICO's remedial purposes are most evident." 473
U.S. at 492 n. 10.
The following principles may thus be gleaned from
an examination of RICO's criminal penalties and [**100] civil remedies provisions and the legislative
history of the statute: Both types of remedies were intended to provide forceful
and innovative weapons against organized crime's infiltration and control of
commercial enterprises. Forfeiture was viewed as a punitive sanction available
only in criminal RICO proceedings. RICO's civil remedies were drawn from
established civil antitrust remedies, including divestiture through which a
defendant could be ordered to dispose of his interest in a particular enterprise
receiving compensation in return, although perhaps sustaining a loss. Finally,
the civil remedies listed in § 1964 were intended to be illustrative and not
exclusive, and the courts were given broad powers to fashion appropriate
equitable relief to further the remedial purposes of that section.
Therefore, while the "divestiture" relief sought by the government in
this action is not expressly authorized by the RICO statute because it does not
contemplate compensation to the defendant, such relief would be authorized to
the extent that it is an equitable remedy which furthers § 1964's remedial
goals.
Disgorgement
The government argues that
the remedy it seeks -- "divestiture" [**101] of
the defendants' interests in specified enterprises with the proceeds to be
turned over to racketeering victims or to the U.S. Treasury -- does not amount
to a "forfeiture" but instead is in the nature of disgorgement. Disgorgement has
been found to be an appropriate, non-punitive, ancillary equitable remedy in the
securities and commodities law area which deprives wrongdoers of their
ill-gotten gains and deters future violations. See, e.g., S.E.C.
v. Tome, 833 F.2d 1086, 1096 (2d Cir. 1987); C.F.T.C.
v. British American Commodity Options Corp., 788 F.2d 92 (2d Cir.),
cert. denied sub nom. Forma
v. C.F.T.C., 479 U.S. 853, 107 S. Ct. 186, 93 L. Ed. 2d 120 (1986); S.E.C.
v. Commonwealth Chemical Securities, Inc., 574 F.2d 90 (2d Cir. 1978);
S.E.C.
v. Manor Nursing Centers, Inc., 458 F.2d 1082 (2d Cir. 1972). A
disgorgement order requires the violator to give up or disgorge the profits made
from his unlawful acts.
The authority to order disgorgement derives from
the broad equitable powers given courts under the securities laws "to provide
such remedies as are necessary to make effective the congressional purpose." J.
I. Case Co. v. Borak, 377 U.S. 426, 433, 12 L. Ed. 2d 423, 84 S. Ct. 1555
(1964). The fashioning [**102] of equitable
remedies under the securities laws lies within the "sound discretion" of the
court. Mills
v. Electric Auto-Lite Co., 396 U.S. 375, 386, 24 L. Ed. 2d 593, 90 S. Ct.
616 (1970). A court exercising the broad equitable powers of RICO's § 1964
has similar, if not wider, latitude in designing appropriate relief. See
United
States v. Ianniello, 824 F.2d 203, 208 (2d Cir. 1987); United
States v. Local 560, 780 F.2d 267, 295-96 (3d Cir. 1985), cert.
denied, 476
U.S. 1140, 90 L. Ed. 2d 693, 106 S. Ct. 2247 (1986). As stated in Hecht
Co. v. Bowles, 321 U.S. 321, 329-30, 88 L. Ed. 754, 64 S. Ct. 587
(1944):
The essence of equity jurisdiction has been the power of the
Chancellor to do equity and to mould each decree to the necessities of the
particular case. Flexibility rather than rigidity has distinguished it. The
qualities of mercy and practicality have made equity the instrument [*1449] for nice adjustment and reconciliation
between the public interest and private needs as well as between competing
private claims.
The Court holds that, if the government succeeds in
this action in proving that the defendants have violated RICO, it would be
within the broad equitable powers of the Court to fashion relief requiring the
defendants to disgorge any ill-gotten gains. [**103] Since the government bases its claim for
disgorgement relief on alleged §§ 1962(c), as well as § 1962(a), violations, the
defendants could conceivably be ordered to disgorge both the proceeds of
unlawful activities which they have allegedly invested in the businesses at
issue as well as any proceeds derived from the unlawful conduct of or
participation in the enterprise's affairs. Any such relief would be dependent
upon the government's ability to prove that the proceeds sought to be disgorged
were "ill-gotten" under the RICO statute.
The government would not be
entitled to an order depriving, without compensation, the defendants of their
entire interest in the enterprises at issue regardless of whether the property
interest is tainted. n28 See C.F.T.C.
v. British American Commodity Options Corp., 788 F.2d 92, 93-94 (2d
Cir.) (court should try to separate legally and illegally derived profits unless
entire property interest is attributable to unlawful activity), cert. denied
sub nom. Forma
v. C.F.T.C., 479 U.S. 853, 107 S. Ct. 186, 93 L. Ed. 2d 120 (1986); S.E.C.
v. Manor Nursing Centers, Inc., 458 F.2d 1082, 1104 (2d Cir. 1972)
(disgorgement must be tailored so as not to amount to a penalty assessment);
[**104] S.E.C.
v. Blatt, 583 F.2d 1325, 1335 (5th Cir. 1978) (disgorgement is a
remedial remedy which must be limited to the amount of wrongful profits with
interest). Such relief would amount to a forfeiture and would be unauthorized
under RICO's civil remedies provision.
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n28 As is evident
from the legislative history of RICO discussed above, the government, if it
proves RICO violations, would be entitled to a divestiture order requiring the
defendants to separate themselves entirely from specific enterprises. Such an
order would not amount to a punitive sanction. United
States v. E. I. Du Pont de Nemours & Co., 366 U.S. 316, 326, 6 L. Ed.
2d 318, 81 S. Ct. 1243 (1961); Schine
Chain Theatres, Inc. v. United States, 334 U.S. 110, 128, 92 L. Ed. 1245,
68 S. Ct. 947 (1948).
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It should be noted that the
government need not demonstrate that specific individuals have been damaged by
the defendants' acts to warrant a disgorgement order. Although it may prove
appropriate to order restitution of certain sums to "victims," n29 the primary
purpose of disgorgement is to prevent unjust enrichment regardless of whether
any victims are entitled to damages. S.E.C.
v. Tome, 833 F.2d 1086, 1096 (2d Cir. 1987) (citing S.E.C.
v. Commonwealth Chemical [**105] Securities, Inc., 574 F.2d 90
(2d Cir. 1978), and S.E.C.
v. Blavin, 760 F.2d 706 (6th Cir. 1985)). Thus, the government's
request that any ill-gotten gains not distributed to racketeering victims be
paid to the U.S. Treasury does not transform this action into an unauthorized
criminal RICO action.
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n29 Spero also argues that
a victims' fund is an improper remedy in a civil RICO action brought by the
government. The Court need not anticipate whether such a remedy will ultimately
prove appropriate in this action and will not address this claim in the context
of a motion to dismiss.
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The Invocation of
the Fifth Amendment Privilege
It is well-established that the Fifth
Amendment privilege against self-incrimination may be invoked in a civil
proceeding. Pillsbury
Co. v. Conboy, 459 U.S. 248, 263-64, 74 L. Ed. 2d 430, 103 S. Ct. 608
(1983); Lefkowitz
v. Turley, 414 U.S. 70, 77, 38 L. Ed. 2d 274, 94 S. Ct. 316 (1973); Kastigar
v. United States, 406 U.S. 441, 444-45, 32 L. Ed. 2d 212, 92 S. Ct. 1653
(1972). If the privilege is invoked in a civil proceeding, however, the
trier of fact may draw an adverse inference from the invocation. Baxter
v. Palmigiano, 425 U.S. 308, 318, 47 L. Ed. 2d 810, 96 S. Ct. 1551
(1976); Brink's,
Inc. v. City of New York, 717 F.2d 700, 710 (2d Cir. 1983). Contrast
[**106] Griffin v. California, 380 U.S. 609, 615,
[*1450] 14 L. Ed. 2d 106, 85 S. Ct. 1229 (1965) (adverse inference may not be drawn in
criminal proceeding); see also United
States v. Robinson, 485 U.S. 25, 56 U.S.L.W. 4174, 4176,
99 L. Ed. 2d 23, 108 S. Ct. 864 (1988) (silence may not be treated as
substantive evidence of guilt in a criminal trial). Therefore, as long as the
instant proceeding is a civil proceeding, the Court would be permitted to draw
adverse inferences if the defendants refuse to testify or otherwise give
evidence on Fifth Amendment grounds.
The government has chosen to bring
the instant action under RICO's civil remedies provision. The fact that the
government might have the option of pursuing RICO criminal proceedings against
the same defendants does not transform this action into a criminal action. Sedima,
S.P.R.L. v. Imrex Co., 473 U.S. 479, 491, 492, 87 L. Ed. 2d 346, 105 S. Ct.
3275 (1985); In
re Debs, 158 U.S. 564, 39 L. Ed. 1092, 15 S. Ct. 900 (1895); United
States v. Ianniello, 646 F. Supp. 1289, 1297 (S.D.N.Y. 1986),
aff'd, 824
F.2d 203 (2d Cir. 1987); United
States v. Cappetto, 502 F.2d 1351, 1357 (7th Cir. 1974), cert.
denied, 420
U.S. 925, 43 L. Ed. 2d 395, 95 S. Ct. 1121 (1975). On the other hand, the
fact that the government has labelled this action a "civil" action is not
determinative of whether [**107] it is in fact
a civil or criminal proceeding as regards the Fifth Amendment privilege.
E.g., In
re Gault, 387 U.S. 1, 50, 18 L. Ed. 2d 527, 87 S. Ct. 1428 (1967). The
Court must look at the actual nature of the action to determine whether it
should be deemed civil, criminal, or even quasi-criminal in regard to the
repercussions of invoking the Fifth Amendment privilege.
Spero argues
that this is a criminal or quasi-criminal action because the relief sought by
the government amounts to forfeiture, a punitive sanction. Spero maintains that
in view of the criminal nature of the relief sought, he is entitled to the same
protections in invoking the Fifth Amendment to which he would be entitled in a
criminal action. Spero bases this argument on Boyd
v. United States, 116 U.S. 616, 29 L. Ed. 746, 6 S. Ct. 524 (1886), in
which the Court held that a forfeiture action was in effect a criminal or
quasi-criminal action and the Fifth Amendment mandated that the claimant of
property could not be compelled to produce evidence under pain of losing the
property.
It is not necessary to discuss what precedential value should
be assigned to Boyd, see Fisher
v. United States, 425 U.S. 391, 407, 48 L. Ed. 2d 39, 96 S. Ct. 1569
(1976) ("Several of Boyd's express or implicit [**108] declarations have not stood the test of time");
accord United
States v. Ward, 448 U.S. 242, 253, 65 L. Ed. 2d 742, 100 S. Ct. 2636
(1980), n30 because, as discussed above, forfeiture is not a remedy
contemplated by § 1964(a) and will not be ordered in this action. Rather, the
Court will limit the relief it awards in this action, if any, to equitable
remedies such as divestiture, disgorgement, and injunction.
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n30 The Court does note that in rem forfeiture actions are not
inevitably deemed to be criminal actions. Contrast United States v. One
Assortment of 89 Firearms, 465 U.S.
354, 104 S. Ct. 1099, 79 L. Ed. 2d 361 (1984); One
Lot Emerald Cut Stones v. United States, 409 U.S. 232, 34 L. Ed. 2d 438, 93
S. Ct. 489 (1972) (per curiam); Calero-Toledo
v. Pearson Yacht Leasing Co., 416 U.S. 663, 40 L. Ed. 2d 452, 94 S. Ct.
2080 (1974), with United
States v. United States Coin & Currency, 401 U.S. 715, 28 L. Ed. 2d
434, 91 S. Ct. 1041 (1971); One
1958 Plymouth Sedan v. Pennsylvania, 380 U.S. 693, 14 L. Ed. 2d 170, 85 S.
Ct. 1246 (1965).
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The potential relief in this
action is not tantamount to a punitive sanction. As set forth in the Supreme
Court's decision in United
States v. Ward, 448 U.S. 242, 248, 65 L. Ed. 2d 742, 100 S. Ct. 2636
(1980) (cited with approval in Sedima,
S.P.R.L. v. Imrex Co., 473 U.S. 479, 489, 491, 87 L. Ed. 2d 346, 105 S. Ct.
3275 (1985)) and reaffirmed in Allen
v. Illinois, 478 U.S. 364, 106 S. Ct. 2988, [**109] 2992, 92 L.
Ed. 2d 296 (1986): "the question whether a particular
statutorily defined penalty is civil or criminal is a matter of statutory
construction." This action is brought pursuant to the civil remedies provision
of RICO which Congress clearly intended to be remedial:
Subsection (a) contains broad remedial provisions for reform of
corrupted organizations. Although certain remedies [*1451] are set out, the list is not exhaustive, and
the only limit on remedies is that they accomplish the aim set out of removing
the corrupting influence and make due provision for the rights of innocent
persons. Because the action is remedial, not punitive, the result in One
1958 Plymouth Sedan v. Pennsylvania, 380 U.S. 693, [14 L. Ed. 2d 170, 85
S. Ct. 1246] (1965), would not obtain here.
Senate
Report at 160. See United
States v. Cappetto, 502 F.2d 1351, 1357 (7th Cir. 1974), cert.
denied, 420
U.S. 925, 43 L. Ed. 2d 395, 95 S. Ct. 1121 (1975) ("Section 1964 provides
for a civil action in which only equitable relief can be granted. The relief
authorized by that section is remedial not punitive and is of a type
traditionally granted by courts of equity.")
Nor is the instant case one
in which "'the statutory scheme [is] so punitive either in purpose or effect as
to negate [the [**110] State's] intention' that
the proceeding be civil." Allen
v. Illinois, 106 S. Ct. at 2992 (quoting United
States v. Ward, 448 U.S. at 248-49). Section 1964(a) authorizes the
courts to fashion equitable relief appropriate to the particular circumstances.
Two such types of relief are divestiture and disgorgement, both of which have
been upheld as remedial, non-punitive, relief. See, e.g., United
States v. E. I. Du Pont de Nemours & Co., 366 U.S. 316, 326, 6 L. Ed.
2d 318, 81 S. Ct. 1243 (1961); United
States v. Ianniello, 824 F.2d 203, 208 (2d Cir. 1987); S.E.C.
v. Manor Nursing Centers, Inc., 458 F.2d 1082, 1103-04 (2d Cir. 1972).
This action therefore truly is a civil action.
Adverse inferences from a
party's invocation of his Fifth Amendment privilege have been held appropriate
in civil disgorgement actions. S.E.C.
v. Tome, 638 F. Supp. 629 (S.D.N.Y. 1986); S.E.C.
v. Musella, 578 F. Supp. 425 (S.D.N.Y. 1984); S.E.C.
v. Scott, 565 F. Supp. 1513 (S.D.N.Y. 1983), aff'd per curiam sub
nom. S.E.C.
v. Cayman Islands Reinsurance Corp., 734 F.2d 118 (2d Cir. 1984); C.F.T.C.
v. U.S. Metals Depository Co., 468 F. Supp. 1149 (S.D.N.Y. 1979).
Moreover, the United States Court of [**111]
Appeals for the Second Circuit has held that an adverse inference may be drawn
from the assertion of the Fifth Amendment privilege in civil RICO actions
brought by the government. United
States v. Ianniello, 824 F.2d at 208.
Spero argues that an
adverse inference should not be drawn because the United States government is a
party to this action and has the power to facilitate the defendants' giving of
evidence by granting them immunity from future prosecutions. n31 Spero overlooks
the fact that Baxter
v. Palmigiano, 425 U.S. 308, 317-18, 47 L. Ed. 2d 810, 96 S. Ct. 1551
(1976), upheld the drawing of an adverse inference in prison disciplinary
proceedings in which the State had not granted immunity to the prisoners. The
cases listed in the previous paragraph also upheld the drawing of an adverse
inference even when the United States government was a party to the action.
Finally, the decision as to whether to grant immunity under 18
U.S.C. §§ 6002, 6003 is within the discretion of the executive branch and
may not be second-guessed or interfered with by the court. E.g., Snelling
v. United States, 719 F.2d 1067, 1068 n. 3 (10th Cir. 1983); United
States v. D'Apice, 664 F.2d 75, 77 (5th Cir. 1981); [**112] United
States v. Lenz, 616 F.2d 960, 962 (6th Cir.), cert. denied, 447
U.S. 929, 65 L. Ed. 2d 1124, 100 S. Ct. 3028 (1980); In
re Daley, 549 F.2d 469, 479 (7th Cir.), cert. denied, 434
U.S. 829, 54 L. Ed. 2d 89, 98 S. Ct. 110 (1977); see also In
re Corrugated Container Antitrust Litigation, 644 F.2d 70, 78 n. 13 (2d
Cir. 1981). The Court therefore holds that an adverse inference may be drawn
in this action if the defendants refuse to provide evidence on Fifth Amendment
grounds even though the United States government is a party to the action.
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n31 This argument is inconsistent with Spero's argument
that, since this is in reality a criminal action, no adverse inference could be
drawn from a defendant's invocation of his Fifth Amendment privilege. If this
were a criminal action, an immunity grant would protect the defendant from use
of his testimony in this very action.
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The Court is mindful
that an adverse inference drawn from the assertion [*1452] of the Fifth Amendment privilege in a civil
proceeding may not be the sole basis for imposing liability upon a defendant. Baxter
v. Palmigiano, 425 U.S. 308, 317-18, 47 L. Ed. 2d 810, 96 S. Ct. 1551
(1976); United
States v. Ianniello, 646 F. Supp. 1289, 1296 (S.D.N.Y. 1986),
aff'd, 824
F.2d 203 (2d Cir. 1987). The [**113] Court
therefore will require independent corroborative evidence of the matters to be
inferred from a defendant's invocation of the Fifth Amendment privilege against
self-incrimination before imposing liability. See United
States v. Local 560, 780 F.2d 267, 292-93 n. 32 (3d Cir. 1985),
cert. denied, 476
U.S. 1140, 90 L. Ed. 2d 693, 106 S. Ct. 2247 (1986).
Receivers Pendente Lite
The Amended Complaint requests that
the Court appoint "one or more receivers, pendente lite, to oversee the
operation of the businesses, buildings and properties known as" the 4th Street
Cafe, 405 Myrtle Avenue, J & S Cake, Hudson Plaza Hotel, Newark Airport
Motel, Belleville Motor Lodge, Big Apple Taxi Two-Way Radio Co., and Casa Bella
Restaurant. The demand for appointment of a receiver is based on the Amended
Complaint's first (1962(c) violations through the Bonanno Family Enterprise),
fourth through eleventh (1962(a) divestiture) and thirteenth (1962(d)
conspiracy) claims for relief.
The government requests that the powers
and duties of the receivers include the following:
A. To the extent that legitimate business activities occur at the
properties identified above, to carry on and supervise those activities
without interruption; [**114]
B. To
the extent that illegal activities occur at the properties identified above,
to cease and prevent such ongoing activities;
C. To protect, preserve
and prevent from waste or dissipation the assets of each such business;
D. To withhold and place into an interest-bearing escrow account any
and all funds, salaries or benefits of whatever kind or description due or
which become due to any individual named as a defendant herein;
E. To
retain legal counsel and to employ accountants and experts to assist in the
proper discharge of the aforesaid duties;
F. To expend the funds of
the businesses for all expenses which are reasonable and necessary to execute
the mandate of this court;
G. To apply to this court for such
assistance as may be necessary and appropriate in order to carry out the
mandate of this court.
Spero argues that the government's motion for
the appointment of a receiver for Big Apple should be denied without a hearing
because the government has not met its heavy evidentiary burden of demonstrating
that the extraordinary remedy of receivership is necessary. See, e.g.,
Donovan
v. Bierwirth, 680 F.2d 263, 276 (2d Cir.), cert. denied, 459
U.S. 1069, 74 L. Ed. 2d 631, 103 S. Ct. 488 (1982); [**115] Meineke
Discount Muffler Shops, Inc. v. Noto, 603 F. Supp. 443, 444-45 (E.D.N.Y.
1985); S.E.C.
v. Republic National Life Insurance Co., 378 F. Supp. 430, 438 (S.D.N.Y.
1974). The government's motion for preliminary injunctive relief and the
appointment of a receiver, however, is not currently before the Court. The Court
will determine whether the government has met its burden after the government
has been given the opportunity to prove the need for appointing a receiver in
submissions in support of its motion or at a preliminary injunction hearing. n32
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- - - - - - -
n32 While an evidentiary hearing is not always essential
to decide a motion for a preliminary injunction or the appointment of a
receiver, United
States v. Ianniello, 824 F.2d 203, 207 (2d Cir. 1987), the government
has requested a hearing in this action and a hearing appears to be appropriate.
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- - - - - - -
Spero also argues that appointment of a receiver for Big
Apple would serve no conceivable purpose. There will be no need to preserve Big
Apple's assets because, Spero argues, the government is only authorized to
obtain an order requiring Spero to sell [*1453] his interest in Big Apple with Spero retaining
the proceeds of the sale. As [**116] discussed
above, the equitable remedy of disgorgement is a possible remedy in this action
which may give the government an interest in ensuring that the assets to be
disgorged remain with Big Apple and are not transferred elsewhere. Preservation
of assets is thus not irrelevant to the relief potentially available in this
action. n33
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n33 Spero also maintains that he is willing to
consent to an injunction against transferring any interest he may have in Big
Apple. Such consent will be considered by the Court in deciding the government's
motion and may well call for a denial of the motion for appointment of a
receiver at least insofar as it is premised on a need to preserve assets.
See Donovan
v. Bierwirth, 680 F.2d 263, 276-77 (2d Cir.), cert. denied, 459
U.S. 1069, 74 L. Ed. 2d 631, 103 S. Ct. 488 (1982).
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Spero argues that the allegations of extortion in paragraph 42 of the
Amended Complaint are conclusory and are so intertwined with legitimate business
activities that a receiver would either not be necessary to halt ongoing
criminal activity or would unalterably prejudice Spero's interests and destroy
the status quo. As discussed above, the government's extortion allegations
concerning Big Apple are [**117] sufficient to
withstand a motion to dismiss. Consideration of whether the government can prove
that the facts underlying those allegations warrant the appointment of a
receiver and such appointment's potential prejudicial effect on Spero must await
the hearing on the government's motion for preliminary injunctive relief.
The United States Court of Appeals for the Second Circuit has upheld the
appointment of a receiver in a civil RICO case to prevent a restaurant's
continued skimming of profits. United
States v. Ianniello, 824 F.2d 203 (2d Cir. 1987). The fashioning of a
receivership to meet the needs of a particular case is within the discretion of
the trial court exercising its equitable powers under § 1964(a) and (b) of RICO.
Id.
at 208; see also United
States v. Local 560, 780 F.2d 267, 296 n. 39 (3d Cir. 1985) (affirming
appointment of trustee for union in civil RICO action), cert. denied,
476
U.S. 1140, 90 L. Ed. 2d 693, 106 S. Ct. 2247 (1986). The appointment of a
receiver for Big Apple is thus relief to which the government may be entitled
depending on its proof. Spero's motion to deny the government's request for that
relief without a hearing is denied. To the extent that other defendants [**118] have joined in Spero's motion in regard to other
property and businesses potentially subject to receivership, those motions are
also denied and the government will be given the opportunity to prove the need
for a receivership.
Rights of Third Parties
Certain defendants have argued that they are not the owners, or are only
part owners, of property sought to be divested and that the divestiture relief
sought would deprive innocent third parties of their property interests. These
arguments are premature since the relief granted in this action will depend upon
the proof as to the defendants' wrongdoing, their investment of racketeering
income, and their interest in the properties at issue. The Court notes, however,
that 18
U.S.C. § 1964(a) specifically requires that the courts make "due provision
for the rights of innocent persons" in fashioning equitable relief in RICO civil
actions.
The government has represented to the Court that it has given
notice of this action to the owners of record of the properties sought to be
divested. Additional notice to parties who may have an interest in the affected
properties may be appropriate at the time the government's request for relief is
heard. [**119] Moreover, the government has
stated it will not oppose any motions to intervene in the action by real parties
in interest. The Court granted the application of Belleville Motor Lodge to
intervene on November 19, 1987.
"Forfeiture" of Rodini's Pension
Benefits
Rodini moves to strike the Amended Complaint's request for
a preliminary injunction appointing a trustee to oversee the operation of Local
814 who would have the power:
[*1454] To withhold the
payment of any and all funds, salaries or benefits of whatever kind or
description from any claimant who may have defrauded or seeks to defraud Local
814 or any associated or affiliated Employee Benefit Funds or who otherwise
has misappropriated or is about to misappropriate any assets thereof until the
completion of the aforesaid accounting and the resolution of any claims
instituted against any individual or entity by or on behalf of Local 814, or
any associated or affiliated Employee Benefit Funds.
Rodini, a retired member of Local 814, maintains that his pension benefits
may not be withheld or "forfeited" under the Employee Retirement Income Security
Act of 1974, 29
U.S.C. §§ 1001 et seq.
The Consent Judgment "so ordered" by
the [**120] Court on October 8, 1987,
appointing a trustee, authorizes the trustee:
To withold [sic] to the extent permitted by law the payment
of any and all funds, salaries or benefits of whatever kind or description
from any claimant who has defrauded or unlawfully misappropriated assets of or
is defrauding or misappropriating assets of Local 814 or the Local 814 Funds
until the completion of the aforesaid accounting and the resolution of any
claims instituted against any individual or entity by or on behalf of Local
814 and the Local 814 Funds.
The Consent Judgment
dismisses the action as against the Local 814 defendants, Ignatius Bracco, and
Vito Gentile. The government has therefore substantially obtained the relief
which Rodini challenges and is no longer pursuing the request for relief which
Rodini moves to strike, making Rodini's motion moot.
The Court notes
that the Consent Judgment only authorizes the trustee to withhold benefits "to
the extent permitted by law." Rodini has not claimed that any of his benefits
have actually been withheld. If and when the trustee does withhold such
benefits, the Court will entertain any appropriate application which Rodini
chooses to make.
Monetary [**121]
Damages
The Amended Complaint's second claim for relief entitled
"18
U.S.C. § 1962(c) - Monetary Relief Against Bonanno Family Enterprise Members
and Associates" alleges that certain defendants were involved in a scheme to rig
moving contracts for federal government offices and that the United States was
thereby injured in the amount of $ 307,500. The section of the demand for relief
entitled "Monetary Relief" claims damages arising from the moving contracts in
the amount of $ 307,500, trebled, together with costs and attorney's fees.
The government's claim for monetary relief purports to be based upon the
second as well as the twelfth (Local 814 captive labor organization) and
thirteenth (§ 1962(d) conspiracy) claims. The twelfth claim for relief contains
no allegation of damage to the United States and the thirteenth claim alleges
that the government has been injured in an amount in excess of $ 300,000 and
"continues to be damaged and hurt by the illegal acts and patterns of
racketeering activity as set forth throughout the instant complaint." As
discussed above, the thirteenth claim for relief is being dismissed because it
fails adequately to plead conspiracy.
The government's [**122] demand for monetary damages purports to be
authorized by 18
U.S.C. § 1964(c) which provides:
(c) Any person injured in his business or property by reason
of a violation of section 1962 of this chapter may sue therefor in any
appropriate United States district court and shall recover threefold the
damages he sustains and the cost of the suit, including a reasonable
attorney's fee.
The RICO definition of "person" states: "'person '
includes any individual or entity capable of holding a legal or beneficial
interest in property." 18
U.S.C. § 1961(3).
Massino argues that the United States government
is not a RICO "person" and has no standing to sue for monetary damages under
U.S.C. § 1964(c). The government responds that it is a "person" under § 1961(3),
that it is suing for damages to [*1455] its
own commercial interests and not as parens patriae, and that courts
have held that state, county, or municipal governments or officials have
standing to sue for damages under RICO. While the United States could be said to
fall within the wording of the RICO definition of "person," the Court holds that
RICO's legislative history and analogous Clayton Act case law indicate that the
federal government [**123] does not have
standing to sue for damages under 18
U.S.C. § 1964(c).
Research has revealed no decisions addressing
whether the federal government may sue for monetary damages under RICO. As the
Supreme Court has noted, however, "the civil action provision of RICO was
patterned after the Clayton Act." Agency
Holding Corp. v. Malley-Duff & Associates, 483 U.S. 143, 107 S. Ct.
2759, 2764, 97 L. Ed. 2d 121 (1987); accord Sedima,
S.P.R.L. v. Imrex Co., 473 U.S. 479, 489, 87 L. Ed. 2d 346, 105 S. Ct. 3275
(1985).
Section 4 of the Clayton Act, 15
U.S.C. § 15, as originally enacted and as it existed at the time RICO was
enacted, provided:
§ 15. Suits by persons injured; amount of recovery
Any person who shall be injured in his business or property by reason
of anything forbidden in the antitrust laws may sue therefor in any district
court of the United States in the district in which the defendant resides or
is found or has an agent, without respect to the amount in controversy, and
shall recover threefold the damages by him sustained, and the cost of suit,
including a reasonable attorney's fee.
The facial
similarity between 18
U.S.C. § 1964(c) and 15
U.S.C. § 15 is obvious. The Court in Agency Holding further
described the similarity of the [**124] §
1964(c) of RICO and Clayton Act treble damage provision as follows:
Both RICO and the Clayton Act are designed to remedy economic
injury by providing for the recovery of treble damages, costs, and attorney's
fees. Both statutes bring to bear the pressure of "private attorneys general"
on a serious national problem for which public prosecutorial resources are
deemed inadequate; the mechanism chosen to reach the objective in both the
Clayton Act and RICO is the carrot of treble damages. Moreover, both statutes
aim to compensate the same type of injury; each requires that a plaintiff show
injury "in his business or property by reason of" a
violation.
107
S. Ct. at 2764.
The reliance on the Clayton Act model is a leitmotif
throughout RICO's legislative history. Agency
Holding, 107 S. Ct. at 2764-65; see, e.g., 116 Cong. Rec.
25191 (1970) (American Bar Association comments) (suggesting addition of
provision authorizing private damage suits based upon the concept of section 4
of the Clayton Antitrust Act); 116 Cong. Rec. 35295 (1970) (remarks of Rep.
Poff) ("private persons injured by reason of a violation of the title may
recover treble damages in Federal courts - another [**125] example of the antitrust remedy being adapted
for use against organized criminality").
In United
States v. Cooper Corp., 312 U.S. 600, 85 L. Ed. 1071, 61 S. Ct. 742
(1941), the Supreme Court held that the United States was not a "person" who
could sue for treble damages under § 7 of the Sherman Act, the predecessor of §
4 of the Clayton Act. The Court noted that "since, in common usage, the term
'person' does not include the sovereign, statutes employing the phrase are
ordinarily construed to exclude it," 312
U.S. at 604, and that, had Congress intended to include the United States as
a "person" under the statute, it would have done so expressly. Id.
at 606. Congress similarly could have expressly included the United States
within the RICO definition of "person" but did not.
The Court in
Cooper Corp. also emphasized that enforcement actions available under
the Clayton Act were divided into two separate categories: "It seems evident
that the Act envisaged two classes of actions, - those made available only to
the Government, which are first provided in detail, and, in addition, a right of
action for [*1456] treble damages granted to
redress private injury." Id.
at 608. n34 The civil remedies provision [**126] of RICO, § 1964, is similarly divided into
proceedings brought by the Attorney General and those brought by persons injured
in their business or property.
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-Footnotes- - - - - - - - - - - - - - - - - -
n34 The Court also
reviewed other sections of the Clayton Act as well as the legislative history of
the Sherman and Clayton Acts which supported the conclusion that the federal
government could not sue for damages.
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Congress amended the
Clayton Act in 1955 to add a section explicitly authorizing suits by the United
States when it is injured in its business or property. 15
U.S.C. § 15a. Under that section, the United States is permitted to recover
only actual and not treble damages.
The Cooper Corp. decision
and the amendment of the Clayton Act to include 15
U.S.C. § 15a both preceded the enactment of RICO. Since the damage action
provision of § 1964(c) was closely modelled on the Clayton Act, the Court can
only conclude that Congress would have expressly authorized the United States to
sue for damages to its business or property had Congress so intended.
Congress in fact considered including a provision in RICO which would
have authorized the United States to bring RICO actions to recover actual
damages for injury to its business [**127] or
property. Representative Steiger, noting that "the Judiciary Committee version
of [RICO] fails to provide not only the necessary procedural provisions but also
two important substantive remedies included in the Clayton Act: compensatory
damages to the United States when it is injured in its business or property, and
equitable relief in suits brought by private citizens," 116 Cong. Rec. 35228
(1970), proposed an amendment to the pending RICO legislation similar to 15
U.S.C. § 15a. See 115 Cong. Rec. 6996 (1969) (Report of Antitrust
Section of the American Bar Association); 116 Cong. Rec. 27739 (1970) (letter
from Rep. Steiger concerning proposed amendment); 116 Cong. Rec. 35227 (1970)
(remarks of Rep. Steiger); 116 Cong. Rec. 35346 (1970) (amendment offered by
Rep. Steiger). The amendment suggested by Representative Steiger was withdrawn
because it had not been considered by the Judiciary Committee, 116 Cong. Rec.
35346-47 (1970), and the statute as enacted did not include such a provision.
See Agency
Holding, 107 S. Ct. at 2766; Sedima,
473 U.S. at 487-88.
Again, in 1971, Senators McClellan and Hruska
proposed a bill, S. 16, entitled the Civil Remedies for Victims of [**128] Racketeering Activity and Theft Act of 1972,
which would have amended RICO to include a provision authorizing damage actions
by the United States. 117 Cong. Rec. 268 (1971); 118 Cong. Rec. 29368-70 (1972)
(text of S. 16 and remarks of Sen. Hruska). The Supreme Court has described this
bill as follows:
This proposed bill, however, was not focused on the addition
of a statute of limitations. Instead, the purpose of the bill was to broaden
even further the remedies available under RICO. In particular, it would
have authorized the United States itself to sue for damages and to
intervene in private damages actions, and it would have further permitted
private actions for injunctive relief. Congress' failure to enact this
proposal, therefore, cannot be read as a rejection of a uniform federal
statute of limitations.
Agency
Holding, 107 S. Ct. at 2766 (emphasis added). The Court therefore
concludes that, under RICO as enacted and as it currently exists, the United
States government does not have standing to sue for damages to its business or
property.
The parties have not addressed the legislative history of RICO
as it relates to this issue. Instead, the government argues that [**129] courts have allowed state, county, and municipal
officials and governments to sue for damages under RICO. See Illinois
Department of Revenue v. Phillips, 771 F.2d 312 (7th Cir. 1985);
Alcorn County, Mississippi v. U. S. Interstate
Supplies, Inc., 731 F.2d 1160 (5th Cir. 1984); Schacht
v. Brown, 711 F.2d 1343 (7th Cir.), cert. denied sub nom. Arthur
Andersen & Co. v. [*1457] Schacht, 464 U.S. 1002, 78 L. Ed.
2d 698, 104 S. Ct. 508 (1983); City
of New York v. Joseph L. Balkan, Inc., 656 F. Supp. 536 (E.D.N.Y.
1987); County
of Cook v. Lynch, 620 F. Supp. 1256 (N.D. Ill. 1985). But see
Michigan,
Department of Treasury v. Fawaz, 653 F. Supp. 141 (E.D. Mich. 1986).
The government also emphasizes that it is suing for damages to its own
commercial interests and not in a representational or parens patriae
capacity. Cf. New
York v. Seneci, 817 F.2d 1015 (2d Cir. 1987) (barring RICO suit by
State as representative for specific individuals); Illinois
v. Life of Mid-America Insurance Co., 805 F.2d 763 (7th Cir. 1986)
(barring RICO suit brought by State in representational or parens
patriae capacity).
These arguments ignore two important features of
the Clayton Act analysis applicable to RICO [**130] actions. First, unlike the federal government,
state governments were held by the Supreme Court to have standing to sue for
treble damages for injury to their business or property interests under § 4 of
the Clayton Act. See Hawaii
v. Standard Oil Co., 405 U.S. 251, 262, 31 L. Ed. 2d 184, 92 S. Ct. 885
(1972); see also Georgia
v. Pennsylvania Railroad Co., 324 U.S. 439, 447, 89 L. Ed. 1051, 65 S. Ct.
716 (1945). Second, the government in United
States v. Cooper Corp., 312 U.S. 600, 85 L. Ed. 1071, 61 S. Ct. 742
(1941), was suing for injury to its own property rights, not as parens
patriae or as a representative, but the Court nevertheless held the
government lacked standing to bring an antitrust treble damage action. Thus the
government's arguments in support of standing are to no avail.
Holding
that the government lacks standing to bring a RICO treble damage action is
consistent not only with RICO's legislative history but also with RICO's goals
and statutory scheme. Treble damages are not necessary to encourage the
government to bring actions against RICO violators but rather serve to encourage
"private attorneys general." As stated by the Supreme Court in describing 15
U.S.C. § 15a, the enactment of which allowed the United States to sue for
actual damages [**131] under the Clayton Act:
"Congress reasoned that the United States, unlike a private party, needed no
extraordinary incentive to bring antitrust suits." Hawaii
v. Standard Oil Co., 405 U.S. 251, 264-65 n. 15, 31 L. Ed. 2d 184, 92 S.
Ct. 885 (1972). The United States has other means at its disposal, including
criminal prosecutions and actions for equitable relief, to enforce the RICO
statute. The failure of Congress expressly to authorize RICO damage actions by
the federal government leads this Court to hold that the government's claims, to
the extent they seek monetary damages, must be dismissed. n35 As stated by the
Court of Appeals for the Seventh Circuit in the similar context of Congress's
failure to provide for parens patriae suits by state governments under
RICO:
Despite the existence of identical language in the RICO
statute and despite its "reliance on the Clayton Act model" in enacting RICO,
Congress has made no similar change in RICO. In the face of such congressional
inaction, we must conclude that the maintenance of such an action was not
intended by Congress.
Illinois
v. Life of Mid-America Insurance Co., 805 F.2d 763, 767 (7th Cir. 1986)
(footnote omitted).
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n35 In light of the dismissal of the
government's damage claims, it is unnecessary to decide whether, as argued by
Massino, res judicata bars the government's claim for monetary damages.
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- - - - - - - [**132]
The second claim
for relief, which seeks only monetary damages is therefore dismissed as to all
defendants. The twelfth and thirteenth claims are also dismissed to the extent
that they seek monetary damages.
Statute of Limitations
Massino and Riela argue that the government's claims are barred by the
four year Clayton Act statute of limitations made applicable to private RICO
actions for damages in Agency
Holding Corp. v. Malley-Duff & Associates, 483 U.S. 143, 107 S. Ct.
2759, 97 L. Ed. 2d 121 (1987). The government responds by arguing that the
doctrine of fraudulent concealment and the [*1458] Clayton Act's tolling provision of 15
U.S.C. § 16(i) applicable by analogy serve to toll the statute of
limitations for the government's monetary damage claims. The government also
contends that the timeliness of the government's claims for equitable relief
should not be assessed in terms of the statute of limitations but instead is
governed by laches.
The timeliness of the monetary damage claims is not
an issue because the government lacks standing to assert those claims. The only
remaining RICO claims are for equitable relief such as injunctions and
divestiture. The timeliness of an action for equitable relief not covered
[**133] by a particular statute of limitations
is generally governed by the doctrine of laches. Russell
v. Todd, 309 U.S. 280, 287, 84 L. Ed. 754, 60 S. Ct. 527 (1940); Argus
Inc. v. Eastman Kodak Co., 552 F. Supp. 589, 599-600 (S.D.N.Y. 1982).
The defense of laches, however, is not available as against the United States
government. United
States v. Summerlin, 310 U.S. 414, 416, 84 L. Ed. 1283, 60 S. Ct. 1019
(1940); United
States v. RePass, 688 F.2d 154, 158 (2d Cir. 1982); see Guaranty
Trust Co. v. United States, 304 U.S. 126, 132, 82 L. Ed. 1224, 58 S. Ct.
785 (1938). As stated in the Senate Report on the RICO statute: "It should
be noted that there is no general statute of limitations applicable to civil
suits brought by the United States to enforce public policy, nor is the doctrine
of laches applicable." Senate Report at 160.
In any event, of the
defendants remaining in the case, Rastelli, Massino, Spero, Attanasio, Infanti,
Marangello, James Vincent Bracco, and Rodini are all alleged to be involved in
continuing acts of racketeering. Graziano is alleged to have been involved in
the collection of an unlawful debt through December 7, 1983, less than four
years before the filing of the Complaint on August 25, 1987. Therefore, none of
the claims will be dismissed [**134] for
untimeliness. n36
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n36 The Court thus need not address
whether a cause of action in a RICO civil proceeding accrues for statute of
limitations purposes according to the principles set forth in United
States v. Persico, 832 F.2d 705 (2d Cir. 1987) (RICO criminal
proceeding) or those set forth in Zenith
Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 28 L. Ed. 2d 77, 91
S. Ct. 795 (1971) (civil antitrust action). See Agency
Holding Corp. v. Malley-Duff & Associates, 107 S. Ct. at 2767
(declining to address "appropriate time of accrual for a RICO claim").
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- - - - - - -
Forfeiture Under 18
U.S.C. § 1955(d)
The instant proceeding is not only an
in personam RICO action against the Bonanno Family and the individual
defendants, but also an in rem forfeiture action against the buildings
and property located at three addresses where the Bonanno Family allegedly
conducts gambling operations. The fourteenth claim for relief sets forth the
government's forfeiture claim pursuant to 18
U.S.C. § 1955(d). Defendant Massino, who claims with his wife to own one of
the properties sought to be forfeited, has moved to dismiss the fourteenth claim
for relief.
Massino argues that the fourteenth claim must be dismissed
[**135] because the forfeiture provision of 18
U.S.C. § 1955(d) does not extend to real property. Section 1955(d) provides
in part:
(d) Any property, including money, used in violation of the
provisions of this section may be seized and forfeited to the United States.
All provisions of law relating to the seizure, summary, and judicial
forfeiture procedures, and condemnation of vessels, vehicles, merchandise, and
baggage for violation of the customs laws; the disposition of such vessels,
vehicles, merchandise, and baggage or the proceeds from such sale; the
remission or mitigation of such forfeitures; and the compromise of claims and
the award of compensation to informers in respect of such forfeitures shall
apply to seizures and forfeitures incurred or alleged to have been incurred
under the provisions of this section, insofar as applicable and not
inconsistent with such provisions.
Research has revealed only four
reported decisions addressing the issue of whether real property is subject to
forfeiture under section 1955(d). The decisions are evenly divided. In two of
the decisions, United States v. Building & Property known as [*1459] 123-125 East
Twelfth Street, Erie, Pennsylvania, [**136] 527 F. Supp. 1167
(W.D. Pa. 1981), and DiGiacomo
v. United States, 346 F. Supp. 1009 (D. Del. 1972), the courts held
that real property is not forfeitable under § 1955(d), reasoning that Congress
would have expressly included real property in § 1955(d) had it intended real
property to be covered, that seizures under admiralty and customs procedures
made applicable to § 1955(d) forfeitures always involve personal, not real,
property, that the only instances in which forfeitures of real property have
been approved have been under statutes expressly authorizing forfeiture of real
property, and, finally, that "the problem of disposing of various interests in
real property presents many complications." DiGiacomo,
346 F. Supp. at 1012.
The two decisions holding that real property
is forfeitable under § 1955(d), United
States v. Premises & Real Property at 614 Portland Avenue, 670 F. Supp.
475 (W.D.N.Y. 1987), and United States v. Various Denominations of
Currency & Coin Totaling $ 4,280.45, 628
F. Supp. 4 (S.D. W. Va. 1984), rejected the reasoning of DiGiacomo
and 123-125 East Twelfth Street. The Court finds the 614 Portland
Avenue and Various Denominations decisions [**137] persuasive and holds that real property is
subject to forfeiture under § 1955(d).
First, as noted by the district
courts for the Western District of New York and the Southern District of West
Virginia, the language of the statute, "any property," is unambiguous and on its
face includes both real and personal property. As stated by the Supreme Court,
"If the statutory language is unambiguous, in the absence of 'a clearly
expressed legislative intent to the contrary, that language must ordinarily be
regarded as conclusive.'" United
States v. Turkette, 452 U.S. 576, 580, 69 L. Ed. 2d 246, 101 S. Ct. 2524
(1981) (quoting Consumer
Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 64 L. Ed.
2d 766, 100 S. Ct. 2051 (1980)). See 614 Portland
Avenue, 670 F. Supp. at 478; Various
Denominations, 628 F. Supp. at 5. The phrase "including money" does not
serve to exclude all other types of property, and, "if Congress did not want §
1955 to apply to particular kinds of property, it would have specifically
excluded them." Various
Denominations, 628 F. Supp. at 6; 614 Portland
Avenue, 670 F. Supp. at 477.
Second, the fact that seizures
under admiralty and customs procedures by their nature involve personal and not
real property [**138] does not mean that
application of those procedures to forfeitures for gambling offenses makes
forfeiture of real property unavailable. Gambling offenses, unlike violations of
customs and admiralty laws, may often involve the use of real property, and
forfeiture of that property under § 1955(d) would further the Congressional
intent underlying the Organized Crime Control Act of 1970. 614 Portland
Avenue, 670 F. Supp. at 478 ("Were the statute limited to the seizure
of roulette wheels, slot machines, gaming tables, as claimants contend, the
intent of Congress would be frustrated in all cases, such as this, where the
illegal gambling activities were limited to card games").
Third,
DiGiacomo's statement that forfeitures of real property have only been
approved under statutes expressly authorizing forfeitures of real property is no
longer accurate in light of various decisions under RICO and the Continuing
Criminal Enterprise (CCE) statute, 21
U.S.C. § 848, which permitted forfeiture of real property even though RICO
and CCE did not expressly authorize it. United
States v. Godoy, 678 F.2d 84, 86-87 (9th Cir. 1982), cert.
denied, 464
U.S. 959, 78 L. Ed. 2d 334, 104 S. Ct. 390 (1983) (RICO); United
States [**139] v. Tunnell, 667 F.2d 1182 (5th Cir. 1982) (RICO); United
States v. Mannino, 635 F.2d 110 (2d Cir. 1980) (CCE); United
States v. Grammatikos, 633 F.2d 1013 (2d Cir. 1980) (CCE). See 614
Portland
Avenue, 670 F. Supp. at 478; Various
Denominations, 628 F. Supp. at 6. The fact that amendments in 1984 to
RICO and the CCE specifically included real property within the property
forfeitable under those statutes while no corresponding amendment was made to §
1955(d) does not indicate that Congress intended to exclude real property under
§ 1955(d). The references [*1460] to real
property in the RICO and CCE amendments merely codified existing case law as to
the forfeitability of real property under RICO and CCE in the context of the
extensive amendments contained in 18
U.S.C. § 1963 and 21
U.S.C. § 853. n37 Section 1955(d) was not amended at all in 1984.
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - -
- -
n37 The House and Senate Reports accompanying the amendments
recognized that real property was already forfeitable under RICO, 18 U.S.C. §
1963, and CCE, 21
U.S.C. § 848, and intended the amended 21
U.S.C. § 881 to extend forfeitures previously available under 21
U.S.C. § 881 also to include real property. H.R. Rep. No. 1030, S. Rep. No.
225, 98th Cong. 2d Sess. 192, 195 & n. 19, 198, 211 reprinted in
1984 U.S. Code Cong. & Admin. News 3182, 3375, 3378 & n. 19, 3381, 3394.
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - -
- - - - - - - [**140]
Finally, the fact
that more than one person may have interests in real property subject to
forfeiture does not make forfeiture unavailable. Forfeiture proceedings pursuant
to § 1955(d) are in rem rather than in personam proceedings.
n38 In the instant case, the government has filed the action against the three
properties where the alleged gambling activities took place. In rem
forfeitures may reach the property interests of third parties who are not active
wrongdoers. Calero-Toledo
v. Pearson Yacht Leasing Co., 416 U.S. 663, 683, 40 L. Ed. 2d 452, 94 S.
Ct. 2080 (1974) ("the innocence of the owner of property subject to
forfeiture has almost uniformly been rejected as a defense"). Section 1955(d)
nevertheless does not make forfeiture mandatory but instead provides that "any
property . . . may be seized and forfeited" (emphasis added). The court
in Various Denominations found that this language provides some leeway
in the fashioning of § 1955(d) forfeiture decrees to take into account the
rights of third parties. 628
F. Supp. at 8. Forfeiture of real property could be refused if the affected
party establishes that "he was uninvolved and unaware of the wrongful activity,
but also that he had [**141] done all that
reasonably could be expected to prevent the proscribed use of his property." Calero-Toledo
v. Pearson Yacht Leasing Co., 416 U.S. 663, 689, 40 L. Ed. 2d 452, 94 S.
Ct. 2080 (1974); Various
Denominations, 628 F. Supp. at 8. Moreover, as the court in Various
Denominations noted:
Additionally, it would appear appropriate to decline
forfeiture where only a minor portion of the property was used for gambling,
or the forfeiture, taking into account its effect on the interests of third
persons, would effect a disproportionate penalty or fail to effect the
purposes of forfeiture.
628
F. Supp. at 8. See 614 Portland
Avenue, 670 F. Supp. at 479 ("claimants may request remission or
mitigation of forfeiture either administratively, to the Secretary of the
Treasury, pursuant to 19
U.S.C. § 1618, or address such a request to the discretion of this Court in
the context of these proceedings"). See also United
States v. One Tintoretto Painting, 691 F.2d 603, 608 (2d Cir. 1982).
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - -
- - - - - - -
n38 Contrary to Massino's argument that a criminal
conviction is a prerequisite to § 1955(d) forfeiture proceedings, in
rem civil forfeiture proceedings such as those brought under § 1955(d) do
not require any underlying criminal conviction. 614 Portland
Avenue, 670 F. Supp. at 479; see United States v. One Assortment of
89 Firearms, 465 U.S. 354, 361 (1984); Calero-Toledo
v. Pearson Yacht Leasing Co., 416 U.S. 663, 683-88, 40 L. Ed. 2d 452, 94 S.
Ct. 2080 (1974).
- - - - - - - - - - - - - - - - -End
Footnotes- - - - - - - - - - - - - - - - - [**142]
Massino argues that one of the
properties sought to be forfeited, 58-23 58th Road, Queens, New York, includes
two parcels, one owned by Mr. and Mrs. Massino as tenants by the entirety and
one owned by Mrs. Massino. Any arguments which Mr. and Mrs. Massino wish to
raise as to Mrs. Massino's interest in the property will be entertained by the
Court in the hearing on the § 1955(d) forfeiture.
Massino's challenges
to the § 1955(d) forfeiture sought by the government therefore do not constitute
grounds for dismissing the fourteenth claim for relief.
CONCLUSION
Defendants' motions are granted in the following respects:
The
Amended Complaint is dismissed in its entirety as to The Bonanno Organized Crime
Family of La Cosa Nostra, Joseph [*1461]
Bonanno, Alfred Embarrato, Frank Lino, Anthony Riela, and Benjamin Ruggiero.
The second, eleventh, and thirteenth claims for relief are dismissed as
against Philip Rastelli and Joseph Massino.
The second, third, and
eleventh through thirteenth claims for relief are dismissed as against Anthony
Spero.
The second, third, fifth, and eleventh through thirteenth claims
for relief are dismissed as against Louis Attanasio.
The second, third,
and seventh through [**143] thirteenth claims
for relief are dismissed as against Gabriel Infanti.
The second, fourth
through eleventh, and thirteenth claims for relief are dismissed as against
Nicholas Marangello, James Vincent Bracco, and William Rodini.
The
second through thirteenth claims for relief are dismissed as against Anthony
Graziano.
All claims dismissed are dismissed without prejudice except
that, to the extent that any claim seeks monetary damages or purports to assert
a claim against the Bonanno Family, it is dismissed with prejudice.
The
allegations of paragraph 27 of the Amended Complaint and Exhibit B are stricken
under Rule 12(f), Fed. R. Civ. P.
Massino's motion for a more definite
statement under Rule 12(e), Fed. R. Civ. P., is granted with respect to the
allegations of paragraph 28.
The government is granted thirty days from
the date of this order in which to file a second amended complaint.
The
original Complaint is dismissed as against Michael Sabella. The government's
motion for leave to serve Sabella with the Amended Complaint is denied. The
government is granted thirty days from the date of this order in which to file
an amended complaint against Sabella in conformance with this Memorandum
[**144] and Order.
The stay of
discovery in this action is hereby lifted as to those defendants remaining in
the action. The Magistrate is requested to confer with the parties at the
earliest practicable date to fix discovery deadlines which should be as short as
possible consistent with the need to prepare adequately for the preliminary
injunction hearing. It is the Court's intention to commence such hearing
immediately upon the completion of discovery.
SO ORDERED.
APPENDIX
Relevant Sections of the Racketeer Influenced and
Corrupt Organizations Statute
18
U.S.C. § 1961:
§ 1961. Definitions
As used in this
chapter --
(1) "racketeering activity" means (A) any act or threat
involving murder, kidnaping, gambling, arson, robbery, bribery, extortion,
dealing in obscene matter, or dealing in narcotic or other dangerous drugs,
which is chargeable under State law and punishable by imprisonment for more than
one year; (B) any act which is indictable under any of the following provisions
of title 18, United States Code: Section 201 (relating to bribery), section 224
(relating to sports bribery), sections 471, 472, and 473 (relating to
counterfeiting), section 659 (relating to theft from [**145] interstate shipment) if the act indictable under
section 659 is felonious, section 664 (relating to embezzlement from pension and
welfare funds), sections 891-894 (relating to extortionate credit transactions),
section 1084 (relating to the transmission of gambling information), section
1341 (relating to mail fraud), section 1343 (relating to wire fraud), sections
1461-1465 (relating to obscene matter), section 1503 (relating to obstruction of
justice), section 1510 (relating to obstruction of criminal investigations),
section 1511 (relating to the obstruction of State or local law enforcement),
section 1512 (relating to tampering with a witness, victim, or an informant),
section 1513 (relating to retaliating against a witness, victim, or an
informant), section 1951 (relating to interference with commerce, robbery, or
extortion), section 1952 (relating to racketeering), section 1953 (relating
[*1462] to interstate transportation
of wagering paraphernalia), section 1954 (relating to unlawful welfare fund
payments), section 1955 (relating to the prohibition of illegal gambling
businesses), section 1956 (relating to the laundering of monetary instruments),
section 1957 (relating to engaging [**146] in
monetary transactions in property derived from specified unlawful activity),
sections 2312 and 2313 (relating to interstate transportation of stolen motor
vehicles), sections 2314 and 2315 (relating to interstate transportation of
stolen property), section 2320 (relating to trafficking in certain motor
vehicles or motor vehicle parts), sections 2341-2346 (relating to trafficking in
contraband cigarettes), sections 2421-24 (relating to white slave traffic), (C)
any act which is indictable under title 29,
United States Code, section 186 (dealing with restrictions on payments and
loans to labor organizations) or section 501(c) (relating to embezzlement from
union funds), (D) any offense involving fraud connected with a case under title
11, fraud in the sale of securities, or the felonious manufacture, importation,
receiving, concealment, buying, selling, or otherwise dealing in narcotic or
other dangerous drugs, punishable under any law of the United States, or (E) any
act which is indictable under the Currency and Foreign Transactions Reporting
Act;
* * *
(3) "person" includes any individual or entity
capable of holding a legal or beneficial interest in property;
(4)
"enterprise" [**147] includes any individual,
partnership, corporation, association, or other legal entity, and any union or
group of individuals associated in fact although not a legal entity;
(5)
"pattern of racketeering activity" requires at least two acts of racketeering
activity, one of which occurred after the effective date of this chapter and the
last of which occurred within ten years (excluding any period of imprisonment)
after the commission of a prior act of racketeering activity;
(6)
"unlawful debt" means a debt (A) incurred or contracted in gambling activity
which was in violation of the law of the United States, a State or political
subdivision thereof, or which is unenforceable under State or Federal law in
whole or in part as to principal or interest because of the laws relating to
usury, and (B) which was incurred in connection with the business of gambling in
violation of the law of the United States, a State or political subdivision
thereof, or the business of lending money or a thing of value at a rate usurious
under State or Federal law, where the usurious rate is at least twice the
enforceable rate;
* * *
18
U.S.C. § 1962:
§ 1962. Prohibited activities
(a) It
shall be unlawful [**148] for any person who
has received any income derived, directly or indirectly, from a pattern of
racketeering activity or through collection of an unlawful debt in which such
person has participated as a principal within the meaning of section 2, title
18, United States Code, to use or invest, directly or indirectly, any part of
such income, or the proceeds of such income, in acquisition of any interest in,
or the establishment or operation of, any enterprise which is engaged in, or the
activities of which affect, interstate or foreign commerce . . . .
* * *
(c) It shall be unlawful for any person employed by or associated with
any enterprise engaged in, or the activities of which affect, interstate or
foreign commerce, to conduct or participate, directly or indirectly, in the
conduct of such enterprise's affairs through a pattern of racketeering activity
or collection of unlawful debt.
(d) It shall be unlawful for any person
to conspire to violate any of the provisions of subsections (a), (b), or (c) of
this section.
18
U.S.C. § 1964:
§ 1964. Civil remedies
(a) The district
courts of the United States shall have jurisdiction to prevent and restrain
violations of section 1962 of [**149] this
chapter by issuing appropriate orders, including, but not limited to: ordering
any person to divest himself of any interest, direct or indirect, in any
enterprise; imposing reasonable restrictions on the future activities or
investments of any person, including, but not limited to, prohibiting any person
from engaging in the same type of [*1463]
endeavor as the enterprise engaged in, the activities of which affect interstate
or foreign commerce; or ordering dissolution or reorganization of any
enterprise, making due provision for the rights of innocent persons.
(b)
The Attorney General may institute proceedings under this section. Pending final
determination thereof, the court may at any time enter such restraining orders
or prohibitions, or take such other actions, including the acceptance of
satisfactory performance bonds, as it shall deem proper.
(c) Any person
injured in his business or property by reason of a violation of section 1962 of
this chapter may sue therefor in any appropriate United States district court
and shall recover threefold the damages he sustains and the cost of the suit,
including a reasonable attorney's fee.
(d) A final judgment or decree
rendered in favor of [**150] the United States
in any criminal proceeding brought by the United States under this chapter shall
estop the defendant from denying the essential allegations of the criminal
offense in any subsequent civil proceeding brought by the United States.