145 F.3d 850 (7th Cir. 1998), 97-3807, United States v. Palumbo Bros., Inc.

Docket Nº:97-3807.
Citation:145 F.3d 850
Party Name:Cas. 1591 UNITED STATES of America, Plaintiff-Appellant, v. PALUMBO BROTHERS, INC., formerly doing business as Leininger Mid-States Paving Co. and as Palumbo Excavating Co., Monarch Asphalt Co., Peter A. Palumbo, Joseph Palumbo, Sebastian Palumbo, Kelson Abdishi, Daniel Ferrarini, and Gerald McGreevy, Defendants-Appellees.
Case Date:May 07, 1998
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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Page 850

145 F.3d 850 (7th Cir. 1998)

Cas. 1591

UNITED STATES of America, Plaintiff-Appellant,

v.

PALUMBO BROTHERS, INC., formerly doing business as Leininger

Mid-States Paving Co. and as Palumbo Excavating Co., Monarch

Asphalt Co., Peter A. Palumbo, Joseph Palumbo, Sebastian

Palumbo, Kelson Abdishi, Daniel Ferrarini, and Gerald

McGreevy, Defendants-Appellees.

No. 97-3807.

United States Court of Appeals, Seventh Circuit

May 7, 1998

Argued Jan. 20, 1998.

Rehearing and Suggestion for Rehearing En Banc Denied June 12, 1998.[*]

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John F. Podliska, Mark R. Filip (argued), Asst. U.S. Attys., Office of the U.S. Attorney, Criminal Div., Scott R. Lassar, U.S. Atty., Chicago, IL, for Plaintiff-Appellant.

Dan K. Webb, Scott J. Szala, Julie A. Bauer, Robert W. Tarun, Winston & Strawn, Chicago, IL, G. Robert Blakey (argued), Notre Dame Law School, Notre Dame, IN, for Palumbo Brothers, Inc., Monarch Asphalt Co., Peter Palumbo and Sebastian Palumbo.

David E. Springer, Tiffanie N. Cason, Skadden, Arps, Slate, Meagher & Flom (Illinois), Chicago, IL, G. Robert Blakey, Notre Dame Law School, Notre Dame, IN, Saul M. Pilchen, Skadden, Arps, Slate, Meagher & Flom, Washington, DC, for Joseph Palumbo.

Robert A. Novelle, Serpico, Novelle & Navigato, Chicago, IL, G. Robert Blakey, Notre Dame Law School, Notre Dame, IN, Donald N. Novelle, Westchester, IL, for Kelson Abdishi.

G. Robert Blakey, Notre Dame Law School, Notre Dame, IN, George Murtaugh, Jr., Marc W. Martin (argued), Chicago, IL, for Daniel Ferrarini.

Theodore T. Poulos, James R. Streicker, Cotsirilos, Stephenson, Tighe & Streicker, Chicago, IL, G. Robert Blakey, Notre Dame Law School, Notre Dame, IN, for Gerald McGreevy.

Before BAUER, COFFEY and ROVNER, Circuit Judges.

BAUER, Circuit Judge.

A federal grand jury returned an indictment against Palumbo Brothers, Inc., Monarch Asphalt Co., Peter Palumbo, Joseph Palumbo, Sebastian Palumbo, Kelson Abdishi, Daniel Ferrarini, and Gerald McGreevy, alleging various criminal activities in conjunction with schemes to defraud employees, unions,

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and various governmental entities. The indictment charges, inter alia: (1) predicate acts of mail and wire fraud in a pattern of racketeering activity, in violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 et seq.; (2) substantive acts of mail fraud, in violation of 18 U.S.C. § 1341; and (3) the submission of false statements, in violation of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq.

In two separate motions, the defendants sought the dismissal of portions of a forty-four count indictment. In the first motion, the defendants collectively moved to dismiss Racketeering Acts 1 and 2 in Count 1, Counts 8 through 30, and Counts 35 through 42 of the indictment. The defendants argued that: (1) the indictment fails to charge them with criminal violations of RICO, mail fraud, and ERISA, but instead alleges unfair labor practices and breaches of collective bargaining agreements in violation of the National Labor Relations Act ("NLRA"), 29 U.S.C. §§ 151 et seq., and the Labor Management Relations Act ("LMRA"), 29 U.S.C. §§ 141-197; and (2) those labor statutes preempt the criminal prosecution of labor-related activities. In the second motion, Ferrarini individually moved to dismiss Count 1 of the indictment in its entirety. Ferrarini argued that: (1) the essential elements of a RICO offense are not sufficiently stated in the indictment; and (2) therefore, the indictment fails to charge him with a criminal violation of RICO. In separate memorandum opinions and orders, the district court granted both motions.

The United States now appeals, arguing that the district court erroneously granted the defendants' motions to dismiss. The government asserts that: (1) neither the NLRA nor § 301 of the LMRA preempts a criminal prosecution, even though the defendants' conduct arguably falls within the scope of federal labor law; and (2) the continuity of a defendant's predicate acts is not an essential element of a RICO offense, and the indictment sufficiently charges Ferrarini with a criminal violation of RICO. For the reasons set forth below, we reverse.

STATEMENT OF FACTS

Palumbo Brothers, Inc. ("PBI") and Monarch Asphalt Co. ("Monarch") were two major road construction firms in Chicago, Illinois engaged in various projects and activities relating to the construction, maintenance, and repair of streets and expressways in Chicago and its surrounding suburbs. The Palumbo firms entered into construction and repair contracts with, among others, the Illinois Department of Transportation ("IDOT"), the Illinois State Toll Highway Authority, and local municipalities throughout the Chicago area.

Throughout the relevant time period of the defendants' alleged criminal activities, PBI and Monarch were owned and controlled by members of the Palumbo family, including principal owners Peter Palumbo, Joseph Palumbo, and Sebastian Palumbo. In various positions within PBI and Monarch, the individual Palumbo defendants were responsible for overseeing various administrative functions, which included, inter alia: (1) the general administration of the firms' construction and repair contracts; (2) routine supervision of those projects; (3) the payment and collection of funds; (4) the development and implementation of payroll, wage, and contribution policies; and (5) various matters involving labor relations and labor contracts.

Kelson Abdishi was employed by IDOT as a Resident Engineer from 1972 through 1991, and his duties included on-site supervision of various Palumbo projects to ensure the roads and highways were constructed and repaired according to contract specifications and in compliance with IDOT regulations. Abdishi also was required to monitor the completion of those projects to ensure that PBI and Monarch were paid only for work performed and materials actually used. Daniel Ferrarini was employed by PBI as a Plant Supervisor at its Dundee, Illinois plant, and he was responsible for supervising the production and shipment of materials to various project sites. Gerald McGreevy, also employed at the Dundee plant, was a Plant Operator responsible for the production of construction materials that were shipped to project sites and the printing of weight tickets that corresponded to those shipments.

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The United States charges the defendants with various criminal activities that extended over a period of 23 years from 1973 to 1996, and the indictment alleges that the defendants executed fraudulent schemes throughout PBI and Monarch and engaged in various criminal activities in conjunction with their construction and repair projects. During that time, each defendant, in some capacity, controlled and/or participated in the execution and completion of those projects. To perform this work, PBI and Monarch hired unionized employees who were represented by the International Brotherhood of Teamsters, the Construction and General Laborers District Council of Chicago and Vicinity, and the Fox Valley Laborers (collectively, "the Unions"). Both PBI and Monarch entered into collective bargaining agreements with each of the Unions to establish the terms and conditions of employment. The collective bargaining agreements generally provided for: (1) specific hourly wages; (2) "show-up" payments; (3) minimum guaranteed hours; (4) guaranteed lunch breaks; (5) overtime rates for working during lunch, and on Sundays or holidays; (6) employer statistical records; and (7) employer contributions to the Unions' health, welfare, and pension plans and employee benefit funds.

On October 3, 1996, a federal grand jury returned an indictment against PBI, Monarch, Peter, Joseph, and Sebastian Palumbo, Abdishi, Ferrarini, and McGreevy, alleging that the defendants were engaged in schemes to defraud their employees, the Unions, and various governmental entities by depriving them of money to which they were entitled under the terms and conditions of the collective bargaining agreements and under the provisions of the government contracts. The United States superseded the original indictment two times, first on November 21, 1996, before the defendants filed their motions to dismiss, and then again on July 23, 1997, after the defendants filed the motions. The allegations in the superseding indictments do not materially differ from those in the original, and the only significant change in the second superseding indictment is that the government increased the number of labor-related allegations from twenty-nine to thirty-two counts. The second superseding indictment is the subject of this appeal. Racketeering Acts 1 and 2 in Count 1, Counts 8 through 30, and Counts 35 through 42 of the indictment are the subject of the defendants' collective motion to dismiss, and Count 1 in its entirety is the subject of Ferrarini's motion to dismiss.

In Count 1, the United States charges the defendants with a substantive RICO offense, in violation of 18 U.S.C. § 1962(c). The indictment identifies 23 predicate acts, including: (1) acts of mail and wire fraud, in violation of 18 U.S.C. §§ 1341 and 1343; and (2) payment of unlawful funds, in violation of Illinois law. Racketeering Acts 1 and 2 charge only PBI and its principal owners with predicate acts of mail fraud that advanced the defendants' scheme to defraud their employees and the Unions by depriving them of wages and benefit payments to which they were entitled under the collective bargaining agreements. The indictment alleges...

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