United States v. Yonan

• Citation: 622 F. Supp. 721
• Decision Date: 15 November 1985
• Docket Number: No. 84 CR 246.,84 CR 246.
• Parties: UNITED STATES of America, Plaintiff, v. Cyrus YONAN, Defendant.
• Court: U.S. District Court — Northern District of Illinois

622 F. Supp. 721

UNITED STATES of America, Plaintiff, v. Cyrus YONAN, Defendant.

No. 84 CR 246.

United States District Court, N.D. Illinois, E.D.

November 15, 1985.

Anton R. Valukas, U.S. Atty., Michele E. Smith, Asst. U.S. Atty., Chicago, Ill., for plaintiff.

Edward R. Genson, Thomas A. Corfman, Genson & Steinback, Chicago, Ill., for defendant.

MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

Cyrus Yonan ("Yonan") is charged in a ten-count second superseding indictment¹ with:

1. violation of 18 U.S.C. § 1962(c),² one of the provisions of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), Sections 1961-1968 (Count One);

2. violation of Section 1962(a), another RICO provision (Count Two); and

3. eight violations of Section 1341, the mail fraud statute (Counts Three through Ten).

Yonan has moved for dismissal of each count, asserting different theories as to the different substantive charges. For the reasons stated in this memorandum opinion and order, Yonan's motion is granted in part and denied in part.

Count One: Section 1962(c)

Lawyer Yonan is that rarest of rarae aves: a sole practitioner. To bring him within the reach of Section 1962(c), the government has embraced the strained reading that first saw the light of day in our Court of Appeals' civil RICO decision in McCullough v. Suter, 757 F.2d 142 (7th Cir.1985)—the notion that a sole practitioner can, in some metaphysical sense, be "employed by" or "associated with" himself or herself.³ After all, the only conduct Section 1962(c) makes unlawful is defined this way:

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.

McCullough certainly does violence to the normal use of that language. Though Judge Posner's opinion does not (of course) acknowledge just how much it bends RICO out of shape, the opinion reaches its result in these terms (757 F.2d at 144):

There would be a problem if the sole proprietorship were strictly a one-man show. If Suter had no employees or other associates and simply did business under the name of the National Investment Publishing Company, it could hardly be said that he was associating with an enterprise called the National Investment Publishing Company; you cannot associate with yourself, any more than you can conspire with yourself, just by giving yourself a nom de guerre. We therefore held in Haroco, Inc. v. American National Bank & Trust Co., 747 F.2d 384, 399-402 (7th Cir.1984), cert. granted, ___ U.S. ___, 105 S.Ct. 902, 83 L.Ed.2d 917 (1985), that an enterprise (a national banking association in that case) could not associate with itself for purposes of section 1962(c). But Suter had several people working for him; this made his company an enterprise, and not just a one-man band; and all section 1962(c) requires, as we said in Haroco, is "some separate and distinct existence for the person Suter and the enterprise National Investment Publishing Company," 747 F.2d at 402.

Even on the government's own terms, McCullough does not necessarily keep Count One in court. Two months ago our Court of Appeals looked at McCullough in a criminal (rather than civil) RICO context in United States v. DiCaro, 772 F.2d 1314 (7th Cir.1985). DiCaro's counsel did not argue, and therefore the Court of Appeals had no occasion to consider whether, the McCullough doctrine could be applied retrospectively without violating due process⁴ — a subject hereafter dealt with in this opinion. What the Court of Appeals did do was to reverse DiCaro's RICO conviction because Haroco rather than McCullough governed his situation (id. at 1319-20):

Based on our analysis of both the statutory language and the underlying policies of section 1962(c), we held in Haroco that an individual corporation could not be held liable as a "person" that conducted its own affairs through a pattern of racketeering activity under that section. Id. We began by noting that the terms "person" and "enterprise" are both defined in section 1961 of RICO to include "any corporation," id., just as both are defined to include "any individual." Nevertheless, section 1962(c) provides that the person who is charged with conducting the enterprise's affairs through a pattern of racketeering activity must also be "employed by or associated with" the enterprise. Id. Thus, if we construed section 1962(c) to permit the same entity to be both the person and the enterprise, we would reach the anomalous result that the entity was employed by or associated with itself. After considering the language of section 1962(c), we therefore concluded that Congress did not intend to allow the same entity to be both the person and the enterprise under section 1962(c). Id.

* * * * * *

We recently reaffirmed this interpretation of section 1962(c) in McCullough v. Suter, 757 F.2d 142 (7th Cir.1985). In McCullough, we held that the defendant-proprietor of a sole proprietorship could be held liable under section 1962(c) on the theory that he conducted the affairs of the proprietorship through a pattern of racketeering activity. Id. at 143. We emphasized, however, that the sole proprietorship at issue in McCullough was a business with an identity distinct and separate from that of the defendant himself. Id. at 144. The defendant "had several people working for him; this made his company an enterprise, and not just a one-man band." Id. "If the sole proprietorship were strictly a one-man show," on the other hand, we noted that Haroco would preclude liability for the defendant under section 1962(c). Id.

Our holding in Haroco governs the present case.

There is a serious question whether even the McCullough view of Section 1962(c) would sustain Count One. Yonan is a sole practitioner with only a secretary to assist him. What the government argues is that a lawyer who is undisputedly a "one-man show" or "one-man band," practicing in his own name (not as a professional corporation) and using no assumed name (the latter factor was present in McCullough), is magically transformed, by the act of hiring a secretary, into an "enterprise" by which he in turn becomes "employed" or with which he in turn becomes "associated." Any such notion would seem to stretch McCullough's already attenuated extension of Section 1962(c) beyond the breaking point. There is a meaningful difference — one of kind rather than degree — between a law practice, in which only the sole practitioner lawyer may render services directly to clients (so the secretary's clerical services do not create "a business with an identity distinct and separate from that of the defendant himself," McCullough, 757 F.2d at 144), and a business in which others too may and do carry on the business activity, though the entrepreneur has chosen a sole proprietorship form of organization (the situation McCullough, id. found sufficient for Section 1962(c) liability). Though it is always risky to predict what a Court of Appeals is likely to do, the most rational answer would seem that Yonan (like DiCaro) would be controlled by Haroco and not by McCullough.

But even were that not the case, Count One must fall. Were the 1985 McCullough reading of the statute extended to sweep up Yonan's 1980 conduct, what would be most significant for current purposes is not whether the surprising McCullough holding is right or wrong, but rather the very fact that it is so surprising.

American jurisprudence has long distinguished between criminal and civil liability in the extent to which the law insists on predictability as a condition of such liability. That distinction may perhaps not commend itself to those to whom no logical distinction exists between property interests (the money at stake in a civil action) and liberty interests (the potential of imprisonment in a criminal prosecution), but it exists nonetheless. It is one thing for a court to announce a defendant may be mulcted in damages by a novel and surprising reading of RICO, but it is quite another to render the same defendant vulnerable to a prison term.

As a Due Process Clause restriction on Congress, United States v. Harriss, 347 U.S. 612, 617, 74 S.Ct. 808, 812, 98 L.Ed. 989 (1954) put the proposition this way:

The constitutional requirement of definiteness is violated by a criminal statute that fails to give a person of ordinary intelligence fair notice that his contemplated conduct is forbidden by the statute.

The underlying principle is that no man shall be held criminally responsible for conduct which he could not reasonably understand to be proscribed.

And as a like restraint on judicial inventiveness, Bouie v. City of Columbia, 378 U.S. 347, 352-54, 84 S.Ct. 1697, 1701-03, 12 L.Ed.2d 894 (1964) announced:

There can be no doubt that a deprivation of the right of fair warning can result not only from vague statutory language but also from an unforeseeable and retroactive judicial expansion of narrow and precise statutory language. As the Court recognized in Pierce v. United States, 314 U.S. 306, 311, 62 S.Ct. 237, 240, 86 L.Ed. 226, "judicial enlargement of a criminal Act by interpretation is at war with a fundamental concept of the common law that crimes must be defined with appropriate definiteness." Even where vague statutes are concerned, it has been pointed out that the vice in such an enactment cannot "be cured in a given case by a construction in that very case placing valid limits on the statute," for

"the objection of vagueness is twofold: inadequate guidance to the individual whose conduct is regulated, and inadequate guidance to the triers of fact. The former objection could not be cured retrospectively by a ruling either of the trial court or the appellate court, though it might be cured for the future by an

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