U.S. v. Lemm

Decision Date15 June 1982
Docket Number80-1836 and 80-1837,Nos. 80-1832,s. 80-1832
Citation680 F.2d 1193
Parties10 Fed. R. Evid. Serv. 1185 UNITED STATES of America, Appellee, v. Marisa LEMM, Appellant. UNITED STATES of America, Appellee, v. Phyllis Ellen STONYS, Appellant. UNITED STATES of America, Appellee, v. Val Bolton MAGHEE, Appellant.
CourtU.S. Court of Appeals — Eighth Circuit

David L. Herzog, Omaha, Neb., argued for Marisa Lemm.

Tom Kelley of Kelley & Kelley, Omaha, Neb., argued, for Phyllis Ellen Stonys.

Terrence Salerno of Kelley & Kelley, Omaha, Neb., argued for Val Bolton Maghee.

Ronald D. Lahners, Edward G. Warin, U. S. Attys., D. Neb., and Robert F. Kokrda, Asst. U. S. Atty., argued, Omaha, Neb., for appellee.

Before HEANEY, HENLEY * and McMILLIAN, Circuit Judges.

HENLEY, Circuit Judge.

This appeal arises from the conviction of appellants Val Bolton Maghee, Phyllis Ellen Stonys and Marisa Lemm for their part in an insurance fraud scheme involving some seventeen arson fires in five states over a three year period.

Appellants were charged in an indictment returned on March 29, 1980 with one count of conspiracy to violate the Act popularly known as RICO. Racketeer Influenced and Corrupt Organizations Provisions, Title IX of the Organized Crime Control Act of 1970, Pub.L.91-452, 84 Stat. 941, codified at 18 U.S.C. §§ 1961 et seq. In addition, they were charged with one count each of mail fraud in violation of 18 U.S.C. §§ 1341 and 1342. All pleaded not guilty at arraignment and the case was tried to a jury in a trial extending over three weeks. 1

On July 3, 1980 the jury returned a verdict of guilty against each appellant on both counts. Appellant Maghee was sentenced by the district court 2 to eight years and a fine of ten thousand dollars on the conspiracy count and three years on the mail fraud count, the sentences to run concurrently. Stonys received concurrent sentences of five years and three years on the respective counts. Marisa Lemm was sentenced to three year concurrent sentences on each count. We affirm.

The arson and insurance fraud activities underlying the convictions vary from fire to fire, but a general scenario can be summarized. Eugene P. Gamst, the government's chief witness, was a public insurance adjuster licensed in Minnesota. The government's case showed that at some point in the early 1970's Gamst began mixing his legitimate adjustment activities with arson, eventually becoming the center of an arson ring alleged to have existed from April 1, 1975 to September 1, 1978. The basic mode of operation was that Gamst, or occasionally another coconspirator, would recruit an individual to start an arson fire for insurance proceeds. Gamst would instruct the individual how to start the fire, how to act, and what to tell the authorities. After the fire, Gamst would pose as a legitimate public adjuster of an accidental fire. Occasionally, Gamst would also act as a private contractor and repair the fire damage in order to obtain a larger portion of the insurance proceeds. The roles of the other conspirators included providing seed money for the purchases of property, locating property for burning, providing property to be burned, preparing and torching the property, and recruiting others to the scheme. The participation of each appellant hereinafter will be set forth in somewhat more detail.

On appeal, appellants jointly raise three allegations of error: (1) the district court erred in ruling that an "enterprise" within the meaning of RICO was alleged in the indictment and proved at trial; (2) the district court erred in denying motions for severance; and (3) the district court abused its discretion in denying motions for mistrial after Eugene Gamst became the government's chief witness.

Appellant Lemm raises three additional allegations. First, she contends that the district court erred in admitting Gamst's testimony against her without independent proof of her participation in the conspiracy. Second, she argues that the district court's refusal of an instruction on separate conspiracies was prejudicial error. Finally, she asserts that the government failed to prove her guilt beyond a reasonable doubt.

Appellant Maghee asserts that a temporary cessation of arson activity resulted in termination of the conspiracy and variance between the indictment and proof. Like Lemm, he also contends that there was insufficient evidence to support his conviction.

We turn first to the contentions which are put forward jointly.

(A) The Existence of a RICO Enterprise

Appellants allege that the indictment did not charge and the evidence did not establish an "enterprise" 3 under RICO. 4 We perceive two distinct aspects of this contention.

(i) Illegal Enterprise

We address first the contention that a wholly illegal enterprise is not within the scope of RICO. This argument has recently been laid to rest by the Supreme Court in United States v. Turkette, 452 U.S. 576, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981). In the face of significant judicial disagreement as to whether a RICO "enterprise" may encompass both legitimate and illegitimate associations, see United States v. Clark, 646 F.2d 1259, 1262 at n.7 (8th Cir. 1981) (and citations therein); United States v. Anderson, 626 F.2d 1358, 1363-64 (8th Cir. 1980) (and citations therein), cert. denied, 450 U.S. 912, 101 S.Ct. 1351, 67 L.Ed.2d 336 (1981), the Court held that wholly illegal enterprises are covered by the legislation. 452 U.S. at 580, 581, 583, 101 S.Ct. at 2528, 2529. Accordingly, we find no ground for reversal in the fact that the government tried this case on the theory that the group, as a RICO enterprise, pursued profit through largely illegal means.

(ii) The Enterprise in Relation to the Predicate Acts

Appellants' second contention is more troublesome. Appellants argue that the enterprise element must be defined in the indictment and proved at trial as an element apart from the pattern of racketeering. This argument is firmly grounded in the language of the Supreme Court's opinion in Turkette, which states that "(t)he existence of an enterprise at all times remains a separate element which must be proved by the Government." 452 U.S. at 583, 101 S.Ct. at 2529. See also United States v. Bledsoe, 674 F.2d at 663-665 (8th Cir. 1982); United States v. Anderson, 626 F.2d at 1372.

In light of Turkette and the legislative history of RICO, we have held that an "enterprise" must exhibit three basic characteristics: (1) common or shared purpose; (2) some continuity of structure and personnel; and (3) an ascertainable structure distinct from that inherent in the conduct of a pattern of racketeering. United States v. Bledsoe, at 665. These characteristics are mandated because the purpose of RICO is to eradicate organized crime, id. at 661, 662, 663, rather than to subject ordinary criminals to the Act's heightened punishment. Id. at 664. To guarantee that RICO will be utilized against its intended target, the "enterprise" alleged must involve more than an association of criminals for the commission of sporadic crime. Id. at 664-665.

The requisite characteristics of an enterprise may, of course, be found in both a legal entity and an associational enterprise, as defined by RICO. 5 In the present instance, for example, the evidence suggests that an "enterprise" might be found in Eugene Gamst's public adjustment business, operating under the name Gamst and Associates.

The government chose, however, to indict these appellants under the second prong of the statutory definition of "enterprise." See n.5. Count I of the indictment, as incorporated in Count II against the present appellants, alleged an associational enterprise consisting of various persons "associated in fact" for the "purpose of committing acts of arson and defrauding certain insurance companies."

We cannot sustain the conviction on the ground that a legally incorporated enterprise was shown, when a "legal enterprise" theory was not presented to the jury. United States v. Bledsoe, at 660 (and citations therein); United States v. Anderson, 626 F.2d at 1362 n.4. Our affirmance, if any, must involve the associational enterprise on which the government rested its case.

The question before us, therefore, is whether the government proved an "association in fact" of various individuals, and, if so, whether this associational enterprise possessed the characteristics set forth in Bledsoe, namely, common purpose, continuity of structure and personnel, and structure distinct from the pattern of racketeering. United States v. Bledsoe, 674 F.2d at 665.

We review the evidence mindful that the "proof used to establish (the enterprise and the pattern of racketeering) may in particular cases coalesce." United States v. Turkette, 452 U.S. at 583, 101 S.Ct. at 2529. We are also obliged on appeal to view the evidence, and all reasonable inferences therefrom, in the light most favorable to the jury verdict. Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 (1942); United States v. Hepp, 656 F.2d 350, 353 (8th Cir. 1981).

Common Purpose

We are satisfied that the first characteristic of a RICO enterprise, namely, the shared purpose alleged in the indictment, was convincingly demonstrated here. Each appellant shared with Eugene Gamst the purpose of setting arson fires so as to defraud one or more insurance companies, and each carried out this purpose to some extent.

Continuity of Structure and Personnel

The second characteristic, continuity of structure and personnel, presents a closer issue. We conclude, however, that this aspect of the alleged enterprise was also convincingly shown.

Structural continuity exists where an unchanging pattern of roles is necessary and is utilized to carry out the predicate acts of racketeering. Here, the group's arson activities required the recruitment of persons who could purchase real estate, aid in the adjustment of claims,...

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