Republic of the Philippines v. Marcos

• Citation: 862 F.2d 1355
• Decision Date: 02 December 1988
• Docket Number: No. 86-6091,86-6091
• Parties: , RICO Bus.Disp.Guide 7108 The REPUBLIC OF THE PHILIPPINES, Plaintiff-Appellee, v. Ferdinand E. MARCOS, et al., Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1355

862 F.2d 1355

57 USLW 2351, RICO Bus.Disp.Guide 7108

The REPUBLIC OF THE PHILIPPINES, Plaintiff-Appellee, v. Ferdinand E. MARCOS, et al., Defendants-Appellants.

No. 86-6091.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 10, 1988.

Decided Dec. 1, 1988.

Special Concurrence, Dec. 2, 1988.

Richard A. Hibey, Anderson, Hibey, Nauheim & Blair, Washington, D.C., John J. Bartko, Bartko, Welsch, Tarrant & Miller, and Stephen Horn, Schmeltzer, Aptaker & Sheppard, P.C., Washington, D.C., for defendants-appellants Ferdinand E. Marcos, Imelda R. Marcos and Ramon Azurin.

John J. Stumreiter, Rosenfeld, Meyer & Susman, Beverly Hills, Cal. and Gerald Walpin, Rosenman, Colin, Freund, Lewis & Cohen, New York City, for defendants-appellants Diosdado C. Ordonez and Ancor Holdings, N.V.

Ronald L. Olson, Bradley S. Phillips, Richard B. Kendall, Munger, Tolles & Olson, Los Angeles, Cal., for plaintiff-appellee Republic of the Philippines.

Richard K. Willard, Asst. Atty. Gen., James M. Spears, Deputy Asst. Atty. Gen., Robert C. Bonner, U.S. Atty., Robert E. Kopp, John F. Cordes, and John P. Schnitker, Asst. U.S. Attys., Washington, D.C., for the amicus curiae U.S.

Appeal from the United States District Court for the Central District of California.

Before BROWNING, Chief Judge, ANDERSON, ^* SCHROEDER, FLETCHER, PREGERSON, ALARCON, CANBY, NORRIS, BEEZER BRUNETTI, and NOONAN, Circuit Judges.

NOONAN, Circuit Judge:

The Republic of the Philippines (the Republic) brought a civil suit against its former president, Ferdinand Marcos, and his wife Imelda (the Marcoses), asserting claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C.

Secs. 1961 et seq., and other applicable law. The district court on June 25, 1986 entered a preliminary injunction enjoining the Marcoses from disposing of any of their assets save for the payment of attorney fees and normal living expenses. The Marcoses appealed. A panel of this court reversed, 2-1. 818 F.2d 1473 (9th Cir.1987). We took the case en banc and now affirm the district court.

Federal Jurisdiction

The Republic alleges that the Marcoses engaged in mail fraud, wire fraud, and the transportation of stolen property in the foreign or interstate commerce of the United States. The acts alleged are crimes under 18 U.S.C. Secs. 1341, 1343, and 2315. The Republic alleges that the acts were repeated, forming a pattern of predicate acts under RICO, 18 U.S.C. Sec. 1961, and thereby giving rise to civil liability under RICO, 18 U.S.C. Sec. 1964.

Contrary to the contention of the Marcoses, the Republic as a governmental body is a person within the meaning of 18 U.S.C. Sec. 1961(3). Illinois Department of Revenue v. Phillips, 771 F.2d 312 (7th Cir.1985). The foreign nature of the Republic does not deprive it of statutory personhood. Cf. Pfizer, Inc. v. Government of India, 434 U.S. 308, 98 S.Ct. 584, 54 L.Ed.2d 563 (1978). Accordingly the Republic has standing to assert the RICO claims.

Contrary to the contention of the Marcoses, the complaint, as interpreted by the district court, sufficiently alleges a RICO offense. The Republic alleges that the Marcoses and the other defendants arranged for the investment in real estate in Beverly Hills, California of $4 million fraudulently obtained by the Marcoses; that the Marcoses arranged for the creation of two bank accounts in the name of Imelda Marcos at Lloyds Bank of California totaling over $800,000 also fraudulently obtained by the Marcoses; and that the Marcoses transported into Hawaii money, jewels, and other property worth over $7 million also fraudulently obtained by them. Criminal conduct under RICO "forms a pattern if it embraces criminal acts that have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events." Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 n. 14, 105 S.Ct. 3275, 3285, n. 14, 87 L.Ed.2d 346 (quoting 18 U.S.C. Sec. 3575(e)). The purposes of the acts here alleged are the same--to invest and to conceal fraudulently-obtained booty. The results are the same--the investment of the booty. The principals are the same--the Marcoses. The victim is the same--the Republic. The episodes are not isolated events. They represent a plan and a practice of getting the fruits of fraud out of the Philippines and into the assumed safety of the United States. If proved, the allegations show acts that form a pattern.

Contrary to the contention of the Marcoses, the complaint as read by the district court also alleges a RICO enterprise. A RICO enterprise has been found to consist of "a group of individuals associated in fact for the purpose of illegally trafficking in narcotics ..., utilizing the United States mail to defraud ..., and corruptly influencing ... the outcome of state court proceedings." United States v. Turkette, 452 U.S. 576, 579, 101 S.Ct. 2524, 2526, 69 L.Ed.2d 246 (1981). Here there is alleged to be a group of individuals associated in fact for the purpose of illegally investing the fruits of fraud and illegally using the mails and wire and illegally transporting in interstate commerce the fruits of the fraud.

The effect on the commerce of the United States of engaging in mail or wire fraud or bringing stolen property into the country is palpable. The Marcoses are mistaken in arguing that such criminal acts have no consequences for commerce to or in this country. The criminal enterprise which they are charged with conducting consisted in operations taking place within the United States. These operations had multiple effects on the domestic and foreign commerce of this country. If the operations were criminal, the operators incurred criminal liability under our law.

United States v. Stratton, 649 F.2d 1066, 1075 (5th Cir.1981) (appearance of out-of-state litigants before court that was a criminal RICO enterprise); United States v. Altomare, 625 F.2d 5 (4th Cir.1980) (interstate telephone calls perpetuating RICO enterprise affected interstate commerce). The Republic's allegations are sufficient to establish federal jurisdiction. 18 U.S.C. Sec. 1964.

Pendent Jurisdiction

The gravamen of the Republic's entire case is the allegation that the Marcoses stole public money:

During his twenty years as President of the Philippines, Mr. Marcos used his position of power and authority to convert and cause to be converted, to his use and that of his friends, family, and associates, money, funds, and property belonging to the Philippines and its people. Complaint, p 12 (emphasis added).

This common allegation supports not only plaintiff's RICO claims but also the eight claims for conversion, fraud and deceit, constructive fraud, constructive trust, breach of implied contract, quiet title, accounting, and subrogation. The claims for a constructive trust, to quiet title, an accounting, and subrogation merely set forth different forms of relief for the same underlying wrongs.

The Republic's strategy of bringing suit in a number of other jurisdictions is not decisive of the question whether the claims are such that they would ordinarily be tried in one judicial proceeding. The present location of the sought-for funds in banks in various countries is not determinative as to the underlying wrongs alleged in the complaint. The claims brought in this suit would ordinarily be tried in a single case. In both the RICO and non-RICO claims, the Republic alleges that the Marcoses converted public funds while in office. The district court concluded:

This Court has pendent jurisdiction over plaintiff's other claims under state and foreign law in that such claims arise from a common nucleus of operative fact and are so intertwined with other matters pending before the court as to make the exercise of such jurisdiction over these claims appropriate.

The district court was correct in asserting pendent jurisdiction over these claims. They derive from "a common nucleus of operative fact" and are such that a plaintiff "would ordinarily be expected to try them all in one judicial proceeding." United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). The power of a federal court to decide pendent claims is "wide-ranging." See Carnegie-Mellon Univ. v. Cohill, --- U.S. ----, 108 S.Ct. 614, 618, 98 L.Ed.2d 720 (1988). The exercise of the power is discretionary but ordinarily the power if it exists is exercised; only exceptionally is the power not employed. See C. Wright, A. Miller & E. Cooper 13B Federal Practice and Procedure Sec. 3567.1 (1984 and 1988 Supp.).

The common nucleus of operative facts that binds the RICO and non-RICO claims together is pleaded in paragraph 12, which is incorporated by reference into each claim for relief. To prove the predicates for RICO that allegedly occurred in this country, the Republic will have to prove theft, the acceptance of bribes, extortion, conspiracy, and similar acts in the Marcoses' conduct of the government in the Philippines. For example, to prove that stolen money was unlawfully transported in the United States, the Republic will have to prove theft in the Philippines. The operative facts necessary as part of the proof of the RICO claim are also the facts necessary to prove the theft. The RICO claims cannot be proved without getting deeply into the pendent claims and proving some or all of them. Because the acts charged, if proved, support both the RICO and the non-RICO claims, the district court has subject matter jurisdiction over all claims in the Republic's complaint.

True, the pendent claims may involve more property than that which entered into or affected the foreign or domestic commerce of the United States. The dissent appears to assume that jurisdiction over the pendent claims cannot extend beyond At "every stage of the proceeding" the district court must exercise discretion as...