US v. Young & Rubicam, Inc.

• Court: United States District Courts. 2nd Circuit. United States District Court (Connecticut)
• Citation: 741 F. Supp. 334
• Decision Date: 07 February 1990
• Docket Number: Crim. No. N-89-68 (PCD).
• Parties: UNITED STATES of America v. YOUNG & RUBICAM, INC., Arthur R. Klein, Thomas Spangenberg, Arnold Foote, Jr., Eric Anthony Abrahams, and Steven M. McKenna.

741 F. Supp. 334

UNITED STATES of America
v.
YOUNG & RUBICAM, INC., Arthur R. Klein, Thomas Spangenberg, Arnold Foote, Jr., Eric Anthony Abrahams, and Steven M. McKenna.

Crim. No. N-89-68 (PCD).

United States District Court, D. Connecticut.

February 7, 1990.

741 F. Supp. 335

COPYRIGHT MATERIAL OMITTED

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Robert J. Lynn, Asst. U.S. Atty., New Haven, Conn., Robert W. Werner, Asst. U.S. Atty., Hartford, Conn., for the U.S

Thomas D. Barr, Allen F. Maulsby, Cravath, Swaine & Moore, New York City, Robert N. Chatigny, Hartford, Conn., John Martin, Shulte, Roth & Zabel, New York City, Robert White, of Murtha, Cullina, Richter & Pinney, Hartford, Conn., Elkan Abramowitz, Robert Anello, Obermaier, Morvello & Abramowitz, New York City, Hubert J. Santos, A. Susan Peck, Buckley & Santos, P.C., Hartford, Conn., Thomas Fitzpatrick, New York City, Charles Howard, James Bergenn, Hartford, Conn., for defendants.

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RULING ON PENDING MOTIONS

DORSEY, District Judge.

On October 6, 1989, a grand jury charged the defendants in a three count indictment¹. Count One charges Young & Rubicam ("Y & R"), Arthur R. Klein ("Klein"), and Thomas Spangenberg ("Spangenberg") with conspiracy to use the mails and other instrumentalities of interstate and foreign commerce to pay money to, or give things of value to Arnold Foote, Jr. ("Foote") and Eric Anthony Abrahams ("Abrahams") to influence them to use their positions and/or influence with the Jamaica Tourist Board ("JTB") to obtain and retain Y & R as their advertising agency, in violation of the Foreign Corrupt Practices Act ("FCPA"), 15 U.S.C. § 78dd-2. Count Two charges Y & R, Spangenberg, Abrahams and Foote with conducting an enterprise's affairs through a pattern of racketeering in violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c). Count Three charges Steven McKenna ("McKenna") with perjury in his testimony before the grand jury on June 20, 1989. Defendants' pre-trial motions shall be discussed seriatim.

1. Motion to Dismiss Count Two

Klein, joined by Y & R, moves to dismiss Count Two for failure to allege conduct constituting predicate offenses. Y & R, joined by Klein, moves to dismiss Count Two on two grounds: (1) Count Two does not properly charge a "pattern of racketeering activity" or a racketeering "enterprise" under RICO and (2) the RICO statute, if applicable here, is unconstitutionally vague.

(a) Predicate Acts

RICO, 18 U.S.C. § 1962(c), requires proof that defendants engaged in "racketeering activity." The predicate offenses alleged in Count Two are multiple violations of the Travel Act, 18 U.S.C. § 1952. Section 1961(1)(B) defines "racketeering activity" as including "... any act which is indictable under ... Title 18, United States Code: ... section 1952," the Travel Act. It is a violation of the Travel Act for any person to "travel in interstate or foreign commerce or use any facility of interstate or foreign commerce ... with intent to ... promote, manage, establish, carry on, or facilitate the promotion, ... of any unlawful activity...." 18 U.S.C. § 1952(a)(3). "Unlawful activity" is defined in § 1952(b)(2) as, inter alia, "... bribery ... in violations of the law of the state in which committed or of the United States...." The Travel Act violations alleged in Count Two are predicated upon conduct alleged to violate two bribery statutes: The Foreign Corrupt Practices Act ("FCPA"), 15 U.S.C. § 78dd-2, and the New York commercial bribery statute, N.Y. Penal Law §§ 180.00 and 180.05.

Klein claims that the FCPA cannot serve as a basis for a Travel Act violation, nor in turn as a predicate for a RICO violation. First, Klein argues that where conduct violates both a specific and a general statute, the government must prosecute the defendant under the more specific statute. United States v. Henderson, 386 F.Supp. 1048 (S.D.N.Y.1974) (mail fraud statutes inapplicable to tax evasion where more specific tax legislation proscribed the same conduct.) This case, however, has been rejected by the Ninth and Seventh Circuits and questioned by the Second Circuit. See United States v. Miller, 545 F.2d 1204, 1216 (9th Cir.1976), cert. denied, 430 U.S. 930, 97 S.Ct. 1549, 51 L.Ed.2d 774 (1977); United States v. Weatherspoon, 581 F.2d 595, 599-600 (7th Cir.1978); United States v. Mangan, 575 F.2d 32, 49 n. 21 (2d Cir. 1978), cert. denied, 439 U.S. 931, 99 S.Ct. 320, 58 L.Ed.2d 324 (1978). The mail fraud statute has been held to be a valid RICO predicate where tax fraud or other specific statutes would cover the same conduct. See United States v. Busher, 817 F.2d 1409, 1412 (9th Cir.1987); United States v. Standard Drywall Corp., 617 F.Supp. 1283, 1295-96 (E.D.N.Y.1985).

A defendant may not be convicted and punished under two separate crimes for a single criminal act. See Whalen v.

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United States, 445 U.S. 684, 688, 100 S.Ct. 1432, 1435, 63 L.Ed.2d 715 (1980); Bell v. United States, 349 U.S. 81, 75 S.Ct. 620, 99 L.Ed. 905 (1955); Blockburger v. United States, 284 U.S. 299, 52 S.Ct. 180, 76 L.Ed. 306 (1932). Klein argues that proof of an FCPA violation would necessarily include proof of a Travel Act violation, a conviction under both would violate Blockburger. However, the indictment does not charge defendants with substantive violations of either FCPA or the Travel Act. Count Two alleges FCPA violations as a basis for Travel Act violations, which, in turn, are alleged as predicates for the RICO offense charged. If convicted, defendants would only be punished for the RICO offense

Next, Klein accuses the government of bootstrapping a general statute into a RICO violation instead of using FCPA, the specific statutory scheme applicable to the defendants' conduct, because the FCPA, unlike the Travel Act, is not a RICO predicate. Klein argues that the use of a general statute as a RICO predicate instead of a specific statute applicable to defendant's conduct is improper. See United States v. Santoro, 647 F.Supp. 153, 167-169 (E.D.N. Y.1986), aff'd, 880 F.2d 1319 (2d Cir.1989). Having found no breach of duty to support a mail fraud prosecution, the court, in dictum, questioned the government's failure to charge the defendants with the various crimes more directly implicated, id. at 167, noting that none of such crimes were RICO predicates. Id. There is no claim here that defendants' conduct does not support a Travel Act violation².

The mail fraud statute may be a RICO predicate even though defendants' conduct may violate another, more specific statute which is not a RICO predicate. See Busher, 817 F.2d at 1412 (mailing of fraudulent tax returns constitutes mail fraud RICO predicate even though tax fraud is not a RICO predicate); United States v. Computer Sciences Corp., 689 F.2d 1181, 1186-88 (4th Cir.1982), cert. denied, 459 U.S. 1105, 103 S.Ct. 729, 74 L.Ed.2d 953 (1983) (mail fraud and wire charges could be brought although conduct was also charged under False Claims Act); United States v. Boffa, 688 F.2d 919, 931-33 (3d Cir.1982) (mail fraud statute not preempted by labor statutes, despite overlap in coverage); United States v. Hartley, 678 F.2d 961, 990 n. 50 (11th Cir.1982), cert. denied, 459 U.S. 1183, 103 S.Ct. 834, 74 L.Ed.2d 1027 (1983) (mail fraud not precluded as RICO predicate where conduct could be prosecuted under False Claims Act); Standard Drywall, 617 F.Supp. at 1295-96 (allowing mail fraud as RICO predicate based on fraudulent mailings related to tax liability).

Klein contends that, because Congress did not specify the FCPA as a predicate act, it should not be a basis for a Travel Act violation and thus, in turn, a predicate act as contrary to Congress' intention. Had Congress so intended, Klein argues, it would have added it as a predicate offense in one of the six amendments of the list. Klein also points to a Department of Justice policy not to charge tax crimes as mail frauds. Klein's argument is unpersuasive. Congress has not specifically restricted the Travel Act as a RICO predicate to cases where the underlying offense is also a listed RICO predicate. There is nothing in the language of RICO nor its history to suggest such an intention. To do so would unduly restrict the use of the Travel Act by limiting its use as a RICO predicate only when the alleged underlying "unlawful activity" was also, independently,

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a RICO predicate. Furthermore, the U.S. Attorney is required to obtain approval of a prosecution under FCPA and RICO from the Fraud and Organized Crime and Racketeering Sections of the Justice Department

As the charged Travel Act violations were not improperly based on FCPA offenses, Klein's motion to dismiss on this ground is denied.

Nor are the violations of the New York commercial bribery statute³, New York Penal Law §§ 180.00 and 180.05, an improper basis for Travel Act violations.

Klein claims that violation of the New York commercial bribery statute cannot support Travel Act violations because the New York statute applies only to commercial bribery and not bribery of public officials. Since the indictment describes Foote and Abrahams as "foreign officials" under the FCPA or as officials acting on behalf of the JTB, Klein contends they are not employees or representatives of a commercial business and §§ 180.00 and 180.05 do not apply. Klein points to the title of Article 180 which he claims unequivocally excludes public officials from its coverage by stating: "ARTICLE 180-BRIBERY NOT INVOLVING PUBLIC SERVANTS, AND RELATED OFFENSES."

Article 180 does not embrace bribery of "public servants." A separate section of the New York Penal Law governs bribery of public servants, § 200.00, et seq. However, foreign officials are not "public servants" within the meaning of that statute. Section 10.00(15) of the Penal Law defines a "public servant" as "any public officer or employee of the state or any political subdivision thereof or of any...