COUNTY OF OAKLAND BY KUHN v. Vista Disposal, Inc.
| Decision Date | 26 September 1995 |
| Docket Number | Civ. A. No. 86-74656. |
| Citation | 900 F. Supp. 879 |
| Parties | The COUNTY OF OAKLAND, by George W. KUHN, the Oakland County Drain Commissioner, Alice L. Schoenholtz, David Snyder, and all other persons similarly situated who are end users of the Detroit Sewage System, Plaintiffs, v. VISTA DISPOSAL, INC., Defendant, and The United States of America, Auxiliary Defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
Robert P. Hurlbert, Dickinson, Wright, Moon, Vandusen & Freeman, Bloomfield Hills, MI, for Alice Schoenholtz, County of Oakland.
Brian P. Gettings, Cohen, Gettings & Dunham, Arlington, VA, Philip G. Tannian, Tannian & Assoc., Detroit, MI, James I. Rubin, Butler, Rubin, Saltarelli & Boyd, Chicago, IL, Jon R. Steiger, Dickinson, Wright, Moon, Vandusen & Freeman, Bloomfield Hills, MI, for County of Oakland.
Elizabeth W. Fleming, United States Attorney's Office, Detroit, MI, for the U.S.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Plaintiff Oakland County brought this action alleging that it lost millions of dollars as a result of a conspiracy engaged in by Vista Disposal, Inc. ("Vista") and other individuals and business entities in violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. Oakland County settled its claims against many of the conspirators and was granted a default judgment against Vista in the instant action. After entry of the default judgment, Oakland County named the United States as an auxiliary defendant, seeking to recover the funds which the United States collected from Vista and the conspirators pursuant to forfeiture orders. Oakland County argued that the United States is holding that money for Oakland County in a constructive trust.
The United State filed a motion to set aside Oakland County's default judgment against Vista. On December 23, 1993, this court issued an order entitled "Order Denying the United States' Motion to Set Aside Default." The court made the following rulings: First, to recover any funds in the possession of the United States, Oakland must prove it was injured by the RICO conspiracy. If Oakland can prove it was injured by the RICO conspiracy, then Vista and the conspirators held Oakland's property in constructive trust and therefore Oakland's rights thereto are superior to the rights of Vista and the conspirators. The United States, through forfeiture, steps into Vista's shoes. If Oakland can trace its property from Vista to the United States, then Oakland can recover its property from the United States.
The court held a bench trial to determine: (1) whether Oakland suffered an injury as a result of the RICO conspiracy; (2) the amount of the injury; and (3) whether Oakland County is entitled to recover funds from the United States which were forfeited from Vista and the conspirators. Below are the court's findings of fact and conclusions of law.
In 1979, the Detroit Water and Sewer Department (DWSD) entered into a consent judgment in an action filed against the DWSD by the Environmental Protection Agency challenging the efficacy of the DWSD's treatment of sewage.1 In order to fulfill the requirements of the consent judgment, the DWSD entered into a sludge disposal contract with Michigan Disposal, owned by Michael Ferrantino. The terms of Michigan Disposal's contract, PC-439, guaranteed Michigan Disposal a minimum of 100 tons/day. As of February 1980, Mr. Ferrantino controlled all the sludge disposal from the City of Detroit.
The DWSD needed a second source of sludge disposal. Mr. Ferrantino offered the DWSD a special deal if he could continue to keep all the business. Ferrantino proposed that if he were offered all the sludge hauling business, he would haul any sludge over 800 tons per day for $28. The DWSD refused Ferrantino's offer. Subsequently, Ferrantino conspired with Jerry Owens, Darralyn Bowers, Sam Cusenza and Joseph Valentini to set up a new corporation, Vista, to secure the DWSD's second sludge hauling contract. Ferrantino and Bowers exercised significant control over Vista, which at the outset had no assets, no experience and no equipment. On October 20, 1980, Vista was awarded the second sludge hauling contract for the City of Detroit, PC-483. The Vista proposal was the only one which had access to a 24 hour a day, seven day a week landfill. The access to the landfill was acquired through Ferrantino. In November 1980, the conspirators began to pay significant sums of money to the director of the Wastewater Treatment Plant, Charles Beckham.
Oakland County sewers are physically connected to the sewer mains which run into the Detroit Waste Water Treatment Plant (DWWTP) operated by the DWSD. The Oakland County Drain Commissioner is responsible for sending Oakland's waste water flows to the DWWTP. Oakland, by contract, pays the DWSD for treatment of its waste water flows. Oakland is charged a fixed rate per cubic foot of waste water, as measured by meters for all flows sent by Oakland's three constituent districts to the DWSD. The rate the DWSD charges Oakland is determined by a computerized rate model which allocates among all who send waste water to the DWWTP costs involved in operating and maintaining that facility and disposing of waste water flows. The rates are adjusted annually to reflect changing costs. The costs of sludge stabilization and disposal are allocated by the rate model among all system users on the basis of waste water flow volumes. As a consequence, the cost of the Vista sludge disposal contract, PC-483, was allocated among the rate payers of the DWSD and passed on to each rate payer on the basis of flow volume.
The Vista sludge disposal contract was in effect and Vista was disposing sludge during the period of January 23, 1981 through October 22, 1983. The DWSD operates on a fiscal year basis, July 1 through June 30. Therefore, although Vista did not dispose of sludge after October 1983, some of its proceeds were earned in the 1984 fiscal year. Oakland's flow contributions (by percentage) to total flow volumes received by the DWWTP during DWSD fiscal years 1981 through 1984 were:
1981: 18.17%
1982: 18.99%
1983: 19.66%
1984: 19.43%
Total average: 19.05%
During the period Vista was hauling sludge from the DWWTP pursuant to contract PC-483, Oakland paid the DWSD for its flows, in accordance with then current rates, $63,201,277. Vista was paid $16,317,428 by the DWSD in gross revenues during the life of PC-483. Of this sum, applying the annual percentages allocable to Oakland's flow volumes, Oakland contributed $3,141,084. Vista's sole source of income was revenue from the DWSD received pursuant to contract PC-483. The prices charged by the receiver who operated Vista were not altered during the receivership period.
In 1983, the United States indicted Charles Beckham, Darralyn Bowers, Michael Ferrantino, Sam Cusenza, Joseph Valentini and Charles Cusenza in criminal proceeding 83-CR-60070-DT.2 At trial, the United States proved that the conspirators conducted Vista's affairs through a pattern of racketeering activity comprised of multiple acts of bribery. The indictment charged Bowers, Ferrantino, Cusenza and Valentini with giving Beckham gifts and money to influence his actions relating to the award, execution, performance and interpretation of contract no. PC-483. Bowers, Cusenza and Valentini were convicted on this count. The United States also proved that the conspirators willfully devised a scheme to defraud the people of Detroit and the Metropolitan Detroit area and obtain City of Detroit contract no. PC-483 by means of false and fraudulent pretense for the purpose of obtaining said contract and money.
At the time of the indictment, Vista was placed in the hands of a receiver, Michigan Circuit Court Judge Theodore Bohn, under the supervision of Senior United States District Court Judge John Feikens. Judge Bohn operated the Vista activities in receivership from the time of the indictment until the funds were disbursed by order of Judge Feikens, a period extending from March, 1983 to February, 1984.
Pursuant to the convictions secured in its criminal RICO case, the United States filed a motion before United States District Court Judge Robert DeMascio to forfeit, on an in personam basis, money and property acquired and utilized in the RICO conspiracy. On January 31, 1984, the United States District Court granted the United States' Motion for Forfeiture against the three criminal defendants. On the basis of the criminal convictions, the United States was granted a Forfeiture Order against Vista. The United States secured: $360,000 from Bowers; $100,000 from Cusenza; $100,000 from Valentini; and $1,808,052 from the receiver for Vista. These funds were deposited into the United States' treasury general fund.
The United States argues that Oakland failed to present any evidence that it was damaged by the Vista conspiracy because the acts of bribery in the RICO prosecution occurred after the Vista contract was awarded. During the United States' closing argument, the court questioned the United States as to why Vista would need to pay any bribes if it already had a contract. The United States was unable to provide an answer.
The indictment and the subsequent convictions clearly show that one important consequence of the RICO conspiracy was the award of contract PC-483 to Vista. In Count II of the indictment, Darralyn Bowers, Michael Ferrantino, Joseph Valentini and Sam Cusenza were charged, inter alia, with conspiring to conduct Vista's affairs through a pattern of racketeering activity comprised of multiple acts of bribery. It was part of the conspiracy that Bowers, Ferrantino, Cusenza and Valentini would give Beckham, a public officer, and then...
To continue reading
Request your trial
-
U.S. v. One Silicon Valley Bank Account
...of Oakland v. Vista Disposal (County of Oakland I), 900 F.Supp. 879, 891 (E.D.Mich.1995), in support of their combined tracing. In County of Oakland I the court did recognize that a "beneficiary can also trace the funds if they are commingled with other trusts and funds." Id. (citing Long v......
-
Hoffman v. Stamper
...of the evidence. See Johnson v. Chesebrough-Pond's USA Co., 918 F.Supp. 543, 548 (D.Conn.1996); County of Oakland v. Vista Disposal, Inc., 900 F.Supp. 879, 890-91 (E.D.Mich.1995); United Parcel Service v. Rickert, 996 S.W.2d 464, 468-69 22. Irwin and Wood's argument as to why the three buye......
-
IN RE COMMISSIONER OF BANKS AND REAL ESTATE
...has held that tracing requires the claimant to trace the flow of funds from one repository to the next. County of Oakland v. Vista Disposal, Inc., 900 F.Supp. 879, 891 (E.D.Mich.1995). One court has dictated that tracing requires the claimant to trace with particularity. Haley, Chisholm & M......
-
Young v. Players Lake Charles, L.L.C.
... ... , Players Casino, Players Club International, Inc., Players Lake Charles Riverboat, Inc. d/b/a ... in the 136th District Court of Jefferson County, Texas. On July 27, 1998, several members of ... ...