STATE OF INDIANA EX REL. ZOELLER v. Pastrick

• Decision Date: 11 March 2010
• Docket Number: No. 3:04 CV 506.,3:04 CV 506.
• Citation: 696 F. Supp.2d 970
• Parties: STATE OF INDIANA ex rel. Gregory F. ZOELLER, Attorney General of Indiana and the City of East Chicago ex rel. Gregory F. Zoeller, Attorney General of Indiana, Plaintiffs, v. Robert A. PASTRICK, et al., Defendants.
• Court: U.S. District Court — Northern District of Indiana

696 F. Supp.2d 970

STATE OF INDIANA ex rel. Gregory F. ZOELLER, Attorney General of Indiana and the City of East Chicago ex rel. Gregory F. Zoeller, Attorney General of Indiana, Plaintiffs, v. Robert A. PASTRICK, et al., Defendants.

No. 3:04 CV 506.

United States District Court, N.D. Indiana, South Bend Division.

March 11, 2010.

Brian David Salwowski, David A. Arthur, Patricia Orloff Erdmann, Thomas M. Fisher, Indiana Attorney General's Office, Indianapolis, IN, G. Robert Blakey, University of Notre Dame, Notre Dame, IN, Joel R. Levin, Patrick M. Collins, Theodore T. Chung, Perkins Coie LLP, Chicago, IL, for Plaintiffs.

Michael W. Bosch, Bosch & Dedelow, Highland, IN, for Defendant Robert A. Pastrick.

Frank Killintzas, Schererville, IN, pro se.

James Harold Fife, III, Munster, IN, pro se.

OPINION and ORDER

JAMES T. MOODY, District Judge.

I. BACKGROUND

On August 3, 2004, the two plaintiffs in this action, the City of East Chicago ("the City") and the State of Indiana ("the State"), filed a complaint alleging that between 1996 and 2004, defendants Robert A. Pastrick, James Harold Fife, III, Frank Kollintzas, and others¹ unlawfully engaged in the management and operation of the City as a racketeering enterprise through a pattern of racketeering activity in violation of federal and Indiana state law; committed theft and official misconduct under Indiana state law; and were unjustly enriched as a result of their actions. (Compl., DE # 1 at 44-50.)

Defendants Pastrick and Fife answered the complaint and participated in pretrial proceedings, but shortly before the trial date advised the court that they would no longer defend against the allegations and would, instead, accept judgment by default. (See DE ## 543, 544, 546.) Just as they had informed the court, Pastrick and Fife did not appear on May 26, 2009, the date the trial was set to begin. (DE # 550.) Kollintzas, who filed no answer to the complaint, also failed to appear at the time set for trial. (Id.)

Following defendants' failure to appear at trial, plaintiffs obtained an entry of default from the Clerk of the Court. (DE ## 551, 555.) Plaintiffs then moved the court for default judgment on liability against defendants. (DE # 548.) The court held a hearing on the issue of defendants' default on liability on June 1, 2009; plaintiffs provided proper notice of the hearing to defendants. (DE # 556.) The court found defendants liable by default on June 2, 2009, and granted defendant Pastrick's motion to dismiss his counterclaim. (DE ## 558, 559, 560, 561.)

The court held an evidentiary hearing on the issue of damages on June 9, 2009. (DE # 565.) Plaintiffs appeared through Special Deputy Attorneys General Patrick M. Collins, Joel R. Levin, G. Robert Blakey, and Deputy Attorney General David A. Arthur. (Id.) Defendant Pastrick appeared by counsel, Michael Bosch; defendant Fife appeared pro se; and defendant Kollintzas did not appear. (Id.) At the hearing, plaintiffs presented witnesses, each of which the court found credible, introduced exhibits relating to their requests for damages and other relief, and made arguments relating to the facts and the law. (Id.) Defendants cross-examined certain of plaintiffs' witnesses, but presented no evidence in their defense. (Id.) At the conclusion of the hearing, the court took the case under advisement. (Id.)

The court has considered all the filings, testimony, evidence of record, and arguments of the parties,² and now makes the following findings of fact and conclusions of law. In so doing, the court incorporates by reference all findings contained in the court's findings of liability by default with regard to Pastrick, Fife, and Kollintzas. (DE ## 559, 560, & 561.)

II. FINDINGS OF FACT³

Because defendants have accepted default on matters of liability, the well-pleaded allegations in the complaint are taken as true. Black v. Lane, 22 F.3d 1395, 1399 (7th Cir.1994). Additional facts related to damages were proven at the damages hearing held on June 9, 2009; citations to relevant portions of the hearing transcript ("Tr.") and the exhibits presented at that hearing ("Hr. Ex.") appear below.

The Pastrick Political Machine

Defendant Pastrick was elected to serve as the City's mayor in 1971 and was re-elected every term through 2003. (Compl. ¶ 10.) Defendant Kollintzas was elected in 1979 to serve as a member of the City's Common Council as Fourth District Councilman, and was re-elected every term through 2003. (Id. ¶ 13.) Defendant Fife was Pastrick's confidant and served as his Special Assistant. (Id. ¶ 20.) Timothy Raykovich, another defendant in this case who settled with plaintiffs before trial, was an associate of Pastrick who served as one of his primary aides. (Tr. 42.)

As Pastrick and his associates managed and operated the City, they drew little distinction between government affairs, political affairs, and personal affairs. Job applications for governmental jobs included a signature line for the applicant's political sponsor. (Tr. 20; Hr. Ex. 19.) Newly hired employees were presented with an opportunity to contribute a percentage of their salary, withdrawn from their paychecks, to a "flower fund" or "slush fund." (Tr. 21, 85-86.) While contributions were supposed to be voluntary, it was understood that there were ramifications for not participating. (Id. at 85-86.) The slush fund was used for political purposes, such as financing campaigns and purchasing signs. (Id. at 22.) The City Controller, Edwardo Maldonado, who also served as the treasurer of what he called the political "machine," ran reports for Pastrick's office that identified which employees were contributing to the mayor's political fund. (Id. at 15-16, 22.) Pastrick and his associates also maintained as much as $25,000-$30,000 in a safe in the Controller's office. (Id. at 47.) Prior to elections, the Controller would give Pastrick and Fife somewhere between $2,000-$5,000 in cash from the safe, which the Controller understood was used to pay poll workers. (Id. at 47-48.) There was no accounting of the cash that was maintained in the safe. (Id. at 48.)

During his mayoral administration, Pastrick and his associates caused the City payroll to increase markedly in the period leading up to elections when as many as 50-90 new employees were hired. (Id. at 23.) Pastrick and his associates encouraged employees to vote for Pastrick. (Hr. Ex. 33.) Contractors or consultants who were political allies received preferential treatment in the award of City contracts. (Tr. 23-24.) Most City department heads also held leadership roles in the Pastrick political organization. (Id. at 24.) In the 2003 City election, Pastrick and the other defendants engaged in a coordinated effort to buy the votes of absentee voters by giving or promising them money. (Compl. ¶ 131; Tr. 65.)

Fife served as the head of Pastrick's political organization and was one of the highest paid consultants for the City. (Tr. 24.) Fife drafted his own contract, with no approval process, to be a consultant for the City Board of Public Works. (Tr. 38-39; Hr. Ex. 24.) Fife also served as a liaison between the casino riverboats and the City. (Tr. 40; Hr. Ex. 26.)

The "Sidewalks for Votes" Scheme

In approximately June of 1998, the City's Board of Public Works initiated a "Street Improvement Program" in order to replace concrete public sidewalks in some portions of the City. (Compl. ¶ 63.) While specifications were developed for the Street Improvement Program and contractor Rieth-Riley, one of the settling defendants, submitted a bid to perform some of the work, the bid was not accepted and the Board of Public Works took no action on the proposed program. (Id. ¶¶ 63-66.)

In early 1999, the Board of Public Works again authorized public bids for a sidewalk improvement program, but again the Board took no action on the bids submitted. (Id. ¶¶ 68-73; Tr. 27.) Notwithstanding the Board's failure to approve the sidewalk program, defendants induced contractors to perform millions of dollars of work on sidewalks and parking lots on public and private property beginning in February of 1999 and continuing until May 1999. (Compl. ¶ 74.)

Defendants arranged for this concrete work, as well as tree trimming work, in order to curry political favor with residents and thereby advance the political prospects of Pastrick and his slate of candidates, who were facing tough opposition in the May 1999 primary. (Id. ¶¶ 48, 74.) The sidewalk/tree program served as the centerpiece for Pastrick's 1999 primary campaign. (Hr. Exs. 21, 33.) To circumvent Indiana bidding laws, defendants had contractors submit invoices and bids in amounts less than $75,000 even when the proposed work was in excess of that amount. (Compl. ¶¶ 75-76; Tr. 69.)

Kollintzas and other City Council members approached City residents and businesses and falsely represented that the City had a duly authorized and lawful program to pay for the work being done on either public or private property and offered contractors opportunities to perform the work as a means of inducing political support. (Compl. ¶ 78.) On one occasion, Pastrick authorized work at a religious institution, Our Lady of Guadalupe Church. (Compl. ¶ 78; Tr. 30-32.)

Shortly before the May 1999 election, Maldonado, serving as City Controller, expressed concern to Fife that the City would start bouncing checks because of the uncontrolled spending for the sidewalk and tree project. (Tr. 34.) Fife asked whether there were sufficient funds to make it through the election and Maldonado replied that there were. (Id. at 34.) Fife then told Maldonado that they would worry about it after the election. (Id.) Shortly after the May 1999 election, National City Bank refused to honor numerous City checks. (Compl. ¶ 87.) Raykovich and Fife directed contractors to stop all work. In some instances, contractors walked away from job sites, leaving work unfinished; in others, workers left behind...