U.S. v. Horak

Decision Date05 November 1987
Docket NumberNos. 86-1473,86-2700 and 86-2660,s. 86-1473
Citation833 F.2d 1235
PartiesUNITED STATES of America, Plaintiff-Appellee, v. John HORAK, Defendant-Appellant. and UNITED STATES of America, Plaintiff-Appellant, v. John HORAK, Defendant-Appellee.
CourtU.S. Court of Appeals — Seventh Circuit

Joseph E. Coughlin, Lord, Bissell & Brook, Chicago, Ill., for defendant-appellant.

Mark Pollack, Asst. U.S. Atty., Anton R. Valukas, U.S. Atty., Chicago, Ill., for plaintiff-appellee.

Before CUMMINGS, CUDAHY and EASTERBROOK, Circuit Judges.

CUDAHY, Circuit Judge.

Defendant-appellant John Horak was convicted of mail fraud, 18 U.S.C. Sec. 1341, and of conducting the affairs of an enterprise through a pattern of racketeering activity, 18 U.S.C. Sec. 1962(c). The district court ordered forfeiture of Horak's job, salary, bonuses and corporate pension and profit-sharing plans from the date of the violation, pursuant to 18 U.S.C. Sec. 1963(a)(1), but held that the conviction did not support forfeiture of Horak's stock in Waste Management, Inc. ("Waste"), under 18 U.S.C. Sec. 1963(a)(2).

Horak appeals his conviction on the ground that the evidence was insufficient to establish a violation of section 1962(c). Horak appeals the order of forfeiture on the grounds that the forfeited interests were not maintained in violation of the Racketeer Influenced and Corrupt Organization Act ("RICO") and that the order violates the Eighth Amendment's proscription against cruel and unusual punishment. The government cross-appeals the denial of its request for forfeiture of Horak's shares in Waste on the ground that the district court incorrectly construed section 1963(a)(2). We affirm Horak's section 1962(c) conviction and the forfeiture order insofar as it relates to Horak's job. We vacate and remand for further consideration the forfeiture order for Horak's salary, bonuses and corporate pension and profit-sharing plans. We dismiss the government's cross-appeal grounded in 18 U.S.C. Sec. 3731 for lack of jurisdiction and decline to issue a writ of mandamus.


HOD Disposal Service ("H.O.D."), a garbage removal company, services portions of Lake County, Illinois and Wisconsin. Prior to 1972, Horak was the sole owner of H.O.D. In 1972 Waste, a Fortune 500 company with foreign and domestic subsidiaries, purchased H.O.D. from Horak. The payment terms included voting shares in Waste (worth approximately $8 million at the time of trial) and an employment contract for Horak as H.O.D.'s manager. H.O.D. is a division of Waste Management of Illinois ("WM-Ill."), a wholly-owned subsidiary of Waste.

H.O.D. has provided garbage collection services to the Village of Fox Lake, Illinois since 1954. In 1981 Fox Lake solicited bids for a new garbage collection contract. Although not the lowest of the four bids received, H.O.D.'s bid nonetheless was approved in June, 1981. The contract, worth approximately $700,000, was awarded to H.O.D. in July, 1981 by the six-member board of trustees, which, together with the mayor, governed Fox Lake.

Richard Hamm, the mayor of Fox Lake, and Richard Gerretsen, the mayor's whip on the board of trustees, were the government's chief witnesses in this case. Their cooperation was obtained during an FBI investigation on a separate indictment under which both men were found guilty of extortion and bribery. According to their testimonies, shortly before the Fox Lake contract was to be awarded, Gerretsen and Horak met and reached an agreement that Hamm and Gerretsen each were to be paid $5,000 in periodic payments in exchange for the 1981 contract. Gerretsen testified that he received $5,000 in small increments. Hamm testified that he received $7,000 in small monthly amounts. The extra $2,000 resulted from a meeting between Hamm and Horak in which a condominium dumpster problem was resolved in H.O.D.'s favor. Horak denied making any payments in response to the dumpster problem.

FBI agents who visited Horak in April, 1985 testified that initially Horak denied any wrongdoing. However, once Horak was informed of Hamm's cooperation with the FBI, he changed his story and admitted to paying Fox Lake officials in the hopes of enhancing H.O.D.'s chances of winning the 1981 contract. He admitted that he knew Hamm and Gerretsen were not authorized to receive the money and agreed to the FBI's characterization of the payoffs as a "bribe."

The WM-Ill. controller, Robert Brach, testified that Horak was considered an H.O.D. employee, with influence over its day-to-day affairs, although "technically" he was a WM-Ill. employee. Brach stated that Horak had nothing to do with Waste or its other subsidiaries, with the exception of WM-Ill. Brach also testified that the revenues WM-Ill. earned from its divisions flowed through to Waste, but that H.O.D.'s revenue generally constituted less than 5% of WM-Ill.'s total revenue. He denied that the amount of Horak's bonus depended solely upon the amount of business H.O.D. generated but rather testified that the bonus was based on H.O.D.'s profits.

On June 10, 1985, the grand jury returned a single-count indictment against Horak charging him with conspiring with Hamm and Gerretsen to violate section 1962(d) of RICO. The RICO enterprise was defined as "HOD Disposal." Horak entered a plea of not guilty and filed a motion to dismiss the indictment, arguing in part that the request contained in the indictment for forfeiture of Waste stock was deficient because the stock was not sufficiently connected to the charged enterprise. Before the motion was decided, the government filed a thirty-eight-count superseding indictment charging Horak with one count of violating section 1962(c) of RICO and thirty-seven counts of mail fraud. The RICO enterprise was defined as "Waste Management, Inc., including its subsidiaries and divisions," with H.O.D. identified as a division of "Waste Management of North America." Horak again filed several pretrial motions, including a motion to dismiss based on a deficient factual nexus between Horak, the enterprise and the pattern of racketeering activity. On February 10, 1986, the government filed a second superseding indictment. The thirty-eight counts remained the same, but the RICO enterprise was defined as "Waste Management, Inc., including its subsidiaries and divisions," with H.O.D. identified as "a division of Waste Management of Illinois, Inc., a wholly-owned subsidiary of Waste Management, Inc."

The jury returned a verdict of guilty on all counts on February 14, 1986. On February 18, the defendant, the government and the district court agreed that the court would hear the forfeiture issue based on briefs and stipulated facts. On March 13, the court sentenced Horak to six months in prison and five years probation and fined him $25,000 for the RICO violation, with a special condition that he make restitution in an undetermined amount on the basis of the mail fraud convictions. (On December 12, 1986, the district court set an $80,000 maximum on this restitution award.) On April 18, 1986, the district court ordered that Horak forfeit his position at H.O.D his salary and bonuses earned from 1981 to 1985 and his interest in any pension or profit-sharing plans connected with H.O.D. The district court also held that Horak's shares in Waste were not subject to forfeiture.

II. Violation of Section 1962(c)

Horak challenges his section 1962(c) conviction on three grounds. 1 Horak contends that: (1) as an employee of a subsidiary of the charged enterprise, he was not "employed by or associated with" the enterprise; (2) the evidence failed to support a finding that he "conducted the affairs" of the enterprise; and (3) the evidence failed to support a finding that he engaged in a "pattern of racketeering activity." We reject all three contentions and affirm the conviction.

First, the evidence manifestly permitted a jury to conclude beyond a reasonable doubt that Horak was employed by or associated with Waste, the charged RICO enterprise. Horak was employed by H.O.D., a division of WM-Ill., which, in turn, is a wholly-owned subsidiary of Waste. H.O.D.'s revenues flowed through to Waste. Horak's day-to-day control of H.O.D. was monitored by WM-Ill. and Waste, particularly Horak's right to contract on H.O.D.'s behalf. Contracts between $300,000 and $1 million required WM-Ill.'s approval; contracts over $1 million required Waste's approval. This evidence is clearly sufficient. See United States v. Yonan, 800 F.2d 164, 167 (7th Cir.1986) (defendant "can associate with the enterprise by conducting business with it"), cert. denied, --- U.S. ----, 107 S.Ct. 930, 93 L.Ed.2d 981 (1987); Haroco v. American Nat'l Bank & Trust Co., 747 F.2d 384, 402-03 (7th Cir.1984) ("we think it virtually self-evident that a subsidiary acts on behalf of, and thus conducts the affairs of, its parent corporation"), aff'd, 473 U.S. 606, 105 S.Ct. 3291, 87 L.Ed.2d 437 (1985); United States v. Starnes, 644 F.2d 673, 679 (7th Cir.), cert. denied, 454 U.S. 826, 102 S.Ct. 116, 70 L.Ed.2d 101 (1981).

Second, the evidence permitted the jury to conclude beyond a reasonable doubt that Horak conducted or participated in the conduct of the affairs of Waste. Essentially Horak argues that even assuming a pattern of racketeering activity were shown, he did not "conduct" the affairs of Waste--the evidence showed only that he conducted the affairs of H.O.D. Horak's argument is misplaced: "conduct" in section 1962(c) does not mean "control" or "manage," and, in any event, section 1962(c) also proscribes "participat[ion], directly or indirectly, in the conduct" of the affairs of the enterprise. To establish the relationship required by 1962(c) between racketeering activity and the affairs of the enterprise, this circuit has held that the government must show, first, that the defendant committed racketeering acts, second, that the defendant's position in or relation with the...

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