United States v. Freshie Co.

• Decision Date: 26 June 1986
• Docket Number: Crim. No. 86-193.
• Citation: 639 F. Supp. 442
• Parties: UNITED STATES of America, v. The FRESHIE COMPANY, a/k/a New Freshie Corporation, a/k/a Freshie Food Service, Inc., Anthony Pili.
• Court: U.S. District Court — Eastern District of Pennsylvania

639 F. Supp. 442

UNITED STATES of America, v. The FRESHIE COMPANY, a/k/a New Freshie Corporation, a/k/a Freshie Food Service, Inc., Anthony Pili.

Crim. No. 86-193.

United States District Court, E.D. Pennsylvania.

June 26, 1986.

James A.A. Pabarue, Bucky Mansuy, Asst. U.S. Attys., Philadelphia, Pa., for the Government.

J. Clayton Undercofler, III, Philadelphia, Pa., for defendant Anthony Pili.

Gregory T. Magarity, Philadelphia, Pa., for defendant The Freshie Co.

MEMORANDUM

NEWCOMER, District Judge.

In a ten-count indictment defendants are charged with violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq. (Counts 1 and 2), mail fraud (Counts 3 through 9) and obstruction of justice (Count 10). Presently before the Court is defendants' Motion to Dismiss Counts 1 and 2 — the RICO counts — on the grounds that the indictment fails to allege predicate acts sufficient to form a "pattern" of racketeering activity. For reasons stated below, defendants' motion will be denied.

In the landmark decision of Sedima S.P. R.L. v. Imrex Co., ___ U.S. ___, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985), the Supreme Court, in footnote, pointed to an area in the statute where courts might limit the broad sweep of the RICO statute without impinging upon the legislative role of Congress. The Court noted:

As many commentators have pointed out, the definition of a "pattern of racketeering activity" differs from the other provisions in § 1961 in that it states that a pattern "requires at least two acts of racketeering activity," § 1961(5) (emphasis added), not that it "means" two such acts. The implication is that while two acts are necessary, they may not be sufficient. Indeed, in common parlance two of anything do not generally form a "pattern." The legislative history supports the view that two isolated acts of racketeering activity do not constitute a pattern. As the Senate Report explained: "The target of RICO is thus not sporadic activity. The infiltration of legitimate business normally requires more than one `racketeering activity' and the threat of continuing activity to be effective. It is this factor of continuity plus relationship which combines to produce a pattern." S.Rep. No. 91-617, p 158 (1969) (emphasis added). Similarly, the sponsor of the Senate bill, after quoting this portion of the Report, pointed out to his colleagues that "the term `pattern' itself requires the showing of a relationship. ... So, therefore, proof of two acts of racketeering activity, without more, does not establish a pattern...." 116 Cong.Rec. 18940 (1970) (statement of Sen. McClellan). See also id., at 35193 (statement of Rep. Poff) (RICO "not aimed at the isolated offender"); House Hearings, at 665. Significantly, in defining "pattern" in a later provision of the same bill, Congress was more enlightening: "criminal conduct 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." 18 U.S.C. § 3575(e) 18 USCS § 3575(e). This language may be useful in interpreting other sections of the Act. Cf. Iannelli v. United States, 420 U.S. 770, 789, 43 L.Ed.2d 616, 95 S.Ct. 1284 1295 (1975).

Following Sedima many courts have focused on the "pattern" requirement to limit RICO suits. Broadly stated, the question is whether the predicate acts meet the requirements of "continuity and relationship."

Here defendants do not contest that the predicate acts are "related", and focus only on interpretation of the "continuity" requirement. Neither the parties nor the Court have uncovered any post-Sedima case in the Third Circuit which addresses this issue.¹ I therefore look to the cases in other circuit and district courts for guidance.

The continuity requirement is aimed at curtailing use of RICO for charges involving one transaction sliced into a series of acts which occur over a short period of time, are not ongoing, and are not indicative of an open-ended scheme.

Some courts have interpreted the "continuity" requirement to mean that in order to be a pattern, there must be two "criminal episodes" not only two or more related criminal acts in furtherance of one criminal scheme. See Northern Trust Bank/O'Hare, N.A. v. Inryco, 615 F.Supp. 828, 832 (N.D.Ill.1985) ("... the common sense interpretation of `pattern' implies acts occurring in different criminal episodes, episodes that are at least somewhat separated in time and place yet still sufficiently related by purpose to demonstrate a continuity of activity," quoting United States v. Moeller, 402 F.Supp. 49, 58 (D.Conn.1979)) (emphasis in original); Allington v. Carpenter, 619 F.Supp. 474, 478 (C.D.Cal.1985) ("Consistent with this intent to exclude single criminal events, a `pattern' of racketeering activity must include racketeering acts sufficiently unconnected in time or substance to warrant consideration as separate criminal episodes.").

Others have found that a single fraudulent scheme which encompasses different types of predicate acts over a significant period of time satisfies the "pattern" requirement. See Bank of America v. Touche Ross & Co., 782 F.2d 966, 971 (11th Cir.1986) ("nine separate acts of wire and mail fraud, involving the same parties over a period of three years" satisfied "pattern" requirement); Kredietbank, N. V. v. Joyce Morris, Inc., C.A. No. 84-1903 slip op. at 5 (D.N.J. January 9, 1986) (Sarokin, J.) Available on WESTLAW, DCTU database ("in the language of one of the more trusted sources for the definitions of English words, a `pattern' is `an arrangement or composition that suggests or reveals a design; a configuration ...' WEBSTER'S NEW COLLEGIATE DICTIONARY (C & G Merriam Co.1961). Two acts alone might form a `pattern' under this definition, but only where they are not only sufficiently connected, but also sufficiently differentiated, to suggest a design or configuration."); Graham v. Slaughter, 624 F.Supp. 222, 224-25 (N.D.Ill.1985) (RICO "pattern" requires separate criminal transactions or events, but all these acts can comprise one fraudulent scheme and still form a "pattern" provided that the transactions share common perpetrators, victims or motives, extend over a substantial period of time, and that the transactions do not simply involve ministerial acts).

As I interpret the continuity requirement it means there must be racketeering acts over a substantial period of time, which when combined with the relatedness requirement, form a group distinguishable in composition, i.e. a "design or configuration," and I am therefore aligning myself with the position of cases such as Kredietbank and Graham. Nowhere in the statutory language or in Sedima do I find any suggestion that a pattern requires different criminal episodes.

To engraft this additional...