United States v. Goldfarb

• Decision Date: 02 January 1979
• Docket Number: Crim. A. No. 8-80572.
• Parties: UNITED STATES of America, Plaintiff, v. Charles B. GOLDFARB, James Tamer, Edward Monazym, James Abraham, and Aladdin Hotel Corporation, Defendants.
• Court: U.S. District Court — Western District of Michigan

464 F. Supp. 565

UNITED STATES of America, Plaintiff, v. Charles B. GOLDFARB, James Tamer, Edward Monazym, James Abraham, and Aladdin Hotel Corporation, Defendants.

Crim. A. No. 8-80572.

United States District Court, E. D. Michigan, S. D.

January 2, 1979.

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Paul E. Coffey, Atty. in Charge, Detroit Strike Force, U. S. Dept. of Justice, Detroit, Mich., for plaintiff U. S. A.; C. Stanley Hunterton, Sp. Atty., Detroit, Mich., of counsel.

N. C. Deday LaRene, Detroit, Mich., for defendant Goldfarb.

S. Allen Early, Jr., Detroit, Mich., Gary Logan, Las Vegas, Nev., for defendant Tamer; Neil H. Fink, Detroit, Mich., of counsel.

Clyde B. Pritchard, Detroit, Mich., for defendant Monazym.

David F. DuMouchel, Detroit, Mich., for defendant Abraham; Albert J. Krieger, Miami, Fla., of counsel.

Sorkis J. Webbe, Sr., St. Louis, Mo., for defendant Aladdin Hotel Corp.; Norman S. London, St. Louis, Mo., of counsel.

OPINION DENYING DEFENDANT GOLDFARB'S FIRST MOTION TO DISMISS INDICTMENT (16).

FEIKENS, District Judge.

Several individuals and the Aladdin Hotel Corporation were indicted in August of 1978 on one count of violating 18 U.S.C. § 371 (conspiracy), 19 counts of violating 18 U.S.C. § 1952 ("Travel Act"), and two counts involving 18 U.S.C. § 1962 ("RICO").

The indictment charges that between December of 1976 and March of 1977 the defendants used interstate telephone lines to own and operate the Aladdin Hotel & Casino without having procured licenses required under Nevada law.

Relevant Statutes and Regulations

Under Nevada law it is unlawful for any person either as an owner or employee to operate or maintain any gambling establishment without first procuring and thereafter maintaining all permits and/or licenses which the state or local government may require. Nev.Rev.Stat. § 463.160.1(a)

Two other sections define exactly who must possess a license. Under Nev.Rev. Stat. § 463.530 certain "key employees" of gaming licensees (such as the Aladdin) may be required to apply for licenses before the Nevada Gaming Commission if in the Commission's opinion the public interest will thereby be served. The Commission learns who it should require to submit to licensure scrutiny by requiring an annual report from each licensee identifying every individual directly or indirectly engaged in the administration or supervision of the gaming operations. Certain employees are presumptively so engaged. They are, any individual who: may approve or extend gaming credit or whose recommendations in this respect are ordinarily followed; supervises or directs or who has the authority to supervise or direct a gaming shift; may approve or extend complimentary house services; supervises those who control gaming assets or records; and, anyone who helps to formulate management policy. Nevada Gaming Commission and State Gaming Control Board Regulation 3.100.1(b), (d), (f), (g) & (i).

Regulation 3.110.1 defines any employee or agent having significant influence over the licensee's operations or who is listed in the annual report as a "key employee" who may be required to submit for licensure. Regulation 3.110.2 sets forth the criteria upon which the Commission decides which key employees must be licensed. Regulation 8.060 provides that no one who proposes to acquire an interest in a gaming operation shall take any part in the management thereof during the pendency of his application for licensing.

Under Nev.Rev.Stat. § 463.335 persons defined as "gaming employees" may not be employed unless they hold all work permits required by the city or county in which the work is performed. Persons empowered to extend credit or complimentary services are considered "gaming employees." Nev.Rev. Stat. § 463.335.1.

The penalty provision of the Gaming Control Act provides:

The violation of any of the provisions of this chapter, the penalty for which is not herein specifically fixed, is a gross misdemeanor. Nev.Rev.Stat. § 463.360

The relevant federal statute is 18 U.S.C. § 1952 (Travel Act) which provides:

(a) Whoever travels in interstate or foreign commerce or uses any facility in interstate or foreign commerce, including the mail with intent to—

* * * * * *

(3) otherwise promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of any unlawful activity, and thereafter performs or attempts to perform any of the acts specified in subparagraphs (1), (2), and (3), shall be fined not more than $10,000 or imprisoned for not more than five years, or both.

(b) As used in this section "unlawful activity" means any business enterprise involving gambling . . . in violation of the laws of the State in which they are committed or of the United States . . .. emphasis added

The government's theory appears to be that Tamer, one of the defendants and the Entertainment Director at the Aladdin, maintained such influence there that he would have been required to hold a license under Nevada law had the extent of his control been known to the Nevada gaming authorities; that he concealed that control; that he was not so licensed and thus violated § 463.160(1). Secondly, the government alleges that Goldfarb maintained a hidden interest in the Aladdin, exercising such control over its activities that had his interest been disclosed, he, too, would have been required to submit to licensure and hold a license under either § 463.160 or § 463.335; that he did not so submit nor was he licensed. The government claims that the other defendants conspired and acted to aid and facilitate this unlawful conduct, were inextricably bound up in what amounted to an illegal business enterprise to violate the Nevada gaming laws, and that they used interstate telephone lines to commit those violations.

As factual background, in 1971 Goldfarb applied for permission to become an incorporator of the Aladdin under a Nevada statute which at that time so provided. His application was denied. Subsequently, he applied for licensure as a shareholder, but protested a "waiver of rights" form that was required as a part of the application. The result was that the Nevada Gaming Control Board failed to process the application until in June of 1974 a suit was instituted in the 8th Judicial District of Nevada, the district which includes Las Vegas. In June of 1978 the suit was dismissed without prejudice when the Board agreed to withdraw the waiver. At no time relevant to these proceedings was Goldfarb licensed either to be employed by, own or manage the Aladdin. Tamer held a permit to be employed as the Entertainment Director of the Aladdin but is not licensed to otherwise participate in its management.

Defendants move the indictment be dismissed because the Nevada Gaming Control Act is unconstitutional.

The Defendants' Theory

The Nevada Gaming Control Act has been definitively construed by the Nevada Supreme Court as setting forth a scheme in which gaming is viewed

as a matter reserved to the states within the meaning of the Tenth Amendment to the United States Constitution. Within this context we find no room for federally protected constitutional rights. This distinctively state problem is to be governed, controlled and regulated by the state legislature and, to the extent the legislature decrees, by the Nevada Constitution. It is apparent that if we were to recognize federal protections of this wholly privileged state enterprise, necessary state control would be substantially diminished and federal intrusion invited. footnotes omitted

State v. Rosenthal, 559 P.2d 830, 836 (Nev. 1977). However, the court distinguishes between applicants and licensees.

A reasonable distinction exists between the status of one who seeks to acquire a license, and the status of one who possesses a work permit as a gaming employee. The former does not have existing privileges, but is attempting to acquire them. The latter does have an existing privilege, and is entitled to receive notice and a hearing before his privilege to work as a gaming employee can be nullified.

Id., at 837.

Goldfarb claims that Rosenthal, as the pronouncement of the court of last resort in Nevada, binds this court, citing, inter alia, Quong Ham Wah v. Industrial Accident Commission, 255 U.S. 445, 41 S.Ct. 373, 65 L.Ed. 723 (1921); Truax v. Corrigan, 257 U.S. 312, 42 S.Ct. 124, 66 L.Ed. 254 (1921); and United States v. Twelve Two Hundred Foot Reels, 413 U.S. 123, 93 S.Ct. 2665, 37 L.Ed.2d 500 (1973); and that the Rosenthal case is, with the statute it construes, a unitary piece of law; the case and statute are inseparable.

Goldfarb next contends that one in his position—that of a license applicant—has certain constitutional rights which may not be so cavalierly abridged. He emphasizes the interpretation of due process which holds that "the touchstone of due process is protection . . . against arbitrary action of government." Wolff v. McDonnell, 418 U.S. 539, 558, 94 S.Ct. 2963, 2976, 41 L.Ed.2d 935 (1974), and notes that due process protections are not dependent upon whether the interest at issue is characterized as a right or a privilege.¹Graham v. Richardson, 403 U.S. 365, 374, 91 S.Ct. 1848, 29 L.Ed.2d 534 (1971).

Goldfarb claims that the right to engage in a lawful occupation is a "fundamental one" whose denial should be attended by due process protections. New State Ice Company v. Liebmann, 285 U.S. 262, 52 S.Ct. 371, 76 L.Ed. 747 (1932); Hampton v. Mow Sun Wong, 426 U.S. 88, 102, 96 S.Ct. 1895, 48 L.Ed.2d 495 (1976); Cafeteria Workers v. McElroy, 367 U.S. 886, 894, 81 S.Ct. 1743, 6 L.Ed.2d 1230 (1961). More specifically, Goldfarb characterizes it as either an interest in "property", as defined in Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972) (protected interests are claims to a benefit to which the holder has "more than an abstract need or desire . . . more than a unilateral expectation ... but instead . . . a...