United States v. Horak

• Decision Date: 18 April 1986
• Docket Number: No. 85 CR 373-1.,85 CR 373-1.
• Citation: 633 F. Supp. 190
• Court: U.S. District Court — Northern District of Illinois
• Parties: UNITED STATES of America, Plaintiff, v. John HORAK, Defendant.

633 F. Supp. 190

UNITED STATES of America, Plaintiff, v. John HORAK, Defendant.

No. 85 CR 373-1.

United States District Court, N.D. Illinois, E.D.

February 8, 1986.

Order on Forfeiture April 18, 1986.

COPYRIGHT MATERIAL OMITTED

Joseph Duffy and Ira Raphaelson, Asst. U.S. Attys., Chicago, Ill., for U.S.

Peter F. Vaira, Chicago, Ill., and G. Robert Blakey, Notre Dame Law School, Notre Dame, Ind., for defendant.

ORDER

NORGLE, District Judge.

This case involves a thirty-eight count superseding indictment against John Horak. Until 1972, Horak was the owner of HOD Disposal. Horak sold HOD to Waste Management in 1972 for over 64,000 shares of Waste stock and "other consideration." Horak, however, remained the manager of HOD as a division of Waste. Richard Hamm is the mayor of the Village of Fox Lake; Richard Gerretsen is a member of its Board of Trustees.

Count I of the indictment charges that Horak paid a $5,000 bribe to Hamm and $5,000 to Gerretsen in connection with the award of a Village garbage contract to HOD. See Ill.Rev.Stat. ch. 38 § 33-1(a), (d) & (e). Count I also charges Horak with the bribery of Hamm at various times between 1981 and 1983. Horak allegedly made smaller payments to Hamm, ranging from $100 to $500, totalling $2000. Count I charges the bribery as a violation of 18 U.S.C. § 1962(c).

Count I also asks for the forfeiture of various interests held by Horak under § 1963(a)(1) and (2). The government's theory is that Horak acquired or maintained certain interests by reason of his violation of § 1962(c), thereby making those interests subject to forfeiture under § 1963(a)(1). Alternatively, the indictment charges that Horak maintained certain interests in Waste which afforded him with influence over Waste (an enterprise which he conducted through a pattern of racketeering activity in violation of § 1962(c)), thereby subjecting those interests to forfeiture under § 1963(a)(2). The various interests which the indictment charges are subject to forfeiture are the following: a) all Horak's "positions" with Waste, b) bonuses and salaries paid to Horak from 1981 through 1985, c) Horak's assets in Waste, d) Horak's shares of Waste stock, e) Horak's interests in profit sharing and pension plans.

Count II alleges a scheme to defraud Fox Lake and its citizens by Horak, Hamm and Gerretsen. That count also charges the first of 37 mail fraud counts. The substance of the scheme is that, in return for bribes, Hamm and Gerretsen would see to it that HOD was awarded a garbage contract even though HOD was not the low bidder for the contract. The scheme allegedly contemplated the mailing of monthly invoices under the contract by HOD and the payment of those invoices by Fox Lake through the mails. Counts 2 through 38 are mail fraud counts predicated on the mailing of checks by Fox Lake for services rendered under the garbage contract. The scheme is alleged to have defrauded Fox Lake and its citizens of the faithful services of Hamm and Gerretsen, the right to have its business conducted without fraud, and the right to have a garbage contract awarded fairly and impartially.

Horak has filed various pretrial motions: 1) a motion to dismiss the indictment, 2) a motion for Rule 6(e) disclosure, 3) a motion for a bill of particulars, 4) a motion to disclose favorable evidence, and 5) a motion in limine regarding the admissibility to co-conspirator statements. Horak's motions are the subject of this Order. The Court addresses each motion in turn.

I Motion to Dismiss

18 U.S.C. § 1962(c) makes it unlawful for any person employed by or associated with any enterprise to conduct or participate in the conduct of the enterprise's affairs through a pattern of racketeering activity. A pattern of racketeering activity is defined by reference to § 1961(1) and (5). Under that section mail fraud (18 U.S.C. § 1341) is a racketeering activity and two acts of mail fraud within ten years of each other (with the first mail fraud occurring after the enactment of § 1961) constitute a "pattern." 18 U.S.C. § 1963 states the penalties for violations of § 1962. Subsection (a) provides for a $25,000 fine or 20 years imprisonment, or both, and a forfeiture to the United States of (1) "any interest ... acquired or maintained in violation of section 1961" in this case, Horak's conduct of an enterprise's (Waste's) affairs through a pattern of racketeering activity, or (2) "any interest in ... or property or contractual right of any kind affording a source of influence over any enterprise ... operated, controlled or conducted in the conduct of in violation of section 1962 (viz. through a pattern of racketeering activity)."

Horak mounts three attacks on various parts of the indictment: 1) the mail fraud counts should be dismissed because the charged mailings were not in furtherance of the scheme to defraud, 2) the indictment fails to state a basis for forfeiture of Horak's shares in Waste, and 3) the forfeiture of shares of stock valued at an amount in excess of $4m in relation to the criminal acts charged is so disproportionate a penalty that it violates the 8th Amendment.

A. Mail Fraud

Horak characterizes the scheme charged in the indictment as one to "obtain a contract for the disposal services of HOD." Deft's Memo at 4. Consequently, because the scheme came to fruition when HOD obtained the contract, the charged mailings could not have been made in execution or furtherance of the scheme to defraud. See United States v. Maze, 414 U.S. 395, 399, 94 S.Ct. 645, 647, 38 L.Ed.2d 603 (1974). See also United States v. Galloway, 664 F.2d 161, 166-68 (CA7 1981) (Swygert, J. dissenting). Horak's second argument is closely related to the first. He contends the charged mailings are not sufficiently closely related to the alleged scheme to defraud because 1) the mailings occurred in the ordinary course of the business of Fox Lake 2) after the object of the fraud had already been achieved. The Court does not agree.

The test for measuring the sufficiency of the mail fraud counts is whether it is conceivable that the government can introduce evidence at trial which shows the charged mailings were part of the execution of the scheme to defraud. United States v. Castor, 558 F.2d 379, 384-85 (CA7 1977). With this standard in mind, the Court believes Horak's characterization of the goal of the charged scheme is too narrow. It makes little sense to exclude the contemplated benefit from the garbage contract in defining the goal of the scheme charged in the indictment. The contract right for garbage services in Fox Lake was worth little to HOD without the monthly payments for those services. Consequently, it is more likely the contemplated goal of the scheme to defraud was the remuneration for garbage services rather than the making of the contract. Thus, the government may well be able to show the contract was but a mere vehicle to the ultimate goal of compensation. See, e.g., United States v. Rauhoff, 525 F.2d 1170, 1176 (CA7 1975). Under such a theory, the charged mailings may have occurred in the execution of the scheme to defraud. Cf. Galloway, 664 F.2d at 162-63. Additionally, the government may choose to prove that the charged mailings were the proceeds of the fraudulent scheme. Under such a theory it does not matter that the mailings were perfected and the proceeds were accepted after the performance of the acts constituting the scheme to defraud. See United States v. Castor, 558 F.2d 379, 385 (CA7 1977); Rauhoff, 525 F.2d at 1176; United States v. Climatemp, 482 F.Supp. 376, 383 (N.D. Ill.1979). For these reasons Horak's motion to dismiss the mail fraud counts is denied.

B. Forfeiture

The only object Horak contests in the indictment's request for forfeiture under § 1963(a)(1) and (2) is his interest in shares of Waste stock. Horak does not contest the remaining interests stated in the indictment as subject to forfeiture. Horak insists the language of § 1963(a) simply does not cover the forfeiture of shares which were obtained at least 10 years before the occurrence of the acts charged in the indictment. The government counters with the explanation that subsection (a)(1) contemplates forfeitures of interests which have been maintained through a pattern of racketeering activity and blithely asserts that Horak's waste shares were "maintained" during the time of the pattern of racketeering activity charged in the indictment. See Gov Memo at 12. The government also points to the possibility of forefeiture under subsection (a)(2). Waste is named as the RICO enterprise in the indictment and HOD is a division of Waste. Based on that subsidiary relationship, the government theorizes that Horak's Waste shares are subject to forfeiture because those shares constituted an interest which afforded Horak with a source of influence over Waste. Gov Memo at 13. The government does not explain the kind or extent of influence Horak had over Waste by reason of his shares of stock. In light of the foregoing, the Court believes it would benefit from oral argument on these issues. The matter is set for argument on Monday, February 10, 1985 at 11:30 a.m.

II Motion for Disclosure Under Fed.R. Crim.P. 6(e)

Horak contends the issuance of a superseding indictment in this case supports his request for access to grand jury materials. According to Horak, a comparison of the original and superseding indictments reveals that the "entire theory of the prosecution changed" although the essential facts charged remained the same. The Court does not agree.

Merely because the government chose to pursue a different theory in prosecuting this case does not necessarily compel the conclusion that the grand jury was misled or misused by the government's effort to obtain a superseding indictment. Indeed, the grand jury process has little semblance of balance. The grand jury's function is to determine whether there is probable cause to believe an offense has been committed. United...