US v. Dempsey

• Decision Date: 14 August 1990
• Docket Number: No. 89 CR 666.,89 CR 666.
• Citation: 768 F. Supp. 1256
• Parties: UNITED STATES of America, Plaintiff, v. Martin J. DEMPSEY, et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

768 F. Supp. 1256

UNITED STATES of America, Plaintiff, v. Martin J. DEMPSEY, et al., Defendants.

No. 89 CR 666.

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

August 14, 1990.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Ira H. Raphaelson, Thomas M. Durkin, Mark L. Rotert, Asst. U.S. Attys., Chicago, Ill., for U.S.

James R. Epstein, Epstein Zaideman & Esrig, P.C., Chicago, Ill., for Martin J. Dempsey.

Michael D. Sher, Neal Gerber & Eisenberg, Chicago, Ill., for James D. Nowak.

Donald C. Shine, Nissen & Elliot, Chicago, Ill., for Charles W. Bergstrom.

George B. Collins, Collins & Bargione, Chicago, Ill., for Bradley Ashman.

Nicholas F. Maniscalco, Chicago, Ill., for William A. Barcal, III.

Matthias A. Lydon, Jayne Carr Thompson, Lydon & Griffin, Chicago, Ill., for Edward A. Cox, III.

Thomas M. Breen, Martin & Breen, Oak Park, Ill., and Nan R. Nolan, Chicago, Ill., for Thomas P. Kenney.

James S. Montana, Jr., Law Offices of James S. Montana, Jr., Chicago, Ill., for Bruce W. Mittlestadt.

Gordon B. Nash, Jr., Gardner Carton & Douglas, Chicago, Ill., for John Ryan.

Robert W. Tarun, Edward L. Foote, Winston & Strawn, Chicago, Ill., for Scott Anixter.

Thomas K. McQueen, Jenner & Block, Chicago, Ill., for Joel J. Fetchenhier.

Royal B. Martin, Leigh D. Roadman, Silets and Martin Ltd., Chicago, Ill., for Sheldon Schneider.

Michael D. Monico, Monico Parich & Spevack, Chicago, Ill., for John A. Vercillo.

MEMORANDUM OPINION AND ORDER

MAROVICH, District Judge.

The original indictment in this case was handed down on August 2, 1989 naming eighteen commodities traders in the soybean futures pit at the Chicago Board of Trade ("CBOT") and a floor clerk as defendants. The indictment charged the defendants with 534 counts alleging violations of, inter alia, the Racketeer Influenced and Corrupt Organizations Act ("RICO"), the Commodities Exchange Act ("CEA"), and the mail and wire fraud statutes. Five of the traders and the floor clerk entered guilty pleas. The other thirteen traders pleaded not guilty to the charges against them. These thirteen defendants filed motions to dismiss various counts of the original indictment. On February 28, 1990, before this court ruled on those motions, the first superseding indictment in this case was handed down. The first superseding indictment charged the thirteen remaining defendants with 751 counts alleging violations of the same statutes. All defendants who filed motions to dismiss under the original indictment renewed those motions as they pertained to the first superseding indictment. In addition, some defendants filed new motions to dismiss. On July 12, 1990, the second superseding indictment was handed down. The second superseding indictment charged the thirteen defendants with 742 counts alleging violations of the same statutes. The second superseding indictment dropped nine counts, but is, in all other material respects except as otherwise indicated below, virtually identical to the first superseding indictment. For the sake of simplicity, all references in this opinion to "the indictment" or to specific count numbers refer to the second superseding indictment or counts therein unless otherwise indicated. Before the court are defendants' motions to dismiss various counts of the indictment, or alternatively as to some motions, to strike certain allegations.¹ For the following reasons, all of the motions are denied.

I. MOTIONS TO DISMISS RICO COUNTS

In counts 749, 750, and 751, defendants Nowak, Dempsey, and Bergstrom are charged with violating one of the three substantive RICO provisions, 18 U.S.C. § 1962(c). That provision makes it a crime

for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate ... commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity....

In count one, all defendants, except Anixter and Ryan, are charged with "conspiring to violate" § 1962(c) in violation of 18 U.S.C. § 1962(d).

A. Vagueness

Defendants Mittlestadt, Fetchenhier, Dempsey, and Nowak argue that the RICO statute is unconstitutional per se because the term "pattern of racketeering activity" is vague. "It is well established that vagueness challenges to statutes which do not involve First Amendment freedoms must be examined in the light of the facts of the case at hand." United States v. Mazurie, 419 U.S. 544, 550, 95 S.Ct. 710, 714, 42 L.Ed.2d 706 (1975). Since first amendment rights are not involved in this case, defendants' argument that RICO is unconstitutionally vague per se is without merit.

The only vagueness challenge which defendants may assert is that the RICO statute "fails to give a person of ordinary intelligence fair notice that his contemplated conduct was forbidden." United States v. Harriss, 347 U.S. 612, 617, 74 S.Ct. 808, 812, 98 L.Ed. 989 (1954) (emphasis added). All of the RICO defendants assert this "as applied" argument. They argue that the RICO statute fails to inform them that the conduct with which they are charged constitutes a "pattern of racketeering activity". The RICO statute defines the term "racketeering activity" as a violation of any of a number of expressly defined offenses under state and federal law. 18 U.S.C. § 1961(1). These offenses are commonly referred to as predicate acts. The predicate acts charged in this case are violations of the federal mail fraud and wire fraud statutes. The RICO statute defines the term "pattern of racketeering activity" as follows: "pattern of racketeering activity' requires at least two acts of racketeering activity, one of which occurred after October 15, 1970 and the last of which occurred within ten years ... after the commission of a prior act of racketeering activity." 18 U.S.C. § 1961(5). Defendants do not argue that the statutory definition of "racketeering activity" is vague. Rather, they argue that the statutory definition of what constitutes a "pattern" of such activity is vague.

The Supreme Court has never addressed the constitutionality of the RICO statute either per se or as applied. It has, however, defined the term "pattern of racketeering activity" in other contexts. In Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985), the issue before the Court was the scope of the express private right of action which the RICO statute affords private individuals. The Court acknowledged that the issue of "whether the commission of the alleged predicate acts fell into a pattern" was not before it. However, at footnote fourteen, the Court observed in dictum:

The definition of a `pattern of racketeering activity,' ... states that a pattern `requires' at least two acts of racketeering activity, ... 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).... 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.... Proof of two acts of racketeering activity, without more, does not establish a pattern....' 116 Cong.Rec. 18940 (1970).... 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). This language may be useful in interpreting other sections of the Act. Cf. Iannelli v. United States, 420 U.S. 770, 789 95 S.Ct. 1284, 1295-96, 43 L.Ed.2d 616 (1975).

Sedima, 473 U.S. at 496, n. 14, 105 S.Ct. at 3285, n. 14 (emphasis in original).

In H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989), the Court held that a civil RICO plaintiff need not allege multiple schemes to sufficiently allege a "pattern of racketeering activity". In the course of reaching this conclusion, the Court noted that its footnote fourteen in Sedima had spawned various lower courts' attempts to define exactly what it is that constitutes such a "pattern". The Court then elaborated at length on what course of racketeering conduct constitutes a "pattern".

The Court began its analysis with the statutory language, observing that § 1961(5) "concerns only the number of predicates necessary to establish a pattern; and it assumes that there is something to a RICO pattern beyond simply the number of predicate acts involved.... Section 1961(5) does not identify, though, these additional prerequisites for establishing the existence of a RICO pattern." Id., 109 S.Ct. at 2899-2900 (emphasis in original). The Court began its attempt to identify "these additional prerequisites" by relying on the "ordinary meaning" of the word "pattern" as indicated by a dictionary definition:

In normal usage, the word `pattern' here would be taken to require more than just a multiplicity of racketeering predicates. A `pattern' is an `arrangement or order of things or activity,' 11 Oxford English Dictionary 357 (2d ed. 1989), and the mere fact that there are a number of predicates is no guarantee that they fall into any arrangement or order. It is not the number of predicates but

...