Summary
The Second Circuit affirmed the defendants’ convictions for RICO conspiracy, substantive RICO violations, mail fraud, bankruptcy fraud, and tax evasion arising from schemes involving New York City bars and restaurants. The court addressed indictment sufficiency, the RICO pattern requirement, mail fraud involving liquor licensing and sales taxes, the Twenty-First Amendment, and corroboration of co-conspirator statements.
Topics
Practice areas
Questions Presented
- Whether the mail-fraud counts were constructively amended by the government's trial theory concerning the objectives of the fraud.
- Whether two predicate acts occurring in furtherance of one continuing criminal enterprise can satisfy RICO's pattern-of-racketeering-activity requirement.
- Whether successive deceptive liquor-license renewal applications concerning one establishment could constitute a RICO pattern rather than a single discrete offense.
- Whether the liquor-license applications were sufficiently clear to support convictions for mail fraud.
- Whether the sales-tax mail-fraud instructions improperly permitted conviction without proof that tax was actually due.
- Whether the Twenty-First Amendment barred federal mail-fraud prosecution of conduct involving state liquor regulation.
- Whether tax-evasion convictions could rest on statements by a co-conspirator without sufficient corroboration.
Holdings
- The indictment sufficiently alleged participation in a scheme to defraud and gave defendants adequate notice of the government's theory; specifying the scheme's pecuniary objective at trial did not constructively amend the indictment or prejudice the defense.
- Under the Second Circuit's pre-existing rule, at least two predicate acts having the common purpose of furthering a continuing criminal enterprise with which the defendant is associated satisfy the relatedness and continuity elements of a RICO pattern.
- A continuing enterprise with a single, indefinite purpose—such as skimming profits—can provide the basis for a RICO pattern; RICO does not require proof of two separate schemes.
- The liquor-license applications and renewal forms were sufficiently clear to support a finding that defendants knowingly concealed undisclosed financial interests and receipt-sharing arrangements from the New York State Liquor Authority.
- For the charged sales-tax mail fraud, the government needed to prove a specific intent to evade sales taxes; it was not required to prove that the understated return produced a particular amount of tax loss or that tax was ultimately due under the defendants' proposed formulation.
- The Twenty-First Amendment does not bar federal prosecution for misuse of the mails in furtherance of a scheme involving state liquor regulation merely because the federal government lacks direct power to regulate intrastate liquor.
- A conviction may not rest solely on an uncorroborated extrajudicial confession, but an admission need not be corroborated when independent indicia of reliability exist; in any event, the cash deliveries independently corroborated Gelb's statements.
Key quotations
“We conclude that when a person commits at least two acts that have the common purpose of furthering a continuing criminal enterprise with which that person is associated, the elements of relatedness and continuity which the Sedima footnote construes section 1962(c) to include are satisfied.” (808 F.2d at 189)
“The proper inquiry, therefore, is whether the statements of Gelb bear independent indicia of reliability.” (808 F.2d at 190)
Factual background
The defendants operated or controlled a group of New York City bars and restaurants through nominal owners and managers, concealing their interests from liquor licensing authorities. They skimmed cash receipts, understated sales receipts and taxes, concealed income from tax authorities, and diverted assets and receipts from the Peppermint Lounge while it was in bankruptcy proceedings. The government relied primarily on electronic audio and video surveillance and related documentary and witness evidence.
Procedural history
A jury in the Southern District of New York convicted the defendants on numerous RICO predicate and related fraud and tax counts arising from the operation of bars and restaurants. The defendants challenged the indictment, the sufficiency and construction of the RICO pattern allegations, jury instructions, the federal mail-fraud prosecution, and the corroboration of co-conspirator statements. The Second Circuit affirmed the judgments of conviction.