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United States of America v. James C. Dimora

October 28, 2011

UNITED STATES OF AMERICA,
PLAINTIFF,
v.
JAMES C. DIMORA, ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Judge Sara Lioi

OPINION AND ORDER

Before the Court are five motions challenging, in one way or another, the integrity of the Indictment*fn1 in this case. Defendant James C. Dimora has filed a motion to dismiss Counts 3, 10, 12, 14, 22, 24, and 26 in light of Brock v. United States (Doc. No. 414) and a motion to dismiss Counts 3, 10, 12, 14, 21, 22, 24, and 26*fn2 as violative of Wharton's Rule (Doc. No. 415). Defendant Michael Gabor has filed a motion to dismiss Count 33 and "schemes" B and C from Count 1 (Doc. No. 428) as well as a motion to dismiss Counts 31 and 32 for failure to state an offense. (Doc. No. 427.) Gabor also seeks a bill of particulars. (Doc. No. 298.) For the reasons set forth below, all five motions are DENIED.

I. Dimora's Motion to Dismiss in light of Brock

Defendant Dimora contends that seven of the Hobbs Act (18 U.S.C. § 1951) conspiracy-to-extort counts against him (Counts 3, 10, 12, 13, 21, 24, and 26) should be dismissed in light of the Sixth Circuit's decision in Brock v. United States, 501 F.3d 762 (6th Cir. 2007). The Hobbs Act provides, in relevant part, that Whoever in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by robbery or extortion or attempts or conspires so to do, or commits or threatens physical violence to any person or property in furtherance of a plan or purpose to do anything in violation of this section shall be fined under this title or imprisoned not more than twenty years, or both.

18 U.S.C. § 1951(a). The Act goes on to define extortion as "the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right." 18 U.S.C. § 1951(b)(2) (emphasis added).

In Brock, the Sixth Circuit held that "[t]o be covered by the [Hobbs Act], the alleged conspirators . . . must have formed an agreement to obtain ‗property from another,' which is to say, formed an agreement to obtain property from someone outside the conspiracy." 501 F.3d at 767. Each of the seven counts challenged in Dimora's motion names, as a member of the alleged conspiracy, a person who also held a position-as an employee, owner, or otherwise-with the entity from which property was allegedly extorted. Dimora argues that, under Brock, the close relationship between each of these co-conspirators and their respective entities means that the "property from another" requirement (that "other," as construed by the court in Brock, being someone outside the conspiracy) has not been met and thus that these counts must be dismissed. To properly address this contention, a closer look at Brock and the chief case interpreting Brock, United States v. Gray, 521 F.3d 514 (6th Cir. 2008), is necessary.

A. United States v. Brock

The defendants in Brock, brothers Michael and Jerry Brock, ran a bail bond business, Brock Bonding. To avoid forfeiture of the bond money they had loaned to criminal defendants who had fled the county and to procure other benefits, the Brocks paid bribes to a clerk at the county court who, among other things, erased from the court calendar hearings at which the absconded defendants were scheduled to appear. Brock, 501 F.3d at 765.

The record before the court in Brock was not clear as to whether the money paid to the clerk came from the Brocks' personal bank accounts or from the company's account. Id. at 769. The court ruled that, because the money had come either from the Brocks themselves or from their company, the "property from another" requirement was not met, and thus the Brocks could not be convicted of conspiracy to extort under the Hobbs Act. Id. at 766. The court came to this conclusion, at least in part, because, even if the money came from Brock Bonding, that company was "their [i.e., the Brocks'] own company." Id. at 767 ("And how could it be said that the Brocks conspired with [the court clerk] to obtain their [own] consent to give . . . [the clerk] money which came from their own pockets or at most from their own company . . . ?") (emphasis added).

The nature of the Brock opinion makes prospective application of its holding difficult in two respects. First, the court in Brock declined to provide any standard or rule as to how its holding should be applied to cases other than those with virtually identical facts. Second, even the facts of Brock, and thus how the court applied the law to those facts, are ambiguous. Because it is unclear whether the "extorted" funds came from the Brocks themselves or from Brock Bonding, and because the Brock opinion does not discuss the legal and practical status of Brock Bonding (e.g., whether Brock Bonding was incorporated, whether any individuals other than the Brocks had an ownership interest in the business, or whether the business employed anyone in addition to the two Brock brothers), it is difficult to determine which of these variables-if any- played into the court's analysis.

With these limitations in mind, it is nevertheless possible to make some modest conclusions as to the consequences of Brock. First, Brock stands for the proposition that the ties between an individual conspirator and a business controlled or owned by that conspirator can be so close as to make the individual and the business indistinguishable for purposes of the "property of another" Hobbs Act conspiracy requirement. The issue left open, of course, is the nature and extent of the ties that must be present between the individual conspirator and the business in order for the two to be considered one-and-the-same for the purposes of Hobbs Act conspiracy.

Brock also indicates, albeit indirectly, that an individual conspirator's status as an employee, even a high-ranking employee, is not by itself enough to "merge" the individual with the business for purposes of the "property from another" requirement. Along these lines, the court in Brock distinguished the case before it from United States v. Spitler, 800 F.2d 1267 (4th Cir. 1986). In Spitler, the defendant was the vice president of a company known as TEI. Defendant Spitler used TEI's money to pay bribes to a Maryland state official, who in turn approved TEI's overbilling of the state. The Brock court, analyzing Spitler, said that Spitler had "facilitated the extortion of TEI's property, not his own." Brock, 501 F.3d at 769. Thus the "property of another" requirement was met.

B. United States v. Gray

Shortly after Brock was decided, the Sixth Circuit was faced with a somewhat-similar set of circumstances in United States v. Gray, 521 F.3d 514 (6th Cir. 2008). In Gray, the court addressed the validity of a number of conspiracy-to-extort convictions, upholding some while reversing others. The court reaffirmed the principle from Brock that the "property from another" element of conspiracy-to-extort under the Hobbs Act requires a showing that the conspirators tried to extort property from "an unrelated entity outside the conspiracy." Gray, 521 F.3d at 540. It thus reversed convictions on several counts where "there was no evidence that the allegedly extortionate payments [to a city of Houston official] . . . came from a source other than Gray [a defendant who was a private citizen and also a named conspirator]." Id. at 539.

Yet the court in Gray upheld a separate Hobbs Act extortion conspiracy conviction involving a conspiracy that included, among others, (1) defendant Gray, (2) a vice president of the Honeywell Corporation, and (3) a Houston city official, as named conspirators. Id. at 536--37. The scheme involved Gray making payments of money from Honeywell to the Houston official in exchange for favors for Honeywell. The presence of a Honeywell vice president in the conspiracy apparently did not mean that the "property of another" requirement was not met.*fn3

The Gray decision thus follows the broad contours of Brock. Gray affirmed that the conspirators must have conspired to extort property from someone outside the conspiracy. And, in accord with the Brock panel's reading of Spitler, the Gray panel did not merge the individual corporate officer conspirator and the extorted corporation into a single entity for purposes of the "property of another" requirement. The Gray decision is, unfortunately, similar to Brock in another respect-it provided little guidance as to under what circumstances such merger might in fact occur.

C. Application to Dimora

It is this less-than-precise Brock-Gray framework that must be applied to the Hobbs Act conspiracy counts at issue here. Each Count names, in addition to Dimora, at least one other conspirator. As to the specific nature of the relationship each of these co-conspirators had with the respective entities from which property was allegedly extorted, the Indictment provides only the following information:

Count 3 -- Co-conspirator Brian Schuman was an "employee" of the extorted "non-profit organization," Alternatives Agency.

Count 10 -- Co-conspirator John Valentin was a "principal" of the extorted "retailer," Salva Stone.

Count 12 -- Co-conspirator Nicholas Zavarella was a "shareholder" of the extorted "subcontractor," Zavarella Brothers Construction Company.

Count 14 -- Co-conspirator William Neiheiser was the "president and [c]hief

[e]xecutive [o]fficer" of the extorted "company," Reliance Mechanical. He also had an "ownership interest" in that company.

Count 22 -- Co-conspirator Anthony Melaragno was an "officer or employee" of the extorted "company," Vandra Brothers Construction Co.

Count 24 -- Co-conspirator Robert Rybak was the "[b]usiness [m]anager" of the extorted "labor organization," Local Union No. 55. His relationship to the Union's "employee benefit plan" (the Joint Apprenticeship and Training Committee Fund), also an allegedly-extorted entity, is not stated.

Count 26 -- Co-conspirator Charles Randazzo was the "president and chief executive officer" of the extorted entity, Financial Network of America.

While brevity may be the soul of wit, it is not, at least in this context, an aid-let alone the key-to expeditious resolution. The barebones nature of the indictment's description of the relationships between these co-conspirators and their related entities makes application of the already-vague framework supplied by Brock and Gray even more challenging.

But this lack of detail is not so much indicative of a problem with the indictment as it is of a problem with the stage of the proceedings at which these Brock arguments are being raised. See FED. R. CRIM. P. 7(c) (indictment need only contain the "essential facts constituting the offense charged") (emphasis added). Dimora's Brock concerns are more appropriately raised after the presentation of evidence at trial. At trial, evidence will presumably be presented making the exact nature of the relationship between each of these co-conspirators and their related entities clearer. As the case currently stands, there is simply not enough information to conclude that the relationship between each of these co-conspirators and their respective entities was or was not tantamount to the relationship between the Brock brothers and Brock Bonding. In both Brock and Gray, of course, the Sixth Circuit was able to resolve the "property from another" issue by looking to the evidence presented at trial. That same type of evidence is also necessary here. Dimora's motion to dismiss Counts 3, 10, 12, 13, 21, 24, and 26 must therefore be DENIED.

II. Dimora's Motion to Dismiss under Wharton's Rule

Dimora also asserts that eight of the Hobbs Act conspiracy counts against him (Counts 3, 10, 12, 14, 21, 22, 24, and 26) should be dismissed because they are charged in violation of Wharton's Rule. The general rule in criminal law is that a defendant may be convicted of both a substantive crime and conspiracy to commit that crime. This is because the formation of the conspiracy is itself seen as an evil separate from the commission of the substantive crime. See Salinas v. United States, 522 U.S. 52, 64 (1997) ("It is elementary that a conspiracy may exist and be punished whether or not the substantive crime ensues, for the conspiracy is a distinct evil, dangerous to the public, and so punishable in itself.") (citing Callanan v. United States, 364 U.S. 587, 594 (1961)).

Wharton's Rule provides an exception to this general rule. Wharton's Rule, as quoted in the Supreme Court's definitive opinion on the Rule, states that

An agreement by two persons to commit a particular crime cannot be prosecuted as a conspiracy when the crime is of such a nature as to necessarily require the participation of two persons for its commission.

Iannelli v. United States, 420 U.S. 770, 773 n.5 (1975) ...


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