Appeal from judgments of conviction in the United States District Court for the Eastern District of New York (Weinstein, Ch. J.) following a jury trial in which appellants were convicted under the Racketeer Influenced and Corrupt Organizations Act and for mail fraud.
Lumbard, Pierce and Altimari, Circuit Judges.
These appeals are from judgments of conviction entered after a jury trial in the United States District Court for the Eastern District of New York, Weinstein, Chief Judge. Appellant Jay Teitler was convicted of conspiring to conduct the affairs of an enterprise through a pattern of racketeering activity in violation of the Racketeer Influenced and Corrupt Organizations Act, (RICO), 18 U.S.C. § 1962(d) (1982), and of one count of mail fraud in violation of 18 U.S.C. § 1341 (1982). Appellant Marc Schultz was convicted of conspiring to violate RICO as well as a substantive RICO violation, 18 U.S.C. § 1962(c) (1982), and two mail fraud counts.*fn1 Novel questions are raised concerning the interpretation of the meaning of "pattern" as described in the RICO statute as well as the applicability of common law conspiracy rules to RICO conspiracies. For the reasons set forth below, we affirm the judgments of conviction.
Over a number of years, according to the indictment, a law firm in Queens County, New York, defrauded insurance companies by manipulating claims arising out of automobile accidents. Appellants Teitler and Schultz were attorneys at the firm. According to the indictment, the firm itself was the "enterprise" with which the appellants associated and carried out a pattern of racketeering activity. See 18 U.S.C. §§ 1962(c), (d) (1982). Appellants, along with others, were charged in an indictment alleging twenty-nine "acts of racketeering" -- including twenty-eight mail fraud violations, id. § 1341, and one count of obstruction of justice, id. § 1503. The defendants were Norman Teitler, Morris Teitler, Leo Guise, Ted Dakis, Ismail D'Javid, Jean P. Hartman, Jay Teitler, Marc Schultz and Maureen Murphy. Schultz, Murphy and Jay Teitler were tried together. The charges against the other defendants were disposed of separately. The head of the firm, Norman Teitler, pleaded guilty. Jay Teitler was named in two mail fraud counts and Schultz was named in three. Both appellants were named in the RICO and RICO conspiracy counts. Maureen Murphy was named in the obstruction of justice count, one mail fraud count, and in the RICO and RICO conspiracy counts. The counts against Murphy were tried along with the charges against Schultz and Teitler. Neither Schultz nor Teitler was charged with obstruction of justice.
The indictment charged that the method of operation employed by the enterprise included the creation of false documents and the encouragement of perjury by the firm's clients in order to inflate their injuries and expenses so as to obtain better settlements from insurance companies and recover higher damage awards in negligence lawsuits brought by the firm. The government contends that the fraud took several forms -- creation of false medical bills, submission of false affidavits to document housekeeping services that were never rendered and lost wages that were never earned; referral of clients to doctors who provided backdated bills and exaggerated medical reports; and procurement of false testimony at trials and examinations before trial (EBTs). Further, when a grand jury investigation was underway, defendants Norman Teitler, head of the firm, and Maureen Murphy, a firm employee, allegedly tried to induce false testimony before the grand jury.
The indictment charged that the firm took advantage of a provision of New York's no-fault law that reimburses a person injured in an automobile accident for medical expenses, lost earnings and up to $25 per day expenses without regard to fault or liability for the accident. N.Y. Ins. Law §§ 5102(a), 5103 (McKinney 1985). The no-fault benefits are limited to $50,000 per person and are paid by the injured driver's insurance company. Id. In addition, a person who has been seriously injured may institute a "third party suit" against the other driver to recover compensation for non-economic losses such as pain and suffering and economic losses above the amount paid by no-fault coverage. Id. §§ 5102(d), 5104. According to the record evidence, ninety-five percent of such third party suits are settled by the other driver's insurance carrier based on its assessment of the damages sustained. The amount of the settlement is arrived at after consideration of the information provided to the no-fault insurers, including a description of the plaintiff's injuries as described in EBT's, and proof of special damages, i.e. medical bills, lost wages and housekeeping expenses; this information provides an index of the seriousness of the injury and consequently a guideline to gauge the amount of the settlement.
The evidence at trial revealed the manipulation of the no-fault system and third party suits by the law firm. The evidence against appellant Jay Teitler showed that he began working at the firm in 1976, first as a paralegal, then as an associate and finally as a partner of his brother, Norman Teitler. The testimony of government witness Edward Dunbar, a former paralegal at the firm, indicated that Jay Teitler knew of the firm's practices. Dunbar testified that Jay told him that, when signing up clients, Dunbar should encourage them to see doctors often to enhance their chances of large recoveries. Jay Teitler told him, "how we fill up third-party actions [is to] send him to [Dr.] Hartman, and Hartman will send us a report and a bill." In addition, Dunbar testified that Jay Teitler told him that the firm kept a large portion of the housekeeping expenses, which were based on false affidavits, because "the clients won't scream because they're not entitled to it in the first place, and he [Norman Teitler] makes a lot of money on it."
Jay Teitler was charged in two mail fraud counts, which became the predicates for the seventh and eighth acts of racketeering respectively in the indictment. Jay Teitler, Norman Teitler, and Dr. Hartman were charged with mail fraud in connection with the false housekeeping and medical claims made on behalf of one Barbara Brucato. Jay Teitler was the attorney of record for Brucato's personal injury claim filed with the insurance company after her automobile accident on September 26, 1979. The trial evidence showed that Jay Teitler sent Brucato to Dr. Hartman, who recorded nineteen visits by Brucato over the ensuing months in his report; the report also described a knee injury as a "permanent partial disability." Brucato testified that she visited Hartman only five or six times and that her knee was not injured. She further testified that she wanted to stop seeing Hartman, but Jay told her that she should continue because "it didn't look good" if she stopped. Jay gave Brucato an affidavit for her mother to sign as her housekeeper. She returned the form as instructed by Jay -- signed, but with the information left blank. The form was completed by Norman Teitler; he described the relationship between Brucato and Brucato's mother as "none," and stated that the latter had been paid $25 per week. The no-fault insurer paid $1,375 in housekeeping benefits, of which Brucato received only $725. After receiving these documents, the third party carrier settled the personal injury claim for $3,500. The jury convicted Jay Teitler of the mail fraud count involving these acts, but was unable to reach a verdict on the second mail fraud count charged, which involved Jay's purported role in filing a false claim on behalf of his father, Morris Teitler. Jay Teitler was also convicted of participating in a RICO conspiracy in violation of 18 U.S.C. § 1962(d), but the jury was unable to reach a verdict on the substantive RICO count.
Appellant Marc Schultz was a trial lawyer who worked at the firm as an associate from July 1978 until February 1983. The indictment alleged that Schultz encouraged and counseled perjury by the firm's clients concerning medical treatment provided by Dr. Ismail D'Javid and concerning housekeeping services provided by Marilyn Vargas, an employee at the firm. The indictment contained three mail fraud counts against Schultz involving three of the firm's clients. These mail frauds were alleged to be the predicates for the racketeering charges in the indictment.
James McCurdy testified that he retained the Teitler firm in connection with injuries he sustained in an automobile accident on July 10, 1978. Jay Teitler sent him to Dr. D'Javid, whom McCurdy testified he saw three times although, according to D'Javid's bill and report, McCurdy made eighteen visits. A lawsuit was commenced for McCurdy's personal injury claim. McCurdy testified that immediately before an EBT in December 1979 he told Schultz that the bill was "untrue and incorrect." He testified that Schultz told him that he "had to answer according to that bill that [he] went to see the doctor on that many days and that the doctor gave [McCurdy] treatments." The case was settled by the third party insurance company for approximately $11,000.
Another client who retained the firm, however, refused to follow Schultz's instructions. Reverend William Hanousek testified that the Teitler firm sent him to see Dr. D'Javid after his automobile accident in March 1977. Hanousek testified that he saw D'Javid only a few times but that the bill and report listed sixteen visits. The no-fault carrier paid $540 to satisfy D'Javid's false bill. A lawsuit was commenced to recover for Hanousek's personal injuries. Hanousek testified that he told Schultz that he would not testify about the false bill. Schultz replied "you really worry me, Reverend." Schultz then allegedly left the room and, after having conferred with Norman Teitler, returned to inform Hanousek that the claim had been or would be settled. The case was in fact settled on April 10, 1980 for $2250.
Lastly, Kenneth Gambella testified that Schultz represented him at an EBT concerning his personal injury claim. Gambella admitted that he lied about his housekeeping expenses by saying Marilyn Vargas was his housekeeper, when actually she was an employee of the law firm. Norman Teitler provided affidavits concerning her purported housekeeping services. Thereafter, Gambella's third-party suit was settled for $4600.
Marc Schultz was convicted of a substantive RICO violation, 18 U.S.C. § 1962(c), RICO conspiracy, id. § 1962(d), and the two counts of mail fraud relating to the McCurdy and Hanousek incidents. The jury was unable to reach a verdict on the mail fraud count relating to the Gambella claims.
Appellants challenge their convictions on several grounds. Teitler contends, inter alia, that the evidence was insufficient to sustain his conviction for RICO conspiracy; that the charge to the jury was legally insufficient as to the RICO conspiracy and the two acts of racketeering underlying the RICO conspiracy conviction were insufficient to constitute a "pattern of racketeering" as required by the RICO statute; and that the evidence was insufficient to sustain a conviction for mail fraud in connection with the Brucato claims. Appellant Schultz contends, inter alia, that the obstruction of justice charges against Maureen Murphy were improperly joined with the charges against him and that this was a violation of Fed. R. Crim. P. 8(b); that the government impermissibly amended the indictment; and that the trial judge improperly admitted co-conspirator hearsay evidence by permitting Dunbar's testimony about Jay Teitler's out-of-court statements.
A. The Rico Conspiracy Count
Appellant Teitler argues that, with respect to his alleged participation in a RICO conspiracy in violation of 18 U.S.C. § 1962(d), the trial judge erred in instructing the jury that it need only find an agreement on his part to commit two predicate acts, rather than actual commission of the acts. He also contends that the jury could not, on the evidence before it, find an agreement to commit the predicate acts without first finding that he actually committed the acts. Finally, Teitler posits that the acts of racketeering underlying the RICO conspiracy conviction were insufficient as a matter of law to constitute a pattern of racketeering. We are not persuaded by these arguments.
1. The Sufficiency of the Charged Predicate Acts
Jay Teitler asserts that the two acts with which he was charged will not suffice to establish the requisite pattern of racketeering required by 18 U.S.C. § 1961(5).
Appellant argues that the trial judge improperly charged the jury because he did not instruct the jurors that they had to find at least two and possibly more acts of racketeering activity. He contends that this is required by footnote 14 of Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 105 S. Ct. 3275, 87 L. Ed. 2d 346 (1985), and points out that Justice White stated that the language of 18 U.S.C. § 1961 requires at least two acts, "not that it 'means' two such acts." Id. at 3285 n.14. In other words, it is argued that two such acts are required, but will not alone constitute a pattern. Appellant ...