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United States v. Kaplan

decided: October 3, 1989.

UNITED STATES OF AMERICA, APPELLEE,
v.
MARVIN KAPLAN, DEFENDANT-APPELLANT



Appeal from a conviction in the United States District Court for the Southern District of New York (Whitman Knapp, Judge) for violating, and conspiring to violate, RICO. We conclude that the evidence was sufficient to support a finding of a pattern of racketeering activity. Affirmed.

Cardamone, Winter and Pratt, Circuit Judges.

Author: Winter

WINTER, Circuit Judge:

This appeal presents the now familiar but still vexing issue of what constitutes sufficient evidence to support a finding of a "pattern of racketeering activity" under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. ยงยง 1961-68 (1982 & Supp. V 1987). Many aspects of this case have already been decided in United States v. Friedman, 854 F.2d 535 (2d Cir. 1988), cert. denied, 109 S. Ct. 1637 (1989), familiarity with which is assumed. In Friedman, however, we reserved decision on appellant Kaplan's RICO convictions so that we might have the benefit of the teaching of our en banc decisions in United States v. Indelicato, 865 F.2d 1370 (2d Cir. 1989) (en banc), and Beauford v. Helmsley, 865 F.2d 1386 (2d Cir. 189) (en banc), vacated for further consideration, 492 U.S. 914, 109 S. Ct. 3236, 106 L. Ed. 2d 584 (1989), upheld by order of Sept. 15, 1989. We have also since been informed by the decision in H.J. Inc. v. Northwestern Bell Telephone, 492 U.S. 229, 109 S. Ct. 2893, 106 L. Ed. 2d 195 (1989). Upon the Supreme Court's remand of Beauford to this court for reconsideration in light of H.J. Inc., we have adhered to our en banc decision, and its reasoning fully governs this case. After supplemental briefing by the parties, we conclude that the evidence against Kaplan was sufficient to support a finding of a pattern of racketeering activity because Kaplan committed the requisite two racketeering acts and his activities regarding the enterprise in question, viewed as a whole, indicated that those acts posed a threat of continuing racketeering activity.

BACKGROUND

We of course view the evidence in the light most favorable to the government. Although Kaplan's role in the corruption that pervaded the New York City Parking Violations Bureau ("PVB") is described in detail in Friedman, we briefly recount the relevant facts here. Along with several partners, Kaplan owned and operated a number of computer-service companies known as the "Kaplan Group." Kaplan Group firms supplied data processing services, including the keypunching of parking and other types of tickets, for municipalities throughout the Northeast. Around 1979, Data Conversion Corporation, a Kaplan Group company, was awarded a contract to perform the microfilming of parking tickets and the manual entry of information from parking tickets into the PVB computer. In the early 1980's, the PVB considered switching to a system of hand-held computers, a move that would eliminate the need for keypunching. Fearing the loss of business, Kaplan and his partners sought to preserve their position by developing their own hand-held computer. To that end, they enlisted the help of the politically influential Stanley Friedman as a consultant. 854 F.2d at 547-48.

During the spring of 1982, Friedman arranged a meeting attended by Kaplan, Geoffrey Lindenauer, an assistant director in the PVB who owed his position to corrupt Queens borough president Donald Manes, Lawrence Yermack, the Deputy Commissioner of the Department of Transportation, and Friedman himself in his capacity as a lobbyist for the Kaplan Group. At the meeting, Kaplan tried to persuade Lindenauer to award the Kaplan Group a contract to carry out a pilot project to develop a hand-held computer. Kaplan failed in this attempt to obtain a "sole-source" contract and was told that the contract for the computer would be awarded through competitive bidding. Id. at 548.

Kaplan met with Lindenauer a few days later. He told Lindenauer that he would give Lindenauer and Manes each $500,000 worth of stock in Citisource, a Kaplan Group company formed to develop the hand-held computer, in return for their assistance in securing the contract. Id. at 548, 557. Manes, then a political power in New York City, was a member of the Board of Estimate, whose approval of the contract would be necessary. Kaplan knew that Manes could play a key role in securing that approval. Id. at 558-59.

When Lindenauer reported Kaplan's offer to Manes, Manes agreed but expressed concern over who would hold the stock. Id. at 557. After deciding that Friedman should hold the stock, Manes instructed Lindenauer to report back to Kaplan that they accepted his proposal and would do everything in their power to ensure that Kaplan won the contract. Id. at 558. Soon thereafter, Lindenauer asked Friedman to hold the stock in three blocks, one each for Manes, Lindenauer and Friedman. Friedman agreed. Id. at 548.

New York City municipal agencies solicit competitive bids by issuing "requests for proposals" ("RFPs") that provide specifications for the contracts to be awarded. Id. at 548. During the months following the bribes, Robert Richards, an investment partner of Kaplan, id. at 548, who was to serve as president of Citisource, helped Lindenauer draft an RFP for the hand-held computer with terms ideally suited to the capabilities of the Kaplan Group. Id. at 548, 558. In responding to the RFP, Citisource, whose chairman was Kaplan, stated that Friedman was "special counsel" to the company, but, at Kaplan's insistence, omitted Friedman from its list of prospective major shareholders. Id. at 549. During the selection process, Lindenauer diligently attempted to skew the PVB's comparative evaluations of the bids in favor of Citisource. He also expressed concern to Kaplan, Friedman and Richards that the Kaplan Group perform its side of the bargain, including issuing and distributing the Citisource stock before the selection committee's vote. Id. at 549, 558.

In April 1983, Citisource issued its stock to Friedman to be held in three equal blocks for himself, Lindenauer and Manes. In June 1983, the selection committee voted unanimously to award the contract to Citisource, but only after Lindenauer lied to assuage concerns raised in the committee about Citisource. In early 1984, when the Kaplan Group wanted to sell Citisource stock to the public to raise capital for the development of the hand-held computer, it was hampered by the fact that its sole asset was merely the prospect of obtaining a PVB contract. Friedman, while continuing to conceal his ownership of Citisource stock, then used his influence to expedite consideration of Citisource's proposed contract before the Board of Estimate. The Board of Estimate approved the contract at the end of June 1984, and, soon thereafter, Citisource signed a contract with the City worth approximately $22 million. Id. at 549.

Kaplan's involvement in the corruption pervading the PVB extended beyond the Citisource contract. Joseph Delario, a close friend of Kaplan, headed a data-processing firm, Datacom, which also used bribes in doing business with the PVB. Id. at 544. In late 1982, Delario was looking for a new consultant to smooth over certain problems with Lindenauer and the PVB and to ensure that Datacom would retain two lucrative contracts, concerning out-of-state towing and collection, up for renewal in 1983. Satisfied with the bribe-brokering services of Friedman with respect to Citisource, Kaplan suggested to Delario that Datacom retain Friedman. Delario was eager to do so, but feared that if he paid Friedman's requested fee of $150,000 to $200,000 openly, new investors in Datacom would object. Delario then enlisted Kaplan's help in using one of Kaplan's companies, Data Conversion, for which Datacom performed services, to launder the payments. Delario suggested that Data Conversion divert funds it owed to Datacom to pay Friedman's fee, thus allowing Datacom to compensate Friedman without the transaction appearing on Datacom's books. Kaplan agreed, and over the next two years, Kaplan's company, Data Conversion, issued checks to Friedman totalling more than $200,000. Id. at 550.

Kaplan played an additional role in funneling money to Friedman for Friedman's help in obtaining a profitable contract for Datacom on a new in-state vehicle towing plan, which would become practical through the use of hand-held computers to identify vehicles. Datacom and several other companies negotiated a corrupt joint venture, called the Bernard Joint Venture ("BJV"), to divvy up the spoils of the new towing contract. Under the arrangement, the BJV would run the towing program and would retain Datacom as a subcontractor to do the towing for a percentage of the commissions received by the BJV. Id. at 550-51.

Friedman negotiated for himself a fee of one percent of the total collections generated by the BJV. Because of publicity stemming from the recent disclosure of his ownership of Citisource stock, Friedman wanted his fee laundered through a third party. Friedman and Delario sought the assistance of their mutual friend Kaplan, who was of course already laundering Datacom fees for Friedman. Kaplan agreed to pass Friedman's fee through Desu Consulting and Leasing, a Kaplan Group firm. In late January 1985, Delario and Kaplan reduced this understanding to writing, under which Datacom agreed to pay Delario one percent of the total ...


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