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UNITED STATES v. ALTMAN
May 11, 1993
UNITED STATES OF AMERICA, Plaintiff,
MELVYN ALTMAN, Defendant.
The opinion of the court was delivered by: WHITMAN KNAPP
WHITMAN KNAPP, SENIOR D.J.
Count 1 of that Indictment alleges violation of 18 U.S.C. § 1962(c) ("RICO"), asserting that defendant, "a person employed by and associated with the enterprise . . . the Surrogates Court of New York County, unlawfully, wilfully, and knowingly did conduct and participate, directly and indirectly, in the conduct of the affairs of that enterprise . . . through a pattern of racketeering activity." Indictment P 14. The charges are specified in more detail in a Bill of Particulars. Defendant moves to dismiss on the ground that neither the Indictment nor the Bill of Particulars alleged his participation in the "operation or management of the enterprise itself" as required by the recent Supreme Court decision in Reves, et al. v. Ernst & Young (1993) 122 L. Ed. 2d 525, 113 S. Ct. 1163, 1173. For the reasons that follow, we agree and dismiss Count I of the indictment.
By way of background, we observe that the Supreme Court granted certiorari in Reves in order to resolve the conflicting tests the Courts of Appeals were applying to § 1962(c), and that it explicitly rejected an interpretation adopted by the Eleventh Circuit in Bank of America Nat'l Trust & Savings Assn. v. Touche Ross & Co. (11th Cir. 1986) 782 F.2d 966. It is therefore appropriate to note the Eleventh Circuit's holding that:
RICO does not require the degree of participation urged by defendants. It is not necessary that a RICO defendant participate in the management or operation of the enterprise. On its face, the statute requires only that the defendant "participate, directly or indirectly in the conduct of [the] enterprise's affairs . . . ." Id. at 970.
In rejecting that standard, the Reves Court repeatedly emphasized the importance of finding that a RICO defendant had participated in "operation or management of the enterprise." Thus the following passages (emphasis added):
The word "conduct" is used twice, and it seems reasonable to give each use a similar construction. As a verb 'conduct means to lead, run, manage, or direct. . . . in the context of the phrase "to conduct . . . [an] enterprise's affairs," the word indicates some degree of direction. 113 S. Ct. at 1169 (citations omitted).
We conclude, therefore, that as both a noun and a verb in this subsection, "conduct" requires an element of direction. Id.
. . . Congress did not intend RICO to extend beyond the acquisition or operation of an enterprise. (at 1172)
One is not liable under that provision unless one has participated in the operation or management of the enterprise itself. Id.
. . . Congress did not intend to extend RICO liability under § 1962(c) beyond those who participate in the operation or management of an enterprise through a pattern of racketeering activity." Id.
In sum, we hold that "to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs," § 1962(c), one must participate in the operation or management of the enterprise itself. (at 1173)
Towards the end of its opinion, the Court dealt with the Government's amicus brief, which argued that the interpretation of § 1962(c) the Court ultimately adopted would make it difficult to prosecute "outsiders" who have no official position within the enterprise. This complaint was echoed in the Dissent, which strongly criticized the Court for limiting RICO liability "to participants in the 'operation or management' of a RICO enterprise" (at 1174). The Court did not dispute that its reading of subsection (c) had the effect to which the Government and the Dissent objected, but observed that the remedy was ...
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