The opinion of the court was delivered by: CHARLES L. BRIEANT
The plaintiffs refer to themselves as representing a class of ratepayers (customers) of Orange & Rockland Utilities, Inc., which is a franchised utility serving the public in Orange and Rockland Counties with electric and gas service under published tariffs and rates allowed or approved by the Public Service Commission of the State of New York (the "PSC"). Defendant Linda Winikow was, until her suspension with pay on August 17, 1993, a Vice President and Director of Corporate Policy and External Affairs (whatever they are) of O&R.
Defendant Paul Pickard is alleged to have been since July 1992 a "director in the Corporate Communications Department" of O&R and in addition, a principal of defendant Communications Strategies International ("CSI"). Maria Pickard is alleged to have been a "supervisor in the Communications Service Department" of O&R until June 1991, and thereafter until November 1991 a "consultant" to O&R and also a principal in defendant CSI.
The complaint is based on 18 U.S.C. § 1961 et seq. and the Common Law of New York to recover damages, treble damages and counsel fees allegedly sustained by the class members from having paid higher electric and gas rates than they otherwise would have paid, since 1984, by reason of "defendants' scheme to defraud, defendants' acts of mail and wire fraud, 18 U.S.C. §§ 1331 and 1343, acts of bribery and extortion indictable under state and federal bribery and extortion laws; violation of the New York State Public Service Law § 107, [and] violation of the New York State Election Laws (§ 14-116(2)) in connection with illegal misuse and illegal contribution of funds paid by ratepayers to O&R". (Amd. Compl. P 1)
The theory of the complaint is essentially that the defendants conducted and participated in the affairs of an enterprise through a pattern of racketeering activity . It is alleged (Amended Complaint P 25) that commencing in about 1984 O&R began a course of conduct in which it "misused funds obtained from ratepayers as a result of electric and gas rate billing allowed and authorized by the New York Public Service Commission for the illegal, improper and unreported purpose of making campaign and political payments and contributions to various public officials and politicians in violation of various statutes and regulatory provisions, and for unauthorized personal expenses of themselves and their families." Of necessity, our summary of the amended class action complaint is somewhat superficial. It consists of 63 pages and 105 numbered paragraphs exclusive of the demand for relief estimated at $ 900,000,000.00, and familiarity of the reader therewith must be assumed.
The initial factual basis for this lawsuit was supplied by the arrest of and subsequent plea of guilty by defendant Winikow growing out of an investigation by the New York State Grand Jury in Rockland County into the financial affairs of O&R. On October 6, 1993, defendant Linda Winikow appeared with her attorney and the Hon. Kenneth Gribetz, District Attorney of Rockland County before the Hon. Robert T. Meehan, Acting Justice of the Supreme Court of the State of New York, County of Rockland, presiding in County Court, and waived indictment as to three separate criminal charges.
In connection with her plea of guilty to all of these charges, Ms. Winikow testified under oath and admitted that she had, between March 1, 1993 and August 11, 1993 extorted $ 3,000.00 in U.S. currency from Stanford Silverman, the president of Devotion, Inc., a vendor serving O&R, by instilling in him a fear that if he did not pay, she or another, would cause Devotion's advertising contract with O&R to be terminated, resulting in a loss of business from O&R to Silverman's advertising agency, Devotion, Inc., in the amount of approximately one million dollars in 1992-1993. She also testified that she asked Mr. Silverman to make political donations on behalf of O&R by donating money, "to various political campaign committees" and told him that he would lose Devotion's contract with O&R, "if he did not make $ 25,000.00 worth of personal expenses and political contributions in behalf of Orange & Rockland per year" (Tr. of Plea at p. 14 produced to this Court as part of the pleadings in a related litigation, Sluys v. Gribetz, 842 F. Supp. 764 (S.D.N.Y. 1994).
In her plea to the second charge, Ms. Winikow testified that she entered into an advertising contract with Community Media, Inc. on behalf of O&R and agreed without the consent of her employer to accept a benefit from the advertising contract, "to wit, cessation of negative press coverage -- negative press about Orange & Rockland Utilities, Inc. from another person . . . upon an agreement or understanding that such benefit would influence her conduct in relation to her employer's or principal's affairs . . .."
In her plea to the third charge Ms. Winikow testified that between March 1, 1992 and April 28, 1992, she made a political contribution in behalf of O&R to "The Friends of Sam Colman Committee" in a name other than the true contributor by having Midland Park Graphics, Inc., an O&R vendor, appear to be the contributor, and also print campaign and related material for use at a Colman Committee fundraiser valued at $ 2,379, the expense of which was paid by O&R. Under the same charge she admitted a further contribution under the name of Midland Park Graphics, Inc. by having that firm issue a check to the Colman Campaign Committee in the amount of $ 1,485 and that Midland Park Graphics was reimbursed by O&R for the amount of that check. Furthermore, she admitted that a further political campaign contribution was made under the name of Maxine Epstein, and another by Mark DeBlasio, in each case by having Mr. Silverman, the president of Devotion, Inc., "solicit a third party to issue a personal check", and that she had asked Silverman to get third party checks made out to the Colman campaign as political donations on behalf of Orange & Rockland Utilities, which she describes in her testimony before Justice Meehan as being "the true contributor".
In addition to the diversion of funds of O&R which were disclosed by Ms. Winikow in her plea of guilty, it was disclosed that other payments of a fraudulent nature were made directly or indirectly by others, including defendant CSI, and charged directly or indirectly to O&R in a manner so as to conceal the true purposes of the payments, or the identity of the payer, or both. Some of these payments were illegal and others were not expenses properly chargeable to the utility.
The allegations of fraudulent diversion of funds and fraudulent representation to the ratepayers and the rate regulators contained in the amended complaint are far broader than the information uncovered by the Rockland County Grand Jury investigation. Included are claims of affirmative misrepresentations made after the wrongdoing came to light, as to the nature, extent and amount of the unauthorized, illegal, improper or unreported payments and items of bribery and extortion. Substantial diversion of funds is also charged based on payment of personal expenses of O&R's then Chief Executive Officer James F. Smith, expenses of Ms. Winikow and others.
The complaint also charges that defendants concealed and affirmatively misrepresented to the PSC projections for future electricity and gas demand in the franchised area.