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UNITED STATES v. PACCIONE

September 3, 1997

UNITED STATES OF AMERICA, - v - ANGELO PACCIONE, et al., Defendants.


The opinion of the court was delivered by: MOTLEY

 On July 17, 1997, this court held a contempt proceeding to determine whether or not Dominick Vulpis, the brother of defendant Anthony Vulpis, should be held in contempt of the court's June 17 and June 25 Orders directing him to take certain actions with respect to assets allegedly belonging to the Rosedale Carting Co. ("Rosedale"). The court finds Vulpis to be in contempt and orders him to pay the attorney's fees and costs of the Receiver of Rosedale as well as compensatory sanctions in an amount to be determined at the close of discovery.

 BACKGROUND

 The underlying facts in this case have been set forth in this court's previous opinion sentencing three of defendants and familiarity therewith is assumed. See U.S. v. Paccione, 751 F. Supp. 368 (S.D.N.Y.), aff'd, 949 F.2d 1183 (2d Cir. 1991). To summarize briefly, this case began as a criminal action against Angelo Paccione, Anthony Vulpis, and a number of other defendants. On June 8, 1990, a jury found defendants guilty under the Racketeering Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c) and (d) (West 1988), and related fraud charges. The court approved a Forfeiture Consent Order on that date requiring defendants to pay $ 22 million to the United States within 90 days. Barrington D. Parker *fn1" was then appointed, by Order dated June 19, 1990, Trustee and Receiver (the "Receiver") for the government's interest in those corporations which were owned by defendants, including Rosedale, a waste carting company and one of the corporate defendants. Nearly nine years later, the government has yet to receive the bulk of the $ 22 million which it was supposed to collect.

 Rosedale was one of the largest assets owned by defendants. However, the Receiver encountered numerous obstacles in his attempt to sell it. One major problem has been a complete lack of interest among the purchasing public. (Petition filed by Louis D'Angelo on June 16, 1997 in support of his motion for a temporary restraining order, P8). In addition, Rosedale's competitors unlawfully began to acquire a good deal of its business as early as 1991. (D'Angelo Pet. P9) *fn2" Though the Receiver brought actions against a number of the competing carting companies for these predatory activities, he was able to obtain only $ 825,000 in settlement, a small fraction of the value of business lost by Rosedale. (D'Angelo Pet. P10). Finally giving up hope of ever obtaining a fair price for Rosedale for these reasons, the receiver sold the company on December 27, 1994 for the relatively modest sum of $ 6.2 million to K.C. Waste Services, Inc., a company in which Dominick Vulpis held a significant minority interest (D'Angelo Pet. P13).

 On February 13, 1997, Dominick Vulpis pled guilty in New York Supreme Court to two counts of the crime of Combination in Restraint of Trade and Competition and admitted that he had participated with other members of the waste carting industry in a customer allocation scheme whereby business formerly belonging to Rosedale was diverted to a competitor and then funneled back to him. (Tr. at 22.) In particular, Vulpis admitted that a rival waste carter was providing services to the Ferdinand Gutman Company, which had once been serviced by Rosedale, and that this carter compensated him by paying him $ 320,000. (Tr. at 24.) This payment was disguised as a fee for consulting services and was paid to Lyn-Val, Inc., a corporation controlled by Vulpis. Another rival carting company, Rockaway Recycling, also admitted to engaging in similar activity with defendant Vulpis when it pled guilty to related charges on Jan. 13, 1997. (Jan. 13 Tr. at 3-4.)

 Suspecting that Vulpis may have engaged in other payment schemes which led to the loss in value of Rosedale prior to its sale to KC Waste, the Receiver gained access to documents seized by the District Attorney in connection with its indictment of Vulpis. After reviewing the documents on June 10, 1997, the Receiver concluded that Vulpis may have collected in excess of $ 4 million from rival carting companies for business which they had taken from Rosedale. Moreover, one document suggested to the Receiver that Vulpis had obtained approximately $ 6.3 million in connection with the sale of Rosedale to KC Waste, implying that, absent this payment, KC Waste would have been able to pay a great deal more for Rosedale. (D'Angelo Pet. at P24.) The Receiver also determined after inspecting the seized documents that a state court breach of contract action brought by Vulpis against KC Waste and related companies (collectively, the "Vulpis Action Defendants") was an attempt by Vulpis to collect some of the payments which were owed to him under these schemes and that such payments were properly assets of the Receiver, since they led to the loss of Rosedale's value.

 Vulpis did appear on June 23, 1997, along with an attorney, Mr. Charles Singer, who claimed that he represented Vulpis in the removed state court action but could not represent him in connection with the matters raised in the June 17 Order because he felt that it raised Fifth Amendment issues which he was not competent to handle. Thus, he requested that Vulpis be given more time to retain counsel to represent him. The court adjourned the hearing until July 10, 1997. Moreover, on June 25, 1997 the court issued a revised order (the "June 25 Order") which clarified some of Vulpis' obligations and set a briefing schedule for the July 10 hearing.

 On July 10, 1997, Mr Singer again appeared and represented to the court that Vulpis had still not retained an attorney. Though Mr. Singer repeated that he did not represent Mr. Vulpis in connection with matters raised in the June 17 and June 25 Orders, he continued to address the court on Vulpis' behalf. Because Vulpis (1) had not submitted papers in accordance with the June 25 Order, (2) had not sent copies of notifications as required by the both the June 17 and June 25 Orders, and (3) had not deposited in an escrow account the full amount of consulting fees paid to him, this court directed the Receiver to prepare an Order to Show Cause why Vulpis should not be held in contempt of court and set the matter for a hearing on July 17, 1997.

 At the July 17 hearing, Vulpis appeared with counsel whom he had recently retained. Counsel's request for a further adjournment was denied, and Vulpis was directed to testify about his compliance with the June 17 and June 25 Orders.

 However, Vulpis refused to answer on Fifth Amendment grounds a series of questions concerning his present financial condition, his relationship with Lyn-Val Associates and his receipt of payments from various carting companies.

 At the close of the hearing, the court originally proposed to hold the preliminary injunction hearing on September 15, 1997, but Vulpis' counsel requested that the date be made September 30 because he had long standing vacation plans and was intending to be out of the country on September 15. The court then scheduled the hearing for September 30th and set a briefing schedule for the parties.

 DISCUSSION

 I. Standard for Contempt

 In order for a district court to hold an individual liable for civil contempt, three conditions must be met: (1) the district court must have entered an order that was clear and unambiguous, (2) it must be shown by clear and convincing evidence that the alleged contemnor failed to comply with the order, and (3) the alleged contemnor must have failed to introduce credible evidence of a present inability to ...


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