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U.S. v. SALVAGNO

February 19, 2004.

UNITED STATES OF AMERICA
v.
ALEXANDER SALVAGNO, RAUL SALVAGNO, and AAR CONTRACTOR, INC., Defendants



The opinion of the court was delivered by: HOWARD MUNSON, Senior District Judge

MEMORANDUM — DECISION AND ORDER

The government has charged defendants Alexander Salvagno, and Raul Salvagno, as well as their company, AAR Contractor, Inc., ("AAR") with various crimes stemming from their asbestos Page 2 abatement business. Count One of the fourteen count Second Superceding Indictment ("Indictment") charges defendants with thirty-three acts of racketeering in violation of 18 U.S.C. § 1962(d). Specifically, Count One sets forth a pattern of racketeering activity consisting of: (1) obstruction of justice, in violation of 18 U.S.C. § 1512(b)(2)(B) (racketeering act one); (2) obstruction of justice, in violation of 18 U.S.C. § 1512(b)(1) and(b)(3) (racketeering act two); (3) money laundering, in violation of 18 U.S.C. § 1956(a)(1)(B)(i) and 18 U.S.C. § 2 (racketeering acts three through nine); (4) money laundering, in violation of 18 U.S.C. § 1956(a)(1)(B)(i) and 18 U.S.C. § 2 (racketeering acts ten through fourteen); and, (5) money laundering, in violation of 18 U.S.C. § 1956(a)(1)(A)(i) and 18 U.S.C. § 2 (racketeering acts fifteen through thirty-three). Count Two charges defendants with conspiring to violate the Clean Air Act, ("CAA"), 42 U.S.C. § 7401 et seq., and the Toxic Substances Control Act, ("TSCA"), 15 U.S.C. § 2601 et seq. Counts Three through Eleven charge defendants with violating the CAA, 42 U.S.C. § 7413(c)(1) and (2). Counts Twelve through Fourteen charge Alexander Salvagno with filing a false Federal personal income tax return (Form 1040) in violation of 26 U.S.C. § 7206(1). See Dkt. No. 112, Indictment.

  Currently before the court are defendants' motions: (1) to dismiss the RICO Conspiracy Count (Count One of the Indictment); (2) to dismiss the various substantive CAA Counts (Counts Three through Eleven); (3) to strike prejudicial surplusage from the Indictment; and, (4) for an order directing an evidentiary hearing to determine the nature and extent of, and the appropriate sanctions for, the disclosures made during the course of plea and cooperation negotiations and agreements by at least one co-defendant in violation of a pre-existing joint defense agreement. For the reasons that follow below, defendants' motion to dismiss the RICO Conspiracy Count (Count 1 of the Indictment) is DENIED; defendants' motion to strike prejudicial surplusage from the Indictment is Page 3 DENIED; defendants' motion to dismiss the various substantive CAA Counts (Counts Three through Eleven) is DENIED without prejudice to renewal based on the evidence presented at trial; and, defendants' motion requesting the court to issue an order directing an evidentiary hearing to determine the nature and extent of, and the appropriate sanctions for, the disclosures made during the course of plea and cooperation negotiations and agreements by at least one co-defendant in violation of a pre-existing joint defense agreement is DENIED.

  BACKGROUND

  A. Relevant Procedural History

  On February 13, 2002, the government indicted defendants and charged them with various crimes stemming from their asbestos abatement activities. Initially, the government charged seven additional individuals, Thomas Reed, Gary Alvord, Anthony Mongato, Sheon Dimaio, Michael Shanahan, Robert O'brey, and Gerald Lindquist, with crimes relating to their asbestos abatement activities. Since the government indicted them, the seven co-defendants have entered guilty pleas. Previously, the government brought an order to show cause why the court should not issue an order precluding consideration of motions filed by David Bernfeld and Jeffrey Bernfeld, or future appearances of any sort, in the absence of their having entered an appearance in this matter and having gained admission to practice law in the Northern District of New York, generally or for purposes of this case. This motion is now moot because both David Bernfeld and Jeffrey Bernfeld have entered their appearance in this matter and have gained admission to practice law in the Northern District of New York. Since their admission, however, the court granted the government's motion to disqualify Jeffrey Bernfeld from representing defendants Alexander Salvagno and AAR Contractor, Inc., as of February 27, 2003. See Dkt. No. 128, Mem. Decision and Order. For these Page 4 reasons, the Government's order to show cause is moot.

  B. The Alleged Scheme

  The alleged scheme is set forth in the Indictment and the government's response papers, which the court summarizes briefly as follows. From 1988 to 2000, Alexander and Raul Salvagno owned and operated AAR, which grew to be one of the largest asbestos abatement companies in New York State with a significant presence in Central and Upstate New York. Their asbestos abatement operation, however, is alleged to have failed to comply with various federal and New York State regulations, which apply to the removal of asbestos to protect workers, the public, and the environment.*fn1 In 1990, defendants allegedly devised and implemented a scheme that defrauded clients of millions of dollars through false representations as to how AAR would perform its asbestos abatement work. Dkt. No. 94, Government's Am. Resp. at 2-3.

  In an effort to reduce their employees' "time-on-the-clock," the most costly component of asbestos abatement projects, defendants are alleged to have convinced a close friend, Timothy Carroll, to start an accredited laboratory and an air and project monitoring company, Analytical Laboratories of Albany, Inc., ("ALA"), in which Alexander Salvagno would secretly own a one-half share. By controlling ALA, defendants were able to circumvent air and project monitoring regulations and falsify test results. ALA, acting as an "independent" laboratory, would mail AAR's clients the falsified test results. Defendants defrauded their clients by leading them to believe that, and charging them as if, they performed the asbestos abatement in accordance with the applicable regulations when in fact they had not. This alleged scheme allowed defendants to complete their abatement projects in less time than if they were to have adhered to the regulations. Id. at 3-5; Dkt. Page 5 No. 112, Indictment at 9-10.

  During the alleged conspiracy, Mr. Carroll deposited ALA-derived funds in his own bank account and subsequently withdrew half of those funds in cash and gave them to Alexander Salvagno. As part of their conspiratorial arrangement with Alexander Salvagno, ALA and Mr. Carroll filed false W-2 forms, which made it appear that Mr. Carroll received all of ALA's funds. ALA failed to provide a W-2 form to Alexander Salvagno and falsified its corporate tax returns while Alexander Salvagno's income tax returns failed to reflect the additional income he received from ALA. Alexander Salvagno also directed AAR to pay a "RASH Services, Inc.," instead of AAR's General Manager, Thomas Reed, a significant portion of Mr. Reed's salary in order to conceal Mr. Reed's true income and allow AAR to pay lower payroll taxes. Again, AAR filed false tax documents as did Mr. Reed. Dkt. No. 94, Government's Am. Resp. at 5-6; Dkt. No. 112, Indictment at 10-13. In addition, defendants are alleged to have obtained large sums of money through mail fraud, which in turn they committed to AAR in order to sustain and expand its illegal activities. Id. at 6.

  DISCUSSION

 I. Defendants' Motion to Dismiss RICO Count

  Defendants move to dismiss the RICO Conspiracy Count (Count 1) arguing that the underlying acts upon which the government relies are insufficient to sustain such a charge. The government bases the RICO Conspiracy Count on money laundering predicates, which in turn rest upon an underlying mail and wire fraud scheme. Defendants contend that the conduct in support of the underlying mail and wire fraud does not, as a matter of law, constitute mail and wire fraud. Defendants also contest the Indictment's association-in-fact RICO enterprise, which it defines as Page 6 an association of a certain and distinct group of seven separate legal entities. Defendants contend that most of these entities did not exist, legally or otherwise at the time the association-in-fact RICO enterprise allegedly formed. Moreover, they suggest that aside from AAR and ALA, the entities that comprise the association-in-fact enterprise were competitors with interests adverse to each other. Defendants also contend that the RICO Count is constitutionally vague. See Dkt. No. 102, Defs.' Mem. of Law in Supp. of Mot. at 2-3.

  A. Sufficiency of the Indictment

  The standard for the legal sufficiency of an indictment is well-established. An indictment is sufficient when it contains the elements of an offense, notice to the defendant of the charges he must be prepared to meet, and information sufficient to protect the defendant from the risk of double jeopardy. United States v. Bailey, 444 U.S. 394, 414, 100 S.Ct. 624, 636, 62 L.Ed.2d 575 (1980). "An indictment need only track the language of the statute and, if necessary to apprise the defendant of the nature of the accusation against him, state the time and place in approximate terms." United States v. Covino, 837 F.2d 65, 69 (2d ...


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