The opinion of the court was delivered by: BECHTLE
Defendants Rocco Frumento and Andrew Millhouse, former employees of the Pennsylvania Department of Revenue's Bureau of Cigarette and Beverage Taxes ("Bureau"),
were each convicted by a jury of one count of violating 18 U.S.C. § 1962(c).
The convictions were based upon their acceptance of bribes during the pendency of a conspiracy to smuggle cigarettes into Pennsylvania for resale without payment of the Pennsylvania cigarette tax. Along with defendant John Sills, Frumento and Millhouse were also convicted of conspiring to commit that substantive offense, in violation of 18 U.S.C. § 1962(d). During the time this conspiracy existed, Sills was the aide to the chairman of the Philadelphia Democratic City Committee in charge of patronage. Frumento, Millhouse and Sills were also each found guilty by the jury of fraud and false statement in the making and subscribing of income tax returns for the calendar years 1971 and 1972, in violation of 26 U.S.C. § 7206(1), due to their failure to include the earnings from the cigarette smuggling operation in their taxable income.
Each defendant has filed a motion for judgment of acquittal or a new trial. For the reasons stated below, we will deny all of the motions.
In our pretrial Orders of March 1, 1976, we rejected defendants' contention that the Bureau, as a government agency, is not an "enterprise" covered by the prohibitions of 18 U.S.C. § 1962(c). We relied on our previous discussion of this issue set forth at 405 F. Supp. 23, 29-30 (E.D.Pa. 1975). Citing the subsequent decision in United States v. Mandel, 415 F. Supp. 997 (D.Md. 1976), wherein it was held that the State of Maryland does not qualify as a statutory "enterprise," defendants have again raised the issue.
We remain unpersuaded that our original decision was erroneous and, thus, again reject defendants' argument.
Congress gave the term "enterprise" a very broad meaning. United States v. Morris, 532 F.2d 436, 441-442 (5th Cir. 1976); United States v. Hawes, 529 F.2d 472, 479 (5th Cir. 1976). The term is defined as including " any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. § 1961(4) (emphasis added). Congress not only did not include any language limiting its definition of "enterprise" to private concerns, but specifically instructed that the provisions of Title IX of the Organized Crime Control Act of 1970 (18 U.S.C. § 1961 et seq.) "shall be liberally construed to effectuate its remedial purposes." Pub.L.No. 91-452, § 904(a).
The legislative history of Title IX demonstrates that its prohibitions were intended to rid the American economy of the influences of racketeering activity. The corruption of employees of a state agency, the activities of which affect interstate commerce, can be just as damaging to our system of free enterprise as the operation of an interstate business by unlawful racketeering methods. Construing 18 U.S.C. § 1962(c) to include within its coverage governmental agencies, such as the Bureau, is directly consistent with the congressional intent "to attack and to mitigate the effects of racketeer infiltration of legitimate organizations affecting interstate commerce. . . ." 116 Cong.Rec. 585 (1970) (remarks of Senator McClellan) (emphasis added).
Recent decisions have held illegal gambling operations to be enterprises within the purview of Section 1962(c). United States v. Altese, 542 F.2d 104 (2d Cir. 1976), petition for cert. filed sub nom. Napoli v. United States, 45 U.S.L.W. 3315 (U.S. Sept. 18, 1976) (No. 76-406); United States v. Morris, supra; United States v. Hawes, supra; United States v. Cappetto, 502 F.2d 1351 (7th Cir. 1974), cert. denied, 420 U.S. 925, 43 L. Ed. 2d 395, 95 S. Ct. 1121 (1975). The expansive interpretation of "enterprise" adopted in those cases reinforces our view that Section 1962 was not designed solely to eliminate the infiltration of legitimate businesses and unions but, rather, was intended to eradicate patterns of racketeering activity contaminating any organization engaged in or affecting interstate commerce. Moreover, in those cases, the application of Section 1962 was not viewed as an unwarranted intrusion into traditional federal-state relationships. Similarly, we are not convinced that persistent corruption in a state agency which has an effect on interstate commerce is simply a matter of local concern which Congress had no proper interest in seeking to regulate through this federal legislation.
Accordingly, for the reasons expressed here and in our above cited earlier Opinion, we believe the jury was properly instructed that the Bureau is an "enterprise" within the coverage of 18 U.S.C. § 1962(c).
The Court also believes that there was no variance between the indictment and the Government's proof concerning the relevant "enterprise." The theory of the Government's case was that Frumento and Millhouse, as officials of the Bureau, conducted the affairs of the Bureau through a pattern of racketeering activity, i.e., the solicitation and acceptance of bribes from Harold Sharp, unindicted coconspirator and operator of Sharp Candy and Tobacco Company, the cigarette wholesaling business which served as the outlet for the smuggled cigarettes. At trial, the Government produced witnesses who testified regarding the function of the Bureau
and its employees, and witnesses who testified concerning the official capacities of defendants Frumento and Millhouse within the Bureau. Other Government witnesses testified about payments made to Frumento and Millhouse in their official capacities which resulted in their protecting, promoting and facilitating Sharp's illegal cigarette wholesaling business. These payments to Frumento and Millhouse, designed to influence their official conduct as employees of the Commonwealth, were acts of bribery under Pennsylvania law. The Government never suggested at trial, either by proof or argument, that there was any enterprise other than the Bureau upon which this prosecution was based. The Government's pleading and proof were in conformity.
Subsequent to the return of the indictment in this case, the Government developed evidence that, during the period of time in which the Sharp conspiracy was operating, Frumento and Millhouse were also being paid bribes by other cigarette smugglers. [N.T. 2-8.] Defendants vigorously opposed the introduction at trial of testimony concerning these other bribes.
The Court allowed the testimony, pursuant to Federal Rule of Evidence 404(b), as proof of motive, opportunity, intent, plan, knowledge and absence of mistake or accident on the part of Frumento and Millhouse as regards their participation in the Sharp conspiracy. [N.T. 7-144, 10-2, 10-11.] However, the Court ruled that the jurors would not be permitted to find the substantive acts of racketeering charged against Frumento and Millhouse established unless they believed that payments had been received by Frumento and Millhouse from the Sharp operation. To the extent that the jurors accepted as true the evidence of acts of bribery unrelated to the Sharp scheme, they were instructed that these acts could not be considered as constituting the pattern of racketeering activity necessary to convict under 18 U.S.C. § 1962(c). [N.T. 12-112 to 12-113.]
Testimony concerning the other bribes came from three witnesses. LeRoy Wade, unindicted coconspirator in the Sharp scheme, was a field investigator assigned to the Bureau's District 2 office during the period in question. He frequently worked together with Frumento. Wade testified that, in January, 1972, Millhouse showed him a box full of cash and offered to let him have the "Coccia thing." Shortly thereafter, Wade testified, he and Frumento began to receive payments totalling $600 per month from Ernest Coccia, who was engaged in illegal cigarette smuggling in the Philadelphia area.
Coccia testified that, in December, 1971, he met with Millhouse and James Bushey and arranged to smuggle cigarettes into Pennsylvania. In return for protection from Bureau interference in the District 2 area, Coccia agreed to pay Millhouse $150 per week. Millhouse told Coccia that someone else would pick up the money. Approximately a week later, with Millhouse's approval, Frumento and Wade came to Coccia to receive the money. At that time, and every two weeks thereafter until sometime in February, 1972, Coccia paid Frumento and Wade $300 pursuant to his arrangement with Millhouse.
Bushey testified that he met with Millhouse in the spring of 1971 and informed Millhouse that he was setting up a wholesale cigarette operation in North Carolina from which he intended to sell to individuals engaged in illegal dealing in Pennsylvania. Millhouse agreed to provide protection to dealers buying from Bushey for a fee to be determined by the amount of volume being brought in by each smuggler. Thereafter, during the fall and winter of 1971, Bushey made several payments to Millhouse on behalf of two of his customers, Ernest Coccia and Robert Cariola, who were engaged in cigarette smuggling.
The rule concerning the admissibility of evidence of similar acts is well-established in this Circuit. In United States v. Stirone, 262 F.2d 571, 576 (3d Cir. 1958), rev'd on other grounds, 361 U.S. 212, 4 L. Ed. 2d 252, 80 S. Ct. 270 (1960), it was stated as follows:
Evidence of other offenses may be received if relevant for any purpose other than to show a mere propensity or disposition on the part of the defendant to commit the crime.
Evidence of similar acts is frequently admitted to prove some aspect of the offense charged, such as intent or the absence of mistake or accident. Andresen v. Maryland, 427 U.S. 463, 96 S. Ct. 2737, 2750, 49 L. Ed. 2d 627 (1976); United States v. Cook, 538 F.2d 1000, 1004 (3d Cir. 1976); see Fed.R.Evid. 404(b).
The Court believes this testimony was properly admitted under the applicable rules of law. It was relevant to far more than simply the propensity of Frumento and Millhouse to commit crime. It highlighted the cooperative relationship which existed during the time period of the Sharp conspiracy between Millhouse, Frumento and Wade, three of the alleged coconspirators in the Sharp operation. It also helped to establish that these individuals were knowingly permitting illegal cigarette businesses to function within District 2 and were intentionally permitting the smuggling in return for payments constituting bribes. It tended to confirm that, in their official positions, they had the opportunity to engage in such illegal arrangements and that their participation in the Sharp operation was not a mistake or accident.
This Court also does not believe that the probative value of this evidence was " substantially outweighed by the risk that its admission [would] create a substantial danger of undue prejudice."
United States v. Stirone, supra at 576-577 (emphasis added); see Fed.R.Evid. 403. Compare United States v. Cook, supra. The jury was instructed several times as to the limited purpose for which this testimony was admitted. [N.T. 10-24 to 10-26, 10-31 to 10-32, 10-66, 12-112 to 12-113.] Moreover, the jury was repeatedly cautioned as to the particular defendant against whom the testimony could be considered. [N.T. 7-150, 7-152 to 7-153, 10-25 to 10-26, 10-31 to 10-32, 10-38 to 10-39, 10-41, 10-47 to 10-48, 10-66, 12-112 to 12-113.] We believe these measures were quite adequate to protect against any misuse of this evidence by the jury.
Evidence of Purchase of Home in Margate, New Jersey
The Court permitted Harold Sharp to testify that, at Frumento's request, he placed a $2,700 down payment on a home in Margate, New Jersey, in early March, 1972, and, along with his wife, signed an agreement of sale for the property although neither he nor his wife had ever seen it. Sharp testified that while the house was to belong to Frumento, Frumento did not want it titled in his own name as suspicions might be raised by his paying it off as quickly as he planned on a state employee's salary. Frumento promised to repay Sharp the $2,700 out of his earnings from the ...