The opinion of the court was delivered by: DONALD J. LEE
INDEX TO SEPTEMBER 3, 1993 MEMORANDUM OPINION
Count One: The Conspiracy
The Conspiracy and its Objects
Manner and Means of the Conspiracy
Count Two: Illegal Gambling Business
DEFENDANT THOMAS "BUD" MCGRATH'S MOTION TO DISMISS COUNT I
Prohibition of Illegal Gambling Business,
Laundering of Monetary Instruments,
18 U.S.C. § 1956(a)(1)(A)(i)
Legislative History of 18 U.S.C. § 1956(a)(1)(A)(i)
S. 572, 99th Cong., 1st Sess. (1985)
S. 1385, 99th Cong., 1st Sess. (1985)
S. 1335, 99th Cong., 1st Sess. (1985)
Hearings before the Senate Committee on the Judiciary
Comments on S. 572 and S. 1385
Comments on the Administration Bill, S. 1335
S. 2683, 99th Cong., 2d Sess. (1986)
Conclusions Drawn from Legislative History
Conclusion with respect to Defendant Thomas "Bud" McGrath's Motion to Dismiss Count I
DEFENDANT SHEILA SMITH'S MOTION TO DISMISS AND
DEFENDANT JACK CONLEY'S OMNIBUS PRETRIAL MOTION:
MOTION TO DISMISS COUNTS I AND II
Vagueness, Facially and as Applied
Adequacy of the Statement of Illegal Gambling
Business Object and Offense
Before the Court are Defendant Thomas "Bud" McGrath's Motion to Dismiss Count I (Document No. 388), Defendant Sheila F. Smith's Motion to Dismiss (Document No. 381), Defendant John Francis "Jack" Conley's Omnibus Pretrial Motion: Motion to Dismiss (Document No. 374, in part), Defendant Mark A. Abbott's Motion to Dismiss on the Grounds of Duplicitous Indictment or, in the Alternative, to Elect (Document No. 252) and Defendant Thomas "Bud" McGrath's Motion to Dismiss or, in the Alternative, to Elect or Force the Government to Divide Count I on the Grounds of Duplicitous Indictment (Document No. 389). Before addressing the motions, the Court will summarize the pertinent parts of the Indictment.
The Indictment contains an Introduction section before Count I begins. The introduction alleges that Duffy Conley was the owner and operator of Duffy's Vending and/or Three Rivers Coin, which had the primary purpose of facilitating an illegal gambling business based on video poker machines. The illegal gambling business was carried on by Duffy Conley "and his associates and employees."
The Introduction identifies the remaining Defendants and their roles as follows. William C. Curtin was the general manager of Duffy's Vending, assisting Duffy Conley in daily operations.
Sheila Smith was an office manager, accountant and bookkeeper for Duffy Conley, also supervising employees who placed, moved and serviced video poker machines.
Jack Conley recorded service calls from locations and facilitated the movement, repair and servicing of video poker machines.
Bud McGrath, Duffy Conley's employee, marketed and secured locations for Duffy Conley's video poker machines.
The Introduction alleges that Duffy Conley employed Chris Kail, Joseph Devita, Frank Garofalo, Thomas Ciocco, Michael Sukaly, Phillip "Mike" Ferrell, Anestos "Naz" Rodites and others known and unknown to the Grand Jury as collectors whose duties included going to machine locations and collecting the proceeds of video poker machine gambling.
The Introduction alleges that William Rusin was an "associate" of Duffy Conley, who entrusted Rusin with depositing proceeds of the illegal gambling business into Pittsburgh National Bank account #2-680118, the Duffy's Vending Account.
The Introduction alleges two "essential parts" of the illegal gambling business. Paragraph 8 of the Indictment alleges:
8.) The placement and use of the video poker machines as illegal gambling devices at various locations, such as taverns, sandwich shops, fraternal clubs, restaurants and convenience stores, in the Western District of Pennsylvania and other places was an essential part of the illegal gambling business that was run by JOHN F. "DUFFY" CONLEY and his associates and employees.
Indictment, P 8 (Document No. 1). Paragraph 18 of the indictment alleges:
18.) It was an essential part of the illegal gambling business run by JOHN F. "DUFFY" CONLEY that the proceeds of this unlawful activity be collected from the various locations where the video poker machines were in use as illegal gambling devices. To accomplish this collection activity, Duffy's Vending and/or Three Rivers Coin maintained a group of employees whose primary job was to travel to the locations, divide the proceeds from the illegal gambling activity with a person at each location, collect the share of the proceeds owed to Duffy's Vending/Three Rivers Coin and in turn deliver that money to another employee of JOHN F. "DUFFY" CONLEY or deposit the money into a designated bank account which was ultimately controlled by JOHN F. "DUFFY" CONLEY.
Indictment, P 18 (Document No. 1) (emphasis added).
Count One: The Conspiracy
Count One, the conspiracy count, is set forth in three sections: "The Conspiracy and its Objects," "Manner and Means of the Conspiracy" and "Overt Acts."
Paragraph 21 of the Indictment constitutes "The Conspiracy and its Objects," stating:
21.) Beginning on or around 1984 through and including September 20th of 1991, in the Western District of Pennsylvania and elsewhere, the defendants . . . knowingly and unlawfully did conspire, combine, confederate and agree together and with each other and with other persons both known and unknown to the grand jury, to commit offenses against the United States, that is:
(a) It was a part and object of the conspiracy that the above named defendants, and other persons known and unknown to the grand jury, did knowingly and unlawfully conduct, finance, manage, supervise, direct and own all or part of an illegal gambling business involving video poker machines in violation of the laws of the Commonwealth of Pennsylvania [Title 18, Pennsylvania Consolidated Statutes, Section 5513], the state in which the illegal gambling business was conducted. This illegal gambling business involved five (5) or more persons who conducted, financed, managed, supervised, directed and owned all or part of the business, remained in substantially continuous operation for a period in excess of thirty (30) days, and had a gross revenue of more than $ 2000 for a single day, in violation of Title 18, United States Code, Section 1955.
(b) It was further a part and object of the conspiracy that the above named defendants, and others known and unknown to the grand jury, did knowingly and unlawfully conduct or attempt to conduct financial transactions affecting interstate or foreign commerce, which transactions involved the proceeds of a specified unlawful activity, that is, illegal gambling with video poker machines, knowing that the property involved in such financial transactions represented the proceeds of the illegal gambling activity, and with the intent to promote the carrying on of the specified unlawful activity, illegal gambling with video poker machines, that is, during the period November 1986 through September 1991 cash proceeds from illegal gambling involving video poker machines was [sic] received, transferred, delivered, deposited or otherwise transacted by the defendants in violation of Title 18, United States Code, Section 1956.
Indictment, P 21 (Document No. 1) (emphasis added).
"Manner and Means of the Conspiracy"
The "Manner and Means of the Conspiracy" is set forth in paragraphs 22 through 37. This section of the Indictment alleges as follows.
Between June, 1986 until at least April of 1991, Duffy Conley, Curtin, McGrath and Abbott sought locations in which to place video poker machines. From June of 1986 through December, 1989, Sheila Smith received requests for video poker machines and supervised the placement of them in various locations. From June of 1986 through December, 1989 Sheila Smith and Jack Conley and others received calls for servicing of machines and dispatched Duffy Vending employees to perform the services.
From May, 1989 through December, 1989 Duffy Conley and Curt in conducted periodic meetings during which employees of Duffy Vending were taught to instruct location operators how to use the "knock-off" and "meter" features on video poker machines and otherwise use the machines for illegal gambling.
From June of 1986 through December of 1989, employees of Duffy Conley, including Chris Kail, Devita, Garofalo, Ciocco, Sukaly, Ferrell and Rodites, collected the proceeds of video poker machines from various locations.
The "Manner and Means of the Conspiracy" section reiterates the locations operated by various defendants, adding only the allegation that Monica Kail operated the Sheridan Coffee Shop, previously known as the Original Snack Shop, in addition to Kail's Coffee Corner.
Paragraph 28 alleges the procedure used to collect from locations the proceeds of the illegal gambling, stating:
28.) It was further a part of the conspiracy that during the time period November 1986 through December 1989 those persons working as collectors on behalf of JOHN F. "DUFFY" CONLEY would go to the various locations that had video poker machines used for illegal gambling and check the accounting information contained in each video poker machine to determine the total amount of money played and the total number of "hits", or the amount of money paid out of the machine, since the last collection period. The collector would then either actually open the machines and collect the proceeds from the machine or would confer with a representative of each location and review the accounting for the period of time since the last collection. Based on that accounting the collector would collect the amount of proceeds due to JOHN F. "DUFFY" CONLEY and either or both of them would count the same to determine a total amount of the collection. Some part of the proceeds were then deposited to the bank accounts of Duffy's Vending and/or Three Rivers Coin at various branches of Pittsburgh National Bank.
Indictment, P 28 (Document No. 1).
From 1986 through early 1989, Duffy Conley purchased from a wholesaler of video games in Imperial, PA video poker machines equipped to be used as illegal gambling devices with proceeds of the illegal gambling business in the form of cash and checks. The wholesaler sold the machines to Duffy Conley and delivered them to his employees.
Duffy Conley and William Curtin used cash proceeds from the illegal gambling business to pay Duffy Vending employees, and to supplement their paychecks with envelopes of cash.
William Rusin deposited into Duffy Vending's Robinson Township Pittsburgh National Bank account proceeds of the illegal gambling business in the form of cash and checks.
In January 1990 Duffy Conley instructed an employee to purchase property in McKees Rocks, Pa. to be used as a facility to service the poker machines that had previously been serviced by Duffy's Vending. Duffy Conley gave the employee money to purchase the property and told the employee whom to hire as service technicians. This business for the servicing of video poker machines was called Matrix.
In January of 1990 Duffy Conley and others created three entities. Duffy Conley and Ciocco created T D Amusements. Duffy Conley and Ferrell created S&M Vending. Duffy Conley and an unindicted co-conspirator known to the grand jury created Chartiers Vending.
From 1988 through 1990 Duffy Conley attempted to expand his illegal gambling business to areas outside the state of Pennsylvania by sending employees and machines to other states.
The conspiracy count alleges sixty-eight (68) overt acts were committed in furtherance of the conspiracy. Roughly one-third of the overt acts alleged are acts most directly related to procuring, setting up and maintaining video poker machines at various locations. See Overt Act Nos. 1-5, 10-13, 16-25, 63, 65, 67, 68. Several relate to pay-offs being made. See Overt Act Nos. 53-56.
Numerous overt acts allege that persons made payments to Matrix by way of checks drawn upon various banks. Duffy Vending employees Ferrell and Ciocco, as well as Duffy Conley himself, are alleged to have made such payments by check. Overt Act Nos. 46, 47, 50-52. Location operators Goodwin, Fleagle and Spratt are also alleged to have made payments to Matrix by check. Overt Act Nos. 48, 49, 58-61.
Numerous Defendants are identified as having committed acts related to the collection, division and distribution of the proceeds of the illegal gambling business. Such overt acts are alleged to have been committed by Duffy Conley, and Duffy Vending employees Sheila Smith, Sukaly, Devita, Chris Kail, Garofalo, Ciocco, Ferrell and Rodites, and location operators Rossi, Steinhart, Reed and Monica Kail. Overt Act Nos. 6-8, 26-29, 32, 57, 65 & 66.
Finally, Overt Act Nos. 9 and 62 allege that Rossi and Joanne Smith, respectively, cashed checks to enable players to gamble on video poker machines in their establishments.
Count Two: Illegal Gambling Business
Count Two, the illegal gambling business count, charges all Defendants as follows:
The grand jury further charges:
Beginning on or around June of 1984, and continuing to on or around September 1991 in the Western District of Pennsylvania and elsewhere, the defendants . . . along with others known and unknown to the grand jury did unlawfully and knowingly conduct, finance, manage, supervise, direct and own all or part of an illegal gambling business involving video poker machines in violation of the laws of the Commonwealth of Pennsylvania [Title 18, Pennsylvania Consolidated Statutes, Section 5513], the state in which the illegal gambling business was conducted. This illegal gambling business involved five (5) or more persons who conducted, financed, managed, supervised, directed and owned all or part of the business, remained in substantially continuous operation for a period in excess of thirty (30) days and had a gross revenue of more than $ 2000 for a single day.
All in violation of Title 18, United States Code, Section 1955 and Title 18, United States Code, Section 2.
DEFENDANT THOMAS "BUD" MCGRATH'S MOTION TO DISMISS COUNT I (DOCUMENT NO. 388)
Defendant Thomas "Bud" McGrath, in his Motion to Dismiss Count I (Document No. 388), raises a challenge to Count One on the basis that charging the money laundering object of the conspiracy in addition to the substantive illegal gambling business in Count Two violates the constitutional prohibition against double jeopardy in that Congress did not intend multiple convictions and punishments for the conduct alleged in the two counts. In doing so, McGrath also raises the issue of the proper relationship between illegal gambling business offenses and money laundering offenses. He states:
McGrath's First Supplemental Brief in Support of Motion to Dismiss Count 1, at 13 (Document No. 628) (quoting United States v. Edgmon, 952 F.2d 1206, 1213-14 (10th Cir. 1991), cert. denied, U.S. , 120 L. Ed. 2d 906, 112 S. Ct. 3037 (1992)).
The Double Jeopardy Clause of the Fifth Amendment, which provides that no person shall "be subject for the same offense to be twice put in jeopardy of life and limb . . . ," U.S. Const. Amend. V, has been interpreted to provide three forms of protection. "The Double Jeopardy Clause 'protects against a second prosecution for the same offense after acquittal. It protects against a second prosecution for the same offense after conviction. And it protects against multiple punishments for the same offense.'" United States v. Grayson, 795 F.2d 278, 281 (3d Cir. 1986) (quoting North Carolina v. Pearce, 395 U.S. 711, 717, 23 L. Ed. 2d 656, 89 S. Ct. 2072 (1969)), cert. denied, 479 U.S. 1054, 107 S. Ct. 927, 93 L. Ed. 2d 978, 481 U.S. 1018, 107 S. Ct. 1899, 95 L. Ed. 2d 505 (1987). As Defendant McGrath's double jeopardy challenge arises in the context of a single indictment, the protection against multiple prosecutions does not apply. Only the protection against multiple punishments applies in this case.
The Double Jeopardy Clause's protection against multiple punishments in a single case ensures only that a court does not impose punishment in excess of the punishment intended by the legislature. "With respect to cumulative sentences imposed in a single trial, the Double Jeopardy Clause does no more than prevent the sentencing court from prescribing greater punishment than the legislature intended." Missouri v. Hunter, 459 U.S. 359, 366, 74 L. Ed. 2d 535, 103 S. Ct. 673 (1983). This Court's inquiry begins with the question of whether the legislature--in this case, Congress--intended each violation of separate statutes to be separate offenses. Garrett v. United States, 471 U.S. 773, 778, 85 L. Ed. 2d 764, 105 S. Ct. 2407 (1985).
The starting point in determining whether Congress intended the violation of separate statutes to be the "same offense" is the so-called "Blockburger test." In Blockburger v. United States, 284 U.S. 299, 76 L. Ed. 306, 52 S. Ct. 180 (1932), the Supreme Court restated its test for determining whether violation of two distinct statutes by way of a single act constituted the "same offense." It said:
The applicable rule is that, where the same act or transaction constitutes a violation of two distinct statutory provisions, the test to be applied to determine whether there are two offenses or only one is whether each provision requires proof of an additional fact which the other does not.
Id. at 304. The Court has made clear, however, that "the rule stated in Blockberger was applied as a rule of statutory construction to help determine legislative intent." Garrett, 471 U.S. at 778-79; see also Hunter, 459 U.S. at 368; Albernaz v. United States, 450 U.S. 333, 340, 67 L. Ed. 2d 275, 101 S. Ct. 1137 (1981); Whalen v. United States, 445 U.S. 684, 691-92, 63 L. Ed. 2d 715, 100 S. Ct. 1432 (1980). Although a determination that violation of two statutes is the "same offense" under the Blockberger test raises a presumption that Congress did not intent multiple punishments, that presumption must yield to a clearly expressed contrary intent. As the Hunter Court explained:
Hunter, 459 U.S. at 366-67. In short, determining whether Congress intended to permit multiple punishments entails "an analysis of the substantive criminal law." Gillespie v. Ryan, 837 F.2d 628, 632 (3d Cir.), cert. denied, 488 U.S. 833, 102 L. Ed. 2d 66, 109 S. Ct. 90 (1988).
Defendant McGrath's double jeopardy challenge is two-fold. First, he contends that the conspiracy to launder money is the same offense as the substantive illegal gambling business charge. Second, he implicitly contends that an illegal gambling business is a lesser included offense of laundering the "proceeds" of an illegal gambling business, despite his being charged with substantive illegal gambling but not substantive money laundering.
The Court concludes that Congress intended multiple punishments for a conspiracy to launder money and violation of the substantive illegal gambling business prohibition. The elements of conspiracy include an agreement. While violation of the illegal gambling business prohibition requires participation of five or more persons, an agreement is not an element of the offense. See Iannelli v. United States, 420 U.S. 770, 788, 43 L. Ed. 2d 616, 95 S. Ct. 1284 (1975). Likewise, to violate the illegal gambling business prohibition, one must actually engage in such a business. An agreement to launder the "proceeds" of an illegal gambling business does not require operation of the illegal gambling business. One could agree first to operate the business and then to launder its "proceeds" without actually engaging in either activity. A conspiracy to launder money and a substantive violation of the illegal gambling business prohibition are not the "same offense" under Blockberger.
McGrath's second argument has more substance. For an agreement to constitute a conspiracy under 18 U.S.C. § 371, the object of the agreement or the means of effectuating it must be illegal. If, as Defendant McGrath contends, Congress did not intend that the conduct alleged in the money laundering object of the conspiracy be money laundering, the money laundering object of the conspiracy fails to state an offense. If violation of the illegal gambling prohibition is a lesser included offense of money laundering and Congress's intent to impose multiple punishments is not clear, the propriety of alleging a "lesser included object" as a separate object must be addressed. If Congress intended the facts alleged to be covered by both statutes, with multiple punishments, a conspiracy alleging both objects is properly charged.
As the government in Edgmon did not dispute the father's contention that the conversion and the money laundering failed the Blockberger test, the Edgmon court stated that it would assume that they did. Nonetheless, discussing Garrett, the court stated, "As in the present case, the two offenses [in Garrett] 'failed' the Blockberger test because one served as an element of the other." Id. at 1213 (emphasis added). Noting that the Blockberger test is not determinative, the court went on to reject the father's contention, concluding that Congress intended punishment for the specified unlawful activity and, in addition, the money laundering activity.
The court now turns to the application of the Blockberger test to Sections 1956(a)(1)(A)(i) and 1955. Sections 1956(a)(1)(A)(i) and 1956(c)(7) provide in relevant part:
s 1956. Laundering of monetary instruments
(a)(1) Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact ...