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U.S. v. Console

filed: December 22, 1993; As Corrected December 27, 1993.

UNITED STATES OF AMERICA
v.
RICHARD P. CONSOLE, APPELLANT UNITED STATES OF AMERICA V. MORTON MARKOFF, D.O., APPELLANT UNITED STATES OF AMERICA V. EDWARD C. CURCIO, APPELLANT



On Appeal from the United States District Court for the District of New Jersey. (D.C. Crim. No. 89-00148).

Before: Greenberg, Cowen, and Seitz, Circuit Judges.

Author: Greenberg

Opinion OF THE COURT

GREENBERG, Circuit Judge.

I. FACTUAL AND PROCEDURAL HISTORY

A. FACTUAL HISTORY

Richard P. Console, Edward C. Curcio, and Morton Markoff appeal from judgments of conviction and sentences entered in the district court on September 28, 1992. We have jurisdiction under 28 U.S.C. § 1291.

The background of the case is as follows. Console and Curcio were partners in a law firm (the "firm") located in Berlin, New Jersey, and Markoff was an osteopathic physician who practiced in nearby Clementon, New Jersey. Console started the firm in 1973, and soon began hiring other associates, some of whom later became partners. Curcio joined the firm in 1978 and became a partner in 1982. Philip LiVolsi was another partner.

The firm developed a relationship with Markoff in the 1970's, which continued into the 1980's. Markoff referred accident victims to the firm for legal services, and the firm referred clients to Markoff for medical services. When treating a client of the firm, Markoff sent the client's medical bills to the firm, which in turn sent them to the client's insurance company for the payment of the client's personal injury protection ("PIP") benefits pursuant to New Jersey's No-Fault law governing claims for injuries from automobile accidents.*fn1 When making a claim on behalf of a client seeking "special damages," the firm also sent the medical bills either to the client's or the defendant's insurance company to support claims for pain and suffering or other "special damages" sustained by the client. Markoff received the PIP payments corresponding to the medical bills he sent to the firm, and the firm retained a share of any recovery made for a claim.

B. PROCEDURAL HISTORY

In 1985, federal agents searched the firm, and in April 1989, a grand jury indicted Curcio and Markoff along with four codefendants: LiVolsi, the firm's legal administrator (Peter Hulmes), and two of Markoff's employees (Virginia Knowlton and Carmella Lombardi).*fn2 The indictment charged the defendants with violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq., and the federal mail fraud statute, 18 U.S.C. §§ 1341-42, perpetrated in connection with a scheme to defraud insurance companies by submitting inflated medical bills on behalf of accident victims represented by the firm.

On April 24, 1990, LiVolsi agreed to plead guilty to one count of RICO and two predicate acts of mail fraud and to testify before a new grand jury. This grand jury returned a superseding indictment on August 23, 1990, charging two additional defendants, Console and Kathy Baldwin-Sabath, an employee of the firm, with the commission of offenses. Subsequently there were two jury trials in the United States District Court in this case.

Count 1 of the final superseding indictment charged the appellants and the codefendants with conducting and participating in the conduct of an enterprise consisting of the firm and Markoff's medical practice (the "Law Firm-Markoff Enterprise") through a pattern of racketeering activity involving multiple acts of mail fraud. 18 U.S.C. §§ 1962(c) and 2. Similarly, Count 2 charged the appellants and the codefendants with conspiring to conduct the affairs of the Law Firm-Markoff Enterprise through a pattern of racketeering activity. 18 U.S.C. § 1962(d). The indictment also charged each of the appellants with multiple counts of mail fraud. 18 U.S.C. §§ 1341 and 2.

Prior to the first trial, the appellants moved to dismiss the indictment by reason of alleged prosecutorial misconduct. The district court heard argument on the motions and decided to review all grand jury transcripts in camera. But the government provided 14 of the more than 100 transcripts it produced without colloquy. The government informed the district court that these 14 transcripts had been irreparably water damaged and lost while in the court reporter's possession. In response to motions regarding this incident, the district court held hearings in December 1989 and January 1990. In an opinion filed on April 11, 1990, the district court held that any prosecutorial misconduct before the grand jury was harmless.

The first trial began on February 26, 1991. During this trial, Knowlton agreed to plead guilty to one count of mail fraud. The jury returned its verdict in June 1991. Markoff was convicted of the RICO counts and 24 counts of mail fraud but he was acquitted of 11 mail fraud counts. Console and Curcio also were acquitted of certain mail fraud counts. The jury, however, did not reach a verdict on the RICO counts and certain mail fraud counts against Console, Curcio, and Hulmes, and consequently the court declared a mistrial as to these counts. The jury acquitted Sabath and Lombardi on all counts.

Following his conviction, Markoff learned that during jury deliberations a juror had obtained information regarding the case from her sister-in-law who was an attorney and had shared that information with other jurors. In September 1991, the district court held hearings to determine the nature of this communication, whether it was prejudicial, and whether Markoff's convictions should be set aside. During in camera proceedings, the district court questioned each juror individually. Based on the jurors' in camera testimony, the district court determined that one of the jurors made a remark during deliberations indicating that she had discussed the case with her sister-in-law who was an attorney. Nonetheless, the court held that the juror's comment had not prejudiced Markoff, and thus it denied his motion to set aside his convictions. Although the juror who mentioned her sister-in-law's comments during deliberations testified in camera that other jurors had read newspapers during the trial, the court also denied Markoff's request for a second jury inquiry to investigate these allegations.

Following his convictions, Markoff entered into a cooperation agreement with the government and agreed to testify against Console, Curcio, and Hulmes at a second trial. Console moved to dismiss the charges against him on double jeopardy grounds prior to the second trial, but the district court denied his motion. The district court also denied Curcio's severance motion. The second trial began on February 25, 1992, and the jury returned its verdict on May 21, 1992, convicting Console and Curcio on both RICO counts. The jury also convicted Console and Curcio of eight counts of mail fraud and four counts of mail fraud, respectively. The jury, however, acquitted Hulmes of all charges except for one which the court then dismissed.

The court sentenced the three appellants to lengthy prison terms on September 25, 1992, and required Console and Markoff to pay restitution to the victims of their RICO and mail fraud violations. The judgments of conviction were entered on the docket on September 28, 1992, and the appellants timely appealed.*fn3

II. DISCUSSION

A. FAILURE TO ESTABLISH A RICO ENTERPRISE

The appellants argue that the evidence was insufficient to support their convictions for violations of 18 U.S.C. § 1962(c) and (d), because the government failed to establish the existence of a RICO "enterprise."*fn4 Section 1962(c) prohibits "any person employed by or associated with any enterprise" affecting interstate or foreign commerce from conducting or participating "in the conduct of such enterprise's affairs through a pattern of racketeering activity." Section 1962(d) makes it unlawful to conspire to violate Section 1962(c) or the other substantive provisions of RICO.

RICO defines an "enterprise" as "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). In United States v. Turkette, 452 U.S. 576, 583, 101 S. Ct. 2524, 2528-29, 69 L. Ed. 2d 246 (1981), the Supreme Court stated that an enterprise "is an entity separate and apart from the pattern of activity in which it engages," and that it is "proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit." In United States v. Riccobene, 709 F.2d 214, 222 (3d Cir.), cert. denied, 464 U.S. 849, 104 S. Ct. 157 (1983), "we construed Turkette to require proof of each of the three sub-elements referred to by the Court in this passage": (1) proof of an ongoing organization, (2) proof that the associates function as a continuing unit, and (3) proof that the enterprise is an "entity separate and apart from the pattern of activity in which it engages." United States v. Pelullo, 964 F.2d 193, 211 (3d Cir. 1992) (citing Riccobene, 709 F.2d at 221-24). Thus, although the proof used to establish the existence of an enterprise and a pattern of racketeering "may in particular cases coalesce," proof of a pattern of racketeering activity "does not necessarily" establish the existence of an enterprise. Id.*fn5

In this case, the government alleged that the RICO enterprise was an association in fact composed of the law firm and Markoff's medical practice and designed "to enrich its members through the pursuit of personal injury business." Govt. Br. at 13. The appellants argue, however, that the evidence did not demonstrate (1) "that there was any kind of organizational structure for decisionmaking," (2) that the appellants associated together on more than "an ad hoc basis," or (3) that the "enterprise existed separate and apart from the racketeering activity alleged." Markoff Br. at 9, 12. Thus, according to the appellants, "all that was shown was that the medical practice and the lawyer's office combined to commit mail fraud on an ad hoc basis." Id. at 12.

The existence vel non of a RICO enterprise is a question of fact for the jury. Riccobene, 709 F.2d at 222. In this case, both the jury that convicted Markoff of RICO violations (Trial I), and the jury that convicted Console and Curcio of RICO violations (Trial II) determined that the government established the existence of the RICO enterprise beyond a reasonable doubt. We must sustain these determinations "if there is substantial evidence, taking the view most favorable to the Government, to support [them]." Glasser v. United States, 315 U.S. 60, 80, 62 S. Ct. 457, 469, 86 L. Ed. 680 (1942); see United States v. Pungitore, 910 F.2d 1084, 1129 (3d Cir. 1990) (citing Burks v. United States, 437 U.S. 1, 16, 98 S. Ct. 2141, 2150, 57 L. Ed. 2d 1 (1978); United States v. Leon, 739 F.2d 885, 890 (3d Cir. 1984)), cert. denied, 111 S. Ct. 2009 (1991). Thus, we must review the evidence introduced at trial, drawing all reasonable inferences in favor of the prosecution, to determine whether there is substantial evidence to support the existence of a RICO enterprise.

As we stated in Riccobene, 709 F.2d at 222, "each of the [three] elements enumerated by the Supreme Court describes a separate aspect of the life of the enterprise." The first element requires proof of an "ongoing organization." Turkette, 452 U.S. at 583, 101 S. Ct. at 2528.

To satisfy this element, the government must show that some sort of structure exists within the group for the making of decisions, whether it be hierarchical or consensual. There must be some mechanism for controlling and directing the affairs of the group on an ongoing, rather than an ad hoc, basis.

Riccobene, 709 F.2d at 222. The government introduced ample evidence at both trials of the existence of an organizational structure within the Law Firm-Markoff Enterprise. The evidence indicates that Markoff and Console met in the early 1980's. Govt. App. at 309 (Trial II); 798 (Trial I). At that meeting, Markoff agreed to inflate the bills of the law firm's clients in exchange for continued patient referrals from the firm. Id. at 310-13 (Trial II); 791-98 (Trial I). Following this meeting, Console and Markoff supervised the execution of this agreement. Id. at 50-66, 313-15, 410-413, 432-92 (Trial II); 790-876 (Trial I). Under Markoff's supervision, his employees falsified patient bills and charts to meet the specifications communicated by Console, LiVolsi and various employees of the firm. Govt. App. at 31-66, 432-92 (Trial II); 730-67, 826-35, 849-60, 869-75, 877-87 (Trial I). Under Console's direction, attorneys referred clients to Markoff, specified the dates and charges that should be reflected on their bills, and coached clients to make false statements regarding the extent of their medical treatment to support fraudulent insurance claims. Govt. App. at 204-39, 432-92 (Trial II); 791-99, 817, 826-34, 849-60, 869-75, 888-98 (Trial I). Thus, at each trial the government established the existence of an ongoing organization, the first element required to prove the existence of a RICO enterprise.

The second element of the Supreme Court's definition of a RICO enterprise requires proof "that the various associates function as a continuing unit." Turkette, 452 U.S. at 583, 101 S. Ct. at 2528. To satisfy this element, the government must demonstrate "that each person performed a role in the group consistent with the organizational structure established by the first element and which furthers the activities of the organization." Riccobene, 709 F.2d at 223. The government also introduced sufficient evidence to satisfy this requirement at each of the trials.

The evidence indicates that between 1981 and 1985, Console, Markoff, Curcio, LiVolsi, and various employees of the firm and the Markoff practice each performed roles within the enterprise structure and through their roles advanced the scheme to defraud insurance companies through the submission of falsified records, inflated bills, and false statements by patients. Console and Markoff devised the scheme and directed its execution. Govt. App. at 38-39, 47-55, 58-65, 310-315, 432-92 (Trial II); 791-99, 817-34, 846-60, 869-75, 877-98 (Trial I). Curcio referred clients to Markoff and coached them to make false statements regarding their medical treatment. Id. at 204-39 (Trial II); 888-98 (Trial I). LiVolsi met with Markoff and his employee in charge of billing to communicate the dates and charges that should be reflected on patient bills. Id. at 39-50, 462-70 (Trial II); 826-34, 847-51 (Trial I). Other firm employees also delivered lists of patient records requiring falsification to Markoff's office, and discussed the required changes with Markoff's employees over the phone. Id. at 39-50, 55-57 (Trial II); 745-57, 795-97, 864-75 (Trial I). Employees of the Markoff practice then falsified the records, which subsequently would be submitted to the insurance companies. Id. at 35-66 (Trial II); 730-57, 877-98 (Trial I). Thus, there is substantial evidence to support the juries' determinations "that the various associates [in the Law Firm-Markoff Enterprise] functioned as a continuing unit." Turkette, 452 U.S. at 583, 101 S. Ct. at 2528.

Finally, the third element of the enterprise requirement demands proof that the enterprise is an "entity separate and apart from the pattern of activity in which it engages." Turkette, 452 U.S. at 583, 101 S. Ct. at 2529.

As we understand this last requirement, it is not necessary to show that the enterprise has some function wholly unrelated to the racketeering activity, but rather that it has an existence beyond that which is necessary merely to commit each of the acts charged as predicate racketeering offenses. The function of overseeing and coordinating the commission of several different predicate offenses and other activities on an on-going basis is adequate to satisfy the separate existence requirement.

Riccobene, 709 F.2d at 223-24. This requirement is satisfied by the evidence that both the firm and the Markoff practice coordinated the commission of multiple predicate offenses, see Govt. App. at 31-66, 204-39, 432-92 (Trial II), 730-67, 791-99, 817, 826-35, 849-60, 869-75, 877-898 (Trial I), and continued to provide legitimate services during the period in which they were engaged in racketeering activities, id. at 67, 373-74 (Trial II), 730-67 (Trial I). Thus, the evidence introduced at each trial supports the juries' determinations that the three elements of the enterprise requirement were established.

The appellants, however, also argue that the government failed to allege and establish a RICO enterprise consistent with the definition contained in Section 1961(4). Specifically, they argue that under Section 1961(4), an association in fact between two legal entities, like a law firm and a medical practice, is not a RICO enterprise. Markoff Br. at 13. As noted above, Section 1961(4) defines an "enterprise" as "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). According to the appellants' construction of this section, "an enterprise can be either a legal entity or an association-in-fact between non-legal entities," but not an association in fact between legal entities. Markoff Br. at 13.

As the government points out, Govt. Br. at 16, we rejected this restrictive definition of a RICO enterprise in United States v. Aimone, 715 F.2d 822, 828 (3d Cir. 1983), cert. denied, 468 U.S. 1217, 104 S. Ct. 3585 (1984). Aimone involved a challenge to an indictment alleging the existence of an enterprise composed of "a group of individuals and a corporation associated in fact." Id. Like the appellants in this case, the appellants in Aimone argued that an enterprise could consist of either a legal entity or an association in fact, but not both. Id. We held that the indictment charged "a proper statutory enterprise" because an association in fact could be composed of legal as well as non-legal entities. Id.*fn6 Moreover, "the Supreme Court has stated that 'there is no restriction upon the associations embraced by the definition' in section 1961(4)." Id. (quoting Turkette, 452 U.S. at 580, 101 S. Ct. at 2527). Accordingly, the association in fact between the law firm and Markoff's medical practice constitutes a RICO enterprise under Section 1961(4).

B. EVIDENCE SUPPORTING CURCIO'S CONVICTIONS

1. RICO Convictions

Curcio challenges the sufficiency of the evidence supporting his substantive RICO and RICO conspiracy convictions, contending that the government "failed to connect [him] . . . to the RICO conspiracy." Curcio Br. at 21. As we noted above, we review challenges to the sufficiency of evidence to determine "whether, viewing the evidence in a light most favorable to the government, there was substantial evidence upon which a reasonable jury could have based its verdict." United States v. Pungitore, 910 F.2d at 1129. We reject Curcio's argument and find that there was sufficient evidence to support his convictions under 18 U.S.C. § 1962(c) and (d).

A conviction under 18 U.S.C. § 1962(c) requires proof of four essential elements:

(1) the existence of an enterprise affecting interstate commerce; (2) that the defendant was employed by or associated with the enterprise; (3) that the defendant participated, either directly or indirectly, in the conduct or the affairs of the enterprise; and (4) that he or she participated through a pattern of racketeering activity.

Shearin v. E.F. Hutton Group, Inc., 885 F.2d 1162, 1165 (3d Cir. 1989) (citing R.A.G.S. Couture, Inc. v. Hyatt, 774 F.2d 1350, 1352 (5th Cir. 1985)). To satisfy the second element or "association" requirement of section 1962(c), the defendant "'must be shown to have been aware of at least the general existence of the enterprise named in the indictment.'" United States v. Eufrasio, 935 F.2d 553, 577 n.29 (3d Cir.) (quoting United States v. Castellano, 610 F. Supp. 1359, 1401 (S.D.N.Y. 1985) (emphasis added)), cert. denied, 112 S. Ct. 340 (1991). Similarly, a conviction under 18 U.S.C. § 1962(d) for conspiracy to violate section 1962(c) requires proof "that the individual defendants knowingly agreed to participate in the 'enterprise' through a pattern of racketeering." Riccobene, 709 F.2d at 220-21 (emphasis added).

The evidence introduced at the second trial sufficiently established that Curcio was "aware" of the existence of the Law Firm-Markoff Enterprise, "knowingly agreed" to participate in the conduct of the enterprise through a pattern of racketeering, and participated in the conduct of the enterprise through a pattern of racketeering activity. Curcio testified that he was "a trial attorney functioning as a partner" in the law firm between 1982 and 1991, Curcio App. at 15, and that prior to 1982 the firm employed him as an associate, id. at 13. Although he denied knowledge of any conspiracy between the firm and the Markoff medical practice, he acknowledged that he and his children had been treated by Markoff, and that during his tenure at the firm, Markoff was the treating physician for approximately 600 of the firm's cases, ten percent of the firm's total caseload. Govt. App. at 556-558.

Moreover, four of Curcio's clients who had been involved in auto accidents testified that the firm referred them to Markoff. Id. at 165 (William George), 205 (David Gousha), 257 (Joyce Joiner), 280-83, 291-92 (Janice Wolfe). These clients also testified that prior to arbitration proceedings regarding their insurance claims, Curcio advised them to lie about the nature of their injuries and the extent of their medical treatment. Id. at 171-183 (William George), 210-12 (David Gousha), 252-70 (Joyce Joiner), 291-301 (Janice Wolfe). Furthermore, Curcio's secretary testified that on one occasion, Curcio asked her to contact Markoff's office and have them "increase a bill on a client's case." Id. at 110. When the secretary relayed the request to Markoff's employee, Marie Maugeri, Maugeri said "'all right,' and hung up." Id. at 111.*fn7

Curcio argues that the evidence is insufficient to connect him to the RICO enterprise because the law firm's activity was not "entirely unlawful," "none of the conduct attributed to Curcio is intrinsically unlawful," the circumstantial evidence of Curcio's membership in the conspiracy did not exclude other equally plausible inferences, and the testimony regarding Curcio's knowledge of and participation in the RICO enterprise was not credible. Curcio Br. at 22-27. We reject this argument. First of all, the activity of a RICO enterprise need not be entirely illegal. In fact, as the Supreme Court recognized in Turkette, "RICO's primary purpose is to 'address the infiltration of legitimate business by organized crime.'" Riccobene, 709 F.2d at 221 (quoting Turkette, 452 U.S. at 591, 101 S. Ct. at 2532). We have recognized that

'the mere fact that a defendant works for a legitimate enterprise and commits racketeering acts on the business premises does not establish that the affairs of the enterprise have been conducted "through" a pattern of racketeering activity.' United States v. Cauble, 706 F.2d 1322, 1332 (5th Cir. 1983). Instead, the government must show that a person 'is enabled to commit the predicate offenses solely by virtue of his position in the enterprise or involvement in or control over the affairs of the enterprise; or . . . the predicate offenses are related to the activities of that enterprise.' United States v. Provenzano, 688 F.2d 194, 200 (3d Cir.), cert. denied, 459 U.S. 1071, 103 S. Ct. 492, 74 L. Ed. 2d 634 (1982) (quoting United States v. Scotto, 641 F.2d 47, 54 (2d Cir. 1980), cert. denied, 452 U.S. 961, 101 S. Ct. 3109, 69 L. Ed. 2d 971 (1981)).

United States v. Jannotti, 729 F.2d 213, 226 (3d Cir.), cert. denied, 469 U.S. 880, 105 S. Ct. 243, 83 L. Ed. 2d 182, 105 S. Ct. 244 (1984). Curcio was able to commit the predicate acts of mail fraud only "by virtue of his position in the enterprise," and the predicate acts were intimately "related" to the firm's personal injury practice and Markoff's medical practice. Thus, although the law firm's activity was not entirely illegal, the evidence regarding Curcio's association with the firm supports an inference that he was aware of the Law Firm-Markoff Enterprise, knowingly agreed to participate in its conduct through a pattern of racketeering activity, and participated in its conduct through a pattern of racketeering activity.

Second, a substantial portion of Curcio's activities were "intrinsically unlawful." These "intrinsically unlawful" activities included the activities charged in four counts of mail fraud for which he was convicted and four instances of subornation of perjury. Third, the circumstantial evidence sufficiently supported the jury's determination that Curcio knowingly agreed to participate in the Law Firm-Markoff Enterprise through a pattern of racketeering.

Proof of agreement in a RICO proceeding may be established by circumstantial evidence to the same extent permitted in traditional conspiracy cases. It is well-established that one conspirator need not know the identities of all his co-conspirators, nor be aware of all the details of the conspiracy in order to be found to have participated in it.

Riccobene, 709 F.2d at 225 (citations omitted). See also United States v. Adams, 759 F.2d 1099, 1114 (3d Cir.) (citing Blumenthal v. United States, 332 U.S. 539, 558, 68 S. Ct. 248, 275, 92 L. Ed. 154 (1947)), cert. denied, 474 U.S. 906, 106 S. Ct. 275 (1985). We find that a reasonable jury could have credited the testimony regarding Curcio's association with the Law Firm-Markoff Enterprise, and that this testimony was sufficient to indicate that Curcio was aware of the enterprise, ...


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