The opinion of the court was delivered by: DONALD J. LEE
Before the Court are Defendant Phillip M. "Mike" Ferrell's motions to dismiss: (1) Pretrial Motions Filed on Behalf of Defendant Phillip M. "Mike" Ferrell: Motion To Dismiss on the Basis of Selective Prosecution (Document No. 379, in part); (2) Pretrial Motions Filed on Behalf of Defendant Phillip M. "Mike" Ferrell: Motion to Dismiss on the Grounds That Video Poker Machines Are De Facto Legal in Pennsylvania (Document No. 379, in part); (3) Pretrial Motions Filed on Behalf of Defendant Phillip M. "Mike" Ferrell: Motion to Dismiss on the Ground That the Alleged Gambling Activities are De Minimis (Document No. 379, in part); (4) Pretrial Motions Filed on Behalf of Defendant Phillip M. "Mike" Ferrell: Motion to Dismiss on the Ground that the Alleged Illegal Gambling Activity Was an Exercise of Public Authority (Document No. 379, in part).
Also before the Court are the related motions seeking to assert affirmative defenses: (5) John Francis "Jack" Conley's Omnibus Pretrial Motion: Motion to Assert Good Faith Defense (Document No. 374, in part); (6) Pretrial Motions Filed on Behalf of Defendant Phillip M. "Mike" Ferrell: Motion for Leave to Assert Affirmative Defense (Document No. 379, in part).
Defendant Ferrell filed an omnibus pretrial motion, (Document No. 379), which included his four motions to dismiss and his motion to assert an affirmative defense. On March 2, 1993, the Court held a hearing. At the hearing, Counsel for Defendant Ferrell introduced the testimony of Defendant Curtin. Counsel for Defendant Ferrell attempted to introduce further evidence in support of his motions. The Court sustained the Government's objection to the further evidence, holding that Defendant Ferrell's proffer did not constitute a preliminary showing adequate to warrant further evidentiary proceedings on his motions. The Court, however, indicated that Defendant Ferrell could brief the adequacy of his proffer.
Pursuant to General Order of Court No. 15, these motions were to have been briefed on or before May 14, 1993. No briefs were filed in the appropriate time frame. After the Government indicated that it would address the merits of the motions when Defendant Ferrell filed briefs, rather than rely on procedural default, (Document No. 688), the Court ordered Defendant Ferrell to state his intentions regarding his motions. (Document No. 689). No response was received by the Court. In a subsequent Order of Court, the Court indicated that Defendant Ferrell's motions "have apparently been abandoned." (Document No. 700). Again, Defendant Ferrell did not respond. Subsequent events revealed an irreconcilable dispute between Defendant Ferrell and his counsel, who was later granted leave to withdraw.
Due to the importance that the Defendants place on the issues raised in Defendant Ferrell's motions, Defendants John F. "Duffy" Conley and William C. Curtin moved to adopt Defendant Ferrell's motions to dismiss, in which they had previously moved to join. (Document No. 709). Over the Government's objections, (Document No. 725), the Court granted in part and deferred in part the motion to adopt. (Document No. 730). The Court limited Defendants Duffy Conley and Curt in to the record made by Defendant Ferrell, but allowed them to proffer evidence of their connection to the pre-existing record. The Court deferred ruling on the request to file additional materials, pending its ruling upon the proffered evidence. (Document No. 730).
Defendant Duffy Conley filed two briefs, including proffers of evidence, and Defendant Curtin moved to join in those briefs. (Document Nos. 348-50). The Government filed a response brief. (Document No. 760).
The subject of these motions arose again at a status conference held by the Court on January 27, 1994. As a result of the status conference the Court issued its Summary Order of Court dated February 3, 1994, (Document No. 821), which reiterated and modified the Court's rulings from the bench at the status conference. Paragraph (4) of the Court's Summary Order of Court granted leave to any Defendant who had originally joined Defendant Ferrell's motions to dismiss to file a brief and a proffer of evidence in support of reopening the record on these motions.
Defendant Duffy Conley supplemented his previous filings, (Document No. 834), and Defendant Goodwin filed his Motion to Reopen the Record. (Document No. 835). The Government responded to these supplemental filings. (Document No. 843).
The record before the Court consists of a Stipulation of Facts with respect to Pretrial Motions of Defendant Phillip M. "Mike" Ferrell, (Document No. 509), Defendant Curtin's testimony and Defendant Ferrell's proffer at the March 2, 1993 hearing, the additional proffer made in the submissions of Defendants Duffy Conley, Curtin, and Goodwin, and the Indictment. Although the stipulated facts are undisputed and the equivalent of found facts, the motions are being adjudicated without a hearing. The relevance of this procedural fact to the light in which the Court must view the facts in deciding the different motions will be discussed with respect to each motion.
Defendants Duffy Conley and Curtin have indicated that three of the motions to dismiss should be treated as one motion: Pretrial Motions Filed on Behalf of Defendant Phillip M. "Mike" Ferrell: Motion to Dismiss on the Grounds That Video Poker Machines Are De Facto Legal in Pennsylvania (Document No. 379, in part); Pretrial Motions Filed on Behalf of Defendant Phillip M. "Mike" Ferrell: Motion to Dismiss on the Ground That the Alleged Gambling Activities are De Minimis (Document No. 379, in part); Pretrial Motions Filed on Behalf of Defendant Phillip M. "Mike" Ferrell: Motion to Dismiss on the Ground that the Alleged Illegal Gambling Activity Was an Exercise of Public Authority (Document No. 379, in part). The issues raised by these motions are therefore reduced to three issues: (1) Whether gambling with video poker machines is de facto legal in Pennsylvania; and the related issue of (2) Whether the Defendants are entitled to assert a good faith defense; and (3) Whether the Government exercised impermissible selectivity in prosecuting the Defendants.
The stipulated facts, which cover the period from January 1, 1984 through September 30, 1991, are set forth as follows:
3. During the aforesaid time frame, video poker machines were present in the United States Judicial District known as the Western District of Pennsylvania, including, but not limited to the following counties: Allegheny, Beaver, Washington and Westmoreland.
4. During the aforesaid time span, these video poker machines were found most frequently, but not exclusively, in bars, lounges, taverns, restaurants, coffee shops, social halls or fraternal and veterans' organizations, laundermats and other places visited by members of the public or members of fraternal and veterans' organizations (hereinafter, collectively referred to as the "locations").
5. During the aforesaid time span, the vast majority of cities, boroughs, townships and other municipalities (hereinafter collectively, the "local governments"), imposed an annual fee or charge on all amusement devices, including video poker machines, that were placed in any location within the local government's borders.
7. The authority under which the local governments imposed the fees or charges arose from an ordinance or ordinances enacted by the governing body of each local government.
8. For the purpose of imposing such fees or charges, most of the local governments classify video poker machines as mechanical or video devices, although some local governments impose the fee or charge on the video poker machine as such.
9. To comply with an ordinance imposing such a fee or charge, the person in control of a video poker machine, or of the location in which a video poker machine is placed, normally completes an application for a video or mechanical device license or permit. The local government then collects the requisite fee or charge for each license or permit that is issued.
10. Often, the local government issues a permit or license to evidence that the annual fee or charge has been paid, which permit or license is affixed to the video poker machine itself or is posted in the location where the video poker machine has been placed.
11. During the time frame covered by this Stipulation, some of the defendants, including, but not limited to, Ferrell have paid the aforesaid fees and charges to local governments and have received licenses and permits to be affixed to video poker machines or posted in the locations in which the same has been placed.
12. To the best of the recollection of any agent of the government, no local government situate within the Western District of Pennsylvania has ever been prosecuted as a result of the governmental activities described herein.
Stipulation of Facts with respect to Pretrial Motions of Defendant Phillip M. "Mike" Ferrell, at 2-3 (Document No. 509).
Proceedings on March 2, 1993
(a) Testimony of Defendant William C. Curtin
The relevant portion of Defendant Curtin's testimony at the March 2, 1993 hearing relates to the Pennsylvania Association of Video Operators ("PAVO"). PAVO is a now defunct organization that was formed no earlier than the summer of 1989. Defendant Curtin was president of PAVO. Defendant Curtin was active in PAVO's affairs, participating in decisions, scheduling meetings and working with others on their agendas, and conferring with PAVO's attorneys. Through his work with PAVO, he communicated with persons involved in the video poker machine industry throughout Pennsylvania and was familiar with the activities of almost all of the video poker machine owners and locations in the City of Pittsburgh.
On August 16, 1989, at the Sheraton Hotel in Pittsburgh, there was a PAVO meeting. At the meeting, Defendant Curtin gave the welcome and introduction. There were also remarks by PAVO's general counsel, William Difenderfer, and Mr. Phillip Benson from Montana.
Among the purposes to which PAVO adhered were to settle confusion arising from licenses being issued by municipalities, to advocate legalizing video poker machine gambling in Pennsylvania, to hire lobbyists to that end and to garner support for legalizing video poker machine gambling from representatives of other interested constituencies, such as the Pennsylvania Association of Tavern Owners. Further, PAVO encouraged an appeal by the property owner in a case that was adverse to the interests of video poker machine vendors.
PAVO instituted a fund-raising drive to raise money to advocate legalizing video poker machine gambling in Pennsylvania. At the August 16, 1989 meeting, there was discussion of the amounts of revenues that could be generated by video poker machines in Pennsylvania.
(b) Testimony of Frank Amity
Frank Amity, a private investigator retained by Defendant Ferrell, testified and attempted to testify regarding the procedures utilized by municipalities in issuing licenses for video poker machines and/or vending machines in general.
When the Government objected to the relevance of the testimony, which related to procedures existing in 1993, Defendant Ferrell proffered that the then existing procedures would be related back to the time covered by the Indictment. On that basis, the Court overruled the Government's relevance objection.
Shortly thereafter, however, the Government again objected to the relevance of the testimony, and the Court sustained the Government's objection. The thrust of the Government's objection was that Mr. Amity had not communicated to municipal officials an intention to engage in illegal gambling activity and, therefore, the municipalities' proceeding with the license applications was irrelevant to the de facto legality and "entrapment by estoppel" contentions being advanced by Defendant Ferrell. The Court agreed with the Government. Because not all video poker machines are per se illegal in Pennsylvania, the Court indicated that the mere issuance of a license for a video poker machine, without a showing that the issuing authority had actual knowledge of the machines' intended illegal use, was insufficient support for a defense of de facto legality.
The Court cut short Mr. Amity's testimony on that basis. The Court allowed counsel for Defendant Ferrell to place a proffer of evidence on the record and subsequently to brief the adequacy of his proffer.
(c) Defendant Ferrell's Proffer
In the course of the proceedings held on March 2, 1993, Defendant Ferrell can be fairly said to have proffered evidence of the following: Most of the licensing and permitting ordinances for the municipalities in question state something to the effect that no license or permit will be issued for illegal gambling devices or any device declared illegal by a court of competent jurisdiction; City of Pittsburgh Detective John Bosetti previously testified that pay-offs are made on all video poker machines; it is common knowledge that all video poker machines are used for illegal gambling; in many of the municipalities in question, the municipal police department or code enforcement officers enforce the licensing and permitting ordinances; in 1989, United States District Judge Gerald Weber had declared all video poker machines illegal per se under federal law in United States v. 294 Various Gambling Devices, 718 F. Supp. 1236 (W.D. Pa. 1989); the Supreme Court of Pennsylvania had declared all video poker machines equipped with knock-off and metering devices illegal; Mr. Amity and his partner communicated with 47 municipalities seeking information; regarding the licensing and permitting of vending machines, including video poker machines; some municipalities licensed video devices generally and some licensed video poker machines specifically; certain municipalities had public meetings where the issue of the legality of video poker machines was discussed, and those municipalities continued to license and permit video poker machines and to collect licensing and permitting fees; Defendant Ferrell had compiled documents showing, for the years in question, the number of permits issued, in some instances to video devices generally, and in other instances for video poker machines specifically. Defendant Ferrell stated that it would be impossible for him to show that police or code officers had actual knowledge that the licensed or permitted devices were intended to be used or were used in illegal gambling activity.
Brief of Defendant John F. "Duffy" Conley in Support of Motion to Dismiss on the Ground of Selective Prosecution (Document No. 750)
The Federal Government, Pennsylvania State Police and the City of Pittsburgh Police Bureau have investigated activities involving video poker machines as early as 1986. During the entire period of these investigations, Duffy Conley and his associates transacted business involving video poker machines in an open, rather than a secret and clandestine, manner. They advertised their video poker machines; they engaged in promotions to attract players; they consented to be interviewed by the news media; and they paid local governments tens, if not hundreds, of thousands of dollars each year for licenses and permits.
Initially, the Federal Government investigated activities involving video poker machines for possible tax violations. In 1988 and 1989, the Federal Government's focus shifted to possible violations of racketeering statutes, such as operating an illegal gambling business, 18 U.S.C. § 1955, and money laundering, 18 U.S.C. § 1956. The federal government's power to investigate and prosecute persons for violations of these statutes depends on them being engaged in a gambling business which is illegal under Pennsylvania law.
Although it is illegal to use video poker machines as gambling devices in gambling activities, Pennsylvania law enforcement officials tolerate these machines.
Duffy Conley and others formed the Pennsylvania Association of Video Operators. Although Duffy Conley and organizations he controlled provided most of PAVO's financial support, others, such as Defendant Ferrell and one John Varney, a defendant in the only other video poker machine case in the Western District of Pennsylvania, also contributed to PAVO. As an organization, PAVO engaged in lobbying activities designed to introduce the merits of video poker machine gambling to members of the legislature. PAVO attempted to generate a groundswell of public support for its goals. PAVO circulated cards for members of the public to sign evidencing support for legalized video poker machine gambling. It obtained the support of members of the general assembly who became sponsors of the sought-after legislation.
PAVO's activities attracted the attention of law enforcement officials. State Police officers attended PAVO meetings and filed reports stating their observations. The State Police officers shared their knowledge with federal agents and Pittsburgh Police officers.
In the fall of 1989, shortly after the surveillance of PAVO, F.B.I. Special Agent John Donnelly ("S.A. Donnelly"), who was then investigating video poker machine activities unrelated to defendants in the instant case, had a chance meeting with Duffy Conley at the Main Hotel in Carnegie, Pennsylvania. Duffy Conley told S.A. Donnelly that the F.B.I. was wasting its time because video poker machine gambling was on the verge of becoming legal, rather than merely tolerated, in Pennsylvania.
A little over one month later, federal agents, along with state and local police officers, met with an Assistant United States Attorney to draft a one-hundred page affidavit in support of search warrants for business properties used by Duffy Conley and his organizations. Searches of 930 Saw Mill Run and 1300 Windgap Avenue were executed in December 1989. During the search of 1300 Windgap Avenue, Federal agents seized numerous records concerning PAVO, its contributors and supporters, and its activities.
PAVO's activities continued into the fall of 1990, when the Pennsylvania General Assembly enacted legislation legalizing video poker machines as gambling devices. Governor Casey, however, vetoed the legislation, which never became law. Within a year, a federal grand jury handed down the Indictment in this case.
Defendant Ferrell subpoenaed voluminous documents from local governments throughout Allegheny County. The documents reveal the names and addresses of persons who obtained licenses and permits to use video poker machines, beginning with the year 1984. The documents reveal that hundreds, if not thousands, of persons obtained such licenses and permits. Only the Defendants in this case and the defendants in the John Varney case have been prosecuted by the Federal Government.
Testimony of federal, state, and local law enforcement officers reveals that video poker machines are used only for illegal gambling.
Brief of Defendant John F. "Duffy" Conley in Support of Motion to Dismiss on Grounds that his Conduct was De Facto Legal, a De Minimus Infraction and a Lawful Exercise of Public Authority (Document No. 749)
Duffy Conley, in the second of his briefs, which was filed contemporaneously with the first of his briefs and also filed pursuant to the Court's Order granting in part and deferring in part the motion to adopt Ferrell's motions to dismiss filed by Defendants Duffy Conley and Curtin, incorporates the facts proffered in the first of his briefs. His second brief alleges more facts and contains an Exhibit A, proffering further evidence.
Exhibit "A" to Defendant John F. "Duffy" Conley's Brief in Support of Phillip "Mike" Ferrell's Motions to Dismiss states:
Defendant John F. "Duffy" Conley is prepared to present the testimony of several witnesses, who, during the indictable period (1985-1991) served in an elected and/or supervisory position within various Allegheny County political subdivisions, those governing political bodies including, but not limited to, McKees Rocks Borough, Robinson Township, Kennedy Township and Brentwood Borough.
If presented an opportunity, each witness will testify that their respective municipal government bodies licensed and collected fees for video poker machines. The witnesses will also testify that they themselves and other government officials were aware that video poker machines license [sic] were being issued for video poker machines on which pay-offs were made.
These witnesses will testify that despite the fact that pay-offs were being made on these video poker machines, the respective governing bodies continued to issue permits. Additionally, these same witnesses will testify that the cost of the aforementioned permits increased annually, due to the fact that the governing bodies knew the amount of revenue generated by video poker machines, in contrast to the cost for non-poker video machines which remains the same during the indictable period.
Defendant is also prepared to present a document, dated April 30, 1992 from Thomas Corbett, U.S. Attorney for the Western District by Mary McKeen Houghton, Assistant U.S. Attorney to the Honorable Gustave Diamond. Said letter was sent to Judge Diamond, ex parte, in regards to a Civil Forfeiture action involving video poker machines found on Defendant Conley's premises, however, not owned by the Defendant.
Said correspondence specifically addresses a report prepared by Agent Holmes with respect to the illegality of a specific type of video poker machine. The letter details the government's attempt to withhold Agent Holmes' report from defense counsel on the basis that it may encourage allegation of selective prosecution with respect to current indictments regarding gambling devices.
Brief of Defendant John F. "Duffy" Conley in Support of Motion to Dismiss on Grounds that his Conduct was De Facto Legal, a De Minimus Infraction and a Lawful Exercise of Public Authority, Exhibit "A" at 1-2 (Document No. 749, Exhibit "A").
In the second of his briefs, Defendant Duffy Conley reiterates that law enforcement personnel from the federal, state and local level have testified that, to the knowledge of each, video poker machines are used solely for gambling purposes.
Duffy Conley also states the following:
"Duffy" Conley's view that video poker machines have attained the status of de facto legality is shared by Attorney General Ernie Preate. He testified before a legislative committee on May 24, 1990 that, when he assumed office (which was in January, 1989): "In most areas of Pennsylvania, video poker machines were so widespread, enforcement efforts were so intermittent and the resulting sanctions so minor that the situation was tantamount to the de facto legalization of video poker gambling. Machines, numbering in the tens of thousands, were found through out Pennsylvania." (Ex. 21-Y) "Duffy" Conley contends that this is, and throughout the period covered by the Indictment has been, the case.
Brief of Defendant John F. "Duffy" Conley in Support of Motion to Dismiss on Grounds that his Conduct was De Facto Legal, a De Minimus Infraction and a Lawful Exercise of Public Authority at 2-3 (Document No. 749).
Duffy Conley's second brief also alludes to the aforementioned stipulation between Defendant Ferrell and the Government (Document No. 509) and the procedural history of these motions outlined above.
Defendant John F. "Duffy" Conley's Omnibus Brief in Response to the Court's February 3, 1994 Summary Order of Court (Document No. 834)
In response to issues raised at the January 27, 1994 status conference, and pursuant to the Court's Summary Order of Court (Document No. 821), Defendant Duffy Conley filed the third, and final, of his briefs. (Document No. 834). After reviewing the procedural history of the case, he reiterates certain of the facts previously proffered and includes Exhibit "A" to the second of his briefs as an exhibit to his third brief. The only new fact arguably proffered is that no municipality or municipal official is being prosecuted under 18 U.S.C. § 1955 or 18 U.S.C. § 1956.
Defendant Kenneth W. "Ron" Goodwin's Motion to Reopen the Record (Document No. 835)
The Pennsylvania Liquor Code is administered and enforced by the following agencies:
a) The Licensing Bureau of the PLCB is charged with the responsibility of administering the Liquor Code and, more specifically, investigating applications for transfer of various types of liquor licenses.
b) The State Police Bureau of Liquor Control Enforcement (hereinafter referred to as "LCE") is charged with responsibility of enforcing the laws set forth in the Pennsylvania Liquor Code and other laws of the Commonwealth which may be violated by liquor licensees.
c) The Pennsylvania State Police at times investigate and enforce the same areas as the LCE.
A supervisor of the Pittsburgh office of the Licensing Bureau of the PLCB will present testimony containing the following:
1. During any investigation for licensing purposes, if a video poker machine is observed, the investigating officer does nothing; no report is made of the observation.
2. The supervisor has never been questioned by any of the investigating officers whom he directs as to what action, if any, should be taken in regard to video poker machines seen during a licensing investigation.
3. There is no policy of the PLCB issued to the Licensing Bureau in regard to video poker machines.
A supervisor in the Pittsburgh office of the LCE will present testimony containing the following:
1. The LCE has never pursued a program against video poker machines solely as gambling devices per se.
2. If officers are conducting an investigation, they merely observe in their reports that video poker machines were seen on licensed premises; no enforcement action is taken.
3. Video poker machines are seized and/or citation proceedings issued only if officers observe a payoff or if there have been other complaints and evidence which can substantiate a payoff.
4. From the time of its inception in 1987, the LCE has not changed the aforesaid policies. Following Judge Weber's Decision in 1989, the LCE was anticipating a change, but no change was ever made.
A supervisor of the Vice and Intelligence Squad of the Pennsylvania State Police will present testimony containing the following:
1. In regard to video poker machines, this agency arrests and confiscates machines resulting from payoffs only [sic].
2. The State Police normally do not prosecute for possession of video poker machines per se.
3. Some video poker machines are confiscated as a result of a complaint.
4. Some of their confiscations are conducted as a result of observations made during investigations for other purposes.
5. There has been no change in State Police policy as a result of Judge Weber's Decision.
6. When the State Police confiscate machines and file gambling charges under Section 5512 of the Pennsylvania Criminal Code, the criminal charges brought against the bartender or other person making a payoff on the machine are frequently dismissed by he [sic] magistrate, with the bartender being permitted to plead guilty to the summary offense of disorderly conduct.
Id. at 2-4. Defendant Goodwin also asks that he and other defendants be given an opportunity to research and subsequently proffer items from the news media in support of Defendant Ferrell's motions to dismiss.
"De Facto Legality of Video Poker Machine Gambling "
Defendants frame this issue as follows:
When it is common knowledge among law enforcement officials that video poker machines are used for gambling purposes alone and when local governments issue licenses and permits authorizing such devices to be placed within their borders, have such machines achieved the status of ...