Appeals from the United States District Court for the Southern District of Illinois, Alton Division. No. 78 CR 50011 -- J. Waldo Ackerman, Judge .
Before Fairchild, Chief Judge, Swygert, Cummings, Pell, Sprecher, Bauer and Cudahy, Circuit Judges.*fn*
This appeal, from convictions on multiple counts of an indictment, presents issues arising from prosecutions under the Racketeer Influenced and Corrupt Organizations Statute ("RICO"); particularly whether a public entity, such as here the office of County Sheriff, can be a RICO "enterprise".
The defendant John Maeras was the Sheriff of Madison County, Illinois, from December, 1970, to December, 1978. The defendant John M. Cooper was a deputy sheriff for this entire period and was serving as a lieutenant and chief of field operations in November, 1978, when the indictment was returned. These defendants were charged with involvement in two broad corruption schemes.
The first aspect of corruption involved payoffs for prostitution and towing activities. Shortly after his inauguration as sheriff, Maeras discussed with his brother-in-law Pete Skundrich and his friend Ron Grzywacz*fn1 kickbacks which he knew deputies were receiving from towing companies and houses of prostitution within the county. He told them that he wanted the payoffs stopped and that any money should go to him and not the deputies. After a few days, Grzywacz and Skundrich agreed to visit various places on behalf of the sheriff and inform them that the payoffs were henceforth to be delivered to Grzywacz collecting for the sheriff and that no further payments were to be made to the deputies.
After the first such visit to Trickey's Towing in Wood River, Illinois Skundrich was replaced by defendant Cooper who Maeras and Grzywacz felt would be more tactful. Altogether, Cooper and Grzywacz visited eleven establishments. In each case, they informed the owner that the sheriff wanted all further payments to be made to him, and they negotiated with the owner regarding the price per prostitute (normally fifty dollars per week) or per tow (six dollars each). Grzywacz arranged to make weekly pickups. Six of the owners agreed, but five refused for various reasons. One owner of a lounge engaged in prostitution, for example, said that he did not have to pay them "because he was taking care of a judge in Madison County." Another pointed out that while his bar was located in Madison County his motel rooms were in the rear of the bar, across the county line in St. Clair County.
The plan began to disintegrate in December, 1971, when a sergeant in the Sheriff's Office, who was unaware of the payoff scheme, led a raid on Myrene's Steakhouse, one of the principal contributors. Shortly thereafter, Maeras called in the sergeant and asked why he had not informed his superiors prior to the raid. The sergeant promised to inform Maeras in advance of any possible future raids. Cooper continued to make pickups at Myrene's until May, 1972, when another raid this one conducted by two assistant State's Attorneys closed the establishment down again. Maeras was again informed of this raid only after it took place.
Meanwhile, Maeras and Cooper had arranged to transfer to a remote area of the county another deputy in the department who was causing problems for Club J, another house of prostitution involved in the scheme. Payments totalling approximately $10,000 were made by Club J until January, 1973, when the club was raided by the Illinois State Police. The Madison County Sheriff's Office was notified of the raid only on the day it took place; the organizer of the raid was opposed to even that late notice. The owners of the club telephoned Grzywacz during the raid to learn why they were being raided. Grzywacz explained later that Maeras had been out of town when the search warrant had been prepared and filed. Club J did not reopen for more than a year, when it did so under the name of a new owner. It was raided shortly thereafter by sheriff's deputies led by Deputy Gary Lee Burns.
The Internal Revenue Service began an investigation in early 1974 of Grzywacz's tax liabilities for 1970, 1971, and 1972, the years during which he was receiving the payoffs. Grzywacz, Cooper, and Maeras discussed the situation and developed a story to tell the IRS that the two deputies had been conducting an investigation for Maeras. Grzywacz was to say that the investigation was supervised by Captain Demos Nicholas of the Sheriff's Office, since Nicholas had died before them. He was also to claim that the investigation had discovered that a former deputy named Dilly Connors was receiving payoffs. After Maeras had signed a letter authorizing Grzywacz to speak to the IRS and referring to "an investigation performed by him for me, concerning suspected unlawful operations in Madison County," Grzywacz told the story as prepared to the IRS. Cooper and Maeras were both later interviewed under oath and repeated the same story. By early 1975, the IRS declared that Grzywacz owed $6,000 in interest and penalties for money collected from the Club J and others. Grzywacz paid the $6,000, but in September, 1977, even though Cooper and Maeras had discontinued all contacts with him, he told the investigation story to a federal grand jury. He was indicted and convicted on charges of perjury and racketeering.*fn2
In addition to the towing and prostitution payoffs, a second aspect of corruption of Sheriff Maeras and Deputy Cooper involved the Madison County Deputy Sheriffs' Association ("DSA"), which had been formed in 1970 as a bargaining unit for the deputies. Shortly after DSA's formation, the deputies joined another union; DSA, which had one hundred percent membership, became a social and charitable organization. Defendant Cooper was the president at that time, and Gary Lee Burns was secretary. In 1971, at the urging of Cooper, DSA contracted with the defendant Leland L. Stoller to organize and promote a "Sheriff's Dance" to raise money for DSA. Stoller paid his own solicitation expenses and received 75% of the money collected; DSA received the other 25%. The first dance, held in February, 1972, was a success and raised thousands of dollars for DSA.
Sheriff Maeras discussed Stoller and his fund-raising activities with Cooper and Burns a month or so later. He asked them, "What's in it for old John?" Cooper answered that he would work something out with Stoller. When Stoller next returned to Madison County a few months later, Cooper and Burns met. Cooper explained to Stoller what a powerful man Maeras was in Madison County and that without his approval, any fund-raising activity would be doomed. Stoller objected at first, but they soon reached an agreement by which Stoller was to pay ten percent to Maeras of the gross money collected. Stoller, the defendant Lee Stoller Enterprises, and DSA then executed a contract for further fund-raising activities, but that contract did not mention that any money would go to Maeras.
A second dance was held in September, 1972, and more were to follow. Stoller delivered cash to Cooper and Burns, and they passed it along to Maeras at his office. After a few deliveries, however, the two deputies decided that Maeras should not get all the money while they took all the risks, so they began to skim some money off the top of the first skim and keep it for themselves. Stoller paid Maeras approximately $10,000 to $12,000; Cooper and Burns kept about $3,000 each for their efforts.
Trouble began to develop for this scheme when Burns, who had replaced Cooper as president of DSA, was succeeded by John Slotta in May, 1975. The new management of the association noticed that the books kept by Cooper and Burns were incomplete and that DSA had accounted only for a small portion of the money raised by Stoller. They also noted that checks had been made payable to 006 Detective Agency from the DSA account; the two owners of the agency were Cooper and Stoller. The new officers confronted Stoller, who could not explain the discrepancies. He reimbursed DSA $650 for some of the unauthorized expenditures. Nevertheless, DSA terminated all business with Stoller about December 1, 1975. DSA was disbanded in August, 1976.
On November 29, 1978, a federal grand jury indicted John Maeras, John M. Cooper, Leland L. Stoller, and Lee Stoller Enterprises, Inc. for conspiracy to violate RICO.*fn3 All defendants were also charged with fourteen counts of mail fraud, 18 U.S.C. § 1341, and six counts of wire fraud, 18 U.S.C. § 1343. Four counts charged defendants Maeras and Cooper with making or inducing false statements within the jurisdiction of the Internal Revenue Service, 18 U.S.C. § 1001. One final count charged Maeras and Cooper with obstructing justice by persuading Gary Lee Burns to testify falsely before a grand jury, 18 U.S.C. § 1503. On February 25, 1979, after a two-week jury trial, the jury found defendants guilty on all but three counts.*fn4 The district court denied the defendants' post-trial motion and, on May 25, 1979, sentenced Cooper to a total of fifteen years and Stoller to three years of imprisonment. Lee Stoller Enterprises, Inc. was fined $10,000. Maeras was later sentenced to a total of fifteen years imprisonment as well.
After the appeal was argued before a panel of this court but prior to a decision, the judges in regular active service voted to hear the appeal en banc because of the importance of the issue of whether a public entity may be a RICO "enterprise".
The defendants' principal contention is that the RICO statute may not properly be applied to them because the Madison County Sheriff's Office is not an "enterprise" within the meaning of the RICO statute. The evidence against the defendants relates to two series of actions. The first was a scheme to extort payoffs from houses of prostitution and towing companies within Madison County, Illinois. The other involved skimming funds from contributions to the Madison County Deputy Sheriffs' Association. The connection between these two series of events was their inclusion in one illegal "enterprise": namely, the Madison County Sheriff's Office. The question whether RICO was properly applied to the sheriff's office as an "enterprise" is thus crucial to the outcome of this case.
RICO was enacted as Title IX of the Organized Crime Control Act of 1970, an eleven-title attack on organized crime. Section 1962 of RICO makes it a federal offense (1) to receive or use income from "racketeering activity" or "collection of an unlawful debt" to acquire an interest in or establish an enterprise engaged in interstate commerce; (2) to acquire through a "pattern of racketeering activity" or collection of unlawful debt any control of an enterprise engaged in interstate commerce; or (3) to participate in the conduct of any enterprise engaged in interstate commerce through a pattern of racketeering activity or collection of unlawful debt. 18 U.S.C. § 1962.*fn5
RICO is one part of the Organized Crime Control Act, which is, as the Supreme Court has noted, "a carefully crafted piece of legislation." Iannelli v. United States, 420 U.S. 770, 789, 95 S. Ct. 1284, 1295, 43 L. Ed. 2d 616 (1975). At the outset of the Act, Congress forcefully expressed its desire to eradicate organized crime and corruption. The Act's Statement of Findings and Purpose declares:
(1) organized crime in the United States is a highly sophisticated, diversified, and widespread activity that annually drains billions of dollars from America's economy by unlawful conduct and the illegal use of force, fraud, and corruption; ...
(3) this money and power are increasingly used to ... subvert and corrupt our democratic processes;
(4) organized crime activities in the United States ... undermine the general welfare of the ...