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UNITED STATES v. WALTERS

March 24, 1989

THE UNITED STATES OF AMERICA, Plaintiff,
v.
NORBY WALTERS and LLOYD BLOOM, Defendants


George M. Marovich, United States District Judge.


The opinion of the court was delivered by: MAROVICH

GEORGE M. MAROVICH, UNITED STATES DISTRICT JUDGE

 Defendants Norby Walters ("Walters") and Lloyd Bloom ("Bloom") are charged in a seven-count indictment with several crimes, including racketeering, extortion, and mail and wire fraud, in connection with their activities as business agents for certain sports and entertainment figures. Now before the court are both defendants' pretrial motions which raise substantial questions about the theories underlying this prosecution and the correct interpretation of several important federal criminal statutes. After careful consideration, the court denies defendants' motions for the reasons set out below.

 I. Factual Background

 For purposes of these pretrial motions, the court accepts the factual allegations of the indictment as true. United States v. Fry, 413 F. Supp. 1269, 1272 (E.D. Mich. 1976), citing United States v. Sampson, 371 U.S. 75, 78-79, 9 L. Ed. 2d 136, 83 S. Ct. 173 (1962); United States v. Lytle, 677 F. Supp. 1370, 1374 n.8 (N.D. Ill. 1988).

 Walters and Bloom are business agents for entertainment and sports figures. During the time period covered by the indictment, they conducted their business through two entities. The first, Norby Walters Associates, Inc. ("Norby Walters Associates"), was a corporation primarily engaged in the business of serving as booking agent for musical entertainers. Defendant Walters was president of and largest shareholder in Norby Walters Associates. Beginning in or about August, 1984, World Sports & Entertainment, Inc. ("WSE") was organized as a corporation in the business of recruiting and representing college athletes in negotiations of professional sports contracts. Defendant Walters was president and defendant Bloom was vice president of WSE. Both defendants were WSE shareholders.

 The bulk of the allegations in the indictment concern a practice whereby Bloom and Walters, through WSE, would contract to represent undergraduate student-athletes while the students were still competing in intercollegiate athletics. The indictment alleges numerous instances where Bloom or Walters approached college football players while the players were still eligible and playing college football and offered the players money and other inducements to sign representation contracts with WSE. *fn1" The contracts were post-dated to make it appear that they were not signed until after the players had ceased being eligible to play college ball.

 The National Collegiate Athletic Association ("NCAA"), the Mid-American Athletic Conference, the Intercollegiate Big Ten Conference ("the Big Ten") (collectively referred to herein as the "athletic regulatory bodies"), and each of the individual colleges and universities mentioned in the indictment all have regulations governing the amateur status of athletes eligible to compete in events sponsored by the entity. In substance, the regulations provide that student-athletes are ineligible to participate in a sport if they do any one of the following:

 
- they contract to be represented by an agent in the marketing of the individual's athletic ability or reputation in that sport.
 
- they receive financial assistance other than that administered by their schools except where the assistance comes from the athletes' family or was awarded on a basis having no relationship to athletic ability.

 To ensure compliance with the regulations, the athletic regulatory bodies and the schools require every student-athlete to sign and submit each year statements containing information relating to eligibility, amateur status, and financial aid. Based on this information, the schools determine a student-athlete's eligibility to compete and to receive an athletic scholarship.

 The indictment alleges numerous instances where defendants' practice of contracting with student-athletes while the athletes were still eligible to play amateur athletics resulted in allegedly false statements being submitted to universities and athletic regulatory bodies. The indictment charges that the submission of false information regarding eligibility resulted in the universities being defrauded of both scholarship money and the universities' right to distribute their limited number of athletic scholarships to individuals who are eligible to compete on behalf of the universities.

 In addition to the conduct outlined above, the government charges that in some cases the defendants threatened student-athletes with physical harm if the student-athletes tried to withdraw from the contractual relationship with defendants. An unindicted third party, Michael Franzese, allegedly a member of an organized crime family, assisted defendants in obtaining and retaining clients through threats of force. In addition to threats against student-athletes, the indictment charges that at least one of Norby Walters Associates' potential entertainment clients - the group known as the "Jackson Five" - was threatened with force if the group did not retain Norby Walters Associates as booking agent. Defendants are further charged with taking money from one student-athlete, Paul Palmer, on the pretext that the money would be invested on his behalf, and thereafter using the money to pay some of defendant Bloom's personal expenses. Finally, the indictment alleges that during the grand jury investigation defendants concealed from the grand jury information concerning athletes who were still competing in intercollegiate athletics.

 II. The Indictment

 The superseding indictment *fn2" contains seven counts. Count One charges a conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Section 1962(d), ("RICO"). The defendants are accused of agreeing to violate RICO Section 1962(c) by conducting and participating in the conduct of the affairs of Norby Walters Associates and WSE through a pattern of racketeering activity consisting of: multiple acts of extortion and attempted extortion; multiple acts of collection of extensions of credit by extortionate means; multiple acts of mail fraud; multiple acts of wire fraud; and multiple acts of the use of interstate facilities in furtherance of unlawful activity.

 Count Two charges the substantive offense of mail fraud. The basis for the charge is the mailing of false eligibility documents by two University of Michigan football players to the Big Ten. Defendants allegedly defrauded the University of Michigan by causing the two student-athletes to submit false eligibility information upon which the players were awarded scholarships. Counts Three through Five allege identical mail frauds victimizing Michigan State University, University of Iowa, and Purdue University respectively.

 Finally, Count Seven charges the defendants with a substantive violation of RICO under 18 U.S.C. Section 1962(c), for conducting the affairs of Norby Walters Associates and WSE through a pattern of racketeering activity as outlined in Count One.

 Defendants filed several motions to dismiss on numerous grounds. In addition, defendants seek to strike some allegations in the indictment. The court discusses each claim separately.

 III. Analysis

 A. Venue

 Defendants first challenge the government's choice of venue for the prosecution. *fn3" According to Fed. R. Crim. P. 18, "the prosecution shall be had in a district in which the offense was committed." Venue in this district is based on the mail fraud allegations that defendants caused Big Ten member universities to send various allegedly fraudulent eligibility lists, statements of eligibility, and statements of financial support to the Big Ten offices in Schaumburg, Illinois. Bloom challenges venue on two grounds: (1) because the universities themselves mailed the documents to the Big Ten, Bloom claims he did not "cause" the mailings, and (2) the mailings are too far removed from the fraudulent scheme to be considered "in furtherance" of the scheme.

 Bloom first asserts that neither the defendant-agents nor the student-athletes are alleged to have personally mailed the forms to the Big Ten nor did they know the particulars of the universities' mailings. Although the indictment does allege that the universities, not the students, mailed the forms to the Big Ten Conference, Bloom's approach to mail fraud is too narrow. See, e.g., Superseding Indictment, Count I, para. 27(a)(8); see also United States v. Wormick, 709 F.2d 454, 461 (7th Cir. 1983).

 It is well settled that a defendant "causes" a mailing for purposes of the mail fraud statute, 18 U.S.C. Section 1341, either when he makes use of the mails or when he causes someone else to do so. United States v. Castor, 558 F.2d 379, 385 (7th Cir. 1977), cert. denied, 434 U.S. 1010, 54 L. Ed. 2d 752, 98 S. Ct. 720 (1978). In Pereira v. United States, 347 U.S. 1, 8-9, 98 L. Ed. 435, 74 S. Ct. 358 (1954), the Supreme Court held:

 
Where one does an act with knowledge that the use of the mails will follow in the ordinary course of business, or where such use can reasonably be foreseen, even though not actually intended, then he "causes" the mails to be used.

 The allegedly false mailings include Statements of Eligibility and Statements of Financial Support completed by each of the student-athletes. See, Superseding Indictment, Count I, para. 25(b)(1)-(5). These statements, which each student-athlete submitted to his university, are Big Ten Conference forms, not university forms. Each university was required to send eligibility lists compiled from these statements to the Big Ten Conference. See Superseding Indictment, Count I, para. 25(b)4. Clearly, the use of the mails to send documents ultimately to the headquarters of the Big Ten Conference is reasonably foreseeable. Thus, the indictment sufficiently alleges that the defendants "caused" the mailings.

 Even if defendants did "cause" the mailings to a location in this district, Bloom argues that the mailings of the documents to the Big Ten Conference by the universities did not further the alleged fraud scheme.

 The mail fraud statute specifically provides that the mailings must be "for the purpose of executing the scheme." 18 U.S.C. ยง 1341. In ruling on this motion to dismiss, the court considers the standard set forth in Castor, supra, 558 F.2d at 384-85:

 
The Government need not allege the subordinate evidentiary facts by which it intends to prove the "in furtherance" element of the crime charged, and an indictment setting out the mailings charged and alleging that they were in furtherance of the scheme should not be dismissed as insufficient on its face unless there is no conceivable evidence that the Government could produce at trial to substantiate its "in furtherance" allegation.

 In Wormick, supra, 709 F.2d at 462 (citations omitted), quoting United States v. Rauhoff, 525 F.2d 1170, 1176 (7th Cir. 1975), the Seventh Circuit summarized the law defining the "in furtherance" requirement:

 
Mailings are in furtherance of a scheme if they are incidental to an essential part of the scheme. Under this definition, mailings made after the scheme has reached its fruition are not in furtherance of the scheme, nor are mailings which conflict with the purposes of the scheme and have little effect upon the scheme. On the other hand, mailings made to promote the scheme, or which relate to the acceptance of the proceeds of the scheme, or which facilitate concealment of the scheme, have been found to have been in furtherance of the scheme under this definition.

 The case of United States v. Murphy, 768 F.2d 1518 (7th Cir. 1985), cert. denied, 475 U.S. 1012, 89 L. Ed. 2d 304, 106 S. Ct. 1188 (1986), supports the contention that the mailings at issue here are "in furtherance" of the alleged fraud scheme. In Murphy, the defendant, who had been an associate judge of a county circuit court, was convicted of mail fraud for depriving the people of Cook County of his honest services. The mail fraud counts were based on the mailings of cash bond refunds which the judge authorized to be sent to defense lawyers who had paid the judge bribes. In holding that the mailings were integral to the offense so as to establish violations of the mail fraud statute, the Court stated:

 
The statute does not demand that the mail . . . be essential to the offense. It may be enough if the use of the mail is an ordinary or expectable event in the course of the scheme and the mailings further the scheme.

 768 F.2d at 1530. Here, the mailings of the documents to the Big Ten Conference by the universities are an expected part of the scheme and the mailings clearly further the scheme.

 Further, a jury could reasonably conclude that the mailings in this case are an essential part of the scheme because they facilitated concealment of the scheme. If the universities or the Big Ten Conference had been given truthful information on the forms, the universities could have terminated the student-athletes' football scholarships and prevented the athletes from playing with the team. Such an occurrence could seriously affect a particular athlete's value to defendants. See e.g., Superseding Indictment, Count I, para. 25(b)(2)-(5).

 Bloom primarily relies on United States v. Maze, 414 U.S. 395, 38 L. Ed. 2d 603, 94 S. Ct. 645 (1974), United States v. Staszcuk, 502 F.2d 875 (7th Cir. 1974), cert. denied, 423 U.S. 837, 46 L. Ed. 2d 56, 96 S. Ct. 65 (1975), and United States v. Kwiat, 817 F.2d 440 (7th Cir. 1987), to support his position. These cases are distinguishable.

 In Maze, supra, the defendant charged motel services on a stolen credit card. The mailings that formed the basis of the mail fraud counts were the mailings of sales slips for purchases from the motels to the bank that had issued the card. The Court found:

 
. . . The mailings here were directed to the end of adjusting accounts between . . . the victims of respondent's scheme. Respondent's scheme reached fruition when he checked out of the motel, and there is no indication that the success of his scheme depended in any way on which of his victims ultimately bore the loss.

 Id. at 402.

 
. . . the notices had little effect on the procedure of passing the amendments . . . from either a procedural or a factual point of view, the committee's mailing of notices seems too remote from ...

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