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UNITED STATES v. QUINTANILLA

February 13, 1991

UNITED STATES OF AMERICA, Plaintiff,
v.
CARLOS QUINTANILLA, JOSEPH MONREAL, and LETICIA GUTIERREZ, Defendants


Suzanne B. Conlon, United States District Judge.


The opinion of the court was delivered by: CONLON

Defendants Carlos Quintanilla, Leticia Gutierrez and Joseph Monreal are named in a forty-count indictment charging violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"); mail and wire fraud; transportation of stolen property in interstate commerce; conspiracy to defraud the Internal Revenue Service; money laundering; and various other offenses arising from essentially the same alleged course of conduct. Pursuant to Fed.R.Crim.P. 8(b) and 14, Quintanilla and Gutierrez move to sever Counts 27 through 40 of the indictment, which relate solely to Quintanilla's alleged scheme to defraud the City of Chicago of Job Training and Partnership Act ("JTPA") funds. In addition, Quintanilla and Gutierrez move to strike all references to the JTPA scheme from all counts except Counts 27 through 40.

 BACKGROUND

 The forty-count indictment presents a complicated array of alleged criminal acts committed by the three defendants in various combinations. However, the case essentially involves an alleged scheme by Monreal, Quintanilla and Gutierrez to defraud the G. Heileman Brewing Company ("Heileman") of over $ 700,000. The following is a summary of the factual allegations relevant to the court's disposition of this severance motion.

 Monreal served as director of Heileman's Hispanic Market Development for several years beginning in September 1984. As part of its marketing efforts, Heileman awarded sponsorship funds to various community group programs in Chicago and Milwaukee. Monreal was responsible for screening funding requests from various community groups, and making preliminary recommendations as to whether Heileman should award funds.

 Operation Search was an Illinois not-for-profit organization devoted to providing employment services to low and moderate income residents primarily residing in the Westtown and Humboldt Park communities of Chicago. Quintanilla served as executive director of Operation Search. Quintanilla controlled all aspects of Operation Search, including the organization's financial dealings.

 The indictment alleges that beginning in September 1983 and continuing through July 1987, Quintanilla, Monreal and Gutierrez conspired in a scheme to defraud Heileman of substantial sums of money designated for Heileman's sponsorship of community programs. *fn1" The co-defendants allegedly accomplished their scheme by submitting to Heileman several false and inflated funding requests on behalf of Operation Search and other Hispanic organizations. Each time Heileman awarded funds to Operation Search or these other organizations, Monreal received all or some of the money in kickbacks. Gutierrez and Quintanilla also allegedly received some of the fraudulently obtained money. Monreal, the central figure in the scheme to defraud Heileman, struck a deal with the government under which he has pleaded guilty to only two counts of the indictment. Monreal has agreed to testify against Quintanilla and Gutierrez.

 In addition to the scheme to defraud Heileman, the indictment charges Quintanilla with defrauding the City of Chicago of federal Job Training and Partnership Act ("JTPA") funds. Quintanilla allegedly achieved this scheme by causing Operation Search to submit false vouchers and other documentation to the Chicago office in charge of administering and distributing JTPA funds. The JTPA fraud forms the basis for Counts 27 through 40, in which Quintanilla alone is charged with various offenses relating to his acquisition of JTPA funds. In addition, in Count Two, Quintanilla is charged with violating section 1962(c) of RICO, by conducting the affairs of Operation Search through a pattern of racketeering activity. *fn2" The JTPA fraud is among the predicate acts alleged in Count Two.

 The government adds Quintanilla's alleged JTPA fraud to allegations in Count One regarding the Heileman fraud, and charges all three defendants with RICO conspiracy in violation of section 1962(d). *fn3" Count One alleges that the three co-defendants conspired to conduct Operation Search through a pattern of racketeering activity. Quintanilla and Gutierrez previously moved to dismiss Count One on the grounds that RICO is unconstitutionally vague and that the government failed to allege a single RICO conspiracy. In support of the motion to dismiss, Quintanilla and Gutierrez asserted that Quintanilla's alleged JTPA fraud was not part of the RICO conspiracy and that defendants would suffer unfair prejudice from the spillover of evidence relating to Quintanilla's JTPA fraud. In a memorandum opinion and order issued on February 7, 1991, this court denied Quintanilla's motion to dismiss Count One, rejecting the claim that RICO was unconstitutionally vague as applied to this particular case. The court also found that Count One was drafted so as to allege a single RICO conspiracy between Quintanilla, Monreal and Gutierrez to use Operation Search as the vehicle for accomplishing various predicate acts of fraud. See Mem. Op., Feb. 7, 1991 at 13. However, the court reserved consideration of defendants' argument regarding the potential prejudice of the government's use of evidence relating to Quintanilla's alleged JTPA fraud. Consideration of this argument was deferred until defendants' motion for severance was fully briefed. Id.

 DISCUSSION

 I. Quintanilla and Gutierrez' Motion for Severance

 Pursuant to Fed.R.Crim.P. 8(b) and 14, Quintanilla and Gutierrez move to sever Counts 27 through 40 of the indictment, which relate solely to Quintanilla's alleged scheme to defraud the City of Chicago of JTPA funds. Rules 8 and 14 of the Federal Rules of Criminal Procedure address similar concerns. Rule 8 sets the boundaries for joining defendants and offenses in a single indictment. The court assesses the propriety of joining offenses or defendants from the allegations in the indictment, not from evidence that the government plans to present at trial. United States v. Sophie, 900 F.2d 1064, 1084 (7th Cir.), cert. denied, 111 S. Ct. 124 (1990) ("joinder under Rule 8(b) is a matter of pleading, not trial proof"), citing Schaffer v. United States, 362 U.S. 511, 517 (1960); United States v. Velasquez, 772 F.2d 1348, 1354 (7th Cir. 1985), cert. denied, 475 U.S. 1021 (1986) ("test for misjoinder is what the indictment charges, not what the trial shows"). If joinder is proper under Rule 8, a trial court may still order severance pursuant to Rule 14 if joinder of offenses or of defendants will unfairly prejudice one or more defendants. Fed.R.Crim.P. 14. Thus, the court need not conduct a Rule 14 analysis unless, as a threshold matter, joinder is proper under Fed.R.Crim.P. 8. Velasquez, 772 F.2d at 1353.

 A. Joinder Under Rule 8

 Rule 8(b) allows the government to charge two or more defendants in the same indictment if they allegedly "participated in the same act or transaction or in the same series of acts or transactions constituting an offense or offenses." In the present case, Counts 27 through 40 charge only Quintanilla with offenses based on the JTPA fraud. Thus, joinder of the allegations against Quintanilla in Counts 27 through 40 with the remaining counts is proper only if Quintanilla's JTPA fraud and the Heileman fraud are part of "the same series of acts or transactions constituting an offense or offenses." Fed.R.Crim.P. 8(b). The Seventh Circuit interprets the "same series of acts or transactions" to mean acts that were committed pursuant to a common scheme or plan. Sophie, 900 F.2d at 1083, citing Velasquez, 772 F.2d at ...


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