Petition — Huber v. United States

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Supreme Court - the Wnithd States :

OCTOBER TERM, 1970

No. ° @9- 896

KARL R, HUBER,

Petitioner,

UNITED STATES OF AMERIOA,

Respondent,

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

i iS

— ti = => _ —

<p - 7-—--eorr—r————-

Juvyney D, ULLMAN

Attorney for Petitioner

835 Broadway

New York, New York 10013

(212) 966-1000

Bonnen, Uruman & Tarcury

Of Counsel

December 10, 1979

INDEX

GO, TNE, i ses Siisins « Sk oe o's Bide se bike¥ ves

SS ERED Pee CA MADE DE aD aa

Se ear tee eee

I asec sece vas ccce.

NI I is ica ecsccscuvcccves

Por l-—Petitioner’s conviction under RICO and the

subsequently ordered forfeiture of seven legiti-

mate business organizations may not be sus-

tained because the District Court permitted the

jury to find that all seven entities were parts of

a single enterprise if it found that Petitioner

f owned them all, and because the indictment was

NIMES ED DOLE. 3 ore 2 oa De Hla RR

Powwr IL—Multiple convictions and cumulative pun-

ishment under 18 U.S.C. § 1001 may not be ob-

tained where the same false statement is re-

iterated in more than one occasion .:..........

ee tee Ass oeU veces eves ewdcbies

Appendix A, Opinion of United States Court of Ap-

peals for the Second Circuit ..................

Appendix B, Order Denying Petition for Rehearing

Appendix C, Order Denying Petition for Rehearing

GR BED sccccecessens AERTS Gi GANS WE WOAK 0 40.06

PAGE

ao Ff Ww bd NO fF

li TABLE OF AUTHORITIES

PAGE

CrraTions

Cases

Bell v. United States, 349 U.S. 81 (1955). .......4.., 28

Bramblett v. United States, 231 F.2d 489 (D.C. Cir.),

cert, dened, 350 U.S. 1015 (1956) ............. 26, 27

Jeffers v. United States, 432 U.S. 137 (1977) ....... 28

Ladner v. United States, 358 U.S. 169 (1958) ....... 28

Simpson v. United States, 435 U.S. 6 (1978) ........ 28

United States v. Altese, 542 F.2d 104 (2d Cir. 1976),

cert. demed, sub nom., Napoli v. United States,

GIs WP ITED io vc ii ethene Acces... 13, 14

United States v. Bettenhausen, 499 F.2d 1223 (10th

CE BOPGP 18.6. i456 A ai iA ba ee saws aaa. ee

United States v. Brown, 555 F.2d 407 (5th Cir. 1977),

cert. denied, 435 U.S. 904 (1978) .............. 13, 14

United States v. Campamale, 518-F.2d 352 (9th Cir.

1975), cert. denied sub nom., Matthews v. United

States, 423 U.S. 1050 (1976) ..........cc cee ee. 12

Umited States v. Elliott, 571 F.2d 880 (5th Cir. 1978),

cert. denied sub nom., Delph v. United States, 439

UG OBR Adee) bis SEA ee 12,14

United States v. Hawes, 529 F.2d 472 (5th Cir. 1976) 14

United States v. Huber, 66 F.2d 387 (2nd Cir.

A i eS re aon 1, 17, 18, 22, 28

United States v. Mandel, 415 F.Supp. 997 (D.Md.

1976), aff'd 591 F.2d 1347 (4th Cir. 1979)... 18, 15

Umited States v. Marubeni America Corp., No. Cr 78-

WE UM AIO cee 15

TABLE OF AUTHORITIES iii

PAGE

Umited States v. Matanky, 482 F.2d 1319 (9th Cir.),

cert. demed, 414 U.S. 1089 (1973) ............ 27

United States v. Nerone, 563 F.2d 836 (7th Cir. 1977),

cert. denied, 435 U.S. 951 (1978) .............. 13, 15

United States v. Parness, 503 F.2d 430 (2nd Cir.

1974), cert. denied, 419 U.S. 1105 (1975) ....... 12,13

United States v. Rubin, 559 F.2d 975 (5th Cir. 1977),

vacated and remanded, 439 U.S. 810 (1978) ..... 13, 14

United States v. Scalzitti, 408 F.Supp. 1014 (W.D.Pa.

1975), appeal dismissed, 556 F.2d 569 (3rd Cir.

BOAT 969 <b 600y ces SOME ab bk eee, | 12

United States v. Stofsky, 409 F.Supp. 609 (S.D.N.Y.

1973), aff'd on other grounds, 527 F.2d 237 (2nd

Cir. 1975), cert. denied, 429 U.S. 819 (1976) ....12,13

United States v. Sutton, 605 F.2d 260 (6th Cir.

BPM ) shaken Wwabas tow Ueua el wks tee. 13, 17

United States v. Swiderski, 593 F.2d 1246 (D.C.Cir.

1978), cert. denied sub nom., McGowan v. United

States, —— U.S. —, 99 S.Ct. 2055-56 (April

sed ET ee TERT Aer ine + Gad cokes 15

United States v. Thevis, —— F.Supp. —— (S.D.Ga.

MENTE RENE RDEC A hie bea ee Us coe eR 15

United States v. Uram, 148 F.2d 187 (2nd Cir.

BIE 6 Fav SecA bee VE Sbs ea oke Os eek 27

United States v. Weatherspoon, 581 F.2d 595 (7th

SI SOTA ead WAV ON gio a cad oa baul ee ecue ds 15

iv TABLE OF AUTHORITIES

PAGE

Statutory Provisions

Title 18,.United States Code, Section 2.............. 4

Title 18, United States Code, Section 371 ........... 4

Title 18, United States Code, Section 1001 . .3, 4, 5, 16, 25, 26

Title 18, United States Code, Section 1341 .......... 4

Title 18, United States Code, Section 1961(4) ...2,3, 12,17

Title 18, United States Code, Section 1961(5) ....:.. 2,12

Title 18, United States Code, Section 1962(c) ...3,5, 10, 14

Title 18, United States Code, Section 1963 ...... 4,5, 14,18

Title 18, United States Code, Section 2314 .......... 5

Title 29, United States Code, Section 504 ....... .... 14

New York State Public Health Law, Article 28A..... 6

_ New York State Public Health Law, Article 28B..... 6

Rules

Rule 12, Federal Rules of Criminal Procedure ....... 19

Rule 29, Federal Rules of Crimina! Procedure ........ 5,18

Rule 31, Federal Rules of Criminal Procedure ....... 21

IN THE

Supreme Court of the United States

OCTOBER TERM, 1979

No.

Karu R. Huser, )

Petitioner,

Unrrep Status or AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

The Petitioner, Karl R. Huber, prays that a Writ of

Certiorari issue to review the judgment entered on October

10, 1979, by the United States Court of Appeals for the

Second Circuit, denying a petition for rehearing contain-

ing a suggestion for rehearing en banc, following an origi-

nal decision and order of the United States Court of Ap-

peals for the Second Circuit on July 20, 1979, affirming

Petitioner’s convictions for federal criminal offenses in

proceedings entitled United States of America, Appellee,

vs. Karl R. Huber, Appellant, Docket No. 79-1132.

Opinion Below

The Opinion of the United States Court of Appeals for

the Second Circuit affirming Petitioner’s ¢onvictions is re-

ported at 603 F.2d 387, and reproduced in the Appendix

at page la. The Orders of the United States Court of

Appeals for the Second Circuit denying rehearing and re-

hearing en banc are reproduced in the Appendix beginning

at page 29a.

Jurisdiction

The judgment of tir Court of Appeals was entered on

July 20, 1979. A petition for rehearing containing a sug-

gestion for rehearing en banc was denied October 10, 1979.

This Court extended the time within which to file Peti-

tioner’s petition for a writ of certiorari to and including

December 10, 1979. The jurisdiction of this Court is in-

voked under Title 28, United States Code, § 1254(1).

Questions Presented

1. May a defendant be convicted and his interest in

seven business corporations and subsidiary legal entities

forfeited under the racketeer influenced and corrupt organi-

zation (RICO) statute, 18 U.S.C. $§ 1961 e¢ seq., where the

trial court’s charge to the jury authorized it to conclude

that all seven entities constituted a single enterprise and

were subject to forfeiture if the jury found that the defend-

ant merely owned them all, without regard to whether the

affairs of each of the entities were conducted “through a

pattern of racketéering activity,” so long as the affairs of

at least one of the seven entities were so conducted?

2. Is an indictment purporting to allege a single vio-

lation of the RICO statute duplicitous where the enterprise

alleged consists of seven different business organizations,

and the evidence fails to establish the existence of any

single set of activities or affairs common to all of the mem-

bers of the group?

A eg ee

3. Is the evidence sufficient to sustain a conviction under

the RICO statute, and the forfeiture of parent or holding

corporate entities where the evidence shows only that the

affairs of subsidiary corporations were operated through

a “pattern of racketeering activity”?

4. May the reiteration of the same false statement on

more than one occasion be used to justify multiple viola-

tions of $1001 of Title 18, United States Code, and the

imposition of cumulative punishment?

Statutory Provisions

Title 18, United States Code, Section 1001

§ 1001. Statements or entries generally

Whoever, in any matter within the jurisdiction of any

department or agency of the United States knowingly and

willfully falsifies, conceals or covers up by any trick, scheme,

or device a material fact, or makes any false, fictitious or

fraudulent statements or representations, or makes or uses

any false writing or document knowing the same to contain

any false, fictitious or fraudulent statement or entry, shall

be fined not more than $10,000 or imprisoned not more

than five years, or both.

Title 18, United States Code, Section 1961(4)

§ 1961. Definitions

As used in this chapter—

(4) “enterprise”? includes any individual, partnership,

corporation, association, or other legal entity, and union

or group of individuals associated in fact although not a

legal entity;

Title 18, United States Code, Section 1962(c)

§ 1962. Prohibited activities

or associated with any enterprise engaged in, or the

activities of which affect, interstate or foreign commerce

to conduct or participate, directly or indirectly, in the

conduct of such enterprise’s affairs through a pattern of

racketeering activity or collection of unlawful debt.

Title 18, United States Code, Section 1963(a) &.

§ 1968. Criminal penalties

(a) Whoever violates any provision of § 1962 of this

chapter shall be fined not more than $25,000 or imprisoned

not more than 20 years, or both, and shall forfeit to the

United States (1) any interest he has acquired or main-

tained in violation of §1962, and (2) any interest in,

security of, claim against, or property or contractual

right of any kind affording a source of influence over, any

enterprise which he has established, operated, controlled,

conducted, or participated in the conduct of, in violation

of $1962.

Statement of the Case

The Petitioner, Karl R, Huber, was convicted in the

United States District Court for the Southern District

of New York of one count of conspiracy, in violation of

Title 18, United States Code, Section 371, 19 counts of

having caused the making of false statements, in violation

of Title 18, United States Code, Sections 1001 and 2.

eight counts of mail fraud, in violation of Title 18, United

States Code, Section 1341, one count of perjury before a

grand jury in violation of Title 18, United States Code,

Section 1623, and one count of having participated in the

affairs of an enterprise through a pattern of racketeering

activity, in violation of Title 18, United States Code,

A a RE ND AN Ra a a ntl tae pa Nii

ee eS

Section 1962(c).* On March 20, 1979, Petitioner was

sentenced to concurrent terms of three years of imprison-

ment on the conspiracy and false statement counts, and

concurrent two years terms of imprisonment on the mail

fraud counts, such periods of incarceration to run con-

currently with the sentences imposed for conspiracy and

false statements, and to a period of one year of incar-

‘ceration on the perjury count, to run consecutively to

the sentences imposed on the remaining counts. In addi-

tion, the Court imposed cumulative fines of $5,000 each

on the conspiracy and false statement counts and $1,000

each on the mail fraud counts, for a total of $108,000.

The Court further directed the forfeiture of all of the

defendant’s right and interest in the seven business

organizations identified in the racketeering count, and di-

rected that the Attorney General of the United States

seize all property or interests of the defendant in those

entities subject, however, to the defendant’s right to re-

deem and repossess himself of such Property and prop-

erty rights upon his payment to the Attorney General of

cash or property satisfactory to the Attorney General

having the value of $100,000, pursuant to 18 U.S.C.

§§ 1963(a) and (b). In addition, the costs of prosecution

were charged to the defendant.

Statement of Facts

1. The structure of State and Federal funding pro-

grams: Under a variety of different State and Federal

programs, during the 1970’s, funds were made available

* Prior to the empaneling of the petit jury, the government

moved to dismiss four counts charging the defendant with vio-

lating 18 U.S.C. § 1001 and one count of mail fraud. Prior to

submission of the case to the jury, the District Court granted the

defendant’s motion, pursuant to Rule 29 of the Federal Rules of

Criminal Procedure, for a judgment of acquittal on all six counts

of the indictment which had alleged the defendant with having

transported stolen money across state lines in violation of 18 U.9.C.

§ 2314.

to eligible hospitals, nursing homes, and other health-related

institutions to constsruct and furnish new facilities and

renovate or rehabilitate old ones. Federal funds for these

purposes were made available under the auspices of the

Department of Health, Education and Welfare through the

Hill-Burton program. (Tr. 87-89)* In the State of New

York, similar funds are provided by the State Department

of Health under financing arrangements set forth in

Articles 28A and 28B of the New York State Public Health

Law. (Tr. 113-115) Each of the hospitals named in the

indictment, Alexian Brothers Hospital, Columbus Hospital,

Greater Paterson General Hospital, Long Island College

Hospital, Point Pleasant Hospital, Saint Clare’s Hospital,

and Wyckoff Heights Hospital, availed themselves of the

benefits of these programs in order to obtain funding for

construction, reconstruction and modernization projects

between 1971 and 1973. (Tr. 89; 115; 414; 595; 755)

In addition,to receiving funds through various grant and

loan programs, each of the seven hospitals identified in the

indictment was eligible for Medicare and Medicaid reim-

bursement for certain costs and expenses related to the

treatment of patients eligible to received. Medicare and

Medicaid benefits. (Tr. 53; 712; 755; 773) Among the costs

and expenses thus reimbursed was the depreciation on

capital assets used in the care and treatment of eligible

individuals. (Tr. 681) At the conclusion of each year,

each of the hospitals submitted a “Cost Report” setting

forth, among other things, an amount of depreciation on

capital assets which, in turn, was derived as a function of

the historical cost of the asset divided by its useful life.

(Tr. 56; 175-76; 446; 618) ‘These cost reports were sub-

mitted to various insurance companies under the contract

with the Department of Health, Education and Welfare to

act as intermediaries between the hospital providers and

* Parenthetical numerical references are to pages of the trial

transcript.

the Department of Health, Education and Welfare. On

the basis of the cost reports, these insurance companies

or “fiscal intermediaries” determined the prorated amount

of per diem reimbursement to be received by each hospital

in the next following fiscal year. (Tr. 68-72; 176-31 ; 711-23,

755-60)

2. The medical companies: Hospital Equipment Com-

pany (HEC) was engaged in the business, primarily, of

selling soft goods and disposable supplies to hospitals,

nursing homes, and other health related facilities. (Tr. 940)

A division of the company, to become known as “Medical

Facilities,” was engaged in the business of planning, design-

ing, and equipping the interiors of newly constructed or

renovated hospitals and nursing homes. (‘Tr. 1073-75)

Medical Facilities provided a complete package of services.

Its staff designers planned entire interior hospital layouts

including the selection of wall coverings, carpeting, drap-

eries, and other fixtures, and it sold all of the furniture

items necessary to completely furnish and equip hospitals

and nursing homes, with the exception of major medical

machinery, such as X-ray equipment, and other sophisti-

cated diagnostic hardware. (Tr. 1080-84)

Between 1971 and 1972, HEC entered into contract agree-

ments with the hospitals identified in the indictment, accord-

ing to which HEC was to provide complete planning and

design services to the hospitals and was to sell to them

furniture and equipment for patient rooms, offices, common

areas, and the like. Under the terms of these contracts or

“letter agreements,” the hospital was to be charged a price

equal to the company’s cost of acquiring furniture, fix-

tures, and equipment plus a percentage of cost ranging

between 5 and 8 percent. In addition, ‘freight charges

actually incurred by the company were to be passed on to

the hospitals. (Tr. 152; 252-3; 412-14; 599-600 ; 671-72)

In 1973, the business of Medical Facilities Division of

HEC was taken over by Debs Hospital Supplies, Inc., a

Chicago-based business engaged in essentially the same ac-

tivities as HEC. (Tr. 3025; 4817) Later, this business was

conducted by a corporation created out of the former Med-

ical Facilities Division of Debs Hospital Supplies, Inc.

(Debs) and a subsidiary of Debs known as Hospital Furni-

ture, Inc. The new corporation was known as Hospital

Furniture/Medical Facilities, Inc. (Tr. 2498-2500)

3. The scheme to defraud: Although the terms of the

letter agreements required that furniture and equipment

be sold by HEC or a successor company to the hospitals

at the company’s cost plus a stated percentage of between

five and eight per cent, the hospitals were in fact charged

a price substantially in excess of that which would have

been arrived at if calculated according to this formula.

Actual manufacturers’ invoiced prices to the company were

inflated by approximately 20 to 30 per cent, and the con-

tract formula of five to eight per cent was then added on

to this inflated price, the entire cost being passed on to the

hospitals. In addition, freight charges not actually in-

curred by the company, known as free freight or phantom

freight, were billed to the hospitals. (Tr. 1176; 2591-92;

2606-07)

4. The conspiracy: Peter Conroy and Anthony Eckert

were the principal salesmen for the Medical Facilities Divi-

sion of HEC, and one or the other or both of them signed

or negotiated all of the ‘‘cost plus” agreements with the

six* hospitals named in the indictment. Conroy and

Eckert each received commissions equal to approximately

30 per cent of the gross profit earned on each contract, and

each of them acknowledged, at trial, that it was not his

intention to carry otit the cOntradts with the indictment

hospitals according to their terms, but rather, to engage in

~ @ systematic course of conduct designed to artificially in-

flate costs and thus increase the profit to be made on each

contract. (Tr. 1179; 3242; 3655; 3681-84) In addition, Con-

* Counts relating to one of the original seven hospitals named

were dismissed prior to the empaneling of the petit jury.

| A ID Ie i ah APES Nat ved a

roy and Kckert received commissions equal to 50 per cent

of the non-existent freight charges, or phantom freight,

charged to the hospitals. (Tr. 3244; 3634)

Petitioner, Karl R. Huber, and his father, Karl Huber,*

were officers and principals of HEC and Debs, and owned

these entities indirectly through their control of other cor-

porations. Prior to November 1, 1971, HEC had been a

division of Esterline Corp., a large publicly held corpora-

tion. (Tr. 887-89) On November 1, 1971, Tudor, Inc., an

investment holding company wholly controlled by the

Huber family, acquired all of the outstanding stock of

HEC. (Tr. 4006-08) Viewed in the light most favorable

to the Government, the evidence showed that Petitioner

became aware of the disparity between the actual 20 to 30

per cent gross profit margin earned by HEC on its con-

tracts with various hospitals and the contract formulations

which called for gross profit margins on the order of five

to eight per cent shortly after Tudor’s acquisition of HEC.

The evidence further showed that Karl R. Huber and Karl

Huber involved themselves in the business affairs of HEC,

and that both were familiar with the day to day operations

of the company. (Tr. 1050-54; 1573) The dual signatures

of Karl Huber and Karl R. Huber were required in order

to disburse funds out of the company’s principal checking

account.

The evidence further showed, viewed in the light most

favorable to the Government, that Petitioner encouraged

the inflation of invoiced prices and the charging of falsified

amounts for freight, and that Petitioner’s father, co-

defendant Karl Huber, invented the term ‘phantom

freight.” (Tr. 3148-49; 3628) The principal area of ac-

tivity of Kar] R, Huber, however, was in the raising of

* Karl Huber was indicted as a co-defendant, but because of

his advanced age and failing health, the case against him was

severed for separate trial.

sufficient capital to permit the company to do business

and in the financing of its accounts receivable. (Tr. 1877)

By the end of its first fiscal year under Tudor (October,

1972), HEC had lost in excess of $400,000. (Tr. 1438-41;

1562) In January, 1973, Tudor, Ine., acquired Debs Hos-

pital Supplies, Inc., a Chicago-based business engaged

in the same kinds of activities as HEC. (Tr. 4802-04)

Debs had a subsidiary known as Hospital Furniture, Inc.,

which was engaged in the same business as the Medical

Facilities Division of HEC. Because of the serious finan-

cial difficulties which were encountered at HEC, the busi-

ness of Medical Facilities Division of HEC was trans-

ferred to Debs in February, 1973, and virtually all of

the invoices submitted to the hospitals named in the in-

dictment were done under the auspices of Debs. (Tr. 2491)

In December, 1973, Medical Facilities was combined with

the Hospital Furniture subsidiary of Debs and a new

corporation, Hospital Furniture/Medical Facilities was

formed. (Tr. 5324)

0. The “Enterprise”: The ‘“‘enterprise” alleged in that

count of the indictment charging the defendant with

having participated in the affairs of an enterprise through

a pattern of racketeering activitiy in violation of 18 U.S.C.

§ 1962(c), consisted of seven business organizations: Hos-

pital Equipment Company, Debs Hospital Supplies, Inc.,

Medical Facilities, Hospital Furniture/Medical Facilities,

Ine., Atlantic Medical Corporation, Tudor, Inc, and

Boden, Inc. The first four of these entities, HEC, Debs,

Medical Facilities, and Hospital Furniture/Medical Facili-

ties, Inc., were the “front line” medical companies actually

engaged in doing business with the hospitals identified in

the indictment. As previously set forth, Medical Facilities

was a division of HEC whose activities were transferred,

in 1973, to Debs. The business activities of Medical Facili-

ties and Hospital Furniture, Inc., already a subsidiary

of Debs at the time of its acquisition by Tudor, Inc.,

were combined to form a single entity, Hospital Fur-

niture/Medical Facilities, Inc. (Tr. 2498-2500; 5324)

es ‘

Se A nr DEE egret le ei

ea ena ne

6 Reith Skea Sed

Tudor, Inc., was an investment holding company having

interests in real estate, securities portfolios, minority in-

terests in various small enterprises, and other related

activities. (Tr. 2482; 5148) On November 1, 1971, it ac-

quired all of the outstanding shares of HEC. (Tr. 5298-99)

Other than guaranteeing certain trade debt and other ob-

ligations of HEC, Tudor had no connection or association

of any kind with the front line medical companies nor,

for that matter, was it in any way associated or connected

with the fraudulent activities which formed the core of

the government’s case.*

Atlantic Medical Corporation was a public shell cor-

poration in which Tudor, Inc., held a majority interest.

(Tr. 2481; 5299) Following its acquisition by Tudor, HEC

was organized as a subsidiary of Atlantic. (Tr. 5305)

Later, following Tudor’s acquisition of Debs, in January,

1973, Tudor exchanged its shares in Debs for Atlantic’s

shares of HEC, leaving the result that Debs became a

subsidiary of Atlantic. (Tr. 2491) Other than its purely

passive ownership capacity, Atlantic had no connection

with the facts of the case. (Tr. 2495; 5298-99)

Boden, Inc., was an investment holding company created

in April, 1975, and, as was the case with Tudor, it was

wholly owned and controlled by the Huber family. (Tr.

4978; 5388) Shortly after its creation, Boden obtained all

of the assets of Tudor, Inc., subject to Tudor’s outstand-

ing liabilities. In addition, Boden owned or controlled

*The government established that some $871,000 flowed from

HEC to Independent Management Company (IMC), which oper-

ated under Tudor in the management of real properties owned by

the Hubers. (Tr. 1547) HEC lent IMC $300,000 and made pay-

ments to IMC for rent and leasehold improvements as well. (Tr.

2048-49; 4945) In turn, consideration in the form of debt assump-

tion and otherwise flowed from IMC to HEC, guch that, by 1973,

the inter-company balance was approximately $1200. None of the

$871,000 was ill-gotten pelf from the hospitals named in the in-

dictment, however. (Tr. 5474)

investments in real estate, securities portfolios, and other

similar assets. Other than as a successor to Tudor, Ine.,

Boden, like Tudor and Atlantic, had no connection or

association with the activities alleged in the indictment.

(Tr. 2474-78; 4878-83)

Reasons for Granting the Writ

The decision below raises critical issues concerning the

ambit of a portion of the Organized Crime Control Act

of 1970, specifically, the Racketeer Influenced and Cor-

rupt Organizations law (“RICO”), 18 U.S.C. §§1961 e¢

seq., and thus issues of critical importance both to the

fair and uniform administration of federal criminal justice.

Enacted by Congress in 1970, the RICO statute has

provoked substantial interpretive litigation centering upon

the scope of its coverage and the meaning and application

of its various terms. While there has been general

unanimity respecting the facial constitutionality of the

statute in the circuits, see, e.g., United States v. Parness,

503 F.2d 430 (2d Cir. 1974), cert. denied, 419 U.S. 1105

(1975); United States v. Campanale, 518 F.2d 352 (9th

Cir. 1975), cert. denied sub nom., Matthews v. United

States, 423 U.S. 1050 (1976), judicial consensus begins and

ends there. In the analysis and application of its most

basic concepts, there has been nothing less than conflict,

inconsistency and contradiction. Compare, e.g., United

States v. Stofsky, 409 F.Supp. 609 (S.D.N.Y. 1973), aff’d

on other grounds, 527 F.2d 237 (2d Cir. 1975), cert. de-

nied, 429 U.S. 819 (1976), and United States v. Scalzitti,

408 F.Supp. 1014 (W.D.Pa. 1975), appeal dismissed, 556

F.2d 569 (3rd Cir. 1977) (“pattern of racketeering

activity” requires that the two or more predicate offenses

be related to each other) with United States v. Elliott,

O71 F.2d 880 (5th Cir. 1978), cert. denied sub nom., Delph

v. Umited States, 439 U.S. 953 (1978) (predicate offenses

PeebASideinetente

ah ene DS RS lh aA ne aS NP owen Som ee

a ewe eae

need not be related to each other to constitute a “pattern

of racketeering activity); United States v. Brown, 555

F.2d 407 (5th Cir. 1977), cert. denied, 435 U.S. 904 (1978)

(“enterprise” includes public entities) with United States

v. Mandel, 415 F.Supp. 997 (D.Md. 1976), aff’d on other

grounds, 591 F.2d 1347 (4th Cir. 1979) (governmental

bodies not within the meaning of “enterprise”); United

States v. Altese, 542 F.2d 104 (2d Cir. 1976), cert. denied

sub nom., Napoli v. United States, 429 U.S. 1039 (1977)

(“enterprise” may be legitimate or illegitimate activity)

with United States v. Sutton, 605 F.2d 260 (6th Cir. 1979)

(“enterprise” refers only to legitimate business organiza-

tions and undertakings) ; United States v. Parness, supra,

and United States v. Altese, supra (s:atute is to be liber-

ally construed in criminal cases) with United States v.

Mandel, 415 F.Supp 997, supra (liberal construction lim-

ited to civil remedial provisions of RICO and does not

extend to its punitive provisions; latter to be construed

in favor of lenity); United States v. Nerone, 563 F.2d

836 (7th Cir. 1977), cert. denied, 435 U.S. 951 (1978)

(substantial nexus between racketeering activity and

affairs of the “enterprise” must be established to sustain

guilt) with United ‘States v. Stofsky, 409 F.Supp. 609

supra (conviction requires only that predicate acts be

committed in the course of association with the “enter-

prise” so long as the acts of racketeering are themselves

interrelated) and United States v. Rubin, 559 F.2d 975

(5th Cir. 1977), vacated and remanded, 439 U.S. 810

(1978) (inclining toward Nerone, but not resolving the

issue).

Indeed, even the relative lucidity of the expression of

legislative intent in the language of the statute has been

the subject of diametrically opposed comment in the eases.

Compare, e.g., United States v. McMonagaie, 437 F.Supp.

721 (E.D.Pa. 1977) (“. . .the clear language of 18 U.S.C.

§ 1962(c)) . . .”) with United States v. Rubin, supra, (“the

language of § 1962(c) is less than pellucid . . .”).

Despite the existence of this dazzling array of sharply

conflicting viewpoints in the Circuits, this Court has not

yet availed itself of an opportunity to address and defini-

tively resolve any of the host of issues arising under RICO.

The urgency of the need for this Court to do so is, in the

context of this case, brought into sharp focus. For in addi-

tion to questions going to the scope of substantive liability

under the statute, the present case involves issues of the

extent to which the criminal forfeiture feature of RICO—

unknown to American law for nearly two centuries—may

be applied to parent or holding corporations by virtue of

their controlling interest in subsidiary entities whose

affairs are corrupted by acts of racketeering.

For the most part, prosecutions under the RICO statute

to date have involved labor unions, see, e.g., United States

v. Rubin; supra, public entities, e.g., United States v. Brown,

supra; Umted States v. Mandel, supra; and groups of

natural persons united in common cause through their

conduct of unlawful gambling businesses, e.g., United States

v. Altese, supra; United States v. Hawes, 529 F. 2d 472

(Sth Cir. 1976); or for the common purpose of committing

arson, murder, obstruction of justice, and other assorted

forms of more or less syndicated mayhem, United States v.

Elliott, supra.

In such cases, the criminal forfeiture sanction of RICO

(18 U.S.C. $1963) is either not meaningfully enforceable

because there 7s no legitimate interest to forfeit, or results

in the forfeiture of one’s position in the organization, a

consequence already compelled by the statute, in the case

of iabor unions (29 U.S.C. $504), and usually by local law,

in the cases of persons convicted of participating in

political entities through acts of racketeering.

She Te is AB Re ne Deg Aico, BF:

Mn ato Rn hh A SE Aa ai) Laeger

DEN, Alena emg ie kee.

Only rarely have the cases involved legitimate business

enterprises, and even in these rare instances, the enter-

prise itself is generally a simply constituted business cor-

poration or unincorporated proprietorship. See, e.g.,

United States v. Nerone, 563 F.2d 836 (7th Cir. 1977)

cert. denied, 435 U.S. 951 (1978), United States v. Mandel,

supra, United States v. Weatherspoon, 581 F.2d 595 (7th

Cir. 1978), United States v. Swiderski, 593 F.2d 1246 (D.C.

Cir. 1978), cert. denied sub nom., McGowan v. United

States, —— U.S. ——, 99 S.Ct. 2055-56 (April 30, 1979).

But the present case represents one of a growing trend

of cases in which more than one legitimate enterprise is

exposed to forfeiture as a result of a single prosecution

under RICO. See, United States v. Thevis, F.Supp.

—— (8.D.Ga. 1979); United States v. Marubeni America

Corp., No. Cr 78-1060 (C.D.Cal. 1978).

Here, as in those cases, the relevant “enterprise” con-

sists of a group or cluster of corporate and quasi-cor-

porate bodies indisputably related to each other, by ties

of common ownership and ownership inter se, but not

by any common activity, project, or set of “affairs” in

which the defendant participated through a pattern of

racketeering activity. Here, rather, by a process of per-

verse transitivity, the involvement of the affairs of sub-

sidiary entities in racketeering activity has resulted in

the forfeiture of all of the Petitioner’s interest in parent

or holding organizations solely by virtue of the status of

those corporate bodies vis a vis their subsidiaries and

their ownership in common by the defendant. The sheer

magnitude of the interests exposed to forfeiture in this

and other pending cases compounds the already urgent

need for this Court to exercise its discretion in favor of

hearing and finally disposing of the issues presented.

In addition, the instant case also presents important

issues regarding the construction and application of 18

U.S.C, § 1001. Petitioner’s conviction below on nearly a

score of false statement counts and the imposition of

cumulative punishment i3 totally inconsistent with the

position of this Court that liabiliy may not be multiplied

and punishment may not be cumulated for a single act

absent a clear expression of congressional purpose to the

contrary.

For these reasons, as more fully enunciated in the body

of this petition, this Court should issue a writ of certiorari

to the United States Court of Appeals for the Second

Circuit in this matter and set the case down for briefing

and argument.

POINT I

Petitioner’s conviction under RICO and the sub-

sequently ordered forfeiture of seven legitimate busi-

ness organizations may not be sustained because the

District Court permitted the jury to find that all seven

entities were parts of a single enterprise if it found

that petitioner owned them all, and because the in-

dictment was duplicitous.

Joining together seven business corporations, subsidiary

corporations, and operating subdivisions of these concerns

in a single RICO count, as a single RICO “enterprise”

the government alleged below that the defendant had par-

ticipated in the affairs of the “enterprise” thus identified

through a pattern of racketeering activity, consisting of

his involvement in a scheme to defraud various hospitals

in the New York metropolitan area through the submission

of inflated invoices for services performed and goods de-

livered and demands for payment for freight charges not

actually incurred.* It was incumbent upon the govern-

* Whether the indictment alleged the existence of a single

enterprise and thus a single offense, or rather represented the

(footnote continued on following page)

Set eden S Seth 9 ae

ment, therefore, to establish through competent evidence

sorhe singularity of purpose or objective in the operation

of these seven entities as a whole in order to justfiably

regard them as a single RICO enterprise. “[G]roups” as

the Sixth Circuit Court of Appeals only recently observed

in United States v. Sutton, supra, at 265, “do not become

‘enterprises’ except in relation to something they do.”

That is, the existence of some activity or project is what

defines a group as an enterprise. It follows from this that

the existence of some shared external characteristic by

each alleged constituent of a putative enterprise—such as,

for example, their common ownership by a single indi-

vidual—does not, without more, define the group as an

enterprise any more than the common membership in a

given community or the common residence of a group of

natural persons, without more, would create an enterprise

within the meaning of RICO.

It was necessary, therefore, in the instant case, for the

government to establish and the jury to find, upon appro-

priate instructions from the trial court, an associational

nexus among the seven entities named in the indictment

going beyond their mere status as parts of a corporate

hierarchy controlled by the defendant in order to justify

(footnote continued from preceding page)

joinder of several enterprises together and thus the allegation of

seven different offenses in a single count was a source of serious

dispute at trial and on appeal. The charging language in the

indictment itself ambiguously alternated between singular and

plural formulations of the term, and added to confusion by al-

legirig that the ‘‘éhterpfise’’ consisted of the seven named entities

which, in turh, were described as “‘eorporations, associations, and

other legal entities,’’ and thus, as “‘enterprises’’ in and of them-

selves; in language which precisely tracks 18 U.S.O. § 1961(4).

Although acknowledging that the government ““‘thight be fatilted

for imprecise lahguage on oecasion,’’ United States v. Huber,

supra, 603 F.2d at 394, the Court of Appeals nevertheless con-

eluded that it was ‘‘clear’’ that the indictment alleged the ex-

istence of a single entefprise, and thus, presumably, a single

offense.

convicticn—-and the forfeiture of rights and interest which

follows necessarily upon conviction under 18 U.S.C.

§ 1963(a).

The Second Circuit, however, without any analytical

amplification, reached a contrary conclusion. Rather than

require the Government to demonstrate the existence of a

common set of affairs to the seven entities named in the

indictment, the Court ruled that it was sufficient for the

Government to show that the affairs of each legal entity

named as part of the “single” RICO enterprise was con-

ducted through “a pattern of racketeering activity.” But

having previously concluded that a single RICO offense

had been alleged in the indictment the Court created a

legal and logical impossibility; the matter may not be had

both ways. If the indictment alleged a single enterprise,

and thus a single offense, as the Second Circuit held, the

Government’s evidentiary burden was necessarily to show

the existence of a common set of affairs galvanizing the

seven named entities into a single unit, whose affairs, in

turn, were conducted in the relevant unlawful way. If, on

the other hand, the Government was only bound to show as

the Second Circuit also held, a connection between each

entity and the acts of racketeering, the indictment was

fatally duplicitous, charging seven different offenses com-

mitted in connection with the affairs of seven different

enterprises.*

*The Court of Appeals viewed the issue of duplicity as one

which may have been waived. United States v. Huber, supra, 603

F.2d at 394, because it was not asserted until the close of the

Government’s case, as part of a motion for a judgment of ac-

quittal under Rule 29 of the Federal Rules of Criminal Procedure.

But a finding of waiver, under the circumstances of this case, is

totally insupportable. Because the structure and language of the

indictment appeared to allege a single offense, the defendant had

a right to assume that the Government would pursue a ‘‘single

enterprise’’ theory of the case, based upon proof that all seven

entities were united through pursuit of a group of activities or

(footnote continued on following page)

—

In charging the jury, however, the District Court re-

quired neither proof of a common set of affairs, nor a

demonstrable connection between each of the seven named

legal entities and the acts of racketeering charged in the

indictment. Instead, the District Court charted a different

course, and charged the jury that it could find that the

seven entities named in the indictment constituted a single

enterprise if it found that the defendant merely owned

them all. The trial court told the jury, in relevant part:

The indictment charges and you must find beyond a

reasonable doubt that the defendant was employed by

or associated with an enterprise, to wit: Tudor Inc.,

Boden Ine., Atlantic Medical Corporation, Hospital

Kquipment Company, Debs Hospital Supplies, Inc.,

Medical Facilities, Hospital Furniture/Medical Facil-

ities.

You are instructed that if you find the defendant owned

one or more of the aforesaid corporations, subsidiary

corporations, or corporate divisions (hereinafter re-

ferred to as corporations) through ownership directly

or indirectly, of a majority of stock of such corpora-

tions, then you may find that such corporations so

owned were associated in fact so as to constitute an

‘enterprise’ within the meaning of the statute.

Next, with respect to this count, you must also find

beyond a reasonable doubt that the defendant com-

mitted two or more of the offenses alleged in counts

(footnote continued from preceding page)

affairs in which the defendant participated through the relevant

racketeering offenses elsewhere charged in the indictment. Coun-

sel’s duty to raise the issue of duplicity by way of a pretrial

motion under Rule 12 of the Federal Rules of Criminal Procedure

assumes that the issue is apparent on the face of the pleadings;

it does not require counsel to possess clairvoyant powers or to

assume that the Government will pursue a theory of the case

radically at variance with the single offense apparently charged

in the indictment.

ee te ew we eee ee ee ee

25, 26, and 28 through 33 [charging mail fraud] while,

and as a part of, his conducting or participating, either

directly or indirectly, in the conduct of the affairs of

the enterprise.

In this regard it is not necessary for the government

to prove that the a‘fairs of the enterprise were ad-

vanced by the defendant’s activities, although you may

find this to be true, or that the particular enterprise

was corrupt, or that the enterprise authorized the de-

fendant to commit, or cause to be committed, the

particular acts of racketeering activity—that is the

two or more acts of mail fraud.

It is only necessary to find once you reach this ele

ment of the caunt, that the acts of mail fraud were

committed by the defendant, or caused to be com-

mitted by him in the conduct of the affairs of the

enterprise.*

Thus, it was not necessary, under the District Court’s

instructions, for the jury to find that the organizational

association of the seven entities together was in some way

or other connected to the perpetration of the acts of mail

fraud charged in the indictment, as the Sixth Circuit has

found the statute requires, nor was it even necessary for

the jury to find that the defendant had participated in ihe

affairs of each one of the seven entities through the un-

lawful acts of racketeering alleged, as the Second Circuit

later viewed the matter. Instead, it was sufficient to find

that an ‘‘association in fact” existed by virtue of the de-

fendant’s common ownership of the seven entities, without

regard ta any connection between each of the seven entities

and the wrongful acts alleged, or any common or unifying

purpose in the organization of the seven entities or any

set of activities or affairs defining the group of seven as

* Transcript of proceedings below at 6287-88; Appellant’s Ap-

pendix on Appeal at A165-A166. (Emphasis added.)

ey ee >

an enterprise, which activities or affairs, in turn, were

corrupted by the commission of the crimes of mail fraud

charged in the indictment.

Accordingly, the subsequently returned general verdict

of guilty on this count of the indictment, and the special

verdict which found that each of the seven named legal

entities was a constituent of the enterprise was tainted by

fatal ambiguity.* Because the District Court permitted

the jury to predicate the finding of ‘‘enterprise” merely

upon the defendant’s common ownership of the seven

named business organizations, it could not be known from

the verdict whether the jury was persuaded beyond a rea-

sonable doubt of the defendant’s implication of the affairs

of each of these entities in the acts of racketeering charged

in the indictment. The jury could well have concluded,

based upon the evidence, that although the defendant

owned all seven of the organizations named, his participa-

tion in the affairs of the “enterprise” through racketeering

activity was limited to his conduct of the frontline medical

companies through acts of mail fraud. But because of the

way in which the matter was structured for them by the

trial court, the jury was necessarily bound to find that all

seven entities were members of the enterprise because the

defendant owned them all and, having found that the de-

fendant’s participation in racketeering activity occurred

“in the course of his conduct of the affairs of” only some

of the entities but not others, the jury could not have

expressed such a conclusion of the evidence except through

a verdict of guilty.

On appeal to the Court of Appeals for the Second Cir-

cuit, Petitioner vigorously argued that, contrary to the

* In addition to its general verdict on the count, the jury was

required to return a special verdict identifying members of the

enterprise and the extent of the defendant’s ownership interest

in each member of the enterprise pursuant to Rule 31 of the

Federal Rules of Criminal Procedure.

District Court’s instruction, his mere ownership of the

seven business organizations named in the indictment was

not a sufficient predicate on which the jury could find

that each of the seven named entities was a part of a

single enterprise. The Government ultimately conceded

the point as a general proposition, but argued mysteriously

that common ownership was the proper standard on the

“facts” of this case. In the end, the Court of Appeals

rejected the Government’s position, and agreed that owner-

ship was not a proper associational circumstance upon

which the jury could find the existence of the single enter-

prise charged in the indictment.

Nevertheless, the Second Circuit affirmed Petitioner’s

conviction concluding that:

So long as the jury is correctly apprised of the

elements of a RICO violation and is instructed that

it may find an entity owned by a defendant to be

part of the enterprise only if the evidence warrants,

then there is no error. We do not believe [the Dis-

trict Court’s] charge authorized the jury to include

entities in the enterprise merely because they were

owned by appellant [Petitioner]. Reading the charge

as a whole, we think that the jury understood that it

could not include a particular entity in the enter-

prise unless its affairs were found to have been con-

ducted through the pattern of racketeering activity.

United States v. Huber, supra, 603 F.2d at 394-95.

(emphasis added)

But this assessment of the state of the record and the

requirements of the statute is both factually and legally

erroneous. Factually, contrary to the Second Circuit’s

view of the record, the District Court did not charge the

jury that ownership was an insufficient predicate upon

which to base a conclusion of “enterprise”; indeed, as the

foregoing reference to the text of the trial court’s charge

makes abundantly clear, the District Court did precisely

the opposite.* Legally, even accepting as accurate the

Second Circuit’s reconstruction of the record so as to

include events which did not happen, and exclude those

which did, the Court’s analysis of the Government’s

burden of proof is at odds with the statute itself. For

as we have already observed, RICO “enterprises” may

not be forged out of combinations of individuals or cor-

porate bodies except in relation to some common project,

activity or set of affairs which makes it possible to refer

to the group as a single enterprise. The Second Circuit’s

failure to require the Government to establish any sin-

gularity of purpose or activity permits the Government

to join as many violations of the RICO statute as it may

believe to exist in a single count of an indictment and thus

deprive the defendant of his right to have a jury separ-

ately consider his liability under the statute in terms of

each entity so named.

To be emphasized here is the fact that such duplicity

cannot be a matter of harmless error. The involvement of

different legal entities in racketeering activities entails the

forfeiture of very different legal interests. Moreover, in

the context of the present case, the seven entities named

* That the jury plainly received the erroneous message that the

defendant’s ownership of each of the seven entities was a suffi-

cient basis upon which to include each of them in the enterprise

emerges most clearly from its subsequent request for further in-

formation from the District Court. On the second day of its

deliberations, having apparently reached this count of the indict-

ment, the jury submitted a note to the Court which read as follows:

Exhibits: Certificates of incorporation of Huber Companies

listed in count 42.

Testimony of Karl R. Huber and Karl Huber pertaining to

ownership of the Huber companies in ¢ount 42.

Definition of an enterprise.

Definition of racketeering.

Transcript of proceedings at p. 6353.

were brought into being at different times—indeed, one of

them, Boden, Inc. did not exist at all, ahd therefore had

no affairs at all, until 1975, well after the last fraudulent

act had been committed. Necessarily, therefore, different

constellations of fact were necessary to establish the rele-

vant degree of connection between the affairs of each entity

and the acts of mail fraud charged in the indictment as a

“pattern of racketeering activity.”

The very vice of duplicity is the generation of ambiguous

general verdicts which fail to make clear which one or

more of the offetises charged in the single count were

committed by the defendant. The vice may be harmless

where the penal conseqtiences are not different, as for ex-

ample, where more than one mailing, and thus more than

one act of mail fraud is charged in a single mail fraud

count. But the vice of duplicity is itretrievably prejudi-

cial in a case such as the present one, where separate

violations of the statute may be differentiated according

to the identity of the legal entities whose affairs are

claimed to be involved in racketeering activity and thus

differentiated according to the very different legal interests

exposed to forfeiture in the event of conviction.

Accordingly, as a result of the District Court’s erroneous

charge to the jury, and the Court of Appeals’ erroneous

analysis of both the record and the evidentiary require-

ments of the statute, the defendant has been forced to

suffer the forfeiture of substantial business interests upon

the most ambiguous of verdicts. For these reasons, we

respectfully submit, this Court should grant this petition

and issue a writ of certiorari to the Court of Appeals for

the Second Circuit.

POINT II

Multiple convictions and cumulative punishment

under 18 U.S.C. § 1001 may not be obtained where

the same false statement is reiterated on more than

one occasion.

Each of the six hospitals named in the indictment filed

Medicare-Medicaid Cost Reports for the years 1974, 1975,

and 1976 in which depreciation was asserted with re-

spect to capital assets and equipment purchased from

the medical companies in this case.* Even assuming that

the amounts reported for depreciation were “false” and

that the act of reporting them was within the ambit of

the defendant’s criminal purpose, it nevertheless follows,

however, that, at most, only one offense was committed

with respect to each hospital, not three—or, in one case,

four—as alleged in the indictment.

The essence of the offense committed by the Petitioner

with respect to these counts was in setting in motion a

chain of events which lead, ineluctably, to an overstatement

of depreciation on capital assets in annual Medicare and

Medicaid Cost Reports by the various hospitals with which

companies owned by the defendant had done business. In

each year for which a Cost Report was filed, the same

assets were depreciated in an equal prorated amount

using the straight line method of depreciation. Thus, each

succeeding year’s Cost Report, for each hospital, contained

nothing more than a reproduction of the amount of depreci-

ation claimed for the preceding year for each asset as to

which depreciation had been claimed in the preceding year.

Thus the government trifureated each offense, multiplying

by a factor of three the defendant’s exposure to conviction

*In the case of Greater Paterson Hospital, a Cost Report

covering the second half of 1973 was included in the indictment.

and punishment.* But one offense does not become three

at the whim of the government, and the making of a false

statement is a single offense regardless of how many times

the same statement may be reproduced or replicated.

In Bramblett v. United States, 231 F.2d 489 (D.C. Cir.

1956), the defendant was convicted on seven counts of

having violated 18 U.S.C. $1001. The evidence showed

that the defendant, then a member of Congress, had con-

trived a scheme to defraud the United States by falsely

representing, in compensation claims submitted on a

monthly basis, that a certain individual was a clerk for

him and entitled to receive compensation when, in truth

and in fact, the defendant converted and intended to con-

vert to his own use the compensation thus authorized.

Like the present case, each count of the indictment repre-

sented a different and succeeding month in which forms

designating the individual as a clerk were submitted to

the relevant agency. The Court ruled, however, that only

one offense was committed.

It is true that, in Bramblett, the defendant was charged

with having engaged in a scheme to conceal a material

fact under Section 1001, rather than with having made a

false statement under the same statute, as in the present

case. Nevertheless, although each of these disjunctive

sub-divisions of $1001 is a distinct offense, the essence

of the wrong in both cases is in the act of concealment or

the act of making a false representation, as the case may

be, and the ‘‘scheme to conceal” in the case of prosecutions

for concealment or covering up a material fact refers

merely to the means by which the offense is perpetrated.

“It is the knowing falsity of the statement which is the

material part of the statutory crime, not [the scheme to

conceal which is] the vehicle of its perpetration.” United

* Indeed; in this case, cumulative fines of $5,000 on each count

were imposed on all of the 19 convictions under § 1001, for a

total of $95,000 in fines.

States v. Uram, 148 F.2d 187, 190 (2d Cir. 1945). And

Bramblett has not been construed, in subsequent decisions,

to be to the contrary. Compare, United States v. Ma-

tanky, 482 F.2d 1319, 1322 (9th Cir. 1973).

Relying upon United States v. Bettenhausen, 499 F.2d

1223 (10th Cir. 1974), however, the Second Circuit ruled

that Petitioner was properly convicted of 19 counts of

having made a false statement. But the Second Circuit’s

reliance upon Bettenhausen was misplaced, and, in any

ease, the subdivision of the defendant’s activities into 19

false statement counts is totally at odds with this Court’s

clear and unwavering commitment to the principle that

a single transaction may not be subdivided into a multitude

of discrete offenses.

Bettenhausen involved the submission of false docu-

mentation in support of a single tax return. The defend-

ant had argued that because all of the documents were

submitted on the single occasion only one false statement

count would lie. But the Bettenhausen court rejected this

contention, observing that the defendant was not charged

with having made “fraudulent statements or representa-

tions,” under § 1001, but rather under that clause of the

statute expressed in singular terms—‘‘any false writing

or document . . .” Thus the Court ruled, ‘We feel that

the statute aims at the making or using of each ‘false writ-

ing or document’ and intends the wrong connected with

each to be a separate offense.” United States v. Betten-

hausen, supra, at 12364.

In Bettenhausen, however, each false document related

to a separate and unrelated transaction, although all were

submitted in support of a single fraudulent tax return at

one time. Here, in complete contrast, each Cost Report

submitted was identical in all relevant respects to every

other Cost Report submitted by that hospital, and all of

them related to a single series of transactions with

companies owned and controlled by Petitioner.

In any case, however, the thrust of the Second Circuit’s

determination in this case runs across the grain of that

line of decisions in this Court holding that “doubt will be

resolved against turning a single transaction into multiple

offenses.’’ Bell v. United States, 349 U.S. 81, 84 (1955) ;

Ladner v. United States, 358 U.S. 169 (1958); see also

Simpson v. United States, 435 U.S. 6 (1978); Jeffers v.

United States, 432 U.S. 137, 155 (1977). Here, the Peti-

tioner’s crime lay in his causing the various hospitals to

overstate their respective claims for depreciation; surely

his liability for that wrong may not be enhanced by virtue

of the fortuitous circumstance that claims for deprecia-

tion are, in fact, amortized over the useful life of the

relevant asset, so that his liability is multiplied by the

number of years of useful life of the assets sold. At most,

Petitioner caused the making of six false statements, rep-

resenting the inflated depreciation claims by each of the

six hospitals for assets purchased from companies owned

or controlled by ‘Petitioner, and the matter should not be

parsed so fine as to justify the multiplication of his lia-

bility for each year in which the same statement is re-

peated. At the very least, there must exist some doubt on

this score; as even the Second Circuit observed the matter

was not ‘‘free from difficulty.” United States v. Huber,

supra, at 399. Such doubt may not be resolved in favor of

the visitation of cumulative sanctions upon the Petitioner,

and accordingly, his convictions should be reversed and the

matter remanded for appropriate further proceedings.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Dated: New York, New York

December 10, 1979

Respectfully submitted,

JEFFREY D, ULLMAN

Attorney for Petitioner

335 Broadway

New York, New York 10013

(212) 966-1000

Bourer, Uttman & Tarkerr

Of Counsel

Appendix A, Opinion of United States Court of

Appeals for the Second Circuit.

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

—~>—

No. 1202—August Term, 1978.

(Argued June 21, 1979 Decided July 20, 1979.)

Docket No. 79-1132

—{>—_

UNITED STATES OF AMERICA,

Appellee,

—against—

KARL R. Huser,

Defendant-Appellant.

Before:

WATERMAN, FEINBERG and TIMBERS,

Circuit Judges.

—>—

Appeal from judgment of conviction following jury

trial before Charles H. Tenney, J. in the United

States District Court for the Southern District of

New York for conspiracy in violation of 18 U.S.C.

§ 371, causing to be made false and fraudulent state-

ments to the United States Department’ of Health,

Education and Welfare in violation of 18 U.S.C.

§§ 1001, 2, mail fraud in violation of 18 US.C.

§§ 1341, 2, making false declarations before a grand

3915

Appendix A.

jury in violation of 18 U.S.C. § 1623, and conducting

the affairs of an enterprise through a pattern of

racketeering activity in violation of 18 U.S.C.

§§ 1961, 1962(c), 1963, 2.

Affirmed.

—_~<p>—

JEFFREY D. ULLMAN, New York, N.Y.

(Bohrer, Ullman & Taikeff, New

York, N.Y., Barry A. Bohrer, of

Counsel), for Defendant-Appellant.

GEORGE FE. WILSON, Assistant United

States Attorney, New York, N.Y.

(Robert B. Fiske, Jr., United States

Attorney for the Southern District of

New York, Howard W. Goldstein, As-

sistant United States Attorney, of

Counsel), for Appellee.

—»—

FEINBERG, Circuit Judge:

Karl R. Huber appeals from a judgment of convic-

tion following a lengthy jury trial on a multi-count

indictment before Judge Charles H. Tenney in the

United States District Court for the Southern Dis-

trict of New York. Appellant was charged in Count

One with conspiring, among other things, to defraud

the United States in connection with its administra-

tion of the Medicaid, Medicare and Hill-Burton pro-

grams, to make and cause to be made false

statements to a government agency in a matter

within its jurisdiction, and to use the mails in fur-

therance of a scheme to defraud in violation of 18

3916

Appendix A.

U.S.C. § 371. Counts Two through 24 charged ap-

pellant with making, and causing to be made, false,

fictitious and fraudulent Statements to the United

States Department of Health, Education and Welfare

in violation of 18 U.S.C. §§ 1001, 2. Counts 25.33

charged using the mails in furtherance of a scheme

to defraud certain insurance companies, hospitals, the

United States, and the States of New York and New

Jersey in violation of 18 U.S.C. §§ 1341, 2. In addi-

tion, appellant was charged with six counts of trans-

porting stolen money in interstate commerce, in

violation of 18 U.S.C. §§ 2314, 2 (Counts 34-39), one

count of making false material declarations before a

grand jury in violation of 18 U.S.C. § 1623 (Count

40), and one count of conducting the affairs of an

enterprise through a pattern of racketeering activity

in violation of 18 U.S.C. §§ 1961, 1962(c), 1963, 2

(Count 42).'

During the course of the trial, the district court

entered judgments of acquittal on Counts 14-16, 20,

27, and 34-39. The jury convicted appellant on all of

the remaining counts, and returned a special verdict

in which it found that the enterprise concerned in

Count 42 consisted of the following entities also

found to be wholly owned by appellant: Tudor, Inc.

(Tudor), Boden, Inc. (Boden), Atlantic Medical Corpo-

ration (Atlantic), Hospital Equipment Company

1 Also charged, in Counts One to 39 and 42 were Huber's

father, Karl Huber, Peter M. Conroy and Anthony W. Eckert,

Jr. Appellant’s father was also charged in Count 41 with making

false material declarations before a grand jury, in-violation of 18

U.S.C. § 1623. His trial was severed because of ill health. Con-

roy and Eckert pleaded guilty prior to trial to the conspiracy

count, four false statement counts, and four mail fraud counts,

and each was sentenced to six months’ imprisonment, three

years’ probation, and a $25,000 fine.

3917

Appendix A.

(HEC), Debs Hospital Supplies, Inc. (Debs), Medical

Facilities, and Hospital Furniture/Medical Facilities

(HF/MF). Judge Tenney sentenced appellant to a

three-year prison term on the conspiracy and false

statement counts and a two-year term on the mail

fraud counts to run concurrently with each other,

and to a one-year term on the perjury count to be

consecutive to the other prison terms, a total of four

consecutive years. Appellant was fined $5,000 on the

conspiracy count and on each of the false statement

counts, and $1,000 on each of the mail fraud counts,

a total of $108,000. The judge directed conditional

forfeiture of appellant’s enterprise in accordance with

the special verdict on the racketeering count. The

condition gave appellant the option to redeem his

corporations by payment within six months of cash

or other property satisfactory to the Attorney Gen-

eral having a value of $100,000. Appellant was also

required to bear the costs of prosecution, which

amounted to $19,412.72. He remains free on $50,000

bail pending appeal.

Appellant makes numerous arguments to us, var-

iously seeking either a new trial or the striking of

some of the counts and a resentencing. For the rea-

sons set forth below, we affirm the judgment of con-

viction in a:l respects.

A number of appellant’s arguments concern the le-

gal sufficiency of the evidence. At this juncture, we

briefly summarize the activities for which appellant

was convicted viewing the evidence most favorably to

the government. Detailed review of the evidence will

be added later where necessary.

3918

Appendiz A.

Appellant Karl R. Huber, an honors graduate of

Princeton University, a 1965 graduate of Harvard

Law School and a member of the New Jersey bar,

joined his father, Karl Huber, in the latter’s allegedly

troubled business ventures instead of working for a

law firm in Newark as planned. In October 1971, ap-

pellant and his father obtained control of HEC, an

established New Jersey hospital supply house. HEC,

through its contract division, Medical Facilities, and

a series of corporate successors, entered into a num-

ber of cost-plus contracts with hospitals in New York

and New Jersey for the sale of hospital and surgical

supplies, furniture and equipment. The price con-

sisted of the manufacturers’ invoiced costs to HEC

plus a specified mark-up (usually between five and

eight percent) and the net cost of any freight. The

evidence showed that the Hubers knew about and un-

derstood the nature of the cost-plus contracts from

the time they took over HEC, were involved in and

managed the hospital supply business on a day-to-day

basis, and were kept apprised in detail about new

contracts as they were made.

Shortly after the Hubers acquired HEC, and at

their specific direction, HEC employees Conroy and

Eckert, see note 1 supra, began to inflate the manu-

facturers’ costs quoted to the hospitals. At appellant’s

Suggestion, invoices were falsified where necessary.

The hospitals were also charged for freight not ac-

tually incurred. The term “phantom freight,” appar-

ently coined by appellant’s father, was in general

usage at the office. As a result of these fraudulent

practices, HEC and Medical Facilities received an ef.

fective mark-up of roughly between 18 percent and

29 percent rather than the five to eight percent

3919

Appendix A.

specified in the contracts. There was evidence that

the mails were used in connection with the scheme

to defraud the hospitals. The fraudulent overcharges

totalled nearly $471,000, most of which was subject

to reimbursement by either the federal or state

government.* Further, each hospital capitalized the

costs incurred in outfitting it, and a depreciation ex-

pense was annually claimed as part of each hospital’s

operating expenses. These expenses were reported to

insurance companies, which served as fiscal in-

termediaries for the Medicare and Medicaid Pro-

grams. The cost reports formed the basis for reim-

bursement by the federal and state governments, and

the fraud resulted in inflated depreciation claims of

nearly $105,000. The nature of the federal and state

hospital funding programs was made clear to the

Hubers from the outset of their involvement in the

hospital supply operation, and they understood that

those programs would stimulate hospital expansion.

In July 1977, appellant appeared before a grand

jury that was investigating whether fraud had been

committed by HEC or its successors. Appellant

denied to the grand jury that he exercised close con-

trol over the hospital business and that he knew of

the cost-plus nature of the contracts or the meaning

of the term “phantom freight.” The proof at trial

overwhelmingly showed otherwise.

In defense, appellant contended that he and his

father had been cheated by Conroy and Eckert and

2 The federal government would reimburse the hospitals through

the United States Public Health Service under the Hill-Burton

Act, 42 U.S.C. § 291 et seq. State reimbursement would be by

the New York Department of Health under N.Y. Pub. Health

Law, Arts. 28-A and 28-B (McKinney 1977), the Nursing Home

Companies Law and the Hospital Mortgage Loan Construction

Law, respectively.

3920

Appendiz A.

that if appellant was directly involved in the fraudu-

lent scheme, because of the peculiar relationship be-

tween him and his domineering father, appellant

lacked the independence of will necessary to form

the intent needed to sustain the convictions. Numer-

ous witnesses, expert and otherwise, testified on this

latter point. Appellant also testified in his own de-

fense.

Appellant makes several challenges to his convic-

tion on Count 42 of the indictment, which charged

that he conducted the affairs of an enterprise

through a pattern of racketeering activity in viola-

tion of 18 U.S.C. § 1962(c), and which resulted in the

forfeiture of the enterprise pursuant to 18 US.C.

§ 1963. Those provisions are part of Title IX of the

Organized Crime Control Act of 1970 (Act), Pub. L.

No. 91-452, 84 Stat. 922, reprinted in [1970] U.S.

Code Cong. & Ad. News 1073, which was enacted in

response to what Congress perceived as. the threat to

the American economy from the unchecked growth

of organized crime. United States v. Parness, 503

F.2d 430, 439 (2d Cir. 1974), cert. denied, 419 U.S.

1105 (1975). The Act was intended in part to rem-

edy

defects in the evidence-gathering process of the

law inhibiting the development of the legally ad-

missible evidence necessary to bring criminal and

other sanctions or remedies to bear on the un-

lawful activities of those engaged in organized

crime and because the sanctions and remedies

3921

Appendix A.

available to the Government are unnecessarily

limited in scope and impact.*

Title IX of the Act added a new Chapter 96 to Title

18 of the United States Code, entitled “Racketeer In-

fluenced and Corrupt Organizations” (RICO). The pur-

pose of RICO is to enable law enforcement authori-

ties not only to punish individual criminals, but to

separate the corrupt interstate enterprises in which

they were involved from their criminal organizations

so that prosecutions will do more than merely impose

a “compulsory retirement and promotion system as

new people step forward to take the place of those

convicted.” S. Rep. 91-617, 91st Cong., 1st Sess. 78

(1969) (Senate Report). Thus, in order to “deal not

only with individuals, but also with the economic

base through which those individuals constitute such

a serious threat to the economic well-being of the

Nation,” id. at 79, RICO, in 18 U.S.C. § 1963, im-

poses the sanction of forfeiture of an “enterprise” in-

volved in violations of 18 U.S.C. § 1962.

That section specifies the kinds of corrupt infiltra-

tion into interstate commerce that Congress sought

to prevent. The section provides:

(a) It shall be unlawful for any person who

has received any income derived directly or indi-

rectly, from a pattern of racketeering activity or

through collection of an unlawful debt in which

such person has participated as a principal

within the meaning of section 2, title 18, United

States Code, to use or invest, directly or indi-

3 The quotation is from the Act’s statement of findings and

purpose, reprinted in [1970] U.S. Code Cong. & Ad. News at

1073.

"3922

Appendiz A.

rectly, any part of such income, or the proceeds

of such income, in acquisition of any interest in,

or the establishment or operation of, any enter-

prise which is engaged in, or the activities of

which affect, interstate or foreign commerce

(b) It shall be unlawful for any person

through a pattern of racketeering activity or

through collection of an unlawful debt to acquire

or maintain, directly or indirectly, any interest

in or control of any enterprise which is engaged

in, or the activities of which affect, interstate or

foreign commerce.

ployed by or associated with any enterprise en-

gaged in, or the activities of which affect, inter-

state or foreign commerce, to conduct or partici-

pate, directly or indirectly, in the conduct of

such enterprise’s affairs through a pattern of

racketeering activity or collection of unlawful

debt.

(d) It shall be unlawful for any person to con-

spire to violate any of the provisions of subsec-

tions (a), (b), or (c) of this section.

A “pattern of racketeering activity” is defined in 18

U.S.C. § 1961(5) as consisting of at least two acts of

racketeering activity within ten years of one another.

“Racketeering activity” is defined in 18 U.S.C.

§ 1961(1) as any of a wide variety of serious criminal

acts under state and federal law, including mail

fraud in violation of 18 U.S.C. § 1341, which was

the racketeering activity charged in the indictment

3923

10a

Appendia A.

here.‘ Since appellant was charged with a violation

of section 1962(c), the government had to show that

appellant had committed at least two acts of mail

fraud within ten years of one another in the conduct

of the affairs of an enterprise in interstate commerce

with which he was associated.

Pointing to what he claims are inconsistent judicial

interpretations of RICO, appellant urges this court to

reconsider its holding that -RICO is not unconstitu-

tionally vague. See United States v. Parness, supra,

503 F.2d at 440-42. We decline the invitation, noting

that each circuit court faced with the issue has

reached the same result. See United States v. Hawes,

029 F.2d 472, 479 (5th Cir. 1976); United States v.

Campanale, 518 F.2d 352, 364 (9th Cir. 1975), cert.

denied, 423 U.S. 1050 (1976); United States v. Cap-

petto, 502 F.2d 1351, 1357-58 (7th Cir. 1974), cert.

denied, 420 U.S. 925 (1975). See also Atkinson,

Criminal Law, “Racketeer Influenced and Corrupt Or-

ganizations,” 18 U.S.C. §§ 1961-68: Broadest of the

Federal Criminal Statutes, 69 J. Crim. Law 1, 4 n.26

(1978).

In a number of loosely related arguments concern-

ing the composition to the enterprise to be forfeited,

appellant claims that a group of corporations cannot

be an “enterprise” within the meaning of RICO, that

the government’s theory of the composition of the

enterprise varied in the indictment and at trial, that

the indictment was duplicitous in the RICO count,

that the judge’s charge concerning the degree of con-

nection that the government had to show between

4 The indictment also charged transporiation of stolen money in

interstate commerce, in violation of 18 U.S.C. § 2314, as part of

the racketeering activity. The substantive charges of 18 U.S.C.

§ 2314 violations, Counts 34-39, were not submitted to the jury.

3924

lla

Appendix A.

each corporation and appellant’s racketeering activity

was erroneous, that the evidence was insufficient to

support the inclusion of certain of the corporations

in the enterprise, and that the use of a special ver-

dict to determine the composition of the enterprise

was error, prejudiced the defense, and in any event

did not cure any of the other problems just itemized.

Appellant’s argument that a group of corporations

cannot be an enterprise within the meaning of the

statute stems from an overly rigid reading of the

definitions contained in section 1961. Subsection (4)

provides

“enterprise” includes any individual, partnership,

corporation, association, or other legal entity,

and any union or group of individuals associated

in fact although not a legal entity.

The argument runs that since the term “corporation”

is in the singular, the only way a group of corpora-

tions may be an “enterprise” within the meaning of

the statute is if they come within the language,

“group of individuals associated in fact.” And since

“person” is defined in subsection (3) as including “any

individual or entity ... ,” it must be that the term,

“individual,” since used in the disjunctive with “en-

tity,” cannot encompass an entity such as a corpora-

tion. Therefore a group of corporations cannot be a

“group of individuals associated in fact” within the

meaning of the definition of “enterprise.” But this

makes nonsense of the statute. First, the language

does not require that result. The definition of “enter-

prise” is a list beginning with the word “includes.”

This indicates that the list is not exhaustive but

merely illustrative. See, e.g., Federal Land Bank of

3925

12a

Appendiz A.

St. Paul v. Bismarck Lumber Co., 314 USS. 95,

99-100 (1941). Second, at least where the enterprise

is commercial, courts have consistently construed “en-

terprise” broadly in light of Congress’ mandate that

the provisions of Title IX of the Act “shall be liber-

ally construed to effectuate its remedial purposes,”

Act § 904(a), [1970] U.S. Code Cong. & Ad. News at

1104. See, e.g., United States v. Altese, 542 F.2d

104, 106 (2d Cir. 1976), cert. denied, 429 U.S. 1039

(1977); United States v. Parness, supra, 503 F.2d at

439. Congress was concerned about the impact on

the American economy of the infiltration of organ-

ized crime into interstate commerce. There is no rea-

son to believe that Congress cared what form such

infiltration took, except to indicate by an abundance

of caution in listing the examples in the definition of

enterprise that all such harmful infiltration, regard-

less of form, should be eradicated. To view “enter-

prise” as excluding groups of corporations would

make it too easy to avoid RICO’s forfeiture sanction.

One could simply transfer assets from the corpora-

tion whose affairs had been conducted through a pat-

tern of racketeering activity to another corporation

whose affairs had up to that point not been so con-

ducted. We agree with the government that ap-

pellant’s reading of the statute would perversely in-

sulate the most sophisticated racketeering combina-

tions from RICO’s sanctions, the precise opposite of

Congress’ intentions. p-

Appellant claims that the government’s theory of

the case never crystallized; that it never decided

whether the prosecution was based on a single enter-

prise composed of one or more of the seven entities

listed in the indictment, or a seven-enterprise theory.

3926

13a

Appendix A.

We disagree. Although there were occasions when

the word “enterprises” was used in the indictment

and during the trial, it seems clear that it was used

as a synonym for “entities” rather than in the tech-

nical sense of a RICO enterprise. While the govern-

ment might be faulted for imprecise language on oc-

casion, it is clear that the indictment was predicated

on a one-enterprise theory, and that that was the

basis on which proof was offered and on which the

jury was charged.

Appellant also claims that the indictment was du-

plicitous in that Count 42, the RICO count, charged

a series of acts through a number of entities, and

that the jury was therefore not required to agree

unanimously on any particular fact to reach a guilty

verdict. Appellant’s failure to raise this claim prior

to trial “may be deemed” a waiver. Fed.R.Crim.P.

12(bX2); United States v. Kelley, 395 F.2d 727, 729

(2d Cir.), cert. denied, 393 U.S. 963 (1968). Further,

the convictions on all the mail fraud counts sub-

mitted to the jury coupled with the special verdict

specifying that all the entities were memers of the

enterprise show that the jury was obviously not

divided on the theory underlying its verdict of guilt.

Appellant argues that Judge Tenney’s charge per-

mitted the jury to find that the various entities were

part of the enterprise if it found that defendant

owned them all even if he conducted the affairs of

only one of them through a pattern of racketeering

activity. The government properly concedes that such

a connection alone would not support application of

RICO’s forfeiture sanction to enterprises whose af-

fairs were not conducted through a pattern of racket-

eering activity. However, so long as the jury is cor-

3927

tt il el ee

l4a

Appendix A.

rectly apprised of the elements of a RICO violation

and is instructed that it may find an entity owned

by a defendant to be part of the enterprise only if

the evidence warrants, then there is no error. We do

not believe Judge Tenney’s charge authorized the

jury to include entities in the enterprise merely be-

cause they were owned by appellant. Reading the

charge as a whole, we think the jury understood that

it could not include a particular entity in the enter-

prise unless its affairs were found to have been con-

ducted through the pattern of racketeering activity.

Appellant contends that, even if the jury was

properly instructed, the evidence was insufficient to

link a number of the enterprises to the pattern of

racketeering activity. The evidence at trial, however,

viewed most favorably to the government, established

that Tudor, Boden, Atlantic, HEC, Debs, Medical

Facilities and HF/MF were involved in the racketeer-

ing activity as follows. First, appellant virtually con-

cedes that the evidence was sufficient to show that

the affairs of Medical Facilities and HF/MF were

conducted through a pattern of racketeering activity.

The focus of the argument is really on the five other

entities. Medical Facilities was the contract division

of HEC when the Hubers acquired HEC in October

1971 through Tudor, a Huber controlled corporation.

In 1972, HEC became the wholly owned subsidiary

of Atlantic, another corporation controlled by the

Hubers. During the operation of the fraud, checks to-

talling $871,000 were drawn on HEC by the Hubers

in favor of Independent Management Company (IMC),

a division of Tudor. This was during a period when

Huber made large transfers of funds among various

company checking accounts. The jury could infer that

3928

15a

Appendiz A.

checks drawn on HEC to IMC represented funds de-

rived from the scheme to defraud the hospitals on

the cost-plus contracts serviced by Medical Facilities.

In 1973, Tudor acquired Debs. Huber then had Tudor

trade its Debs stock for Atlantic’s HEC stock. In

1973, HEC was wound down, and its business was

transferred to Debs. Debs’s name was pasted over

HEC’s name on the invoices. HF/MF was then

formed and became the successor to the hospital de-

sign and interior business of HEC and Debs. The lat-

ter ceased operations in March 1974, and HF/MF

ceased in May 1975. Shortly before this last event,

Huber shifted to Boden all of Tudor’s assets, subject

to its liabilities. Thus, these companies were not

merely unrelated businesses owned by the same per-

son. They were all involved in the hospital supply

operation, which could be fairly characterized as a

single business operated under various names and

forms chosen by appellant to suit his own purposes

and convenience.

Appellant relies heavily on United States v.

Nerone, 563 F.2d 836 (7th Cir. 1977), cert. denied,

435 U.S. 951 (1978), in arguing that not all of the

seven entities were conducted “though a pattern of

racketeering activity.” There, the Seventh Circuit re-

versed a RICO conviction where the defendants had

been charged with conducting the affairs of Mapel

Manor, Inc., a trailer park corporation, through a

pattern of racketeering activity. The defendants ap-

parently conducted an illegal gambling operation in

one of the mobile homes at their trailer park. But

the gambling operation had nothing to do with the

affairs of the trailer park. There was no “endeavor to

show that gambling revenues were used by or in any

3929 ©

l6a

Appendix A.

way channeled into the corporation or that persons

were paid out of gambling revenues to perform ser-

vices for Mapel Manor, Inc.” Id. at 851. Thus, the

government's RICO case failed there “because of a to-

tal want of proof of the connection between the

racketeering activities and the affairs of Maple

Manor, Inc.” Id. at 852. Moreover, the trailer park

was not in the gambling business. In contrast to that

case, the seven entities here were all in the hospital

supply business, and that business was conducted

through a series of mail frauds.

We thus find there was sufficient evidence to sus-

tain the charge that the affairs of the seven entities

were conducted by appellant though a pattern of

racketeering activity. We note, however, that the po-

tentially broad reach of RICO poses a danger of

abuse where a prosecutor attempts to apply the stat-

ute to situations for which it was not primarily in-

tended. Therefore, we caution against undue prosecu-

torial zeal in invoking RICO. We also emphasize to

the district judges that when RICO is invoked each

set of facts must be evaluated independently. We

cannot at this point lay down: any fixed rules con-

cerning the applicability of the statute. For example,

in some cases a pattern of racketeering activity in

the conduct of a subsidiary’s affairs may not be at-

tributable to the parent. We hold only that on these

facts, particularly the evidence of continuous manipu-

lation of the form of the business and the transfer

of large sums among the corporations, these entities

were sufficiently intertwined in the mail fraud to be

deemed part of the RICO enterprise.

Appellant also challenges the use of the special

verdict. Fed.R.Crim.P. 31(e) provides:

3930

17a

Appendix A.

Criminal Forfeiture. If the indictment or the

information alleges that an interest or property

is subject to criminal forfeiture, a special verdict

shall be returned as to the extent of the interest

or property subject to forfeiture, if any.

This provision, along with Fed.R.Crim.P. 7(cX2) gov-

erning indictments, was specifically added to the

rules in 1972 “to provide procedural implementation

of the recently enacted criminal forfeiture provision

of [RICO].” Notes of Advisory Committee on Rules,

Rule 7(cX2). Appellant claims that the Rule au-

thorizes the use of a special verdict only to the ex-

tent necessary to determine a defendant’s interest in

an enterprise, but not for the purpose of identifying

membership in the enterprise. Here the special ver-

dict called for both inquiries. The jury was required

to specify which corporations were part of the enter-

prise and the percentage of appellant’s interest in

each. Appellant argues that since the former was un-

authorized by Rule 31(e), the special verdict runs

afoul of the asserted general proposition that special

verdicts are anathema to federal criminal procedure.

However, we believe this special verdict to be wholly

within the confines of Rule 31(e). Given the nature

of the enterprise alleged, it was obviously necessary

for the jury to say which entities were part of it, as

well as appellant’s interest in each, in order to deter-

mine the “extent of the... property subject to

forfeiture.”

Finally, appellant argues that the forfeiture sanc-

tion violates the Eighth Amendment’s proscription on

cruel and unusual punishments. Judge Tenney re-

5 Both parties incorporated by reference their arguments on this

issue in the district court.

3931

18a

Appendix A.

jected the contention in a lengthy oral opinion. RICO

is apparently the first modern federal statute to im-

pose forfeiture as a criminal sanction directly on an

individual defendant. As noted in the Senate Report

to RICO,

While there is some indication that this con-

cept of criminal forfeiture was in usage in the

colonies, the First Congress by Act of April 20,

1790, abolished forfeiture of estate and corrup-

tion of blood, including in cases of treason. That

statute, as revised, is found in 18 U.S.C. § 3563

.... From that date to the present, therefore,

no Federal statute has provided for a penalty of

forfeiture as a punishment for violation of a

criminal statute of the United States. Section

1963(a), therefore, would repeal 18 U.S.C. § 3563

by implication.

Senate Report at 80. However, what is innovative

about RICO is not that it imposes forfeiture as a

consequence of criminal activity, but rather that it

imposes it directly on an individual as part of a

criminal prosecution rather than in a separate pro-

ceeding in rem against the property subject to for-

feiture. Statutes providing for in rem forfeiture of

property related to criminal activity are relatively

common. See, e.g., 49 U.S.C. §§ 781-83 (relating to

narcotics violations); Legislative N ote, Organized

Crime Control Act of 1970, 4 U. Mich. J. of Law

Reform 546, 624 & n.13 (1971). Such statutes have

been upheld even where, unlike here, the effect is to

deprive an owner of property where that owner is

not the person guilty of using the property for

criminal purposes. See Goldsmith-Grant Co. v. United

3932

19a

Appendix A.

States, 254 U.S. 505, 511 (1921) (statute “too firmly

fixed in the punitive and remedial jurisprudence of

the country to be now displaced”). Further, such “a

forfeiture proceeding is quasi-criminal in character.

Its object, like a criminal proceeding, is to penalize

for the commission of an offense against the law.”

Plymouth Sedan v. Pennsylvania, 380 US 693, 700

(1965). At least for this purpose, there is no substan-

tial difference between an in rem proceeding and a

forfeiture proceeding brought directly against the

owner. Cf. Shaffer v. Heitner, 433 U.S. 186 (1977).

We do not say that no forfeiture sanction may

ever be so harsh as to violate the Eighth Amend-

ment. But at least where the provision for forfeiture

is keyed to the magnitude of a defendant’s criminal

enterprise, as it is in RICO, the punishment is at

least in some rough way proportional to the crime.

We further note that where the forfeiture threatens

disproportionately to reach untainted property of a

defendant, for example, if the criminal and

legitimate aspects of the “enterprise” have been com-

mingled over time, section 1963 permits the district

court a certain amount of discretion in avoiding

draconian (and perhaps potentially unconstitutional)

applications of the forfeiture provision. Section

1963(c) provides:

Upon conviction of a person under this sec-

tion, the court shall authorize the Attorney Gen-

eral to seize all property or other interest de-

elared forfeited under this section upon such

terms and conditions as the court shall deem

proper.

In this case, Judge Tenney provided in his sentence

that the seizure

3933

20a

Appendix A.

shall be on the following terms and conditions:

(1) that defendant may redeem and repossess

himself of said entities at any time within six

months of the date of this judgment upon pay-

ment or delivery to the Attorney General of cash

or other property satisfactory to the Attorney

General having a value of $100,000 ....

We certainly cannot say that the forfeiture provision

is unconstitutional as applied to these circumstances,

even if there were some doubt about its application

to others.

Having determined that appellant’s conviction

under the RICO count is entirely proper, we turn to

the other points raised.

Huber raises several points with respect to his

false statement convictions under 18 U.S.C. §§ 1001,

2. Section 1001 provides:

Whoever, in any matter within the jurisdiction

of any department or agency of the United

States knowingly and willfully falsifies, conceals

or covers up by any trick, scheme, or device a

material fact, or makes any false, fictitious or

fraudulent statements or representations, or

makes or uses any false writing or document

knowing the same to contain any false, fictitious

or fraudulent statement or entry, shall be fined

not more than $10,000 or imprisoned not more

five years, or both.

Section 2 provides:

(a) Whoever commits an offense against the

United States or aides, abets, counsels, com-

3934

2la

Appendix A.

mands, induces or procures its commission, is

punishable as a principal.

(b) Whoever willfully causes an act to be done

which if directly performed by him or another

would be an offense against the United States, is

punishable as a principal.

Huber was convicted on 19 counts for having caused

six hospitals with which he dealt to submit claims to

the government, through fiscal intermediaries, for re-

imbursement for depreciation costs that were inflated

due to fraud. The 19 convictions represented each

hospital’s annual claims over three, and in one case

four, years.

Appellant first argues that the statements made to

the government were not literally false, since the

figures reported as the basis on which depreciation

was calculated reflected the hospitals’ actual original

(albeit inflated) costs. But the hospitals were required

to certify that the claims submitted represented

properly reimbursable costs. Appellant bases his argu-

ment on regulations applicable to depreciation claims

on capital expenditures. 20 C.F.R. § 405.415. Al-

though these regulations were not referred to by the

district judge in his charge to the jury,® they do not

differ on this issue from those to which the judge

did refer in his charge. That is, under either set of

regulations the government provides reimbursement

only to the extent that the expenditures were based

on reasonable costs honestly arrived at. Thus, even

under the regulations cited to us by appellant, for

6 Appellant did not refer to the depreciation claims regulations

either in his written requests to charge or in his exceptions to

the charge.

3935

22a

Appendiz A.

depreciable assets acquired after 1970 as those in-

volved here, allowable depreciation could only be

based on “historical cost” to the extent that such

cost did not exceed the “lower of current reproduc-

tion cost . . . or fair market value at the time of pur-

chase.” 20 C.F.R. § 405.415(b\(1). “Fair market value”

is defined in the next subsection, (bX2), as “the price

that the asset would bring by bona fide bargaining

between well-informed buyers and sellers at the date

of acquisition.” In this case, there was bona fide

bargaining, which produced the cost-plus contracts.

The costs relied on by the hospitals in the reports,

however, were not the costs that would have been in-

curred through honest performance of those con-

tracts, but were costs that were inflated by fraud,

and to the extent they were so inflated, the claims

were not reimbursable. The hospitals’ innocent

statements that the costs were fully reimbursable

were therefore false. On this view, we need not ad-

dress the government’s contention that even if the

statements were not literally false, they were “fraud-

ulent” within the meaning of section 1001.

Appellant next argues that the evidence was insuf-

ficient as a matter of law to establish that he “will-

fully cause{d]” the submission of the false statements

to the government within the meaning of section

2(b). He argues that his purpose, if any, was only to

defraud the hospitals, not the government. Appellant

claims that he did not care about the hospitals’ cost

reports because they “played no role in the amount

of money paid by the hospitals to the defendants

. and even their filing vel non was a matter of

total irrelevance and indifference to the defendants.”

Thus, he argues, in the absence of a criminal purpose

3936

23a

Appendiz A.

or objective to cause a false statement to be made to

the government, his convictions cannot stand, citing

United States v. Peoni, 100 F.2d 401, 402-03 (2d

Cir. 1938) (L. Hand). However, there was sufficient

evidence from which the jury could infer that the fil-

ing of the false statements was a criminal purpose of

appellant and that their filing was not a matter of

indifference to him. There was plenty of evidence

that from the outset Huber was familiar with the

government hospital funding programs, which he

knew would stimulate hospital activity and encourage

expansion. The jury was entitled to infer that such

funding, and the paper work that went with it, was

essential to the prosperity of appellant’s ongoing

fraudulent business activities. This was not a one-

time fraud that ended prior to the filing of any

papers with the government by the hospitals.

Appellant’s last objection to his false statement

convictions is to the number of them. He was con-

victed on 19 counts, whereas, he argues, the ac-

tivities alleged comprised at most six counts, i.e., one

count for each of the six hospitals submitting de-

preciation claims to the government. Appellant’s

point is that since the historic cost figure reported to

the government as the basis for each hospital’s an-

nual claim for depreciation was the same each year,

there was, in effect, only one false statement for

each hospital, which was merely repeated a number

of times. In other words, appellant claims the convic-

tions were multiplicitous, in that a single act was al-

leged to constitute several violations of the same

statute. See United States v. Samuel Israelski, 597

F.2d 22, 24-25 (2d Cir. 1979). While such a question

3937

24a

Appendiz A.

is rarely free from difficulty, we think appellant was

correctly convicted on all 19 counts. Appellant was

not charged with a given number of fraudulent

schemes, but rather with having caused a certain

number of false statements to be made. Had a hos-

pital knowingly used an inflated historic cost as the

basis for depreciation claims, it would have com-

mitted a separate violation with each annual claim.

See United States v. Bettenhausen, 499 F.2d 1223,

1234 (10th Cir. 1974). Thus, appellant’s convictions

for having caused the submission of the 19 state-

ments are affirmed.

Appellant next complains of the district judge’s re-

fusal to allow a defense witness to testify as an ex-

pert in the field of psychoanalysis, and that such re-

_ fusal seriously interfered with appellant’s ability to

present his defense that because of his relationship

with his father he was incapable of forming the men-

tal state necessary to sustain the convictions. The

witness did testify as a business expert. He is a pro-

fessor of economics at Harvard Business School. He

has also studied psychoanalysis at the Boston Psycho-

analytic Institute, and, though he has had no medical

training, is certified as a psychoanalyst by the

American Psychoanalytic Institute. He has treated

people regularly without supervision for a number of

years. Judge Tenney heard the proffered testimony

in the absence of the jury, and ruled the witness un-

qualified to testify as an expert concerning ap-

pellant’s mental state. While we do not say that all

of us would have ruled the same way, we hold that

the district judge did not abuse his broad discretion

in deciding that this witness was not qualified in

this case. See, e.g., Hamling v. United States, 418

3938

25a

Appendiz A.

U.S. 87, 108 (1974); United States v. Bermudez, 526

F.2d 89, 98 (2d Cir. 1975), cert. denied, 425 US.

970 (1976). This is particularly so in light of the fact

that two psychiatrists did testify as experts concern-

ing appellant’s mental state, and thus the defense

based on appellant’s asserted lack of free will was

presented to the jury.

Appellant challenges the sufficiency of the evi-

dence on four of the mail fraud counts. These chal-

lenges are aimed at more than simply reversal of

those convictions. Relying on a case in the Third Cir-

cuit for the proposition, appellant argues that if any

of the mail fraud counts are reversed, the RICO

count must be reversed as well, because it is impos-

sible to know which mail fraud counts the jury relied

on in finding the requisite “pattern of racketeering

activity.” United States v. Brown, 583 F.2d 659, 669

(3d Cir. 1978). We need not decide whether this cir-

cuit would agree with that analysis, cf. United States

v. Parness, supra, 503 F.2d at 438 (“Convictions on

any two of these [travel fraud] counts were sufficient

under § 1961(5) to establish the ‘pattern of racketeer-

ing activity’ necessary for a conviction under

§ 1962(b).”), because the evidence was sufficient to

sustain all the mail fraud counts submitted to the

jury.

Appellant argues that as to two of the counts, 25

and 26, there was insufficient evidence of use of the

mails. Those counts concerned checks paid by two of

the hospitals to Medical Facilities. Officials from

both hospitals testified that checks were typically

mailed in the ordinary course of business. Although

there was testimony that some checks were picked

up by hand, they were identified as checks other

3939 ©

26a

Appendiz A.

than those specified in Counts 25 and 26, Witnesses

could not recall whether any checks other than those

identified were picked up by hand. This testimony of

an alternative mode of delivery is simply too scanty,

compare United States v. Baker, 50 F.2d 122, 123

(2d Cir. 1931) (testimony by lawyer that “a great

many letters delivered by his office were not

mailed”), to prevent the use of customary business

practices as proof of mailing. See United States V.

Toliver, 541 F.2d 958, 966 (2d Cir. 1976); United

States v. Fassoulis, 445 F.2d 13, 1% (2d Cir.), cert.

denied, 404 U.S. 858 (1971).

As to Counts 32 and 33, appellant claims that use

of the mails by the hospital to deliver monthly pay-

ment requisitions to the New York State Department

of Health came only after consummation of the

fraudulent transactions, and thus could not have

been “for the purpose of executing [a] scheme or ar-

tifice [to defraud]” within the meaning of 18 U.S.C.

§ 1341,’ under United States vy. Maze, 414 U.S. 395

(1974). Appellant’s point is that all the invoices on

which the requisitions were based had already been

paid to one of appellant’s entities by the hospital be-

fore the mailing. However, regardless of whether all

7 In relevant part, 18 U.S.C. § 1341 provides:

Whoever, having devised or intending to devise any scheme

or artifice to defraud .. . , for the purpose of executing such

scheme or artifice or attempting so to do, places in any post

office or authorized depository for mail matter, any matter or

thing whatever to be sent or delivered by the Postal Service,

or takes or receives therefrom, any such matter or thing, or

knowingly causes to be delivered by mail according to the di-

rection thereon, or at the place at which it is directed to be

delivered by the person to whom it is addressed, any such

matter or thing, shall be fined not more than $1,000 or im-

prisoned not more than five years, or both.

3940

27a

Appendiz A,

of the invoices had already been paid, the mailing to

obtain reimbursement was a part of this ongoing

scheme to defraud. As stated earlier, the jury could

find that government funding of hospital expansion

was essential to the prosperity of appellant’s fraud-

ulent scheme. In Maze, supra, 414 U.S. 395, the de-

fendant stole a credit card and fraudulently used it

to obtain food and lodging at motels. The mails were

used by the motels to obtain payment on invoices

from banks. Maze’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. Further, the mailings there “increased the

probability that [the] respondent would be detected

and apprehended.” Id. at 403. Thus, in Maze, the

mailings were not only not in furtherance of a

scheme to defraud, they threatened to thwart it.

Here, viewed realistically, the mailings were an inte-

gral part of Huber’s fraudulent scheme. As stated

earlier, the jury could find that the government

funding was essential to generate the funds for

hospital expansion on which the continuance of the

illegal enterprise depended. See generally United

States v. Hasenstab, 575 F.2d 1035, 1038-39 (2d Cir.

1978). Therefore, there was sufficient evidence that

the mailings were in furtherance of a scheme to

defraud.

Finally, appellant argues that his request for an

order withdrawing several of the 18 specifications of

perjury set forth in Count 40 should have been

granted. We have carefully reviewed the objections

8 Appellant was charged with violating 18 U.S.C. § 1623, which

provides in relevant part:

(footnote continued on next page)

3941.

Appendia A.

to each specification and find that the truthfulness

of each was a question that was properly submitted

to the jury. United States v. Bonacorsa, 528 F.2d

1218 (2d Cir.), cert. denied, 426 U.S. 935 (1976).

There was no “fundamental ambiguity or im-

preciseness in the questioning,” id. at 1221, and we

cannot say that any of the answers was literally true

on its face.

For the reasons set forth above, we affirm the

judgment of conviction is all respects.

(a) Whoever under oath in any proceeding before or an-

cillary to any court or graad jury of the United States know-

ingly makes any false material declaration . . . Shall be fined

not more than $10,000 or imprisoned not more than five

years, or both.

3942

570—7-23-79 ad USCA—4391

29a

Appendix B, Order Denying Petition for Rehearing.

UNITED STATES COURT OF APPEALS

Seconp Circuit

At a Stated Term of the United States Court of Appeals,

in and for the Second Circuit, held at the United States

‘Court House, in the City of New York, on the tenth day of

October, one thousand nine hundred and seventy-nine.

Present: Hon. Srerry R. WarTerMan,

Hon. Witrrep FEInsere,

Hon. Wit11am H. Timsers,

Circuit Judges.

79—1132

Unirep States or AMERICA,

Plaintiff-Appellee,

Karu Huser,

Defendant-Appellant.

A petition for a rehearing having been filed herein by

counsel for the appellant, Karl Huber

Upon consideration thereof, it is

Ordered that said petition be and it hereby is denied.

A. Dante Fvsaro,

Clerk.

30a

Appendix C, Order Denying Petition for Rehearing

in banc.

UNITED STATES COURT OF APPEALS

Seconp Circuir

At a stated term of the United States Cov~’ .. Appeals,

in and for the Second Circuit, held at the United States

Court House, in the City of New York, on the tenth day

of October, one thousand nine hundred and seventy-nine.

79-1132

Unirep States oF AMERICA,

Plaintiff-Appellee,

Karu R. Huser,

Defendant-A ppellant.

A petition for rehearing containing a suggestion that

the action be reheard in banc having been filed herein by

counsel for the appellant, Karl R. Huber, and no active

judge who was a member of the panel having requested

that a vote be taken on said suggestion

Upon consideration thereof, it is

Ordered that said petition be and it hereby is denied.

Irvine R. KavrmMan

Chief Judge

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