# Amicus Curiae Brief — Bankers Trust Co. v. Rhoades

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_0089%3A3

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1985
- **Citation:** 473 U.S. 922

## Text

(7 » | otice-Supre
3) (4) FIL. cn

No. 84-648 and No. 84-647
NOV 21 1994

IN THE ALEXANDER L. STEVaS,
SUPREME COURT OF THE UNITED STAT#SRK

October Term, 1984

No, 84-648

SEDIMA, S.P.R.L.,
Petitioner,

-V,@

IMREX COMPANY, INC.,, et al.,
Respondents.

No, 84-657

BANKERS TRUST COMPANY,
Petitioner,

-V->-

DANIEL RHOADES, et al.,
Respondents.

BRIEF OF AMICUS CURIAE
THE CITY OF NEW YORK

FREDERICK A.O. SCHWARZ, JR.,
Corporation Counsel of the
City of New York
100 Church Street
New York, New York 10007
(212) 566-4501 or 4338

LEONARD KOERNER,

MICHAEL D. YOUNG,

MARTIN C. ARONCHICK,
Of Counsel.

TABLE OF CONTENTS

Table Of Contents.......cccccccccccsccsscsscccscccscers
Table of Authorities.........ccccccccccccscscccsscsees
Interest of AMICUS CUTIAC..........cccccccccscscees
Reasons For Granting The WTits.......ccccccccsss

CORI cccacncdnntcocensenessecenwumecssesensenesecneee

-j|-

Page

12

TABLE OF AUTHORITIES
Cases: Page
Alcorn County v. U.S. Interstate
Supplies Inc., 73! F.2d 1160
5th Pel isieiteenesaccnasene eeeeseecoeeseoe 5

Bankers Trust Co. v. Rhoades,
741 F.2d 511 (2d Cir. Sic hiisteasadinene passim

City of Milwaukee v. Hansen,
Civ. No. 77-246 (E.D.Wis.

Jan. 13, Ree IR eeeeeeee eeeceoses 6,11

City of New York v. Arnmart
Wholesale Beer Distributors

Inc., 83 Civ. 9263 (S.D.N.Y.,

filed Dec.2 l, Ta a cicncneeonne 5,8

City of New York v. Bandolene
Fuels, Inc., 81 Civ. 1240

eo e e °9 filed

April UE Pintnieetasadccscoccscdcoccccccscoes 6
City of New York v. Sitzer,

81 Civ. 7116 (S.D.N.Y., filed

November 16,1981)...ccceee eeeee eeeescoeeoeese 6
County of Cook v. Lynch,

560 F. Supp. 136 (N.D.

DL. REED ee eeeeseeee 5
County of Suffolk v. wanehy

81 Civ. 0257 (E.D.N.Y.,

filed Jan. 27, EE een 5

Cases: ' | Page

Gerace v. Utica Veal Co.,
580 F. Supp. 1465

(N.D.N.Y. iain entecesuneen 5
Maryland v. Buzz Berg Wrecki
~ Co., 496 FT Supe 24s _
Md, I ciuiiianintentptiaees eeoese eseeeeeo eee 5

Moore v. Margiotta, 83 Civ. 2036
(E.D.N.Y., filed
May 19, EO 5

Municipality of Anchorage v.
Hitachi Cable, Ltd., 547 F.
upp. 63 A a ET 5

New York v. O'Hara,
83 Civ. 1440 (W.D.N.Y..,filed

December 21, CES 5
Sedima, S.P.R.L. v. Imrex Co.

741 F.2d 482 (2d Cir. 1984).......ccccccees passim
Statutes:

The Racketeer Influenced and
Corrupt Organizations Act,
18 U.S.C.§§ eee passim

New York City Charter,
Ch. 16, i Uliiikisiaapiahbiieeienineeihiteiidiremnieieaiiaiien 2

-iii-

Other Authorities:

Note, Government Corruption and

Civil RICO: Providi
Compensation for Intangible
Losses, 58 N.Y.U. L. ier

1530 (1983)... SSOSSSSSSESSSSSSSSSSESOSSESSSESOOEEOSD

Tannenbaum & Molo, State and
Local Governments’ Use of

the Treble Damages
Remedy Under Chil RICO:
A Means of Redressing The
Poonomts Effects of

onduct,
75 Bavlor * Rev. l (1983)... seeeeeeeseeeseeee

116 Cong. Rec. 35,343 a

116 Cong. Rec. 35,344 (a

Page

No. 84-648 and No. 84-657

IN THE

SUPREME COURT OF THE UNITED STATES
October Term, 1984

No. 84-648
SEDIMA, S.P.R.L.,
Petitioner,
— Vv. —
IMREX COMPANY, INC.,, et al.,

Respondents.

No. 84-657

BANKERS TRUST COMPANY,
Petitioner,
_ Vv. —

DANIEL RHOADES, et al.,
Respondents,

BRIEF OF AMICUS CURIAE
THE CITY OF NEW YORK

INTEREST OF AMICUS CURIAE

The City of New York ("City") submits this

amicus curiae brief in support of the petitions for

writs of certiorari to the United States Court of

Appeals for the Second Circuit.* The decisions of

the Second Circuit in Sedima, S.P.R.L. v. Imrex Co.,

741 F.2d 482 (1984) and Bankers Trust Co. v.

Rhoades, 741 F.2d 511 (1984), threaten the vitality
and effectiveness of a statutory remedy used by the
City and other local or state governments to combat
systematic fraud and governmental corruption.

The New York City Charter charges the
City with the responsibility of representing and
protecting the public interest and the rights of its
citizens. New York City Charter, Ch. 16, § 394.
The City is also charged with the institutional
responsibility of protecting its capability for
delivering honest, efficient, impartial and effective

governmental services to all its citizens. Id,

*A third, recently-filed petition for a writ of
certiorari to the Second Circuit, Joel, et al. v.
Cirrito, et al., No. 84-604, raises some of the same
issues aS thoseherein. The City supports the
issuance of a writ in that case for the same reasons
stated herein.

44

In fulfilling its obligations, the City, as
well as other localities, must confront the persistent
challenges and dangers, as well as the corrupting
influence posed by systematic criminal frauds. Tax
evasion or public contractor frauds cause massive
economic loss to the City. Bribery and kickback
schemes injure the public fisc and impair the
integrity of government. Public benefits programs
are repeatedly targeted by malefactors who defraud
the government and the intended beneficiaries.
Organized drug trafficking and arson for profit
schemes create extraordinary demands on police and
other governmental services and diminish the
quality of life in the City.

These criminal activities are often
accomplished through sophisticated means, ° by
criminal enterprises which systematically commit
multiple criminal acts. Ordinary civil and criminal
remedies available to penalize specific criminal acts

and offer recompense to the City are insufficient to

eradicate the widespread problems caused by the
systematic misconduct of criminal enterprises.
Extraordinary remedies are needed to eradicate
these widespread problems.

The City has found that the civil remedy
provision in the Racketeer Influenced and Corrupt
Organizations Act, 18 U.S.C. §§ 1961-1968 ("RICO")
is an effective weapon for combatting these various
criminal schemes and protecting the public interest,
the public fisec and the institutions of local
government.* Specifically, the City has employed
the civil remedy provision in RICO to attack
fraudulent tax evasion and illegal bidding

*The City's view is shared by commentators. See
Note, Government Corruption and Civil RICO:

Providing Compensation for. Intangible Losses, 58
-X.U. Le Rev. 15 9 annenbaum & Molo,

State and Local ration sk Use of the Treble

Da es Remedy Under Civil RICO: A Means of

Recressing ine Economic Effects of Unlawful
et, ylor L. Rev. I (1983).

-4-

schemes.* In City of New York v. Arnmart

Wholesale Beer Distributors, Inc., 83 Civ. 9263

(S.D.N.Y., filed Dec. 21, 1983) the City sued eleven

beer distributors and their principal officers for

*Civil RICO actions have also been employed by or
on behalf of state or other local governments to
recover the loss flowing from complex and far-
reaching frauds, often accompanied by bribery or
some other form of corruption. See New York v.
O'Hara, 83 Civ. 1440 (W.D.N.Y., filed December 21,
1983) (bribery and overcharges in connection with
toxic waste disposal contract); county of Suffolk v.
Walsh, 81 Civ. 0257 (E.D.N.Y., an. 27, 19
bribery and bid rigging in connection with sewer
construction project); Moore v. Margiotta, 83 Civ.
2036 (E.D.N.Y., filed May 19, 1983) aloavere’ civil
RICO action arising from political slush fund
payoffs, kickbacks, and money laundering scheme);
Alcorn soe, v. U.S. Interstate Supplies Inc., 731
° 0 6 ir. bribery raudulent
billing by office supply company); Gerace v. Utica
Veal Co., 580 F. Supp. 1465 (N.D.N.Y. 1984)
(fraudulent underreporting by stockyard of weight

and grade of ranchers' livestock, causing higher
reimbursement payments to ranchers by state);

County of Cook v. Lynch, 560 F. Supp. 136 (N.D. Il,
8 bribery in return for real estate tax
assessment reductions); Municipality of Anchorage
v. Hitachi Cable, Ltd., 547 F. Boe 633 (D. Alaska
1982) (bribery and bid rigging in connection with
telephone cable contracts); Maryland v. Buzz Be
Wr Co., 496 F. Supp. 245 (D.Md. 1980) in
Hesiag end Eripery in connection with demolition
work for urban renewal project).

-5-

their perpetration of an elaborate series of schemes
— described in greater detail, infra — to evade the
City's beer excise and general corporation taxes. In

City of New York v. Sitzer, 81 Civ. 7116 (S.D.N.Y.,

filed November 16, 1981), the City sued the

operators of a group of massage parlors who

systematically laundered their revenues, committed

bribery and evaded City taxes. In City of New York

v. Bandolene Fuels, Inc., 81 Civ. 1240 (E.D.N.Y.,

filed April 24, 1981) the City sued a fuel oil
company and its principal officer for the damages
flowing from a fraudulent bidding and overbilling
scheme, In addition, the City has explored the
possibility of a civil RICO action to recover the
losses arising from extraordinary demands on local
governmental services and diminution of the quality
of life caused by the systematic misconduct of

criminal enterprises. *

*Compare City of Milwaukee v. Hansen, Civ. No.
77-246, slip op. at 3-4 (E.D.Wis. Jan. 13, 1981)
(arsonists liable for treble the cost of fighting fires).

-§-

REASONS FOR GRANTING THE WRITS

The Second Circuit's decisions in Sedima,

S.P.R.L. v. Imrex Co., 741 F.2d 482 (1984) and

Bankers Trust Co. v. Rhoades, 741 F.2d 511 (1984)

destroy the efficacy of the civil remedy provision in
RICO and consequently the ability of local and state
governments to vindicate the public interest by
means of that statute.

The prior conviction requirement created
in Sedima, supra, 741 F.2d at 496-504 -- which has
absolutely no basis in the statute —- makes local and
state government civil RICO suits subject both to a
prosecutor's prior exercise of discretion to
commence a criminal action, and to the prosecutor's
prior success in the criminal action. Thus, the prior
conviction requirement strips local and state
governments of independent use of an effective

weapon against corruption, large-scale frauds and

other broad-based criminal schemes.

The prior conviction requirement will bar
many actions clearly contemplated by Congress
when it enacted the civil remedy provision in RICO.

For example, in City of New York v. Arnmart

Wholesale Beer Distributors, Inc., supra, eleven beer

distributing companies evaded excise taxes on
wholesale beer purchases in New York City by
fraudulently representing sales of beer to be sales of
soda; laundering beer sales through fictitious
purchasers residing outside the City; engaging in
off-the-books cash transactions; filing fraudulent
tax returns; and failing to file tax returns. This is
the kind of systematic criminal scheme which RICO
was designed to eliminate. The City decided to
bring a civil RICO treble damages action since
treble damages would be most effective as a

deterrent and as a means of recovering idsses.*

*Referring a case to a criminal prosecutor does not
guarantee that there will be a criminal prosecution,
since the decision to do so is then within the
prosecutor's discretion. Prosecutorial priorities may
differ from the City's priorities, and prosecutorial
resources are limited.

Because there were no prior convictions, the
perpetrators of these schemes will totally escape
civil liability under RICO -if the prior conviction
requirement created in Sedima is not overruled.

The differing "racketeering injury"
requirements in, respectively, Sedima and Bankers
Trust, similarly eviscerate the utility of the civil
remedy provision in RICO. The "mobster"
requirement created in Sedima, supra, 741 F.2d at
494-96 is either so vague or so limited as to impose
an insuperable obstacle to success in a civil RICO
suit. It is contrary to the express intent of
Congress, which feared that such a requirement
would create an unconstitutional "status" offense.
116 Cong. Rec. 35,343 (1970). It is also contrary to
the spirit, structure and language of the statute,
which defined prohibited racketeering activity in
terms of conduct rather than association. See 116

Cong. Rec. 35,344 (1970); see generally 18 U.S.C.

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§§ 1961-1968. The "distinct RICO injury"

requirement created in Bankers Trust, supra, 741

F.2d at 515-18, similarly debilitates the civil
remedy provision in RICO, by illogically requiring a
differentiation between the injury caused by any one
predicate act and the injury caused by the RICO
offense.

The Second Circuit's analysis in Bankers
Trust of how the civil remedy provision in RICO
would apply in a case of arson for profit
demonstrates that the “distinct RICO injury"
requirement deprives the civil remedy provision in
RICO of any practical significance. In Bankers
Trust, supra, 741 F.2d at 517, the Second Circuit
stated that an example of a "distinct RICO injury"
could be found where a victim of multiple arsons
was denied fire insurance and thereafter was unable
to obtain reimbursement for innocent fire damage
(e.g., destruction caused by lightning). In contrast,

the Second Circuit seemed to indicate that the

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victim of repeated arscns could not sue the arsonist
for fire damage directly resulting from fires set by
the arsonist. Plainly, such analysis destroys the
effectiveness of the civil remedy provision in RICO
as a method for combatting crime, and erodes the

doctrine established in City of Milwaukee v. Hansen,

supra, that the damage directly resulting from
arson - in that case, municipal fire-fighting costs -
is compensable in a civil RICO suit. Plainly, such
analysis undermines the purposes of the civil remedy
provision in RICO — augmented compensation to the
victim for all of its losses resulting from the
criminal scheme, and the economic destruction of

the criminal enterprise.

CONCLUSION

For the reasons set forth herein, amicus
curiae, The City of New York respectfully urges
that the Court grant the petitions for writs of

certiorari to review the decisions of the Second

Circuit Court of Appeals,
November 21, 1984.
Respectfully submitted,

FREDERICK A. O. SCHWARZ, JR.
Corporation Counsel of the
City of New York,

LEONARD KOERNER,

MICHAEL D. YOUNG,

MARTIN C. ARONCHICK,
Of Counsel.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_0089%3A3. Public record. Not legal advice.