RICO Law Blog : RICO Lawyer & Attorney : Thomas Walker : Cosho Humphrey Law Firm : RICO Act, Federal and State Racketeering Litigation, Boise Idaho

United States Attorney Benjamin B. Wagner announced on February 18, 2010 that a federal grand jury has returned a seven-count indictment charging FREDERICK SCOTT SALYER, 54, of Pebble Beach, with violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), in connection with his direction of various schemes to defraud SK Foods’ corporate customers through bribery and food misbranding and adulteration, and with wire fraud and obstruction of justice.

Additionally, SK Foods former Vice President for Operations STEVEN JAMES KING, 46, of Visalia, was charged this morning with one count of food adulteration and misbranding. He has agreed to plead guilty and to cooperate in the ongoing investigation and prosecution.

These cases are the product of a joint and extensive investigation by the FBI, the IRS-Criminal Investigation, the Food and Drug Administration Office of Criminal Investigations, and the United States Department of Justice’s Antitrust Division.

According to Assistant United States Attorney Sean C. Flynn, who is prosecuting the case with Barbara Nelson and Richard Cohen of the San Francisco Field Office of the Antitrust Division, between 1990 and 2008, SALYER was the owner and served as chief executive officer of SK Foods LP, a grower, processor, and distributor of tomato products and other food products for sale nationwide. SK Foods declared bankruptcy in May 2009, and its assets were purchased by the Singapore-based Olam International.

According to the indictment, SK Foods and its related corporate entities constituted a racketeering enterprise, an organization that SALYER directed, and other SK Foods leaders and employees helped to further through a variety of illicit activities. It is alleged that over a period of 10 years, SALYER orchestrated a number of wide-ranging schemes whereby SK Foods regularly paid bribes to the purchasing managers of many of its customers such as Kraft Foods Inc., Frito-Lay Inc., B&G Foods Inc., and Safeway Inc. to ensure that those customers purchased processed tomato products from SK Foods rather than from its competitors, and that they purchased the product from SK Foods at elevated, above-market prices. The indictment alleges that some bribes were made in order to wrongfully obtain its competitor’s proprietary bid information.

As the racketeering enterprise’s leader and primary decision maker, SALYER is also alleged to have directed a widespread practice of selling and shipping processed tomato product that did not meet contractual specifications, contained mold levels in excess of the thresholds established by the FDA and was thus unsaleable domestically. The indictment alleges that at SALYER’s direction, various individuals at SK Foods falsified both internal and customer-bound documentation to make the product appear as if it were legal and contractually compliant when, in fact, it was not.

SALYER is also charged with obstructing justice by ordering the alteration and falsification of certain SK Foods’ corporate records after the government’s investigation of the company became known. Specifically, the indictment alleges that two weeks after former SK Foods sales broker and Director Randall Lee Rahal pleaded guilty to racketeering, money laundering, and antitrust charges in December 2008, SALYER ordered certain individuals to alter the minutes of a December 14, 2007, SK Foods Board of Directors meeting to eliminate any reference to Rahal as a director of the company.

On February 4, 2010, FBI Special Agents arrested SALYER at Kennedy International Airport in New York City, based on a criminal complaint charging him with 20 counts of mail and wire fraud. According to that complaint, SALYER left the United States in October 2009, following the guilty pleas of several employees of SK Foods and some of its customers, intending to relocate abroad permanently. SALYER had instructed a subordinate to sell many of SALYER’s belongings and had transferred millions of dollars from bank accounts formerly associated with SK Foods entities to bank accounts in the Carribean and Liechtenstein. The complaint alleged that SALYER spoke with a former SK Foods employee about obtaining permanent residence status in Uruguay, Paraguay, Andorra, and France because he believed he would not be extradited from these countries. SALYER had booked a flight back to Europe the next day, February 5, 2010. Instead, SALYER made his initial appearance before U.S. Magistrate Judge Steven Gold in Brooklyn, N.Y. that afternoon. Judge Gold denied SALYER bail, stating that SALYER’s efforts constituted one of the “most elaborate schemes to flee he had ever seen.”

According to the charges filed against KING, between 1994 and 2009, he served in a variety of positions, most recently as SK Foods’ Vice President for Operations. In that role, he was responsible for overseeing and managing SK Foods production facilities in Williams and Lemoore. He also assisted in managing SK Foods’ inventory of processed tomato and other food products, and arranging for the shipment of those food products to SK Foods customers. KING has agreed to plead guilty to falsifying and directing other SK Foods employees to falsify various SK Foods’ quality control documents and to ship adulterated and misbranded tomato product to various SK Foods customers. He has admitted that his actions were conducted at the express instruction and direction of SALYER, and with the assistance of other senior leaders and directors of SK Foods, and were intended to make it appear to customers as if particular shipments of processed tomato product were compliant with USDA and FDA standards, and with customer specifications, when in fact they were not. KING is expected to appear in U.S. District Court in Sacramento in the near future to enter his guilty plea.

The current charges against SALYER and KING are the latest in the ongoing investigation of conduct at SK Foods. See attached chart for details. That investigation has not yet been concluded.

The maximum statutory penalty on racketeering charges against SALYER is 20 years in prison, a fine of up to $250,000, and the forfeiture of any interest, property or proceeds acquired or maintained as a result of the racketeering activity. The wire fraud and obstruction charges against SALYER also are punishable by up to 20 years in prison. The food misbranding and adulteration charges against KING carry a three-year maximum sentence. The actual sentences, however, will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.

The charges are only allegations and the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.

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For the past few decades the largest Hispanic street gang, the Latin Kings, wreaked havoc in many large cities around the country, initiating in Chicago as the result of prejudice against Puerto Rican immigrants in the 1940s. While they were originally not great in numbers, their increased propensity for violence caused them to be a force to be reckoned with in Chicago, competing against larger gangs in the area. Their inevitable downfall did not occur until 2006, when RICO conspiracy charges brought down the majority of the state leadership members. A total of 39 were arrested, furthering the stipulation that RICO laws are successful in bringing down any gang-related criminals. 

 

The Latin Kings have been a difficult gang in which to determine criminal activity; it was uncertain for years as to whether or not they stood as a negative criminal force, or a positive community organization. The stages of consciousness, according to the “Latin King Manifesto”, involve a rigorous state of mind for years. The primitive stage usually involves a new member to be subjected to the gang life and therefore participate in much gang-related behavior on the street. The majority of the Latin Kings remain in this stage for most of their gang life, and it is this reason why the public assumes the group in general is responsible for gang-related activity. However, the next stage is the Conservative stage wherein a member no longer actively participates in street violence but is still wholly aware of the racial lines that exist in most of humanity. As the gang is prevalent in Chicago, there are many racial barriers to break through and many different nationalities that live within inner city streets. Additionally, Puerto Rican immigrants were discriminated against for many years within urban cities such as this one, and the Kings have held onto this past hatred for decades in an attempt to bring awareness to their own communities. The final stage, however, is the New King Stage in which the member recognizes the freedom of a revolution of the mind. This final stage is the end product of years of enlightenment where one’s thoughts are no longer clouded by previous prejudices and humanity is recognized as one giant entity rather than separate bubbles of race.

Nonetheless, RICO laws were still able to bring down many of the top leaders, as this community organization was still responsible for multiple murders and other accounts of criminal activity as defined by their racketeering law.   Chicago alone contains over 25,000 members of the Latin Kings who have been responsible for many violent acts within the city. The instatement of this type of act has encouraged many gangs to rethink their criminal activities on the off chance that they may be jailed not for the activities themselves but for repeat convictions of racketeering charges. 

This post was contributed by Kimberly Peterson, who writes about online criminal justice degrees. She welcomes your feedback at KimPeterson2006 at gmail.com

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CQPolitics.com (11/14) reports, "A federal grand jury on Thursday indicted Rep. Rick Renzi on eight additional charges, including racketeering and making false statements on his 2005 tax return. The expanded indictment also levies additional conspiracy and insurance fraud charges against Renzi, R-Ariz." Renzi was originally "accused of conspiring to commit insurance fraud with James W. Sandlin, a former business associate, in a land-swap scheme in his home state and with Andrew Beardall, formerly the general counsel of a Renzi-owned insurance agency. The new indictment adds a fourth defendant, accountant Dawayne Lequire, who worked at Renzi's insurance agency." Renzi is accused of captaining "a criminal enterprise for at least six years based on the misappropriation of insurance premiums."

The Washington Times (11/14) adds, "A three-term congressman who did not seek re-election this year, Mr. Renzi had pleaded not guilty."

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The White Collar Crime Prof Blog reported yesterday on an interesting issue presented in the Chronicle of Higher Education, Harvard Law Professor Takes New Tack Against RIAA (citing Jaikumar Vijayan, Computer World, Harvard professor offers new challenge to RIAA antipiracy campaign -Nesson claims Digital Theft Act, on which RIAA lawsuits are based, is unconstitutional) on whether the Digital Theft Act as used in a civil lawsuit is improper because the statute is limited to criminal matters.

Years back the issue would not have arisen as the overlap between criminal and third-party civil statutes did not exist.  With the Racketeer Influenced & Corrupt Organization Act (RICO) in 1970 we have seen statutes that allow for both criminal and civil enforcement, with the civil enforcement being extended beyond a government agency.  The rationale for these civil actions being allowed is that DOJ can't do it alone and allowing third-party civil actions can assist with enforcement. This was appealing with RICO because its initial focus was organized crime.  But RICO was interpreted broadly and went well beyond its roots and with it went the third-party civil actions. DOJ had and continues to have guidelines that restrict application of the statutes by providing oversight on prosecutorial discretion.  There are, however, no guidelines on the civil side.  This caused Congress to place additional limits on the civil side of RICO as seen in 18 U.S.C. 1964(c).

Other criminal statutes have seen attempts to be used in civil matters, such as the Foreign Corrupt Practices Act.  In Lamb v. Phillip Morris, Inc., 915 F.2d 1024 (6th Cir. 1024), the court did not allow the civil action. (See also Lewis v. Spock, 612 F. Supp. 1316 (N.D. Cal. 1985)).  Interestingly, one finds civil RICO actions that use the FCPA.

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RICO or the Racketeer Influenced and Corrupt Organizations Act, the federal law that allows the prosecution of criminal acts performed by individuals as part of a mob or criminal organization, is used to fight against organized crime and its adverse effects on legitimate business activities. The law states that “It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering", a statement that is easily misinterpreted by those not familiar with the intricacies of the law.

The reason for this confusion arises because, according to the rules of RICO, any individual who has been proven to belong to a criminal organization is liable for prosecution just by association. This means that if any member of said organization has been found guilty of a serious offense like murder, kidnapping, gambling, arson, robbery or bribery, other persons who are known to belong to the same organization can be prosecuted for a pattern of crimes (two or more of 8 state crimes and 16 federal crimes) that have been found to be the organization’s handiwork, even if they are not directly or indirectly responsible for the crime that the defendant has been found guilty of.

The law has been framed this way to get at the entire organization rather than just one or two members. But the ambiguity of the word “association” gets people asking the question – am I liable to be prosecuted if law enforcement officers saw me engaged in an innocent conversation with the defendant in a murder trial? Does the word association extend even to casual relationships where there is no knowledge that one person (the defendant) is engaged in illegal activities? The RICO law allows only for the prosecution of conspirators, people who have knowledge of the crime committed and have supported it in some form or the other. So while the cops do have the option of acquiring a warrant to search your home and office if they suspect you of association with a criminal organization, they cannot book you until they find proof of your involvement.

RICO violations are punishable with up to 20 years of imprisonment.

By-line:

This post was contributed by Kelly Kilpatrick, who writes on the subject of the criminal justice schools. She invites your feedback at kellykilpatrick24 at gmail dot com.

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Since state and federal racketeering cases must be based upon the commission of a crime, defendants in a civil racketeering case need to be aware of the likelihood that a parallel criminal investigation will be conducted during the pendency of the civil case. This reality presents significant risks to the civil racketeering defendant. I plan to deal with the enormous difficulties faced by a defendant exposed to parallel civil and criminal prosecutions in later posts. For now I just want to provide an overview of the criminal discovery process.

At the outset the point must be made that the government’s ability to discover information is significantly broader than that of a defendant, although a defendant’s rights are protected by certain constitutional guarantees.

1.  Investigation

The most obvious source of information for the prosecution is the investigatory arm of law enforcement. By the time the prosecution’s attention is drawn to an individual, law enforcement has typically gathered substantial evidence relating to the alleged offense. The government’s ability to gather evidence is further enhanced by the use of search and seizure, a mechanism not available to the defense.

Like the government, defendants can employ investigators to gather potential exculpatory evidence. However, an innocent defendant has no prior knowledge of the accusations against which he must defend himself and a defendant who has committed many crimes does not know which the government has discovered. Consequently, the defendant must rely on the government’s disclosures to calculate how best to present a defense.

2.  Grand Jury

Grand jury proceedings provide another significant avenue for the prosecution to gather evidence. It is a “fundamental maxim” that the grand jury “has a right to every man’s evidence....”  Before the grand jury, prosecutors have wide latitude to compel testimony and obtain documentary evidence without the restrictions imposed by the state and federal rules of evidence and out of the presence of the defendant and his counsel.

Unlike the prosecution, the defendant has little or no access to grand jury proceedings. A defendant may not even be aware of a grand jury investigation until it is complete. Further, state and federal rules of criminal procedure require that grand jury proceedings be kept confidential.

3. Constitutional Disclosure

The Constitution requires the prosecution to produce certain evidence material to the defense. The most familiar requirement is the prosecution’s obligation to produce exculpatory evidence.  The United States Supreme Court has held that the government’s failure to provide a defendant with exculpatory evidence in its possession violated the defendant’s constitutional rights. This obligation extends to evidence that a defendant can use to impeach the government’s witnesses.

4.  Discovery Authorized by Statute

The Jencks Act, 18 U.S.C. § 3500, provides that statements by government witnesses in the hands of the government must be produced, but not until after those witnesses have testified. Certain statutes provide some defendants with additional discovery. For example, defendants charged with capital offenses are entitled to a list of the witnesses against them at least three days before commencement of trial.

5.  Discovery Under the Federal Rules of Criminal Procedure

A. Rule 16. Rule 16 of the Federal Rules of Criminal Procedure requires that the parties disclose certain information. Upon request, the prosecution must provide certain statements made by the defendant; the defendant’s criminal record; access to certain physical evidence; and reports related to expert, scientific, and medical evidence. Significantly, the Rule does not require disclosure of statements made by government witnesses.

Rule 26.2 of the Federal Rules of Criminal Procedure provides that after a witness testifies, a party may compel production of any relevant statements made by that witness. The Rule does not provide a method for discovery of statements or documents in the hands of a non-party even if they are relevant statements by a witness who has testified.

B. Rule 17(c) Subpoenas

Finally, there is Rule 17(c) of the Federal Rules of Criminal Procedure, which provides:

(1) In General. A subpoena may order the witness to produce any books, papers, documents, data, or other objects the subpoena designates. The court may direct the witness to produce the designated items in court before trial or before they are to be offered in evidence. When the items arrive, the court may permit the parties and their attorneys to inspect all or part of them.

(2) Quashing or Modifying the Subpoena. On motion made promptly, the court may quash or modify the subpoena if compliance would be unreasonable or oppressive.

6.  Cases

There are numerous cases dealing with criminal discovery, a discussion of which is well beyond the scope of this post.

7. Conclusion.

This brief overview is intended only as an introduction to the criminal discovery process. Books have been written about it. Hopefully this information will be helpful.

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