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Adding UPL to Indiana RICO statute

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An Indiana Supreme Court case involving an estate planning “trust mill” has led to a policy discussion about whether certain types of unauthorized practice of law should rise above a misdemeanor crime and involve a racketeering component.

The Indiana General Assembly will likely be asked to consider a proposal during its next session, following an interim Probate Code Study Commission recommendation for changes to state statute about how the state targets those individuals or businesses that illegally practice law. Specifically, lawmakers could address whether a pattern of UPL should be added to the list of three dozen crimes covered by the Racketeer Influenced and Corrupt Organizations statute.

foley-ralph-mug.jpg Foley

“This is a phenomenon we’ve tried to address in the past,” said Rep. Ralph Foley, R-Martinsville, an attorney who practices probate law and chairs the study committee. “The problem is that these are charlatans trying to deceive people. They aren’t lawyers and are nothing but a bad way to separate people from their money.”

The case against Indianapolis-based United Financial Systems Corp. initiated this policy discussion. The Indiana Supreme Court determined United Financial was illegally practicing law when preparing and selling estate planning documents and services to people. The Indiana State Bar Association filed a “trust mill” suit three years ago, and in April 2010 the justices determined United Financial should have known what it was doing was UPL and ordered the disgorgement of fees the company received from its UPL. All of the Indiana estate plan customers going back to 1995 were to be notified of the decision, but the company refused to pay those refunds immediately, and the justices in December 2010 ordered United Financial to notify those customers and return the fees as previously ordered.

An exact monetary figure of refunds or claims isn’t outlined in the order or in court filings. But in the court’s ruling, it provided context for the potential amount: from October 2006 through May 2009, the company’s Indiana business included 1,306 estate plans grossing more than $2.7 million. Nationally, 18.8 percent of United Financial’s total income was reported to have come from estate planning services in this state.

The Indiana Supreme Court in June said it wouldn’t reconsider its 2010 ruling, and now former Monroe Circuit Judge Viola Taliaferro is acting as commissioner and deciding what resolution is best for the case.

Earlier in the year, she determined that United Financial had failed without good cause to pay refunds to 346 customers, and she’s now determining whether contempt sanctions should be imposed. At a hearing in late October, the commissioner heard evidence about the company’s information on past customers, tax returns and financial documentation, and both sides have submitted proposed findings for Taliaferro to consider. The proposals call for repaying the restitution amount over the course of seven years, according to attorneys in the case.

Separate from the restitution action before Taliaferro, two lawsuits against United Financial are pending in Marion and Fulton counties as a result of the Supreme Court’s decision about the company’s prior activity.

The lawsuits and judicial action sparked legislative discussion about strengthening state criminal and probate code to address what some consider racketeering.

At the probate commission meeting Oct. 12, members voted 11-2 in support of recommending law changes to the General Assembly.

The changes would add UPL, currently a Class B misdemeanor outlined in Indiana Code 33-43-2, to the list of crimes covered under the RICO statute in IC 35-45-6. By definition, a pattern of racketeering activity occurs when a business or person engages in two or more incidents that had the same or similar intent, result, method of commission or was otherwise interrelated by distinguishing characteristics to other incidents. The current statute lists 36 crimes or activities including murder, arson, theft, child solicitation, promoting professional gambling and money laundering.

Proposed legislation would take effect July 1, 2012. It would allow for enhanced penalties under the racketeering statute, such as giving prosecutors the discretion to make UPL a Class C felony.

Vincennes attorney Jeff Kolb, who chaired the ISBA’s UPL section during the initial United Financial investigation, said he agrees this UPL activity fits into the racketeering definition and that a law change would strengthen the ability to collect restitution or even obtain attorneys fees from the prosecution of these actions.

Foley said that he and former Rep. Trent Van Haaften, D-Mount Vernon, had previously tried unsuccessfully to add UPL to the list of racketeering activities and that now is the time to move forward.

“They’ve developed a scheme and are taking advantage of people and stealing from them,” Foley said about those engaging in UPL similar to the United Financial activity. “Pure and simple, I think it’s a scheme that is racketeering.”

blakey-robert-mug.jpg Blakey

Not everyone on the probate panel agrees. Sen. Susan Glick, R-LaGrange, a former county prosecutor, said she didn’t believe UPL fit with the other listed crimes such as arson and child solicitation. Two non-attorney committee members – Tom Hardin and David Pendergast – voted against the proposal.

“I just wonder if there’s a need here, and if we’re not using a sledge hammer to hit at this when a misdemeanor should be used,” Hardin said.

University of Notre Dame law professor G. Robert Blakey, who helped craft the federal RICO Act in 1970, and is considered one of the nation’s foremost experts on RICO law, said he thinks the kind of UPL activity at issue in this discussion should be covered by the state racketeering statute.

The predicate may not be the same as other offenses, such as murder or drug trafficking, but Blakey says RICO was designed to target illegal businesses operating as an enterprise.

“Organized crime is not limited to the mob, and white-collar crime equals RICO,” he said. “This sounds like white-collar crime to me and it (the proposed statute revisions) makes a lot of sense to me.”•

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  1. Indianapolis employers harassment among minorities AFRICAN Americans needs to be discussed the metro Indianapolis area is horrible when it comes to harassing African American employees especially in the local healthcare facilities. Racially profiling in the workplace is an major issue. Please make it better because I'm many civil rights leaders would come here and justify that Indiana is a state the WORKS only applies to Caucasian Americans especially in Hamilton county. Indiana targets African Americans in the workplace so when governor pence is trying to convince people to vote for him this would be awesome publicity for the Presidency Elections.

  2. Wishing Mary Willis only God's best, and superhuman strength, as she attempts to right a ship that too often strays far off course. May she never suffer this personal affect, as some do who attempt to change a broken system: https://www.youtube.com/watch?v=QojajMsd2nE

  3. Indiana's seatbelt law is not punishable as a crime. It is an infraction. Apparently some of our Circuit judges have deemed settled law inapplicable if it fails to fit their litmus test of political correctness. Extrapolating to redefine terms of behavior in a violation of immigration law to the entire body of criminal law leaves a smorgasbord of opportunity for judicial mischief.

  4. I wonder if $10 diversions for failure to wear seat belts are considered moral turpitude in federal immigration law like they are under Indiana law? Anyone know?

  5. What a fine article, thank you! I can testify firsthand and by detailed legal reports (at end of this note) as to the dire consequences of rejecting this truth from the fine article above: "The inclusion and expansion of this right [to jury] in Indiana’s Constitution is a clear reflection of our state’s intention to emphasize the importance of every Hoosier’s right to make their case in front of a jury of their peers." Over $20? Every Hoosier? Well then how about when your very vocation is on the line? How about instead of a jury of peers, one faces a bevy of political appointees, mini-czars, who care less about due process of the law than the real czars did? Instead of trial by jury, trial by ideological ordeal run by Orwellian agents? Well that is built into more than a few administrative law committees of the Ind S.Ct., and it is now being weaponized, as is revealed in articles posted at this ezine, to root out post moderns heresies like refusal to stand and pledge allegiance to all things politically correct. My career was burned at the stake for not so saluting, but I think I was just one of the early logs. Due, at least in part, to the removal of the jury from bar admission and bar discipline cases, many more fires will soon be lit. Perhaps one awaits you, dear heretic? Oh, at that Ind. article 12 plank about a remedy at law for every damage done ... ah, well, the founders evidently meant only for those damages done not by the government itself, rabid statists that they were. (Yes, that was sarcasm.) My written reports available here: Denied petition for cert (this time around): http://tinyurl.com/zdmawmw Denied petition for cert (from the 2009 denial and five year banishment): http://tinyurl.com/zcypybh Related, not written by me: Amicus brief: http://tinyurl.com/hvh7qgp

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