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Indiana RICO Act applies to 'foot soldiers'

Jennifer Nelson
January 1, 2008
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An Indiana Supreme Court decision Feb. 27 regarding the state's racketeering laws creates a larger net of potential defendants that can be charged under it.

The Indiana Supreme Court ruled that under Indiana's RICO (Racketeer Influenced and Corrupt Organizations) Act, a person can be implicated under the state act even if he or she doesn't participate in directing the racketeering activity.

In Linda Keesling, Harold Lephart, et al. v. Frederick Beegle III, John Bucholtz, et al., No. 18S04-0704-CV-150, the high court accepted transfer to rule on whether liability under the Indiana RICO Act extends only to people who direct racketeering activity, the "generals," or whether it extends below the managerial or supervisory level to the "foot soldiers."

The Supreme Court ruled that the Indiana RICO Act uses "significantly broader" language than the federal act, which states that it's unlawful for anyone employed by or associated with an enterprise 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."

Under Indiana's act, a person can be charged if he or she "knowingly or intentionally conducts or otherwise participates in the activities of that enterprise through a pattern of racketeering activity."

As a result of this difference in language, the Supreme Court overturned summary judgment in favor of defendants Dennis Baugher; Baugher's company, Florida Underwriting; and William Jones with respect to the Indiana RICO Act, finding Indiana's act imposes liability on both persons at or below a racketeering enterprise's level of manager or supervisor.

The plaintiffs are Indiana residents who purchased pay telephones and entered into service agreements to install, service, and maintain the phones. The plaintiffs were passive investors in the program that targeted investors across the country, relying upon the promoters of the deal to select locations, install, and service phones, as well as obtain all regulatory certifications.

Kelley Johnson, associate at Cohen & Malad and an attorney on the case, described the program as a pyramid scheme in which the only way people could receive money was to recruit more people into the program.

The promoters violated federal security laws by not registering the pay-telephone program with the Securities and Exchange Commission.

Baugher, president of Florida Underwriting, was not one of the ultimate promoters of the program but did have an agreement with the promoters to recruit sales representatives and receive commission on the sales made by his recruits. Baugher recruited Jones; Jones in turn recruited another person, who made the sales to plaintiffs Keesling and the Lehparts.

The plaintiffs sued, alleging violations of the Indiana Securities Act, the Indiana RICO Act, fraud, conversion, and theft. The Court of Appeals affirmed the trial court grant of summary judgment in favor of Baugher, Florida Underwriting, and Jones with respect to the fraud, conversion, and theft allegations; however, the court reversed the grant of summary judgment in their favor with respect to the Indiana Securities and Indiana RICO Act allegations.

The Court of Appeals had previously ruled that in order for someone to be charged under the Indiana RICO Act, the person must do more than just participate in the activities of the enterprise but actually participate in the operation or management of it, Yoder Grain, Inc. v. Antalis, 722 N.E.2d 840, 846 (Ind. [Ct.] App. 2000).

However, in this case, the Court of Appeals took a different approach, finding Indiana's RICO Act is broader than the federal statute and that merely participating in the activities of an enterprise can allow a person to be charged under the act.

The Supreme Court agrees with the Court of Appeal's decision in this case, ruling that the scope of liability under the Indiana act is broader than the federal act because it imposes liability not only on the person who "conducts" the activities, but also one who "otherwise participates in the activities," wrote Justice Frank Sullivan.

The legislature intended for the Indiana act to reach "a racketeering enterprise's 'foot soldiers' as well as its 'generals,'" he wrote.

The Supreme Court vacated the trial court's grant of summary judgment in favor of Baugher, Florida Underwriting, and Jones with respect to the Indiana RICO Act allegations and remanded to the trial court for further proceedings. In all other respects, the high court affirms the Court of Appeals' ruling.

"This definitely solidifies that the Indiana act is different from the federal act, which I think has been a question for some time," Johnson said.

Bradley Skolnik, attorney at Stewart & Irwin and former Indiana Securities commissioner, said this ruling will give plaintiffs more opportunities to file RICO cases in Indiana.

"I would characterize this as an investor-friendly decision of the court," he said. "It certainly broadens the scope of potential defendants in any security fraud or RICO action."
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  1. Applause, applause, applause ..... but, is this duty to serve the constitutional order not much more incumbent upon the State, whose only aim is to be pure and unadulterated justice, than defense counsel, who is also charged with gaining a result for a client? I agree both are responsible, but it seems to me that the government attorneys bear a burden much heavier than defense counsel .... "“I note, much as we did in Mechling v. State, 16 N.E.3d 1015 (Ind. Ct. App. 2014), trans. denied, that the attorneys representing the State and the defendant are both officers of the court and have a responsibility to correct any obvious errors at the time they are committed."

  2. Do I have to hire an attorney to get co-guardianship of my brother? My father has guardianship and my older sister was his co-guardian until this Dec 2014 when she passed and my father was me to go on as the co-guardian, but funds are limit and we need to get this process taken care of quickly as our fathers health isn't the greatest. So please advise me if there is anyway to do this our self or if it requires a lawyer? Thank you

  3. I have been on this program while on parole from 2011-2013. No person should be forced mentally to share private details of their personal life with total strangers. Also giving permission for a mental therapist to report to your parole agent that your not participating in group therapy because you don't have the financial mean to be in the group therapy. I was personally singled out and sent back three times for not having money and also sent back within the six month when you aren't to be sent according to state law. I will work to het this INSOMM's removed from this state. I also had twelve or thirteen parole agents with a fifteen month period. Thanks for your time.

  4. Our nation produces very few jurists of the caliber of Justice DOUGLAS and his peers these days. Here is that great civil libertarian, who recognized government as both a blessing and, when corrupted by ideological interests, a curse: "Once the investigator has only the conscience of government as a guide, the conscience can become ‘ravenous,’ as Cromwell, bent on destroying Thomas More, said in Bolt, A Man For All Seasons (1960), p. 120. The First Amendment mirrors many episodes where men, harried and harassed by government, sought refuge in their conscience, as these lines of Thomas More show: ‘MORE: And when we stand before God, and you are sent to Paradise for doing according to your conscience, *575 and I am damned for not doing according to mine, will you come with me, for fellowship? ‘CRANMER: So those of us whose names are there are damned, Sir Thomas? ‘MORE: I don't know, Your Grace. I have no window to look into another man's conscience. I condemn no one. ‘CRANMER: Then the matter is capable of question? ‘MORE: Certainly. ‘CRANMER: But that you owe obedience to your King is not capable of question. So weigh a doubt against a certainty—and sign. ‘MORE: Some men think the Earth is round, others think it flat; it is a matter capable of question. But if it is flat, will the King's command make it round? And if it is round, will the King's command flatten it? No, I will not sign.’ Id., pp. 132—133. DOUGLAS THEN WROTE: Where government is the Big Brother,11 privacy gives way to surveillance. **909 But our commitment is otherwise. *576 By the First Amendment we have staked our security on freedom to promote a multiplicity of ideas, to associate at will with kindred spirits, and to defy governmental intrusion into these precincts" Gibson v. Florida Legislative Investigation Comm., 372 U.S. 539, 574-76, 83 S. Ct. 889, 908-09, 9 L. Ed. 2d 929 (1963) Mr. Justice DOUGLAS, concurring. I write: Happy Memorial Day to all -- God please bless our fallen who lived and died to preserve constitutional governance in our wonderful series of Republics. And God open the eyes of those government officials who denounce the constitutions of these Republics by arbitrary actions arising out capricious motives.

  5. From back in the day before secularism got a stranglehold on Hoosier jurists comes this great excerpt via Indiana federal court judge Allan Sharp, dedicated to those many Indiana government attorneys (with whom I have dealt) who count the law as a mere tool, an optional tool that is not to be used when political correctness compels a more acceptable result than merely following the path that the law directs: ALLEN SHARP, District Judge. I. In a scene following a visit by Henry VIII to the home of Sir Thomas More, playwriter Robert Bolt puts the following words into the mouths of his characters: Margaret: Father, that man's bad. MORE: There is no law against that. ROPER: There is! God's law! MORE: Then God can arrest him. ROPER: Sophistication upon sophistication! MORE: No, sheer simplicity. The law, Roper, the law. I know what's legal not what's right. And I'll stick to what's legal. ROPER: Then you set man's law above God's! MORE: No, far below; but let me draw your attention to a fact I'm not God. The currents and eddies of right and wrong, which you find such plain sailing, I can't navigate. I'm no voyager. But in the thickets of law, oh, there I'm a forester. I doubt if there's a man alive who could follow me there, thank God... ALICE: (Exasperated, pointing after Rich) While you talk, he's gone! MORE: And go he should, if he was the Devil himself, until he broke the law! ROPER: So now you'd give the Devil benefit of law! MORE: Yes. What would you do? Cut a great road through the law to get after the Devil? ROPER: I'd cut down every law in England to do that! MORE: (Roused and excited) Oh? (Advances on Roper) And when the last law was down, and the Devil turned round on you where would you hide, Roper, the laws being flat? (He leaves *1257 him) This country's planted thick with laws from coast to coast man's laws, not God's and if you cut them down and you're just the man to do it d'you really think you would stand upright in the winds that would blow then? (Quietly) Yes, I'd give the Devil benefit of law, for my own safety's sake. ROPER: I have long suspected this; this is the golden calf; the law's your god. MORE: (Wearily) Oh, Roper, you're a fool, God's my god... (Rather bitterly) But I find him rather too (Very bitterly) subtle... I don't know where he is nor what he wants. ROPER: My God wants service, to the end and unremitting; nothing else! MORE: (Dryly) Are you sure that's God! He sounds like Moloch. But indeed it may be God And whoever hunts for me, Roper, God or Devil, will find me hiding in the thickets of the law! And I'll hide my daughter with me! Not hoist her up the mainmast of your seagoing principles! They put about too nimbly! (Exit More. They all look after him). Pgs. 65-67, A MAN FOR ALL SEASONS A Play in Two Acts, Robert Bolt, Random House, New York, 1960. Linley E. Pearson, Atty. Gen. of Indiana, Indianapolis, for defendants. Childs v. Duckworth, 509 F. Supp. 1254, 1256 (N.D. Ind. 1981) aff'd, 705 F.2d 915 (7th Cir. 1983)

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