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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. Ah yes... Echoes of 1963 as a ghostly George Wallace makes his stand at the Schoolhouse door. We now know about the stand of personal belief over service to all constituents at the Carter County Clerk door. The results are the same, bigotry unable to follow the directions of the courts and the courts win. Interesting to watch the personal belief take a back seat rather than resign from a perception of local power to make the statement.

  2. An oath of office, does it override the conscience? That is the defense of overall soldier who violates higher laws, isnt it? "I was just following orders" and "I swore an oath of loyalty to der Fuhrer" etc. So this is an interesting case of swearing a false oath and then knowing that it was wrong and doing the right thing. Maybe they should chop her head off too like the "king's good servant-- but God's first" like St Thomas More. ...... We wont hold our breath waiting for the aclu or other "civil liberterians" to come to her defense since they are all arrayed on the gay side, to a man or should I say to a man and womyn?

  3. Perhaps we should also convene a panel of independent anthropological experts to study the issues surrounding this little-known branch of human sacrifice?

  4. I'm going to court the beginning of Oct. 2015 to establish visitation and request my daughters visits while she is in jail. I raised my grandchild for the first two and half years. She was born out of wedlock and the father and his adopted mother wantwd her aborted, they went as far as sueing my daughter for abortion money back 5mo. After my grandchild was born. Now because of depression and drug abuse my daughter lost custody 2 and a half years ago. Everyting went wrong in court when i went for custody my lawyer was thrown out and a replacment could only stay 45 min. The judge would not allow a postponement. So the father won. Now he is aleinating me and my daughter. No matter the amount of time spent getting help for my daughter and her doing better he runs her in the ground to the point of suicide because he wants her to be in a relationship with him. It is a sick game of using my grandchild as a pawn to make my daughter suffer for not wanting to be with him. I became the intervener in the case when my daughter first got into trouble. Because of this they gave me her visitation. Im hoping to get it again there is questions of abuse on his part and I want to make sure my grandchild is doing alright. I really dont understand how the parents have rights to walk in and do whatever they want when the refuse to stand up and raise the child at first . Why should it take two and a half years to decide you want to raise your child.The father used me so he could finish college get a job and stop paying support by getting custody. Support he was paying my daughter that I never saw.

  5. Pence said when he ordered the investigation that Indiana residents should be troubled by the allegations after the video went viral. Planned Parenthood has asked the government s top health scientists at the National Institutes of Health to convene a panel of independent experts to study the issues surrounding the little-known branch of medicine.

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