ILNews

Indiana RICO Act applies to 'foot soldiers'

Jennifer Nelson
January 1, 2008
Keywords
Back to TopCommentsE-mailPrintBookmark and Share
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."
ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. November, 2014, I was charged with OWI/Endangering a person. I was not given a Breathalyzer test and the arresting officer did not believe that alcohol was in any way involved. I was self-overmedicated with prescription medications. I was taken to local hospital for blood draw to be sent to State Tox Lab. My attorney gave me a cookie-cutter plea which amounts to an ALCOHOL-related charge. Totally unacceptable!! HOW can I get my TOX report from the state lab???

  2. My mother got temporary guardianship of my children in 2012. my husband and I got divorced 2015 the judge ordered me to have full custody of all my children. Does this mean the temporary guardianship is over? I'm confused because my divorce papers say I have custody and he gets visits and i get to claim the kids every year on my taxes. So just wondered since I have in black and white that I have custody if I can go get my kids from my moms and not go to jail?

  3. Someone off their meds? C'mon John, it is called the politics of Empire. Get with the program, will ya? How can we build one world under secularist ideals without breaking a few eggs? Of course, once it is fully built, is the American public who will feel the deadly grip of the velvet glove. One cannot lay down with dogs without getting fleas. The cup of wrath is nearly full, John Smith, nearly full. Oops, there I go, almost sounding as alarmist as Smith. Guess he and I both need to listen to this again: https://www.youtube.com/watch?v=CRnQ65J02XA

  4. Charles Rice was one of the greatest of the so-called great generation in America. I was privileged to count him among my mentors. He stood firm for Christ and Christ's Church in the Spirit of Thomas More, always quick to be a good servant of the King, but always God's first. I had Rice come speak to 700 in Fort Wayne as Obama took office. Rice was concerned that this rise of aggressive secularism and militant Islam were dual threats to Christendom,er, please forgive, I meant to say "Western Civilization". RIP Charlie. You are safe at home.

  5. It's a big fat black mark against the US that they radicalized a lot of these Afghan jihadis in the 80s to fight the soviets and then when they predictably got around to biting the hand that fed them, the US had to invade their homelands, install a bunch of corrupt drug kingpins and kleptocrats, take these guys and torture the hell out of them. Why for example did the US have to sodomize them? Dubya said "they hate us for our freedoms!" Here, try some of that freedom whether you like it or not!!! Now they got even more reasons to hate us-- lets just keep bombing the crap out of their populations, installing more puppet regimes, arming one faction against another, etc etc etc.... the US is becoming a monster. No wonder they hate us. Here's my modest recommendation. How about we follow "Just War" theory in the future. St Augustine had it right. How about we treat these obvious prisoners of war according to the Geneva convention instead of torturing them in sadistic and perverted ways.

ADVERTISEMENT