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RICO case against former East Chicago mayor nets $108M in damages

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A federal judge has ordered an ex-mayor and top allies to pay more than $108 million in damages for a voting scandal a decade ago, but in doing so he's rejected the Indiana Attorney General's most novel and far-reaching legal arguments in a landmark civil racketeering case centered on public corruption in East Chicago.

In issuing his 53-page decision in State of Indiana and City of East Chicago v. Robert A. Pastrick, et al., No. 3:04-CV-506, March 11, U.S. District Court Senior Judge James Moody criticized the state's top attorney for failing to flush out legal arguments or provide enough rationale, trying to basically bypass due process in targeting non-parties, and going beyond the scope of federal and state law regarding civil racketeering offenses.

But attorney experts specializing in racketeering law say that the recent ruling is one of first impression that's clearly a victory for the state and East Chicago, and it will be imitated nationally in cases targeting public corruption.

"We now know how much the corrupt administration cost the city, and I am confident that the litigation will be a precedent for other suits by other AG's," said G. Robert Blakely, a Notre Dame Law School professor who was an attorney on this case based on his experience as the nation's foremost expert on the Racketeer Influenced Corrupt Organizations Act. "To my knowledge, no other AG anywhere has successfully used federal RICO and his state RICO to sue a corrupt city administration and corrupt businesses to recover for the damages inflicted on the city."

The ruling comes in a 6-year-old case involving the decade-old "sidewalks-for-votes" scandal that helped end a Lake County titan's 33-year political career. The civil racketeering case went after the former mayor Robert Pastrick and his top aides for misusing $24 million in public money to pave sidewalks and driveways to gain votes in the 1999 Democratic primary.

While criminal cases ensnared most involved, former Attorney General Steve Carter in 2004 sued Pastrick and allies using the federal and state RICO statutes. Most defendants eventually settled, except for Pastrick, former aide James Fife III, and the now missing former city councilman Frank Kollintzas who almost pushed the matter to trial last year. But in days before that trial was to happen, Pastrick and Fife waived that right and the court entered a default judgment against them for running a corrupt enterprise in East Chicago. Judge Moody held a damages hearing in June, and he's been considering the damages amount and remedy since then.

In assessing the damages, Judge Moody counted the $27.3 million originally totaled from the sidewalks-for-votes scheme - $24 million plus legal fees and other financial costs - and added $8.7 million in prejudgment interest, which is four years worth at an 8 percent interest rate. With treble damages that he determined was allowed through his interpretation of state and federal law, the total came to $108,007,584.33. The judge also found that six corporations, all found liable for the sidewalk scheme in a separate decision by U.S. District Court Judge Allen Sharp, are now jointly liable with Pastrick and his aides for chunks of the $108 million.

But as current AG Greg Zoeller has publicly explained in the past, this case wasn't as much about money as it was about weeding out public corruption and finding a remedy to provide transparency and confidence for those in East Chicago. On that front, the AG's Office didn't get the judge's support.

In the legal points the AG made beyond the misused public money, Judge Moody rejected those proposed remedies and essentially told the state agency it was overstepping its authority. Most of the second-half of his order focuses on this, pointing out in multiple spots that the AG has failed to offer authority or missed the point of caselaw.

Judge Moody determined that the city couldn't recover salary or compensation from Pastrick or those aides because that isn't allowed by the civil RICO statute, that plaintiffs couldn't recover money paid to Fife's consulting firms, and that the court wouldn't issue an injunction banning the defendants from holding any public office anywhere in the U.S. He also admonished the AG for trying to open up the finances of for-profit and non-profit organizations - non-parties - that received casino money and provided some of that for local development projects. The AG had offered possible remedies the court might impose, such as civil forfeiture, a state-ordered "forensic audit" of non-party organizations, and having the court serve as a receiver if any money might be recouped from them.

"The obvious and most critical problem with plaintiffs' request is that it cannot be reconciled with principles of due process," Judge Moody wrote, relating to one of the AG's proposed remedies about a forensic audit. "These core, intertwined due process issues prevent the court from ordering the remedy plaintiffs seek in this case."

Chicago attorney Howard Foster, who runs a two-person firm specializing in civil RICO cases, said the 7th Circuit Court of Appeals hasn't set precedent on various aspects of RICO law raised by the Indiana AG and so the judge's rulings were consistent with what other District Courts have done. He described this as an impressive victory for Indiana, and this was how both the federal and state RICO statutes were meant to be used.

In the days following the decision, the Attorney General's Office was still reviewing the judge's ruling and declined to comment about specifics or whether it might be appealed on any points, spokesman Bryan Corbin said. But Zoeller described the decision as a victory for the state.

"I am enormously pleased that the federal judge awarded triple damages against former Mayor Pastrick and the other remaining defendants as a symbol of how brazen and shameless the public corruption was in the municipal government of East Chicago during the Pastrick regime," he said in a statement.

The state will now focus on collecting that judgment, which defense attorney Michael Bosch described as being mostly uncollectable - last year he'd dismissed the state's damages request and mocked the AG about treble damages, saying the judge should award $1 in damages and triple that amount.

Corbin said a bill of costs will be filed this month, which will include the $581,038 total invoiced by Chicago law firm Perkins Coie that represented the state; attorney Patrick Collins there served as a special deputy attorney general on this case. The AG now can file its brief outlining attorney fees and costs associated with the case.

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  1. California Sex Offender Management Board (CASOMB) End of Year Report 2014. (page 13) Under the current system many local registering agencies are challenged just keeping up with registration paperwork. It takes an hour or more to process each registrant, the majority of whom are low risk offenders. As a result law enforcement cannot monitor higher risk offenders more intensively in the community due to the sheer numbers on the registry. Some of the consequences of lengthy and unnecessary registration requirements actually destabilize the life’s of registrants and those -such as families- whose lives are often substantially impacted. Such consequences are thought to raise levels of known risk factors while providing no discernible benefit in terms of community safety. The full report is available online at. http://www.casomb.org/index.cfm?pid=231 National Institute of Justice (NIJ) US Department of Justice Office of Justice Programs United States of America. The overall conclusion is that Megan’s law has had no demonstrated effect on sexual offenses in New Jersey, calling into question the justification for start-up and operational costs. Megan’s Law has had no effect on time to first rearrest for known sex offenders and has not reduced sexual reoffending. Neither has it had an impact on the type of sexual reoffense or first-time sexual offense. The study also found that the law had not reduced the number of victims of sexual offenses. The full report is available online at. https://www.ncjrs.gov/app/publications/abstract.aspx? ID=247350 The University of Chicago Press for The Booth School of Business of the University of Chicago and The University of Chicago Law School Article DOI: 10.1086/658483 Conclusion. The data in these three data sets do not strongly support the effectiveness of sex offender registries. The national panel data do not show a significant decrease in the rate of rape or the arrest rate for sexual abuse after implementation of a registry via the Internet. The BJS data that tracked individual sex offenders after their release in 1994 did not show that registration had a significantly negative effect on recidivism. And the D.C. crime data do not show that knowing the location of sex offenders by census block can help protect the locations of sexual abuse. This pattern of noneffectiveness across the data sets does not support the conclusion that sex offender registries are successful in meeting their objectives of increasing public safety and lowering recidivism rates. The full report is available online at. http://www.jstor.org/stable/full/10.1086/658483 These are not isolated conclusions but are the same outcomes in the majority of conclusions and reports on this subject from multiple government agencies and throughout the academic community. People, including the media and other organizations should not rely on and reiterate the statements and opinions of the legislators or other people as to the need for these laws because of the high recidivism rates and the high risk offenders pose to the public which simply is not true and is pure hyperbole and fiction. They should rely on facts and data collected and submitted in reports from the leading authorities and credible experts in the fields such as the following. California Sex Offender Management Board (CASOMB) Sex offender recidivism rate for a new sex offense is 0.8% (page 30) The full report is available online at http://www.cdcr.ca.gov/Adult_Research_Branch/Research_Documents/2014_Outcome_Evaluation_Report_7-6-2015.pdf California Sex Offender Management Board (CASOMB) (page 38) Sex offender recidivism rate for a new sex offense is 1.8% The full report is available online at. http://www.google.com/url?sa= t&source=web&cd=1&ved= 0CCEQFjAA&url=http%3A%2F% 2Fwww.cdcr.ca.gov%2FAdult_ Research_Branch%2FResearch_ documents%2FOutcome_ evaluation_Report_2013.pdf&ei= C9dSVePNF8HfoATX-IBo&usg=AFQjCNE9I6ueHz-o2mZUnuxLPTyiRdjDsQ Bureau of Justice Statistics 5 PERCENT OF SEX OFFENDERS REARRESTED FOR ANOTHER SEX CRIME WITHIN 3 YEARS OF PRISON RELEASE WASHINGTON, D.C. Within 3 years following their 1994 state prison release, 5.3 percent of sex offenders (men who had committed rape or sexual assault) were rearrested for another sex crime, the Justice Department’s Bureau of Justice Statistics (BJS) announced today. The full report is available online at. http://www.bjs.gov/content/pub/press/rsorp94pr.cfm Document title; A Model of Static and Dynamic Sex Offender Risk Assessment Author: Robert J. McGrath, Michael P. Lasher, Georgia F. Cumming Document No.: 236217 Date Received: October 2011 Award Number: 2008-DD-BX-0013 Findings: Study of 759 adult male offenders under community supervision Re-arrest rate: 4.6% after 3-year follow-up The sexual re-offense rates for the 746 released in 2005 are much lower than what many in the public have been led to expect or believe. These low re-offense rates appear to contradict a conventional wisdom that sex offenders have very high sexual re-offense rates. The full report is available online at. https://www.ncjrs.gov/pdffiles1/nij/grants/236217.pdf Document Title: SEX OFFENDER SENTENCING IN WASHINGTON STATE: RECIDIVISM RATES BY: Washington State Institute For Public Policy. A study of 4,091 sex offenders either released from prison or community supervision form 1994 to 1998 and examined for 5 years Findings: Sex Crime Recidivism Rate: 2.7% Link to Report: http://www.oncefallen.com/files/Washington_SO_Recid_2005.pdf Document Title: Indiana’s Recidivism Rates Decline for Third Consecutive Year BY: Indiana Department of Correction 2009. The recidivism rate for sex offenders returning on a new sex offense was 1.05%, one of the lowest in the nation. In a time when sex offenders continue to face additional post-release requirements that often result in their return to prison for violating technical rules such as registration and residency restrictions, the instances of sex offenders returning to prison due to the commitment of a new sex crime is extremely low. Findings: sex offenders returning on a new sex offense was 1.05% Link to Report: http://www.in.gov/idoc/files/RecidivismRelease.pdf Once again, These are not isolated conclusions but are the same outcomes in the majority of reports on this subject from multiple government agencies and throughout the academic community. No one can doubt that child sexual abuse is traumatic and devastating. The question is not whether the state has an interest in preventing such harm, but whether current laws are effective in doing so. Megan’s law is a failure and is destroying families and their children’s lives and is costing tax payers millions upon millions of dollars. The following is just one example of the estimated cost just to implement SORNA which many states refused to do. From Justice Policy Institute. Estimated cost to implement SORNA Here are some of the estimates made in 2009 expressed in 2014 current dollars: California, $66M; Florida, $34M; Illinois, $24M; New York, $35M; Pennsylvania, $22M; Texas, $44M. In 2014 dollars, Virginia’s estimate for implementation was $14M, and the annual operating cost after that would be $10M. For the US, the total is $547M. That’s over half a billion dollars – every year – for something that doesn’t work. http://www.justicepolicy.org/images/upload/08-08_FAC_SORNACosts_JJ.pdf. Attempting to use under-reporting to justify the existence of the registry is another myth, or a lie. This is another form of misinformation perpetrated by those who either have a fiduciary interest in continuing the unconstitutional treatment of a disfavored group or are seeking to justify their need for punishment for people who have already paid for their crime by loss of their freedom through incarceration and are now attempting to reenter society as honest citizens. When this information is placed into the public’s attention by naive media then you have to wonder if the media also falls into one of these two groups that are not truly interested in reporting the truth. Both of these groups of people that have that type of mentality can be classified as vigilantes, bullies, or sociopaths, and are responsible for the destruction of our constitutional values and the erosion of personal freedoms in this country. I think the media or other organizations need to do a in depth investigation into the false assumptions and false data that has been used to further these laws and to research all the collateral damages being caused by these laws and the unconstitutional injustices that are occurring across the country. They should include these injustices in their report so the public can be better informed on what is truly happening in this country on this subject. Thank you for your time.

  2. Freedom as granted in the Constitution cannot be summarily disallowed without Due Process. Unable to to to the gym, church, bowling alley? What is this 1984 level nonsense? Congrats to Brian for having the courage to say that this was enough! and Congrats to the ACLU on the win!

  3. America's hyper-phobia about convicted sex offenders must end! Politicians must stop pandering to knee-jerk public hysteria. And the public needs to learn the facts. Research by the California Sex Offender Management Board as shown a recidivism rate for convicted sex offenders of less than 1%. Less than 1%! Furthermore, research shows that by year 17 after their conviction, a convicted sex offender is no more likely to commit a new sex offense than any other member of the public. Put away your torches and pitchforks. Get the facts. Stop hysteria.

  4. He was convicted 23 years ago. How old was he then? He probably was a juvenile. People do stupid things, especially before their brain is fully developed. Why are we continuing to punish him in 2016? If he hasn't re-offended by now, it's very, very unlikely he ever will. He paid for his mistake sufficiently. Let him live his life in peace.

  5. This year, Notre Dame actually enrolled an equal amount of male and female students.

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