Corruption

Offences

• Abuse of functions (Article 19)
• Illicit enrichment (Article 20)

Roles

• promising/offering/giving undue advantage
• Solicitation/acceptance of undue advantage

Sectors

• Private sector

Other Crimes

Details:

Racketeering

 

United States v. John Cody. 722 F.2d 1052 (2d Cir. 1983)

UNODC No.:
USAx105

Fact Summary

This case is an appeal by John Cody regarding convictions handed down pursuant to the Racketeer Influenced and Corrupt Organizations Act ("RICO"), count 1; receiving illegal benefits from employers, counts II, IV, V and VI; income tax evasion, count VII;  and filing a false tax return, count VIII. He was  sentenced to concurrent prison terms of five years on the RICO and tax evasion counts, three years on the false filing count and one year each on the illegal benefit counts. In addition, he was fined $25,000 on the RICO count, $10,000 on the tax evasion count and on each illegal benefits count, and $5,000 on the false filing count. Cody also appeals a post-judgment order denying his motion for a new trial.

Commentary and Significant Features

Passed as Title IX of the Organized Crime Control Act of 1970 The Racketeer Influenced and Corrupt Organizations Act  (RICO) was designed to facilitate the elimination of the infiltration of organized crime and racketeering into legitimate organizations operating in interstate commerce.   It became the weapon of choice in combatting the alleged abuses of racketeer-controlled unions given its broad scope and long list of predicate acts. The “collective focus of RICO made it a natural fit for attempts to discipline the collectiveaction space of unions” or rather the opportunities for crime within those spaces. Under RICO, the criminal enterprise replaced the individual as the cornerstone of each trial and shone a light on relationships between unions and gangs.  Significantly violations under other legislation could serve as predicate acts under RICO (as discussed by the court in this case) rendering the statute a sort of “penalty enhancer”.  Also of interest is the side-stepping of some restrictive statutes of limitations provided that the offences remain within the overall ten-year period. This is also discussed by the court in this case. The present case demonstrates the potential of criminal organisational infrastructures to infiltrate legitimate businesses by means of pension funds for example, as well as the power of the RICO legislation in forcing such ‘racketeer-influenced organisations’ into court and targeting the economic power of criminal groups. It has been suggested that it became the model for legislation on fighting organized crime internationally, including the 2000 United Nations Convention against Transnational Organized Crime (see further Encyclopedia of Transnational Crime and Justice edited by Margaret E. Beare and Benjamin Levin, Criminal Labor Law, 37 Berkeley J. Emp. & Lab. L. 43 (2016)). 

Sentence Date:
1983-11-28

Cross Cutting

Application of the Convention

Involved Countries

United States of America

Procedural Information

Legal System:
Common Law
Latest Court Ruling:
Appellate Court
Type of Proceeding:
Criminal
 
 
Proceeding #1:
  • Stage:
    appeal
  • Is the decision appealable?:
    Yes
  • Official Case Reference:
    United States of America v. John Cody 722 F.2d 1052
  • Court

    • Criminal
    Description:

    The Court firstly recounted the background to the Count 1 charges (racketeering). It noted three incidents related to the construction of Cody's home.  For works valued at  $6,653 he paid only  only $1,900 until during proceedings, when he paid the full amount; for works completed by another contractor Cody eventually tendered a check in part payment for these services but, at the same time, demanded the contractor kickback most of it-when he refused, Cody threatened him. The final incident concerned an expensive driveway that a third contractor, $7,500 to install. Cody had asked for a "break" on the price and  paid less than half of the contractor's costs ($3,230).

    In addition to these three incidents, the racketeering count encompassed two major kickback schemes related to the purchase of a golf club made with the pension fund (as agreed with the trustees) and another parcel of land purchased also with the fund. in relation to the first purchase Cody demanded a $60,000 kickback and $100,000 with regard to the second (from a John Strong) While these incidents were predicated offences of the purposes of the Racketeer Influenced and Corrupt Organizations Act (RICO) they were potentially outside the statute of limitations. Regarding this however the appeal court concluded that a Joinder with tax  offences was entirely proper since Count I (c)  of the indictment and the two tax counts were based on the same transaction--the $100,000 kickback. Further, Cody failed to demonstrate prejudice. The appeal court while acknowledging that some prejudicial effect will inevitably appear whenever two charges are joined, if only due to the fact that they arise out of the same act or transaction, none occurred on the facts. The court pointed out that the jury had acquitted him of other counts and indicated they considered the incidents separately. 

    In relation to counts Counts IV, V and VI charged him with receiving free chauffeuring services from "no show" employees who were members of Local 282 (i.e. the union of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America represents truck drivers who deliver building materials to construction sites In New York).  Cody asserts that his conviction under these counts should be reversed because the government failed to prove that the employers had intentionally given the services of their employees to him and, further, because the trial court erroneously instructed the jury on this charge. Additionally, he claims that the employees themselves--not their employers--made a gift of their services. The court rejected  these arguments noting the first chauffeur worked concurrently for Cody and, as teamster foreman, for a construction company who paid him over $600 per week, although he had no duties at the jobsite, in order that he was able to chauffeur Cody without any distractions. Later, Cody was chauffeured for substantial periods of time by other both members of the Local who also  drew their salaries from construction contractors while spending their working hours serving Cody.

    The appeal court agreed with the finding and reasoning of the trial court that was unnecessary for the government to prove the employers' guilt as a predicate to Cody's. It was enough to show that the employers paid, lent or delivered the chauffeurs and that Cody accepted their services. Instead of performing the jobs for which they were ostensibly hired, the three of them at different times spent their working hours, including overtime, providing free chauffeuring service to Cody. Although they may have served him willingly--after all, he was the head of the union of which they were members--the fact is that they did so while on the payroll of their respective employers. It is no different than if the employers had simply paid the salary of some person Cody had hired to be his chauffeur. The Court at this point also considered  the legislative history and parliamentary intent of the Taft-Hartley Act and related legislation, it noted the law punished all forms of bribery and extortion in labor-management relations and confirmed labor officials serve as fiduciaries, who should act in accordance with "the highest standards of responsibility and ethical conduct in administering the affairs of their organizations,". Noting that using one's union office for personal financial advantage--playing both sides of the street--is a conflict of interest that corrupts and weakens the national labor movement. 

    In relation to court II (the rent-free use by Cody's mistress of a luxury apartment owned by Somer Construction) the court noted Somer did not have a contract with Local 282, nor did it employ any of the Local's members, although several subcontractors working on the project did. At trial, the government's only allegation of a nexus between Somer Construction and Local 282 was that Somer had plans to erect an office building in Manhattan that would be subject to a "high-rise construction" agreement between employers and Local 282. But the plans never came to fruition. Testimony of the mistress was read to the jury in the absence of the who absconded to Europe. While the government again it was unlawful for an officer of a labor organization to receive or accept anything of value from someone who employs members of that labor organization. The court agreeing with the Appellant to reverse this conviction on the basis that there was no existing employment relationship between Somer  and members of Local 282.  The plans for future construction were not a sufficient nexus between Somer and Local 282 members and its relationship with its subcontractors' employees was too indirect to support the claim that Cody had sufficient leverage to extort from Somer or that Somer had any incentive to bribe Cody. This language requires an existing employment relationship, between the employer and members of the union, not the possibility of a future relationship. while noting that doubtless, the gift did not spring entirely from the kindness of Somer's heart, and perhaps it could be surmised that he hoped to obtain future goodwill from Cody the connection was too nebulous at the time the gift was made to be the basis for a criminal charge. It further ruled that there was no general prejudicial effect of the mistress evidence -it was discreet to count II which was in any event reversed for other reasons.

    Regarding  counts VII and VIII both of these counts arose from Cody's failure to report and pay taxes on the $100,000 kickback. Cody argued the trial court erroneously failed to sever the first six counts of the indictment from the tax counts; the evidence was insufficient; the trial court improperly ordered defense counsel to produce a tape recording of an interview between a defense investigator and John Strong; and the government failed to disclose exculpatory evidence in the form of threats made by an FBI agent to Strong. The court rejected each of these contentions. In relation to the severance argument it reasoned an appellate court will reverse a district court's denial of motion to sever only upon the showing of a clear abuse of discretion -the appellant must prove that he suffered prejudice so substantial as to deny him a fair trial -but  simply denying an appellant's severance motion was not an abuse of discretion.  The Joinder was entirely proper since Count I(c) of the indictment and the two tax counts were based on the same transaction--the $100,000 kickback. Further, Cody failed to demonstrate prejudice. The government presented sufficient, independent evidence on each count of the indictment, and the fact that the jury voted to acquit Cody on two of the RICO predicates indicates that it considered each count separately. Cody's "insufficiency of evidence" argument was in the appellant court's view similarly without merit. At trial, Cody conceded his guilt on Counts VII and VIII and the proof--including the donor's prior statement that he had paid the $100,000 to Cody as a kickback--more than ample. The third ground raised pertains to the disclosure by defense counsel of a taped interview with the donor John Strong. When the government first made a motion to discover the tape, defendant objected and the court refused to grant discovery. After Strong testified, the court directed the defendant to make the tape available for inspection and, without objection, defense counsel complied. On this kind of issue, an objection not raised at trial is waived. Here defense counsel made a strategic decision to use the tape in his cross-examination of Strong, rather than forego its use and object to the court's ruling requiring him to produce. Accordingly, it is now too late to challenge the production order.

    Finally, as regards Cody's contention that the government's failure to disclose threats made against witness Strong warrants reversal of the convictions, this was also rejected by the court on appeal. Although an FBI agent said that if Strong did not follow instructions he would throw Strong out the window or inform Cody that Strong was an informant, the non-disclosure of this threat did not necessarily merit a retrial.  Although prior to trial the appellant had requested disclosure of exculpatory evidence and although he was not apprised of these threats made to Strong until shortly after the trial concluded any non-disclosure needs to be material.  And where If there is no reasonable doubt about guilt whether or not the additional evidence is considered, there is no justification for a new trial. Here Strong originally admitted to making the kickback and while he later recanted his testimony at Cody's trial -the jury was well aware that Strong changed his story  and it is unlikely that the jury's knowledge of the threats made against Strong would have weakened the government's case against Cody. Moreover, it is clear from Strong's trial testimony that he did not fear reprisal from the FBI agents. In fact, Strong's last-minute about face more readily suggests a substantial fear of Cody. The appeal court state while it would have been better for the government to disclose the threats since they did bear upon Strong's credibility the undisclosed evidence must be material, and the test for materiality is whether or not the threat was before the jury, no reasonable doubt exists as to Cody's guilt. On the facts here  the government was not obligated to inform Cody of the threats made against Strong as Cody's guilt had been established. The court held the conviction on Counts VII and VIII must stand.

    The court concluded Count II of the indictment is reversed and it affirmed on all other counts. 

     

    Sentences

    Sentence

    Term of Imprisonment:
    5 years
     

    Court

    US Court of Appeals for the Second Circuit

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