RICO: Each Member of Enterprise Needn’t Know Each Other’s Role — Enough to Know General Nature of Enterprise & That It Extends Beyond His/Her Role — Conspiracy Conflation — Impact on Hub & Spoke?
United States v. Christensen, 2016 U.S. App. LEXIS 12738 (9th Cir. July 8, 2016):
Six defendants appeal their criminal convictions stemming from a widespread criminal enterprise offering illegal private investigation services in Southern California. At the center of this criminal enterprise was Pellicano Investigative Agency, known as PIA. Defendant Anthony Pellicano operated PIA, ostensibly as a legitimate private investigation agency. But many of PIA's investigation methods were, in fact, illegal. Pellicano bribed Los Angeles area police officers, such as Defendant Mark Arneson, for access to confidential law enforcement databases. He orchestrated wiretaps on investigative [*8] targets so he could overhear their conversations with friends, family, medical professionals, and legal counsel. He paid a telephone company employee, Defendant Rayford Turner, for the confidential technical information he needed for the wiretaps, and hired a software developer, Defendant Kevin Kachikian, to create custom software to record the conversations Pellicano overheard. At the height of PIA's success, scores of people retained PIA for its often illegal services. Most pertinent to this case, Defendant Terry Christensen, an attorney, hired PIA to assist in litigation in which he represented his client, Kirk Kerkorian, against Lisa Bonder. Pellicano wiretapped Bonder's telephone and frequently discussed with Christensen what he heard. Defendant Abner Nicherie also hired PIA to wiretap the husband of a woman whose business Nicherie hoped to take over.
PIA's criminal enterprise began to unravel in 2002, when the FBI investigated PIA's attempt to intimidate a reporter, Anita Busch. This investigation led to a search, pursuant to a search warrant, of PIA's offices. By 2003, the government was investigating the widespread scope of PIA's illegal activities. A grand jury returned an [*9] indictment charging Pellicano, Arneson, and Turner with crimes under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq., for their roles in operating PIA's criminal enterprise. The indictment also variously charged Defendants with other crimes, including wiretapping, computer fraud, honest services fraud, identity theft, and conspiracy offenses. The case proceeded to two separate jury trials, which resulted in the convictions of all six Defendants on at least some counts. Defendants appeal their convictions.
In this opinion, we vacate Turner's conviction for aiding and abetting computer fraud, Arneson's convictions for computer fraud and unauthorized computer access, and Pellicano's convictions for aiding and abetting both computer fraud and unauthorized computer access. We also vacate Nicherie's conviction for aiding and abetting a wire interception. The rest of the convictions are affirmed, including the RICO convictions of Pellicano, Arneson, and Turner for operating PIA's criminal enterprise, Christensen's convictions based on hiring that enterprise to illegally wiretap Lisa Bonder, and Kachikian's convictions for his role in PIA's wiretapping. We vacate the sentences [*10] imposed on the defendants whose convictions were vacated in part--Pellicano, Arneson, and Turner--and remand for resentencing on their remaining, affirmed convictions. We remand for further proceedings on the vacated counts of conviction, including the possibility of retrial, as may be appropriate, on those charges.
Defendants have raised a staggering number of issues on appeal. Their briefs--fourteen in all--totaled over 900 pages.1 Many of the issues raised on appeal do not warrant discussion in a precedential opinion. We thus address many issues in a concurrently filed memorandum disposition, in which we affirm on all the issues covered in the memorandum. In this opinion, we address those issues that merit an extended discussion.
1 The government was similarly verbose. Its answering brief was nearly 700 pages.
These consolidated appeals arise out of the prosecution in two separate trials of private investigator Defendant Anthony Pellicano and several individuals associated with him. Pellicano owned and operated Pellicano Investigative Agency ("PIA"). He provided investigation services to clients in connection with litigation and personal matters.
The factual core of this case [*11] is simple: PIA's investigations were often illegal. Pellicano wiretapped investigative targets, for instance, and used proprietary software called "Telesleuth," which Defendant Kevin Kachikian developed and updated over the course of several years, to record wiretapped phone conversations. Pellicano related the content of those conversations (e.g., by playing recordings) to clients, who often used what they learned to gain an advantage in litigation.
To get the technical information he needed to install the wiretaps, Pellicano paid Defendant Rayford Turner, a telephone company technician, to obtain cable-pairing data from the telephone company, SBC. Turner himself did not have access to SBC databases, but he paid other SBC employees, non-parties Teresa Wright and Michele Malkin, to access the databases and give Turner the information PIA wanted. Turner then gave the information to Pellicano and implemented wiretaps. Pellicano and PIA also paid an LAPD officer, Defendant Mark Arneson, to search confidential police databases for information about various investigative targets and provide that information to PIA.2
2 Pellicano also paid at least one other police officer for information from [*12] police databases. That person was not charged in this action.
PIA's activity on behalf of client Robert Pfeifer concisely illustrates how Pellicano, Arneson, and Turner operated the illegal investigations. Pfeifer, not named as a party in this case, retained PIA in July 2000 to influence his former girlfriend, Erin Finn, to recant deposition testimony about Pfeifer's drug use. The evidence established that Pellicano paid Arneson $2,500, and that Arneson accessed law-enforcement databases to acquire criminal history and/or information from the Department of Motor Vehicles (DMV) on Pfeifer, Finn, and Finn's friends and associates. Arneson then gave this information to Pellicano. Turner provided Pellicano with confidential subscriber information from SBC, and a wiretap on Finn was initiated. The wiretap revealed extensive information about Finn's business, which Pfeifer used to get her to recant her testimony.
Based on Pfeifer's case and many others, the grand jury returned an indictment charging Pellicano, Arneson, and Turner with RICO violations. The indictment alleged that they formed an enterprise for "the common purpose of earning income through the conduct of diverse criminal activities [*13] including, but not limited to, illegal wiretapping, unauthorized access of protected computers, wire fraud, bribery, identity theft, and obstruction of justice." The predicate acts included bribery, honest services wire fraud, and identity theft. Kachikian, the Telesleuth developer, was not charged with RICO violations; he was charged with conspiracy to intercept, interception of communications, and possession of a wiretapping device.
The government also prosecuted two of PIA's clients: Defendants Abner Nicherie and Terry Christensen. Abner Nicherie hired Pellicano to wiretap Ami Shafrir, the husband of Sarit Shafrir, whose business Nicherie hoped to take over. Nicherie went to PIA many times to listen to and transcribe Ami Shafrir's telephone conversations, which were in Hebrew. The intercepted conversations included Ami Shafrir's confidential communications with his attorneys.
Terry Christensen hired Pellicano to wiretap Lisa Bonder. Bonder was engaged in a child support dispute with Christensen's client, Kirk Kerkorian. A central part of Christensen's strategy was proving that the child involved in the dispute was not his client's biological child. A DNA test eventually proved that [*14] another man was the father. While the litigation was ongoing, Pellicano intercepted many of Bonder's conversations, including conversations with her attorneys, family, and friends about the child support litigation. The main evidence against Christensen consisted of recordings of more than 30 phone conversations in which he discussed with Pellicano the wiretap on Bonder. These recordings, which Pellicano recorded secretly, were seized from PIA's offices.
The government's investigation into PIA began when it investigated threats against reporter Anita Busch. On the morning of June 20, 2002, Busch went to her car on the street outside her home and found that her car had been vandalized. The windshield had been punctured, a handwritten sign reading "STOP" had been placed on the car, and a dead fish and a rose had been left on the windshield. An informant recorded his conversations with Alex Proctor, who stated that Pellicano had hired him to vandalize Busch's car. Based in large part on the informant's recordings, in November 2002, the government obtained warrants to search PIA for evidence that Pellicano was involved in the vandalism. The government seized computers and data storage devices [*15] pursuant to the warrant. After obtaining more evidence of the widespread extent of PIA's illegal investigations, the government obtained more warrants in July 2003 and seized additional records from the data storage devices previously taken from PIA, including the Pellicano-Christensen recordings.
A grand jury returned an indictment,3 and the Defendants were prosecuted in two trials. The first trial included (1) RICO and related charges against Pellicano, Arneson, and Turner and (2) wiretapping and related charges against Pellicano, Kachikian, and Nicherie. The second trial, in which only Pellicano and Christensen were defendants, focused on the Lisa Bonder wiretap.
3 The Fifth Superseding Indictment was the operative charging document. The government filed a redacted Fifth Superseding Indictment during the first trial, which dismissed some counts and renumbered the remaining ones.
The Defendants in the first trial (Pellicano, Arneson, Turner, Kachikian, and Nicherie) were convicted on the following charges:
Pellicano: RICO (18 U.S.C. § 1962(c));
RICO conspiracy(18 U.S.C. § 1962(d)); Honest-services wire fraud (18 U.S.C. §§ 1343, 1346);
Unauthorized computer access of United States agency information (18 U.S.C. §§ 1030(a)(2)(B), (c)(2)(B)(i));
Identity theft (18 U.S.C. § 1028(a)(7)); Computer fraud (18 U.S.C. § 1030(a)(4));
Conspiracy [*16] to intercept and use wire communications (18 U.S.C. § 371);
Interception of wire communications (18 U.S.C. § 2511(1)(a), (d)); and
Possession of a wiretapping device (18 U.S.C. § 2512(1)(b)).
Arneson: RICO (18 U.S.C. § 1962(c));
RICO conspiracy(18 U.S.C. § 1962(d)); Honest services wire fraud (18 U.S.C. §§ 1343, 1346);
Unauthorized computer access of United States agency information (18 U.S.C. § § 1030(a)(2)(B), (c)(2)(B)(i));
Identity theft (18 U.S.C. § 1028(a)(7)); Computer fraud (18 U.S.C. § 1030(a)(4)).
Turner: RICO (18 U.S.C. § 1962(c));
RICO conspiracy(18 U.S.C.§ 1962(d)); Identity theft (18 U.S.C. § 1028(a)(7)); Computer fraud (18 U.S.C. § 1030(a)(4));
Conspiracy to intercept and use wire communications (18 U.S.C. § 371);
Interception of wire communications (18 U.S.C. § 2511(1)(a), (d)); and False statements (18 U.S.C. § 1001(a)(2)).
Kachikian: Conspiracy to intercept and use wire communications (18 U.S.C. § 371);
Possession of a wiretapping device (18 U.S.C. § 2512(1)(b)).
Nicherie: Aiding and abetting interception of wire communications (18 U.S.C. § 2511(a), (d)).
The jury acquitted Pellicano of one count of unauthorized computer access, Turner of four counts of intercepting wire communications, and Kachikian on all counts of intercepting wire communications.
In the second trial, Pellicano and Christensen were each convicted of one count of conspiracy to intercept and use wire communications, 18 U.S.C. § 371, and one count of interception of wire communications, 18 U.S.C. §§ 2511(1)(a), (d).
Pellicano was sentenced to 180 months of imprisonment, Arneson to 121 months, Turner to 121 months, Kachikian to 27 months, Nicherie to 21 [*17] months, and Christensen to 36 months. Pellicano, Arneson, and Turner were also ordered to forfeit $2,008,250, jointly and severally.
II. Standards of Review
We address the standard of review for most issues as we discuss the relevant arguments below. Because they apply to multiple issues in the case, we address the standards for plain error and clear error review here at the outset.
When a defendant raises an argument for the first time on appeal, the plain error standard of review applies. See Fed. R. Crim. P. 52(b); United States v. Pelisamen, 641 F.3d 399, 404 (9th Cir. 2011). Plain error requires that (1) there was error; (2) it was plain; and (3) the error affected substantial rights. United States v. Olano, 507 U.S. 725, 732-35 (1993). When confronted with plain error, an appeals court shall exercise its discretion and reverse only if the error "seriously affect[s] the fairness, integrity, or public reputation of judicial proceedings." Id. at 736 (internal quotation marks omitted) (alteration in original). Plain error review applies on direct appeal even where an intervening change in the law is the source of the error. Johnson v. United States, 520 U.S. 461, 467-68 (1997); Pelisamen, 641 F.3d at 404.
We review for clear error a district court's findings of fact. A finding of fact is clearly erroneous only where it is "(1) illogical, (2) implausible, or (3) without support in inferences that may be drawn from [*18] the facts in the record." United States v. Pineda-Doval, 692 F.3d 942, 944 (9th Cir. 2012) (citation and internal quotation marks omitted). Clear error review is deferential, and "[w]here there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous." United States v. Working, 224 F.3d 1093, 1102 (9th Cir. 2000) (en banc) (quotation omitted).
A. Sufficiency of RICO Enterprise
Pellicano, Arneson, and Turner were all convicted of racketeering under the RICO statute, 18 U.S.C. § 1962(c), and also of RICO conspiracy, 18 U.S.C. § 1962(d). They argue that the evidence was insufficient to prove a single RICO enterprise among Pellicano, PIA, Arneson, and Turner because there was no evidence that Arneson and Turner knew about each other's roles in the enterprise. We are not persuaded by this argument. The government presented sufficient evidence from which the jury could conclude that Arneson and Turner knew about the essential nature of their illegal enterprise with Pellicano.
Defendants challenged the sufficiency of the evidence supporting the RICO enterprise in a Rule 29 motion, which the district court denied. The denial of a Rule 29 motion for judgment of acquittal is reviewed de novo. United States v. Chapman, 528 F.3d 1215, 1218 (9th Cir. 2008). The court "view[s] the evidence in the light most favorable to the government and determine[s] whether any rational trier of fact could [*19] have found the essential elements of the crime beyond a reasonable doubt." Id. (citation and internal quotation marks omitted); see United States v. Nevils, 598 F.3d 1158, 1163-64 (9th Cir. 2010) (en banc).
The RICO provision at issue here, 18 U.S.C. § 1962(c), "makes it unlawful for any person employed by or associated with any enterprise . . . to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity." Boyle v. United States, 556 U.S. 938, 943-44 (2009) (emphasis and internal quotation marks omitted). A RICO offense is established by "proof of (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." United States v. Fernandez, 388 F.3d 1199, 1221 (9th Cir. 2004) (citation and internal quotation marks omitted).
RICO defines the term "enterprise" as "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. § 1961(4). This expansive definition is "not very demanding." Odom v. Microsoft Corp., 486 F.3d 541, 548 (9th Cir. 2007) (en banc). An associated-in-fact enterprise is "a group of persons associated together for a common purpose of engaging in a course of conduct." Id. at 552 (quoting United States v. Turkette, 452 U.S. 576, 583 (1981)). Such an enterprise has three elements: (1) a common purpose, (2) an ongoing organization, and (3) a continuing unit. Id.
"[I]t is sufficient that the defendant [*20] know the general nature of the enterprise and know that the enterprise extends beyond his individual role." United States v. Eufrasio, 935 F.2d 553, 577 n.29 (3d Cir. 1991) (citation and internal quotation marks omitted). Likewise, a RICO conspiracy under § 1962(d) requires only that the defendant was "aware of the essential nature and scope of the enterprise and intended to participate in it." Fernandez, 388 F.3d at 1230 (citation and internal quotation marks omitted). "[T]he point of making the government show that the defendants ha[d] some knowledge of the nature of the enterprise[ ] is to avoid an unjust association of the defendant with the crimes of others. " United States v. Brandao, 539 F.3d 44, 52 (1st Cir. 2008). Nonetheless, the definition of a RICO enterprise has "wide reach" and is to be "liberally construed to effectuate its remedial purposes." Boyle, 556 U.S. at 944-45 (internal quotation marks omitted) (holding that a RICO enterprise does not need to have a formal, business-like structure or hierarchy).
As the First Circuit has explained, "[t]he RICO net is woven tightly to trap even the smallest fish, those peripherally involved with the enterprise." United States v. Marino, 277 F.3d 11, 33 (1st Cir. 2002) (citation and internal quotation marks omitted). For instance, this court affirmed a RICO conspiracy conviction of the wife of a Mexican Mafia member where the evidence showed that she "collected protection money [*21] for the [enterprise] on behalf of her husband," "passed messages" among enterprise members, "smuggled drugs into prison[,] and accepted payment for drugs sold on the street." Fernandez, 388 F.3d at 1230.
Defendants primarily argue that the evidence was insufficient to prove that Arneson and Turner associated themselves with the common purpose of the same alleged enterprise because they did not know about each other's roles in it. We disagree. The common purpose alleged in the indictment was "earning income through the conduct of diverse criminal activities including, but not limited to, illegal wiretapping, unauthorized access of protected computers, wire fraud, bribery, identity theft, and obstruction of justice." The government presented ample evidence from which a reasonable jury could find, at a minimum, that Arneson and Turner were each aware of the "essential nature and scope" of that enterprise and intended to participate in it.
Arneson's role included illegally accessing law enforcement databases and passing the information to Pellicano. Turner's role included illegally obtaining information from SBC to facilitate Pellicano's wiretaps. The jury heard evidence that Pellicano paid Arneson and Turner for [*22] their roles in the enterprise. Witnesses testified that both Arneson and Turner visited PIA, sometimes at the same time, and even hid from a client together in PIA's kitchen. Although it was not required that either be aware of the specific identity or activity of the other, in this instance the evidence would have permitted a reasonable jury to infer that they were.
Arneson also testified that Pellicano told him about phone company sources and explained the Telesleuth wiretapping software to him. Arneson testified that he thought Pellicano was going to patent Telesleuth and sell it to law enforcement, but a reasonable jury would not be required to credit this testimony. The jury also heard evidence that Pellicano openly told his clients about his illegal wiretapping and access to law enforcement reports. A reasonable jury could have inferred that Pellicano was equally open with Arneson and Turner. In sum, a reasonable jury could easily infer that Arneson and Turner knew about each other and knew about the essential nature of the enterprise in which they were both participating with Pellicano.
Moreover, the jury heard evidence about specific instances in which Arneson and Turner coordinated [*23] their activities with Pellicano. Boyle, 556 U.S. at 945-46 (explaining that an associated-in-fact enterprise may be proven "by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit" (internal quotation marks omitted)). We return to the example of Robert Pfeifer. As recounted in the background section, above at 17, Pfeifer retained PIA in July 2000 to make his former girlfriend, Erin Finn, retract damaging deposition testimony about his drug use. The evidence established that on July 20, 2000, Pellicano paid Arneson $2,500, and that on August 2, 2000, Arneson accessed law-enforcement databases to acquire criminal-history and DMV information on Pfeifer, Finn, and her friends and associates, which Arneson then provided to Pellicano. That same day, Turner provided Pellicano with confidential subscriber information from SBC, and a wiretap on Finn was initiated. The government also introduced evidence of other clients for whom Pellicano coordinated the activities of Arneson and Turner.
Accordingly, this is not a case where Arneson and Turner were unjustly associated with Pellicano and PIA or each other. The evidence was sufficient to conclude [*24] that each worked together with Pellicano and others to earn money from criminal activities, including illegally accessing confidential databases, bribery, and wiretapping. A reasonable jury could find that Arneson and Turner each knew about the essential nature of this enterprise. The district court did not err in denying Defendants' Rule 29 motion on this issue.
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