RICO “Nexus” Element — Needed Relationship among Defendant, D’s Involvement in Enterprise’s Affairs and Pattern — Same in Civil, Criminal Cases — Racketeering Must Be One Means by Which Defendant Participates in Enterprise’s Affairs

United States v. Ferriero, 2017 U.S. App. LEXIS 14358 (3d Cir. Aug. 4, 2017):

Joseph A. Ferriero appeals his judgments of conviction, forfeiture, and sentence based on violations of the Travel Act, 18 U.S.C. § 1952, the Racketeer Influenced and Corrupt Organizations Act ("RICO"), id. § 1962(c), and the federal wire fraud statute, id. § 1343. We will affirm.1

1   The District Court had jurisdiction under 18 U.S.C. § 3231. We have jurisdiction under 28 U.S.C. § 1291 and 18 U.S.C. § 3742(a).

I.

Joseph Ferriero served as chairman of the Bergen County Democratic Organization (BCDO) from 1998 until he resigned in January 2009. As party chair, Ferriero wielded significant power in the process of nominating Democrats in local elections and in the process of choosing which issues and candidates the party supported. In his role, he raised money for the Democratic Party, helped elect Democratic candidates to local office, and managed campaigns in important local elections. Significantly for this case, one [*2]  aspect of party business was connecting and recommending vendors to Democrats elected or appointed to local office in Bergen County.

Ferriero's convictions stem from payments he took from a particular vendor, John Carrino, in exchange for recommending to certain officials that their towns hire Carrino's firm. Carrino owned C3 Holdings, LLC (hereinafter, "C3")--short for Citizen Communications Center--a New Jersey corporation that provided emergency-notification systems for local governments.2 Carrino also owned Braveside Capital, LLC, a New Jersey corporation he described as the "sales arm" of C3.

2   Emergency-notification systems--also known as "reverse 911" services--allow governments to use various communication platforms (e.g., text message, email, voice call) to automatically notify residents of local emergencies like natural disasters, missing children, loose wild animals, and power outages.

Since Carrino sought municipal contracts for C3, Ferriero was uniquely situated to influence Democratic municipal officials by virtue of his position as their county party chair. The two struck an agreement. Ferriero would recommend C3 to local governments in exchange for a 25-to 33-percent commission on contracts for the towns that ultimately hired the company. They memorialized the agreement in a contract between Carrino's Braveside Capital and SJC Consulting, a new company Ferriero had incorporated under the laws of Nevada. The contract, executed April 22, 2008, describes the relationship as [*3]  an "agreement . . . to provide governmental relations consulting services required in connection with marketing of a product known as C3 and any other related products or services."

To that end, Ferriero had drawn up a list of target Bergen County municipalities with corresponding names of Democrats in local office, and over the course of about a year, he "pushed hard for C3." Relevant to his convictions, he recommended C3 to local officials for the boroughs of Dumont, Cliffside Park, and Wood-Ridge, and for Saddle Brook and Teaneck townships.

Ferriero made these recommendations at BCDO-sponsored events, at local political fundraisers, at informal meetings, or simply over email. For example, Ferriero made inroads for C3 with Dumont's leadership at a 2007 lunch where he introduced Carrino to the borough's mayor, Matthew McHale. Ferriero recommended C3 to the mayor and followed up with an email asking, "How [are] we doing with C-3"? Mayor McHale ultimately brought C3 to the borough administrator, who in turn took the idea to the borough council. The borough council voted to license C3's software. Neither McHale, the borough administrator, nor the councilmembers knew Ferriero would make [*4]  money as a result.

In August 2007, Ferriero introduced Carrino to Teaneck councilman El-Natan Rudolph, whose name Ferriero had written next to Teaneck on the list of municipal sales targets. Rudolph put Carrino in touch with Teaneck's town manager, Helene Fall, who that very day emailed Carrino about C3's web services. In December, the Teaneck council unanimously voted for a resolution, introduced by Rudolph, authorizing the town to pay up to $24,000 to hire C3 for the year 2008.

In November 2007, Ferriero introduced Carrino to Saddle Brook Mayor Louis D'Arminio at a BCDO-sponsored gala. Ferriero recommended C3's products, and D'Arminio and Carrino exchanged business cards. The town council ultimately voted to contract with C3 without D'Arminio or the township council having been aware that Ferriero stood to benefit financially from the contract.

Sometime in 2008, Ferriero called Cliffside Park's borough attorney Chris Diktas to vouch for C3 after Carrino pitched the service to town leaders. Councilwoman Dana Spoto testified that, before the borough council voted on the matter, Diktas advised her that Ferriero had vouched for C3 and that "Joe wanted it." The Cliffside Park council voted [*5]  to contract with C3, resolving to authorize a $2,000-per-month contract, though neither Diktas nor Councilwoman Spoto were aware Ferriero stood to gain financially from the contract.

As Carrino's local contracts moved forward, Ferriero profited as well. Over the course of 2008, Carrino paid Ferriero's SJC Consulting at least $11,875 with checks that included those four town names in the checks' memo lines. On a check dated May 16, 2008, the memo line read "Q1/Q2 SB / Q1 Dumont." A check dated July 27, 2008, had a memo line that read "Q1: Teaneck Q2: Teaneck, Dumont + CP -- Q2 (2m)." And the memo line of a check dated September 18, 2008, read "Q3: Saddlebrook & Dumont."

Sometime that same year, Cliffside Park's mayor grew concerned about Ferriero's role in the town's contract with C3. He asked the borough's Chief Financial Officer, Frank Berardo, about the contract's details and directed Berardo to find out "who the owners of the company were." On July 9, 2008, Berardo called Carrino to inquire into the contract and "the owners of th[e] corporation." Carrino said he would respond by email, and roughly one hour later, emailed Berardo with a reply:

   Frank,

Per our conversation this morning, please [*6]  find attached copies of the State of New Jersey Business Certificate as well as C3's Standard Software as a Service Licensing Agreement.

Please call me if you have any questions. My cell is: [***.***.****]

By way of this email I am also cc'ing [Borough Attorney Chris] Diktas for his review.

Attached to the email were copies of the contract and C3's certification of formation, which listed only Carrino under "Members/Managers." There was no reference to Joseph Ferriero. Cliffside Park paid Carrino for services in June and July with a $4,000 check dated July 9.

Not all of the localities on Ferriero's list ultimately hired C3. The Borough of Wood-Ridge declined to contract with C3, but the borough's mayor Paul Sarlo still felt pressured to do so. Mayor Sarlo broke the news of Wood Ridge's decision to Ferriero and Carrino at a local political fundraiser. Ferriero and Carrino were upset and the ensuing conversation "got tense and . . . heated" until a Sarlo staffer intervened.

Ferriero pushed Democratic officials from Bergen County towns to contract with C3, and four of the localities on his list eventually did so. He was paid thousands of dollars based on those four contracts in checks listing [*7]  out which payments corresponded to which town. But none of the local Democratic officials to whom Ferriero recommended C3 were aware he stood to profit.

II.

A federal grand jury returned a five-count Indictment that charged Ferriero with violations of RICO, the Travel Act, and federal mail and wire fraud statutes. Count 1 charged Ferriero with violating RICO, 18 U.S.C. § 1962(c), alleging he conducted the Bergen County Democratic Organization through a pattern of racketeering activity. As proof of that pattern, the Indictment alleged seven predicate racketeering acts. Racketeering acts #1 and #2 were based on allegations of bribery, extortion, and honest services fraud unrelated to Ferriero's contract with C3.3 Predicate racketeering acts #3 through #7 alleged the payments made in exchange for Ferriero's recommendations to local Democratic officials in favor of contracting with C3 violated New Jersey's bribery statute. That provision prohibits "accept[ing] or agree[ing] to accept . . . [a]ny benefit as consideration for a decision, opinion, recommendation, vote or exercise of discretion of a public servant, party official or voter on any public issue or in any public election." N.J. Stat. Ann. § 2C:27-2 (emphasis added).

3   The jury found the government failed to prove racketeering acts #1 and #2. Racketeering act #1 alleged Ferriero orchestrated the appointment of Dennis Oury as Bergenfield, NJ, borough attorney. Ferriero allegedly committed bribery and honest services fraud when he gave Oury a financial interest in a Ferriero-owned grant-writing company called GGC in exchange for Oury's promise to arrange for Bergenfield to hire the firm. Racketeering act #2 alleged Ferriero committed bribery and extortion when he and others accepted a $35,000-per-month consulting fee in exchange for supporting a commercial development project in the Bergen County town of East Rutherford.

Count 2 charged Ferriero with conspiracy [*8]  to commit mail fraud, 18 U.S.C. § 1341, wire fraud, id. § 1343, and violations of the Travel Act, id. § 1952. Count 3 charged a substantive Travel Act violation based on an underlying violation of New Jersey's bribery statute. Counts 4 and 5 charged violations of mail and wire fraud, respectively, alleging Carrino and Ferriero defrauded Dumont (Count 4) and Cliffside Park (Count 5). Count 5's underlying fraud allegation stemmed from the Carrino email to Cliffside Park that failed to disclose Ferriero's financial interest in the borough's contract with C3.

Before trial, Ferriero moved to dismiss Count 1 (RICO) on the ground the Indictment failed to allege RICO's so-called "nexus" requirement, and moved to dismiss Counts 1-3, arguing New Jersey's bribery statute was unconstitutionally overbroad and vague. Both motions were denied.

The jury found Ferriero guilty on Count 1 (RICO), Count 3 (Travel Act), and Count 5 (wire fraud). As noted, the jury determined that, for Count 1's seven alleged racketeering acts, the government did not prove Ferriero committed racketeering acts #1 and #2, the alleged crimes unrelated to the C3 scheme. See supra, note 3. But the jury concluded Ferriero committed racketeering acts #3 through [*9]  #7--that is, the jury concluded Ferriero committed bribery by agreeing to recommend C3's services in exchange for a share of any resulting contracts' revenues. The jury acquitted Ferriero of Count 2 (conspiracy) and Count 4 (mail fraud).

Ferriero had moved for judgment of acquittal on all counts following the close of the government's case at trial, and he renewed that motion for Counts 1, 3, and 5, which the court denied. Ferriero was sentenced to three concurrent 35-month prison terms and ordered to forfeit the money equivalent of the proceeds he derived from the racketeering and wire fraud. Ferriero appealed.

III.

***

2.

Next, Ferriero challenges his RICO conviction by attacking the sufficiency of the evidence supporting 18 U.S.C. § 1962(c)'s "nexus" element. Section 1962(c) makes it unlawful [*17]  "to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity." Id. The nexus element requires proving a sufficiently close relationship between the defendant, his involvement in the enterprise's affairs, and the pattern of racketeering. See In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 371 (3d Cir. 2010). This includes the relationship between the defendant and the conduct of the enterprise's affairs, see Reves v. Ernst & Young, 507 U.S. 170, 179 (1993), and between those affairs and the predicate racketeering activity, see Ins. Brokerage, 618 F.3d at 371; see also United States v. Cauble, 706 F.2d 1322, 1331-33 (5th Cir. 1983) (discussing the relational permutations of the defendant, enterprise, and racketeering acts in § 1962(c)'s nexus element). The latter relationship, which Ferriero asserts was not proved here, proceeds from the requirement a defendant participate in the conduct of the enterprise's affairs "through" racketeering. In In re Insurance Brokerage Antitrust Litigation, we said that relationship exists if a defendant "participated in the conduct of the enterprise's affairs . . . through--that is 'by means of, by consequence of, by reason of, by the agency of, or by the instrumentality of'--a pattern of racketeering activity." 618 F.3d at 372 (quoting United States v. Brandao, 539 F.3d 44, 53 (1st Cir. 2008)).

Here, the District Court properly instructed the jury that "the government [*18]  must demonstrate that Joseph Ferriero conducted or participated in the conduct of the affairs of the enterprise by means of, by consequence of, by reason of, by agency of, or by the instrumentality of a pattern of racketeering activity." The relevant "enterprise" was the Bergen County Democratic Organization. Its "affairs" include any matters and concerns that constituted party business.8 And the jury concluded the C3 scheme amounted to a pattern of bribery. Therefore, the question is whether a rational juror could conclude the C3 bribery scheme was one means by which Ferriero participated in the conduct of party business.

8   See 1 Webster's Third New International Dictionary 35 (1961) (defining "affairs" as "commercial, professional, or public business"); Black's Law Dictionary 79 (4th ed. 1968) (defining "affairs" as "[a]n inclusive term, bringing within its scope and meaning anything that a person may do").

The record contains more than enough evidence for a rational juror to conclude that it was. A rational juror could conclude it was party business when Ferriero recommended vendors to party members holding local office. As the District Court observed, multiple witnesses testified Ferriero regularly recommended vendors to local Democratic officials.9 In fact, the BCDO hosted an annual gala at the municipal convention where local officials came to find vendors and providers of professional services. And, [*19]  as party chair, Ferriero's recommendations carried great weight. A rational juror could conclude that when Ferriero made certain recommendations to local Democratic officials (regarding vendors or otherwise), it was party business by virtue of the considerable influence he held over those officials' reelection and career prospects. Indeed, Ferriero's list of target officials and towns in Bergen County was almost entirely composed of Democratic officials and towns controlled by Democrats. A rational juror could conclude Ferriero conducted party business and the C3 bribery scheme in tandem when he carried out the scheme by recommending C3 to local Democratic officials and using his influence to urge that they award C3 contracts. A rational juror could therefore conclude the pattern of bribery was one means by which Ferriero participated in the conduct of the BCDO's affairs.

9   For example, Mayor Sarlo (Wood-Ridge) testified Ferriero regularly advised him about vendors. Mayor McHale (Dumont) testified Ferriero would advise him on hiring professional service providers and make particular recommendations when the town had particular needs. Ferriero recommended C3 to Mayor D'Arminio (Saddle Brook) at the same municipal conference where, several years earlier, Ferriero had recommended the engineering company Saddle Brook hired when D'Arminio first assumed the office of mayor.

Ferriero asserts a rational juror could not reach that conclusion, and offers two arguments. We find neither persuasive. First, he argues the evidence was insufficient because it did not show he recommended C3 while performing an official BCDO duty or while acting in his capacity as party chairman. But a rational juror [*20]  could have found that the BCDO's affairs went beyond the chair's official duties. As noted, the BCDO's affairs included those matters and concerns that comprised party business, and a rational juror could have concluded that party business included recommendations to party members in local office, in particular recommendations about hiring vendors. Ferriero need not have carried out the bribery scheme in an official capacity for a rational juror to conclude it was a means by which he participated in the conduct of the party's affairs.

Ferriero also argues that participating in the conduct of an enterprise's affairs by means of racketeering categorically excludes cases in which a defendant's association with the enterprise facilitates his predicate acts. Ferriero affirmatively agreed to the nexus instruction charged to the jury and takes no issue with it on appeal.10 He nonetheless asserts that, because there was evidence he used his BCDO position to facilitate his bribery scheme, the record lacks evidence that bribery was a means by which he participated in the conduct of the BCDO's affairs. As noted, there was more than enough evidence for a rational juror to conclude bribery was a means [*21]  by which Ferriero participated in the conduct of the BCDO's affairs. And in any event, his understanding of the nexus element is incorrect.

10   The government suggests Ferriero's nexus argument necessarily embeds a jury-instruction challenge into a sufficiency-of-the-evidence attack, and urges us to reject his argument as invited error or alternatively to review it for plain error, because Ferriero's attorney played an affirmative role in formulating the instruction. Appellee Br. at 33. If a defendant specifically requested an instruction, then he invited any alleged error in it and waived the right to argue it was flawed on appeal. See United States v. Andrews, 681 F.3d 509, 517 n.4 (3d Cir. 2012). But if he acquiesced to an instruction, then he forfeited (rather than waived) the argument and we may correct the error if it was "plain error . . . affecting substantial rights." Fed. R. Crim. P. 52(b); see United States v. Lawrence, 662 F.3d 551, 557 (D.C. Cir. 2011) (reviewing for plain error where a defendant "acquiesced [to a jury instruction] . . . but he did not invite it" (citation and quotation marks omitted)); see also United States v. Olano, 507 U.S. 725, 733 (1993) (distinguishing waiver from forfeiture). Assuming plain error review is appropriate, there was no error in the instruction, much less plain error, because Ferriero's nexus interpretation is incorrect.

Ferriero's flawed understanding stems from his misreading of a footnote in Insurance Brokerage that said it would "invert[] the relationship specified by § 1962(c)," 618 F.3d at 372 n.69, for the nexus inquiry to ask whether "the defendant was able to commit the predicate acts by means of . . . his association with the enterprise," id. (quoting Brandao, 539 F.3d at 53). Ferriero mistakenly reads our explanation to mean that in those circumstances--that is, when a defendant is able to commit racketeering by means of his association with an enterprise--it can never satisfy the required relationship between racketeering and the enterprise's affairs.

That reading puts more weight on the word "invert" than it can bear, and it ignores Insurance Brokerage's relevant holding. The Insurance Brokerage test asks whether racketeering was a means of conducting the enterprise's affairs, but it does not foreclose satisfying the nexus when a defendant's position also enabled or facilitated the racketeering. In fact, those two situations may well overlap. For example, a crime boss can "[be] able to [*22]  commit [murder] by means of . . . his association with [his crime syndicate]," see Brandao, 539 F.3d at 53, and simultaneously "participate[] in the conduct of [his crime syndicate's] affairs . . . by means of . . . a pattern of [murder]," see Ins. Brokerage, 618 F.3d at 372. We did not, in a footnote, transform § 1962(c)'s application by ruling out an entire category of cases that otherwise fall comfortably within the statute. The statute examines the relationship between the racketeering and the enterprise's affairs. But the relationship between the racketeering and the defendant's association with the enterprise may be relevant--and indeed sufficient--to satisfy the required relationship between the racketeering and the enterprise's affairs.

That much is clear from Insurance Brokerage's relevant holding. There, in a case that evaluated a civil RICO complaint at the pleading stage,11 we concluded that § 1962(c)'s nexus was not satisfied by allegations defendants simply used an opportunity provided by a legitimate enterprise--there, an industry group--to plot, discuss, or otherwise facilitate predicate acts. Id. at 380-81. But we said that if defendants "actually utilized [the industry group's] institutional machinery to formulate strategy and issue public statements in [*23]  aid of their [alleged racketeering acts]," id. at 381, it would plausibly imply the pattern of racketeering was "one way they operated the enterprise," id. at 381-82. The allegations we determined could satisfy pleading plaintiffs' nexus element contradict Ferriero's nexus interpretation.

11   Insurance Brokerage involved civil RICO claims, and though the burden of proof differs in civil and criminal RICO actions, the requisite nexus showing does not. See United States v. Parise, 159 F.3d 790, 796 & n.5 (3d Cir. 1998).

Ferriero's interpretation would also contradict familiar RICO examples and prior Third Circuit cases in which a public official's position facilitated predicate racketeering acts.12 Ferriero's reading would likewise run counter to the Supreme Court's explanation that "RICO . . . protects the public from those who would unlawfully use an 'enterprise' (whether legitimate or illegitimate) as a 'vehicle' through which 'unlawful . . . activity is committed.'" Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 164 (2001) (quoting Nat'l Org. for Women, Inc. v. Scheidler, 510 U.S. 249, 259 (1994)) (second alteration in original). Several other circuit opinions apply standards that satisfy § 1962(c)'s nexus if the enterprise facilitates racketeering.13 And Ferriero's reading makes little sense given precedent elsewhere that predicate acts need not benefit the enterprise.14

12   See, e.g., United States v. Gillock, 445 U.S. 360, 362 (1980) (state senator's office); United States v. McDade, 28 F.3d 283, 287 (3d Cir. 1994) (U.S. Congressman's office, office employees, and committee staff); United States v. Woods, 915 F.2d 854, 855-56 (3d Cir. 1990) (City Council of Pittsburgh); United States v. Bacheler, 611 F.2d 443, 450 (3d Cir.1979) (Philadelphia Traffic Court); United States v. Frumento, 563 F.2d 1083, 1089-90 (3d Cir. 1977) (Pennsylvania Bureau of Cigarette and Beverage Taxes).

13   See, e.g., United States v. Vernace, 811 F.3d 609, 615 (2d Cir. 2016), cert. denied, 137 S. Ct. 691 (2017) ("[P]redicate acts must be . . . related to the enterprise . . . [such] that the defendant was enabled to commit the offense solely because of his position in the enterprise or his involvement in or control over the enterprise's affairs, or because the offense related to the activities of the enterprise." (citation and quotation marks omitted)); United States v. Ramirez-Rivera, 800 F.3d 1, 21 (1st Cir. 2015), cert. denied, 136 S. Ct. 908 (2016) ("It suffices that the defendant was able to commit the predicate acts by means of, by consequence of, by reason of, by the agency of, or by the instrumentality of his association with the enterprise." (citation and quotation marks omitted)); Akin v. Q-L Investments, Inc., 959 F.2d 521, 533-34 (5th Cir. 1992) ("[The] nexus is established by proof that the defendant has in fact committed the racketeering acts alleged, that the defendant's association with the enterprise facilitated the commission of the acts, and that the acts had some effect on the enterprise."); United States v. Pieper, 854 F.2d 1020, 1026 (7th Cir. 1988) ("To establish the nexus required by § 1962(c) between the racketeering activity and the affairs of the enterprise, . . . the government must show that: (1) the defendant committed the racketeering acts, (2) the defendant's position in or relation with the enterprise facilitated commission of the acts, and (3) the acts had 'some effect' on the enterprise."); see also United States v. Grubb, 11 F.3d 426, 439-40 (4th Cir. 1993) (stating it satisfied the nexus element when a judge "physically used his judicial office . . . [and] the prestige and power of the office itself" to commit racketeering).

14   See, e.g., United States v. Godwin, 765 F.3d 1306, 1320-21 (11th Cir. 2014); United States v. Bruno, 383 F.3d 65, 84 (2d Cir. 2004); Grubb, 11 F.3d at 439; United States v. Welch, 656 F.2d 1039, 1061-62 (5th Cir. Unit A 1981).

We reiterate Insurance Brokerage's statement that racketeering must be one means by which the defendant participates [*24]  in the conduct of the enterprise's affairs. As noted, we believe there was sufficient evidence for a rational juror to conclude Ferriero participated in the conduct of the BCDO's affairs by means of a pattern of bribery. We will affirm Ferriero's RICO conviction on grounds that the evidence was sufficient to support the conviction's nexus element.

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