government breached plea agreement

Double Jeopardy Clause and Issue Preclusion: Basic Conspiracy versus RICO Conspiracy

Double Jeopardy Clause and Issue Preclusion: Basic Conspiracy versus RICO Conspiracy

United States v. Zemlyansky, 908 F.3d 1 (2d Cir. 2018)

United States Court of Appeals for the Second Circuit

Decided: November 5th, 2018

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ISSUE

Whether the issue-preclusion component of the Double Jeopardy Clause prohibits the Government from predicating a Racketeer Influenced and Corrupt Organization Act (RICO) conspiracy charge based on acts from a previous charge on which the defendant was acquitted.    

HOLDING

The Courts held that the issue preclusion component of the Double Jeopardy Clause does not prohibit the Government from using previously acquitted convictions to prove a RICO conspiracy in a second trial when the evidence acquitted was used to prove different, non-precluded conduct.  The Fifth Amendment’s issue-preclusion component of the Double Jeopardy Clause “precludes prosecution of an offense when an issue of ultimate fact or an element essential to conviction has necessarily been determined in favor of the defendant by a valid and final judgment in a prior proceeding. United States v. Cala, 521 F.2d 605, 607–08.  Thus, in order to restrict the use of the earlier acquittals, an essential element of the RICO conspiracy had to have been decided in the defendant’s favor.

The burden is on the defendant in the second case to establish that the issue he seeks to foreclose from litigation was necessarily deiced in his favor by the prior verdict.        

FACTS OF THE CASE

Mikhail Zemlyansky started an investment firm called “Lyons, Ward & Associates” in 2007 which claimed to invest in insurance-settlements he received nearly seven million dollars from investors by guaranteeing an 18% yearly return.  Rather than invest, Zemlyansky embezzled and laundered the money the money.  Zemlyansky paid out small interest payments and issued false account statements in order to carry out the scheme.  Using a model similar to

“Lyons Ward,”  Zemlyansky started “Rockford Funding Group LLP” in 2009

where he garnered about ten million dollars in investments. 

Proceeds were wired to and from shell companies in the United States and overseas. 

Zemlyansky also operated an illegal, high-stakes poker ring. 

Zemlyansky and his co-defender Danilovich – who were not medical professionals – owned and controlled over ten medical profession corporations (P.C.s) that fraudulently billed for millions of dollars under New York’s No-Fault comprehensive Motor  Vehicle Reparations Act, N.Y. Ins. Law § 5101 between the years 2009 and 2012.  Both defendants profited from insurance payments, fee-sharing arrangements and kickbacks for referrals.  Much like the aforementioned schemes, profits were, in part, wired to and from shell companies overseas.

In the first indictment, Zemlyansky, Danilovich and others were charged with nine counts relating to the No-Fault Insurance Organization by a federal grand jury.  The first indictment did not include allegations relating to Lyons Ward or Rockford Group securities fraud scheme, or the Illegal Gambling Ring.  One count of the first indictment charged Zemlyansky with conspiring to participate in the affairs of a RICO enterprise.  The racketeering enterprise was the No-Fault Insurance Organization, and the pattern of racketeering consisted of mail fraud and money laundering.  The first indictment also charged Zemlyansky with eight counts that mirrored the RICO conspiracy’s predicate offenses: On November 13, 2013, the jury acquitted Zemlyansky of the non-RICO conspiracy and substantive counts.  Since the jury was unable to reach a verdict in regard to the RICO conspiracy count, Count One, the District Court declared a mistrial on that count.

After the mistrial, Zemlyansky was indicted again.  The second indictment charged Zemlyansky with conspiring to violate RICO. Like the racketeering charges in the first indictment, the charges encompassed conduct relating to the No‐Fault Insurance Organization, to Lyons Ward, the Rockford Group and the Illegal Gambling Ring.  The second indictment also charged Zemlyansky with five substantive counts relating to Lyons Ward.  

Zemlyansky moved to dismiss Count One and to prevent the Government from offering evidence of his involvement in the No‐Fault Insurance Organization to prove that count. He argued under the issue‐preclusion component of the Double Jeopardy Clause that the Government could not offer such evidence because he had been acquitted of that in the previous trial.  The District Court ultimately granted the motion in part, prohibiting the Government from arguing Zemlyansky was guilty of insurance fraud, while allowing evidence of Mr. Zemlyansky’s involvement in the alleged no‐fault scheme insofar as such conduct went to his alleged guilt on the RICO conspiracy charge.

After a month-long trial, Zemlyansky was convicted of all six counts.  The jury’s decision that Zemlyansky was liable for all five of the RICO conspiracy count’s predicate acts was reflected in the special verdict form.   

COURT’S ANALYSIS

The Courts held that the issue-preclusion component of the Double Jeopardy Clause does not prohibit the Government from using acts on which defendant was previously acquitted to prove a RICO conspiracy in a second trial when the evidence acquitted was used to prove different, non-precluded conduct.  The Double Jeopardy Clause was created to protect individuals from being “twice put in jeopardy of life or limb” “for the same offense.”  U.S. Const. Amend. V. In layman terms, after a defendant is tried and found not guilty of a crime, the defendant cannot be tried or punished for the same offense a second time.

The issue-preclusion component of the Double Jeopardy Clause “precludes prosecution of an offense when an issue of ultimate fact or an element essential to conviction has necessarily been determined in favor of the defendant.   When arguing issue-preclusion in a second case, the burden falls on the defendant to establish that the issue he seeks to foreclose from litigation… was necessarily deemed in his favor by the prior verdict.. 

The Court disagreed with Zemlyansky’s argument because none of the counts on which he was acquitted in the first trial were necessary components of the RICO conspiracy in the second trial.  The evidence used in the second trial proved different, non-precluded conduct and the Government could reuse this evidence to prove Zemlyansky’s guilt in the second trial.

The distinction between basic conspiracies and RICO conspiracy charges makes it clear that the acquittal of basic conspiracies do not compel the conclusion that a jury decided an essential element of a RICO conspiracy in Zemlyansky’s favor.  Contrary to the former, a RICO conspiracy does not require that a defendant knowingly agreed to commit a specific crime.  Rather, it is enough that the defendant knowingly agreed to facilitate “the general criminal objective of a jointly undertaken racketeering scheme,” Yannotti, 541 F.3d at 122 and is the extent of the burden on the government in this respect.  The Court, therefore, faced the question of whether a “rational jury” could have acquitted Zemlyansky in the first trial for similar, non-preclusive reasons.

Upon analyzing the record from the first trial, the Courts determined that a rational jury could have based its acquittal of basic conspiracy on reasons non-essential to proving the later RICO conspiracy.  For one, the first jury could have found a conspiracy by parties other than Zemlyansky to commit insurance-related fraud and agreed to acquit him on that count because he did not “knowingly and intentionally agree to facilitate the particular conspiracy.”  They could have even found that Zemlyansky made a great effort not to agree to facilitate any specific “basic” conspiracies.  Therefore, the second jury was not prohibited from using this element along with others to prove a RICO conspiracy.