State v. SchlosserState v. Schlosser
Ohio‘s Racketeer Influenced and Corrupt Organizations statute,
{¶ 1} In 1991, John D. Schlosser (a.k.a. Michael Schlosser), appellee, opened a telemarketing operation. Appellee placed ads in the local newspaper seeking employees, and interviewed and hired applicants. Appellee purported to represent two catalogue sales companies that sold credit card packages, Family Consumer Union (“FCU“) and Universal American Credit Card Company (“UACC“).
{¶ 2} The appellee provided telemarketers with lists of names and phone numbers of individuals who had recently been denied a credit card. Telemarketers working for the appellee used telephone scripts originally sent by FCU or UACC, but modified to delete any mention of the catalogue sales and to speak only about the offer of either a Visa or MasterCard. Telemarketers would call individuals outside Ohio from the list and inform them that they were now eligible for a credit card. Potential customers were offered an unsecured Visa or MasterCard with a $5,000 limit, and were also offered either an FCU or UACC credit card. Potential customers were informed that the credit card would cost them either $149.50 or
{¶ 3} A telemarketer would request the potential customer‘s name, address, bank, check number, and “RTN” number from a personal check. After that exchange, customers were transferred to a “verifier,” who would confirm the information gathered by the original telemarketer and record the customer‘s voice on tape for the electronic debit of his or her checking account.
{¶ 4} The appellee instructed his telemarketers to tell customers that the company was located in Virginia Beach, although it was actually located in Montgomery County, Ohio. The appellee told employees that they were not set up to take incoming phone calls because someone might track where they were and call and complain. Telemarketers also told customers that the company was a fully licensed and bonded credit services organization, and the company was federally regulated. However, throughout the course of these transactions, the appellee was not registered with the Consumer Finance Division of the Ohio Department of Commerce.
{¶ 5} After the debit of the customer‘s bank account, a check processing company would take a percentage and then send the remainder of the $149.50 or $179 to accounts controlled by the appellee. A few of the customers received a catalogue from the company they thought they were doing business with. However, none of the customers in this case received a Visa or MasterCard.
{¶ 6} The appellee was involved in the day-to-day operations of the business. He owned the building out of which he operated the telemarketing company. Appellee had reserved approximately one hundred telephone numbers for the company, which were registered in his name. Other utilities were registered
{¶ 7} The appellee was convicted of eleven counts of failure to register as a credit services organization in violation of
{¶ 8} Prior to jury instructions, the appellee argued that because the RICO statute specifies no degree of culpability, the trial court should instruct the jury on recklessness as the applicable culpable mental state. The trial court instructed the jury, however, that the RICO statute imposes strict liability and thus no culpable mental state was required.
{¶ 9} The court of appeals reversed the RICO conviction, finding that the statute required a finding of recklessness. Finding its judgment to be in conflict with the Court of Appeals for Preble County in State v. Haddix (1994), 93 Ohio App.3d 470, 638 N.E.2d 1096, and with the Court of Appeals for Franklin County in State v. Rice (1995), 103 Ohio App.3d 388, 659 N.E.2d 826, the court of appeals entered an order certifying a conflict. This cause is now before this court upon our determination that a conflict exists. 76 Ohio St.3d 1475, 669 N.E.2d 857.
{¶ 10} The issue in this appeal involves the mental state required for a conviction under Ohio‘s Racketeer Influenced and Corrupt Organizations (“RICO“) statute. In particular, the issue certified to this court by the Court of Appeals for Montgomery County is, “Is any culpable mental state required for a violation of
{¶ 11} Formerly, legislative silence as to mens rea in a statute defining an offense was interpreted as an indication of the purpose to impose strict liability. See, e.g., State v. Lisbon Sales Book Co. (1964), 176 Ohio St. 482, 27 O.O.2d 443, 200 N.E.2d 590, paragraph two of the syllabus. However,
{¶ 12}
{¶ 14} In general,
“The Congress finds that (1) organized crime in the United States is a highly sophisticated, diversified, and widespread activity that annually drains billions of dollars from America‘s economy by unlawful conduct and the illegal use of force, fraud, and corruption; (2) organized crime derives a major portion of its power through money obtained from such illegal endeavors as syndicated gambling, loan sharking, the theft and fencing of property, the importation and distribution of narcotics and other dangerous drugs, and other forms of social exploitation; (3) this money and power are increasingly used to infiltrate and corrupt legitimate business and labor unions and to subvert and corrupt our democratic processes; (4) organized crime activities in the United States weaken the stability of the Nation‘s economic system, harm innocent investors and competing organizations, interfere with free competition, seriously burden interstate and foreign commerce, threaten the domestic security, and undermine the general welfare of the Nation and its citizens; and (5) organized crime continues to grow because of defects in the evidence-gathering process of the law inhibiting the development of the legally
admissible evidence necessary to bring criminal and other sanctions or remedies to bear on the unlawful activities of those engaged in organized crime and because the sanctions and remedies available to the Government are unnecessarily limited in scope and impact. “It is the purpose of this Act to seek the eradication of organized crime in the United States by strengthening the legal tools in the evidence-gathering process, by establishing new penal prohibitions, and by providing enhanced sanctions and new remedies to deal with the unlawful activities of those engaged in organized crime.” Organized Crime Control Act of 1970, Statement of Findings and Purpose, 84 Stat. 922, reprinted in 1970 U.S.Code Cong. & Adm. News at 1073.
{¶ 15} Interpreting the mens rea requirement of the federal RICO statute, United States v. Scotto (C.A.2, 1980), 641 F.2d 47, 55-56, held that the RICO statute does not require any specific intent to engage in an unlawful pattern of racketeering. The United States Supreme Court has also held that it is clearly within Congressional power to create a strict liability offense which dispenses with any element of intent. United States v. Dotterweich (1943), 320 U.S. 277, 64 S.Ct. 134, 88 L.Ed. 48. Further, the failure to require mens rea, standing alone, does not violate due process. United States v. Greenbaum (C.A.3, 1943), 138 F.2d 437.
{¶ 16} Looking to Ohio‘s statutory history, the Ohio General Assembly unanimously passed the Ohio RICO Act in 1985. 141 Appendices and General Index to the Journals of the Senate and House of Representatives (1985) 236. There is little legislative history regarding the enactment. Senator Eugene Watts, the statute‘s Senate sponsor, described the Ohio RICO Act as “the toughest and most comprehensive [RICO] Act in the nation” and “state-of-the-art legislation.” 57 Ohio Report No. 117, Gongwer News Serv. (June 18, 1985) 3. These comments indicate an intent to impose the greatest level of accountability, i.e., strict liability.
{¶ 17} Offenses under RICO,
{¶ 18} Therefore, we agree with the Haddix court that the legislature intended strict liability under
{¶ 19} However, merely committing successive or related crimes is not sufficient to rise to the level of a RICO violation. Both the federal and the Ohio RICO statutes require an “enterprise.” The federal RICO statute states that an enterprise “includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.”
{¶ 20} The federal statute requires a “pattern of racketeering activity,” defined as requiring “at least two acts of racketeering activity.”
{¶ 21} Thus, neither statute intended to make a situation such as three robberies committed by the same person a RICO violation. Instead, while slightly different in definition, both statutes attempt to prohibit an enterprise. “To obtain convictions, [the state] had to prove that each defendant was voluntarily connected to that pattern and performed at least two acts in furtherance of it.” United States v. Palmeri (C.A.3, 1980), 630 F.2d 192, 203.
{¶ 22} In this case, the appellee was found guilty of one count of violating
{¶ 23} For
{¶ 24} The RICO statute was designed to impose cumulative liability for the criminal enterprise. In this case, the appellee committed systematic acts of fraud and corruption over the course of four years using a large “enterprise” with a complex setup. During this period of time, the appellee was not registered with the state of Ohio as a credit services organization. The appellee‘s telemarketing scheme preyed on potential customers who had recently been denied a credit card.
{¶ 25} Therefore, we hold that
Judgment reversed.
MOYER, C.J., DOUGLAS, RESNICK, F.E. SWEENEY, PFEIFER and COOK, JJ., concur.