Opinion
02 Crim. 1066 (HB)
May 13, 2002
OPINION AND ORDER
John Fitzsimmons and George Conforti (collectively "Defendants") were convicted after a trial of involvement in an illegal gambling business, in violation of 18 U.S.C. § 1955. They moved for acquittal, pursuant Fed.R.Crim.P. 29, or for a new trial, pursuant to Fed.R.Crim.P. 33. The Court denied these motions in an Opinion and Order on March 25, 2003, and Defendants appealed this decision to the Second Circuit. Presently before this Court is Defendants' motion for release on bail pending a decision on their appeal. The Court heard oral arguments on May 2, 2003. For the following reasons, Defendants' motion is denied.
I. DISCUSSION
Defendants contend that they meet the requirements for release on bail pending appeal because the prosecution failed to prove that the gambling was part of a business. Specifically, they contend there was no proof that Defendants had conducted a business — i.e., there was no proof of profit or the profit motive of the enterprise, such as through vigorish or lay-off bets. Defendants claim that this is an element of the offense and one likely to result in the reversal of their convictions or a new trial, one of the considerations for bail pending appeal.
The defendants formulate their theory variously throughout the motion for bail as:
• "[T]he defense contends that the Government has failed to set forth any essential proof that any gambling operation was conducted as a business. The defense maintains that proof showing a built in financial incentive or profit margin is an essential element for conviction under 18 U.S.C. § 1955." Memorandum on Behalf of Defendant John Fitzsimmons for Release on Bail Pending Appeal [hereinafter "Bail Memo"] 1.
• "[T]he Government failed to present proof of the overall profit motive of this alleged illegal gambling enterprise." Id. 2.
• "[T]he Government failed to prove an essential element of operating a gambling enterprise, by not offering any evidence showing that the Defendants conducted the enterprise in a way designed to ensure profitability." Id.
• "[T]he main issue argued by the defense, the failure of proof of the gambling business, is a novel issue." Id. 4 (emphasis in original).
• "The entire thrust of the defense arguments on this points is that some proof that wagering activity is conducted as part of a business is necessary to sustain a conviction." Id.
Defendants advanced this same argument in their motion for acquittal or a new trial.
In general, a defendant convicted of a crime with a term of imprisonment is to be detained, notwithstanding that he or she appeals the conviction. See 18 U.S.C. § 3143(b)(1); United States v. Randell, 761 F.2d 122, 124 (2d Cir. 1985). However, this presumption against bail pending an appeal can be overcome "(1) by clear and convincing evidence that the person is not likely to flee or pose a danger to the safety or any other person or the community if released . . . and (2) that the appeal is not for purpose of delay and raises a substantial question of law or fact likely to result in reversal or an order for a new trial." Randell, 761 F.2d at 124; 18 U.S.C. § 3143(b)(1). The government does not contest the first of these elements; it concedes that the Defendants do not pose a danger to others or to the community. However, the government joins the battle on the issue of whether the issue on appeal raises a substantial question of law or fact likely to result in reversal.
Congress has amended this provision since the Randell decision, but there is no change of substance implicated in the present matter.
In Randell, the Second Circuit construed the meaning of "substantial question." The court there concluded that "substantial" must mean something other than "likely to result in reversal or a new trial" lest it be rendered superfluous; instead, the term "goes to the issue's significance with respect to the ultimate disposition of the appeal." United States v. Tunick, 2001 U.S. Dist. Lexis 2911, at *4 (S.D.N.Y. Mar. 22, 2001); see also Randell, 761 F.2d at 124 (quoting United States v. Miller, 753 F.2d 19, 23 (3rd Cir. 1985)). After reviewing decisions from other circuits, the court arrived at the following formulation: "[O]ne of more substance than would be necessary to a finding that it was not frivolous. It is a `close' question or one that very well could be decided the other way." Randell, 761 F.2d at 125 (quoting United States v. Giancola, 754 F.2d 898, 901 (11th Cir. 1985)).
The court noted Giancola's formulation and the formulations from two other circuits did not "differ significantly from each other." Randell, 761 F.2d at 125 (citing United States v. Handy, 753 F.2d 1487, 1490 (9th Cir. 1985) ("fairly debatable"); and United States v. Miller, 753 F.2d 19, 23 (3rd Cir. 1985) ("[O]ne which is either novel, which has not been decided by controlling precedent, or which is fairly doubtful.")).
It should be noted that the federal gambling statute, 18 U.S.C. § 1955, does not explicitly impose a requirement of proof of vigorish, nor does the New York statute which the federal statute incorporates. Nor do these statutes define the word "business." Nevertheless, Defendants contend that "Courts have traditionally required proof of the vigorish as proof which demonstrates that the defendants were something other than gamblers." See Reply Memorandum of John Fitzsimmons on Post-Trial Motions [hereinafter "Post Trial Reply"] 5 (citing United States v. Reeder, 614 F.2d 1179, 1183 (8th Cir. 1980)). Defendants further argue that "the Government has not cited any case law that proofs of a profit margin are not essential to sustain a 1955 conviction." See Bail Memo 3 (emphasis in original). Each of these arguments is either wrong or unpersuasive.
One of the elements of§ 1955 is that the gambling business "violate the law of a state." See 18 U.S.C. § 1955.
Defendants also suggest that this Court's statement in its prior decision that "I read these cases differently" demonstrates the existence of a substantial or novel issue. Defendants misconstrue my attempt to tactfully say that their interpretation of these cases was without merit.
Contrary to Defendants' assertion, courts do not generally require proof of vigorish to show illegal gambling. While it is true that Defendants' cases describe the mechanism of bookmaking, including how bookmakers ensure profits by charging vigorish and, when necessary, hedging risk by placing lay-off bets with other bookmakers, none of them imply that proof of vigorish is essential to a gambling conviction, let alone directly say as much. Indeed, the absence of case law on the necessity of a profit margin or profit mechanism supports the conclusion that no such proof is necessary. If proof of a profit motive or profit mechanism were an essential element to prove a gambling business, there would likely be decisions concluding that without such proof the government fails as a matter of law to meet its burden.
These cases are United States v. Grezo, 566 F.2d 854 (2d Cir. 1977); United States v. Reeder, 614 F.2d 1179 (8th Cir. 1980); United States v. Greco, 619 F.2d 635 (7th Cir. 1980); United States v. Avarello, 592 F.2d 1339 (5th Cir. 1979). Defendants state that "The significance of Greco, and all of the various other cases cited by the defense in support of this argument, is that there must be proof that the wagering activity was conducted as part of a financial enterprise conducting its business with an overall intention and direction to turn a profit." Bail Memo 4-5. However as discussed briefly below and in the Opinion denying Defendant's motion for acquittal, these cases do not support this proposition.
Defendants make much of the fact that there was no evidence of lay-off bets. For example, they state that "even proof of lay-off bets, which is strong evidence that one is wagering for the purpose of conducting a gambling business for profit, will not sustain a conviction unless there is clear-cut evidence that the wager is a lay-off wager and not a mere personal bet." Bail Memo 5. Also, the cases relied on by Defendants involve the issue of whether a bookmaker is betting as an individual or making a lay-off bet. I believe that this argument is entirely without merit. First, while a lay-off bettor is necessarily a bookmaker, a bookmaker is not necessarily a lay-off bettor (at least in theory). As the Eight Circuit stated: "Of course the existence of lay off betting is not necessary in determining that one gambling business exists for the purposes of section 1955." Second, most of the cases that defendants rely on with respect to proof of lay-off betting pertain to a specific issue that is not implicated by the facts of this case. Specifically, cases such as Greco, Grezo, Avarello, and Reeder involve the common situation where there is some question whether there are five or more people involved in the gambling enterprise, an element that is required by § 1955. The question often arises in these cases whether multiple bookmakers are sufficiently interrelated to consider them a single enterprise for purposes of § 1955. At best, these cases are tangential to the issue of whether there is any special meaning to and proof requirement for "business" under § 1955. However, these cases do not stand for the proposition that Defendants urge, namely that proof of profit motive or profit mechanism is an essential element under § 1955.
Earlier, Defendants state:
The entire thrust of the defense arguments on this points is that some proof that wagering activity is conducted as part of a business is necessary to sustain a conviction. "Lay-off' betting is evidence proving that individuals were wagering as part of conducting a business enterprise involving illegal gambling. `Laying-off' bets is one way in which a bookmaker balances a book so that losses on one side of any game will not adversely affect the gambling business." (emphasis in original)
Bail Memo 4.
United States v. Reeder, 614 F.2d 1179, 1183 (8th Cir. 1980). This is a case that defendants cited for the bold proposition that "Courts have traditionally required proof of the vigorish as proof which demonstrates that the defendants were something other than gamblers." I submit that the quote to which the defendants refer does not support the proposition that courts generally require proof of vigorish, but rather merely describes the mechanism by which they operate profitably. The passage states that the defendant "clearly was a bookmaker" because, among other things, he charged vigorish.
Although not so explicit, the following discussion from a 1977 Second Circuit decision implies as much:
Bookmakers use two principal devices to insure that bets on both sides of an event will be relatively balanced. First, they adopt a betting "line". . . . Second, a bookmaker can equalize the bets on both sides of an event by `laying off' excess bets with another bettor or bookmaker who, in effect, reinsures against the danger of excessive loss.United States v. Grezo, 566 F.2d 854, 857 (2d Cir. 1977) (emphasis added). Lay-off bets are an optional, not a mandatory, stratagem for a bookmaker to hedge risks and thus to protect profits.
Both federal and state law make clear that mere bettors are outside the scope of criminality, and defendants contend that absent proof of profit there is nothing to indicate that they were anything more than mere bettors. However, this position is entirely at odds with the government's theory and evidence that Fitzsimmons and Conforti were the ringleaders — they employed Lazzaro as a runner who solicited business and collected bets and paid off bets, they ran a substantial operation which included several toll-free numbers and rented an offshore hotel room and several heavies to collect delinquencies. I submit that this is solid evidence that they not only were more than mere bettors but that their enterprise was in fact a business. In short, this case clearly illustrates that proof that the gambling enterprise was a "business" can take many forms. I fail to see that the statute, case law, or logic requires more.
II. CONCLUSION
The Defendants have not met the burden of showing a substantial question of law likely to result in reversal or a new trial. Accordingly, their motion for bail pending appeal is denied, and they are to surrender per the order of the Court.