People v. Western Express International, Inc.

Andrias, J.P.

(dissenting). The 173-count indictment charges multiple defendants with enterprise corruption in violation of Penal Law § 460.20 (the Organized Crime Control Act [OCCA]) and other crimes which are not at issue in this appeal.* The enterprise corruption charge is based on allegations that defendants comprised an international cybercrime group in which defendant-respondent Western Express, with the knowledge and participation of its president, defendant-respondent Vassilenko, facilitated the Internet sale of stolen credit card data in anonymous transactions between defendant vendors and defendant buyers, including respondents Latta, Perez, Roach and Washington, by advertising on Web sites, buying and selling unregulated digital currencies and directing wire transfers to shell accounts.

Finding that the proof presented to the grand jury would establish that defendants were associated with a criminal enterprise that had “an ascertainable structure distinct from a pattern of criminal activity,” as required by Penal Law § 460.10 (3), the majority would reverse Supreme Court’s dismissal of the enterprise corruption charge against each defendant-respondent. Because I believe that defendants’ combined activities, undertaken for their individual benefit, without any chain of command, profit sharing, or continuity of criminal purpose beyond the scope of the criminal incidents alleged in the indictment, are insufficient to show that they engaged in the type of criminal enterprise covered by the statute, I dissent.

In 1986, the Legislature enacted the OCCA for “the purpose of creating the separate crime [of enterprise corruption] ... to address the particular and cumulative harm posed by persons who band together in complex criminal organizations” (see People v Besser, 96 NY2d 136, 142 [2001]). The statute “focuses upon criminal enterprises because their sophistication and organization make them more effective at their criminal purposes and because their structure and insulation protect their leadership from detection and prosecution” (Penal Law § 460.00 [“Legislative findings”]).

*16“A person is guilty of enterprise corruption when, having knowledge of the existence of a criminal enterprise and the nature of its activities, and being employed by or associated with such enterprise, he:
“(a) intentionally conducts or participates in the affairs of an enterprise by participating in a pattern of criminal activity” (Penal Law § 460.20 [1] [a]).

A “pattern of criminal activity” is defined as “conduct engaged in by persons charged in an enterprise corruption count constituting three or more criminal acts” committed within a specified time frame (Penal Law § 460.10 [4] [a], [b]). A “criminal act” includes the felonies specified in the statute and conduct constituting a “conspiracy or attempt to commit any of [those] felonies,” even if the conspiracy or attempt is a misdemeanor (Penal Law § 460.10 [1] [a], [b]). The criminal acts must be either part of a common scheme or plan or have been “committed, solicited, requested, importuned, or intentionally aided by persons acting with the mental culpability required for the commission thereof and associated with or in the criminal enterprise” (Penal Law § 460.10 [4] [c] [ii]). The People must also prove that the defendant committed the three eligible “pattern acts,” either as a principal or an accomplice pursuant to section 20.00 of the Penal Law (Penal Law § 460.20 [2]; see People v Newspaper & Mail Deliverers’ Union of N.Y. & Vicinity, 250 AD2d 207, 212 [1998], lv denied 93 NY2d 877 [1999], cert denied 528 US 1081 [2000]).

Penal Law § 460.10 (3) defines “criminal enterprise” as “a group of persons sharing a common purpose of engaging in criminal conduct, associated in an ascertainable structure distinct from a pattern of criminal activity, and with a continuity of existence, structure and criminal purpose beyond the scope of individual criminal incidents.” As stated by one of the statute’s authors, Assembly Member Melvin H. Miller, then Chair of the Committee on Codes:

“[t]he members of the Codes Committee felt that the extraordinary sanctions allowed under the Act should be reserved for those who not only commit crimes but do so as part of an organize^ criminal enterprise . . . For that reason, it was not the sponsors’ intent to redefine or sanction anew conduct already punishable under current law . . . Rather, the bill now requires association with an ascertainably distinct criminal enterprise in addition to corrup*17tion of a legitimate enterprise by criminal activity.” (July 16, 1986 letter, Bill Jacket, L 1986, ch 516.)

While the association need not “be so rigid as to resemble the formalistic corporate flow chart” (People v Wakefield Fin. Corp., 155 Misc 2d 775, 785 [Sup Ct, NY County 1992]), an ascertainable structure does not exist where multiple people commit multiple acts, but do not engage in “any structure, business, activity, or continuity of criminal purpose beyond the scope of the criminal incidents alleged in the indictment” (People v Nappo, 261 AD2d 558, 559 [1999], read on other grounds 94 NY2d 564 [2000]; see also People v Besser, 96 NY2d 136, 143 [2001]; Donnino, Practice Commentary, McKinney’s Cons Laws of NY, Book 39, Penal Law § 460.20, at 175). An ascertainable structure will be found where there are “planners and managers at the top, and middle and lower level participants executing the scheme — ‘a system of authority beyond what is minimally necessary to effectuate individual substantive criminal offenses’ ” (id. at 176, quoting Wakefield at 785; see also People v D.H. Blair & Co., 2002 NY Slip Op 50152[U], *22 [Sup Ct, NY County 2002] [“hierarchical structure with the common purpose” of criminal activity satisfies the requirement]; People v Cantarella, 160 Misc 2d 8, 19 [Sup Ct, NY County 1993] [“(t)he structure consisted of a chain of command and profit sharing”]).

Thus, as explained in People v Pustilnik (14 Misc 3d 1237[A], 2007 NY Slip Op 50407[U], *6 [Sup Ct, NY County 2007]), an ascertainable structure requires “ ‘[a] system of authority beyond what is minimally necessary to effectuate individual substantive criminal offenses’ (People v. Wakefield, 155 Misc 2d at 785),” something more than and “distinct from any ad hoc association entered into for the purpose of carrying out one or more of the criminal incidents relied upon to establish its existence” (People v Cantarella, 160 Misc 2d at 14). Although

“ ‘a distinct ascertainable structure does not necessarily require the presence of an organization that is functionally independent of the criminal activity[,] [w]hat is significant is the existence of an enterprise “beyond that which is necessary merely to commit each of the acts charged as predicate racketeering offenses.” ’ ” (People v D.H. Blair & Co., 2002 NY Slip Op 50152[U], *22, quoting People v Forson, NYLJ, May 12, 1994, at 29, col 3 [Sup Ct, NY County].)

*18The proof before the grand jury was that Western Express acted as a “money mover,” providing credit and facilitating transactions for buyers and sellers of credit card data stolen by hackers or by other methods. Western Express did so by buying and selling large sums of unregulated digital currencies, such as Egold and WebMoney, which they exchanged for each other and for United States currency. The digital currency provided by Western Express made it possible for buyer defendants, who used aliases, to purchase credit card data anonymously from vendor defendants, and allowed for the laundering of the illegal income. Vassilenko knew that Western Express’s clients used aliases, which violated standard anti-money-laundering practices, but made no effort to ascertain their true identities. Western Express employees also used aliases and hid their identities.

Western Express helped the vendors and buyers structure transactions to evade federal reporting requirements by advising that wire transfers be made in small amounts under various names. Vassilenko admitted to an investigator that five percent of his business involved “dirty” money, and that Western Express wired money to dozens of “shell accounts” in Baltic states. Western Express sought to encourage the market for its services by maintaining Web sites that included postings about the sale of stolen account information and advertised its money-moving services.

The buyer defendants purchased stolen credit card data from vendors, by sending Egold via Western Express. Buyer defendants Latta, Perez, and Washington, along with various vendors, made use of online “carding” forums, which advertised the sale of stolen credit card account information. In addition, buyer defendants Latta and Perez committed credit card fraud together, as did Washington and another defendant. When Western Express ceased its operations, buyer defendants Latta, Perez, and Washington continued to purchase stolen credit card information from one of the vendor defendants herein, who continued to accept Egold as payment for the stolen data.

This evidence only established that, by sophisticated means, some of the defendants, in arm’s length transactions, sold stolen information and illegitimate services to the other defendants, who acted independently in using the information and services to commit their individual crimes. While the People assert that the “Western Express Cybercrime Group” was “comprised of Buyers, Vendors, Cybercrime Services Providers, and Money *19Movers, all of whom made decisions and shared authority over distinct aspects of the enterprise’s activities,” there is no evidence of any collective decision-making or coordination with respect to the purported enterprise’s activities or of any overarching structure of authority or hierarchy in which defendants participated. Accordingly, even when viewed in the light most favorable to the People (see People v Jensen, 86 NY2d 248, 251 [1995]), the evidence before the grand jury was insufficient to establish an ascertainable structure (see People v Nappo, 261 AD2d at 559; People v Yarmy, 171 Misc 2d 13, 19 [Sup Ct, NY County 1996]; People v Moscatiello, 149 Misc 2d 752, 756 [Sup Ct, NY County 1990]).

In Nappo, the Nappo defendants formed a corporation for the purpose of importing motor fuel oil and conspired to evade payment of state sales taxes. In finding that the defendants were not engaged in a criminal enterprise within the meaning of the OCCA, the Second Department found that “[t]he Grand Jury evidence is insufficient to establish that the respondents engaged in any structure, business, activity or continuity of criminal purpose beyond the scope of the criminal incidents alleged in the indictment” (261 AD2d at 559). In People v Conigliaro (290 AD2d 87, 89 [2002]), the Second Department explained that in Nappo, “the People failed to establish either an ‘existing organized crime entity’ or any continuity of existence wherein the said entity was capable of continuing without the participation of [the Nappos].” Here too, even after Western Express ceased its participation, certain vendor and buyer defendants continued on their own to traffic in stolen credit card data, using Egold as payment.

In Yarmy, the People alleged that the criminal enterprise included the customers to whom Yarmy unlawfully sold firearms. In rejecting the claim, the court found that the customers’

“only concern was to obtain firearms illegally, with no intent to further the enterprise. Such a position, if accepted by the court, would be the equivalent of an addict on a street corner who purchased a vial of crack being held accountable for a criminal enterprise that reached to the highest echelon of the Colombian cartels. This clearly was not the intent of the OCCA statute” (Yarmy at 19).

Here too, each participant, whether it be a vendor defendant, buyer defendant, or Western Express, was concerned with *20furthering their interests alone, not with generating profits to be shared by the other participants.

In Moscatiello, which involved a bribery scheme, the court held that

“[t]he evidence as presented to the Grand Jury shows three individuals engaged in giving or taking bribes and related activities. Beyond the various criminal acts these three people were associated in no structure and certainly not one with a scope of existence beyond their criminal acts. The People have sought, with some imagination and ingenuity, to show the existence of an organization by showing that Moscatiello was the ‘director’ of the enterprise, Schepis, his ‘assistant’ and Eckhaus the ‘instrument’ of the criminal activity. However, this shows little more than that the three people played different roles . . . for the purpose of this activity was to bribe Eckhaus to allow violations of the union rules” (149 Misc 2d at 756).

Similarly, in the matter before us, as Supreme Court found:

“In essence, the People have described an illegal industry rather than a corrupt enterprise, the criminal parallel of a typical legitimate industry consisting of producers, wholesalers, distributors, retail outlets, and credit suppliers, each of which has a unique but independent role in the industry. Despite the People’s great creativity in attempting to describe the defendants’ activities, the People’s theory of the case (and the evidence) never points beyond long-term, repeated illegal business transactions among parties who stand on equal footing, and who operate independently of each other.” (People v Latta, NYLJ, Aug. 1, 2008, at 26, col 1, 2008 NY Misc LEXIS 4967, *4-5 [Sup Ct, NY County 2008].)

In seeking to expand the definition of a criminal enterprise, the majority goes to great lengths to describe how the Internet has provided an extraordinarily useful new tool for criminals to perpetrate crimes in an entirely new way. While this may be true,

“[t]he governing rule of statutory construction is that courts are obliged to interpret a statute to ef*21fectuate the intent of the Legislature, and when the statutory ‘language is clear and unambiguous, it should be construed so as to give effect to the plain meaning of [the] words’ used. Equally settled is the principle that courts are not to legislate under the guise of interpretation.” (People v Finnegan, 85 NY2d 53, 58 [1995], cert denied 516 US 919 [1995] [citations omitted].)

Thus, as stated in McKinney’s Consolidated Laws of NY, Book 1, Statutes § 73,

“A statute must be read and given effect as it is written by the Legislature, not as the court may think it should or would have been written if the Legislature had envisaged all of the problems and complications which might arise in the course of its administration; and no matter what disastrous consequences may result from following the expressed intent of the Legislature, the Judiciary cannot avoid its duty.” (Comment, at 148; see also Matter of Tina Marie W., 87 AD2d 988 [1982].)

Accordingly, if there is a need to address the unique dangers posed by Internet crime, and the new ways in which individuals or entities interact with each other to commit those crimes, it is for the Legislature to do so. It is not for the courts to expand the definition of criminal enterprise beyond its clearly defined parameters in a manner that would for all intents and purposes eliminate the ascertainable structure required to establish a criminal enterprise under Penal Law § 460.10 (3). Indeed, as the majority notes, while federal law enforcement has prosecuted “carding” by charging a number of individuals with existing crimes such as “conspiracy, identity theft, trafficking in illegal information, credit card fraud, and money laundering . . . , in some respects, new criminal legislation such as the federal Computer Fraud and Abuse Act (18 USC § 1030) has been determined to be necessary to effectively combat such crime.”

Contrary to the majority’s position, the United States Supreme Court decision in Boyle v United States (556 US —, 129 S Ct 2237 [2009]) does not mandate a different conclusion. In Boyle, the Supreme Court considered “whether [under the Racketeer Influenced and Corrupt Organizations Act (RICO) (18 USC § 1961 et seq.f\ an association-in-fact enterprise . . . must have an ascertainable structure beyond that inherent in the pattern of racketeering activity in which it engages” (556 *22US at —, 129 S Ct at 2241 [internal quotation marks omitted]). While agreeing that “an association-in-fact enterprise must have a structure,” the Supreme Court held that “[f]rom the terms of RICO” this requires evidence of (1) a purpose, (2) relationships among those associated with the enterprise, and (3) longevity sufficient to permit the associates to pursue the purpose of the enterprise (556 US at —, 129 S Ct at 2244), but does not require a hierarchical structure or fixed roles for its members, a name, regular meetings, dues, established rules and regulations, disciplinary procedures, or induction or initiation ceremonies (556 US at —, 129 S Ct at 2245).

However, under RICO 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” (18 USC § 1961 [4]). The Supreme Court has stated that this language is expansive and should be interpreted liberally (Boyle, 556 US at —, 129 S Ct at 2243). Accordingly, the Supreme Court has found that “an enterprise includes any union or group of individuals associated in fact” (United States v Turkette, 452 US 576, 580 [1981]) and that RICO reaches “a group of persons associated together for a common purpose of engaging in a course of conduct” (id. at 583).

In contrast, Penal Law § 460.10 (3)’s definition of criminal enterprise expressly includes the requirement that the group be “associated in an ascertainable structure distinct from a pattern of criminal activity.” The New York Legislature has cautioned that the definitions of the statute’s terms “should be given their plain meaning, and should not be construed either liberally or strictly, but in the context of the legislative purposes set forth in these findings” (Penal Law § 460.00; People v Yarmy, 171 Misc 2d at 16) and that “[b]ecause of its more rigorous definitions, this act will not apply to some situations encompassed within comparable statutes in other jurisdictions” (Penal Law § 460.00). Thus, the purpose of the OCCA is “to arm State prosecutors with the ability to prosecute organized crime activities on a similar — but more limited — basis than [RICO].” (People v Yarmy, 171 Misc 2d at 16.) Accordingly, Boyle, where the Supreme Court stated that “[w]e see no basis in the language of RICO for the structural requirements that petitioner asks us to recognize” (556 US at —, 129 S Ct at 2245), is not dispositive of the issues before us.

In any event, even under the relatively undemanding standard of Boyle, there are “situations in which proof that individu*23als engaged in a pattern of racketeering activity would not establish the existence of an enterprise” (556 US at — n 4, 129 S Ct at 2245 n 4) and the requisite structure cannot be found without some evidence of relationships among those associated with the enterprise that includes some form of concerted, coordinated, decision-making regarding the common purpose of the criminal enterprise. Here, the evidence before the grand jury did not satisfy this burden.

In asserting that an ascertainable structure may be found, the majority maintains that Vassilenko began with a legitimate business enterprise which he perverted by attracting buyers and sellers of stolen credit card data to transact business on his Web site by providing affirmative assistance in the form of a full-service clearinghouse devoted to optimizing illegal transactions involving stolen credit card information. However, the majority acknowledges that defendant vendors and buyers could have conducted their illegal activities without Western Express. While these defendants may have found it to be beneficial to utilize Western Express’s Web site and services, it does not alter the fact that there has been no showing other than they acted independently, without a broader structure beyond the individual crimes perpetrated.

In sum, the fact that Western Express may have acted as an intermediary or “money mover” providing credit and facilitating transactions for buyers and sellers of stolen credit card data, earning a commission for each transaction, or aspired to be “carders’ ” facilitator of preference, did not in and of itself create an ascertainable structure as required by Penal Law § 460.10 (3). Western Express was in essence no more than the equivalent of a common fence, taking stolen property from independent thieves and selling it to buyers looking for an illicit deal. Although defendants may all have been in the same industry, the vendors, buyers and Western Express each operated at arm’s length for their own benefit, not as an enterprise with a shared purpose. Vendors and buyers could conduct their transactions without Western Express and in fact certain of them continued to do so after Western Express ceased operation.

Accordingly, I would affirm the orders of the Supreme Court, New York County that dismissed the enterprise corruption count against each defendant-respondent, and that granted the People’s motion to reargue and adhered to the original decision.

*24Acosta and Abdus-Salaam, JJ., concur with Saxe, J.; Andrias, J.E, and Manzanet-Daniels, J., dissent in a separate opinion by Andrias, J.P.

Orders, Supreme Court, New York County, entered on or about July 25, 2008, reversed, on the law, and the enterprise corruption counts reinstated. Appeals from orders, same court, entered on or about March 3, 2009, dismissed, without costs, as taken from nonappealable papers.

Motions of Douglas Latta and Angela Ferez, also known as Anna Ciano, to dismiss appeal denied.

Motion of John Washington to dismiss appeal granted.

These include conspiracy in the fifth degree (Penal Law § 105.05 [1]); scheme to defraud in the first and second degrees (Penal Law § 190.65 [1] [a], [b]; § 190.60); grand larceny in the second and third degrees (Penal Law § 155.40 [1]; § 155.35); attempted grand larceny in the third degree (Penal Law § 110.00, 155.35); criminal possession of a forged instrument in the second degree (Penal Law § 170.25); and criminal possession of stolen property in the second and fourth degrees (Penal Law §§ 165.52, 165.45 [2]).