State v. Roberts ( 2018 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
STATE OF DELAWARE
v. l.D. 1708007568
MICHELLE N. ROBERTS
\_/\./\_/\/\/\_/\/\/
Defendant.
Submitted: April 18, 2018
Decided: May 2, 2018
ORDER
Defendant’s Motion to Dismiss Count I of the Indictment: Denied
State’s Motion in limine to Admit Facebook Photographs: Denied
l. The State initiated this criminal case after Defendant allegedly
confessed to multiple instances of fraud against her former employer, Cox Auto
Group. The State charged Defendant With racketeering in violation of
11 Del. C. § 1503(a), in addition to other counts of theft and forgery. The
indictment alleged CoX Auto Group and its financing arm, HCAC Financial
Services, LLC, simultaneously Were the victims of, and the enterprises that
facilitated, Defendant’s racketeering activity. Defendant moved to dismiss the
racketeering charge, arguing an “enterprise” cannot also be the victim of alleged
racketeering under Section 1503(a). The State also filed a motion in limine
seeking a pretrial ruling as to the admissibility of photographs posted on Facebook
purportedly depicting Defendant’s destination wedding shortly before the alleged
crimes Were discovered. The issues presented are l) Whether the State must allege
in the indictment the existence of a legal “enterprise” distinct from the victim of
the alleged racketeering activities, and 2) Whether photographs depicting
Defendant’s Wedding, Which occurred during the period of Defendant’s alleged
fraud, are admissible under Rules 401 and 403 of the Delaware Uniform Rules of
Evidence.
BACKGROUND
2. Cox Auto Group, lnc. (“Cox”) is a used-car dealership located in
Newark, Delaware. Defendant Michelle Roberts Worked as a cashier at CoX from
November 2015 through August 2017. As a cashier, Defendant Was responsible
for accepting customer payments for CoX and its associated financing arm, HCAC
Financial Services, LLC (“HCAC”). Defendant also Was responsible for
depositing customer payments for CoX and HCAC at WSFS Bank (“WSFS”).
3. Cox’s deposit process consisted of two steps. First, Defendant Would
fax or scan copies of WSFS deposit tickets and checks to HCAC to reflect the
amount to be deposited at WSFS. Then, Defendant Would deposit the checks and
cash into the Cox and HCAC accounts at WSFS.
4. Beginning in March 2017, Defendant allegedly began “shorting” the
deposits by not depositing the full amount represented in the deposit tickets.
According to a confession allegedly penned by Defendant, “[f]or each daily
deposit [she] would use [the deposit] to cover a previous days [sic] deposit. . . .
The deposit would be delayed because it was being used to cover the prior
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deposit.
5. According to the State, after Defendant resigned her position at CoX,
an internal audit uncovered nineteen missing deposits from the previous six
months. The discrepancy was estimated to exceed $40,000. On August 7, 2017,
Defendant allegedly confessed to HCAC officials that she misappropriated funds
from Cox. On October 2, 2017, a grand jury indicted Defendant on one count of
racketeering (“Count I”), two counts of theft, and two counts of forgery.
6. Count I of the indictment states:
CRIMINAL RACKETEERING, in violation of` Title ll,
Section 1503(a) of the Delaware Code of 1974, as amended.
MICHELLE N. ROBERTS on or between the lst day of
March, 2017, and the 5th day of August, 2017, in the County of
New Castle, State of Delaware, while employed by or
associated with Cox Auto Group, lnc., or HCAC Financial
Services, LLC, enterprises as defined by Title ll, Section
1502(3), did knowingly conduct or participate in the conduct of
the affairs of said enterprise or enterprises through a pattern of
racketeering activity as defined by Title ll, Sections 1502(5)
and 1502(9) that is more fully described in Counts II, III, IV, or
V, incorporated herein by reference.
7. Counts II through V go on to allege Cox and HCAC were the victims
of Roberts’ theft and forgery. Defendant moved to dismiss Count l of the
indictment, arguing the alleged racketeering “enterprise” and victim cannot be the
l State’s Answ. Br. at 2.
same entity under Section 1503(a). The parties briefed and argued the motion. l
find Section 1503(a) permits the racketeering enterprise and victim to be the same
under federal precedent interpreting the substantively-identical federal racketeering
statute, and Defendant’s motion therefore is denied.
ANALYSIS
8. Delaware Criminal Rule of Procedure lZ(b) provides that “objections
based on defects in the indictmen ” must be raised before trial.2 “The procedure
whereby the Court can consider a motion to dismiss prior to trial has been
”3 “In effect, if there are
compared to a civil motion for summary judgment.
genuine issues of material fact, a jury must decide the issue involved.”4
A. A Section 1503(a) “enterprise” also may be the victim of the alleged
racketeering activity.
9. Defendant argues the racketeering charge must be dismissed as a
matter of law because the alleged victim and enterprise cannot be the same under
Section 1503(a). In other words, Defendant contends the claim must be dismissed
because Cox and HCAC are the alleged victims of the racketeering activity as well
as the alleged enterprises through which the activity was conducted.
lO. Section 1503(a) provides:
lt shall be unlawful for any person employed by, or
associated with, any enterprise to conduct or participate
2 super ct. Crim. R. iz(b)(z).
3 swore v. Baker, 679 A.zd 1002, 1006 (Del. super. 1996).
4
Id.
in the conduct of the affairs of the enterprise through a
pattern of racketeering activity or collection of an
unlawful debt.5
11. Although there is no Delaware case directly addressing this issue, the
parties agree this Court should consider federal precedent because Delaware’s
RICO statute essentially is an adaptation of the federal statute.6 Specifically,
Section 1503(a), the statutory provision under which Defendant is charged,
contains the same elements as 18 U.S.C. § 1962(c), except the federal statute also
requires that the enterprise and its activities affect interstate commerce.
12. Defendant’s argument relies strongly on Jaguar Cars, lnc. v. Royal
Oaks Motor Co., Inc.,7 in which the Third Circuit noted that “a victim corporation
drained of its own money by pilfering officers and employees could not reasonably
be viewed as the enterprise through which employee persons carried out their
racketeering activity.”8 ln Jaguar Cars, the officers of a Jaguar car dealership
allegedly submitted fraudulent warranty claims to the manufacturer.9 After
discovering the alleged fraud, the manufacturer brought a civil RICO action under
18 U.S.C. § 1962(c) against the dealership and its officers.10 The Third Circuit
5 11 Del. C. § 1503(a).
6 Def.’s Mot. Dismiss Indictment 5 (citing Stroik v. State, 671 A.2d 1335, 1340 (Del. 1996)
(distinguished by Lloya1 v. State, 152 A.3d 1266, 1273 (Del. 2016) (noting the Stroik Court’s
“separate” or “ascertainable” structure requirement was dispensed with in Boyle v. United States,
556 U.S. 938 (2009))).
7 46 F.3d 258 (3d Cir. 1995).
8 Id. at 267 (internal quotation marks omitted).
9 Id. at 260
10 Id
previously held in Glessner v. Kenrlyll that “persons” under Section 1962(c) must
be distinct from the “enterprise” through which they conduct the racketeering
activity.12 The officers argued the manufacturer’s RICO claims legally were
insufficient because the manufacturer failed to demonstrate a distinction between
the “persons” allegedly liable and the “enterprise” through which they acted.13
13. First, the Third Circuit considered whether the distinctiveness
requirement the court articulated in Glessner survived the Supreme Court’s
opinions in Reves v. Ernst & Young14 and Nat’l Org. of Women v. rS`cheia’ler.15 The
Third Circuit held that Glessner’s limitation of 18 U.S.C. § 1962(c) to cases in
which “outside” defendants either victimize the corporate enterprise or operate it as
a passive tool did not survive the Reves and Scheidler decisions, and that officers
properly may “be held liable as persons managing the affairs of their corporation as
an enterprise through a pattern of racketeering activity . . . .”16
‘1 952 F.2d 702 (3d Cir. 1991).
12 In Glessner, the Third Circuit limited Ҥ 1962(c) claims to only those instances in which an
‘innocent’ or ‘passive’ corporation is victimized by the RICO ‘persons,’ and either drained of its
own money or used as a passive tool to extract money from third parties.” Jaguar, 46 F.3d at 264
(quoting Glessner v. Kenny, 952 F.2d 702, 713 (3d Cir. 1991) (internal quotation marks
omitted)).
13 Id
14 507 U.S. 170, 185 (1993) (“Of course, ‘outsiders’ may be liable under § 1962(c) if they are
‘associated with’ an enterprise and participate in the conduct of its affairs-that is, participate in
the operation or management of the enterprise itself . . . .”).
15 510 U.s. 249, 259 (1994) (“[T]he ‘enterprlse’ in subsection (c) connotes generally the vehicle
through which the unlawful pattern of racketeering activity is committed, rather than the victim
of that activity.”).
16 Jogunr, 46 F.3d et 261.
14. The central issue in Jaguar Cars, therefore, was whether the
dealership sufficiently was distinct from the officers to satisfy § 1962(c)’s
requirement that the “person” conducting the RICO activity is distinct from the
“enterprise.”17 In what widely is considered dictum, however, the Court also stated
that a RICO “enterprise” cannot also be the victim of the racketeering activity.l8
15. Several subsequent federal circuit and district court opinions have
criticized the Jaguar Cars Court’s interpretation of Scheidler and have permitted
claims under Section 1962(c) where the alleged enterprise also is the victim of the
racketeering activity.19 At least one court in the Third Circuit appears to hold a
RICO victim and enterprise can be the same entity.20
16. Most directly, in Unitea1 Staies v. Browne,21 the Eleventh Circuit
rejected the Jaguar Cars Court’s Scheidler discussion as unpersuasive dictum.22 ln
Browne, the Court reasoned the Jaguar Cars decision misconstrued the holding in
11 Jctgttor, 46 F.3d at 269.
18 Id. at 267 (quoting Nat’l Org. of Women v. Scheidler, 510 U.S. 249, 259 (1994)).
19 See United States v. Goldin Indus., lnc., 219 F.3d 1268 (llth Cir. 2000) (“The distinction
between the RICO person and the RICO enterprise is necessary because the enterprise itself can
be a passive instrument or victim of the racketeering activity.”) (emphasis added); LaSalle Bank
Lake View v. Seguban, 937 F. Supp. 1309 (N.D. Ill. 1996) (“[T]his court does not agree with the
leap of logic made by the Third Circuit from the Supreme Court’s Scheidler statement that
‘enterprises’ ‘generally’ are not ‘victims,’ to the conclusion that ‘enterprises’ cannot be
‘victims.”’) (emphasis in the original).
211 Polymcr Dynnmt'cs, lnc. v. Bctyer Corp., 2000 WL 1146622, at *5 (E.D. Pa. Aug. l4, 2000)
(“A plaintiff [irl a civil RICO claim] also can be an enterprise or a member of an enterprise.”).
21 505 F.3d 1229 (1 lth cir. 2007).
22 Id. at 1272-73 (“We find this dictum in Jaguar Cars to be unpersuasive.”).
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Scheia'ler,23 ointin out that the central issue in that case was whether
P g
racketeering acts must have an economic motive.24
In holding that an economic motive was unnecessary, the
[Scheidler] [C]ourt explained that “the ‘enterprise’ in
subsection (c) connotes generally the vehicle through
which the unlawful pattern of racketeering activity is
committed, rather than the victim of that activity.” By so
qualifying its language, therefore, the Scheicller Court did
not foreclose the possibility that the enterprise can also
be the victim of the alleged RICO violation.25
17. The Browne Court held Jaguar Cars’s reliance on Reves also was
misplaced.26
The issue in Reves was how much involvement in a
corporation’s affairs an outside accounting firm must
have in order to be deemed a participant in the conduct of
those affairs. . . . The Court’s statement that “Congress
consistently referred to subsection (c) as prohibiting the
operation of an enterprise through a pattern of
racketeering activity and to subsections (a) and (b) as
prohibiting acquisition of an enterprise,” thus
underscored the Court’s application of an “operation or
management” test, not the validity of a victim/vehicle
distinction.27
The Browne Court concluded by affirming subsection (c) targets criminal activity
that exploits “legitimate businesses by corrupt individuals.”28 The Seventh Circuit
”Mmmn
24 Id_
25 Ia'. (quoting Nat’l Org. of Women v. Scheia'ler, 510 U.S. 249, 259 (1994)) (emphasis in the
original) (intemal citations omitted).
26 ld
27 Ia'. (quoting Reves v. Ernst & Young, 507 U.S. 170, 182 (1993)) (emphasis in the original)
(internal citations omitted).
28 ld. (quoting United States v. Gola'z`n Indus., Inc., 219 F.3d 1268 (1 lth Cir. 2000)).
8
in Unitea' States v. Warner29 reached a similar conclusion, holding the State of
Illinois could be both victim and enterprise in a RICO charge under Section
l962(c).10
18. I agree with the Browne Court that the Jaguar Cars language on
which Defendant relies is dictum. The issue before the Jaguar Cars Court was not
whether an enterprise simultaneously can be a victim for purposes of RICO. ln
that case, the victim was the plaintiff-manufacturer, while the “enterprise” was the
dealership that employed the defendants. For that reason, the language on which
Defendant relies was not necessary to the Jaguar Cars Court’s holding. I agree
with the decision in Browne and similar cases that the statutory language does not
preclude a RICO claim or charge in which the enterprise and alleged victim are the
same.31 Accordingly, Count l properly alleges a claim against a RICO enterprise
B. A Section 1503(a) claim properly may be brought against a single
defendant.
19. Defendant also argues Count I should be dismissed because (i) she
acted alone, and (ii) no racketeering enterprise existed apart from her. Defendant
29 498 F.3d 666 (7th cir. 2007).
111 lot at 696.
31 In a supplemental submission after oral argument, Defendant argues Browne and similar
“public corruption” RICO cases are distinct because it is really the “public,” and not the
government, that is the victim in such cases. Defendant cites no case drawing this distinction, if
indeed it is a distinction, and it is not a reason cited by those courts that declined to follow
Jaguar Cars. Moreover, it is not only public corruption cases in which courts have concluded an
enterprise also may be a victim under the federal RICO statute. See LaSalle Bank Lake View v.
Seguban, 937 F. Supp. 1309 (N.D. lll. 1996).
appears to argue that, like the association of officers in Jaguar Cars, a group of co-
conspirators is necessary to satisfy the requirement of a separate “enterprise” under
Section 1503(a). Additionally, Defendant argues Section 1503(a) was designed to
target groups of organized criminals, which does not apply to this case because she
acted alone.
20. Section 1501 of Delaware’s RICO statute provides:
The purpose of this chapter is to guard against and
prevent the infiltration and illegal acquisition of
legitimate economic enterprises by racketeering
practices, and the use and exploitation of both legal and
illegal enterprises to filrther criminal activities. This
chapter is intended to apply to conduct beyond what is
traditionally regarded as “organized crime” or
“racketeering.”32
Accordingly, the Chapter explicitly applies to more than what traditionally is
considered organized crime. This is consistent with the drafter’s intent “that a
person who engages in a continuing pattern of illicit conduct is more culpable than
a person who engages in one instance of that conduct.”33
21. Additionally, Section 1503(a) provides “[i]t shall be unlawful for any
person . . . to . . . participate in the conduct of the affairs of the enterprise through a
pattern of racketeering activity . . . .”34 The statute, therefore, targets racketeers
32111)61. C. § 1501.
33 Strot'k v. State, 671 A.2d 1335, 1342 (Del. 1996).
24 11 Dcl. C. § 1503(a)(enrphas1s oddecl).
10
acting alone. In view of the statute’s application to individual racketeers, the Court
is left to consider Defendant’s argument that no enterprise existed apart from her.
22. As discussed in section A, a racketeering enterprise may be the same
as the victim of the racketeering activity. ln this case, the State alleges Cox and
HCAC were the racketeering enterprises as well as the victims of Defendant’s
racketeering activities. The State, therefore, properly alleged the existence of a
separate enterprise through which Defendant engaged in a pattern of racketeering
activity.
C. The danger of unfair prejudice substantially outweighs the marginal
probative value of the Facebook photographs.
23. The State also filed a motion in limine to allow introduction of
photographs that were posted to Defendant’s Facebook page. Those photographs,
all of which were posted on July 17, 2017, appear to show Defendant getting
married in Tennessee. The photographs themselves are undated and show a variety
of wedding-related items, including Defendant’s dress, flowers, limousine, and
wedding location. The State argues the photographs show Defendant was absent
from work for approximately two weeks in July 2017, which was when Cox and
HCAC first discovered the missing deposits. According to the State, it was only
when Defendant was absent for an extended period, and therefore unable to cover
previous thefts with new deposits, that the companies’ bookkeeper discovered the
missing funds.
11
24. The State contends the wedding photographs should be admitted for a
number of reasons. First, the State argues the fact that Defendant’s alleged scheme
only was discovered during her extended absence from work shows that (i) it was
Defendant, and not another employee, who engaged in the alleged scheme, and (ii)
Defendant’s activities would have continued had they not been discovered. The
latter issue is important, the State maintains, because it satisfies the “continuity”
element of the RICO charge. The State also argues the photographs are
circumstantial evidence of Defendant’s motive, allowing the State to suggest to the
jury that Defendant might have used the money she allegedly stole to hand what
the State paints as an expensive wedding. Defendant argues the photographs are
not relevant to identity, continuity, or motive because they are not dated and were
not necessarily taken on the date they were posted to Facebook. Defendant also
asserts the photographs are not relevant to motive because the State has no
evidence of how much the wedding cost, who paid for it, or that Defendant used
any stolen funds to finance the wedding. Defendant further argues that any
tangential relevance substantially is outweighed by the danger of unfair prejudice
or confusion of the issues.
12
25. The parties agree the Court’s analysis is governed by Delaware Rules
of Evidence 401 and 403.35 Relevance is the Court’s threshold inquiry; only
relevant evidence is admissible at trial, which means evidence that has “any
tendency to make the existence of any fact that is of consequence to the
determination of the action more probable or less probable than it would be
”36 In evaluating relevance, the Court considers both
without the evidence.
materiality and probative value.37 Materiality refers to the relationship between the
propositions for which the evidence is offered and the issues in the case, while
probative value refers to the tendency of the evidence to establish the proposition
that it is offered to prove.38
26. There is no doubt that questions of identity, continuity, and motive are
material to the case, The Facebook photographs’ probative value, however, is
marginal at best. At most, the Facebook photographs establish that Defendant got
married in Tennessee. As they are not dated, they do not indisputably establish
Defendant’s wedding date. Even assuming, however, that the photographs are
circumstantial evidence that Defendant got married on or close to the date the
photographs were posted, the photographs only establish that Defendant was out of
35 Although the parties’ briefs analyzed the issues under Rule 404(b), at oral argument the parties
agreed that Defendant’s wedding was not a “crime, wrong, or other bad act” and therefore did
not fit the confines of that rule.
36 D.R.E. 401.
31 callaway v. State, 65 A.3d 564, 569-70 (Del. 2013).
33 1a at 569.
13
the state for her wedding. The photographs do not establish the length of her
absence or that the wedding occurred on a day Defendant otherwise would have
been working. Therefore, to the extent they are offered for purposes of
establishing identity or continuity, the photographs only are minimally probative of
those issues. The State presumably can establish the length of Defendant’s
absence from work through Cox’s records or witness testimony. As to the'State’s
theory of motive, without some other evidence that Defendant used the funds to
pay for her wedding, or even paid for her wedding at all, the photographs
themselves are not circumstantial evidence of motive.39
27. Even marginally relevant evidence may be admissible at trial,
provided its probative value is not outweighed Substantially by the danger of unfair
prejudice, confusions of the issues, or misleading the jury.40 Here, danger of unfair
prejudice-that is, the danger that the jury will consider the photographs for
improper or emotional reasons, rather than for the reasons they are offered-
substantially outweighs the photographs’ value in establishing identity or
continuity. In other words, it is very likely the jury may conclude Defendant used
stolen funds to pay for a wedding she could not otherwise afford, even though
39 The State’s theory that the photographs are relevant to motive is difficult to distinguish from
an argument that an alleged drug dealer’s manner of living or type of car is relevant to establish
motive for dealing drugs. Without any evidence of a connection between the wedding and
allegedly ill-gotten funds, the photographs have no more tendency to establish motive than any
other aspect of Defendant’s life in which she might have spent money.
411 D.R.E. 403.
14
there is no evidence establishing who paid for the wedding, how much it cost, or
how the allegedly misappropriated funds were used. Accordingly, although they
technically are relevant under Rule 401, the proffered photographs are not
admissible under Rule 403.
For the foregoing reasons, Defendant’s Motion to Dismiss Count l of the
indictment is DENIED, and the State’s Motion in limine to admit Facebook
photographs is DENIED.
IT IS SO ORDERED.
nme/
Abligail`M. I:eGrgw, Judge
Original to Prothonotary
cc: Andrew J. Meyer, Esquire
Stephen McDonald, Esquire
15