General Litigation

NY Court Finds Loose Affilitiation of CyberCriminals to be “Enterprise” Under Organized Crime Act

When you think of the phrase “criminal enterprise,”  certain images immediately pop in your head. Vito Corleone, Scarface, Joe Pesci.  But NY courts have long expanded the term “criminal enterprise” to include any band of criminals working within “an ascertainable  structure.” NY 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” So the structure must be more than just a pattern of criminal activity. A bunch of hoodlums roaming the street stealing hubcaps and breaking into parking meters (yes some neighborhoods still have both – cars with hubcaps and parking meters that take coins) are engaging in a pattern or criminal activity but they are not a criminal enterprise because courts have consistently required some evidence of “a system of authority or hierarchy binding the defendants together.”  The difference between “a pattern of criminality” and “a criminal enterprise” is important because folks that are found to be part of a criminal enterprise face lost of jail time under NY’s Organized Crime Control Act (OCCA).

Well yesterday, in a decision likely to strike fear in the hearts of mildly-organized hoodlums everywhere, a NY Appellate Court significantly weakened the “structure” and “hierarchy” required for an enterprise under the OCCA.  In the case of People v. Western Express, Judge David Saxe, writing for a divided court in the First Department (the Appellate Court in NY that handles cases from Manhattan and the Bronx) found that an internet forum that handled transactions for identity thieves was a criminal enterprise even though there was no connection between the thieves and the forum.

Here are the allegations against the defendants: Western Express is a chain of check-cashing stores and allows online e-transactions on its websites. Its owner Vadim Vassilenko has faced criminal charges before for illegal check cashing and money laundering.  He lived only a few blocks from Bernie Madoff and in fact Madoff used Western Express to handle some of his transactions. The Manhattan District Attorney’s office explained that while Western Express offered a variety of legitimate services, such as check-cashing, mail receiving, money orders, digital currency exchange, and Russian/English translation services, it also acted as an intermediary, or “money mover,” providing credit and facilitating transactions for buyers and sellers of stolen credit card data, while earning a commission for each such transaction. The credit card data was obtained by hackers or by other illegal methods, and was then sold through Western Express to buyers who in turn used that data for such illegal purposes as manufacturing counterfeit credit cards or making fraudulent online purchases. Vassilenko was not accused of stealing the data or selling the data or buying the data or making the fake cards or making the fake purchases. He did not control or direct the thieves or the buyers nor did he even create this whole scheme.  In fact the court specifically found that this activity was going on before Western Express existed and it continued even after Western Express was shut down. The court said however that Western Express “was molded into a full-service clearinghouse devoted to optimizing illegal transactions involving stolen credit card information.” This made its website  a structure even though “there is no social club or office, no hierarchy of appointed positions.”  In other words, it wasn’t organized crime but it literally organized crime and allowed unaffiliated criminals to have a place to do their transactions more efficiently.

The court was also not troubled by the fact that none of the members of this enterprise had ever met or even knew each other. All of the buyers and sellers charged with Vassilenko only handled their own crimes through the site, yet they too were found to be part of the enterprise.   What Vassilenko did, the court said was to shape his previously legitimate business “into a hub for criminal activity geared toward maximizing its own and its participants’ profits from the theft and use of stolen credit card information and its protection from law enforcement.” It didn’t matter that the participants didn’t ask him for this assistance or that he figured out on his own to make it easier for the criminals. Judge Saxe said that “the question is not whether the Legislature had this particular type of criminal enterprise in mind when it formulated the language of the statute. Rather, we need only decide whether the structure of the enterprise at issue falls within its definition of enterprise corruption.” The court below had granted the defendants’ motion to dismiss the enterprise corruption charge and the First Department reversed by a vote of 3-2 and sent the matter back down for trial.

The dissent, written by Judge Richard Andrias, focused on the purpose of the OCCA to combat organized crime and add severe penalties for those criminals who not only commit a pattern of crime but get together and organize themselves for the purpose of doing so. Citing numerous prior decisions Judge Andrias said  “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.'” You know, like the Mafia.  Critical to Judge Andrias’ decision was that “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.” You know, like the Mafia. He likened Western Express to a local fence who accepted what he knew was stolen property and then allowed someone else to buy it and he kept the transaction fees.  Judge Andrias said that holding the individual buyers responsible for the entire Western Express activity was “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.”

I know many of you are thinking “Who cares? These people are criminals so what difference does this make?”  Well, this case could have far-reaching implications if it is not reversed by the Court of Appeals.  The idea of the Penal Law is to let people know what is illegal and what ramifications you will face if you engage in certain conduct. If someone decides to shoplift a $1.00 candy bar he should not be required to do 10 years in jail because 200 people stole from the same store. Also, stretching the definition of enterprise to this thin level may soon catch innocent people who the government may allege knew or should have known that folks were doing illegal things on their websites. Making it easier to commit crime is not a criminal enterprise if you are not participating with the actual criminals and the actual criminals do not know each other or what you are doing.

Last week I wrote about a Federal Court that  found that copyright infringement occurring in Arizona and Oregon could be the subject of lawsuit here in NY because the internet has an impact in all states.  This decision now states that websites could form the basis of a criminal enterprise.  It is clear that courts are willing to be flexible and creative as they try and use pre-internet laws to deal with internet related activity. What I hope is that in doing so, they won’t run too far afield and change the meaning and intent of constitutionally-enacted statutes.







Leave a Reply

Your email address will not be published.