In a December 1994 internal memorandum not intended for public disclosure, Fawell
recommended to Ryan that certain IG Investigators be terminated and reassigned to discourage
further investigations into improper political fundraising activities. Ryan agreed and Fawell drafted
written memoranda falsely justifying the decision based on budgetary cutbacks. From February
through June 1995, most of the |G Investigators were in fact terminated or reassigned. As a result,
Ryan and Fawell disabled the IG Department and “substantially hindered it from fulfilling its duties
to, among other things, investigate all allegations of SOS Office misconduct, including allegations
linked to fundraising efforts of Citizens For Ryan." (/d. Count 2 fff] 131-35.)

G. Diversion of State Resources to Benefit Ryan

Between 1992 and 1998, Ryan, Fawell, and others allegedly authorized the diversion of
SOS Office resources to benefit Ryan personally and Citizens For Ryan. For example, Ryan,
Fawell, and another high-ranking SOS Office official, Richard Juliano, participated in the campaign
effort of then-Texas Senator Phil Gramm, who was running for president of the United States in
1995-96. Ryan proposed that certain individuals receive “consulting” payments related to the
Gramm campaign in Illinois, with Ryan, Fawell, and Juliano splitting the money. Fawell and
Udstuen helped Ryan recruit Alan Drazek to participate in the Gramm campaign and used Drazek's
company (AMR) as a conduit to funnel the consulting payments to Ryan, Fawell, and Juliano. (/d.
Count 2 {fj 136-40.) In addition, Fawell, Juliano, and other SOS Office employees working at the
direction of Fawell and Juliano performed campaign work on state time and using state resources,
such as participating in campaign meetings, phone conferences, political fundraisers,
organizational meetings, strategy sessions, and public appearances with Gramm. Ryan allegedly
knew about and authorized these activities. (fd. Count 2 J 141.)

Between September 1995 and March 1996, the indictment claims, Ryan, Fawell, and

Juliano caused over $32,000 in payments to be made from the Gramm campaign through AMR to

18



Although Warner did not raise substantive objections to a joint trial at the time of the second
superseding indictment, he does, as noted, do so now. Warner argues that the counts in which
he and Ryan are both named are not sufficiently connected to those in which Ryan alone is named.
He argues, in addition, that certain allegations in the false statement counts against Ryan give rise
to Bruton violations, and, in the alternative, that the court should grant a severance under Rule 14.
Ryan, too, moves for severance, arguing that the false statement counts (Counts Eleven through
Thirteen) and tax counts (Counts Eighteen through Twenty-Two) are insufficiently connected to the
remaining counts of the indictment, which allege RICO violations and mail fraud.

As misjoinder appears to be the most significant objection, the court begins there. Both
Defendants argue that there is an insufficient relationship between the counts against Ryan alone
and those in which both Defendants are named. The court is uncertain that Ryan has any standing
to raise this challenge; there is little question that the counts against him “are connected with or
constitute parts of a common scheme or plan” within the meaning of Rule 8(a). The cases Ryan
cites in support of his motion address the right of the defendant not named in certain charges (in
this case, Warner) to seek severance. See United States v. Schweihs, 971 F.2d 1302, 1321-22
(7th Cir. 1992) (characterizing the question as “whether [Rules 8(a) and 8(b)] can be combined”
to allow joinder of charges against movant Daddino with charges against Schweihs alone); United
States v. Velasquez, 772 F.2d 1348, 1353 (7th Cir, 1985) (finding no prejudice from denial of a
severance motion and observing that heroin charges could have been joined with other charges
against the defendant charged with heroin trafficking alone). In any case, as the government
points out, joinder of tax evasion counts with conspiracy charges is proper where the counts allege
failure to report income received by the fraudulent scheme. United States v. Shelton, 669 F.2d
446, 460 (7th Cir. 1982); United States v. Emond, 935 F.2d 1511 (7th Cir. 1991)

Warner has a more colorable argument on this score. He notes that Ryan is the sole

Defendant named in nine of the 22 counts of the indictment. Two of the nine (Counts Six and Ten)

39



and of course the danger that a conviction will result from less than a unanimous
verdict as to each separate offense.

id, at 425 (internal quotations and citations omitted). See a/so United States v. Caputo, 288 F.
Supp. 2d 912, 917 (N.D. Ill. 2003).

Ryan claims that the factual scenarios in Count Two demonstrate that there are “schemes
of differing nature.” For example, Ryan allegedly (1) authorized the SOS Office to enter into leases
for properties owned by Warner, Ryan, and Associate 1; (2) gave confidential information to
Associate 1 in connection with the construction of a maximum security prison in Grayville; and (3)
authorized the termination of an Inspector General investigation into political fundraising by SOS
employees on behalf of Citizens For Ryan. (Ryan Mail Fraud Mem., at 6.)"> In Ryan's view, these
schemes have no relation to each other except for his involvement in them. (/d.) Ryan also
attempts to characterize the allegations as separate schemes to defraud the people of the State
of Illinois of Ryan’s honest services as the Secretary of State on the one hand, and as Governor
on the other. (/d. at 7-8.)

The government responds that it has alleged just one scheme — to deprive the people of
the State of Illinois and the State of Illinois of money, property, and their right to the honest services
of Ryan and other state employees — that was merely executed in different ways. (Gov't Resp.,
at 27.) One method of execution was that Ryan, in exchange for gifts and benefits for himself and
his family, allegedly gave friends and associates, including Warner, access to non-public
information that enabled them to benefit from government leases, contracts, and projects. Another
method was that Ryan allegedly used state resources to further his political career, such as having
state employees sell fundraising tickets for his political campaign and providing certain “plum”

benefits (e.g., low-digit plates) in exchange for campaign assistance and contributions. (/d.) Ryan,

" Defendant Ryan’s Memorandum of Lawin Support of his Motion to Dismiss the Mail

Fraud Charges is cited as “Ryan Mail Fraud Mem., at __.”

35



where the court granted a motion to strike a preamble that contained an irrelevant narrative and
potentially suggested that certain defendants not charged with RICO violations were in fact guilty
of such violations. During the course of the trial, this court will entertain proposed revisions to the
preamble to the extent that information set forth therein is irrelevant and prejudicial. The court
notes, however, that at least some of the state statutes and regulations cited there are indeed
relevant and necessary to explain conduct alleged in specific counts. For example, the jury may
well need some explanation of the reasons that Warner allegedly kept his name off certain lobbying
agreements. Further, without some information concerning Illinois statutes banning public officials
from accepting gifts from persons doing business with the state, the jury is unlikely to understand
the reasons Ryan allegedly engaged in sham transactions to conceal his acceptance of free
lodging from a business associate. If the evidence at trial demonstrates that any of the statutes
cited is irrelevant to the charges, the court will grant Defendants’ motion to strike the reference.

3. References to Third Parties

Defendants object to such expressions as "others known and unknown,” “nominee” and
“conduit.” With respect to “others,” the government asserts that listing every person involved in
each event alleged in the indictment would be cumbersome and overly detailed, but that it “has
every intention of presenting evidence at trial of the known people who are referenced” in the
indictment as “others.” (Gov't Resp., at 51.) On the strength of that representation, the motion to
strike this expression is denied without prejudice. The court also overrules Warner's objection ta
the terms “conduit” and “nominee.” Warner contends these terms are argumentative and
prejudicial, but in the court's view they convey more information than Warner's preferred substitute
expression, “third party.” If the evidence at trial does not establish that the individuals at issue
acted as conduits or nominees for the receipt or exchange of funds, the court will direct appropriate

amendments to the indictment.

44



be awarded additional business with the SOS Office. An official with Modern Business Systems
declined. (/d. Count 2 7] 65-67.)

7. Real Property Leases

The second superseding indictment also charges Ryan and Warner with influencing SOS
Office leasing and purchasing of real property for personal gain. In 1991, Warner learned that the
SOS Office was seeking to relocate certain of its administrative office facilities then located at 188
West Randolph Street in Chicago. In April, Warner “caused a contract to be entered into” with an
individual associated with property at 17 North State Street in Chicago (“Property Manager 1”). The
contract, executed by a third party to conceal Warner's involvement, gave Warner a 6%
commission interest in any SOS Office lease relating to 17 North State Street. (/d. Count 2 {[{] 69-
72.) On October 22, 1991, Ryan and Warner arranged for a six-year lease on the 17 North State
Street property, which was renewed for an additional six-year term in 1998, again with a 6%
commission for Warner. Between October 1991 and at least October 2001, Warner received
approximately $383,276 in commission payments relating to the 17 North State Street lease. He
was also identified on Fawell's “master list” as the lease’s “sponsor.” (/d. Count 2 [If] 73-76.)

On October 15, 1992, Warner obtained an ownership interest in a building at 405 North
Mannheim Road in Bellwood, Illinois, concealing the interest through a third-party nominee. On
December 15, 1992, Ryan authorized the SOS Office to enter a five-year lease of the Bellwood
facility and to renew the lease in March 1998 for another five-year term. Between December 1992
and March 2003, Warner received approximately $171,000 in proceeds related to the Bellwood
lease. (fd. Count 2 Jf] 80-82.) On October 31, 1994, Warner also obtained a substantial ownership
interest in a building at 605 Maple Road in Joliet, Illinois, again concealing his interest by using a
third-party nominee. On January 1, 1995, Ryan, who had instructed a high-ranking SOS Office

official to help Warner find a building for the new lease, authorized the SOS Office to enter a four-

12



stating that government agents are unaware of any electronic surveillance of Defendant Ryan, with
the exception of a single recorded telephone conversation in April 2002. The tape recording, and
a draft transcript, has been produced, and Ryan accordingly has withdrawn this motion,

M. Ryan’s Motion for an Order Directing the Government to Produce Agents’ Notes

Ryan asks the court to require the prosecution to produce all of the original handwritten
notes of law enforcement agents who interviewed him, Rule 16(a)(1)(A) requires the government
to disclose the substance of any oral statement made by a defendant to a government agent if the
government expects to use the statement at trial. In this case there can be no doubt that the
government expects to use certain statements made by Ryan, as it has charged in three counts
that certain of those statements were false.

As the government notes, the Seventh Circuit has held that the government satisfies the
requirements of Rule 16 without furnishing original handwritten notes, so long as it does produce
a written report containing all of the information in those notes. See United States v. Coe, 220 F.3d
573, 582 (7th Cir. 2000); United States v. Muhammad, 120 F.3d 688, 699 (7th Cir. 1997). With
respect to any government witness who testifies to what Ryan told him, production of such a report
satisfies the government's obligations under the Jencks Act as well. United States v. Bastanipour,
697 F.2d 170 (7th Cir. 1982). To demonstrate its compliance with the requirement that the written
reports it has produced are accurate and complete, the government has offered to produce the
agents’ notes for the court’s in camera review. The court adopts this proposal and directs the
government to produce agents’ handwritten notes, together with the written reports purportedly
summarizing those notes. Should the court detect even slight omissions or alterations, it will

entertain Ryan’s request for production of the original notes.

54



of this case. In declining to set the date as early as 120 days before the scheduled trial, the court
observes that it is Ryan's own attorneys who insisted on a trial date in March. Ryan's counsel is
unavailable in September, this court's preferred date for trial, due to a longstanding prior
commitment that, he asserts, will keep him fully occupied until the end of the year. Even
recognizing that other lawyers in his firm could presumably begin the process of preparing cross-
examination prior to that date, the court believes a disclosure date 90 days prior to trial is adequate
for Mr. Ryan to prepare his defense.
L Ryan’s Motion for an Order Requiring Immediate Notice of 404(b) Evidence

Defendant Ryan has asked that the court order the government to give notice of its intent
to offer Rule 404(b) evidence immediately. In its consolidated response to the pre-trial motions,
the government has offered to produce such material 60 days before trial, Ryan has accepted that
proposal, and it is hereby so ordered.
J Ryan’s Motion for Pretrial Production of Jencks Material and Witness List

Pursuant to 18 U.S.C. § 3500, Jencks material must ordinarily be produced at trial. In
complex cases such as this one, however, involving dozens of witnesses and many thousands of
documents, courts encourage production of such materials well in advance of the trial. The
government has offered to produce this material 60 days before trial; Ryan again urges that a
production date 120 days in advance is more appropriate. For the reasons stated with respect to
the motion for disclosure of impeachment evidence, the court will require disclosure of Jencks
material 90 days prior to the scheduled trial date.

Ryan also asks the court to order production of a witness list 45 days prior to trial. He
argues that relevant factors weigh in favor of this disclosure, including the very large number of
witnesses, the complexity of the facts at issue, the absence of any risk that witnesses would be

intimidated by the defense, and the fact that the government would not be prejudiced by this

52


investigation and that he concealed and hid the acts of the conspiracy, and will order no further
particulars concerning those matters. (/d. Items 7, 8.)

The court believes the indictment already provides information sufficient to identify the
individuals or entities referred to; for example, Ryan Relative One is identified as “the husband of
a Ryan Daughter’, Individual 2 as “a caretaker for defendant Ryan’s mother-in-law"; Associate Z
as an individual who annually furnished Ryan with the use of his vacation home in Jamaica. (SSI,
Count 18 {J 2A, B; Count 2 7] 89.) The court will require no further disclosure of this information
absent a showing that Ryan in good faith cannot determine who such individuals are. (Ryan's
Motion for Bill of Particulars, Particulars Regarding Persons, Items 1, 2.) Finally, Ryan asks for
particulars concerning when he “approved a plan" by Warner to share proceeds of payments with
Udstuen. (/d., Particulars Regarding Dates, Item 1.) The indictment alleges that in early 1991,
Warner told Udstuen that Ryan had approved such a plan. It alleges, further, that payments were
made to Udstuen with Ryan’s approval, but does not allege that this actually occurred pursuant to
a plan, nor does it suggest that Ryan formerly approved a plan at a particular time; the court will
require no further particulars concerning this matter.

With respect to certain other items, the court will require some additional disclosure: in
Count Eighteen ] 6, the indictment alleges that Ryan wrote and caused the writing of "false and
misleading notations on [Citizens For Ryan] checks issued to family members,” but does not
identify which checks bear such allegedly false notations. (Ryan's Motion for Bill of Particulars,
at 5.) Ryan asserts that Citizens For Ryan issued thousands of checks per year; the court will
direct the government to provide at least several examples of checks on which it contends false
notations appear, or a method by which Ryan can easily identify those checks, (/d., Particulars
Regarding Fraud/Misstatements, Item 1.) Similarly, the court will direct the government to identify
low-digit license plates that Ryan awarded, or a method by which Ryan can determine this

information from the documents that have been produced. (/d., Particulars Regarding Payment,

50



DISCUSSION

A. Defendants’ Motions to Dismiss RICO Charge

Ryan and Warner have separately moved to dismiss the RICO conspiracy charge against
them. Ryan claims that the State of Illinois is not a proper “enterprise” under the statute; that the
government has failed to allege a single enterprise, that the government has improperly alleged
multiple conspiracies; and that the State cannot be both the RICO “enterprise” and “victim.”
Warner argues that the RICO charge is deficient because it fails to specify the predicate
racketeering acts agreed upon by Defendants in furtherance of the conspiracy.

1. The State as a RICO Enterprise

To plead a RICO conspiracy under 18 U.S.C. § 1962(d), an indictment must allege that (1)
the defendants agreed to participate in the affairs of an enterprise through a pattern of racketeering
activity, and (2) the defendants further agreed that someone would commit at least two predicate
acts to accomplish those goals. Slaney v. International Amateur Athletic Federation, 244 F.3d 580,
600 (7th Cir. 2001). The definition of enterprise in the RICO statute is broad, including “any
individual, partnership, corporation, association, or other legal entity, and any union or group of
individuals associated in fact although not a legal entity," National Organization for Women, Inc. v.
Scheidler, 510 U.S. 249, 256-57 (1994) (quoting 18 U.S.C. § 1961(4)).

The second superseding indictment alleges that the RICO “enterprise” is the State of
Ilinois. (SSI, Count 115.) Ryan argues that a sovereign state cannot be an enterprise under the
Statute, directing the court to United States v. Mandel, 415 F. Supp. 997 (D. Md. 1976). In Mandel,
the former governor of Maryland was charged with, among other things, engaging in patterns of
racketeering activity and mail fraud by conducting and participating in the affairs of the State of
Maryland in a manner that personally benefitted himself and his co-defendants. /d. at 1018, The

defendants objected to the indictment on several grounds, including that the State of Maryland

22



are mail fraud counts involving state contracts of a nature similar to those in which Warner was
allegedly involved. Although Warner had no alleged involvement in either of these contract awards,
the court concludes that they are similar enough to matters in which he was allegedly involved that
joinder is proper here, and that any prejudice to Warner can be addressed by way of an appropriate
instruction to the jury.

The remaining seven assertedly misjoined counts are charges of false statements and tax
claims. The alleged conduct was that of Ryan alone. The government notes that several Seventh
Circuit cases have upheld the joinder of tax evasion charges against one defendant with RICO
charges against others. See, e.g., United States v. Anderson, 809 F.2d 1281, 1288 (7th Cir. 1987)
There might well be no abuse of discretion in denying joinder in these circumstances, particularly
if the evidence on these seven counts is relatively brief. If itis not, the court believes prejudice to
Warner could be eliminated if the government were directed to present evidence on these charges
only after evidence on all other counts has been presented to the jury. Alternatively, the court will
consider bifurcating the evidence on these counts from the remainder of the indictment, with these
counts to be tried to the same jury only after they have returned a verdict on the counts that relate
to Warner and Ryan jointly, and to the South Holland lease and Grayville prison counts (Counts
Six and Ten).

Such a procedure would address Warner's Bruton concerns, to the extent they are valid.
In Bruton v. United States, 391 U.S. 123 (1968), the Court recognized that when a defendant will
be faced with a co-defendant’s accusatory statements, the non-declarantis entitled to a severance.
As Warner himself recognizes, for Bruton to apply, the co-defendant’s statements "not only must
be powerfully incriminating, but also facially incriminating of the non-declarant defendant.”
(Warner's Memorandum of Law in Support of Motion for Severance, at 10) (citing Richardson v.
Marsh, 481 U.S. 200, 207-08 (1987)). As this court understands them, none of Ryan's statements

at issue in this case are incriminating: Specifically, Ryan allegedly stated that he appointed Warner

40



himself or another’; or (2) “[s]olicit[ing] or knowingly accept[ing] for the performance of any act a
fee or reward which he knows is not authorized by law.” 720 ILCS 5/33-3(c) and (d). (See also
SSI, Count 1] 2D.)

Pursuant to 50 ILCS 105/3, Ryan was not permitted to be “in any manner financially
interested directly in his own name or indirectly in the name of any other . . . in any contract or the
performance of any work in the making or letting of which [he] may be called upon to act or vote.”
(See $S1, Count 19] 2E.) In addition, Ryan was obligated under the Illinois Governmental Ethics
Act to file annually a Statement of Economic Interests with the State of Illinois disclosing, among
other things, (1) the name of any entity doing business in the State of Illinois from which he derived
income during the preceding calendar year in excess of $1,200 (that is, income other than for
specified professional services); (2) the identity of any compensated lobbyist with whom he
maintained a close economic association, and (3) the name of any entity from which a gift or gifts
valued singly or in the aggregate in excess of $500 was received during the preceding calendar
year. 5ILCS 420/4A-101; 5 ILCS 420/4A-102(a)(1), (5) and (b)(3). (See a/so SSI, Count 1 9 2F.)
|f Ryan constructively controlled the interest of a spouse or any other party as described in (1) or
(3) above, he was obligated to disclose the interest as if it were his own. /d.

Under the Illinois Gift Ban Act, 5 ILCS 425/10, Ryan, in his capacity as Governor, was
prohibited from soliciting or accepting gifts from any “prohibited sources,” including a person who
was registered or required to be registered with the Secretary of State under the Illinois Lobbyist
Registration Act, 25 ILCS 170/1 et seq.' (See SSI, Count 1 2G.) In addition, a written Secretary
of State ("SOS") Office policy memorandum effective no later than August 26, 1997 prohibited SOS

Office employees, including Ryan, from accepting any gifts, meals, or entertainment valued at $50

1 The Gift Ban Act was repealed effective December 9, 2003. See P.A. 93-617 § 85.
Legislation to enact a new version of the statute is currently pending in the Illinois legislature. See,
e.g., 2003 IL H.B. 638 (SN)



Id. at 501. By alleging all essential elements of a RICO conspiracy, specifying the time period
during which the conspiracy operated, the locations and principal actors in the conspiracy, the
specific types of predicate acts that were committed, and the modus operandi of the conspiracy,
the indictment sufficiently (1) stated the elements of the offense charged, (2) informed Glecier of
the nature of the charge so he could prepare a defense, and (3) enabled him to evaluate any
possible double jeopardy problems. /d. at 499, 500.

The second superseding indictment similarly sets forth the elements of the conspiracy and
provides sufficient detail to allow Defendants to prepare a defense and evaluate any double
Jeopardy concerns. The indictment identifies the RICO enterprise, the purposes of the conspiracy,
the types of racketeering acts involved (mail fraud, money laundering, extortion, and obstruction
of justice), and the means and methods of the conspiracy. (Gov't Resp., at 21; SSI, Count 1 {I 5-
17.) It also provides details regarding the time period during which the conspiracy operated and
the principal actors. In light of the government's representation that it will “request that the jury be
instructed that in order to convict a defendant of the RICO conspiracy offense, the jury's verdict
Must be unanimous as to which type or types of racketeering activity the defendant agreed would
be committed,” the foregoing allegations are adequate to allege a RICO conspiracy. (/d. at 21-22)
(emphasis in original).

Warner also claims that Count One improperly charges an agreement to violate Illinois’
official misconduct statute, 720 ILCS 5/33-3(d). He notes that official misconduct can only serve
as a predicate act under RICO if it amounts to the generic equivalent of bribery, and argues that
“absent the RICO conspiracy charge describing the underlying bribery or official misconduct
activity, this Court cannot determine whether the alleged agreements to commit official misconduct

were tantamount to bribery.” (Warner RICO Mem., at 4, 5) (citing United States v. Genova, 333

2 The Government's Consolidated Response to Defendants’ Pretrial Motions and

Government’s Motion for Reciprocal Discovery is cited as “Gov't Resp., at __.”

33



individuals and entities designated by them. Ryan directed his share of the “consulting” payments
to certain family members who had not performed any bona fide services for the Gramm campaign.
(id. Count 2 §] 142.) Ryan concealed the benefits he received from the Gramm campaign by
omitting the income from his 1995 and 1996 Statement of Economic Interest forms and tax returns.
(id, Gount 2 J 143.)

H. Obstructing the Grand Jury Investigation

The second superseding indictment also charges Ryan with concaaling misconduct and
obstructing a Grand Jury Investigation into allegations of misconduct, corruption, and fraudulent
conduct relating to the SOS Office, the Governor's Office, and related entities and individuals. (/d.
Count 1 7 4.) In September 1998, after learning about the Grand Jury Investigation, Fawell
directed SOS Office employees, including William Mack, to “clean up” Citizens For Ryan-related
documents on SOS Office premises. Ryan was present when Fawell gave this instruction. (/d.
Count 2 | 145.) Mack gathered a number of SOS Office employees and directed them to shred
“voluminous amounts of material,” filling numerous garbage bags that were subsequently
transported out of the office. Afterwards, Mack contacted Ryan and Fawell to inform them that the
SOS Office had indeed been “cleaned up.” (/d. Count 2 Jf] 146, 147.)

In addition to this shredding incident, Ryan is charged with making material false statements
in three interviews with law enforcement agents from the Federal Bureau of Investigations (“FBI”)
who were conducting the Grand Jury Investigation. In a January 5, 2000 interview, Ryan allegedly
made false material statements about the vacation benefits he received from Associate 2; the lease
of Associate 2's property in South Holland, Illinois; the Joliet lease involving Warner's property; his
decision to appoint Warner to the McPier board®; and the Libertyville raid regarding the fundraising

tickets. (/d. Count 2 J 148A.) In an October 16, 2000 interview, Ryan allegedly made false

8 The second superseding indictment does not provide any information regarding the

McPier board, its purpose, or its membership.

19



innocent individuals,’ namely, the People of the State of Illinois.” (/d. at 7) (quoting United States
v. Thompson, 685 F.2d 993, 1000 (6th Cir. 1982)). To the extent that an enterprise is merely the
vehicle through which defendants conducted alleged illegal activity, this argument has no merit.
“A major purpose of the RICO statute was to protect fegitimate enterprises by attacking and
removing those who had infiltrated them for unlawful purposes.” United States v. McDade, 28 F.3d
283, 296 (3d Cir. 1994) (emphasis in original) (citing Russello v. United States, 464 U.S. 16, 28
(1983)) (‘Congress viewed the RICO statute in large part as a response to organized crime’s
infiltration of legitimate enterprises’). Consistent with this goal, the government is seeking to prove
that Ryan and Warner infiltrated legitimate state government and defrauded the citizens of Illinois.
The mere fact that other State employees may somehow be cast in a negative light — a potential
side-effect of any case involving a governmental enterprise — in no way establishes that the
definition of enterprise does not include a State.

Ryan next argues that the plain language of the statute and its legislative history
demonstrate that Congress never intended for a state to be deemed an enterprise. (Ryan RICO
Mem., at 8.) Much of this argument follows the rationale of Mande/ which, as noted, has been
criticized, For example, Ryan notes that the statutory definition of “enterprise” does not include
States or other sovereign governments, instead setting forth “a number of the ‘common legal forms
in which business entities and labor groups fashion themselves to carry out their private functions.”
Id. (quoting Mandel, 415 F. Supp. at 1021). These legal forms include partnerships, corporations,
associations, and “other legal entit[ies].” 18 U.S.C. § 1961(4). Relying on the doctrine of ejusdem
generis, which presumes that all items named are of the same type and class, Ryan insists that
“[t]he more general reference[] to ‘any legal entity’. .. must be construed to be limited to the same
type and class of entities which preceded it in the statutory definition.” (Ryan RICO Mem., at 8)
(quoting Mandel, 415 F, Supp. at 1021). From there, Ryan argues that, “constru[ing] the broad in
light of the narrow,” § 1961(4) does not encompass the State of Illinois. /d.

25



In counts Eleven through Thirteen, Ryan is charged with making materially false, fictitious,
and fraudulent statements during interviews with the FBI on January 5, 2000, October 16, 2000,
and February 5, 2001. Count Fourteen charges Warner with extortion by knowingly attempting to
obtain payments from American Decal Manufacturing under color of official right using threats of
economic harm. 18 U.S.C. § 1951. Counts Fifteen and Sixteen charge Warner with money
laundering by funneling illegal proceeds from the validation stickers contract and computer-related
contracts through Drazek’s company, AMR. 18 U.8.C. § 1956 (a)(1)(B)(i). Count Seventeen
charges Warner with structuring currency transactions in violation of 31 U.S.C. §§ 5324(a)(3) and
(d)(2). Specifically, to avoid the reporting requirements of 31 U.S.C. § 5313(a), Warner allegedly
structured the withdrawal of $14,000 from his Omega Consulting Group Ltd. checking account into
two separate transactions — one in the amount of $9,000 on August 4, 1997, and a second in the
amount of $5,000 on August 5, 1997 — at different branches of the North Community Bank.

Count Eighteen charges that Ryan attempted to, and did in fact obstruct the IRS in the
correct reporting of income and the assessment and collection of taxes. Specifically, Ryan
allegedly (1) used Citizens For Ryan funds to pay his and certain family members’ personal
expenses and to provide personal gifts, such as payments for travel expenses, for the benefit of
third parties (SSI, Count 18 J] 4); (2) caused income that he was receiving from Citizens For Ryan
and third parties to be diverted to others, thereby depriving the IRS of accurate information
regarding his income (/d. Count 18 {[ 5); (3) concealed benefits he received from the Gramm
campaign (/d. Count 18 JJ] 14-20); and (4) received money from political supporters, which he used
for personal expenses but failed to report as income. (/d. Count 18 ff] 23, 24.) Counts Nineteen
through Twenty-Two charge Ryan with filing false tax returns and amended returns that
understated his gross income.

Ryan and Warner have filed 20 separate motions seeking, among other things, dismissal

of the RICO conspiracy and mail fraud charges. The court addresses each motion in turn.

21



F.3d 750, 758-59 (7th Cir. 2003)), The Genova court did hold that “§ 5/33-3(c) does not read like
a definition of bribery and therefore may not be used as a predicate offense under RICO.” 333
F.3d at 758-59. Section 5/33-3(d), however, which the government relies on in this case, does
“define[] a species of bribery.” /d. at 758 (citing United States v. Garner, 837 F.2d 1404, 1417-19
(7th Cir. 1987)). (See also SSI, Count 1 | 8D) (charging Warner and Ryan with conspiring to
engage in a pattern of racketeering activity involving, among other things, “multiple acts involving
bribery chargeable under the following provisions of state law: 720 ILCS 5/33-1(c) and (d); and
5/33-3(d).) Thus, official misconduct under § 5/33-3(d) may serve as a predicate act of
racketeering. Warner's motion to dismiss the RICO conspiracy charge is denied.
B. Ryan’s Motion to Dismiss Mail Fraud Charges

Ryan seeks to dismiss the mail fraud charges against him on two theories: (1) the second
superseding indictment improperly alleges “multiple schemes with different characteristics, different
participants, and no legally sufficient nexus between them”, and (2) the intangible right of “honest
services,” 18 U.S.C. § 1346, is unconstitutionally vague on its face and as applied. The court
addresses each argument in turn

41. Multiple Schemes to Defraud

Ryan first claims that Count Two of the second superseding indictment is duplicitous
because it combines multiple, unrelated schemes. “Duplicity” —i.e., “the joining of two or more
offenses in a single count” — is prohibited by FED. R. CRIM. P. 8, which requires “a separate count
for each offense,” United States v. Buchmeier, 255 F.3d 415, 421 (7th Cir. 2001). As the
Buchmeier court explained,

[t]he overall vice of duplicity is that the jury cannot in a general verdict render its

finding on each offense, making it difficult to determine whether a conviction rests

on only one of the offenses or both. Additionally, we have explained that a

duplicitous indictment may expose a defendant to other adverse effects including

improper notice of the charges against him, prejudice in the shaping of evidentiary
rulings, in sentencing, in limiting review on appeal, in exposure to double jeopardy,

34



the contribution, Individual 1 made out four $500 checks to Ryan and certain Ryan family members,
As aresult, Ryan avoided his obligation under the Illinois Governmental Ethics Act to disclose gifts
from any entity valued singly or in the aggregate in excess of $500. 5ILCS 420/4A-102. (See also
SSI, Count 1 2F.) Ryan also accepted gifts from Individual 1 in December 1997 and December
1998 in violation of SOS Office policy. He failed to disclose the financial benefits he received from
Individual 4 until after federal investigators questioned him on October 16, 2000. (/d. Count 2
WM 122-24.)

According to the second superseding indictment, Warner was also involved in awarding low-
digit plates to friends and associates in exchange for political favors. In early 1991, he advised
Ryan to “keep close track of how low digit plates were issued” and to use the plates as a “plum.”
(id. Count 2 7 125.) From the early 1990s through late 1998, Ryan approved Warner's requests
for low-digit plates for Warner's business associates and clients, and employees of his private
business. Warner then solicited some of the individuals who received low-cigit plates to make
campaign contributions to Citizens For Ryan. (/d. Count 2 ff] 126, 127.) All told, Ryan awarded
more than 90 low-digit license plates to Warner and to third parties acting through Warner. (/d.
Count 2 J 129.)

F. Reorganization of the Inspector General Department

From 1991 through at least 1998, Citizens For Ryan sponsored annual political fundraising
events that "relied upon SOS Office personnel selling political fundraising tickets.” (/d. Count 2
11130A.) As SOS Office chief of staff, Fawell mandated political fundraising “goals” for SOS Office
departments, Aware of these goals, certain SOS Office employees, including supervisory
employees in the Driver Services Department and Vehicle Services Department, individually sold
thousands of dollars in fundraising tickets on behalf of Citizens For Ryan. Each year, Ryan

rewarded SOS Office employees who had sold substantial numbers of political fundraising tickets

16



of the proceeds to Udstuen through payments made to American Management Resources. (fd.
Count 2 {| 23.)

2. Title Laminates Contract

In August 1991, Warner told an official of ADM that in exchange for $67,000, he would
cause the SOS Office title laminates contract, then held by 3M, to be awarded to ADM. At
Warner's direction, and with the understanding that Warner was acting with Ryan's authority, SOS
Official A “took official actions to materially benefit ADM and to the competitive disadvantage of
3M.” As a result, ADM was awarded the title laminates contract between 1991 and September
1998. (/d. Count 2 ff] 25-27.)

3. Computer Contracts

Also in 1991, Warner and Udstuen learned information pertaining to the SOS Office's
mainframe computer upgrade contract. That summer, they and Associate 1 met with
representatives of Honeywell/Bull (“Honeywell”), which held the existing computer contract, and
conveyed to them that in exchange for total payments of up to $1,000,000, Honeywell “would be
awarded one or more computer-related contracts with the SOS Office, including the prospective
mainframe computer upgrade contract.” (/d. Count 2 {[{] 28-30.) Honeywell managers declined to
make the payments and on September 24, 1991, reported the solicitation activities to Ryan, who
said that he would “get to the bottom of it.” Instead, Ryan authorized Warner and Udstuen to assist
in hiring a Director of the SOS Office Information Systems Services Department whe would be
responsible, in part, for helping in the selection and implementation of the computer upgrade
contract. (/d, Count 2 ff 2A, 31-33.)

In or about February 1992, Warner and Udstuen learned that SOS Official B would support

selecting IBM for the mainframe computer upgrade contract and recommended that Ryan hire

Official B for the Director position. Ryan did so and in March 1993, Warner entered into a written



benefit himself, Associate 1, and Udstuen. (/d. Count 1 JJ 11-12, Count 2 [J 102-15; Ryan RICO
Mem., at 18.) According to Ryan, “it is far from evident from the face of the Indictment that the
alleged conspirators engaged in the requisite ‘agreement’ to a single, unitary objective broad
enough to encompass these disparate alleged acts.” (/d.)

Ryan is correct that the second superseding indictment describes a variety of activities and
objectives; nevertheless, in the court's view, the alleged conspiracies do not so easily separate into
distinct groupings. For example, Udstuen was involved in the validation stickers contract and the
computer contracts for the SOS Office while Ryan was Secretary of State, but he was also involved
in the Wisconsin Energy lobbying scheme with Ryan and Associate 1 during the Governor years.
Similarly, Associate 1 was involved in the digital licensing contract for the SOS Office, but he was
also the beneficiary of the Grayville Prison, Wisconsin Energy, and Metropolitan Pier and
Exposition Authority schemes while Ryan was Governor. In addition, several of Warner’s and
Ryan’s alleged schemes that began in the Illinois SOS Office continued after Ryan became
Governor. Specifically, Warner and Udstuen received payments relating to the validation stickers
contract until 2000; Warner and Associate 1 received payments relating to the digital licensing
contract through November 2002; and Warner received payments relating to the 17 North State
Street, Bellwood, and Joliet leases until at least October 2001, March 2003, and March 1999,
respectively. The court is satisfied that the second superseding indictment sufficiently alleges an
ongoing conspiracy to use state resources for personal gain. See, e.g., United States v. Magana,
118 F.3d 1173, 1190 (7th Cir. 1997) (“ongoing drug distribution conspiracy . . . involving core
members who bought from and sold to various suppliers and dealers” constituted a single
conspiracy rather than a series of smaller, separate conspiracies); United States v. Stern, 858 F.2d
1241, 1249 (7th Cir. 1988) (substitution of "players” in ongoing prostitution enterprise “did not alter
the continuing nature of the single conspiracy”). Ryan's motion to dismiss the RICO charge for

alleging multiple conspiracies is therefore denied.

31



towns can constitute RICO enterprises and, even with due respect to the states’ unique role in our
system of federalism, the court is unable to identify a principled distinction between states and
other public bodies in this context. In short, Ryan has not established to this court's satisfaction
that an entire state cannot, in appropriate circumstances, also serve as a vehicle for the type of
corruption RICO seeks to eradicate. Thus, Ryan's motion to dismiss the RICO charge on this basis
is denied.

2. Allegations of a Single Enterprise

Ryan also seeks dismissal of the RICO conspiracy charges for failure to properly allege a
single enterprise. To prove a single RICO conspiracy, the government must show that the
defendants “agreed to conduct the affairs of the enterprise through the commission of two
predicate acts.” United States v. Maloney, 71 F.3d 645, 664 (7th Cir. 1995). A series of
agreements may be tried as a single “enterprise” conspiracy if the defendants have agreed to
commit a substantive RICO offense. /d. “'So long as the alleged RICO co-conspirators have
agreed to participate in the affairs of the same enterprise, the mere fact that they do not conspire
directly with each other’ does not convert the agreement to conduct the enterprise's affairs through
a pattern of racketeering activity into multiple conspiracies.” /d. (quoting United States v. Friedman,
854 F.2d 535, 562 (2d Cir, 1988)).

Ryan argues that even if the State of Illinois can generally constitute an enterprise, the
government cannot use that entity “for the sole purpose of encompassing multiple, unrelated
conspiracies within a single RICO charge.” (Ryan RICO Mem., at 14.) In Ryan’s view, the second
superseding indictment alleges two separate conspiracies relating to two different enterprises. The
first involves criminal acts that occurred while Ryan was Secretary of State (the “SOS Office
conspiracy”); the second involves criminal acts that occurred while Ryan was Governor of Illinois

(the “Governor's Office conspiracy”). (Ryan RICO Mem., at 13.) The SOS Office conspiracy, Ryan

28



department directors, regarding matters related to the award of SOS Office contracts and real
property leases; and assisted in determining the content of official SOS Office communications and
contract specifications. (/d. Count 29 2C.) Warner was never an official or employee of the State
and did not draw a state salary or consulting fees.

Pursuant to the criminal laws of the State of Illinois, Warner was prohibited from promising
or tendering to a public official, with intent to influence the performance of any official act, any
property or personal advantage which the public officer would not be authorized by law to accept.
720 ILCS 5/33-1(c¢). (See also SSI, Count 1 3A.) In addition, the Illinois Lobbyist Registration
Act, effective in January 1994, required that Warner register with the SOS Office as a lobbyist if
he qualified under either of the following definitions: “(1) Any person who, for compensation or
otherwise, either individually or as an employee or contractual employee of another person,
undertakes to influence executive, legislative or administrative action’; or “(2) Any person who
employs another person for the purposes of influencing executive, legislative or administrative
action.” 25 ILCS 170/3. (See a/so SSI, Count 1 [ 3B.) The same Act required Warner to disclose
in annual statements filed with the SOS Office all expenditures related to lobbying, and to itemize
any expenditures over $100 made on behalf of, or benefits given to, any legislative or executive
branch official, including gifts and travel and entertainment expenses. 25 ILCS 170/6. (See also
SSI, Count 14 3C.)

3. Others

Donald Udstuen conducted lobbying activities for medical professionals in Illinois and
served as the Chief Operating Officer for the lilinois State Medical Insurance Exchange, a company
that provides malpractice insurance to Illinois physicians. See http:/Avww.ismie.com. Ryan

appointed him co-chairman of the SOS Office Transition Team, and at times during Ryan’s political

career, Udstuen served as an advisor and fundraiser for Ryan’s political campaigns. (SSI, Count



or more in a given year from any single “prohibited source,” defined as “any person or entity who
sought official action, did business or sought to do business with the SOS Office, conducted
activities regulated by the SOS Office or had interests that could be substantially affected by the
performance or non-performance of the employee's official duties.” From at least August 1997
through 2002, Ryan also had a stated personal policy of not accepting personal gifts with a value
exceeding $50. (/d. Count 1 J 2J.)

Finally, political activity by SOS Office employees was at all relevant times limited in the
following respects: (1) no person was permitted to induce or persuade, or attempt to induce or
persuade, particular categories of state employees to violate the restrictions against performing
political activity during regular working hours, 5 ILCS 320/4*; (2) no public funds could be used “to
urge any elector to vote for or against any candidate or proposition, or be appropriated for political
or campaign purposes to any candidate or political organization,” 10 ILCS 5/9-25.1; and (3) SOS
Office employees were prohibited from using state working time for personal gain or for any reason
other than performing their governmental duties, or from participating in any political campaigning
or activity while on duty. (SSI, Count 1 21.)

2. Warner

Warner owned and operated several businesses, including two entities named National
Consulting Company and Omega Consulting Group Ltd. (/¢. Count 1 71H.) In or about November
1990, then-Secretary of State Ryan appointed Warner as a member of the SOS Office Transition
Team, a team of individuals designated to review the practices and procedures of the SOS Office
and make recommendations for changes and improvements. Warner attended internal SOS Office
meetings, including policy meetings and staff retreats; occasionally performed private work inside

Ryan's governmental offices; directed and advised SOS Office personnel, including one or more

2 This statute was repealed effective November 19, 2003. See P.A. 93-615, Art. 90,

§ 90-6



by attending special ceremonies to acknowledge top ticket sellers and by having his picture taken
with them. (/d. Count 2 Jf] 1308, 130C.)

According to the second superseding indictment, Ryan and Fawell knew by December 1994
that agents of the Inspector General (“IG") Department were investigating alleged official
misconduct by employees of the Drivers Services Department and the Vehicle Services
Department relating to the sale and distribution of fundraising tickets for Citizens For Ryan.
Specifically, in March 1993, the IG Department had investigated SOS Office employees of the
Libertyville driver's license facility and seized a briefcase containing cash and fundraising tickets
from the governmental office of an employee suspected of criminal activity. On March 9, 1993, the
Inspector General told Ryan that IG Investigators "had located fundraising-related evidence in the
SOS Office employee’s governmental office." In late March 1994, the IG Department had
investigated allegations, “aired on local television,” that an SOS Office employee had solicited an
auto parts dealer who was regulated by the SOS Office for fundraising tickets during state working
hours. Those allegations were allegedly communicated to Ryan.® In April 1994, the IG Department
had investigated official misconduct’ by an employee in the SOS Office's Naperville licensing
facility. On April 26, 1994, an IG Investigator called Ryan and told him that the Naperville
employee’s alleged misconduct “may have been motivated by sales of Citizens For Ryan
fundraising tickets.” Finally, in November 1994, IG Investigators had learned that a driver involved
in a widely-publicized fatal traffic incident may have obtained his commercial driver's license
illegally at the McCook driver's license facility. The Inspector General allegedly notified high-

ranking SOS Office officials of these allegations. (/d. Count 2 J 130D.)

6 The second superseding indictment does not indicate who communicated the

allegations to Ryan or when that allegedly occurred,
7 The second superseding indictment does not describe the exact nature of the
“official misconduct.”

7



Udstuen's past service to Ryan, Ryan had approved of a plan to provide Udstuen with one-third of
the proceeds that Warner obtained from certain vendors doing business with the SOS Office
(American Decal Manufacturing (‘ADM’) and International Business Machines (“IBM")), To conceal
the flow of proceeds from Warner to Udstuen, the two agreed that Warner would use American
Management Resources (“AMR”), a company owned by Udstuen’s personal associate Alan Drazek,
as “a conduit for the purpose of passing payments from Warner to Udstuen relating to ADM and
IBM." Warner issued checks to Drazek who, in turn, gave a substantial portion of the proceeds
back to Udstuen in the form of cash. (/d. Count 2 {J 7-10.)

1. Validation Stickers Contract

Up to and including 1991, ADM held the contract to manufacture and print vehicle
registration validation stickers for the State of Illinois. As of 1991, the contract required that
validation stickers bear a “metallic security mark,” a product created and manufactured by ADM.
(id. Count 2 J 14.) In July 1991 and continuing thereafter, Warner made unsolicited contacts with
officials of ADM and pressured them to make monthly payments to him in exchange for his
assurance that the metallic security mark would remain a requirement for the validation stickers
contract. (/d. Count 2 ff] 15, 16.) In 1993, a committee of the SOS Office Vehicle Services
Department unanimously recommended to a high-ranking official of the Department (“SOS
Official A") that the metallic security mark requirement be removed from the specifications for the
validation stickers contract. SOS Official A did in fact remove that requirement but at some point
Warner directed that it be reinstated. In an effort to assist Warner in his efforts on behalf of ADM,
Ryan also instructed SOS Official A in April 1993 to put the metallic security mark requirement back

in the contract specifications. (/d. Count 2 fff 17, 20-22.) Between 1991 and 2000, Warner

received approximately $332,000 in payments from ADM and, with Ryan's approval, gave one-third



could not be a RICO enterprise. /d. at 1020. The court first noted that the legislative history of
RICO is silent as to whether public entities such as governments and states may be considered
“enterprises,” and that there is no indication that Congress was concerned about the use of violent
and criminal tactics to subvert states or governments. /d, The court next concluded that applying
the statutory remedies to public entities “would clearly result in what could only be characterized
as a startling departure from the traditional understanding of federal-state relationships.” /d. at
1021. As an example, the court considered a scenario in which “a private citizen of a state,
aggrieved by the ‘racketeering acts’ of an official in conducting the state, could bring a treble
damage action against that official and require forfeiture of office and dissolution of the state
government.” /d. The court further explained that because “States have their own adequate
resources to combat threats to their integrity leveled by organized crime,” it is “simply untenable
to argue that Congress, without saying so, intended to federalize crimes involving the acts of a
public official in conducting the government of a state." /d. Having concluded that the State of
Maryland was not an enterprise, the court dismissed the RICO count of the indictment. /d. at 1022.

The parties in Mande! never appealed the court's ruling that public entities cannot be RICO
enterprises and, technically, the case remains good law. The reasoning behind that decision,
however, has been roundly criticized by other courts. In United States v. Long, 651 F.2d 239 (4th
Cir. 1981), for example, the Fourth Circuit, which hears appeals from the District of Maryland,
expressed its “disapproval” of Mande/ and held that a South Carolina State Senator's legislative
seat constituted a RICO enterprise. In concluding that enterprise “should be construed to include
public entities,” the court noted that the definition of that term in § 1961(4) does not differentiate
between public and private individuals or entities, and emphasized that the congressional statement
of purpose and findings in the statute “denounces racketeering activities because, among other
evils, they ‘subvert and corrupt our democratic processes.” /d, at 241 (citing United States v.
Altomare, 625 F.2d 5 (4th Cir. 1980) (state prosecutor's office constitutes an enterprise)). In the

23


Mikute Order Form (847)

United States District Court, Northern District of Ilinois

Tameotasazne ase | Reg. Pallmeyer | Siig Jute other

CASE NUMBER Yoo CR 506 - 1,4 DATE 8/11/2004
CASE USA vs. Lawrence Warner, George H. Ryan, Sr.
TITLE

Lin the following box (a) indicate the parly filing the motion, ¢.g., plaintitt, defendant, 3rd party plaintitY, and (6) state briefly the nature
of the motion being presented.)

MOTION:

DOCKET ENTRY;

(1) Oo Filed motion of [ use listing in “Motion” box above.]

(2) ia Brief in support of motion due

GB) a Answer brief to motion due___._ Reply to answer brief due.

(4) a Ruling/Hearing on____sset for___at

(5) oO Status hearing [held/continued to] [set for/re-set for}on set for at
(6) Oo Pretrial conference[held/continued to] [set for/re-set for]on__—ssetfor_—at_
(7) Oo Triallset for/reeset for]on at

(8) Oo [Bench/Jury trial] [Hearing] held/continued to___at

(9) oO ‘This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant lo]

QFRCP4(m) = C) Local Rule 41.1 OFRCP41(a)(1) OO FRCP41(a)(2).

(10)M (Other docket entry] Enter Memorandum Opinion And Order. Defendants’ pretrial motions (142, 160-
1, 138-1, 150-1, 167-1, 140-1, 84-1, 144-1, 159-1, 146-1, 166-1, 158-1, 157-1, 156-1, 156-2, 58-1, 155-1, 154-1,
153-1, 152-1, 151-1, 149-1, 148-1 and 171-1) are granted in part and denied in part.

(il) [For further detail sce order on the reverse side of the original minute order.] order attached to the original minute

Document
Number

No notices required, advised ia open court.

No notices required
number af nicer

o | Notices mailed by judge’s statt AUG 12-2004

Notified counsel by telephone. date docketed

Jy

“dockering deputy initiate

Dockcting to mail notices,

Mail AO 450 form.

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Copy to judge/magistrate judge.
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courtroom ayn Hd {chy ib dae ied wi
[TV deputty’s 4 ay
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contracts and leases and to lobbying agreements are part of the charged scheme to defraud.
Matters involving the distribution of low-digit license plates, the dismantling of the Illinois Inspector
General's office, and the shredding of campaign documents are of a slightly different nature, but
these matters, too, constitute misuse of state resources for personal or political ends. The motion
to strike these allegations is denied without prejudice.

5. Paragraphs 11, 52, and 130 of Count Two

Finally, Warner objects to certain paragraphs of Count Two as irrelevant and prejudicial.
First, he correctly notes that paragraph 11 of Count Two of the indictment identifies personal and
financial benefits Warner supplied to Ryan, but does not allege that the benefits were extended in
exchange for official action. The court agrees that extending favors to a governmental official is
not necessarily unlawful and that the jury must find a connection between the benefits that Ryan
and Warner extended to one another in order to find that the two conspired to deprive the State of
Illinois of Ryan’s honest services. In the court's view, this is a matter that can be addressed in jury
instructions, not by way of striking paragraph 11.

In paragraph 52 of Count Two, the indictment details Warner's purchase of Viisage stock
months before the SOS Office awarded a contract to Viisage. The government argues that this
evidence will “help the jury understand the circumstances under which Warner operated to enrich
himself” with non-public information. (Gov't Resp., at 55.) Warner's purchase of the stock
presumably reflects his confidence that the contract would ultimately be awarded to Viisage and
may be admissible on that basis. The court shares Warner's concern that the jury not be invited
to consider this matter as evidence of some other uncharged wrongdoing, however, and will
consider striking this allegation from the indictment or giving an appropriate instruction concerning

the matter.

46



4. Digital Licensing Contract

In 1986, the SOS Office began an initiative to switch to a “digital licensing" system such that
all State of Illinois automobile and truck drivers’ licenses would be created and maintained through
digital technology. Warner learned about the digital licensing system initiative in August 1996.
Around the same time, Warner learned that a high-ranking SOS Office official who would have a
role in implementing the system (“SOS Official D’) preferred Viisage Technologies, a
Massachusetts-based company that provides “advanced technology identity solutions,” as a vendor
for the system. (/d. Count 2 I] 47, 48.) (See also htto:/Awww.viisage.com.) In October 1996,
Warner and Viisage entered into a lobbying contract. Pursuant to that contract, Warner agreed
to assist Viisage in its efforts to obtain the digital licensing contract; in exchange, Viisage agreed
to pay Warner a percentage of all gross revenues received by Viisage if it won the digital licensing
contract, To conceal his involvement with Viisage, Warner kept his own name off the lobbying
contract, presumably to avoid the reporting and registration requirements of the Illinois Lobbyist
Registration Act, 25 ILCS 170/3, 170/6. (/d. Count 1 | 3B and C; Count 2 9] 49, 50.)

In December 1996, before the SOS Office began the bidding process on the digital licensing
contract, Warner guaranteed Associate 1 payments totaling $36,000 in 1997 if Associate 1 agreed
to assist Warner on behalf of Visage. Warner also purchased Viisage stock and advised another
SOS Office employee to do the same. On June 2, 1997, Ryan awarded the digital licensing
contract to Viisage through approximately 2004 and, shortly thereafter, Warner “caused the
financial interest in the lobbying contract with Viisage to be assigned explicitly to Warner's
business.”” Between 1999 and November 2002, Warner received approximately $800,000 in

revenues related to the lobbying contract. In addition, beginning in 1999, Warner paid Associate

3 The second superseding indictment does not specify which of Warner's businesses

was assigned the financial interest in Viisage.

10



contract with IBM, retroactive to July 1, 1992, in which IBM agreed to pay Warner a percentage of
all revenues, up to $1,000,000, received in connection with SOS Office contracts. Based in part
on the actions taken by Warner, Ryan awarded the mainframe computer upgrade contract to IBM.
(id. Count 2 I] 34-38.)

In 1995, the SOS Office considered a pilot project that would use computerized kiosks
within certain SOS license facilities to allow citizens to renew vehicle registration, obtain validation
stickers, and perform other vehicle titling and registration operations. On April 24, 1995, a high-
ranking SOS Office official who supported the use of kiosks ("SOS Official C") notified Ryan and
Fawell in writing that the SOS Office could view kiosk demonstrations by several vendors at an
upcoming event in Columbus, Ohio. (/d. Count 2 1 39.) The next day, Ryan, Warner, Fawell, SOS
Official B, and SOS Official C traveled to Columbus to view the demonstrations, including ones by
IBM and a competing vender. Upon their retum to Illinois, SOS Official C recommended to other
SOS Office officials that the kiosk project be awarded to IBM's competitor. In response, Warner
instructed Udstuen to direct SOS Official C to drop his opposition to IBM’s selection.
“Understanding that Warner and Udstuen acted with the authority of defendant Ryan, SOS
Official C did as Udstuen advised." (/d. Count 2 ff 40-42.) In January 1996, Ryan selected IBM
for the kiosk project contract. (/d. Count 2 J] 43.)

Between 1993 and early 1999, Warner received approximately $1,000,000 in payments
under his contract with IBM, principally related to the mainframe computer upgrade contract. Per
their agreement, Warner directed one-third of the proceeds to Udstuen, routing the funds through
American Management Resources. Warner “filed false and misleading lobbyist registration

statements relating to IBM and failed to disclose all of his Ryan-related expenditures.” (/d. Count 2

1144, 46.)



As noted earlier, the court remains concerned by the delay that the joinder of Ryan has caused for
Warner. Although Warner is not in custody, his personal and professional life are certainly in
turmoil as a result of these pending charges. Further, although the court does not recognize a
qualitative difference between the delay in this case and the delay in others cited by the
government, the number of months between his original indictment and the scheduled trial is large.
The court therefore remains willing to try this case at the parties’ earliest possible convenience and
stands ready to alter its trial schedule and begin at the very first day that Ryan's attorneys are
teady.

The motion for dismissal on Speedy Trial grounds is denied.
E. Defendants’ Motions to Strike

Both Ryan and Warner have moved to strike language from the second superseding
indictment. Rule 7(d) authorizes the court to strike from an indictment allegations that are
‘immaterial, irrelevant or prejudicial.” As the government points out in response, the case law
reflects that such motions are not often granted. See United States v. Stoecker, 920 F. Supp. 867,
887 (N.D. Ill. 1996) (motion to strike should be granted only if the allegations are “‘clearly not
relevant to the charge and are inflammatory and prejudicial”) (citations omitted); United States v.
Marshall, 985 F.2d 901, 905-06 (7th Cir. 1993) (declining to grant such a motion and observing that
the “language of the indictment can hardly be characterized as immaterial since it delineates with
great specificity the numerous charges alleged by the government against each defendant’). In
United States v. Lavin, 504 F. Supp. 1356 (N.D. lll. 1981), Judge Moran observed that “language
in the indictment which covers information which the government, in good faith, intends to prove
at trial cannot be stricken as surplusage, no matter how prejudicial it may be." /d. at 1362. The
court granted the motion to strike in Lavin, where defendant property tax commissioners were

charged with taking bribes in return for reductions in property assessments. Specifically, the court

42



however, does not require a finding that he and his co-defendants acted through more than one
enterprise. Nor is the court persuaded that the government is constrained by allegations set forth
in earlier indictments. At this stage of the proceedings, the court cannot say that no reasonable
jury could conclude that Defendants conspired to commit predicate acts of racketeering through
the State of illinois.

3. Multiple Conspiracies

Ryan next asserts that the indictment improperly combines multiple, unrelated conspiracies
into a single conspiracy without the necessary interrelationship between the alleged wrongdoing.
(Ryan RICO Mem., at 18.) “Multiple conspiracies exist when there are separate agreements to
effectuate distinct purposes,” whereas a single conspiracy exists when “the evidence, viewed in the
light most favorable to the government, establishes that the co-conspirators joined to effectuate
a common design or purpose.” United States v. Ceballos, 302 F.3d 679, 688 (7th Cir. 2002). “So
long as the evidence demonstrates that the co-conspirators embraced a common criminal
objective, a single conspiracy exists, even if the parties do not know one or another and do not
participate in every aspect of the scheme,” United States v. Jones, 275 F.3d 648, 652 (7th Cir.
2001).

Ryan claims that there is no interrelationship between the "various SOS Office conspiracies”
and the Governor's Office conspiracy. As described earlier, the former includes: (1) the conspiracy
between Ryan and Warner to have Ryan act in his official capacity to personally benefit himself,
Warner, and other Associates (SSI, Count 1 f] 11-13); (2) the conspiracy between Warner and
unnamed “others” to extort vendors and prospective vendors of the SOS Office (/d. Count 1 {1 14);
and (3) the conspiracy between Ryan, Fawell, and agents of Citizens For Ryan to use SOS Office
resources for their personal benefit. (/d. Count 1 J 15-17.) The latter consists of the conspiracy

between Ryan, Associate 1, and Udstuen to have Ryan act in his official capacity to personally

30



Paragraph 130 refers to “a driver involved in a widely-publicized fatal traffic accident.”
Warner notes this allegation is unrelated to his own wrongdoing and that evidence of the incident
is unfairly prejudicial. The court agrees with the government's characterization of this language
as “muted and hardly inflammatory,” (/d. at 56), as it makes no mention of the number of victims,
their age, or other tragic circumstances. The court also agrees that the government has included
a reference to this incident as evidence of an act in furtherance of the mail fraud with which Warner
is charged. The motion to strike paragraph 130 is denied.

F. Defendants’ Motions for a Bill of Particulars

Both Defendants have moved for a bill of particulars, arguing that without additional
information, they are unable to prepare their defense. The government brushes off this concern,
insisting that the 91-page indictment is adequate notice of the charges against Defendants, and
noting its willingness to provide substantial disclosure well in advance of the scheduled trial date.

Rule 7(f) authorizes the court to order the government to produce a bill of particulars if the
allegations of the indictment are inadequate to provide notice of the charges against a defendant
Under Rule 7(f), a court may order a bill of particulars if the indictment fails to provide sufficient
notice of the charges to allow the defendant to prepare for trial. United States v. Fassnacht, 332
F.3d 440, 446 (7th Cir. 2003) (citing United States v. Kendall, 665 F.2d 126, 134 (7th Cir. 1981))
Thus, the test for determining whether a motion for a bill of particulars should be granted is
“whether the indictment sets forth the elements of the offense charged and sufficiently apprises the
defendant of the charges to enable him to prepare for trial.” Fassnacht, 332 F.3d at 446, Another
court has explained that in determining whether to impose the requirement of a bill of particulars,
the court may consider “the complexity of the charges, the clarity of the indictment, and the degree
of discovery available to the defense ...." United States v. Vasquez-Ruiz, 136 F. Supp. 2d 941,

942 (N.D, Ill. 2001). A defendant is only entitled to be informed of the charges against him; he is

47



says, consisted of three separate schemes: (1) one by Ryan, Warner, and Udstuen involving
contracts and leases with the SOS Office; (2) one by Ryan, Warner, and others relating to low-digit
license plates; and (3) one by Ryan, Fawell, and others engaged in various activities relating to the
SOS Office. (/d. at 14-15.) The Governor's Office conspiracy allegedly consisted of Ryan,
Associate 1, and Udstuen and involved (1) Associate 1’s efforts in lobbying for Grayville as the site
of a new prison after that site, unbeknownst to the public, had already been selected; (2) lobbying
contracts for Associate 1 related to Wisconsin Energy; and (3) Associate 1’s hiring as a lobbyist
for the Metropolitan Pier and Exposition Authority. (fd. at 14.)

Ryan directs the court to prior indictments in related cases as evidence that there is no
single enterprise conspiracy here. In the first superseding indictment against Warner, for example,
the core allegation was that Warner and others engaged in a scheme to defraud the people of the
State of Illinois, the State of Illinois, and the SOS Office of the honest services of “SOS Official A.”
The alleged enterprise consisted of Warner, two of his businesses, the Office of the Secretary of
State, and Udstuen. (First Superseding Indictment, {J 1(V), 2.) The second superseding
indictment similarly charges Ryan and Warner with scheming to defraud the people of the State
of Illinois and the State of Illinois of money, property, and the honest services of Ryan, but the
enterprise is now the State of Illinois. (Ryan RICO Mem., at 15.) In United States v. Fawell, No.
02 CR 310, Fawell was charged with using SOS Office resources for political purposes and
reorganizing the Inspector General’s office, much like the allegations in this case. (Fawell
Indictment, I] 136-44, 130-35.) The RICO enterprise in Fawell, however, consisted of an
association in fact between Fawell, Citizens For Ryan, the SOS Office, and others. (/d. J] 2.)

In this court's view, Ryan's argument is basically another challenge to the viability of aRICO
enterprise consisting of the State of Illinois. It is true that the second superseding indictment
alleges a pattern of racketeering activity that covers conduct from the time Ryan was Secretary of

State through his service as Governor of Illinois. The mere fact that Ryan changed elected offices,

29



191, Count 2 9 2B.) “Associate 1” was a lobbyist and consultant representing individuals and
entities before the Illinois legislature and executive offices, including the SOS Office and the
Governor's Office, from approximately 1973 through December 2002. In that capacity, Associate 1
met with Ryan and other Illincis government officials to promote and advance the positions of his
clients. (/d. Count 19] 1J.) Scott Fawell served as Ryan's Chief of Staff from February 1992 to
January 1999, making personnel, policy, strategic, and business decisions binding the SOS Office
He was also a principal operating officer, advisor, and decisionmaker for Citizens For Ryan, a
Private, state-wide political campaign committee established to support Ryan's campaign efforts.
(Id, Count 1 ff 1K, L.) Associate 2 owned a commercial building in South Holland, Illinois which
was leased to the SOS Office in May 1997. Through an entity called Seven Seas Villa, Associate
2 also co-owned a vacation home in Jamaica and personally owned a home in Palm Springs,
California. (/d. Count 1 {J 1N.)

The second superseding indictment alleges that Ryan performed and authorized official
actions to benefit his own financial interests and those of Warmer, Associate 1, Associate 2, and
“certain Associates and designated third parties, including Ryan family members and Citizens For
Ryan.” (/d. Count 2 14.) Ryan and certain third parties affiliated with him allegedly received
personal benefits from Warner, Associate 1, and certain other Associates, which Ryan understood
were provided to influence and reward him in the performance of official acts. In addition, from the
early 1990s to at least 2002, Ryan, Warner, and certain Associates concealed their financial
relationships with each other. (/d. Count 2 I] 5, 6.) The specific allegations are detailed below.
B. Official Actions Related to Warner and Udstuen

According to the second superseding indictment, Ryan gave Warner and Udstuen access

to material non-public information relating to government decisions, which enabled them to engage

in transactions for their personal benefit. In early 1991, Warner told Udstuen that, as a reward for



material statements by claiming that he had no personal knowledge of Warner's interest in the
Joliet lease; that he had no idea how Warner had advance knowledge that the SOS Office was
looking to lease property in Joliet; and that he had no personal financial relationship with Warner.
(Id. Count 2 § 148B.) In a February 5, 2001 interview, Ryan allegedly made false material
statements with respect to a conversation he had on a boat trip with Individual 1, which led to his
receiving four $500 checks. Specifically, Ryan falsely claimed that he did not give Individual 1 the
name and address of his son and daughter-in law, who were identified as. payees on certain of the
checks. (/d. Count 2 ¥] 148C.)
I, The Criminal Charges

Count One of the second superseding indictment charges Ryan, Warner, and “others
known and unknown to the Grand Jury’ with conspiring to commit a pattern of racketeering activity
involving multiple acts of mail fraud, money laundering, extortion, obstruction of justice, and bribery,
as Set forth above. (/d. Count 1] 8.) As part of the conspiracy, Warner and other Associates
allegedly provided personal and financial benefits to Ryan, his family, and Citizens For Ryan in
exchange for Ryan's exercising his official authority to benefit Warner and the Associates. (Id,
Count 1 919-12.) Defendants improperly concealed these actions by structuring cash withdrawals
to avoid the filing of currency transaction reports; paying funds to third parties who acted as
conduits and nominees; and paying cash and writing checks to cash. (/d. Count 1 9113.) Counts
Two through Five and Seven through Nine charge that, by their actions described above, Ryan and
Warner schemed to defraud the people of the State of Illinois and the State of Illinois of money,
property, and the honest services of Ryan and other state officials in violation of the mail fraud

statute, 18 U.S.C. §§ 1341, 1346. Counts Six and Ten charge Ryan with two additional counts of

mail fraud.



No. 148-1) are both granted. The government's corresponding request to renew its previous
responses to Wamer’s prior motions is also granted. Finally, the government's request for

reciprocal discovery (Docket No. 171-1) is granted.

ENTER:

Dated: August 11, 2004

57



Fawell/Bauer indictments does the government allege any connection between these two alleged
schemes.” (Ryan Mail Fraud Mem., at 7.) The government responds that the prior indictments
were “steps along the way to the government's uncovering the full scheme. Each indictment led
to more evidence which filled in a more complete picture of the overarching fraud on the public.”
(Gov't Resp., at 28.)

The court agrees that the government is not bound by the earlier indictments and is free
to expand and refine charges consistent with available evidence. Ryan objects that the
government's “improper joining of multiple schemes into a single scheme also creates problems
of ambiguous and, ultimately, improper jury findings.” (Ryan Mail Fraud Reply, at 3.)'® To be sure,
drafting appropriate jury instructions and verdict forms in this complicated case will require
particular care and attention. The court does not agree, however, that the complications dictate
dismissal of the mail fraud charges. Such concerns may properly be addressed with jury
instructions at trial. See United States v. Adeniji, No. 96 CR 259, 1997 WL 97725, at *2 (N.D. Ill.
Feb. 27, 1997) (citing United States v. Nava-Salazar, 30 F.3d 788, 795 (7th Cir. 1994)) (‘if it is
warranted by the facts at trial, a jury instruction on the question of single and multiple schemes may
be appropriate”). The second superseding indictment does not combine “isolated facts” nor allege
a “series of disconnected swindles or of frauds that may have had merely a common actor or
stage.” United States v. Reicin, 497 F.2d 563, 570 (7th Cir. 1974); United States v. Swinton, 75
F.3d 374, 378 (8th Cir. 1996). Ryan’s motion to dismiss the mail fraud charges is therefore denied.

2. Intangible Right of Honest Services

Section 1346 of the mail fraud statute prohibits “a scheme or artifice to deprive another of
the intangible right of honest services." Ryan claims that this provision is unconstitutionally vague

on its face and as applied; creates an impermissible common law crime; violates separation of

18 Defendant Ryan’s Reply in Support of his Motion to Dismiss the Mail Fraud Charges,

is cited as “Ryan Mail Fraud Reply, at __.”

37



powers; and violates core federalism principles. Courts, including this one, however, have routinely
rejected such challenges to the application of “honest services” fraud. See Faweil!, 2003 WL
21544239, at *3 (collecting cases that declined to find unconstitutional vagueness); United States
v. Genova, 167 F. Supp. 2d 1021, 1037 (N.D. Il, 2001) (citing United States v. Bloom, 149 F.3d
649, 655-56 (7th Cir. 1998)) (“misuse of a public position for private gain is the line that separates
run of the mill violations of state law fiduciary duty from federal crime”). Absent contrary direction
from the Seventh Circuit, the court declines to dismiss the mail fraud charges on these grounds.

Several other motions may be addressed more summarily,
c. Defendants’ Motions to Sever

In an earlier ruling in this case, the court noted its history; Defendant Warner was indicted
in 2002 and was prepared, after several delays, to proceed to trial in February of this year. Instead,
as 2003 came to a close, the government filed a Second Superseding Indictment, asserting a
number of additional charges and naming George H. Ryan as a second Defendant in the case.
Mr. Ryan was not prepared to proceed to trial at that time. See United States v. Warner, No. 02
OR 506, 2004 WL 144125 (N_D. Ill. Jan. 16, 2004). !n that earlier opinion, the court reviewed the
standards for charging more than one defendant together under Feo. R. Crim. P. 8 and concluded
that the standards of that Rule were satisfied here, where Warner and Ryan are charged with
engaging together in a racketeering conspiracy and scheme to defraud. With grave reluctance,
the court set a very long trial date, finding no other way to accommodate Ryan’s need for sufficient
time to prepare for trial, each Defendant's choice of counsel, the possible prejudice to either
Defendant from serial trials, and the interest of the court, the government, and many trial witnesses
in a single proceeding. The court's own preference was and remains to proceed to trial with

respect to both Defendants as early as September of this year.

38



disclosure. The government objects, citing settled case law holding that the prosecution is not
required to reveal the names of its witnesses prior to trial. United States v. Braxton, 877 F.2d 556,
560 (7th Cir. 1989); United States v. Napue, 834 F.2d 1311, 1317 (7th Cir. 1987); United States v.
Bouye, 688 F.2d 471, 473-74 (7th Cir. 1982). Instead, the government proposes to proceed as it
did in the case of United States v. Faweill, No. 02 CR 310, i.e., by furnishing the court with a list of
names likely to come up at trial, for use in jury selection, and then providing a list of the witnesses
it intends to call “on a ralling basis as trial progressed.” (Gov't Resp., at 67.)

The court agrees with the government that the procedure adhered to in the Fawell
prosecution will satisfy due process concerns. First, as a practical matter, it seems likely that all
parties will be well aware of the identity of substantially all of the key witnesses well before trial
begins, based upon the language of the indictment and the disclosure of impeachment evidence
a full 90 days before trial. Also, as a matter of practicality, it will be hard to predict the precise
availability of particular witnesses and/or the order in which they can or should be called to testify.
The court will expect each side to provide appropriate advance notice of the order in which they
expect to call witnesses and believes 48 hours is the minimum amount of advance notice that
would be appropriate. Should a more specific direction on this matter be required as the case
proceeds, the court will entertain further argument on the matter.

K, Ryan’s Motion for Immediate Production of Statements

The government recognizes its obligation to produce all statements made by Defendant
Ryan and represents that it has already done so. In response, Ryan has withdrawn this motion.
L. Ryan’s Motion for an Order Concerning Electronic Surveillance Evidence

Ryan asks that the government affirm or deny the occurrence and legality of any electronic
or video surveillance conducted as part of the government's investigation of this case, as required

by 18 U.S.C. § 3504. The government has furnished an affidavit from AUSA Patrick M. Collins,

53



The problem with this argument is that courts have uniformly held that Congress intended
RICO to apply to activities that corrupt public or governmental entities, making resort to ejusdem
generis unnecessary. See, e.g., Angelilli, 660 F.2d at 33 n.10 (rejecting application of ejusdem
generis to limit RICO enterprises to private entities where “we believe the congressional intent
appears clearly to the contrary”); Frumento, 563 F.2d at 1090 (quoting State of Texas v. United
States, 292 U.S. 522, 534 (1934)) ("[t]he rule of ‘ejusdem generis’ is applied as an aid in
ascertaining the intention of the legislature, not to subvert it when ascertained”), Ryan urges that
the legislative history of RICO nonetheless evidences an intent that Title | of the statute, which sets
forth procedures for special grand juries, “would serve as the primary vehicle for fighting political
corruption,” not Title IX as charged in the second superseding indictment. (Ryan RICO Mem., at
9-10.) This theory similarly ignores clear precedent to the contrary. See Conn, 769 F.2d at 424-25
(Cook County Circuit Court was enterprise for purposes of charge under 18 U.S.C. § 1962(c));
United States v. Ambrose, 740 F.2d 505, 512 (7th Cir. 1984) (Chicago Police Department was
enterprise in § 1962(c) case); McDade, 28 F.3d at 295-96 (Congressman McDade and his
Congressional offices in Washington, D.C., and in the 10th Congressional District of Pennsylvania
constituted an enterprise in § 1962(c) case).

Ryan next posits that reading § 1961(4) to include states would lead to "absurd and
anomalous results" because the civil and criminal RiCO remedial provisions authorize courts to
dissolve or reorganize an enterprise. In Ryan's view, “[i]t would truly be absurd to suppose that
Congress intended to give federal courts the authority to dissolve or reorganize a sovereign State."
(Ryan RICO Mem., at 10-11.) As the Supreme Court explained in United States v. Turkette, 452
U.S. 576 (1981), however, “even if one or more of the civil remedies might be inapplicable to a
particular illegitimate enterprise, this fact would not serve to limit the enterprise concept. Congress
has provided civil remedies for use when the circumstances so warrant. It is untenable to argue

that their existence limits the scope of the criminal provisions.” /d. at 585. Ryan objects that the

26



language and allegations from the indictment (Docket No. 84-1, 144-1, 159-1) are denied without
prejudice. Defendants’ motions for a bill of particulars (Docket No. 146-1, 166-1) are granted in
part and denied in part as stated in this opinion.

Ryan's motion for immediate disclosure of favorable evidence (Docket No. 158-1) is granted
without objection. Ryan's motions for timely disclosure of impeachment evidence (Docket No. 157-
4), motion for pretrial production of Jencks material and a witness list (Docket No. 156-1, 156-2),
and motion for an order requiring the government to make a Santiago proffer (Docket No. 58-1,
155-1) are granted in part and denied in part. Specifically, the government must disclose
impeachment evidence, produce Jencks material, and make a Santiago proffer 90 days before trial,
and must produce a witness list in accordance with the procedures set forth in this opinion. The
parties have agreed that the government will give notice of its intent to offer Rule 404(b) evidence
60 days before trial, and Ryan’s motion for such disclosure (Docket No. 154-1) is granted. Ryan
has withdrawn his motion for immediate production of statements made by him (Docket No. 153-1)
and his motion for an order requiring the government to affirm or deny the occurrence and legality
of any electronic or video surveillance and to produce same (Docket No, 152-1). Both are denied
as moot. With respect to the original handwritten notes of law enforcement agents who interviewed
Ryan, the government is ordered to produce them, together with the relevant typewritten reports,
to the court for in camera review by August 20, 2004. Ryan's motion for production of the notes
(Docket No. 151-1) is denied without prejudice pending that review.

Warner’s motion to adopt the pretrial motions filed by Ryan (Docket No. 149-1) and his

motion to reassert motions filed prior to the return of the second superseding indictment (Docket

56



court to dismiss the mail fraud charges against him and seeks immediate disclosure of favorable
evidence; timely disclosure of impeachment evidence; an order requiring the government to give
immediate notice of its intent to offer Rule 404(b) evidence against him at trial; pretrial production
of Jencks material and a witness list; immediate production of statements made by him; an order
requiring the government to affirm or deny the occurrence and legality of any electronic or video
surveillance and to produce same; an order directing the government to preserve and produce
agent notes; and an order requiring the government to make a Santiago proffer. Warner has
separately moved for an order permitting him to adapt the pretrial motions filed by Ryan; to reassert
motions filed prior to the return of the second superseding indictment; and to dismiss all charges
on Speedy Trial grounds. The government, in turn, has filed a motion for reciprocal discovery. For
the reasons set forth here, the motions are granted in part and denied in part.
BACKGROUND

A. The Parties

1. Ryan

Ryan was elected by the voters of the State of Illinois to serve as Secretary of State from
January 1991 through early January 1999, In November 1998, he was elected Governor of Illinois
and served in that capacity from January 1999 through early January 2003. (Second Superseding
Indictment ("SSI"), Count 1] 1G.) In his capacity as Secretary of State and Governor, Ryan was
prohibited from receiving, retaining, or agreeing to accept “any property or personal advantage
which he [wa]s not authorized by law to accept knowing that such property or personal advantage
was promised or tendered with intent to cause him to influence the performance of any act related
to the employment or function” of his public office. 720 ILCS 5/33-1(d). (See also SSI, Count 1
{| 2C.) He was also prohibited from committing the following acts in his official capacity: (1)

performing an act “in excess of his lawful authority” with intent to “obtain a personal advantage for



4, Events that are not the Subject of Specific Mailings

Both Defendants object to references in Count Two to circumstances they claim are
unrelated to the mail fraud charges in Counts Two through Ten. The episodes described in Count
Two include the award of a title laminates contract to ADM; award of a consulting contract to ATC;
the solicitation of Modern Business Systems regarding a photocopier lease; leases on property in
Springfield owned by clients of Associate 1; the hiring of Associate 1 as a lobbyist for MPEA; the
Wisconsin Energy lobbying referral; Warner's and Ryan’s involvement in distribution of low-digit
license plates; interference with activities of the Illinois Inspector General, and the shredding of
campaign documents. The government insists each of these episodes is a part of the charged
scheme to defraud the people and State of Illinois of money, property, and the intangible right to
the honest services of Defendant Ryan and other state officials. The government cites United
States v. Lanas, 324 F.3d 894 (7th Cir. 2003), where a claims adjuster for Alexsis Risk
Management assigned surveillance work to six vendors who paid cash kickbacks to him for each
job. At the trial on a three-count indictment, the government offered evidence not only of the three
charged mailings of money to defendant Lanas and another vendor, but also of several other
vendors who paid kickbacks. Defendants argued on appeal that this evidence was at variance with
the allegations of the indictment, but the Seventh Circuit rejected their contention that “the scope
of a mail fraud scheme is limited by the mailings that are spacifically charged in the indictment.”
Id. at 901. The indictment alleged one overarching fraud scheme, in the court’s view, and evidence
concerning other vendors who paid kickbacks constituted additional proof of that scheme.

The connection between at least some of the episodes alleged in Count Two is arguably
a looser one than the evidence presented in the Lanas case, where the claims adjuster’s manner
and method of cheating his employer followed a consistent pattern. The court nevertheless has

little difficulty concluding that at least those episodes relating to the solicitation and award of

45



struck an allegation “that property assessments were corruptly reduced in over two thousand
cases” where it was clear that the government intended to offer evidence concerning far fewer
incidents of bribery. Id,

The court does not understand Warner and Ryan to be arguing that the government does
not intend to prove the allegations that Defendants seek to have stricken. To the extent they are
making such an argument, the court adopts the government's suggestion that their motions to
strike should be entered and continued until the evidence has been presented at trial. (Gov't
Resp., at 46-47.)

Defendants do contend that some of the allegations are irrelevant to the charges against
them and prejudicial. Although relevance and prejudice are often most readily addressed in the
context of trial, the court is prepared to address at least some of the matters that are targets of
these motions at this point

1. 18 U.S.C. § 1512

First, with respect to 18 U.S.C. § 1512, Defendant Ryan is correct that the second
superseding indictment makes no direct reference to witness tampering; but as the government
notes, § 1512 prahibits not only witness tampering, but also alteration or destruction of records or
documents so as to render them unavailable in an official proceeding. 18 U.S.C. § 1512(c). The
indictment alleges that, in Defendant Ryan's presence, after learning about a grand jury
investigation of campaign activities in the Secretary of State's office, Ryan's subordinate Scott
Fawell directed an SOS employee to “clean up" documents relating to Citizens For Ryan. If the
government fails to offer evidence of a violation of § 1512, the court will strike that reference.

2. Preamble

Both Defendants object to the 11-page preamble to the indictment as ‘irrelevant and

prejudicial monologue.” They cite United States v. Vastola, 670 F. Supp. 1244, 1255 (D.N.J, 1987),

43



year lease of the Joliet facility. Between January 1995 and March 1999, Warner received
approximately $387,500 in proceeds relating to that lease. (/d. Count 2 {[f] 84, 86-88.)
Cc. Lease Involving Associate 2

Between 1993 and at least 2002, Associate 2 provided personal and financial benefits to
Ryan, including “annual vacation-related benefits.” (/d. Count 2 | 89.) Specifically, Ryan received
free lodging each year at Associate 2's Jamaican vacation home and, on at least two occasions,
at Associate 2's Palm Springs, California home. All told, Associate 2 gave Ryan $1,000 - $2,000
in lodging benefits each year. (/d.) Fawell received similar lodging benefits from Associate 2
between 1994 and 1998. (/d. Count 2 7 90.) To conceal these benefits, Ryan would tender a
check to Associate 2 in the amount of the lodging benefit and Associate 2 would give him back an
equal amount in cash.* (/d. Count 2 7 95.)

In 1997, Ryan contacted Associate 2 and proposed that the SOS Office lease a commercial
building located in South Holland, Illinois which was owned by an entity controlled by Associate 2.
Ryan was directly involved in negotiating the lease, and both he and Fawell approved final terms
and conditions that were not standard in SOS Office leases but which benefitted Associate 2. (/d.
Count 2 ff] 91-93.) Between May 1997 and June 2002, Associate 2 received approximately
$600,000 in lease payments from the SOS Office. (/d. Count 2 | 94.) Between August 26, 1997
and January 2002, Ryan and Fawell continued to receive free lodging benefits from Associate 2,
which Ryan intentionally concealed by (1) failing to disclose them as gifts and financial benefits “as
required by law,” and (2) making false and misleading statements to federal investigators when
they asked him about “financial arrangements involving his vacations with Associate 2” during a

January 2000 interview. (/d. Count 2 fff] 96-97.)

4 The second superseding indictment does not specify whether Fawell engaged in a

similar “tender-back” arrangement.

13



NL Ryan’s Motion for an Order Requiring the Government to Make a Santiago Proffer

The government does not object to Ryan’s request for a Santiago proffer, but the parties
again part company on the scheduling of such a disclosure. As before, the court directs a
disclosure earlier than the government proposes, but later than Ryan would prefer, i.e., 90 days
before trial.
oO. Warner's Motion to Adopt Pretrial Motions Filed by Ryan

The government does not object to this motion, and it is granted.
P. Warner's Motion to Reassert Prior Motions

In the months since the original indictment in this case, Ryan has filed several motions; he
asks to reassert those motions in response to the superseding indictment. The government has
no objection to this motion, but asks the court to consider its previously-filed responses to those
motions, as well. Warner's motion is granted, as is the government's request to renew its previous
responses.
Q. Government's Motion for Reciprocal Discovery

Citing FED. R. Crim, P. 16(b){1)(A), the government asks the court to enter an order
requiring Defendants to make various documents available for inspection. Neither Defendant has
objected to the request and the motion is granted.

CONCLUSION

For the reasons stated above, Defendants’ motions are granted in part and denied in part.
Defendants’ motions to dismiss the RICO conspiracy charge (Docket No. 142-1, 160-1) and their
motions to sever certain counts from the indictment and/or to sever both co-defendants from each
other (Docket No. 138-1, 150-1) are all denied. Ryan’s motion to dismiss the mail fraud charges
against him (Docket No. 167-1) is denied. Warner's related motion to dismiss all charges on

Speedy Trial grounds (Docket No. 140-1) is also denied. Defendants' motions to strike certain

55



$4,000 cash payment while in the men’s bathroom of a Chicago restaurant. Associate 1 told
Udstuen that he was also “taking care” of Ryan. (/d. Count 2 J] 108-12.)

Finally, in 1999, Ryan directed that Associate 1 be hired as a lobbyist for the Metropolitan
Pier and Exposition Authority (‘MPEA”), an entity that received annual public funding and had
officers and directors that were jointly appointed by the Governor and the Mayor of the City of
Chicago. MPEA and its principal lobbying firm (“Firm A”) were not looking for additional lobbyists
at the time. Nevertheless, on January 1, 2000, Firm A hired Associate 1 as a “sub-lobbyist” with
an annual retainer of $60,000. This relationship continued for three years untit December 31, 2002.
(id. Count 2 Ff 113-15.)
E. Awarding of Low Digit Plates

The SOS Office was responsible for issuing license plates to qualifying individuals, including
certain low-digit or specialty license plates that were not generally available to the public. From
January 1991 to January 1999, Ryan personally approved the award of the most coveted low-digit
plates. For example, in October 1990, shortly before Ryan’s election as Secretary of State in
November, Ryan solicited a $75,000 loan from “an individual known to Ryan” (“Individual 3”).
Individual 3 arranged for such a loan to be paid to Citizens For Ryan through a friend of his; the
loan was repaid in full within two weeks, with no interest charges.® In early 1991, Ryan awarded
both Individual 3 and his friend low-digit plates as a reward for their efforts in securing the loan.
(Id. Count 2 {f] 116-18.)

From March 1996 through December 1998, Ryan also awarded Individual 1 a number of
low-digit plates “while receiving, annually, at least $500 or more in personal checks from Individual
41.” (id. Count 2 121.) On September 5, 1997, Individual 1 spoke to Ryan at a Chicago social

event and expressed an interest in contributing $2,000 to his gubernatorial campaign. To conceal

5 The second superseding indictment does not explain why Citizens For Ryan needed

a $75,000 loan for only a two-week period.

15



UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
Vv. No. 02 CR 506

LAWRENCE E, WARNER and
GEORGE H. RYAN, SR.,

Judge Rebecca R. Pallmeyer

DOCKETED

Defendants.
AUG 1 2 2004

MEMORANDUM OPINION AND ORDER

Defendants Lawrence E, Warner and George H. Ryan, Sr. have been charged in a 22-count
second superseding indictment with (1) conspiring to use the resources of the State of Illinois for
their personal and financial benefit and for the benefit of Ryan’s family members, the Citizens For
Ryan political campaign committee, and various political and business associates, in violation of
the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962(d); and (2)
devising a scheme to defraud the people of the State of Illinois and the State of Illinois of money,
property, and the right to the honest services of Ryan and other State of Illinois officials, in violation
of the federal mail fraud statute, 18 U.S.C. §§ 1341, 1346. Ryanis separately charged with making
materially false, fictitious, and fraudulent statements during several FBI interviews in violation of
18 U.S.C. § 1001(a)(2); obstructing and endeavoring to obstruct the Internal Revenue Service in
the correct reporting of income and the collection of taxes in violation of 26 U.S.C. § 7212(a); and
filing materially false tax returns in violation of 26 U.S.C. § 7206(1). Warner is separately charged
with extortion under the Hobbs Act, 18 U.S.C, § 1951, money laundering, 18 U.S.C. § 1956
(a)(1)(B)(i), and structuring currency transactions in violation of 31 U.S.C. §§ 5324(a)(3) and (d)(2).

Ryan and Warner both seek to dismiss the RICO conspiracy charge: to sever certain counts

from the indictment and/or to sever both co-defendants from each other; to strike certain language

and allegations from the indictment; and to obtain a bill of particulars. Ryan additionally asks the

|3%



Warner, and their associates also allegedly took deliberate actions to cover their trail, such as lying
to FBI agents, destroying documents, and funneling illegal proceeds through Alan Drazek’s
company.

The court believes that the second superseding indictment sufficiently alleges a common
scheme to defraud to avoid dismissal on grounds of duplicity. “[A]n indictment charging multiple
acts in the same count, each of which could be charged as a separate offense, may not be
duplicitous where these acts comprise a continuing course of conduct that constitutes a single
offense.” Buchmeier, 255 F.3d at 421. Ryan and Warner are charged with misusing State of
Illinois resources for their personal gain, a scheme they carried out in a variety of ways, such as
using non-public information to manipulate SOS Office contracts and leases, awarding low-digit
plates in exchange for political contributions, and providing financial and job opportunities to
associates in exchange for vacation and other personal benefits. The mere fact that these
activities involved different individuals and entities does not render the charges duplicitous. See
United States v. Dumeisi, No. 03 CR 664-1, 2003 WL 22757747, at *2 (N.D, Ill. Nov. 20, 2003)
(citing United States v. Folks, 236 F.3d 384, 391 (7th Cir. 2001)) (“an indictment may properly
include multiple factual scenarios to establish a single charged offense’).

Ryan finds it significant that though earlier indictments encompass many of the same
individuals and conduct referenced in the second superseding indictment, the government never
before suggested a link between them. The first superseding indictment against Warner, for
example, alleged the same misconduct relating to SOS Office contracts and leases as set forth in
Count Two of the second superseding indictment. The Fawell and Bauer" indictments included
allegations now found in Count Two regarding use of the SOS Office for political gain and

reorganization of the Inspector General's Office. According to Ryan, “[nJowhere in the Warner and

“4 See United States v. Bauer, No. 00 CR 81.

36



Fourth Circuit's view, nothing in the Act “threatens the discretion state officials must exercise in the
discharge of their duties." See also United States v. Angelilli, 660 F.2d 23, 31 and 33.10 (2d Cir.
1981) (rejecting Mandel and finding that the New York City Civil Court was a RICO enterprise);
United States v. Clark, 646 F.2d 1259 (8th Cir. 1981) (rejecting Mande! and finding that the office
of county judge and the government of Craighead County, Arkansas was a RICO enterprise);
United States v. Frumento, 563 F.2d 1083, 1090 (3d Cir. 1977) (rejecting Mandel and finding that
Pennsylvania Bureau of Cigarette and Beverage Taxes was a RICO enterprise).

Other courts similarly agree that governmental and public entities do in fact qualify as
enterprises under the racketeering statutes. See United States v. Conn, 769 F.2d 420, 424-25 (7th
Cir. 1985) (jury fairly concluded that defendant “conducted the affairs of the enterprise[, the Cook
County Circuit Court,] through racketeering’); United States v. Kovic, 684 F.2d 512, 516 (7th Cir.
1982) (“governmental or public entities [such as the Chicago Police Department] fit within the
definition of ‘enterprise’ for purposes of RICO”); Evans v. City of Chicago, No. 00 C 7222, 2001 WL
1028401, at *8 (N.D. Ill. Sept. 6, 2001) (indictment sufficiently alleged that defendants used the
Chicago Police Department as the vehicle through which they carried out their agreement to
intimidate and retaliate against the plaintiff); DeFalco v. Bernas, 244 F.3d 286, 309 (2d Cir. 2001)
(jury “could have reasonably found that the Town of Delaware was a ‘passive instrument' through
which the defendants wielded power for their personal benefit and, accordingly, was a RICO
enterprise”); United States v. Brown, 555 F.2d 407, 415-16 (5th Cir. 1977) (Macon police
department was an enterprise)

Ryan concedes the “broad proposition’ that “enterprise” is not limited to private entities but
argues that it does not extend to entire states. (Ryan RICO Mem., at 6-7.)° He first claims that

identifying the State of Illinois as the RICO enterprise “needlessly cast[s] unfair reflection upon

5 Defendant Ryan’s Memorandum of Law in Support of his Motion to Dismiss the

RICO Charge is cited as “Ryan RICO Mem,, at __.”

24



(Reserved for use by the Court)

ORDER

Enter Memorandum Opinion and Order. Defendants’ motions to dismiss the RICO conspiracy charge
(Docket No. 142-1, 160-1) and their motions te sever (Docket No. 138-1, 150-1) are all denied, Ryan's
motion to dismiss the mail fraud charges against him (Docket No. 167-1) is denied. Warner's related
motion to dismiss all charges on Speedy Trial grounds (Docket No. 140-1) is also denied. Defendants’
motions to strike (Docket No. 84-1, 144-1, 159-1) are denied without prejudice; their motions for a bill
of particulars (Docket No. 146-1, 166-1) are granted in part and denied in part as stated in this opinion.

Ryan’s motion for immediate disclosure of favorable evidence (Docket No. 158-1) is granted.
Ryan's motions for timely disclosure of impeachment evidence (Docket No. 157-1), motion for pretrial
production of Jencks material and a witness list (Docket No. 156-1, 156-2), and motion for an order
requiring the government to make a Santiago proffer (Docket No. 58-1, 155-1) are granted in part and
denied in part. Ryan's motion for disclosure of 404(b) evidence (Docket No. 154-1) is granted. Ryan's
motions for immediate production of statements made by him (Docket No. 153-1) and for an order
requiring the government to affirm or deny the occurrence and legality of any electronic or video
surveillance and to produce same (Docket No. 152-1) are denied as moot. The government is directed
to produce the original handwritten notes of law enforcement agents who interviewed Ryan, together
with the relevant typewritten reports, to the court for in camera review by August 20, 2004, Ryan’s
motion for production of the notes (Docket No. 151-1) is denied without prejudice pending that review.

Warner's motion to adopt the pretrial motions filed by Ryan (Docket No. 149-1) and his motion
to reassert motions filed prior to the return of the second superseding indictment (Docket No, 148-1) are
both granted, as is the corresponding request to renew its previous responses to those motions. Finally,
the government's request for reciprocal discovery (Docket No. 171-1) is granted.

Agen Bectoy



not entitled to know the details of how the government will go about proving its case. Kendall, 665
F.2d at 134; see afso United States v. Glecier, 923 F.2d 496, 502 (7th Cir, 1991). Further, as the
Fassnacht court noted, a bill of particulars is not required where the defendant is able to obtain
information necessary for his defense through other means, for example, pre-trial disclosure by the
government of relevant documents, 332 F.3d at 447 n. 2.

In this case, Defendants urge that the length and breadth of the indictment militate in favor
of a bill of particulars; the government argues that the charging document does identify the specific
incidents on which it will rely to prove the charges. The government notes, further, that it will make
or has made a substantial disclosure of relevant documents, either voluntarily or pursuant to this
court's order. The court recognizes that this voluminous production of documents by itself does
not preclude an order requiring more specifics. Cf Vasquez-Ruiz, 136 F. Supp. 2d at 943 (“[t]he
defense should not be left to its own devices and a sifting of the voluminous materials that have
been provided in order to divine the particulars of these critical allegations”), For the reasons set
forth here, the motions are granted in part and denied in part.

Defendant Warner asks that the government be ordered to provide the “date, place and
participant in each agreement or act involved in the alleged ‘pattern of racketeering activity.”
(Warner Memorandum in Support of Motion for Bill of Particulars, at 3.) The indictment includes
those details with respect to several substantive counts of mail fraud (Counts Two through Ten);
extortion (Count Fourteen); money laundering (Counts Fifteen and Sixteen); and structuring
currency transactions (Count Seventeen), The court understands those counts to constitute as well
the acts involved in the pattern of racketeering activity; if the government expects to present
evidence of other specific acts of racketeering, and to ask the jury to make findings on such acts,
the government will be required to furnish a bill of particulars on those matters. Similarly,
Defendant Warner asks the government to identify the “other officials” and “employees of the State
of Illinois” identified in Count 2 | 3. The court understands these as references to Illinois officials

48



4. The State as RICO Enterprise and Victim

Ryan finally argues that the State of Illinois cannot be both a RICO victim and part of the
alleged enterprise. The court has twice rejected this same argument, first in United States v.
Fawell, No. 02 CR 310, 2003 WL 21544239, at *1 (N.D. Ill. July 9, 2003), and again in this case
prior to Ryan's addition as a defendant. United States v. Warner, 292 F. Supp. 2d 1051, 1067
(N.D. Ill. 2003). The court continues to recognize that the case law is unsettled on this issue but,
following Judge Kocoras's rationale in Shapo v. Engle, No. 98 C 7909, 1999 WL 1045086, at *8-9
(N.D. Ill. Nov. 12, 1999), declines to find that an indictment fails merely because it names the same
entity as both a victim and a part of the enterprise.

5. Failure to Specify the Predicate Racketeering Acts

Warner additionally objects to the RICO charge on the theory that the indictment fails to
“specifically identify the predicate racketeering acts that the defendants allegedly agreed would be
committed in the conduct of the enterprise’s affairs.” (Warner RICO Mem., at 1.)'' | The
government responds that under United States v. Glecier, 923 F.2d 496 (7th Cir. 1991), such
specificity is not required. In Glecier, the defendants were charged with fifteen counts of
conspiracy, mail fraud, and tax violations. /d. at 498. Glecier was not charged in the indictment
with personally committing any predicate acts of racketeering and he claimed that such omission
violated his fifth and sixth amendment rights. /d. at 499. The court disagreed, reasoning that

{i]f the government were required to identify, in indictments charging violation only

of section 1962(d), specific predicate acts in which the defendant was involved, then

a 1962(d) charge would have all of the elements necessary for a substantive RICO

charge. Section 1962(d) would thus become a nullity, as it would criminalize no

conduct not already covered by sections 1962(a) through (c). Such a result, quite

obviously, would violate the statutory scheme in which conspiracy to engage in the
conduct described in sections 1962(a) through (c) is itself a separate crime.

" Warner’s Memorandum of Law in Support of Motion to Dismiss RICO Conspiracy

Charge is cited as “Warner RICO Mem., at __.”

32



to the McPier board on a resigning board member's recommendation; that he never discussed the
Joliet lease or SOS Office leases with Warner and had no personal knowledge that Warner profited
from the Joliet lease; that he had no idea of the source of Warner's information concerning those
leases; and that he had no personal financial relationship with Warner. Simply put, nothing about
any of these statements suggests improper conduct on Warner's part.

Finally, Warner asks the court for severance under Rule 14, which permits the court to order
severance to prevent prejudice. In support of this request, Warner asks the court “not to slight
reality,” but instead to be sensitive to the enormous negative publicity Ryan has endured, not only
as a result of the “Licenses for Bribes" investigation, but also because of Ryan's controversial
decision, the last days of his tenure as Governor, to commute the death sentences of every Illinois
inmate on death row. (Warner’s Memorandum of Law in Support of Motion for Severance, at 15.)
The court is indeed sensitive to these matters and understands the difficulty that the court and the
parties will face in jury selection and in the day-to-day trial process. Realistically, however,
severing Warner's trial from that of Ryan will not eliminate these difficulties."° A trial of Warner by
himself will necessarily implicate Ryan in a variety of ways and will generate extensive press
attention even if Ryan is not a party.

Dd. Warner's Motion to Dismiss for Spsedy Trial Act Violation

Defendant Warner seeks dismissal of the charges against him based on violation of the
Speedy Trial Act, 18 U.S.C. § 3161 et seq. He argues that the Speedy Trial Act “clock” should tick
during periods of time for preparation of pretrial motions under § 3161(h)(1)(F). Warner
acknowledges that the Seventh Circuit has ruled against his position on this issue, however, and

the court concludes that the government's calculations of the days that have elapsed are accurate.

6 As the parties are well aware, this court conducted the trial of Ryan’s associate,

Scott Fawell, months ago. Ryan himself was not a party to that trial, but every potential juror was
questioned about his or her views concerning Ryan and whether he/she could put positive or
negative views aside in making a decision based on the evidence.

ai



mere existence of these “drastic remedies” suggests that “the statute's drafters never intended to
encompass sovereign States within the statutory definition of enterprise.” (Ryan RICO Reply, at
6.) The same argument could be made, however, with respect to other governmental entities,
such as governor's offices and cities, but courts have readily found that the statute applies to them.
See, e.g., United States v. Powell, No. 87 CR 872-4, 1988 WL 40864, at *4 (ND. Ill. Feb. 23, 1988)
(Nordberg, J.) (City of Chicago was an enterprise).

In a final challenge to the State of Illinois' status as a RICO enterprise, Ryan argues that
such a designation is “contrary to the basic notions of federalism and unnecessarily strains state-
federal relations.” (Ryan RICO Mem., at 11.) He claims that absent a clear Congressional
statement that RICO applies to State “enterprises,” there is no authority for treating them as such.
(/d. at 12-13.) In support of this argument, Ryan notes that federal courts must “exercise their
discretionary power with proper regard for the rightful independence of state governments in
Carrying out their domestic policy.” (Ryan RICO Reply, at 7-8) (quoting Burford v. Sun Oil Co., 319
U.S, 315, 318 (1943)), As explained earlier, the fact that RICO does not expressly define
“enterprise” to include public and governmental entities does not establish that the statute only
applies to private entities

The court recognizes the importance of state sovereignty and the significance of this
decision, which has no direct controlling precedent. In other contexts, however, the Seventh Circuit
has noted that “the legislative history [of RICO} manifests a serious concern by Congress not
merely with a profusion of racketeering activities within private businesses and labor organizations
. .. but with the potentially devastating effects of organized crime on the nation’s political and
economic system as a whole." United States v. Grzywacz, 603 F.2d 682, 687 (7th Cir. 1979)

(emphasis added). As reflected in the cases already cited here, courts have found that cities and

" Defendant Ryan's Reply in Support of his Motion to Dismiss the RICO Charge is
cited as “Ryan RICO Reply, at__.”

27



1 $36,000 from Warner's Viisage proceeds. Neither Warner nor Associate 1 registered as
lobbyists for Viisage. (/d. Count 2 {] 47B, 51-56.)

5. Automated System Consulting Contract

In 1991, the SOS Office decided to install a heating and cooling system for certain State
Capitol Complex buildings in Springfield, Illinois. Between early 1992 and October 1994, the SOS
Office “sought to award a series of engineering consulting contracts for assistance with preparing
the specifications and consultations with regard to the contractual process related to the automated
heating and cooling system.” (/d. Count 2 57.) Wamer learned about the automated system
consulting contract and, in December 1991, solicited a Northbrook-based company, Affordable
Temperature Control (‘ATC’), to provide the consulting services. Warner then told a high-ranking
SOS Office official in the Physical Services Department ("SOS Official E") that ATC was to receive
the automated system consulting contract. SOS Official E followed Warner's instruction,
understanding him to be acting with Ryan’s authority. (/d. Count 2 J] 58-60.) Thereafter, Warner
notified ATC that he expected to recover 8% of ATC's revenues under the automated system
consulting contract. Between June 1992 and October 1994, Warner received approximately
$8,240 from ATC. Warner was identified as the company's “sponsor” on Fawell's “master list” of
official acts performed on behalf of, or relating to, particular “sponsors.” (/d. Count 2 J] 62-64.)

6. Photocopier Leases

The SOS Office had leases with one or more vendors for the use and service of photocopier
machines. In mid-1991, Warner learned that Modern Business Systems, Inc., which held several
of the photocopier leases, was attempting to win future additional leases with the SOS Office. On
July 16, 1991, Warner, representing that he was an agent of the SOS Office, solicited Modern

Business Systems to pay him $2,000 per month in return for his guarantee that the company would

"1


who played a role in decisions concerning leases and contracts in which Warner was involved, but
in the context of this indictment, the court does not believe specific identification of each such
individual is necessary in order for Warner to prepare his defense. Finally, Warner asserts that he
is entitled to a description of “each materially false and fraudulent pretense[], representation[],
promise], and material omission.” (Warner Memorandum in Support of Motion for Bill of
Particulars, at 3.) The court will generally not require such disclosure, which would in effect
constitute the “details of how [the government] plans to prove its case.” Glecier, 923 F.2d at 502.
The court does, however, direct the government to provide detail that supports its allegation that
Warner “fixed false and misleading lobbyist registration statements relating to IBM and failed to
disclose all of his Ryan-related expenditures.” (SSI, Count 2 {] 46.)

Defendant Ryan has identified a list of 23 items of information he claims to need in order
to prepare his defense. With respect to certain of those items, the court believes his request goes
beyond a request to be informed of the charges against him. The court will not require the
government to identify specific benefits received by Ryan in exchange for certain acts, or with
knowledge that they were provided to influence him (Ryan’s Motion for Bill of Particulars, at 8,
Particulars Regarding Payments, Benefits, or Income, Items 1-3), though Ryan will be free to argue
that benefits received by him were not quid pro quos for official acts. In this court's view, the
indictment does apprise Ryan of the benefits that Warner allegedly provided to Ryan or Citizens
For Ryan; of the SOS Office resources that Ryan allegedly diverted; and of the benefits Citizens
For Ryan received. (/d. Items 7, 9, and 10.) The court concludes the indictment adequately
identifies the allegedly false and misleading statements and “sham” transactions alleged in Counts
Two, Eleven, Twelve, Thirteen, and Eighteen, and that the government is not required to restate
the questions asked by law enforcement agents that elicited these statements. (/d. Particulars
Regarding Fraud/Misstatements, Items 4-6.) The court assumes the statements alleged in those
counts are also the bases for the government's assertion that Ryan attempted to obstruct the

49



Benefits, or Income, Item 8.) The court will also require the government to identify the payments
from the Gramm campaign to individuals that Ryan, Fawell and Juliano designated, or a method
by which Ryan can identify those payments. (/d., Particulars Regarding Payments, Benefits of
income, Items 11, 12.) In addition, Ryan notes that the government has not identified the line items
within his tax returns that are alleged to be false or what income he is alleged to have failed to
disclose. For each of the years in which allegedly false tax returns were filed, the government is
directed to identify in a general way what income Ryan improperly failed to report. (/d., Particulars
Regarding Fraud/Misstatements, Items 2,3; Particulars Regarding Payments, Benefits, or Income,
Items 5, 6.)
G. Ryan’s Motion for Immediate Disclosure of Favorable Evidence

Ryan has moved for an order requiring disclosure of all evidence favorable to him and within
the government’s custody. The government has acknowledged its ongoing obligations under Brady
and other authorities to provide such material as soon as it is identified. The court therefore grants
this motion without objection.
H. Ryan’s Motion for Timely Disclosure of Impeachment Evidence

Defendant Ryan asks for disclosure, no later than 120 days before trial, of any
impeachment evidence the government may have concerning the witnesses it intends to call at
trial. The government has acknowledged its obligation to produce such evidence under Giglio v.
United States, 405 U.S. 150 (1972), and expects to do so 60 days in advance of the trial. Ryan
argues this is inadequate, and points out that the government has announced its intention to begin
trial preparation in August 2004.

At the risk of being accused of arbitrarily splitting the difference, the court concludes that

a 90-day disclosure period is most appropriate. In opting for an earlier date than proposed by the

government, the court is mindful of the fact that there will be dozens of witnesses called in the trial



BD. Official Acts Relating to Associate 1

According to the second superseding indictment, Associate 1 also provided personal and
financial benefits to Ryan and his family members between mid-1990 and 2002. These included
“[mJonetary payments and gifts on multiple occasions to defendant Ryan which payments and gifts
exceeded the $50 threshold” allowed by SOS Office policy (/d. Count 1 {] 2); "[vjacation benefits
to defendant Ryan, including benefits associated with a 19985 trip te Cancun, Mexico”; and “[glifts
and personal service benefits to Ryan’s family members, including a $2,200 vacation benefit to a
Ryan daughter's family in 1999.” (/d. Count 2 7 98.) In exchange for these benefits, Ryan
allegedly took official action to benefit Associate 1, described below.

In 1995 and again in 1997, Ryan authorized the SOS Office to enter into leases of certain
property in Springfield, Illinois, with commission payments exceeding $38,000 going to Associate
1. (fd. Count 2] 101.) In addition, in late 2000, the Governor's Office, together with the Illinois
Department of Corrections ("IDOC"), began searching for a location to construct a maximum
security prison. On February 23, 2001, Ryan chose the town of Grayville, Illinois as the prison site.
He did not notify the public but did inform Associate 1. Shortly thereafter, Associate 1 entered into
an agreement with a representative of a business group affiliated with Grayville to lobby for the
selection of Grayville as the prison site in exchange for $50,000 in lobbying fees. Ryan announced
the Grayville site selection at a public ceremony on April 12, 2001. (/d. Count 2 9] 102-07.)

In mid-1999, Wisconsin Energy was seeking to hire a lobbyist in Illinois to handle various
regulatory and governmental issues in connection with a proposed project in the state. An
“intermediary" acting on behalf of Wisconsin Energy solicited Udstuen’s recommendation for an
Illinois lobbyist. Udstuen conferred with Ryan, who agreed that Udstuen should recommend

Associate 1. After Associate 1 was hired as Wisconsin Energy's lobbyist, he gave Udstuen a

14