Document ID: ./input/supremecourt_opinions/opinions/boundvolumes/529bv.pdf
Page Number: 573.0

529US2

Unit: $U51

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498

BECK v. PRUPIS

Opinion of the Court

William Paulus, Jr., Ernest S. Sabato, Harry Olstein, Freder-
ick C. Mezey, and Joseph S. Littenberg, are former senior
ofﬁcers and directors of SIG. Until 1990, when it declared
bankruptcy, SIG was a Florida insurance holding company
with three operating subsidiaries, each of which was engaged
in the business of writing surety bonds for construction
contractors.

Beginning in or around 1987, certain directors and ofﬁcers
of SIG, including respondents, began engaging in acts of
racketeering. They created an entity called Construction
Performance Corporation, which demanded fees from con-
tractors in exchange for qualifying them for SIG surety
bonds. Respondents also diverted corporate funds to per-
sonal uses and submitted false ﬁnancial statements to regula-
tors, shareholders, and creditors. During most of the time
he was employed at SIG, petitioner was unaware of these
In early 1988, however, petitioner discovered re-
activities.
spondents’ unlawful conduct and contacted regulators con-
cerning the ﬁnancial statements. Respondents then orches-
trated a scheme to remove petitioner from the company.
They hired an insurance consultant to write a false report
suggesting that petitioner had failed to perform his material
duties. The day after this report was presented to the SIG
board of directors, the board ﬁred petitioner, relying on a
clause in his contract providing for termination in the event
of an “inability or substantial failure to perform [his] mate-
rial duties.” App. 104. Petitioner sued respondents, as-
serting, among other things, a civil cause of action under
§ 1964(c).4
In particular, petitioner claimed that respond-
ents used or invested income derived from a pattern of rack-
eteering activity to establish and operate an enterprise, in
violation of § 1962(a); acquired and maintained an interest in

4 Petitioner’s lawsuit was originally brought as a cross-claim in a share-
holders’ derivative suit ﬁled against SIG ofﬁcers and directors, including
petitioner, in the United States District Court for the District of New
Jersey. The New Jersey District Court severed petitioner’s claims and
transferred them to the Southern District of Florida.