Opinion ID: 677825
Heading Depth: 4
Heading Rank: 1

Heading: Application of the Reves standard

Text: 7 Section 1962(c) makes it unlawful for any person employed by or associated with a RICO enterprise to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity. Under the previously settled law of this circuit, a defendant did not have to operate or manage a RICO enterprise in order to conduct or participate in the conduct of the enterprise's affairs. See United States v. Scotto, 641 F.2d 47, 52-53 (2d Cir.1980), cert. denied, 452 U.S. 961, 101 S.Ct. 3109, 69 L.Ed.2d 971 (1981). However, we have recently recognized that the Supreme Court's holding in Reves--that at a minimum the defendant must have some part in directing [the enterprise's] affairs, --- U.S. at ----, 113 S.Ct. at 1170--is irreconcilable with the relevant portion of our decision in Scotto. See Napoli v. United States, 32 F.3d 31, 34-35 (2d Cir. Aug. 4, 1994). 8 In Reves, the Court adopted an operation or management test to gauge whether a defendant had a sufficient connection to the enterprise to warrant imposing liability under Sec. 1962(c). Under the Court's interpretation, simply aiding and abetting a violation is not sufficient to trigger liability even though Sec. 1962(c) punishes those who participate directly or indirectly in the enterprise's affairs. This is so because aiding and abetting liability extends beyond persons who engage, even indirectly, in a proscribed activity; aiding and abetting liability reaches persons who do not engage in the proscribed activity at all, but who give a degree of aid to those who do. Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., --- U.S. ----, ----, 114 S.Ct. 1439, 1447, 128 L.Ed.2d 119 (1994). The Court did not determine how far Sec. 1962 extends down the ladder of operation, though it indicated that [a]n enterprise is 'operated' not just by upper management but also by lower-rung participants in the enterprise who are under the direction of upper management. Reves, --- U.S. at ---- & n. 9, 113 S.Ct. at 1173 & n. 9. Some insight into the scope of the operation or management test can be discerned from the Court's intimation that while the operation or management test is more restrictive than aiding and abetting liability, it requires less than significant control over the enterprise. See Reves, --- U.S. at ---- & n. 4, 113 S.Ct. at 1170 & n. 4; Stone v. Kirk, 8 F.3d 1079, 1091-92 (6th Cir.1993). 9 We agree with Formisano that the district court's charge did not comport with the requirements of the statute as interpreted in Reves. The district court instructed the jury as follows: 10 The third element that the government must prove is that a defendant conducted or participated in the affairs of the enterprise. The terms conduct and participate in the conduct of an enterprise include the performance of acts, functions or duties that are necessary or helpful to the operation of the enterprise. 11 A person may participate in the conduct of an enterprise even though he had no part in the management or control of the enterprise and no share in any profits. But the participation must be willful and knowing. (emphasis added). 12 Since Reves, it is plain that the simple taking of directions and performance of tasks that are necessary or helpful to the enterprise, without more, is insufficient to bring a defendant within the scope of Sec. 1962(c). So also, the district court's instruction that Formisano could be convicted even though he had no part in the management or control of the enterprise, cannot be reconciled with the Reves requirement that the defendant have some part in directing the enterprise's affairs. Reves, --- U.S. at ----, 113 S.Ct. at 1170. We therefore find that the instruction given was erroneous under Reves.