Opinion ID: 402152
Heading Depth: 2
Heading Rank: 2

Heading: Proof of Alleged Enterprise.

Text: 84 During the summer of 1972, Gibson and Phillips met to discuss the sale of securities through an agricultural cooperative. Although Cloninger was present at several of these meetings, he was not party to the agreement between Gibson and Phillips which resulted in the formation of UFA-Mo. in October of 1972. A management company, Midwest Investment Group, was used to divert funds from UFA-Mo. to Phillips and Gibson. The only identifiable association of individuals distinct from the pattern of racketeering in the operation of UFA-Mo. was the agreement between Gibson and Phillips to share the co-op's profits. This association arguably exhibits a distinct structure and the common purpose of Gibson and Phillips. However, the difficulty with the assertion that it represents the beginning of the charged enterprise is that this enterprise had a short life. 85 In April of 1973, Gibson and Phillips had a misunderstanding and dissolved their arrangement. Gibson stayed on and operated UFA-Mo. Moffitt became a salesman for UFA-Mo. In May of 1973, Phillips independently formed PFA. At this point in time, no entity existed which encompassed both UFA-Mo. and PFA. Although they were operated in a similar manner, the only continuity between the original UFA-Mo. and PFA was Phillips' participation in both co-ops. The common purpose originally shared by Gibson and Phillips had broken down. An enterprise can grow and evolve, but it must be shown to have some continuity of structure and personality and the participants must maintain their common purpose. 86 Cloninger came to PFA sometime in the spring or summer of 1973. In November 1973, Phillips and Cloninger hired Bledsoe and Burks to manage PFA's security sales. Burks became president of PFA. The evidence shows that thereafter Phillips, Bledsoe, Burks, and Cloninger made an agreement to evenly share all profits derived from PFA. Moffitt and Stafford joined PFA as salesmen in the fall of 1973. Thus there is evidence of association among the five defendants in operating PFA and a shared purpose to profit from the fraudulent sale of PFA securities. Furthermore, the Government argues, The secrecy of the agreement among Phillips, Cloninger, Burks and Bledsoe proved the existence of an association separate from the PFA cooperative. However, this external association did not include Moffitt and Stafford. But even assuming this agreement was the basis of an enterprise, the enterprise was unrelated to UFA-Mo. which, until June of 1975, was operated by Gibson using Moffitt as a salesman (Stafford also signed a UFA-Mo. salesman's contract, but made no sales). 87 At best, the Government has shown two separate associations of individuals without any overarching structure or common control. The evidence demonstrates only that the two schemes were conducted using the same modus operandi, that Phillips initiated both schemes, and that Moffitt and Stafford had some connection with both PFA and UFA-Mo. 88 The Government charges that the purpose of the alleged enterprise was to sell securities of agricultural cooperatives by fraudulent means in several states. On this basis, proof of fraudulent sales in both Oklahoma and Arkansas was admitted into evidence. It is conceded that Bledsoe did not participate in the planning or operation and may not even have had any knowledge of the Oklahoma or Arkansas co-ops. Stafford was a salesman for UFA-Ok., but had no connection with the activities of CFA in Arkansas. Thus, in order to argue that all defendants were implicated in the fraudulent acts in Oklahoma and Arkansas, it was essential for the Government to demonstrate the existence of an enterprise operating UFA-Ok. and CFA as well as UFA-Mo. and PFA in Missouri. 89 This court fails to find evidence of any association in fact exhibiting the requisite features which embraces the activities of all the co-ops. As in 1972, Phillips initiated the plan to organize co-ops in other states. Again, he returned to his old confederate, Gibson. Around this same time, UFA-Mo. became defunct. Gibson still had nothing to do with PFA in Missouri. Phillips discussed the plan with Gibson and the two of them formed a partnership to organize co-ops in other states. Thereafter, Gibson prevailed on Moffitt and Paul Canaday to form UFA-Ok. and share the proceeds. Unknown to Moffitt, Gibson had agreed to share his one-third interest with Phillips, his secret partner. Moffitt evidently had a falling out with Phillips and refused to participate in the new venture if Phillips had anything to do with UFA-Ok. The evidence shows that Cloninger's participation in UFA-Ok. amounted to his presence at one meeting with two officers of UFA-Ok. and Phillips at which the co-op's accounting procedures were discussed. There is no evidence indicating he participated in the operation of the co-op or received any of its profits. 90 In November of 1975, Gibson and another defendant charged in the indictment, Ron Elia, agreed to share profits earned by an Arkansas cooperative. Gibson once again agreed to share his profits with Phillips. Consumer-Farmers Association was thus incorporated on January 23, 1976, as an Arkansas agricultural cooperative. There is evidence that Moffitt sold CFA securities. 91 The only association which embraced the Arkansas and Oklahoma operations was the agreement between Gibson and Phillips. This agreement is temporally disjunct from their original agreement. The other defendants did not participate in this association except through their roles in the individual cooperatives. The new agreement did not relate to the operation of UFA-Mo. or PFA. There simply was no structured association, apart from the individual coops, which exhibited any degree of continuity over the period between 1972 and 1977 and which was concerned with the operation of all four co-ops. 92 Although many of the defendants played various roles in UFA-Mo., PFA, UFA-Ok., and CFA, these roles cannot be seen as constituent elements of a larger structure. Apart from the individual co-ops, the evidence reveals loose and discontinuous patterns of associations and agreements, primarily between Phillips and Gibson, contemplating the illegal use of the co-ops. We find no real evidence of a structure, a pattern of authority or control, or of continuity in the pattern of association or the common purpose of all of the defendants. At best, there is proof of various ventures initiated by Phillips and sometimes Phillips and Gibson in which many of the defendants from time to time participated. This evidence is not sufficient to support conviction under RICO. 11 Thus we conclude the evidence in this case does not support the allegation that a single enterprise existed which was distinct from the individual co-ops, which operated in Missouri, Oklahoma, and Arkansas, and which continued to exist from mid-1972 until the spring of 1977. 12 93 On this basis, we reverse the convictions of all defendants under counts one and two. 94