Enterprise Corruption/Organized Crime Control Act (New York Penal Law Chapter 460)
Matthew Galluzzo, an attorney at Galluzzo & Arnone LLP, is one of New
York state's most accomplished and knowledgeable attorneys regarding
the charge of Enterprise Corruption, having represented a client on a
successful appeal to the New York Court of Appeals (New York's highest
state court) in a case that is now considered to be the most important
case in the history of the charge.
People v. Western Express, 19 N.Y.3d 652 (2012) (text of the decision is below). Since that decision,
other individuals and corporations being prosecuted for Enterprise Corruption
have retained him, and have been most satisfied with his services and advice.
A person is guilty of the Class B felony of Enterprise Corruption (per
Penal Law Section 460.20) "when, having knowledge of the existence
of a criminal enterprise and the nature of its avtivities, and being employed
by or associated with such enterprise, he:
(a) intentionally conducts or participates in the affiars of an enterprise
by participating in a pattern of criminal activity; or
(b) participates in a pattern of criminal activity and knowingly invests
any proceeds derived from that conduct, or any proceeds derived from the
investment or use of those proceeds, in an enterprise.
2. For the purposes of this section, a person participates in a pattern
of criminal activity when, with intent to participate in or advance the
affairs of the criminal enterprise, he engages in conduct constituting,
or, is criminally liable for pursuant to section 20.00 of this chapter,
at least three of the criminal acts included in the pattern, provided that:
(a) Two of his acts are felonies other than conspiracy;
(b) Two of his acts, one of which is a felony, occurred within five years
of the commencement of the criminal action; and
(c) Each of his acts occurred within three years of a prior act.
3. For purposes of this section, the enterprise corrupted in violation
of subdivision one of this section need not be the criminal enterprise
by which the person is employed or with which he is associated, and may
be a legitimate enterprise."
A person is guilty of the Class A-I felony of Aggravated Enterprise Corruption
when he or she commits the crime of enterprise corruption and two or more
of the acts that constitute his or her pattern of criminal activity are
class B felonies or higher, and at least two acts are armed felonies as
defined in paragraph (a) of subdivision forty-one of section 1.20 of the
criminal procedure law or one act is such an armed felony and one act
isa violation of subdivision two of section 265.17 of this chapter or
one act is a class B violent felony and two are violations of subdivisiontwo
of section 265.17 of this chapter.
People v. Western Express - the leading case on Enterprise Corruption
The Western Express case involved a very interesting and complicated question
concerning the proper scope of prosecutions pursuant to the Organized
Crime Control Act, pursuant to NY Penal Law Section 460.00 et seq. Fortunately
for our client in that matter, she did not have to face these serious
Class B felony charges at trial. The full text of the decision is below.
People v. Western Express International Inc., No. 156
New York State Court of Appeals
New York Law Journal
Cite as: People v. Western Express International Inc., No. 156, NYLJ 1202575459447,
at *1 (Ct. of App., Decided October 18, 2012)
Opinion by Chief Judge Lippman. Judges Ciparick, Graffeo, Read, Smith and
Jones concur. Judge Pigott dissents and votes to affirm in an opinion.
Decided October 18, 2012
Jan Hoth, for appellant Latta.
Submitted by Marianne Karas, for appellant Vassilenko.
Allen Fallek, for appellant Roach.
Matthew J. Galluzzo, for appellant Perez.
David M. Cohn, for respondent.
Jonathan Lippman, Chief Judge:
Appellants have been indicted for enterprise corruption (Penal Law §460.20
 [a]), a class B felony, based in essential part on their commission
of numerous predicate offenses. There was proof before the grand jury
that three of them—Douglas Latta, Lyndon Roach and Angela Perez —
repeatedly purchased stolen credit card data which they then used for fraudulent
purposes, and that the remaining appellant, Vadim Vassilenko, through
the company he controlled, defendant Western Express International, Inc.
(Western Express), facilitated transactions by which the purloined credit
card data was transferred.
Appellants' conduct, the People claim, was part of a larger enterprise
to traffic in stolen credit card information. To make out the corrupt
enterprise, the People adduced before the grand jury proof that Eastern
European vendors of stolen credit card data engaged in internet transactions
with buyers in New York. There was also proof that, in consummating these
transactions, buyers and sellers sometimes availed themselves of services
offered by Western Express through its publicly accessible internet web
sites. While Western Express's menu of services — i.e., check
cashing, mail receiving, issuing money orders, digital currency exchange,
and Russian/English translation — was superficially unremarkable,
the services themselves being legal and admitting of legitimate utility
in the conduct of international transactions, there was evidence that
some Western Express customers, among them defendants Latta, Roach and
Perez, used the company's services for "carding" purposes,
i.e., to traffic in stolen credit card information.
The People, in presenting the matter to the grand jury, dwelt principally
on the carders' use of Western Express's digital currency exchange
service. Western Express, having
purchased large sums of the unregulated internet currencies EGold and Webmoney,
was an authorized vendor of those forms of tender. For a commission of
between two and five percent, the company would transfer into a customer
internet account held in an assumed name digital currency purchased from
it by the customer with US dollars. The digital currency could then be,
and on occasion was, transferred to pay for stolen credit card information,
after which the vendor would sell the digital currency received in payment
back to Western Express for its value in another digital currency or US
Dollars, with Western Express taking an additional commission. This transactional
pattern recommended itself for money laundering purposes by reason of
the circumstance that E-currency was not government regulated and that
international transactions using it went largely unscrutinized.
There was evidence that Western Express was not a neutral observer of this
use of its services; its employees offered advice on how to structure
transactions to avoid detection and defendant Vassilenko, the company's
president, recognizing that a significant portion of Western Express's
business was from "carding" transactions,<sup>2</sup>
actively sought the patronage of carders. Carder business was encouraged
by postings on the Western Express web sites and there was proof that
Vassilenko attempted (evidently unsuccessfully) to advertise Western Express's
services on Carder Planet, a members-only web site devoted exclusively
illegal carding activities.
Supreme Court granted appellants' respective motions to dismiss the
subject indictment's enterprise corruption count upon the ground that
the proof before the grand jury, even when viewed most favorably to the
People, did not make out the existence of a "criminal enterprise."
As is here relevant, guilt of enterprise corruption under New York's
Organized Crime Control Act (OCCA) (Penal Law §460.00 et seq.) requires
proof that the accused "when, having knowledge of the existence of
a criminal enterprise and the nature of its activities, and being employed
by or associated with such enterprise … intentionally conducts
or participates in the affairs of [the] enterprise by participating in
a pattern of criminal activity" (Penal Law §460.20  [a]).
For OCCA purposes a "criminal enterprise" is "a group of
persons sharing a common purpose of engaging in criminal conduct, associated
in an ascertainable structure distinct from a pattern of criminal activity,
and with a continuity of existence, structure and criminal purpose beyond
the scope of individual criminal incidents" (Penal Law §460.10
). In dismissing the enterprise corruption count, Supreme Court focused
upon the absence of proof of an "ascertainable structure distinct
from a pattern of criminal activity":
"Here, the People have failed to even articulate—much less adduce
evidence proving—any system of authority or hierarchy in which the
defendants participated … [W]hat the People allege are a series
of arms-length business transactions—admittedly extensive and, if
the People's allegations are true, illegal—conducted by a variety
of organizations and individuals, each operating independently
and with no overarching structure or system of authority. In essence, the
People have described an illegal industry rather than a corrupt enterprise,
the criminal parallel of a typical legitimate industry consisting of producers,
wholesalers, distributors, retail outlets, and credit suppliers, each
of [whom] has a unique but independent role in the industry."
In reversing and reinstating the enterprise corruption count (85 AD3d 1
[1st Dept 2011]), the Appellate Division, while acknowledging that there
was no evidence of a traditionally structured, i.e., hierarchical, entity,
theorized that Vassilenko had used Western Express to create a structured
enterprise the purpose of which was to "actively encourage more and
larger transactions by its participants on an ongoing basis" (id.
at 14). The evidence, said the Court, permitted the inference that defendants
knowingly played roles in the enterprise even though, for the most part,
they had no personal interaction (id.). Two Justices dissented, expressing
the view that the requisite "ascertainable structure" to the
alleged enterprise had not been demonstrated, even to the bare bones extent
necessary to sustain the enterprise corruption count to trial. The dissenters
found compelling the absence of "evidence of any collective decision-making
or coordination with respect to the purported enterprise's activities
or of any overarching structure of authority or hierarchy in which defendants
participated" (id. at 19). One of the dissenting Justices granted
appellants' separate applications for permission to appeal to this
Court. We now reverse and reinstate the orders of Supreme Court dismissing
the enterprise corruption count as
New York's OCCA was enacted in 1986 to afford state prosecutors a means
of exacting heightened penalties for criminal activity referable to or
generative of structured criminal enterprises (see Penal Law §460.00).
Those enterprises were understood to present a distinct evil by reason
of their unique capacity to plan and carry out sophisticated crimes on
an ongoing basis while insulating their leadership from detection and
prosecution (see id.; People v. Besser, 96 NY2d 136, 142 ). The
Federal Racketeer Influenced and Corrupt Organizations Act (RICO) (18
USC §1961 et seq.) had, of course, for some time enabled federal
prosecutors to prosecute enterprise corruption as such, but until the
enactment of the OCCA there was no New York State analogue.
The common challenge posed both federal and state legislators in penalizing
enterprise corruption as a separate crime was to delineate the circumstances
under which conduct already fitting under a criminal definition would
additionally be subject to prosecution and more serious penalization for
its connection to a criminal organization. To justify the superadded penalties
for participation in a corrupt enterprise, and concomitantly to avoid
sweeping relatively minor offenders into complex multi-defendant, multi-count
prosecutions entailing a risk of draconian punishment, it was necessary
to distinguish between what on the one hand were merely patterns of criminal
conduct and what on the other were patterns of such conduct demonstrably
designed to achieve the purposes and promote the
interests of organized, structurally distinct criminal entities. Accordingly,
both RICO and the OCCA require the prosecution to prove, in addition to
a pattern of criminal activity, the existence of a separate criminal enterprise
to which that pattern of activity is beneficially connected (see United
States v. Turkette, 452 US 576, 583 ; Penal Law §§460.20
; 460.10 ). While RICO does not explicitly require proof of the
enterprise's structural integrity, it is settled that a qualifying
enterprise must have structure (Boyle v. United States, 556 US 938, 940-941
). And, as noted, the OCCA, which is assertedly of more narrow application
than RICO (Penal Law §460.00),<sup>3</sup> makes the
requirement of "an ascertainable structure distinct from a pattern
of criminal activity" express in its definition of "criminal
enterprise" (Penal Law §460.10 ). Both statutes demand or
have been understood to demand proof of an association possessing a continuity
of existence, criminal purpose, and structure — which is to say,
of constancy and capacity exceeding the individual crimes committed under
the association's auspices or for its purposes (id.; Boyle, 556 US at 946).
There is no question that the People presented as to each appellant considerable
evidence of a pattern of illegal activity. The issue to be decided is
whether they also presented evidence from which a petit jury could reasonably
infer (see People v. Bello, 92 NY2d 523, 525 ) that that activity
bore the requisite relation to a distinct criminal enterprise—a
"group of persons" seeking a "common purpose" and
associated in an ascertainably structured entity. The People and the Appellate
Division majority proposed a structure composed of buyers and sellers
of stolen credit card information arrayed around Western Express's
hub-like web sites, drawn there by reason of the sites' menu of facilitative
services. As Supreme Court perceptively observed, however, this does no
more than describe a prevalent pattern evidently organic to the "carding"
market; it is how that business often happens to be configured given the
needs and interests of the individual market participants. It is, however,
not indicative of a distinct, structured criminal enterprise. There is
no hint that any of the market participants acted except for and according
to their own particular interests,<sup>4</sup> much less that
their actions within the illicit market were somehow connected to the
workings of a structured, purposeful criminal organization.
The People urge that a criminal enterprise need not be hierarchical to
be structured and that structure may be inferred from patterns of criminal
conduct. While both of these propositions may be true in theory, it remains
that under the OCCA a "common purpose" is required and the structure
of a criminal enterprise must be "ascertainable." Here these
conditions are not met. The presented evidence was indicative
of no more than the manner in which international transactions in stolen
credit card data were commonly conducted, with or without the use of Western
Express's services<sup>5</sup>; it did not support the
further inference of a distinct, beneficially related criminal enterprise.
It is true that in Boyle the RICO requirement of enterprise structure was
deemed satisfied simply by proof of the underlying pattern of criminal
activity and the inference of structure that that proof would bear (see
556 US at 947-948). The OCCA, unlike RICO, however, specifically demands
that the structure be distinct from the predicate illicit pattern, and
not surprisingly there are no New York cases in which the requisite structure
has been inferred simply from an underlying pattern. Moreover, Boyle involved
a ring of thieves whose relatively constant membership met from time to
time to plan and execute bank heists, the proceeds of which they shared
(see id. at 941). There was, then, some evidence from which a continuing
cooperative criminal enterprise possessed of a common purpose and some,
albeit loose, structure could be inferred. Here, although there was evidence
of many arms' length transactions, there was no proof of concerted
activity from which a petit jury might reasonably have gathered that the
appellants were knowing participants in the affairs of a "criminal
enterprise" within the meaning of Penal Law §460.10 (3).
Doubtless, the internet may be used to facilitate crime, and we do not
exclude the possibility that a web site
singularly preoccupied with processing a screened clientele's illicit
transactions could be understood as elemental to and reflective of a criminal
enterprise. But crimes committed by resort to cyber means are not invariably
referrable to distinct nefarious enterprises, and the web sites here involved
do not permit the inference of an overarching criminal purpose or organization;
while Western Express may have sought to make its web sites attractive
to carders, the sites themselves presented simply as publicly accessible
loci for the conduct of business, the legality of which turned in the
end upon the independent agendas of individual users. To the extent that
the usage was for illegal purposes, it reflected the existence of a prevalent
black market but did not reasonably justify the additional inference necessary
to the viability of the proposed enterprise corruption prosecution, that
there was within that market an enduring structurally distinct symbiotically
related criminal entity with which appellants were purposefully associated.
Accordingly, the order of the Appellate Division, insofar as appealed from,
should be reversed and the orders of Supreme Court, New York County, dismissing
the enterprise corruption count of the indictment as against appellants,
Eugene F. Pigott, Jr., J.(dissenting):
The days of traditional organized crime families seem to be fading. Instead,
in today's modern world, criminal organizations now vary in size and
even operate on a global span by way of the computer. Criminal organizations
operating on the internet do so without any notion of a hierarchy or any
formalized decision-making process. The New York State Legislature, recognizing
that organized crime is evolving, has expressly permitted courts and prosecutors
to apply the Enterprise Corruption statute (Penal Law §460.20 
[a]), in their discretion, to organizations that engage in a pattern of
criminal activity and that possess any sort of "ascertainable structure"
(see Penal Law §460.00).
The majority correctly summarizes the Grand Jury presentation by the People,
noting the following: (1) defendant Western Express purchases "large
sums of the unregulated internet currenc[y]"; (2) it then transfers
this money to customers with "assumed name" accounts; (3) those
"customers" then buy stolen credit card information with this
unregulated money; and (4) the "customer" then sells the currency
back to Western Express obtaining U.S. dollars in return with Western
Express taking an additional commission. As the majority notes,
this is simply a digital form of money laundering.
My colleagues conclude that no "ascertainable structure" was
presented to the Grand Jury in this case because, although there was a
"prevalent black market" for stolen credit card information,
within that market there was no "enduring structurally distinct symbiotically
related criminal entity with which appellants were purposefully associated"
(majority op at 11). I find no such requirement in the statute.
The People allege that a cybercrime group (which the People termed the
Western Express Cybercrime Group), was formed. The group included a pre-existing
corporation, Western Express International, Inc., that acted as the "money
mover" for the other members of the group. Those other members included
"vendors" and "buyers" who trafficked in stolen credit
card numbers and other stolen personal identifying information.
The group acted with a common purpose to engage in conduct constituting
the crime, among others, of trafficking stolen information, while avoiding
detection by law enforcement. Specifically, the vendors and buyers, through
Western Express, were permitted to conduct anonymous transactions, via
the internet and by other means, using sophisticated payment schemes.
Western Express further assisted the buyers and vendors by helping structure
the transactions to avoid federal reporting requirements. For instance,
via computer, Western Express employees advised certain members to structure
wire transfers in small amounts under various names. Thus, although the
members had their own self-interest to profit from the
criminal activity, they also acted for the benefit of both the vendors
and buyers. Indeed, all of the participants of the group were acting together
for the intended result and common goal of ensuring that all parties to
and proceeds of the transactions remain virtually untraceable.
The purpose in enacting the Enterprise Corruption statute "was to
address the particular and cumulative harm posed by persons who band together
in complex criminal organizations" (People v. Besser, 96 NY2d 136,
142 ). Here, Western Express and the other group members banded
together in a way that was distinct from a simply buy-sell transaction
on the black market. Rather, the parties acted in an organized way, or,
in other words by an "ascertainable structure", which allowed
the members to be more successful in effecting their criminal purpose
and to avoid detection from law enforcement for several years.
I would, therefore, affirm the order of the Appellate Division.
1. These included scheme to defraud, conspiracy, grand larceny, money laundering,
possession of stolen property, and falsifying business records. No issue
is before us respecting the sufficiency of the counts charging these offenses;
this appeal concerns no more than the sufficiency of the evidence offered
in support of the enterprise corruption count.
2. Vassilenko estimated that 5 percent of his business was from carding
transactions. The People contend that the actual percentage was much higher.
3. As is here relevant the Legislature in enacting the OCCA was careful
to explain that "[t]he organized crime control act is a statute of
comparable purpose [to that of RICO] but tempered by reasonable limitations
on its applicability, and by due regard for the rights of innocent persons.
Because of its more rigorous definitions, this act will not apply to some
situations encompassed within comparable statutes in other jurisdictions"
(Penal Law §460.00 [emphasis supplied]).
4. We note that, while the Appellate Division offered that the common purpose
of the purported enterprise was to encourage more and larger criminal
transactions, there was no proof that Western Express's customers
availed themselves of the company's services with any objective other
than the expedient conduct of their own individual transactions.
5. There are numerous providers of such services and, in fact, after Western
Express's demise, its carder clientele simply switched to different
providers of comparable services.
Order, insofar as appealed from, reversed and orders of Supreme Court,
New York County, dismissing the enterprise corruption count of the indictment
as against appellants, reinstated. Opinion by Chief Judge Lippman. Judges
Ciparick, Graffeo, Read, Smith and Jones concur. Judge Pigott dissents
and votes to affirm in an opinion.