## Facts

- After Jerome Genova was elected mayor of Calumet City, Illinois, he appointed Lawrence Gulotta as City Prosecutor and directed most city legal work to Gulotta’s private firm.
- Factfinders determined Gulotta paid Genova kickbacks of about 30% of the firm’s fees received from the City.
- Genova also used the City’s resources for partisan political activity by directing Public Works Commissioner Jerome Stack to make city employees available for political work.
- Stack provided employees paid leave and “comp time” for political work, and in some instances approved overtime that increased paychecks in amounts sufficient to cover the cost of political fundraiser tickets employees had purchased.
- Defendants were charged with RICO violations predicated on bribery and mail fraud, and with theft from a program receiving federal funds under 18 U.S.C. § 666.
- Genova (jury trial), Gulotta (bench trial), and Stack (jury trial) were convicted; the district court set aside Stack’s § 666 theft convictions and some RICO predicate-act findings but otherwise left the convictions intact.
- Defendants appealed their convictions and sentences; the government cross-appealed the rulings that vacated Stack’s § 666 convictions and certain predicate acts.

## Issues

1. Whether a municipality can be the RICO “enterprise” and whether the evidence showed defendants conducted the City’s affairs through a pattern of racketeering activity.
2. Whether the kickback and paid political-labor schemes constituted qualifying predicate acts of bribery and mail fraud for RICO.
3. Whether conduct characterized under state law as “official misconduct” could be treated as “bribery” for federal predicate-act purposes and whether the related jury instructions were erroneous.
4. Whether using city-paid labor, comp time, overtime, and other municipal resources for political purposes constituted theft (or bribery) under 18 U.S.C. § 666.
5. Whether the district court correctly set aside Stack’s § 666 convictions and certain RICO predicate-act findings, and what relief was warranted on the government’s cross-appeal.

## Decision

- The Seventh Circuit largely affirmed the convictions and rejected most defense challenges to sufficiency of the evidence, instructions, and sentencing.
- The court held that Calumet City qualified as a RICO “enterprise” and that the kickback and political-work schemes supported a “pattern of racketeering activity.”
- The court sustained the use of bribery and mail fraud as RICO predicates based on the evidence that official authority and municipal processes were used to obtain money and benefits through concealed arrangements.
- The court endorsed a broad application of 18 U.S.C. § 666 to municipal misappropriation where the city met the federal-funding threshold, and addressed the government’s cross-appeal concerning the district court’s vacatur rulings in a manner that left the core judgments in place.

## Legal Principles

- A municipality is a “legal entity” that can serve as the RICO “enterprise” under 18 U.S.C. § 1961(4); officials and associates may be liable for conducting its affairs through racketeering acts.
- Repeated kickbacks tied to the ongoing award of municipal business, and repeated use of city employees and compensation mechanisms for political work, can satisfy RICO’s “pattern” requirement (relatedness and continuity).
- For RICO predicate purposes, a state offense functionally equivalent to bribery—corrupt receipt of value in exchange for official action—may be treated as “bribery” even if state law labels it “official misconduct.”
- Mail fraud may serve as a RICO predicate when mailings connected to billing, payment, or administrative communications are integral to schemes that deprive a government and the public of money and honest services.
- 18 U.S.C. § 666 applies to theft or bribery involving property of a local government that receives more than $10,000 annually in federal funds; diversion of municipal funds and paid labor for self-enrichment or political purposes may fall within the statute.

## Conclusion

The Seventh Circuit upheld the central RICO and federal-program corruption convictions arising from a city hall scheme involving kickbacks on municipal legal fees and the compensated use of city employees for political activity, confirming that municipalities may be RICO enterprises and that § 666 reaches substantial misappropriation by officials of federally funded local governments.


United States v. Genova, 333 F.3d 750 (7th Cir. 2003)