Antitrust Law Daily Wrap Up, RICO—N.D. Ill.: Employee failed to plead continuity to maintain RICO claims against ex-state treasurer, (Mar 9, 2015)

By Linda O’Brien, J.D., LL.M.

A former state government employee failed to show a pattern of racketeering activity and was therefore unable to state Racketeer Influenced and Corrupt Organizations Act (RICO) claims against a former state treasurer, his chief of staff, and two political campaign committees for allegedly forcing him to perform unpaid political work as a condition of his employment, the federal district court in Chicago has ruled (Michalowski v. Rutherford, March 6, 2015, Lefkow, J.).

Dan Rutherford was elected Treasurer of the State of Illinois (ISTO) in 2010. Rutherford hired Edmund Michalowski as deputy director of Community Affairs for the ISTO in 2011. Michalowski reported to Kyle Ham, Rutherford’s chief of staff. Shortly after he started at the ISTO, Rutherford told Michalowski that he was hired to gain new sources of campaign funding for Rutherford’s gubernatorial and Mitt Romney’s presidential campaigns. He was also told that his employment was contingent upon his performance of political work for both campaigns.

After Michalowski objected to demands for unpaid political work and donations, he was told that he would be fired if he did not adequately support the Rutherford and Romney campaigns. Subsequently, Michalowski filed suit against Rutherford, Ham, and the Rutherford and Romney campaign committees, alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), among other claims. The defendants moved for dismissal.

Racketeering activity. To prove a pattern of racketeering activity, a plaintiff must show that the predicate acts are related, pose a threat of continued criminal activity, and include at least two predicate acts of racketeering activity over a ten-year period, the court explained. Michalowski made several allegations of extortionate predicate acts. Specifically, on multiple occasions he was told that (1) he would be fired if he did not perform political work and solicit donations to the level of Rutherford’s expectations; (2) his job was contingent on performing political work; and (3) he was on a list to be fired due to his lack of political support. In the court’s view, the allegations were clearly related in that they had the same purpose of forcing the plaintiff to contribute to the political campaigns by threatening termination.

However, the plaintiff failed to plead the requisite continuity under RICO, according to the court. Michalowski alleged a closed period of racketeering activity in which the course of criminal conduct ended at the conclusion of the political campaigns. He alleged that the scheme of extortionate conduct spanned three years —from the date he was hired until the date he resigned his employment. Although he generally alleged threats were made to him and others, Michalowski alleged only two specific acts in 2011 in which his job was threatened. Those allegations lacked any specificity as to time, place, or occasion. Michalowski also failed to allege that the defendants engaged in other racketeering schemes before or after the closed period associated with the two campaigns.

There was no credible threat of future harm, since the campaigns ended with the elections. Because the alleged schemes had a “natural ending point” when the election efforts came to a close, there were no allegations of a “specific threat of repetition” or a showing of a continuing threat of continued activity. Thus, Michalowski failed to show a pattern of racketeering activity and his RICO claim must be dismissed, the court concluded.

The case is No. 14 C 899.

Attorneys: Alice Christine Svenson (Svenson Law Offices) for Edmund Michalowski. Daniel T. Fahner (Locke Lord LLP) for Dan Rutherford. R. Douglas Rees, Office of the Illinois Attorney General, for State of Illinois, and Illinois State Treasurer's Office. Michael K. Forde (Forde Law Offices LLP) for Dan Rutherford Campaign Committee. Brian Joseph Murray (Jones Day) for Romney for President, Inc.

Companies: Romney for President, Inc.

Cases: RICO IllinoisNews