Commonwealth v. Lavelle

Nos. 83 CR.615(a), et al. (Pa. Ct. C.P. Lackawanna Cty. August 23, 1985)

The court upholds the conviction of individuals and corporations involved in hazardous waste transportation and disposal for violating racketeering provisions of the Pennsylvania Crimes Code. The court rules that defendants' family business was an "enterprise" within the meaning of the Corrupt Organizations section of the Code, despite the lack of any connection to organized crime. It rules that individually and corporately they engaged in a pattern of racketeering by committing hundreds of thefts by deception during the period covered by the indictment. Defendants solicited customers for their hazardous waste disposal business by alleging that they were using state-approved facilities, when in fact they were knowingly disposing of the wastes illegally. The court next rules that defendants used proceeds from their racketeering activities to support their enterprise and to establish another one in violation of another provision of the Corrupt Organizations section. The evidence demonstrated that defendants invested the considerable proceeds of their illegal activities in their disposal firm and that after learning of the criminal conviction of another in the business, they transferred the assets of that company to a new hazardous waste transportation firm. The court rules that the successor transportation company was properly convicted even though it did not engage in illegal disposal. The doctrines extending tort liability to a successor corporation that is merely a continuation of a prior corporate wrongdoer can properly be applied in a criminal case. The transportation company received income and assets derived from the illegal activities of its predecessor. Finally, the court rules that there was no violation of defendants' accountant-client privilege, the claim was not barred by the statute of limitations, and the state established that the original company was Pennsylvania corporation.

Counsel for Plaintiff
Keith Welks
Strawberry Square, 16th Fl., Harrisburg PA 17120
(717) 787-3391

Counsel for Defendants
Albert J. Slap
Slap, Williams & Cuker
Suite 960, One Franklin Plaza, Philadelphia PA 19102
(215) 557-0099

[16 ELR 20497]

Kosik, J.:

Opinion

A multi-County Investigating Grand Jury issued Presentment No. 16 to the Honorable John C. Dowling, Supervising Judge, Court of Common Pleas, Dauphin County, Pennsylvania, in Re: January 25, 1982 Multi-County Investigating Grand Jury, No. 109 Middle District, No. 407 Misc. Docket 1982. The presentment recommended that the Attorney General of Pennsylvania institute criminal proceedings against William A. Lavelle, III [hereinafter referred to as Lavelle], W.A. Lavelle and Son Co. [hereinafter referred to as Lavelle and Son], and Lavco, Inc. [hereinafter referred to as Lavco], for violations of the corrupt organizations provisions of the Pennsylvania Crimes Code, 18 Pa. C.S.A. § 911.

Pursuant to the applicable provisions of the Investigating Grand Jury Act, 42 Pa. C.S.A. §§ 4541 et seq., the Office of the Attorney General filed criminal complaints in Lackawanna County against the above-mentioned "persons" on or about August 5, 1983. These complaints were supported by an affidavit and the presentment. Lavelle was charged with conducting the affairs of an enterprise through a pattern of racketeering activities [theft by deception and conspiracy], and investing the income from these racketeering activities in the operation of Lavco (18 Pa. C.S.A. Sections 911(b)(3) and 911(b)(1) respectively). Lavelle and Son was also charged with conducting its affairs through the same pattern of racketeering activities. 18 Pa. C.S.A. § 911(b)(3). Lavco was charged with investing and utilizing income derived from the racketeering activities in the operation of its business enterprises. 18 Pa. C.S.A. § 911(b)(1).

On September 2, 1983, all defendants waived preliminary hearings on the charges. An Indicting Grand Jury in Lackawanna County returned indictments against the defendants on September 20, 1983.

Following the disposition of pre-trial matters the case was sent to trial before the court without a jury of February 21, 1984.¹ A Memorandum and Verdict was filed on April 24, 1984, and each defendant was found guilty as charged. Timely post-trial motions were filed and argued. The matter is before us on those motions.

The trial developed the defendant Lavelle was President of Control Sanitation Corporation which engaged in the collection and disposal of refuse. On November 7, 1977 a family corporation known as W.A. Lavelle & Son Co. was incorporated in Pennsylvania. Lavelle was its President. Both companies operated out of an office and garage located at 1620 North Keyser Avenue, Scranton.

During the period of its existence until March 1979, Lavelle and Son engaged in the business of hauling and disposition of industrial wastes in solid and liquid form. Such materials were systematically dumped or disposed of at the Morgan Highway landfill or poured down a mine borehole located at the office address of both companies then in existence, to wit, 1620 Keyser Avenue, Scranton. Employees engaged in the hauling of the industrial waste were instructed by Lavelle to dispose of the waste at each site. Lavelle reported that the borehole at Keyser Avenue deposited the waste into a holding tank or the lines of the Scranton Sewer Authority. Lavelle, at one point, instructed that windows at the borehole site be painted. Neither site was officially approved for the receipt of industrial waste, nor was the site owner or Lavelle provided with any oral or written permit to dump the industrial waste as required by law.

Lavelle solicited the business of several companies whose operations resulted in the generation of industrial wastes as a by-product. Such wastes had to be disposed of in an appropriate facility. The representatives of the various companies solicited by Lavelle consistently testified that Lavelle personally or through reference represented the epitome of reliability in the field of disposal. Lavelle offered a series of documents which allegedly represented permits for the disposition of waste at various sites, along with letters of recommendation from existing customers. In each instance Lavelle assured his customers that disposal would conform with the requirements of both state and federal laws. In at least one instance Lavelle was provided with a sample of a waste by-product to determine if it was acceptable at the Morgan landfill site. The waste generator was orally advised by Lavelle that it was approved and that representatives of the state continued to monitor the landfill operations as material was received. During the period covered in the indictment, there were over seven hundred instances in which Lavelle had contracts or purchase orders to haul and dispose of wastes for a consideration which would not have been authorized had the waste providers known of the deception and false impressions as to the intentions of Lavelle in disposing of the industrial wastes. In the fiscal year October 31, 1978 ending October 31, 1979 Lavelle and Son received over four hundred thousand dollars as income from undocumented disposal of industrial waste; that is, waste disposed of by Lavelle and Son without documentation as to where such wastes were specifically desposited.

The Commonwealth offered evidence that Lavelle was aware of permit requirements in order to dump industrial wastes at the Morgan landfill. In June of 1978 Lavelle and Son apologized for dumping industrial waste without a permit on one stated instance. There was evidence that in the latter part of 1978 or the early months of 1979 there was much publicity over another local hauler of industrial waste who was being investigated for illegal dumping on a site located within miles of the Lavelle and Son disposals. Lavelle was aware of this investigation and assured at least one of his customers that there was no connection. Soon thereafter, Lavelle represented to customers that it was becoming more difficult to get state approval for the disposition of wastes at sites utilized by him. Thence, Lavelle commenced a withdrawal from the disposal business, and just continued to haul the wastes to locations determined by the customer. In fact, the last date Lavelle and Son performed a service was on March 29, 1979.

It appears from the evidence that when Lavelle and Son ended its corporate activity as a hauler and disposer of industrial wastes, a new corporation, the defendant Lavco, Inc. took over the work of just hauling industrial wastes which had previously been contracted out to Lavelle and Son. Lavco is a Pennsylvania corporation which was incorporated on December 21, 1978. Members of the Lavelle family, except the defendant Lavelle, are officially and legally the incorporators, stockholders and officers of Lavco. While Lavelle appears to have no official connection with Lavco, he continued to represent Lavco in soliciting business, and as will appear [16 ELR 20498] more clearly later, he identified and held himself out as the owner and President of Lavco. Substantial assets of Lavelle and Son were sold to Lavco for a consideration. In addition, monies were loaned to Lavco by Lavelle and Son (labor and other expenses paid by Lavelle and Son), and the employees of Lavelle and Son continued as the employees of Lavco. Lavco at one point made a substantial loan to defendant Lavelle. The Commonwealth has established that between June 1979 and February 1981 there was an aggregate flow of $118,845.00 from Lavelle and Son to Lavco. Of course, a substantial portion of this was repaid by Lavco.

A. Statute Involved

The Corrupt Organizations Section of the Crimes Code, appearing at 18 Pa. C.S. Section 911, proscribes in subsection (b) the following activities:

(b) Prohibited activities. —

(1) It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity in which such person participated as a principal, to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in the acquisition of any interest in, or the establishment or operation of, any enterprise: Provided, however, that a purchase of securities on the open market for purposes in investment, and without the intention of controlling or participating in the control of the issuer, or of assisting another to do so, shall not be unlawful under this subsection if the securities of the issue held by the purchaser, the members of his immediate family, and his or their accomplices in any pattern of racketeering activity after such purchase, do not amount in the aggregate to 1% of the outstanding securities of any class, and do not confer, either in law or in fact, the power to elect or more directors of the issuer: Provided, further, that if, in any proceeding involving an alleged investment in violation of this subsection, it is established that over half of the defendant's aggregate income for a period of two or more years immediately preceding such investment was derived from a pattern of racketeering activity, a rebuttable presumption shall arise that such investment included income derived from such pattern of racketeering activity.

(2) It shall be unlawful for any person through a pattern of racketeering activity to acquire or maintain, directly or indirectly, any interest in or control of any enterprise.

(3) It shall be unlawful for any person employed by or associated with any enterprise to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity.

(4) It shall be unlawful for any person to conspire to violate any of the provisions of paragraphs (1), (2) or (3) of this subsection.

Since it may be pertinent, we incorporate subsection (c) which provides for continuing violations in certain circumstances.

Whoever violates any provision of subsection (b) of this section is guilty of a felony of the first degree. A violation of this subsection shall be deemed to continue so long as the person who committed the violation continues to receive any benefit from the violation.

Under subsection (h), "racketeering activity" means any act which is indictable under any of the provisions of the Crimes Code; specifically in this case Chapter 39 relating to theft and related offense. "Pattern of racketeering activity" requires proof of a course of conduct requiring two or more acts of racketeering, one of which occurs after the effective date of the act, to wit, June 6, 1973. "Enterprise" means any individual, partnership, corporation, association or other legal entity engaged in commerce. "Commerce" is business between one place in the state with any other place in the state or any place in any other state.

B. Charges Against W.A. Lavelle and Son Co. and William A. Lavelle III under 18 Pa. C.S.A. § 911(b)(3)

In order to find the defendants guilty of violating the Corrupt Organizations section of Title 18 Pa. C.S.A. § 911(b)(3) it was incumbent on the Commonwealth to establish beyond a reasonable doubt each of the following elements:

[1] that the defendants were employed by or associated with an "enterprise" as earlier defined.

[2] that the defendants engaged in a "pattern of racketeering activity" as earlier defined.

[3] that at least two acts of racketeering activity occurred, one of which occurred after the effective date of the act, to wit, June 6, 1973.

[4] that through the commission of two or more connected offenses the defendants conducted or participated, directly or indirectly, in the conduct of the enterprise, and

[5] that the enterprise engaged in "commerce" as defined.

The racketeering activity alleged was a violation of the Crimes Code; theft by deception or creating a false impression stated in 18 Pa. C.S.A. § 3922 (l). In order to establish this offense the Commonwealth was required to show [1] that the defendants intentionally obtained property of another, in this case money; [2] that the money was the property of companies who paid Lavelle and Son; and [3] that the defendants obtained the property by intentionally creating a false impression as to their intention and state of mind in disposal of the industrial wastes.

The well established rule for reviewing the sufficiency of the evidence standing to support a guilty verdict, is to consider that evidence in a light most favorable to the Commonwealth, accepting as true all evidence submitted by the Commonwealth and drawing all reasonable inferences upon which a jury or fact finder could reasonably have based its verdict. Commonwealth v. Young, 494 Pa. 224, 228, 431 A.2d 230, 232 (1981); Commonwealth v. Stockard, 489 Pa. 209, 413 A.2d 1088 (1979).

Lavelle was the President and owner of Lavelle and Son, a Pennsylvania Corporation. Having contracted with numerous companies to haul and dispose of their industrial wastes, bboth defendants engaged in commerce. Lavelle and his company urge, as does Lavco, that no "enterprise" exists where prefectly legitimate family businesses are involved in ordinary contractual activities. They allude to the introductory clauses of the statute here involved for the legislative purposes which address themselves to the evil posed by organized crime in infiltrating and corrupting legitimate businesses. The defense says the evidence fails to show any direct or indirect connection with organized crime. We previously ruled in pre-trial matters that while there were no Pennsylvania cases, the federal authorities found similar statutory provisions applicable to legitimate family businesses. Recently, the Pennsylvania Superior Court rejected a similar argument by the defense in Commonwealth v. Yacoubian, Pa. Super. , 489 A.2d 228 (1985).

We believe it equally clear that the defendant Lavelle individually, the Lavelle and Son through Lavelle as its officer engaged in a pattern of racketeering activity by committing several hundred separate acts of theft by deception during the period alleged in the indictment. Lavelle contracted for money payments to Lavelle and Son for the removal, transportation and lawful disposal of their industrial wastes, which wastes Lavelle and Son or Lavelle never intended to and, in fact, never did lawfully dispose of, thereby creating f false impression as to the value of their service, their intention, and state of mind in dealing with the various companies. These acts, coupled with evidence to conceal their conduct, was direct participation in the affairs of the enterprise prohibited by 18 Pa. C.S.A. § 911(b)(C).

Both Lavelle and Son and Lavelle, as well as Lavco, argue that there could be no theft by deception because the waste generators with whom Lavelle contracted were fully aware of the problems associated with waste disposal. We reject this argument. The waste generators with whom Lavelle contracted all testified about a common pattern employed by Lavelle in soliciting their business. As heretofore noted, it commenced with misrepresentations to the generators which continued throughout the relationships. Without exception, the generators did business with Lavelle and his company in order to avoid difficulties in waste disposal which some generators had encountered with other similar enterprises.

Defendants Lavelle and Lavelle and Son have raised several other issues which are common to all defendants. These will be considered at a later point. However, as to the sufficiency issue, we find that the evidence more than adequately supported the finding of guilt as to the violation of 18 Pa. C.S.A. § 911(b)(3).

[16 ELR 20499]

C. Charges Against William A. Lavelle, III, and Lavco, Inc. under 18 Pa. C.S.A. Section 911(b)(1).

In order to find the defendants guilty of violating the Corrupt Organizations Section of Title 18 Pa. C.S.A. § 911(b)(1), it was incumbent on the Commwealth to establish beyond a reasonable doubt each of the following elements:

[1] that the defendants Lavelle and Lavco received income which they knew to be derived from a pattern of racketeering activity in which such person defendants participated as a principal.

[2] that the defendants used any part of the income so derived or the proceeds thereof in the acquisition of any interest in, or in the establishment or operation of an enterprise.

The racketeering activities alleged were the same violations of the Crimes Code previously outlined against Lavelle and Lavelle and Son; theft by deception or creating a false impression as stated in 18 Pa. C.S.A. § 3922(l).

Lavelle as President and owner of Lavelle and Son did in fact contract with numerous waste generators to haul and dispose of their waste for a consideration. We concluded earlier that the conduct of Lavelle and his company Lavelle and Son constituted a pattern of reacketeering activity by committing several hundred separate acts of theft by deception during the period alleged in the indictment. There is little doubt from the evidence stated earlier that Lavelle participated in the predicate offenses as a principal, and that he used the income derived from those contracts in the operation of Lavelle and Son as an enterprise, and then did the same in the establishment and operation of Lavco as an enterprise.

We must recall the evidence which shows that the Lavelle operation through Lavelle and Son generated in excess of $400,000.00 in income from undocumented disposal alone. These monies were generated in the fiscal period October 31, 1978 and ending October 31, 1979, and were used in a successful operation for the hauling and disposal of industrial wastes. During the latter part of 1978 and early part of 1979 there was much publicity about another local hauler of industrial waste who was being investigated for illegal dumping. Although he was not associated with this operation, Lavelle was soon to represent to customers that it was becoming more difficult to receive state approval for the disposition of industrial wastes. Lavelle and Lavelle and Son withdrew from the disposal business, but continued to haul waste to locations determined by others. This continuing venture concluded when the last service performed by Lavelle and Son was on March 29, 1979. Any contract Lavelle and Lavelle and Son had for hauling material was thereafter performed by a new entity on the scene, Lavco, which was incorporated on December 21, 1978. The lawyer who incorporated Lavco did business with Lavelle, but the latter nowhere appears as a person with a legal interest in Lavco, either as a stockholder or officer. However, the following does appear: Lavco operated out of the same garage where Lavelle and Son was situated, 1620 Keyser Avenue, Scranton; Lavco continued the same business activity of hauling industrial wastes, and with the same customers; Lavco had work performed by employees of Lavelle and Son; eventually all of the Lavelle and Son employees became Lavco employees; Lavelle continued to solicit business for Lavco as he was accustomed to in the case of Lavelle and Son; Lavelle continued as the most visible representative of Lavco; Lavelle represented himself to be President of Lavco to the State of Virginia; he signed a contract with a banking institution as President of Lavco; Lavelle made application for a hazardous waste license for Lavco as President; Lavelle pledged his personal assets on a loan for Lavco; Lavco applied to Blue Cross/Blue Shield for an extension of the Lavelle and Son policy claiming it was a name change in companies; Lavco assumed various accounts payable by Lavelle and Son; Lavco identified itself to the Pennsylvania Department of Labor and Industry as a successor corporation to Lavelle and Son and was given the same rate applicable to Lavelle and Son; Lavco acquired through sale from Lavelle and Son its primary asset, the trucks used for hauling; Lavco loaned money to Lavelle which remained unpaid; and after the sale of the trucks, for a consideration to Lavelle and Son, the latter used the major part of the consideration to make other payments on behalf of Lavco. The evidence clearly establishes Lavelle's role in receiving income from a pattern of racketeering activity in which he acted as a principal along with Lavelle and Son. The evidence shows the subsequent use of a part of these monies or proceeds from racketeering activity in the operation of Lavelle and Son as well as the establishment and operation of Lavco, both of which are enterprises under the act. A serious consideration arose in this case concerning the status of Lavco as a principal in the commission of the predicate crimes. The Commonwealth concedes that most of the predicate offenses were complete prior to the existence of Lavco as an entity on December 21, 1978, and that Lavco was not involved in the predicate acts as an active committing principal. Rather, the Commonwealth takes the position that Lavco was a successor corporation, created as a continuation of Lavelle and Son, as evidenced by the foregoing stated events. Essentially, the Commonwealth takes the position that Lavco was a further extension of the racketeering aspirations of Lavelle and Lavelle and Son formed with the objective of escaping criminal responsibility and accountability for the conduct of Lavelle and Son. This, the Commonwealth argues, is one of the very purposes for the corrupt organizations sections. The defense of Lavco, on the other hand, dwells on the impossibility of holding one responsible for criminal conduct occurring before one even comes into existence.

Confronted with what we believe to be an issue of first impression in this Commonwealth, we are persuaded by the Commonwealth's reasoning and authority. There is little doubt that under the evidence Lavco was conceived to be, and did become the defacto successor and a continuation of Lavelle and Son, which remained nothing more than a shell. When such a continuation exists, as demonstrated by the evidence in this case, we believe that the continuing corporation ought to be criminally liable for the acts of its predecessor in fact.

There is precedent in Pennsylvania for the liability of a corporate successor in products liability cases. Writing in Dawejko v. Jorgensen Steel Co., 290 Pa. Super. 15, 434 A.2d 106 (1981), Judge Spaeth proceeded to state the general rule that when one company sells or transfers all of its assets to a successor, the successor does not acquire the liabilities of the transferor merely because of the succession. There are several exceptions: [1] the successor agrees to assume the obligation; [2] the transaction amounts to a merger or consolidation; [3] the purchasing corporation is merely a continuation of the selling corporation; and [4] the transaction is fraudulently entered into to escape liability. In discussing the "continuation" exception the court noted that traditionally it applied only when there was a common identity of officers, directors and stockholders, and onlyone corporation after the transfer. Judge Spaeth referred to some decisions where a "continuation" was defined more broadly, the emphasis being on the nature of the business operations rather than the common identity of management and ownership. One of those cases was Turner v. Bituminous Casualty Co., 397 Mich. 406, 244 N.W.2d 873 (1976). There the successor maintained the same product, name, personnel, property and clients. The court offered a characterization equally applicable here. "[C]ontinuity [was] the purpose, continuity [was] the watchword, continuity [was] the fact." Id. at 426, 244 N.W.2d at 882. In more recent times our Superior Court was confronted with the issue of imposing punitive damages on a successor corporation. Judge Spaeth, writing in Martin v. Johns-Manville Corp., 322 Pa. Super. 348, 469 A.2d 655, 667 (1983) stated:

We believe, however, that in some circumstances a successor should be held accountable for the recklessness of its predecessor. This will be so when the goals that underlie the imposition of punitive damages — punishment and deterrence — will be advanced. In this regard, we may draw from the various formulations of the rule permitting the imposition of successor liability when the successor is a mere "continuation" of its predecessor.

We therefore hold that punitive damages are recoverable against a successor corporation when the plaintiff has shown such a degree of identity of the successor with its predecessor as to justify the conclusion that those responsible for the reckless conduct of the predecessor with be punished, and the successor will be deterred from similar conduct.

The defense disputes that Lavco represented anything more than a separate legal entity with its own stockholders, officers and identity. While Lavco hauled industrial wastes, it did not carry on the same business as Lavelle and Son, which included disposal of the industrial waste. Additionally, Lavco urges that a successor corporation [16 ELR 20500] cannot be liable for the criminal liability of a predecessor under some extension of tort principles. Citing United States v. Johns-Manville, 245 F. Supp. 74 (E.D. Pa. 1965), Lavco argues that criminal conduct cannot be presumed, and that a successor can only be criminally liable if it is shown to be carrying on in futuro the illegal activities of its predecessor; that there is no way that a corporation can carry on any activities before it exists. We disagree.

We believe that in this case there is no more reason for allowing Lavco to escape criminal penalties than damages in a civil suit. An individual can be to jail for criminal conduct, whereas a corporation cannot be sent to jail. The discharge of corporate liabilities, whether criminal or civil, can be affected only by the payment of money. The growth of corporate criminal responsibility was fostered by analogies from the law of torts. Corporate Criminal Responsibility, Edgerton, 36 Yale L.J. 827 (1926-27). It cannot be disputed that corporate criminal responsibility is tested by standards of tort when there no longer remains any distinction in essence between civil and criminal liability of corporations based on the element of intent or wrongful purpose through the application of legal principles applicable to respondeat superior or agency.

The corporate substantive law which has evolved out of the four exceptions to the general rule that a successor does not acquire the liabilities of the transferor corporation has been applied in criminal actions against corporations. in United States v. Polizzi, 500 F.2d 856, 907 (9th Cir. 1974), a defendant, Emprise Corporation, claimed it was not liable for any criminal acts committed by its predecessor in interest after a merger. Applying New York State corporate law applicable to merged corporations, to wit, that the surviving corporation in a merger is liable for its constituents "liabilities, obligations and penalties," the court held tht words to include crimes. Reasoning that corporations are artificial creatures wholly dependent on state law for their existence, and that such statutory construction has been applied in civil causes of action, the court did not find its conclusions particularly unique. Similar results were reached in United States v. Michigan Carton Co., 552 F.2d 198 (7th Cir. 1977), where the question presented was whether St. Regis Paper or Michigan Carton should have been named in the indictment as defendant for Michigan Carton's criminal conduct prior to a merger. Again, in the interpretation of state corporate law St. Regis, the successor, claimed on its own that it should be named the defendant for Michigan Carton's acts.

Pennsylvania Corporate Law provides that the effect of merger or consolidation is to hold the survivor responsible for "all liabilities and obligations of each of the corporations so merged. . . ." Further, "that any claim existing or action or proceeding pending by or against any of such corporations may be prosecuted to judgment . . . or the surviving or new corporation may be proceeded against or substituted in its place." 15 P.S. 1907. As stated in Polizzi and Michigan Carton Co., there is nothing to say that the statutory language in Pennsylvania excludes criminal acts. Although Polizzi and Michigan Carton Co. were cases of complete legal merger, we believe this is the intent of the legislature in the case of the continuation of a corporation or defacto merger; especially when the public is threatened by conduct of racketeers who take advantage of the privilege of engaging in business through a corporate entity, and then abusing that very privilege by simply collapsing one corporation to shelter their lucre in another corporation.²

Having concluded that Lavco is a continuation and successor liable as a principle for the conduct of Lavelle and Son in the commission of the predicate acts, we next turn to see if Lavco received incone derived from a pattern of racketeering activity and whether any part of that income so derived, or the proceeds thereof, was used in the establishment or operation of an enterprise. We find that these elements have been established. Lavelle and Lavelle and Son clearly received the income earned from the commission of the predicate crimes, and they just as clearly used that income, as well as the proceeds from that income, to establish and operate Lavco. Lavco as a continuing successor of Lavelle and Son is equally responsible for the acts of Lavelle and Son. While it may be improper at some point to punish both Lavelle and Son and Lavco, that is a subject to be left from another more appropriate occasion.

D. Common Issues To All Defendants

A number of issues were raised which are common to all defendants.

First, that the trial judge erred in extending the time in which the defendants should be brought to trial pursuant to Pa. R. Crim. P. 1100.

Second, that the convictions should be set aside because the investigative grand jury presentment was defective on its face, i.e., it confused gross income with net income.

Third, that the parties were prejudiced by consolidation of the trials.

Fourth, that the Corrupt Organizations Act in Pennsylvania is unconstitutional for failing to provide for a mens rea.

Fifth, that important accounting papers were released by an accountant in violation of Pennsylvania C.P.A. Law, 63 P.S. Section 9.1 et seq.

Sixth, that the prosecution was barred by the applicable statute of limitations.

Seventh, that Lavelle and Son was never established to be a Pennsylvania Corporation.

This first issue was resolved in a written Memorandum and Order filed on February 22, 1984. Similarly, issues two, three and four were addressed and resolved in a written Memorandum filed prior to trial on February 17, 1984. We see no necessity to repeat that which has already been stated and appropriately recorded.

As to the fifth issue concerning important accounting papers, we must agree with the prosecution that there was no issue concerning Commonwealth Exhibit 23. In the case of Lavco, we assume the defendant company has in mind Commonwealth Exhibit 26, a trial balance prepared by John McAndrew, a public accountant. We ruled that the accountant-client privilege as to this document was waived. It was provided to the accountant by an officer of Lavco so that the accountant could respond to a subpoena duces tecum. Further, it was disclosed to the defense during discovery. Even if it had not been disclosed during discovery, the defense had the document in sufficient time during the trial so as to preclude prejudice, if any, to the defense. In fact, no prejudice was demonstrated.

In the case of Lavelle and Son, we ruled in advance of trial that no prejudice existed because counsel for Lavelle and Son authorized the accountant Gold in writing that certain documents could be provided to the government. We have not been persuaded that either of the rulings on this subject should be revised.

All defendants claim the applicable statute of limitations bars prosecution. This is based on their view that the last alleged act of racketeering occurred in March of 1979 and no continuing benefit resulted thereafter. Applying the two year statute of limitations in effect prior to its amendment in 1982, 42 Pa. C.S.A. § 5552(a), effective until July 12, 1982, the prosecution should be barred because the criminal complaints were not filed until August 5, 1983, more than two years after the last act of racketeering. The defendants' position is in error for several reasons.

The Commonwealth relies on the text of Section 911(c), supra, which provides that a violation of the subsection ". . . shall be deemed to continue so long as the person who committed the violation continues to receive any benefit from the violation." This is consistent with the findings expressed by the legislature that it wishes to prohibit the infiltration of legitimate business with money and power accumulated by organized crime. Title 18 Pa. C.S.A. § 911(a). Thus, the legislature did not link the running of the statute of limitations to the last traditional criminal act, but provided that prosecution would be vital so long as a benefit existed from a violation. In this case that benefit consisted of loans from racketeering proceeds to Lavco and individuals including Lavelle, which helped to extend the life of Lavco and continued the corrupt enjoyment from these benefits to all defendants until a time in 1982. We agree with the Commonwealth that "benefit" is to be given a common-sense understanding. Blacks Law Dictionary, (Fifth Edition 1979) defines benefit as "advantage, profit, fruit, privilege, gain, interest," and Webster's Third New International Dictionary (1971), adds to the meaning "something that guards, aids or promotes well being . . . payment, gift. . . ." Applying the two year statute of limitations it would cover conduct two years back from August 5, 1983 when the criminal complaints were filed. Regardless, the Commonwealth further argues, and we agree, that a 1982 amendment to the statute of limitations, effective July 12, 1982, extended the statute of limitations [16 ELR 20501] to five years.³ 42 Pa. C.S.A. § 5552(b)(1). The defense counters that this would constitute a retroactive application of the 1982 amendment. In support of the latter the defense quoted limiting language found in a further amendment to Section 5552 by the Act of December 20, 1982, P.L. 1409, No. 326, Section 403, which added certain Public Welfare Code violations to Section 5552. That limiting language is inapplicable here.

In considering whether the extension of the statute of limitations is being retroactively applied we turn to the Statutory Construction Act of 1972 which provides in Section 1975, 1 Pa. C.S.A., that

Whenever a limitation or period of time, prescribed in any statute for acquiring a right or barring a remedy, or for any other purpose, has begun to run before a statute repealing such statute takes effect, and the same or any other limitation is prescribed in any other statute passed by the same General Assembly, the time which has already run shall be deemed part of the time prescribed as such limitation in such statute passed by the same General Assembly.

It is clear from the foregoing provision that retrospective application would refer to the situation where the applicable limitations period had expired prior to the adoption of a new, and presumably longer period of limitation. To then apply the new statute of limitations to the crime would constitute retroactive application; however such is not the case herein.

The Commonwealth having proved that these defendants continued to receive benefit from the racketeering activity until the last quarter of 1981 or into 1982, the two year limitations period in effect at that time would not have begun running until late 1981 or early 1982. The new five-year statute became effective on July 12, 1982. Therefore, pursuant to 1 Pa. C.S.A. § 1975, the time which had run to that date under the two-year statute would be deducted from the new five-year statute, and the remainder of the five years would then be the applicable limitations period. Crisante v. J.H. Beers, Inc., 297 Pa. Super. 337, 443 A.2d 1150 (1982); Ondrey v. Vates, 14 D&C 3d 470 (1980). (Both cases pertain to limitations periods in the context of civil cases, but note that § 1975 does not distinguish between civil and criminal cases.)

In all events we find no merit to the defense claim that the prosecution was barred.

Finally, we have a defense assertion that the Commonwealth failed to establish that Lavelle and Son was a Pennsylvania corporation. This is totally lacking in merit because the corporate certificate to Lavelle and Son was offered and received in evidence.

For the reasons stated above the defense motions for a new trial and an arrest of judgment will be denied.

Order

NOW, this 23rd day of August, 1985, it is hereby,

ORDERED, that the post-trial motions of all defendants are denied.

1. Defendant W.A. Lavelle and Son Co. proceeded to trial without counsel.

2. It is interesting to note that in this case Lavelle was represented by a public defender; Lavelle and Son had no representation except for the effort of the public defender, while the thrust of the paid defense was to save Lavco the sole depository of the Lavelle enterprises.

3. Act of May 13, 1982, P.L. 417, No. 122, Section 1, effective in 60 days.