author: HANCOCK, District Judge.

text:
    W. Larry HUNT as Receiver of Life Insurance Company of America, an Alabama corporation, Plaintiff, v. AMERICAN BANK & TRUST COMPANY OF BATON ROUGE, LOUISIANA, a banking corporation; Calvin Wilson; Rolf McCollister; George E. McNutt, Jr.; Robert A. Holloway; Donald A. Hayden; Donald E. Hinds; George Pihakis; Karl Rodriquez; Jack R. Tanner; Matthew E. Wright; James Pihakis; Benjamin E. Abbott, Jr.; John C. Roth; Don L. Atkins; Sam A. Gallo; each individually and as, or as former directors of Royal American Corporation and/or Pacific American Corporation, and/or Life Insurance Company of America and/or Investors Corporation of America and/or American Bank and Trust Company of Baton Rouge, Louisiana, Defendants.
    No. CV81-H-601-S.
    United States District Court, N.D. Alabama, S.D.
    April 10, 1985.

      John N. Pappanastos, Pappanastos & Blanchard, P.C., Montgomery, Ala., J. Gusty Yearout, Joanne Boyd, Yearout, Hardy & Myers, P.C., Birmingham, Ala., for plaintiffs.
    Calvin W. Wilson, Pensacola, Fla., W. Ramsey McKinney, Jr., Caine O’Rear, Alex F. Lankford, Hand, Arendall, Bedsole, Greaves & Johnston, Mobile, Ala., for American Bank & Trust.
    Jack E. Held, C. Lee Reeves, Sirote, Per-mutt, Friend, Friedman, Held & Apolinsky, P.A., Birmingham, Ala., for Matthew E. Wright.
    Donald E. Hinds, pro se.
    James Pihakis, pro se.
    Clarence M. Small, Jr., Karen Bowdre, Rives, Peterson, Pettus, Conway, Elliott & Small, Birmingham, Ala., for McCollister, McNutt, Holloway, Hayden, Rodriquez and Gallo.
    Ferris S. Ritchey, Jr., Birmingham, Ala., for George Pihakis.
   MEMORANDUM OF DECISION

HANCOCK, District Judge.

This cause comes before the court on the June 23, 1983 motion for summary judgment of defendant American Bank & Trust Company of Baton Rouge, Louisiana, (American Bank) and the June 28, 1983 motion for summary judgment of defendants Rolfe H. McCollister, George E. McNutt, Jr., Robert A. Holloway, Donald A. Hayden, Karl E. Rodriguez, and Sam Gallo (the “moving individual defendants”) which two motions for summary judgment are addressed to the First, Second, Third and Fourth causes of action set forth in the complaint, as amended August 7, 1981 and as amended March 18, 1983. This cause is also before the court on the January 14, 1985 motions to dismiss of American Bank, the moving individual defendants and defendant Calvin Wilson directed to the Fifth, Sixth, Seventh, Eighth, Ninth and Tenth causes of action set out in the third, fourth and fifth amendments to the complaint. The issues raised by the motions have been ably presently to the court by excellent briefs after ample opportunity for discovery with regard to the issues presented. The motions are ripe for a ruling thereon.

Plaintiff is the Receiver for Life Insurance Company of America (LICA). His complaint, through the fifth amendment, states ten causes of action. Causes First, Second, Fifth and Seventh arise under federal securities laws; causes Third, Fourth, Sixth and Eighth are pendent state law fraud claims; and causes Ninth and Tenth seek to state claims under RICO, 18 U.S.C. § 1961, et seq. In summary, plaintiff complains of three securities frauds, which drained the resources of LICA until it was forced into receivership. The three securities frauds alleged are: (1) the Calvin Wilson transaction; (2) the Transamerican Securities Company, Inc. transaction; and (3) the Advanced Education, Inc. transaction. The various motions now before the court present a variety of issues but this memorandum of decision will address only the affirmative defense of the statute of limitations addressed to the first eight causes of action and the failure of the Ninth and Tenth causes of action to state a claim under RICO upon which relief may be granted.

The following facts are either not in dispute or are stated most favorably from the standpoint of the plaintiff. In the mid-1970s Royal American Corporation (RAC) owned at least 51% and maybe as much as 60% of the common stock of Pacific American Corporation (PAC), which owned 100% of the stock of LICA, which owned 67% of the stock of Investors Corporation of America (ICA), which owned 100% of International Resorts, Inc., which owned a property known as Point Aquarius Country Club. While the officers and directors of the foregoing were not identical, there was sufficient common identity of officers and directors to assume validity to the allegations in the complaint that certain of the defendants who were officers and directors of such corporations, through the dominance and control of other officers and directors who are not defendants, dominated and controlled the corporations. LICA was an insurance company which at all times was subject to the supervision of the Department of Insurance of the State of Alabama.

As stated earlier, the causes of action pursued in the complaint center around three alleged fraudulent transactions.

The Calvin Wilson transaction, as alleged, involved a scheme by all defendants to divert $500,000 from LICA into ICA, a financially troubled company in which LICA owned a two-thirds interest. Since the schemers felt a direct transfer of funds from LICA to ICA might result in an undesirable response by the Alabama Department of Insurance, the object of the scheme was accomplished in June of 1975 through the use of a straw man, Calvin Wilson. Wilson borrowed $500,000 from American Bank and used it to purchase from ICA 1,000,000 shares of its stock, pledging the stock to American Bank as security for the loan. As further security for the loan, the defendants had LICA guaranty payment of the loan. Upon Calvin Wilson’s default, LICA paid American Bank the $500,000 and received an assignment of the pledged 1,000,000 shares of ICA stock. Plaintiff's First through Fourth causes of action arise out of the factual setting of the Calvin Wilson transaction and are pursued against all defendants.
The Transamerican Securities Company, Inc. transaction, as alleged, involved a scheme by certain of the defendants to divert funds from LICA to another company which some LICA board members controlled, Transamerican Investment Company, Ltd. This transaction occurred on June 2 and 3, 1977. Transamerican Investment Company, Ltd. is the holding company for Transamerican Securities Company, Inc. LICA, using its demand note, purchased from Transamerican Investment Company, Inc. eight $50,000 debentures (presumably the debentures were issued by Transamerican Securities Company, Inc.) maturing in three years, bearing interest at an annual rate of 10%, payable monthly, beginning July 1, 1977. The demand note used to purchase the debentures was secured by a $400,000 irrevocable letter of credit. Although not alleged, the letter of credit apparently was the outgrowth of a simultaneous delivery by LICA of its $400,000 promissory note to First National Bank of Oxford, secured by a mortgage of real estate (Point Aquarius Country Club) owned by International Resorts, Inc., a corporation wholly owned by ICA. Only one monthly interest payment on the debentures was received by LICA. The debentures have not been located and there is no evidence that LICA was paid for the debentures at the stated maturity thereof. Plaintiff’s Fifth and Sixth causes of action arise out of the factual setting of the Transamerican Securities Company, Inc. transaction and are pursued against certain of the moving individual defendants, plus defendants Donald E. Hinds, Jack R. Tanner, Matthew E. Wright and George Pihakis.
The Advanced Education, Inc. transaction, as alleged, involved a scheme by American Bank and certain of the defendants to drain funds from LICA. American Bank was trustee for education bonds sold by Advanced Education, Inc. designed to help parents pay the cost of their children’s college educations. At some point in time, American Bank and Advanced Education, Inc. became aware that the Advanced Education, Inc. investment portfolio was insufficient to pay the education bonds as they came due. On or about July 23, 1974, they set out to avoid liability for this discrepancy. Advanced Education, Inc. borrowed $300,000 from American Bank. Advanced Education, Inc. used this $300,000 in cash and the entire Advanced Education, Inc. investment portfolio to purchase a $600,000 convertible debenture from ICA. LICA guaranteed this debenture. Advanced Education, Inc. used this debenture as collateral on its $300,000 loan from American Bank. Apparently simultaneously, Advanced Education, Inc. returned to ICA its $600,-000 debenture in exchange for ICA’s agreement to assume, unconditionally, all the debts, liabilities and obligations of Advanced Education, Inc. (including the $300,000 note payable to American Bank and the education bonds). LICA guaranteed ICA’s assumption of these liabilities. Plaintiff’s seventh and eighth causes of action arise out of the factual setting of the Advanced Education, Inc. transaction and are pursued against American Bank, certain of the moving individual defendants and defendants George Pihakis, Matthew E. Wright and Jack R. Tanner.

The financial affairs of LICA became so bad that in late 1978 the Commissioner of Insurance commenced an action in the Circuit Court of Jefferson County, Alabama, seeking the appointment of a receiver for LICA. On December 15, 1978, that court appointed Charles E. Crawford, Chief of Receivership Division of Alabama Department of Insurance, as Receiver “of all the property, assets and estate” of LICA and directed the Receiver “to take immediate possession of said property, including the premises and all rights of action, as well as the books, papers, evidence of debt and all other property of every kind whatsoever belonging” to LICA. The Receiver was expressly authorized by statute and directed by court order to hire legal, clerical, managerial and other employees necessary to discharge his responsibility. Plaintiff W. Larry Hunt is the successor Receiver, having been appointed by the state court on January 23, 1980.

The federal securities law contains no statute of limitations for 10b-5 claims. Therefore, a court must look to the law of the forum state for the closest substantive state cause of action and graft the statute of limitations from that cause of action onto the federal securities fraud claim. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976). In Alabama, the choice is between the one-year statute for common law fraud, Ala.Code § 6-2-39 (1975), and the two-year period applicable to actions under the Blue Sky law. Ala. Code § 8-6-19(e) (1975). Diamond v. Lamotte, 709 F.2d 1419 (11th Cir.1983), explains the method of determining the proper statute of limitations. First, the court must compare the essential elements of the federal cause of action with the available choices under state law, looking not just to the elements of the causes of action, but also comparing the similarities of purpose that underlie the state and federal causes of action, in choosing the most analogous state cause of action. Second, the period of limitations for the state categorization of the action is applied, unless the categorization or the limitation period is inconsistent with federal policy. Id. at 1422. The primary distinction between the Alabama Blue Sky law and the federal securities law 10b-5 claim is that the Alabama securities fraud remedies can only be sought by a purchaser whereas the federal remedy is open to both sellers and purchasers. White v. Sanders, 650 F.2d 627 (5th Cir.1981) (Unit B), explained that where a purchaser is alleging that it was defrauded, that distinction between the state and federal securities laws is of no moment. Thus in the instant action where LICA occupied the position of a purchaser, the applicable statute of limitations for the federal securities law claims is two years. Of course, plaintiff’s common law fraud claims are governed by the one-year period of limitation. Ala. Code § 6-2-39 (1975).

The pivotal question in the instant case is when the period of limitations began to run. Regardless of the state statute of limitations adopted, a federal court is bound to follow the federal rule with regard to when the clock starts running. White v. Sanders, 650 F.2d 627, 630 (5th Cir.1981) (Unit B). The test for when the statute begins to run is an objective one. The plaintiff’s actual knowledge need not be proved. At that time when the plaintiff knew or should have known of facts sufficient to indicate that the fraud had taken place, the statute begins to run. Thus, for our purposes, the inquiry must concentrate on when the holder of the claim had either actual knowledge of the alleged violation or notice of facts which, with the exercise of due diligence, would have led to actual knowledge thereof. First Federal Savings and Loan Association of Miami v. Mortgage Corporation of the South, 650 F.2d 1376 (5th Cir.1981) (Unit B); Vigman v. Community National Bank & Trust Company, 635 F.2d 455 (5th Cir.1981); Azalea Meats, Inc. v. Muscat, 386 F.2d 5 (5th Cir.1967).

The instant action was commenced April 22, 1981, approximately six years after the Calvin Wilson transaction, approximately four years after the Transamerican Securities Company, Inc. transaction and approximately seven years after the Advanced Education, Inc. transaction. The claims embraced in the action belonged to LICA. While LICA knew of the existence of the fraudulent transactions at the time the transactions took place because it was a party to the transactions, the court is assuming arguendo complete domination and control of LICA by the defrauding officers and directors. Therefore the running of the statute of limitations would not begin until knowledge concerning the alleged fraudulent transactions was available to persons or entities other than LICA or its officers and directors who had the right to pursue avenues of redress, on behalf of LICA, for the alleged fraudulent transactions. Where a corporation, such as LICA, fails to pursue a claim which is owned by it, shareholders of the corporation are permitted to bring a derivative action to redress the injury to the corporation. Of course, a receiver appointed to represent a corporation has the right to pursue such claims; but more importantly, a receiver often has a duty imposed by a court and by statute to pursue such claims. Thus the statute of limitations may begin to run when it is clear that shareholders of the corporation, with an interest in redressing wrongs against their corporation, are or should be aware of the fraudulent activities damaging their corporation. If such knowledge or notice of facts is never garnered by shareholders, then the statute may begin to run when a court appointed receiver knows of the fraudulent transaction or acquires notice of facts which with the exercise of due diligence would lead to actual knowledge thereof. Since PAC was the sole stockholder of LICA, we must look to the shareholders of PAC to determine whether those shareholders knew of the fraudulent activities. At this point, the court is assuming PAC was dominated and controlled by the same interlocking directors and officers that controlled LICA. While RAC did own a controlling interest in PAC, there was substantial ownership of the shares of PAC which was clearly not controlled by RAC or any of the interlocking directors and officers. These independent shareholders had actual knowledge of extensive frauds perpetrated upon LICA at least by September of 1976.

In September of 1976, Wesley Lambert, Jr. and Fletcher E. Jones, both shareholders of PAC, instituted a derivative action in this court under FRCP Rule 23.1 for the use and benefit of PAC and LICA against American Bank and many of the same individual defendants named as defendants in the instant action. The action was styled Wesley Lambert, Jr., et al. v. Pacific American Corporation, et al., CV76-H1249-S. In the same month an action was commenced in the Circuit Court of Jefferson County, Alabama, under Case Number 200-531, pursuing identical claims against the same defendants, with the exception of American Bank. The complaint in the Lambert case expressly alleges that the shareholders of PAC had made demand on the officers and directors of PAC and LICA to take action on behalf of LICA in connection with the various wrongs perpetrated on LICA which were enunciated in the Lambert complaint. The Lambert complaint described a variety of alleged frauds against LICA, including the Calvin Wilson transaction and the Advanced Education, Inc. transaction. The Lambert complaint demonstrates that non-dominated PAC shareholders had actual knowledge of the Calvin Wilson transaction and the Advanced Education, Inc. transaction and that those shareholders pursued avenues available to them to redress those and other wrongs committed against LICA.

Paragraph 10 of the Lambert complaint describes the Advanced Education, Inc. transaction as follows:

10. In July 1974 the Louisiana directors made arrangements for ICA to issue a Six Hundred Thousand ($600,-000.00) Dollar Fourteen (14%) Percent convertible debenture to Louisiana Bank in exchange for the trust portfolio of Advanced Education, Inc. held by Louisiana Bank. As additional consideration PAC, LICA, ICA and IRI [International Resorts, Inc.] were caused to guaranty the liability of Advanced Education, Inc. to the purchasers of its pre-paid college expense plans. The burden of said guaranty was concealed from PAC and LICA and said burden is greatly in excess of the value of the assets received and has cost in excess of Three Hundred Thousand ($300,000.00) Dollars in three years. The value of the investment portfolio was overstated, consisting of approximately Three Hundred Thousand ($300,-000.00) Dollars in liquid assets and approximately Three Hundred Thousand ($300,000.00) in mortgage notes having a loan value of not more than half. Plaintiff avers that said mortgage notes were issued by a company in which an associate or former associate of Defendant, McCollister was interested. Plaintiff further avers that said mortgage notes were pledged to Louisiana Bank by Defendants for a loan to ICA of One Hundred Fifty Thousand ($150,000.00) Dollars.

Paragraph 13 of the Lambert complaint describes the Calvin Wilson transaction as follows:

13. During sometime in 1975 or 1976 the Louisiana Defendants and RAC entered into an agreement to sell RAC’s stock in PAC for Three and .75/100 ($3.75) Dollars per share or approximately Two Million Nine Hundred Thousand ($2,900,000.00) Dollars to a purchaser. As a part of said plan or scheme the Louisiana directors caused ICA to issue One Million (1,000,000) Shares of Fifty (50) Cent par stock to said Purchaser who demanded control of ICA to enter into the agreement with RAC. One Million (1,000,000) Shares represented Thirty-three (33%) Percent of the capital of ICA. In order to consummate said sale, the Louisiana directors caused purchaser to borrow the purchase price of approximately Three Million Four Hundred Thousand ($3,400,000.00) Dollars from Louisiana Bank, secured by said stock. They caused LICA to either initially guaranty, or upon default by the purchaser to purchase the said shares in ICA for Five Hundred Thousand ($500,-000.00) Dollars, thus transferring an additional Five Hundred Thousand ($500,-000.00) Dollars from LICA to ICA.

It cannot seriously be argued that the shareholders of LICA were not pursuing derivative claims on behalf of LICA to redress injury to LICA caused by the Advanced Education, Inc. transaction and the Calvin Wilson transaction. Likewise, because of the extensive allegations of fraud in the Lambert complaint, it cannot seriously be argued that the same stockholders were not on notice of facts which, with the exercise of continuing due diligence would have also led them to actual knowledge of the Transamerican Securities Company, Inc. transaction when it occurred. The applicable two-year statute of limitations began to run at least by September 8, 1976 when the Lambert complaint was filed and the causes of action based on securities fraud associated with the Calvin Wilson transaction and the Advanced Education, Inc. transaction were effectively barred as of September 8,1978, three months prior to the appointment of the Receiver for LICA. Of course, the causes of action based upon common law fraud arising from those transactions were barred as of September 8, 1977, fifteen months prior to such appointment. The shareholder knowledge of the wide variety of frauds perpetrated by the dominating officers and directors of LICA reflected in the Lambert complaints would, for purposes of the statute of limitations, also demand continuing inquiry by those shareholders into the affairs of LICA. By virtue of the notice to the shareholders afforded by the descriptions of the securities and other frauds in the Lambert complaint, an objective test with regard to the commencement of the running of the statute of limitations for the Transameriean Securities Company, Inc. transaction would result in the statute beginning to run either at the time of the transaction itself (June 3, 1977) or at the time of the LICA Board of Directors’ meeting approving the transaction (July 2, 1977), or at the time of non-payment of interest due on the debentures (August 1, 1977 and the first day of each month thereafter). In any event, shareholders with knowledge of the pervasive frauds described in the Lambert complaint should have known of the Transamerican Securities Company, Inc. transaction at least by the fall of 1977. See generally Armstrong v. McAlpin, 699 F.2d 79 (2nd Cir.1983). The common law fraud claim based on that transaction was barred by the one-year statute of limitations prior to the appointment of the Receiver, and the securities fraud claim based on that transaction was barred by the two-year statute of limitations long before plaintiff commenced the instant action.

The foregoing is a sufficient basis upon which to grant the pending motions for summary judgment addressed to causes First, Second, Third and Fourth in the amended complaint and, after proper notice, to convert the pending motions to dismiss into motions for summary judgment and to grant them as addressed to causes Fifth, Sixth, Seventh and Eighth. But there is a separate and independent reason why the claims set forth in causes First through Eighth are barred by two-year (securities fraud claims) and one-year (common law fraud claims) statutes of limitations. That reason concerns the delay by the Receiver in bringing this action until twenty-eight months after his appointment.

A receiver stands in the shoes of the corporation and can only assert those claims that the corporation could assert. See Lank v. New York Stock Exchange, 548 F.2d 61 (2nd Cir.1977); Ex Parte Wilkinson, 220 Ala. 529, 126 So. 102 (1930). See also Porter v. Sabin, 149 U.S. 473, 13 S.Ct. 1008, 37 L.Ed. 815 (1893). Thus, were the court not assuming that LICA was under the domination and control of defrauding officers and directors, the Receiver would be barred by the applicable statute of limitations. But, because of that domination and control, the running of the statute is tolled, but only during the period of domination and control. See generally Armstrong v. McAlpin, 699 F.2d 79 (2nd Cir.1983). That domination and control of LICA ended when the Receiver was appointed on December 15, 1978. The period of tolling ended and the statute began to run at that time. The undisputed facts hereafter discussed demonstrate that the Receiver, at the time of his appointment, at the very least had notice of facts which with the exercise of due diligence would have led to actual knowledge of the subject frauds. As pointed out in Armstrong, supra, at page 88.

The test as to when fraud should with reasonable diligence have been discovered is an objective one. Warner v. Republic Steel Corp., 103 F.Supp. 998, 1009 (S.D.N.Y.1952). “[T]he means of knowledge are the same thing in effect as knowledge itself.” Wood v. Carpenter, 101 U.S. [ (11 Otto) ] 135, 143, 25 L.Ed. 807 (1879). “[W]here the circumstances are such as to suggest to a person of ordinary intelligence the probability that he has been defrauded, a duty of inquiry arises, and if he omits that inquiry when it would have developed the truth, and shuts his eyes to the facts which call for investigation, knowledge of the fraud will be imputed to him.” Higgins v. Crouse, 147 N.Y. 411, 416, 42 N.E. 6 (1895). This rule is fully applicable in cases such as the instant one, which involve claims of securities fraud.

A receiver who is brought in to manage a failing insurance company is on notice of problems with the company by virtue of the fact that he is needed. Furthermore, the court order appointing the Receiver specifically directs him to take charge of every aspect of the company and to rehabilitate the company. See Decree for Injunction and Appointment of a Receiver, Payne, Commissioner of Insurance v. Life Insurance Company of America, CV78 505-498 WCB (December 15, 1978 Circuit Court of Jefferson County, Alabama, Equity). As noted earlier, Ala. Code § 27-32-15 (1975) authorizes the Receiver to employ such counsel, clerks and assistants as he deems necessary. The Receiver must be held to the highest level of “due diligence” in ferreting out those claims held by LICA.

A strict application of the statute of limitations to the Receiver imposes no undue hardship under the facts established in the instant case. A receiver for an insurance company in Alabama is only appointed after an examination of the company reveals that it is “impaired,” i.e., a finding that its liabilities exceed its assets. Weaver depo. at 27. The product of that examination is in the hands of the Alabama Department of Insurance. A receiver is selected by the Commissioner of Insurance and then established by court order. It would be a gross admission of governmental inefficiency not to charge such a receiver with notice of facts determined by the pre-receivership investigation, particularly under the facts in this case.

The first receiver for LICA was Charles E. Crawford. Mr. Crawford was a Deputy Commissioner and Chief of the Receivership Division of the Alabama Department of Insurance. His immediate supervisor was the Commissioner of Insurance of Alabama — the head of the Alabama Department of Insurance (Crawford deposition at 12, 15). Plaintiff in the case at bar, W. Larry Hunt, was Mr. Crawford’s successor as Receiver of LICA. Mr. Hunt is also an employee of the Alabama Department of Insurance and Chief of the Receivership Division of that department (Hunt depo. at 6-7). By statute the rehabilitation, liquidation, reorganization and conservation of insurers is the responsibility of the Commissioner of Insurance. Ala.Code § 27-32-1, et seq. (1975). Information that the Department of Insurance had must be imputed to the Receiver who was wearing two hats, the hat of the Receiver for LICA and the hat of Chief of the Receivership Division of the Department of Insurance.

The Department of Insurance began its investigation of LICA in the early part of 1975 (Weaver depo. at 22). The Calvin Wilson transaction took place on June 19, 1975. In Otis D. Weaver’s December 12, 1975 report to the Commissioner of Insurance on the examination of the affairs and financial conditions of LICA, he comments

On June 19, 1975, I.C.A., an affiliate of LICA sold Calvin Wilson 1,000,000 shares of I.C.A. stock at $.50 per share. The $500,000.00 to purchase this stock was loaned to Calvin Wilson by the American National Bank of Baton Rouge, Louisiana. The Life Insurance Company of America unconditionally guaranteed repayment of the loan if not paid by Calvin Wilson on December 16, 1975. The $500,000.00 loaned to Mr. Wilson was paid into I.C.A. I.C.A. was desperately in the need of cash at this time in order to meet due obligations. The $500,000.00 was looked upon by the examiners as a means of getting funds into I.C.A. at this time. It was requested that the Company furnish financial statements from Calvin Wilson indicating as to his ability to meet this obligation. No financial statements were available.

American Bank Exhibit 2 to deposition of Otis Weaver. In his March 31, 1976 report on the condition of LICA as of December 31, 1975, Weaver explained that the loan to Calvin Wilson was not paid on the due date and had thus become a liability of LICA. American Bank Exhibit 3 to deposition of Otis Weaver at page 51.

The conflict of interest that underlay this transaction was apparent from the Annual Statement for the year ended December 31, 1975, in which the interlocking directorships of ICA and LICA are reported and graphically demonstrated. See American Bank Exhibit 5 to Deposition of Otis Weaver. Furthermore, the examiner was well aware that Rolfe McCollister, the Chairman of the Board of LICA, was also a director of American Bank (Weaver depo. at 77-79). Mr. Weaver testified that he understood Mr. McCollister “practically owned” the American Bank (Weaver depo. at 79).

In his June 29, 1978 report on the examination of LICA for the Commissioner of Insurance, Sam Alison, the Department of Insurance examiner, explains:

Transactions involved in purchase of debentures. During the course of this examination it was learned that on June 29, 1977, the Company filed an amendment to its Form B filing under the Alabama Insurance Holding Company System Regulatory Act which stated that on June 3, 1977, the Company purchased $400,000 of debentures from Transamerican Investment Company, Ltd., a holding company organized under the laws of the State of Louisiana in 1977. That company’s principal asset was 100% ownership of Transamerican Securities, Inc., a Memphis, Tennessee broker-dealer which began business on April 15, 1977. It was reported in this amendment that the debentures were purchased with a note secured by an Irrevocable Letter of Credit issued by the First City National Bank of Oxford, Alabama, in exchange for a first mortgage of $400,000 on the Point Acquarius [sic] resort development property. One official of the Company stated that, to his knowledge, the debentures had never been purchased. Another official of the Company stated that the $400,000 of debentures had been purchased and were still held by the Company at December 31, 1977. Other information indicated that, as of December 31, 1977, only $150,000 of the debnetures [sic] were still owned by the Company and the mortgage indebtedness due to the First City National Bank of Oxford had been reduced to $150,000. These transactions were not reported or disclosed in the Company’s 1977 annual statement. With the exception of the mortgage which is commented upon under the asset caption “Real Estate”, these transactions have not been reflected in the financial statement of this report.

American Bank Exhibit 6 to deposition of Charles Crawford at page 82. (emphasis supplied) In light of what the Receiver knew of other frauds, this report alone should have been sufficient to suggest the possibility of fraud. As noted earlier, the interest on these debentures was payable monthly beginning July 1, 1977, and the purchase of these debentures was the subject of a LICA Board of Directors’ meeting on July 2, 1977, during the period of ongoing examination of LICA by the Department of Insurance. Only one payment of interest was received by LICA, the debentures were missing and no payment of the principal on the debentures was received. A receiver charged with the responsibility of running an insurance company and empowered with the ability to hire specialized assistants to assist him in running the company must be held to the highest standard of due diligence. Failure to note the nonpayment of $2,630.16 every month for three years and failure to note the absence of a $500,000 asset are not exemplary of due diligence.

Additional notice of the Calvin Wilson transaction and the Advanced Education, Inc. transaction was available from the court papers in the shareholder derivative

litigation discussed earlier. Mr. Weaver testified that the Department of Insurance reviewed the Lambert litigation involving LICA during the 1975-76 examination (Weaver depo. at 105). While the federal court Lambert case had been dismissed by December 15, 1978, when the Receiver was appointed, the state court Lambert case was still pending. On December 15, 1978, William Jackson was employed as counsel for the Receiver. See Ex rel. Payne v. Life Insurance Company of America, Case No. CV78-505-498 WAT, Order of January 26, 1979 (Jefferson County Circuit Court) (approving December 15, 1978 contract for hire of William Jackson as attorney). On April 9, 1979 (more than two years before the instant action was filed), Mr. Jackson formally entered an appearance on behalf of the Receiver in the state court Lambert action. Mr. Jackson had actually been involved earlier in that state action as the attorney for the Receiver of LICA. See Lambert et al. v. Pacific American Corp., Case No. 200-531 Order of March 5, 1979 (Circuit Court of Jefferson County, Alabama). There simply is no doubt that concrete objective facts were available to the Receiver more than two years prior to April 22, 1981, so that had he exercised any diligence at all, he would at the very least have discovered the alleged frauds. Although not enumerated herein, the Department of Insurance had in its files prior to the appointment of the Receiver countless other documents which constitute notice of facts which, if pursued at all, would have led to actual knowledge of subject fraudulent activity. To paraphrase the court in Armstrong, supra, the tortuous history of LICA during the several years prior to the appointment of the Receiver was such that a fiduciary such as the Receiver who did suspect chicanery at the time of appointment must have had his head in the sand.

The court has made an earlier determination that, by reason of the actual knowledge of shareholders of PAC more than two years prior to the appointment of the Receiver, all claims asserted on behalf of LICA in causes First through Eighth were barred by the applicable statute of limitations before the Receiver was appointed. Even if the court is wrong in this determination, the foregoing discussion makes plain that, more than two years prior to April 22, 1981, the Receiver either had actual knowledge of the subject fraudulent transactions or at the very least had notice of facts which with the exercise of due diligence would have led to actual knowledge thereof. That is a sufficient basis upon which also to grant the pending motions for summary judgment addressed to causes First, Second, Third and Fourth in the amended complaint and, after proper notice, to convert the pending motions to dismiss into motions for summary judgment and to grant them as addressed to causes Fifth, Sixth, Seventh and Eighth.

The court has, for the purpose of resolving the issues thus far resolved, treated the Transamerican Securities, Inc. transaction and the Advanced Education, Inc. transaction as if included in the original complaint filed April 22, 1981. They were not injected into this action until, at the earliest, May 2, 1983, with the filing of a motion for leave to file a third amendment to the complaint. The failure of the court not to discuss FRCP Rule 15(c) relation back problems should not be understood as a determination that these two transactions are the same conduct, transaction or occurrence pleaded in the original complaint. See National Distillers and Chemical Corp. v. Brad’s Machine Products, Inc., 666 F.2d 492 (11th Cir.1982).

The third, fourth, and fifth amendments to the complaint purport to claim damages under the Racketeer Influenced Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq. (1982), in the Ninth and Tenth causes of action. These causes of action are the subject of motions to dismiss, or, in the alternative, motions for a more definite statement, pursuant to FRCP Rule 9(b).

The Ninth and Tenth causes of action (as amended) allege violations of RICO, 18 U.S.C. § 1961 et seq., by “reason of the use of [Life Insurance Company of America] funds through a pattern of securities frauds to operate [other businesses], thereby draining] the assets of [Life Insurance Company of America]” and by the use of the mails to accomplish the scheme. After careful consideration of the defendants’ motions to dismiss, the intricate web of pleadings generated in this action, the plaintiff’s memorandum brief, and the developing law regarding RICO, this court finds that the Ninth and Tenth causes of action are due to be dismissed for failure to state a claim upon which relief may be granted under 18 U.S.C. § 1961 et seq.

RICO provides for private civil remedies at 18 U.S.C. § 1964(c):

Any person injured in his business or property by reason of a violation of section 1962 of the chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee.

Id. A violation of section 1962 includes (a) deriving income from a pattern of racketeering activity and investing any part of that income in an enterprise whose activities affect interstate commerce; (b) acquiring through a pattern of racketeering activity any interest or control in an enterprise whose activities affect interstate commerce; (c) conducting affairs of an enterprise whose affairs affect interstate commerce through a pattern of racketeering activity; and (d) conspiring to violate (a), (b) or (c).

RICO defines a pattern of racketeering activity to require at least two acts of racketeering activity. 18 U.S.C. § 1961(5). Racketeering activity includes acts indictable under certain listed provisions of the United States Code, including mail fraud, 18 U.S.C. § 1341, and “any offense including fraud connected with a case under title 11, fraud in the sale of securities____” 18 U.S.C. § 1961(1) (emphasis supplied).

Courts have construed the requirement that the predicate acts be indictable to mean that the allegations must provide the highest level of FRCP Rule 9(b) particularity — even beyond that required in the ordinary fraud case. E.g. Bache Halsey Stuart Shields, Inc. v. Tracy Collins Bank & Trust Co., 558 F.Supp. 1042, 1046 (D.Utah 1983). This is justified by the connotative nature of the allegations in a racketeering action and the ten-year time limit on predicate acts invoked by RICO. Thus several cases have been dismissed for the failure to provide the requisite particularity in pleading.

Other courts have looked to the RICO statutory language to imply a requirement that a plaintiff show some nexus between the racketeering and the injury received. E. g. Hokama v. E.F. Hutton & Co., 566 F. Supp. 636, 643 (C.D.Cal.1983); Waterman S.S. Corp. v. Avondale Shipyards, Inc., 527 F.Supp. 256, 260 (E.D.La.1981); Adair v. Hunt Int’l Resources Corp., 526 F.Supp. 736, 747 (N.D.Ill.1981); Noonan v. Granville-Smith, 537 F.Supp. 23, 29 (S.D.N.Y.1981).

Some courts have required a “competitive” or “racketeering” injury, based on the RICO Act’s ancestry — the Clayton Act. E. g. Bankers Trust v. Feldesman, 566 F. Supp. 1235, 1241 (S.D.N.Y.1983); North Barrington Dev., Inc. v. Fanslow, 547 F.Supp. 207, 211 (N.D.Ill.1980); Waste Recovery Corp. v. Mahler, 566 F.Supp. 1466, 1468-69 (S.D.N.Y.1983). But see Bunker Ramo Corp. v. United Business Forms, Inc., 713 F.2d 1272, 1288 (7th Cir.1983); Schacht v. Brown, 711 F.2d 1343, 1358 (7th Cir.), cert. denied, — U.S.-, 104 S.Ct. 508, 78 L.Ed.2d 698 (1983).

Still other courts have divided on the question of whether a prior criminal conviction for the predicate acts is required in order to permit a civil RICO action. E.g. Sedima, S.P.R.L. v. Imrex Co., 741 F.2d 482 (2nd Cir.1984) cert. granted — U.S. -, 105 S.Ct. 901, 83 L.Ed.2d 917 (1985); Glusband v. Benjamin, 530 F.Supp. 240, 241 (S.D.N.Y.1981); Harper v. New Japan Securities Int’l, Inc., 545 F.Supp. 1002 (C.D.Cal.1982).

In a series of opinions the Second Circuit exhaustively reviewed the state of the law in civil RICO. Sedima, S.P.R.L. v. Imrex Co., 741 F.2d 482 (2nd Cir.1984), cert. granted, — U.S. -, 105 S.Ct. 901, 83 L.Ed.2d 917 (1985); Bankers Trust Co. v. Rhoades, 741 F.2d 511 (2nd Cir.1984), petition for cert. filed, 53 U.S.L.W. 2063 (U.S. Oct. 24, 1984); Furman v. Cirrito, 741 F.2d 524 (2nd Cir.1984), petition for cert. filed, 53 U.S.L.W. 2063 (U.S. Oct. 24, 1984). After reviewing the statutory language at issue, the Second Circuit panel found that “RICO ... presents a classic case of a statute whose ambiguous language needs to be construed in light of Congress’ purpose in enacting it.” Sedima, 741 F.2d at 488 & n. 17. Turning first to the legislative history, the Second Circuit found a surprising paucity of discussion of the civil treble damages remedy. The two judge majority described the lack of commentary as “a clanging, silence.” Id. at 492. The plethora of case law on the statute, catalogued above, also revealed no consensus on what civil RICO entailed. With the congressional purpose as its North Star, the Second Circuit set out to define a civil RICO action. Mixed reviews of its efforts have emerged. E.g. Furman v. Cirrito, supra; Atlantic Federal Savings and Loan Association of Fort Lauderdale v. Dade Savings and Loan Association, 592 F.Supp. 1089, 1092-93 (S.D.Fla.1984). This court has considered the opposing views and finds the reasoning of the Sedima opinion persuasive.

Sedima, supra, requires the plaintiff to allege a “racketeering injury” — an “injury different in kind from that occurring as a result of the predicate acts themselves.” Id. at 493. In neither the Ninth nor the Tenth cause of action is there any allegation that plaintiff suffered any proprietary injury by reason of a pattern of racketeering activity, which injury was different from the alleged injuries caused by the predicate acts.

Even under the less restrictive view of RICO adopted by the Eighth Circuit the plaintiff’s complaint fails to state a cause of action under RICO. See Alexander Grant & Co. v. Tiffany Industries, Inc., 742 F.2d 408 (8th Cir.1984) petition for cert. filed, 53 U.S.L.W. 3672 (1985) (expressly distinguishing Second Circuit’s view enunciated in Sedima).

The injury to be addressed by a RICO civil action is that which results from ill-gotten gains being channelled into the lanes of legitimate commerce, thus destroying natural effects of the competitive marketplace. At the heart of the Ninth cause of action, plaintiff alleges that LICA was injured by reason of the use of its own funds through a pattern of securities frauds to operate some five different business concerns. Allegedly, the cooperation of each of these concerns drained the assets of LICA. The Tenth cause of action relies on the same injury but predicates RICO liability on the mailing of false financial statements and financial reports.

Alexander Grant and Company v. Tiffany Industries, Inc., supra, discussed a civil RICO claim made by an accounting firm that complained of injuries from a former client’s systematic fraud in order to induce a favorable audit report. The accounting firm’s complaint outlined a series of fraudulent acts by its former clients, concluding that:

(1) Tiffany’s actions constitute a substantive RICO violation under 18 U.S.C. § 1962(c).
(2) Mail fraud and wire fraud are acts within the definition of “racketeering activity” in 18 U.S.C. § 1961(B).
(3) Tiffany carried out two or more such acts within a ten-year period, thus establishing a “pattern of racketeering activity.” 18 U.S.C. § 1961(5).
(4) Tiffany is an interstate “enterprise,” 18 U.S.C. § 1961(4), conducted through a pattern of racketeering activity by the defendants.
(5) Plaintiff was injured in his business or property by reason of a violation of section 1962, and therefore entitled to damages.

Id. at 410.

The Eighth Circuit expressly declined to adopt the Second Circuit’s rationale in Sedima that led to the requirement of an organized crime or mobster activity as the cause of injury, but it did opine that its decision was consistent with the Second Circuit’s opinion in Bankers Trust Co. v. Rhoades, supra, to the extent that a civil RICO plaintiff must allege something more than the injuries from the predicate acts. The Eighth Circuit went on to hold that the accounting firm had sufficiently alleged that its injury resulted from the operation of Tiffany through a pattern of racketeering. Alexander Grant & Co. at 413.

Plaintiff in the instant action does not allege anything more than injuries caused by the predicate acts. Plaintiff does allege that the predicate acts constitute a pattern of racketeering activity, but in no way does plaintiff attempt to set out how the alleged injury is a product of racketeering distinct from the injury caused by securities fraud or mail fraud.

Both the Second Circuit and the Seventh Circuit agree that a causation element must'be imposed in civil RICO liability. Cf. Sedima, supra, with Haroco, Inc. v. American National Bank & Trust Co. of Chicago, 747 F.2d 384 (7th Cir.1984), cert. granted, — U.S.-, 105 S.Ct. 902, 83 L.Ed.2d 917 (1985). The Second Circuit’s restrictive view of RICO requires “but for” causation with regard to each element of the RICO action in order for the damages to be assessed. Bankers Trust, 741 F.2d at 517. The Seventh Circuit, while expressly rejecting the Second Circuit’s but-for test for causation, reads the statutory requirement that injury results “by reason of” a violation of section 1962 to impose a proximate cause requirement on plaintiff. Under either view, the Tenth cause of action in the instant case fails to state a claim. In the morass of pleadings generated in this case it is apparent that the alleged acts of mail fraud were not the legal cause of LICA’s proprietary injuries. The Tenth cause of action is therefore due to be dismissed.

Furthermore, the most decisive prerequisite from the Sedima opinion is also not alleged. Sedima and Bankers Trust Co. both discuss the requirement of a prior criminal conviction as a prerequisite to civil liability. Plaintiff has alleged no prior criminal conviction of any of the defendants in the case at bar. In the only Eleventh Circuit treatment of civil RICO, the panel did not go so far as to require a criminal conviction, but it did require indicia of criminality. Thus, the Eleventh Circuit appears to lean toward limiting the development of RICO to matters that are fairly considered to be criminal. Morosani v. First National Bank of Atlanta, 703 F.2d 1220 (11th Cir.1983); see also Taylor v. Bilezikian, (Case No. 84-833 Civ -T-10) (M.D.Fla. Dec. 11, 1984), in which Chief Judge Hodges expressly dismissed a RICO civil complaint “for failure to allege a prior criminal conviction on the underlying predicate offenses.” See generally Butler Manufacturing Co. v. Convey-All, Inc., 605 F.Supp. 1203 (N.D.Ala.1985), where Judge Acker of this court adopted the rationale of Judge Hodges’ Taylor opinion.

A civil treble damages action for racketeering raises the pragmatic problem of what burden of proof is to be applied. Courts and commentators have covered the spectrum of possibilities. See Matz, Determining the Standard of Proof in Lawsuits Brought Under RICO, Nat’l L.J., Oct. 10, 1983, at 21 col. 1; Swanson v. Wabash, Inc., 577 F.Supp. 1308 (N.D.Ill.1983); Farmers Bank of Delaware v. Bell Mortgage Corp., 452 F.Supp. 1278 (Del.1978). In a confusing approach to this difficult dilemma, a distinct minority of courts have gone beyond a FRCP Rule 9(b) requirement of particularity to require “probable cause” in the germane allegations. Bache Halsey Stuart Shields, Inc. v. Tracy Collins Bank & Trust Co., 558 F.Supp. 1042 (D.Utah 1983).

The Second Circuit’s requirement of a prior criminal conviction provides a sound solution to this troubled area. Instead of instructing one jury on a panoply of varied burdens of proof, the underlying criminality is made a prerequisite to the institution of the action. With the criminal conviction as a starting point, the civil RICO provisions can justifiably be given a liberal interpretation without trampling over the rights of due process and fair trial. See Tarlow, RICO Revisited, 17 Ga. L.Rev. 291 (1983).

The Ninth and Tenth causes of action must be dismissed for failure to allege a prior criminal conviction on the underlying predicate offenses. As an additional basis for such dismissal the court finds the complaint, as amended, insufficiently particular in its allegations to permit continued prosecution of the RICO claims. While the court is well aware that a complaint need only offer a short and plain statement of the claim showing that the pleader is entitled to relief and that mere notice pleading is all that is now required, there is a limitation on the liberal pleadings rules. FRCP Rule 9(b) is that limitation. “In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” Id. In a civil RICO claim the plaintiff necessarily alleges that the defendant has engaged in a pattern of racketeering activity involving fraud and/or indictable offenses. Rule 9(b) plainly applies to RICO claims. The complaint fails to meet the requisite standard for particularity in pleading the proprietary injury element of a RICO action. Plaintiff does not allege the injury to business or property that resulted from the violation of section 1962 other than to state the element of the action in a eonclusory fashion. The necessary particularity is not present.

For the reasons herein expressed a separate order will be entered granting the pending motions for summary judgment addressed to the First, Second, Third and Fourth causes of action and granting the pending motions to dismiss addressed to the Ninth and Tenth causes of action. The pending motions to dismiss addressed to the Fifth, Sixth, Seventh and Eighth causes of action will be treated as motions for summary judgment. As such, they will be deemed submitted for decision on April 30, 1985.


source: Caselaw Access Project

author: CAFFREY, Chief Judge.

license: Public Domain

text:
    UNITED STATES of America, Plaintiff, v. Elmer E. RODRIGUEZ a/k/a “Edgar”, Helmer Mosquera, Milton Calderon, Felix Rengifo, Francis Scala a/k/a “Frankie” a/k/a “Frank”, Leslie K. Grover, Harvey Brand a/k/a Harvey Arias, Patrick J. Scala a/k/a “Jay”, James Malacaria, Rodney A. King, Javier Brand a/k/a Javier Arias, and Nelson Rodriguez, Defendants.
    Crim. No. 84-407-C.
    United States District Court, D. Massachusetts.
    April 10, 1985.

      Oliver C. Mitchell, Jr., U.S. Atty., for U.S.
    Richard Gargiulo, Boston, Mass., for defendant Elmer Rodriguez.
    Richard Gargiulo, Brian J. McMenimen, Gargiulo & McMenimen, Boston, Mass., for defendant Mosquera.
    W.H. Underhill, Jr., Boston, Mass., for defendant Calderon.
    James Michael Merberg, Law Offices of F. Lee Bailey, Boston, Mass., for defendant Rengifo.
    Cornelius H. Kane, Boston, Mass., for defendant Francis Scala.
    William F. York, Boston, Mass., for defendant Grover.
    Judd- Carhart, Carhart, Bonistalli & McCarthy, Boston, Mass., for defendant Harvey Brand.
    Kevin J. O’Dea, Boston, Mass., for defendant Patrick Scala.
    Paul W. Losordo, Quincy, Mass., for defendant Malacaria.
    Kevin Glynn, Boston, Mass., for defendant King.
    Edward Gargiulo, Boston, Mass., for defendant Javier Brand.
    Thomas F. Heffernon, Salon, Heffernon & Shub, Boston, Mass., for defendant Nelson Rodriguez.
   MEMORANDUM

CAFFREY, Chief Judge.

This is a criminal case in which twelve defendants are accused of conspiracy to possess cocaine with intent to distribute and related offenses in a fifteen count indictment. The defendants have filed a multitude of motions to suppress evidence which motions may be broken down into three categories: evidence obtained through electronic surveillance, evidence seized pursuant to search warrants, and post-arrest statements. All of the motions are presently before the Court.

ELECTRONIC SURVEILLANCE EVIDENCE

Defendants E. Rodriguez, Mosquera, Calderon Grover, H. Brand, P. Scala, Malacaria, King, J. Brand, N. Rodriguez

The above-named defendants have moved to suppress evidence obtained through electronic surveillance of communications made to and from a telephone numbered (617). 277-8290, and subscribed to by defendant Elmer Rodriguez. The Honorable David S. Nelson of this Court authorized such interceptions pursuant to 18 U.S.C. § 2518.

The first application for an order authorizing interception of wire communication was filed on October 2, 1984. A seventy-one paragraph affidavit by Special Agent John J. Hampe, Jr. of the Drug Enforcement Administration (“DEA”) was also submitted in support of the application. The substance of the relevant facts recited in the affidavit is as follows.

Hampe, an 18-year DEA veteran and Massachusetts state and local police were engaged in a joint investigation with which had focused on unlawful cocaine distribution activities involving several of the present defendants. During the course of the investigation several confidential informants (“Cl”) provided information as to the existence and structure of the cocaine distribution network. One of these informants has described Elmer Rodriguez as a seller of cocaine who transacts business over the telephone. Another Cl has purchased cocaine from Rodriguez on two occasions under law enforcement surveillance. Both transactions were arranged by telephoning Rodriguez at (617) 277-8290. Visual surveillance of the Rodriguez residence revealed that Rodriguez left the house shortly after each call, went to a second location, then proceeded to the rendezvous to complete the sale. Two additional informants gave information as to Elmer Rodriguez’ extensive involvement with cocaine distribution in the area, and also named several other participants.

The investigating officials attempted to use conventional methods to further the investigation. A DEA agent attempted to purchase cocaine from Elmer Rodriguez by telephoning (617)277-8290 on two occasions but this was unsuccessful. A Court authorized pen register was used to record telephone numbers dialed from Rodriguez’ phone, but this, of course, did not identify the persons engaged in the conversation or its subject matter.

The affidavit recites a number of reasons why normal investigative techniques would be unlikely to yield further results. Elmer Rodriguez was known to keep the bulk of his cocaine at locations other than his home, and to make arrangements for pickup and delivery via telephone. Furthermore, an informant reported that Rodriguez would not sell cocaine to persons he did not know or trust. The informants refused to testify against Rodriguez even when offered relocation under the Witness Protection Program. Offers of immunity from prosecution were unlikely to succeed because several participants in the alleged conspiracy were related. Furthermore, those members of the organization trusted by Rodriguez appeared to be as culpable as he, and therefore inappropriate persons for a grant of immunity. Finally, the use of conventional search warrants would not identify all locations used by Rodriguez and his associates to store cocaine or identify all members of the group. The affiant concluded that, based on his experience, the interception of wire communications was “the only method of investigation likely to provide the quality and amount of evidence necessary to prosecute Rodriguez and his associates____”

The application for an order authorizing electronic surveillance was granted on October 2, 1984, and a 30-day order issued the same day. The intercepts began immediately and continued throughout October. Later in the month the Government made application for a second order authorizing interceptions beginning on October 31 and continuing for 30 days. The affidavit accompanying that application was again provided by Agent Hampe, and contains transcripts of previously intercepted conversations during which drug transactions were discussed. This affidavit recites that visual surveillance had become even less feasable because of the defendants’ heightened concern about police activity. Hampe also describes in greater detail Rodriguez’ complex movements which made it very unlikely that conventional methods would discover where his cocaine was stored, his source, and how he disposed of his sale proceeds.

The defendants move to suppress evidence obtained through the interception of communications on the Rodriguez phone on several grounds. They claim that the statute pursuant to which the wiretaps were authorized, 18 U.S.C. § 2518, is unconstitutional; that the affidavit is insufficient to satisfy the requirements of 18 U.S.C. § 2518(10)(a) and the Fourth Amendment; that the orders authorizing the intercept are improper and insufficient, that the interceptions were not made in accordance with the order of authorization; that the interceptions were not properly minimized, and that inventories were not served upon the defendants within 90 days as required by 18 U.S.C. § 2518(8)(d).

Several of these contentions may be dealt with summarily. To begin with, the statute has survived numerous constitutional challenges. See United States v. Southard, 700 F.2d 1, 27 (1st Cir.1983), cert. denied, — U.S.-, 104 S.Ct. 89, 78 L.Ed.2d 97 (1984) and cases cited therein at n. 35. It is unnecessary to belabor that issue at this juncture. As to defendants’ other contentions, I find and rule that the affidavits show that there was probable cause to believe that named and unnamed individuals had committed and were committing offenses enumerated in 18 U.S.C. § 2516; that there was probable cause to believe that particular communications concerning these offenses could and would be obtained through the interception; and that the telephone to be intercepted is listed in the name of Elmer Rodriguez. Additionally, I find and rule that the surveillance orders issued meet the requirements of 18 U.S.C. § 2518(4) in describing the identities of persons and location of communications to be intercepted as well as the identity of the agencies authorized to make these interceptions and the period of time during which the interceptions are authorized. I further find that inventories of the intercept were served upon each of the defendants in accordance with § 2518(8)(d).

There remain two grounds for suppression of the wiretap evidence which require more detailed attention: (1) that the affidavits fail to meet the requirement of § 2518(l)(c) by showing that normal investigative techniques have failed or appear to be unlikely to succeed, and (2) that the intercepts were not “conducted in such a way as to minimize the interception of communications not otherwise subject to interception under this chapter.” 18 U.S.C. § 2518(5).

On the first theory, defendants contend that wiretap surveillance is permissible only as a “last resort” where more traditional and less intrusive techniques have been tried unsuccessfully. The law of the First Circuit, as set forth in the seminal case of United States v. Scibelli, 549 F.2d 222 (1st Cir.), cert. denied, 431 U.S. 890, 97 S.Ct. 2687, 53 L.Ed.2d 278 (1977) does not support this interpretation of § 2518(1)(c). Quite to the contrary, it is clear that the statute does not require that the Government exhaust all other means before a wiretap order may issue. Id. at 226. Rather, the statute is designed to safeguard against wiretaps being “routinely employed as the initial step in a criminal investigation.” United States v. Giordano, 416 U.S. 505, 515, 94 S.Ct. 1820, 1827, 40 L.Ed.2d 341 (1974).

Here, Agent Hampe’s affidavit has painstakingly described law enforcement agent’s unsuccessful efforts to penetrate the conspiracy by traditional means. He also gave reasons why further attempts were unlikely to succeed. By way of example, the affidavit recites that visual surveillance produced indicia of “suspicious activity” but not the competent evidence, necessary for prosecution. Law enforcement agent’s unsuccessful attempts at infiltration and their use of other undercover techniques and the obstacles encountered in those attempts are described by the affiant. Because of the high mobility and extreme wariness and caution of the participants in the conspiracy, traditional search warrants would be unlikely to discover the cache of cocaine or identify other persons involved. Informant testimony was not a realistic alternative, given the informant’s unwillingness to expose themselves to retaliation. Similarly, Agent Hampe was of the opinion that key participants in the conspiracy would be unwilling to testify even if given immunity. Such opinions, based on lengthy investigative experience, may be properly considered here. See Scibelli, 549 F.2d at 227.

On a motion to suppress, the government’s showing that traditional investigative techniques have been tried, or are unlikely to succeed is to be “tested in a practical and commonsense fashion.” Id. at 226. By this standard, I rule that the Government’s affidavits satisfy the requirements of § 2518(l)(c).

With regard to their minimization claims, the defendants complain that interceptions were made when named parties were not within the premises where the phone was located, that the interceptions were not otherwise properly minimized, that conversations between unnamed parties were intercepted, that calls not involving criminally culpable behavior were intercepted, and that defendants were not provided with an intercept inventory as required by § 2518(8)(d).

In response, the Government has submitted an additional affidavit by Agent Hampe which describes the minimization procedures followed. This affidavit recites that all persons assigned to the listening post were informed of the goals and nature of the investigation and the identities of the named interceptees. The intercepting officers were also required to read the wiretap affidavits and the orders issued by Judge Nelson. The court order limiting the hours of interception were strictly complied with, and an effort was made to minimize the interceptions on a call-by-call basis. Agent Hampe prepared the following statistics on the numbers of calls intercepted and minimized:

Number of Call (Incoming and Outgoing)
4.985 or 100%
Number of Incriminating Calls
306 or 6%
Conversations Minimized
700 or 15%
Number of Calls That Were Too Short to Minimize
3,017 or 60%
Number of Unanswered or Attempted Calls
900 or 18%

Additionally, I note that the October 2 order required progress reports every five days; that the October 31 order required progress reports every ten days; and that the Government complied with these requirements.

Section 2518(5) requires that listening agents minimize the interception of nonpertinent conversations. It does not however, require that no nonpertinent conversations be intercepted. The focus of the Court’s inquiry is the “reasonableness of the agents attempts to minimize in light of the purpose of the wiretap and the information available to the agents at the time of interception.” Scott v. United States, 436 U.S. 128, 133, 98 S.Ct. 1717, 1721, 56 L.Ed.2d 168 (1978). Several factors may be considered in this analysis, including the percentage of calls minimized, the duration of the calls, the use of ambiguous or coded language by conversants, and the breadth and nature of the conspiracy. Id.

With these factors in mind, I find and rule that the agents in this case made reasonable efforts to minimize interception of non-pertinent calls. I find that a very large number of the calls, i.e. 60.5% thereof, were too short to minimize, particularly considering the scope of the conspiracy. Of those calls which lasted more than one minute, almost all of the non-minimized conversations were pertinent to the investigation.

The interception of calls between non-named parties is also subject to a “reasonableness” test. Where the subject telephone is located in the home of a person believed to be a principal in a major drug ring, agents may reasonably suspect that calls are drug-related. See, Scott, 436 U.S. at 140, 98 S.Ct. at 1724. In other words, the mere fact that named parties are not present does not require the agents to immediately terminate surveillance-normal minimization procedures still apply. In ruling that these interceptions do not violate minimization requirements, I am cognizant that this conspiracy involved a large number of participants in at least two states. Therefore, the expectation that new participants in the conspiracy might be identified at any time is not unreasonable, particularly when the subject telephone is thought to be a primary means of facilitating the distribution of cocaine. I further note that the Court maintained close supervision of this surveillance through frequent progress reports, a factor which weighs against suppression of this evidence for failure to minimize.

For these reasons, I rule that these motions to suppress wiretap evidence obtained through interception of telephone number (617) 277-8290 should be denied.

Defendant Felix Rengifo

Defendant Felix Rengifo moves to suppress evidence obtained through court-authorized interception of communications on the following two telephones: (617) 277-8290, subscribed to be Elmer Rodriguez; and (516) 348-6970, subscribed to be Felix Rengifo in Hauppauge, New York. Both the government and defendant Rengifo have agreed that probable cause for the wiretap on Rengifo’s telephone may be established only by using information obtained by means of the wiretap on the Rodriguez telephone. Consequently, Rengifo argues that the evidence obtained through surveillance of the Rodriguez telephone is inadmissible, and therefore cannot provide probable cause for interception of communications on the Rengifo telephone.

I have ruled above that the affidavit on its face provides probable cause for a wiretap order to issue for telephone number (617) 277-8290. Without challenging the validity of the wiretap order itself, defendant Rengifo takes the position that the affidavit was insufficient to show probable cause as to him. According to this theory, conversations in which Rengifo was a participant would not be admissible, even though the application and order name him as a probable interceptee.

Section 2518(4)(a) requires that an order authorizing interception of wire communications specify “the identity of the person, if known, whose communications are to be intercepted.” This provision has been construed to mean that the application must name each person likely to be intercepted when probable cause exists to believe that the person is committing the offense for which the wiretap is sought. United States v. Donovan, 429 U.S. 413, 97 S.Ct. 658, 50 L.Ed.2d 652 (1977). Here, the defendant seems to argue the reverse — that where an interceptee is named and no probable cause exists any evidence obtained should be suppressed. This argument runs afoul of the teaching on United States v. Kahn, 415 U.S. 143, 94 S.Ct. 977, 39 L.Ed.2d 225 (1974), which held that even the communications of unnamed persons need not be suppressed where the statements are within the scope of the criminal activity described in an order which specifies that the communications of “unknown persons” may be intercepted. Id. at 156-7, 94 S.Ct. at 984-5. It follows, therefore, that if Rengifo had not been named as a probable interceptee, he would be unable to challenge on these grounds. To require identification of persons for whom probable cause exists, yet punish for naming a person for whom it does not exist would be to force passage between Scylla and Charybdis.

The United States Supreme Court has identified the two policy objectives of the Omnibus Crime Control and Safe Streets Act of 1968, 18 U.S. §§ 2510-2520 to be: (1) the authorization of electronic surveillance as a weapon against organized crime; and, (2) the protection of individual privacy. Kahn, 451 U.S. at 151, 94 S.Ct. at 982. Neither objective would be served by the statutory construction which the defendant propounds. United States v. Martin, 599 F.2d 880 (9th Cir.), cert. denied, 441 U.S. 962, 99 S.Ct. 2407, 60 L.Ed.2d 1067 (1979). Probable cause need not be shown for each person named in an application so long as it is shown with respect to at least one individual. Id. at 885.

Therefore, without reaching the issue of whether probable cause existed as to defendant Rengifo, I rule that evidence obtained during intercepts on the Rodriguez telephone is admissible against defendant Rengifo. I further rule that the affidavit in support of the application for interception of communications on Felix Rengifo’s own telephone shows, on its face, that probable cause existed for the order, that the affidavit made the requisite showing regarding the practicability of other investigative techniques, and that the interception was conducted in accordance with the order. I rule that defendant Rengifo’s motion to suppress this wiretap evidence should be denied.

SEARCH WARRANT EVIDENCE

The defendants have made motions to suppress evidence seized in nine separate searches. Law enforcement officers obtained warrants authorizing each of these searches. Due to the large number of motions filed by defense counsel on this subject, it is preferable to organize the Court’s analysis in terms of the locations searched, whereby overlapping motions may be addressed simultaneously.

Various Locations

The first group of motions, filed by defendants N. Rodriguez, E. Rodriguez, Calderon, Malacaria, P. Scala, J. Brand, Mosquera, and H.. Brand, challenges the validity of search warrants authorizing the search of “various premises of persons allegedly connected with this case.” Facially, these motions fail to state grounds for suppression. The defendants fail to specify which of the nine warrants they challenge, and, more importantly, fail to claim any basis for their standing to challenge such searches. See United States v. Salvucci, 448 U.S. 83, 100 S.Ct. 2547, 65 L.Ed.2d 619 (1980); Rawlings v. Kentucky, 448 U.S. 98, 100 S.Ct. 2556, 65 L.Ed.2d 633 (1980). Consequently, I rule that these motions to suppress should be denied.

77 Walnut Street, Brookline

Two distinct searches were conducted at 77 Walnut Street in Brookline, Massachusetts. The two apartments searched were the first floor residence of Elmer Rodriguez and the third floor residence of Nelson Rodriguez. Quantities of drugs, paraphernalia, cash and other evidence were found in each of the two apartments. Both Nelson and Elmer Rodriguez move, without supporting memoranda to suppress such evidence.

A single seventy-five page affidavit was filed by DEA Agent Hampe in support of applications for warrants for all eight Massachusetts locations to be searched. With respect to this location, the affidavit recites evidence obtained through electronic surveillance and conventional investigative techniques which show that both Nelson and Elmer Rodriguez were engaged in an ongoing cocaine distribution enterprise through the end of November, 1984. Several intercepted conversations, reproduced in the affidavit, indicate cocaine was frequently stored in Nelson’s apartment and brought down to Elmer’s apartment as needed for a sale.

Upon consideration of the nature of the criminal activity engaged in at the premises, and the voluminous evidence marshalled in Agent Hampe’s affidavit taken as a whole, I find and rule that the search warrants were properly issued upon the basis of probable cause. I therefore rule that the motions to suppress evidence found at 77 Walnut Street, Brookline, should be denied.

22 High Street, Brookline

Defendant Helmer Mosquera moves to suppress evidence seized during a search of his residence at 22 High Street, Brook-line. From Agent Hampe’s affidavit it is apparent that defendant Mosquera was heavily involved in the cocaine distribution ring, and that he conducted this business, in large part, from his home. Moreover, an intercepted conversation with defendant Brand Elmer Rodriguez indicated that Mosquera was holding a quantity of cocaine “there” — probably meaning Mosquera’s home. Although this intercept was made on October 26, 1984, the incident is part of a continuous chain of criminal conduct, and this information was not stale at the time the warrant was obtained. See United States v. Hershenow, 680 F.2d 847, 853 (1st Cir.1976).

Accordingly, I rule that the search warrant for these premises was properly sisued upon the basis of probable cause and that the motion to suppress should be denied.

5 Bickford Road, Malden

Defendant Milton Calderon moves to suppress evidence obtained during the search of his residence at 5 Bickford Road, Malden, Massachusetts. Again, the affidavit indicates a pervasive involvement with the cocaine distribution ring. A conversation intercepted October 19, 1984 indicates that Calderon possessed a quantity of cocaine at his residence at that time. A later intercept indicates that Calderon was also in possession of cocaine on November 16. As late as November 21 Calderon was holding cash proceeds from cocaine sales.

Based upon the evidence described in the affidavit as a whole and the particular assertions recited above, I rule that the search warrant for 5 Bickford Street, Malden, was issued on probable cause, and that the motion to suppress should be denied.

250 Hammond Pond Parkway

Apartment 809-South, Newton

Defendants Patrick Scala and Leslie Grover move for suppression of evidence seized at 250 Hammond Pond Parkway, Apartment 809-South, Newton, Massachusetts. At the outset, I note that there is a question as to Patrick Scala’s standing to contest the validity of the search. The government asserts that Leslie Grover was the sole occupant of the premises. Defendant Scala has failed to present any evidence, either by affidavit or testimony, which would indicate a legitimate expectation of privacy in the premises. Therefore, I find and rule that defendant Patrick Scala lacks standing to challenge this search.

With respect to defendant Leslie Grover, the evidence marshalled in Agent Hampe's affidavit is consistent with an ongoing involvement in the criminal enterprise. More specifically, the affidavit indicates that Grover made arrangements to purchase cocaine on October 3, that she was in possession of cocaine on October 5, and that she, together with Patrick Scala, purchased a substantial amount of cocaine on October 10. Keeping in mind the “staleness” concerns discussed above, I find and rule that there was probable cause for a warrant to issue authorizing the search of 250 Hammond Pond Parkway, Apartment 809-South, Newton, Massachusetts.

Delaware Place, Apartment 1

Brighton

Six Delaware Place is the residence of Harvey and Javier Brand, who move for suppression of the evidence seized there. A perusal of Agent Hampe’s affidavit makes it readily apparent that this location was continuously used to store and distribute cocaine. Accordingly, I find that probable cause existed to issue a warrant authorizing a search of the premises, and rule that the motion to suppress should be denied.

1159 Washington Street

Norwood “The Gold Merchant”

James Malacaria, proprietor of “The Gold Merchant” moves for suppression of evidence found on the premises during the execution of a search warrant. On its face, the affidavit shows that Malacaria was also heavily involved in cocaine trafficking. One intercepted conversation indicates that as late as November 18 he was in possession of a very substantial amount of cocaine. The affidavit also indicates that cocaine was delivered to Malacaria’s store on October 26 and November 15.

Accordingly, I rule that probable cause existed to issue a warrant authorizing a search of “The Gold Merchant” on Washington Street in Norwood and that the motion to suppress should be denied.

255 Lincoln Boulevard

Hauppauge, Long Island

New York

Defendant Felix Rengifo has moved to suppress evidence seized at his residence, 255 Lincoln Boulevard, Hauppage, Long Island pursuant to a search warrant. The affidavit for this search warrant was executed by DEA Agent Thomas Cregan. The affidavit relies heavily upon court authorized wiretap intercepts of conversations on telephones subscribed to by Elmer Rodriguez and Gladys Rengifo. Visual surveillance in both the Boston area and in New York supplements these intercepts.

The affidavit contains numerous excerpts of intercepted conversations between Felix Rengifo in New York and confederates in New England, including Donald Rengifo, Elmer Rodriguez and Liz Maria Rengifo. Other relevant conversations took place among the New England members of the group. These intercepts, which took place between October 2,1984 and November 17, 1984, show an extensive pattern of drug trafficking in which Felix Rengifo was a supplier of cocaine. Many conversations concern the financial aspects of the operation, with frequent reference to debts and disposition of proceeds of sales. There is also a reference to a “beeper,” owned by Felix Rengifo and used to facilitate drug transactions.

While these facts alone do not indicate the presence of cocaine in Rengifo’s home, visual surveillance of the location supplies the missing link. On at least three occasions persons belonging to the New England end of the operation visited Felix Rengifo’s home. These visits were contemporaneous with intercepted telephone conversations which discussed the delivery of money or pick-up of cocaine from Rengifo. These conversations sometimes specified the couriers, and times of arrival and departure. The pattern is the same in all three trips: the couriers were observed leaving the Boston area, followed surreptitiously to the Massachusetts Turnpike, then observed by DEA Agents in New York upon their arrival. The logged times indicate that the couriers traveled directly to the Rengifo House on Long Island, then returned immediately to the Boston area.

Although the last of these trips took place on November 16, Felix Rengifo’s involvement in the conspiracy as a cocaine supplier was continuous. Consequently, I find and rule that the search warrant was properly issued upon probable cause to believe that cocaine, proceeds of illicit sales, instrumentalities and paraphernalia were present at 255 Lincoln Boulevard, Hauppauge, Long Island.

POST-ARREST STATEMENTS

Rodney King

Defendant Rodney King was arrested after law enforcement officers, armed with a search warrant, entered and searched his residence at 2 Crawford Street, Cambridge. The substance of King’s motion is that post-arrest statements and other evidence was obtained in contravention of his Fourth, Fifth and Sixth Amendment Rights.

By affidavit accompanying his motion to suppress, defendant King relates the following version of the events surrounding his arrest. At 7:00 a.m. on December 19, 1984 six law enforcement officers broke down the door to King’s apartment without warning and entered. King was ordered to the floor, told to put his hands behind his back, kicked in the head just hard enough to indicate “the price of resistance,” then told that he was under arrest, handcuffed, and lifted to his feet. At this time he spoke to Agent Murphy, saying that he “would cooperate fully with her”, and there was no need for the male agents to “bust up the place.” She then advised him of his rights, including his right to have an attorney present. Upon hearing this, King asked “may I call my attorney right now?” Agent Murphy did not respond, but asked “where’s the stuff?” King said he would tell her where it was if she would give it to him in writing that the men would not tear up the place. There followed some discussion about whether Murphy would put this in writing, during which King again asked for his attorney. Murphy continued to ask questions about where “it” was. Subsequently she executed a document making the requested promise and he directed her to his cache of cocaine.

In opposition to defendant King’s motion, the government has submitted the affidavit of DEA Agent Normandene Murphy, which differs from King’s version in several respects. Murphy asserts that the raiding party knocked on the glass outer door of the apartment, causing King to open the inner door. They identified themselves by yelling “police” and displaying badges. King then slammed the inner door shut. Only then did the agents forcibly enter the premises. When Murphy entered the apartment, King was already prone on the floor with his hands handcuffed behind his back. King said he wanted to cooperate, but Murphy told him to wait and proceeded to read him his “Miranda” rights. After the rights were read to him, King asked to call his attorney. Although Murphy made a telephone directory available to King, he was unable to make a call because he could not remember the attorney’s name. According to Murphy, no questions were asked of King after he made his request to call an attorney. Some time later, King made an unsolicited offer to cooperate if the agents agreed not to tear up the house. Murphy responded by saying “nothing would be torn up or destroyed” if King cooperated. She subsequently put this promise in writing and obtained King’s cooperation in locating and seizing contraband.

Regardless of which version of the facts one accepts, it is clear that defendant King made a request for counsel. Once an accused requests counsel “the interrogation must cease until an attorney is present.” Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966). Having invoked his Fifth and Fourteenth Amendment right against self incrimination, a defendant may not be subjected to further questioning unless he initiates the dialogue making a “knowing and intelligent” waiver. Edwards v. Arizona, 451 U.S. 477, 486 at n. 9, 101 S.Ct. 1880, 1885 at n. 9, 68 L.Ed.2d 378 (1981). A court should determine whether such waiver has occurred by considering the “totality of the circumstances” surrounding the statement.

As to the material facts, there is little discrepancy between the two affidavits. Both agree that defendant King, under arrest and handcuffed, offered to cooperate in return for a promise that the agents not damage or disrupt his apartment. After the promise was given, he told Agent Murphy where the cocaine was hidden. Certainly, the defendant’s version of the arrest describes a more violent, coercive atmosphere, and asserts that he asked for his lawyer twice. However, even if one accepts the government version of the facts, there was a highly coercive atmosphere in the apartment. It is just this coercion, inherent in a custodial situation, which the Miranda warnings were intended to dispell. Miranda, 384 U.S. at 467, 86 S.Ct. at 1624.

There was, however, an additional element of coercion which influenced King’s decision to cooperate — the fear that the agents would “bust up the place.” If this fear had caused King to blurt out the location of the eyidence without prodding from the agents, quite a different issue would be before the Court. The fact is that Agent Murphy encouraged this fear and used it as a basis for negotiation. I find that during this process, she resumed questioning on the basis of King’s inquiry. Although he initiated the conversation, King’s admission was the product of an implied threat of unnecessary and possibly unlawful destruction. It can hardly be said that statements obtained through such machinations are the result of voluntary, knowing, and intelligent waiver of the previously invoked right to counsel within the contemplation of Edwards. Accordingly, I find that King did not effectively waive his right to the Fifth and Fourteenth Amendment Rights, and rule that all statements by King should be suppressed.

Having suppressed defendant King’s statements there remains the question whether certain physical evidence should also be suppressed. The defendant argues that this evidence was discovered as a result of these tainted statements and is therefore inadmissible. In support of admissibility the government argues that even without King’s assistance the agents would have discovered this evidence, thereby coming within the “inevitable discovery” exception to the exclusionary rule. Nix v. Williams, — U.S.-, 104 S.Ct. 2501, 81 L.Ed.2d 377 (1984). Upon consideration of all the circumstances surrounding this search, I conclude that a team of well trained and experienced law enforcement officers would have discovered the cocaine and other evidence without King’s assistance. I rule, therefore, that' defendant King’s motion to suppress this physical evidence should be denied.

Felix Rengifo

Defendant Felix Rengifo moves to suppress incriminating post-arrest statements which DEA agents allegedly obtained from him in violation of his Fifth Amendment rights against self-incrimination. The Court held an evidentiary hearing on this matter on March 11-13, 1985, and received testimony from four DEA agents as well as defendant Rengifo and his wife, Patricia Rengifo. The testimony given by the Rengifos and that presented by the four agents reveals two dramatically different versions of the circumstances under which defendant Rengifo made the incriminating remarks which he now seeks to suppress. Having observed the demeanor of Mr. and Mrs. Rengifo on the witness stand, and having carefully examined the substance of their testimony, I find that none of the testimony given by either defendant Rengifo or his wife is worthy of credence. I therefore rely solely on those portions of the four agents’ testimony which I find credible. Pieced together, the credible evidence reveals the following picture of the events surrounding defendant Rengifo’s arrest and interrogation.

At approximately 6:00 a.m. on December 19, 1984, nine DEA agents, armed with a search warrant and a warrant for the arrest of Felix Rengifo, went to Rengifo’s home at 255 Lincoln Boulevard in Hauppauge, New York. The agents knocked at the front door and were admitted by defendant’s wife, Patricia Rengifo. The agents identified themselves and explained that they had come to execute the two warrants. After a brief search of the dwelling, the agents determined that Mrs. Rengifo and her infant were alone in the house.

While the other agents began to perform a thorough search of the residence, Agents Yaniello and Cregan talked to Mrs. Rengifo and asked her to contact her husband by means of his beeper, which she did. Shortly thereafter, Rengifo called the house by telephone in response to his wife’s message. Agent Yaniello spoke to Rengifo and told him that DEA agents were presently at his home and that they possessed a warrant for his arrest. Yaniello asked Rengifo to return home immediately, and informed him that he would be a fugitive if he did not do so. Rengifo replied that he would be there in about thirty minutes.

Defendant Rengifo arrived at about 7:30 a.m. He was met in the driveway by several agents who frisked him, informed him that he was under arrest, and led him into the house. Defendant was then met in the living room by Agents Scalzo and Yaniello. Yaniello described to defendant Rengifo the strength of the case against him. The agent informed him that he had been identified as a cocaine supplier to New England. Furthermore, Yaniello explained the government had placed a tracer on his car and had wiretapped not only his own phone but also the phones of some of his friends and relatives. Yaniello then gave Rengifo his Miranda warnings. Rengifo asked the agent to repeat one of the warnings, and then stated that he understood all of his rights. He further stated that he wished to cooperate and that he was willing to talk to the agents. Defendant Rengifo then suggested that he, Scalzo and Yaniello go down to the basement to talk. He said that he did not want his wife to overhear their conversation, and that the bustle of the search and the presence of so many agents made him nervous.

Defendant Rengifo and the two agents held their conversation in a corner of the basement where there were two desks and a chair. The interrogation lasted approximately one hour. The door at the top of the basement stairs was left open for most, if not all of this time. Scalzo and Yaniello both testified that Rengifo appeared calm and rational throughout the interrogation, and they characterized the tenor of the conversation as “relaxed” and “friendly.” Agents Cregan and Friel, who remained upstairs during the interrogation, testified that they never heard the sound of raised voices coming from the basement. At one point, Mrs. Rengifo went into the basement to see how her husband was doing.

During the interrogation, defendant Rengifo gave incriminating responses to many of the agents’ questions, although he refused to answer some questions, such as the name of the individual from whom he obtained cocaine. Rengifo stated that he wanted to cooperate because he knew he was in trouble and had expected to be arrested for some time. He also expressed concern about his own safety and that of his wife and child, and his mother in Columbia, because he feared his confederates in the drug trade would seek retaliation if they learned of his cooperation. In exchange for cooperating, Rengifo apparently sought absolute immunity, physical protection, and a promise that he would not be required to testify on behalf of the government. Although the agents replied that they lacked the authority to promise anything more than protection, they also stated that any helpful information which he provided would be reported to the Court. They also told Rengifo that he would probably spend a long time in jail if he were convicted. From the time of his arrest to the end of the interrogation, Rengifo never expressed a desire to call a lawyer, and none of the agents offered to allow him to use the telephone for that purpose.

At about 8:30 a.m., Agents Yaniello and Scalzo took Rengifo upstairs to the kitchen where Agent Friel explained to Rengifo and his wife that he would be taken first to the DEA office and then to the federal courthouse for the Eastern District of New York for arraignment. Agent Friel asked Rengifo if he had an attorney whom he would like to have meet them at the federal courthouse. Rengifo apparently questioned Agent Friel about the role of an attorney in the impending court proceedings, and then stated that he would like to have a lawyer present at the arraignment. Agent Cregan wrote down the name of an attorney whom Mrs. Rengifo could contact. Agent Friel also told Rengifo that a lawyer would be provided for him at the courthouse if he were unable to obtain a lawyer of his own to represent him at the arraignment.

Agents Friel and Cregan then transported defendant Rengifo to the DEA office for processing. There was no conversation between defendant and the agents during this brief trip. At about 9:30 a.m., the three left the DEA office en route to the federal courthouse. While they were in the car, Agent Friel read defendant his Miranda rights from a standard DEA card and asked defendant whether he understood each of his rights. During the trip, defendant apparently initiated a conversation with the agents and began to volunteer incriminating information. Agent Friel therefore repeated the Miranda warnings. Rengifo nevertheless continued to talk to the agents. Both agents testified that the conversation was friendly, and that it focused on Rengifo’s fear for his life and the lives of his family members and his desire to cooperate with the government. Rengifo also gave the agents directions for the fastest route to the federal courthouse. At about 11:00 a.m., the three arrived at the courthouse where they waited more than six hours before a magistrate became available to perform the arraignment.

Defendant Rengifo apparently spent part of this waiting period in a holding cell and part of it in the company of Agents Friel and Cregan. At some point, Rengifo telephoned his wife from the courthouse and learned that an attorney was coming to meet him. He nevertheless continued to make admissions to the agents and stated, at one point, that he did not need a lawyer while talking to them. Rengifo’s attorney arrived at about 4:30 p.m., and the defendant was arraigned shortly after 5:00 p.m.

None of the agents involved in the case ever obtained from defendant Rengifo a signed waiver of his Miranda rights or a signed statement setting forth the admissions which he had made throughout the day.

In a situation such as this, where no express written or oral waiver of Fifth Amendment rights was obtained from defendant, a court must make two determinations. It must decide, first, whether defendant knowingly and intelligently waived his Fifth Amendment rights, North Carolina v. Butler, 441 U.S. 369, 373, 375, 99 S.Ct. 1755, 1757, 1758, 60 L.Ed.2d 286 (1979), and second, whether the incriminating statements which defendant allegedly made were “the product of a rational intellect and a free will.” Blackburn v. Alabama, 361 U.S. 199, 208, 80 S.Ct. 274, 280, 4 L.Ed.2d 242 (1960). In making these assessments, a court should consider not only the circumstances under which the statements were given, but also relevant personal characteristics of the accused, such as his background, intelligence, and experience. Fare v. Michael C., 442 U.S. 707, 725, 99 S.Ct. 2560, 2571, 61 L.Ed.2d 197 (1979); North Carolina v. Butler, 441 U.S. at 374-75, 99 S.Ct. at 1757-58.

Applying these criteria to defendant Rengifo’s case, I find that the defendant knowingly and intelligently waived his Fifth Amendment rights against self-incrimination. Rengifo, who has been a resident of the United States for 18 years, understands English well and speaks it competently. The testimony he gave concerning the corporate structure of his taxicab business indicates that he is an intelligent businessman.

At the time of his arrest, Rengifo appeared calm and rational. The arrest did not take him by surprise. He was informed by Agent Yaniello on the telephone that he was going to be apprehended half an hour before the arrest occurred. As he drove home, he presumably had time to contemplate the impending arrest and to assess his situation. Furthermore, he told Agents Scalzo and Yaniello that he had expected to be arrested for some time.

The evidence also reveals that Rengifo was given his Miranda rights three separate times. On each occasion, he indicated by his words and actions that he understood his rights and wished to cooperate. He then proceeded either to answer questions posed by the agents or to volunteer incriminating information. Although Rengifo asked for an attorney before he was transported from his home to the DEA office, it is evident from the nature of his request that he wished to have counsel only in the Sixth Amendment sense, to represent him at the impending judicial proceedings, and not to assist or advise him in communicating with the DEA agents. See Collins v. Francis, 728 F.2d 1322, 1332, 1333 (11th Cir.1984). Thus, I find that the circumstances, taken as a whole, demonstrate that defendant made an informed and rational decision to waive his right to remain silent and his right to counsel.

I further find that defendant Rengifo’s admissions were made voluntarily and were not coerced in any way. From the outset, Rengifo demonstrated a willingness to cooperate with law enforcement officers. The interrogation of defendant Rengifo which Agents Scalzo and Yaniello conducted in the basement of Rengifo’s home was neither hostile nor lengthy. See Frazier v. Cupp, 394 U.S. 731, 737, 739, 89 S.Ct. 1420, 1423, 1424, 22 L.Ed.2d 684 (1969) (one hour of questioning considered an interrogation of “short duration.”). Although a basement may not be an ideal place in which to question a suspect, the basement almost certainly provided an atmosphere which was more reassuring to defendant Rengifo than that offered by alternative locations, such as an interrogation room at DEA headquarters. The basement, though austere, was familiar to defendant, and it was in close proximity to the kitchen, where Mrs. Rengifo remained with their baby. During the interrogation, the door at the top of the stairs leading to the kitchen was left open. Mrs. Rengifo went down to the basement once to check on her husband’s condition and once to serve coffee to those in the basement.

Although agents Yaniello and Scalzo gave defendant Rengifo a detailed description of the case against him, informed him that he would probably serve a lengthy prison sentence if he were convicted, and promised to bring his cooperation to the attention of the Court, these statements alone do not constitute coercion. Providing such information to a suspect is “normally attendant to arrest and custody.” Rhode Island v. Innis, 446 U.S. 291, 301, 100 S.Ct. 1682, 1689, 64 L.Ed.2d 297 (1979). Furthermore, such information helps a suspect make a judicious decision about whether to waive his Miranda rights. Cf. United States v. Guido, 704 F.2d 675, 677 (2d Cir.1983); United States v. Thierman, 678 F.2d 1331, 1334 n. 3 (9th Cir.1982); United States ex rel. Gorham v. Franzen, 675 F.2d 932, 938 (7th Cir.1982).

The evidence produced at the suppression hearing also demonstrates that Rengifo did, in fact, use his right to remain silent to control the scope of the agents’ interrogation. Agents Scalzo and Yaniello testified that Rengifo refused to answer several of their questions. “Through the exercise of his option to terminate questioning ... [a suspect] can control the time at which questioning occurs, the subjects discussed, and the duration of the interrogation.” Michigan v. Mosley, 423 U.S. 96, 103-4, 96 S.Ct. 321, 326, 46 L.Ed.2d 313 (1975). The selectivity with which defendant Rengifo revealed information to the agents contributes to the Court’s conclusion that Rengifo’s incriminating statements were made of his own free will. See United States v. Thierman, 678 F.2d at 1335.

Because I find that defendant Rengifo knowingly waivéd his Miranda rights and that he thereafter voluntarily provided incriminating information, I rule that defendant Rengifo’s motion to suppress post-arrest statements should be denied.

Order accordingly.

      . A "call” is any action involving the lifting of a telephone headset and incoming calls, whether answered or not.

      . These calls were usually 30 to 60 seconds or less in duration.

      . Counsel for the government has informed the Court that the judicial proceeding which all the witnesses referred to as "arraignment” was actually an initial appearance during which bail was set.