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ATTORNEYS FOR APPELLANTS

ATTORNEYS FOR APPELLEES

Richard N. Bell David S. Wallace Arend J. Abel B. Joseph Davis Kelley J. Johnson Muncie, Indiana Indianapolis, Indiana _____________________________________________________________________________________________

In the

Indiana Supreme Court
_________________________________ No. 18S04-0704-CV-150 LINDA KEESLING, HAROLD LEPHART AND PRISCILLA LEPHART, HAGAR ANDERSON, JAMES BRIDGES, EARL AND EVELYN HAIBE, ESCAR AP, MABEL MCGUFFEY, RUTH AMICK, AND DORA BUTRUM, v. FREDERICK BEEGLE III, JOHN BUCHOLTZ, FLORIDA UNDERWRITING CO., DENNIS BAUGHER, WILLIAM JONES, AND ADVANCE INSURANCE MARKETING, Appellees (Defendants below). _________________________________ Appeal from the Delaware Circuit Court, No. 18C01-0202-PL-0008 The Honorable Marianne L. Vorhees, Judge _________________________________ On Petition to Transfer from the Indiana Court of Appeals, No. 18A04-0501-CV-10 _________________________________ February 27, 2008 Sullivan, Justice.

FILED
Feb 27 2008, 2:52 pm
of the supreme court, court of appeals and tax court

CLERK

Appellants (Plaintiffs below),

Both Congress and the Indiana General Assembly have passed statutes called "RICO Acts" to combat "racketeer influenced and corrupt organizations." There is a conflict between opinions of the Court of Appeals as to whether liability under the Indiana RICO Act extends only to persons who direct racketeering activity (the rule under the Federal RICO Act) or extends below the managerial or supervisory level to a racketeering enterprise's "foot soldiers" as well.

Because the Indiana Act uses language significantly broader than that of the Federal Act, we conclude that it imposes RICO liability both on persons at and below a racketeering enterprise's managerial or supervisory level.

Background

The plaintiffs in this case are Indiana residents who purchased pay telephones and simultaneously entered into service agreements to install, service, and maintain the telephones. The telephone purchase contracts and the service agreements were marketed and sold by their promoters to the plaintiffs as a package. The plaintiffs were passive investors in this program, completely relying on the promoters to select a suitable location for the pay telephones, install and maintain them, pay all monthly telephone and utility bills, and obtain all regulatory certifications. SEC v. Rubera, 350 F.3d 1084, 1091-92 (9th Cir. 2003). The promoters violated federal securities laws by not registering the pay telephone investment program with the Securities and Exchange Commission. Id. at 1093. More details on the failed payphone program are set forth in the Rubera decision.

Defendant Dennis Baugher, president and sole owner of defendant Florida Underwriting Co., was not one of the ultimate promoters of the payphone program. In fact, the trial court in this case found that the plaintiffs presented no evidence showing that Baugher "had any role in directing" the payphone program. (Order Granting Mot. For Summ. J. by Defs. Dennis Baugher and Florida Underwriting Co., Br. of Appellants at 42). But Baugher did have an agreement with the ultimate promoters of the payphone program to recruit sales representatives and receive commissions on the sales made by his recruits.

Baugher recruited defendant William Jones, co-owner of defendant Advanced Insurance Marketing, Inc. And Jones recruited Joe Richman as a sales representative for the payphone program. Although Jones did not make sales himself, he received commissions on Richman's sales. Richman made sales to plaintiffs Linda Keesling, Harold Lephart, and Priscilla Lephart.

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Our reading of the record indicates that six of the remaining plaintiffs purchased investments in the payphone program from defendant John Bucholtz and one from defendant Ronald Van Deusen. It does not appear that plaintiff Hagar Anderson purchased an investment in the payphone program from any of the defendants nor that defendant Frederick Beegle III sold an investment in the payphone program to any of the plaintiffs.

The plaintiffs sued the defendants for their respective roles in the payphone program, alleging violations of Ind. Code

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Indiana Law