Date: Fri, 28 Aug 1998 06:43:59 -0400
[Note (by WCH): See also Previous RICO material,
and On Extortion by Insurance Companies.]

Notes from my reading of RICO cases, extortion cases and some legal analysis of applying it to health care situations.

Extortion and RICO Cases

US 9th Circuit Court of appeals, US v. Ward, 914 F.2d 1340 (9th cir. 1990) No. 89010157

Ward demanded money by falsely representing himself to be an officer of the US

Only threat was "to make it easy on [Bagala] or as bad on [Bagala] as he wanted to make it" Bagala feared fines would bankrupt him.

Jury must be instructed on the inducement element of the crime of extortion, i.e. requisite state of mind

Hobbs Act - attempt to obtain a sum of money by , make sure the words willful and corruptly are in complaint, defined in 18 USC 1951(b)(2)..""section 1951 (b)(2) defines extortion as ""he obtaining property from another, with his consent, induced by wrongful use of actual or threatened force, violence OR fear, or under color of official right" 18 USC 1951(b)(2). make sure to use words willful, intentional. planned, conspiratorial, deliberate, maliciously, etc. ALOT

"culpable intent" and "conduct constituting a substantial step toward commission of the crime that strongly corroborates the intent" Smell, 627 F. 2d at 187

[I was told in several letters from both UNUM and DOI that I would need to sue - they were using the fear, duress and financial expense of a lawsuit for extortion]

"an attempt to instill fear, that is, that the threat made by the defendant was reasonably calculated to instill fear of economic loss in Mr. Bagala " And the attempt must be "deliberate" "Inducement" can be in the form of a demand, or it can manifest itself in a more subtle form, such as custom or expectation. US v Egan, 860 F. 2d at 907.

Need element of fear for extortion, otherwise it's blackmail, mention the fear, anxiety, nightmares, avoidance behavior, hypervigilance reaction, paranoia, despair that I've been through

What is important in attempted extortion is that the defendant attempted to instill fear in the victim. Carbo v US, 314 F 2d 718 (9th Cir. 1963)

The term "extortion" means the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear.

The term "wrongful" as used in USC 1951(b)(2) means that the defendant has NO LAWFUL CLAIM to the money demanded from Vincent Bagala.

[The insurance companies have NO LAWFUL RIGHT to the money they are trying to get us to give up our right to]

Steele v. HOSPITAL Corp. of America 36 f. 3d 69 (9th Cir. 1994)

The civil RICO provision, 18 USC 1964(C) allows "any person injured in his business or property by reason of a violation of " RICO to sue and, if successful, recover treble damages and attorney's fees. Need proof of concrete financial loss. Plaintiff must show not only that the defendants' violation was a 'but for' cause of his injury, but that it was the proximate cause as well." There must be a direct relationship between the injury asserted and the injurious conduct alleged.

GOMEZ v GARCIA 9th Cir. No 95-55512 DC No CV-94-05020-ER - California

Must be specific INTENT TO EXTORT - "The claim of right theory, however, does not apply to claims based on notoriously illegal activities." Extortion is a notoriously illegal activity

Robbery and extortion are different crimes distinguished by the fact that in extortion the property is taken with the victim's consent whereas in robbery it is taken against his will.


>From Timothy C. Russell, The National Law Review (p. B04) Monday, April 27, 1998

About McCarran-Ferguson - 3rd circuit court of Appeals - Sabo v. Metropolitan Life Narrow application for M-F M-F reserves to the states the power to regulate the insurance business absent conflicting federal legislation that "specifically relates" to insurance.

Does this mean an insurance company can engage in terrorism since I'm sure the Federal anti-terrorism laws do not specifically relate to insurance. Well same goes for criminal fraud, extortion and racketeering.

Besides the regulatory agencies are part of the racketeering enterprise being recipients of bribes in the form of money, campaign financing, and jobs. I will be including them in the lawsuit for collusion. (Is that a predicate act, well I can include for aiding and abetting extortion and mail and wire fraud).

M-F passed in 1944 to restore insurance regulation to the states. M-F, 15 USC 1012(b): "No Act of Congress shall be construed to invalidate, impair or supercede any law enacted by any State for the purpose of regulating the business of insurance...unless such Act specifically relates to the business of insurance."

The Mass. DOI specifically told me IN WRITING that my problem was not one of "regulation" or "law. " They can't have it both ways.

Third circuit used "direct conflict" approach to say that "imposition of severe remedial sanctions authorized by RICO would NOT upset any 'balance' struck by the state between permitted and prohibited insurance conduct.

Federal laws that supplement remedies available under state insurance law are not viewed as conflicting with state law or, in the words of M-F as 'invalidating, impairing or superseding" state laws "enacted for the purpose of regulating the business of insurance." Similarly no "direct conflict" between RICO and state insurance law would be deemed to exist, and M-F preclusion would be inappropriate, where insurance-related conduct was not subject to specific state-prescribed rules.

If M-F is interpreted broadly the states "should be permitted to regulate as they each see fit." and state regulatory action or INACTION (how about outright fraud) "should not be circumscribed by the establishment of any control over the power of regulation or exercise by them of that power." IS THIS GOOD PUBLIC POLICY CONSIDERING THE CIRCUMSTANCES HEREIN?

However what actually was the purpose of M-F According to this document it is "the regulation of insurance accounting practices, reinsurance treaties and insurance holding -company transactions and other regulatory activities that have the end, intention or aim of adjusting, managing or controlling' participants in the insurance industry. In other words the third circuit concluded correctly that there can be RICO liability for fraudulent misrepresentations to policyholders. That this does not "invalidate, supercede, or impair" a statute empowering the state to enjoin or penalize the same fraudulent conduct.

RICO would not be allowed if the suit involved asking whether an insurer's reserves are adequately balanced by assets or whether a reinsurance cession calls for sufficient "risk transfer" to warrant an increase in statutory surplus accounts. ------------------------------------------ Reves v. Ernst & Young, 507 US 170 "one must participate in the operation or management of the enterprise itself and play "some part in direction the enterprise's affairs" to be liable."

US v. Allen 97-6254 "the commission of crimes by lower-level employees of a RICO enterprise may be found to indicate participation in the operation or management of the enterprise but does not compel such a finding."

"unless a civil RICO defendant is indisputably directing the affairs of the enterprise, his commission of crimes that advance its objectives must be assessed by a fact-finder to determine whether or not his criminal activity, assessed in the context of all the relevant circumstances, constitutes participation in the operation or management of the enterprise's affairs."

Supreme Court of Appeals of West Virginia - Ira Light v. Allstate Insurance regarding bifurcating contract and damage portions of a lawsuit. No. 24365 "In a first party bad faith action the insurer is actually the named defendant in both the underlying claim and the bad faith claim. Thus, the primary concern of disclosing the existence of insurance which was articulated in Madden does not exist in a first party bad faith action." "We believe that Madden (mandatory bifurcation) should not extend to first party bad faith actions against insurers."

Webster's New Collegiate Dictionary - Racket (as in racketeering) - Any method of exploitation for money, ranging from petty charlatanry, illicit business and gambling schemes to an organized extortionary crime ring operating by use of violence; with hired legal protection and bribery of politicians"

RICO suit v. HUMANA - before Supreme Court (Nevada) - differing penalties did not create a conflict between the state and federal laws. RICO penalties are intended to exist "side by side" with state penalties Humana Inc. Vs. Forsyth 97-303

Note (by WCH): Humana Documents are available.

From Memorandum re RICO liability

To state a RICO claim must prove - 1) a pattern of racketeering, 2) the existence of an enterprise engaged in interstate commerce, 3) a connection between the pattern of racketeering and the enterprise, and 6) an injury to business or property by reason of the above. 18 USC. A pattern must have continuity and relationship, referring either to a closed period of repeated conduct, or to past conduct that by its nature projects into the future with a threat of repetition, show a series of related predicates extending over a substantial period of time Relationship requires no more than a showing that the defendants engaged in acts that had "the same or similar purposed, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events." HJ Inc. supra, 109 S. Ct at 2901.

the proximate causation requirement - For example, in Ocean Energy II v. Alexander & Alexander (5th Cir 1989) 868 F. 2d 740, plaintiffs brought a RICO suit against a bankrupt insurance corporation asserting that the insurance company had engaged in a scheme to defraud them. The court held that the scheme to defraud permitted the plaintiff to state a RICO claim. [Note (by WCH): Also see judicial interpretation of proximate cause.]

Indirect RICO liability - in the case discussed here regarding stockbrokers who failed to supervise their employees who were engaged in RICO fraud - "The brokers may be secondarily liable under RICO for aiding and abetting in the commission of RICO predicate acts. US v Rastelli (2d Cir. 1989) 870 F. 2d 822, 832-33 (defendant held liable for aiding and abetting a RCIO violation even though he was not within the scope of persons who could be primarily liable); Petro-Tech, Inc. v Western Co. of North America (3rd Cir. 1987) 824 F. 2d 1349 (reversing dismissal of complaint and holding that defendant may be liable under 18 USC sec 1962(a) for aiding and abetting a RICO violation.) The brokers may also be liable for RICO conspiracy. In order to establish a RICO conspiracy claim the complaint need only allege an agreement, the objective of which is a substantive violation of RICO. US v. Tille (1984) 729 F. 2d 615, 619 (9th Cir), cert. denied, 469 US 845


NAIC Research Library This is a list of articles. I do not have them but if anyone want to get any of them, even one and send me a copy, that would be nice and helpful (although I will manage without them if necessary). The charge is $10.00 plus $.30 a page. Call (816) 374-7175 to order.

"Insurers Get First RICO Win in California Fraud Scheme," Best Week, P&C, October 13, 1997, pg. 6. "Civil and Criminal RICO: An Overview of the Statute and Its Operation,' Defense Counsel Journal, January 1997, pg 36. "Supreme court Lets Stand Application of Civil RICO to the business of Insurance<" NAIC Legislative Update, November 30, 1995, pg 11. "Supreme Court lets Stand a RICO Ruling Against Insurers," Federal & State Insurance Week, November 13, 1995, pg 2. "NAIC Friend of the Court Brief Supports Use of Civil RICO Against Persons in the Insurance Industry," NAIC E-News, November 6, 1995, pg. 3. "RICO is Applied to Insurance Broker's Fraudulent Acts," Journal of Insurance Regulation, Winter, 1995 Racketeer Influenced and Corrupt Organizations (RICO) Act, Issues 1994, pg 62 RICO: Law, Practice, and Issues in the Context of Insurer Insolvency." Journal of Insurance Regulation, March 1991, pg 344 "A Rebuttal to Some of the Myths Spurring Reform Effort in Congress," The national Law Journal, August 3, 1987, pg, 26 Jurisdiction and Civil RICO," Tort & Insurance Law Journal, vol. 22;3, Spring 1987, pg 457

Civil RICO: The Insurers Fight Back," Tort & Insurance Law Journal, Fall 1985, pg 1 "Blame it on RICO: The Impact of the Racketeer Influenced and Corrupt Organizations Act on the Insurance Industry Following Sedima." FICC Quarterly, Fall 1985, pg 3. "The Act is Neither Anti-Business Nor Pro-Business, It's Pro-Victim," The National Law Journal, August 26, 1985, pg 24.

That last one looks good because the title gets to the heart of the matter. RICO is not anti-business, only when the business is being conducted illegally, usually by fraud, but as I've tried to prove, with UNUM, it's fraud AND extortion.


More comments on RICO "We believe that RICO will supplant antitrust laws as a basis for challenging improper medical business practices...RICO provides for treble damages plus attorneys fees." "The Predicate acts for a RICO action (this article happens to be about peer review, but it could also apply to insurance reviews and practices) ...could be commercial bribery, mail and wire fraud. Commercial bribery laws prohibit using financial incentives to influence the decisions of physicians and other fiduciaries. Since these laws prohibit hospitals and third-party payers from providing financial incentives to influence physicians' decisions about their patients, physicians who receive these incentives are technically receiving bribes. If these incentives are involved in an improper peer review action, the injured physician (or in the case of health care or disability insurance, the injured patient or claimant) may claim under the RICO laws."

The mail and wire fraud statutes merely require plaintiffs to prove that the defendants used the mail or telephone ancillary to their fraudulent activities. The plaintiff does not need to prove that the use of the mail or wire was and essential element of the fraud. A peer review committee meeting that was scheduled by telephone or with a letter would satisfy the requirement for mail or wire fraud if the committee performed a fraudulent review.

(In the example given of peer review, just substitute insurance company here). A medical staff committee that uses sham quality of care issues to deprive competitors of their medical staff privileges (or sham claims processes to deprive claimants of legitimate benefits or patients of legitimate treatments) would be engaged in fraud beyond the anticompetitive activities. If these fraudulent activities involved the use of the mails or the telephone, they violate the federal mail or wire fraud statutes. Although it has not been specifically litigated, a hospital medical staff (or insurance company) may satisfy the RICO definition of an enterprise. Combining this enterprise with a pattern of mail and wire fraud violations would subject all members of the medical staff committee (or in UNUM's case, the "Complex Claims Unit, anti-fraud divisions and management) and the hospital (insurance company) itself for RICO violations."


I have previously discussed the Valenzo case but I think it bears repeating since it touches on all the important LEGAL definitions of EXTORTION and even goes into violations of the Fair Credit Reporting Act.

Based on my reading the only difference between this case and what insurance companies are doing by master plan is that in this case, the victims had to give money, whereas in our cases, first we gave money out of fear (fear of disability related financial ruin) and then the insurance companies STOLE money that was legitimately ours by using fear and the actual fact of financial ruin in trying to pursue our claims to prevent us from pursuing our legal claims.

This case is US v. Alan J. Valenzeno, No. 95-4203

Valenzo is a man who promised to help some people out of tax dilemmas if they gave him money up front. One of his ploys was to imply that if they didn't let him help them, the IRS would put them in jail. He also got their credit reports so he knew they had the money to pay him. It's as simple as that, no threats of violence or anything else. Merely the implication of some fearful consequence in order to get money under false pretenses.

A few select quotes - Valenzo was charged with Extortion under the Hobbs Act.18 USC $1951

"We agree with the position of the government and the district court that the legislation at issue is clearly 'directed at protection of interstate commerce against injury from extortion." [UNUM is clearly involved in interstate commerce]

"Extortionate credit transactions though purely intrastate, may in the judgement of Congress affect interstate commerce..."

Valenzo "extorted money from those who relied upon his supposed....expertise through fraud and misrepresentation."

"Extortion occurs, however, when 'the defendant purports to have the power to hurt the victim in economic terms and fear is induced.'"

"the element of 'fear' required by the Act can be satisfied by putting the victim in fear of economic loss."

"'fear of economic loss' is viewed from the perspective of the victim"

"extortion by wrongful use of fear encompasses threats of economic loss...Furthermore, the fear need not be the product of the defendant's actions. It is enough if the fear exists and the DEFENDANT INTENTIONALLY EXPLOITS IT."

"Valenzeno played upon those fears in the Sickles and many other victims in order to extract their money for his alleged wrongfully exploiting their fears of economic and personal harm in connection with IRS investigations."

[There are two elements of extortion in our cases. We are sold contracts of insurance based on the fear of economic loss should there be a disability of illness. Then we are denied our contractual right by OUR fears, exploited and compounded by the insurance companies and their lawyers, of protracted and expensive legal battles, defamation, financial ruin before we can get to court, and the consequences of the emotional and physical stresses of suing on our underlying illnesses or injuries, the relentless harassment and innuendoes, fear of losing our doctors who are sick of trying to comply with all the reports they are required to write that are then ignored, sometimes they are threatened, and fear of financial ruin before we can get to court. --- As I've said all along, the insurance companies are USING THE LEGAL SYSTEM AS A MEANS TO INDUCE FEAR FOR MONEY - EXTORTION]

[UNUM further uses the fact that there is still some societal negative connotations to CFS, and they are playing this up with the implication that we are somehow exaggerating our symptoms, that they are all in our heads that we don't look sick, etc. And in some cases, not UNUM, but another insurance company actually implied that if this person pursued his claim, the insurance company should file fraud charges against him, based on a hired gun's IME report.]

Federal Credit Reporting Act Violations (15 USC $1681)

[As someone previously mentioned why are they doing credit checks on us? What does that have to do with our medical condition or disability. Unless they are actually conducting, and have damn good reason to conduct a fraud investigation, then they are obtaining our credit records under false pretenses and for purposes of checking our financial wherewithal to withstand their onslaught, hire expensive lawyers, and keep a roof over our heads for the duration of litigation. They are also fishing for tidbits to use for threats - they didn't find any bad credit in my case - but did background checks on my doctors and family members for this purpose]

"Any person who knowingly and willfully obtains information from a consumer reporting agency under false pretenses shall be fined not more than $5000 or imprisoned not more than a year, or both."

In this case Valenzeno's purpose in obtaining credit reports was "to target those individuals as victims of the extortion scheme." [I maintain this is also UNUM's purpose]

More on extortion:

"It is enough to sustain a conviction if...fear exists and the defendant intentionally exploited it."

"Our examination of the statutory language and the legislative history of the Hobbs Act impels us to the conclusion that Congress intended to make criminal all conduct with the reach of the statutory language."

"As Representative Hobbs noted, the words robbery and extortion 'have been construed a thousand times by the courts. EVERYBODY KNOWS WHAT THEY MEAN.'"

situations involving "the wrongful use of fear to obtain money...would therefore fall within the statutory definition."

Although Judge Moore also states that "not every snake-oil salesman who preys on our fears of sickness and death is an extortionist" she not only agreed with the court's decision but I would add that considering the degree, maliciousness, and planning involved in UNUM's scheme, it is clearly extortion.

Also concerning the violation of the Credit act "any person who knowingly and willfully obtains information on a consumer from a consumer reporting agency under false pretenses shall be fined....or imprisoned."

[In my case, although nothing in my credit report was specifically used against me, it was clearly obtained with intent to extortion if there had been something useful in it, since UNUM has no other reason for needing this personal information or a background check on my father.]

Now the law states that it "prohibits obtaining consumer information under false pretenses, not obtaining it for an improper purpose."

The question is under what rationale did UNUM obtain our credit reports. If they implied they were investigating fraud, (In my case there was specifically a notation in my file that there is "no fraud") that is a false pretense, and as I've said, I know of no other reason for them to need this information in the processing of my claims.

[You lawyers need to find out if your case was being handled by UNUM's "anti-fraud", "special investigations," or "complex claims units" or something else to that effect. And let me know, because part of the RICO action is that these division are actually set up FOR THE SPECIFIC PURPOSE OF RACKETEERING within a legitimate business. If they don't have some RATIONAL reason for suspecting fraud, then these units should not be involved and are being used for a different purpose.]

If UNUM is obtaining these credit reports for illicit reasons without disclosing that they are also in violation of the Act as in this case it states: "Valenzeno's prior dealings with the credit agency created AN IMPRESSION that he would request reports only for certain purposes; his obtaining Taylor's credit report for other, illicit reasons without disclosing them constituted obtaining the report under false pretenses. This is PRECISELY what the statute prohibits; because part of the Act's purpose is to protect consumer privacy, $1681q does not require that he victim suffer economic harm or be a victim of fraud."

[So even if they didn't use the information adversely the fact that they obtained it at all with no good reason is against the law and carries fines and imprisonment]

"there is a need to insure that consumer reporting agencies exercise their grave responsibilities with....a respect for the consumer's right to privacy...a major purpose of the Act is the privacy of a consumer's credit-related data."

[I'm adding the credit agency to my list of defendants in my lawsuit for releasing this information without adequate justification]

From this case:
"'Extortion' is 'the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right. 18 USC $1951 (b)(2)"

"We use the word 'extort' in the dictionary sense: Extort: to compel or any means serving to overcome one's power of resistance; to gain by wrongful methods; to obtain in an unlawful manner; to exact something wrongfully by threats or PUTTING IN FEAR.

Extortion: the obtaining of property from another induced by wrongful use of ...force..OR FEAR, or under color of official right.

Black's Law Dictionary (6th Ed. Webster's Third International Dictionary includes in its definitions 'extort,' to obtain from an unwilling or reluctant person by importunity, argument or ingenuity' or 'to deceive.'"

"We cannot discern why the government did not charge wire fraud in this case." [Exactly, based on what I've read, UNUM is involved in extortion, wire fraud and mail fraud - using the wires and the mails in a scheme to defraud - it's that simple.]

"defendant knowingly and willfully OBTAINED INFORMATION on a consumer...from a consumer reporting agency under false pretenses."

Also in the case of a public official in a position of power the "position of power provides the necessary coercive element and no showing of fear is necessary." UNUM is guilty of Extortion by color of official right by having the collusion of the Massachusetts Department of Insurance.

"Where one uses fear to obtain money to which one has no LAWFUL CLAIM, the use of fear is wrongful." [The insurance benefits we are concerned with here are LAWFULLY ours, and UNUM is preventing us from getting them by FEAR, see above]

"any person who obtains a consumer report from a consumer reporting agency under false pretenses or knowingly without a PERMISSIBLE PURPOSE shall be liable to the consumer reporting agency." [What exactly is UNUM trying to claim is their "permissible purpose" for needing this information to "adjust" our claims???]

"The Fair Credit Reporting Act requires that reporting agencies obtain such information from prospective customers. See 15 USC $ `681e ('Every consumer reporting agency shall maintain reasonable procedures designed to avoid violations of section 1681c of this title and to limit the furnishing of consumer reports to the purposed listed under section 1681b of this title [anybody see a reason for UNUM to obtain credit information in this section - I don't have it here]. These procedures shall require that prospective users of the information identify themselves, CERTIFY THE PURPOSES for which the information is sought, and certify that the information WILL BE USED FOR NO OTHER PURPOSE..... No consumer reporting agency may furnish a consumer report to any person if it has reasonable grounds for believing that the consumer report will not be used for a purpose listed in section 1681b of this title.)"


Just a few odds and ends - I just finished reading a 110 page RICO case brought by the US Government against a Mob controlled Union. Believe it or not, after reading this, I am more convinced than ever that I can write up a RICO case against UNUM. This suit even uses magazine articles, and newspaper articles for "evidence," and the Ethical Guidelines of the Union, that were violated. I have access to all kinds of stuff like this about UNUM, and can give examples of numerous violations. So yes, it will take me a little while to write it up. It's not that it's hard, it's just that I'm going to have to be methodical, and make sure I touch on all the points mentioned in these notes that I'm compiling. Then all we'll have to deal with is the inevitable initial dismissal that will have to be appealed, and possible judicial misconduct. But at least I won't have to deal with my own lawyers selling me out. No offense to those of you on this list who would not do something like that, and to those who would, all I can say is, you have to live with your consciences.

Anyway, so all this stuff UNUM is doing against the law. So why are they getting away with it? Because the PROPER LAWSUITS, proper counts are not being filed, criminal charges are NOT being filed, nothing will ever change unless they get sued for what they are actually doing, and the victims of their crimes file criminal charges. (If someone was raped, you wouldn't just file a civil charge against them (for money), you would also file CRIMINAL charges because rape is a criminal act. Well so is mail fraud, wire fraud, racketeering and extortion. The authorities will not come to you. You must go to the courthouse and file the criminal charges, and keep filing them until something gets done. Be a pest.

If you want to check out Alan Graf's recent win: Palmer v. Standard, you can read the judges comments at I'll be analyzing this case shortly and add it to the legal precedents in the Indictment.


                           Inspirational message

            When things go wrong, as they sometimes will,
            When the road you're trudging seems all up hill,
            When the funds are low and the debts are high,
            And you want to smile, but you have to sigh,
            When care is pressing you down a bit,
            Rest, if you must -- but don't you quit!

            Success is failure turned inside out --
            the silver tint of the clouds of doubt --
            And you never can tell how close you are,
            It may be near when it seems afar;
            So stick to the fight when you're hardest hit --
            It's when things seem worst that you mustn't quit.


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Created: August 28, 1998
Last Updated: May 28, 2000