Relying on authorities interpreting other statutes, defendants argue that the court is without jurisdiction under 18 U.S.C. sec. 1345 to order restitution to the victims of Cen-Card's fraud.
The issue of statutory construction defendants present is whether the court has the power "to prevent a continuing and substantial injury . . . to any person or class of persons" injured by Cen-Card's conduct as a final, as opposed to a preliminary, remedy. This issue hinges on whether the phrase "at any time before a final determination" modifies both "restraining order or prohibition" and "other action, as is warranted . . ." or solely the former.
The court is guided in this determination by the Third Circuit's affirmance (under an abuse of discretion standard) of the very broad relief ordered by the court at the preliminary injunction hearing. See United States v. Cen-Card Agency, 872 F.2d 411 (3rd Cir., Mar. 23, 1989). The Third Circuit denied Cen-Card's request for a stay of the court's order for the return of millions of dollars to victims of the scheme who mailed moneys to after the mail detention began. This remedy was not expressly provided for within the four corners of the statute.
The court sees no reason why Section 1345, which was adopted by Congress to increase the "inadequate" consumer mail fraud relief provided by 39 U.S.C. sec. 3007, see 1984 U.S.Code Cong. and Admin. News 3182, 3539-40, should be construed to prevent the return of moneys sent prior to detention of incoming mail. More importantly, the court finds that that defendants' interpretation would produce the absurd result of allowing the court to take broad remedial measures prior to resolution of all factual questions, but rendering it powerless to order such relief once defendants' responsibility for the fraud had been finally determined.
Accordingly, the court finds that it has jurisdiction, and proceeds to the merits of the Government's request for summary judgment as to damages.
In support of its this request, the Government offers an affidavit of Richard Mullin, president of the data processing firm which was retained by Rigatuso to process customer responses to the July and August 1988 solicitations. Relying solely on Cen-Card's records, which he states reflect the amount of money mailed by each alleged pre-detention victim, Mr. Mullin states that $ 1,486,536 was received from 31,280 customers. (Mullin Aff., at paras. 5-6). Rigatuso challenges the accuracy of these figures, contending that "many of the people who responded included bad or stale checks, or failed to enclose any monies at all" and speculating that Mr. Mullin may have incorporated receipts from "a modified solicitations." (S. Rigatuso Aff., at para. 10).
The second assertion fails to comply with the Rule 56(e) requirement that the party opposing a summary judgment motion "set forth specific facts showing that there is a genuine issue for trial." F.R.C.P. 56(e).
The first assertion also fails to satisfy the requirements of Rule 56(e). In apparent recognition of this defect, Mr. Rigatuso requests an opportunity to conduct further discovery on the issue of the amount of money actually paid out to Cen-Card. (S. Rigatuso Aff., at para. 11). Even if the court were to construe the affidavit as a Rule 56(f) application, the submission would be insufficient to stave off summary judgment; Mr. Rigatuso has failed to satisfy the Rule 56(f) requirements of demonstrating "what particular information is sought; how, if uncovered, it would preclude summary judgment; and why it has not previously been obtained." Dowling v. City of Philadelphia, 855 F.2d 136, 140 (3rd Cir. 1988). Although on notice since February 1, 1989 that the Government planned to rely on Mullin's investigations of Cen-Card's own records, (4th Aff. of Richard Blackburn, at para. 3), Mr. Rigatuso offers no explanation for his delay in requesting this information. He has failed to "demonstrate, with specificity, diligent efforts . . . and unusual circumstances which have frustrated those efforts." Koplove v. Ford Motor Co., 795 F.2d 15, 18 (3rd Cir. 1986). Accordingly, the court denies Mr. Rigatuso's request for more time to obtain this information.
Finally, Rigatuso argues that he has "received 3,524 petitions from customers acknowledging that they were not misled" by the prior solicitation. (Aff., at para. 9). He contends that these petitions and the success of subsequent non-fraudulent mailings demonstrate material facts for consideration by a jury. The court found the very mailing prompting these petitions -- which solicited an additional six dollars from Cen-Card's victims and contained claims that Mr. Rigatuso was in business to aid starving children -- to be fraudulent and contemptuous. See Trans., November 1, 1988, at 3-5. Furthermore, Mr. Rigatuso does not supply the court with a single example of these petitions, therefore failing to satisfy the "specific facts" requirement of Rule 56(e).
Accordingly, the court grants summary judgment on the damage issue with interest, as demanded by the Government.
Diana Rigatuso's Cross-Motion for Summary Judgment
Defendant Diana Rigatuso moves for summary judgment on the grounds that there is no evidence of her involvement in the solicitations alleged in the complaint, that she had no knowledge of her husband's decision to list her as Director of Cen-Card when the company was incorporated in New Jersey in August of 1988, and that the Government's Stipulated Findings of Fact in the Maryland action specifically exculpate her. See Government's Exh. 3, at 3. The United States does not contest Mrs. Rigatuso's lack of involvement of her husband's original fraudulent scheme. (Reply, at 14). However, it observes that both the evidence before the court and its proffer in the criminal action make abundantly clear that Mrs. Rigatuso has functioned as an "alter ego for purposes of advancing their fraudulent aims" by transferring money through an intricate series of bank accounts.
Although there is no evidence of Mrs. Rigatuso's involvement in the solicitations, see United States v. Pearlstein, 576 F.2d 531, 541 (3rd Cir. 1978) (requiring proof of knowledge and willful participation to hold employees liable for their employers' fraudulent conduct), allowing her to escape this court's jurisdiction might permit both defendants' contumnacious efforts to secrete profits from the solicitations to succeed.
In Levin v. Garfinkle, 514 F. Supp. 1160 (E.D.Pa. 1981), the court, faced with a similar case of unusually persistent fraud involving transfers of funds between shell corporations, found that it had jurisdiction to order relief against defendants included and not included in the complaint to prevent the secreting of assets. Id., at 1162-64. In this similarly "unusual case" of recalcitrance "warranting extraordinary relief," Id. at 1162, the court is satisfied that it has the authority to enforce a judgment against Diana Rigatuso, who is a named defendant and was directly involved in attempting to transfer assets so as to evade the orders of this court.
The court is satisfied that it must treat Diana Rigatuso as the alter ego of her husband for the purposes of this action to "prevent fraud, illegality [and] injustice." Publicker Industries v. Roman Ceramics, 603 F.2d 1065, 1069 (3rd Cir. 1979) (citing Zubik v. Zubik, 384 F.2d 267, 272 (3rd Cir. 1967). Although deciding to treat one entity as the alter ego of another must be based on specific facts, id., the court finds that Ms. Rigatuso's involvement in the secreting and co-mingling of assets makes her the alter ego of her husband and of the Cen-Card Agency.
Accordingly, her motion for summary judgment is denied.
For the foregoing reasons, the United States' motion for summary judgment on the issue of liability is granted, the United States' motion for summary judgment as to damages is granted with interest, and Diana Rigatuso's motion for cross-motion for summary judgment is denied.
Dated this 8 day of November, 1989