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United States v. Cusumano

argued: May 14, 1991.


Appeal from the United States District Court for the Eastern District of Pennsylvania; D.C. Crim. No. 90-00091-01.

Hutchinson, Cowen and Seitz, Circuit Judges.

Author: Seitz


SEITZ, Circuit Judge

Joseph Cusumano appeals his conviction and sentence pursuant to his involvement in a kickback scheme concerning an employee benefit plan. The district court had jurisdiction under 18 U.S.C. § 3231 (1988). This court has jurisdiction under 28 U.S.C. § 1291 (1988).


Viewing the evidence in the light most favorable to the government, the facts relevant to this appeal are as follows. Certain union locals and retail food stores maintained the Retail Clerks Tri-State Health and Welfare Fund ("Fund") which administered various benefit programs for approximately 14,000 retail food workers. The Fund was managed by a board of trustees ("Board") that met regularly to discuss matters related to the Fund. John Bogan was the Fund's administrator, acting under the direction of the Board.

The Board contracted with various companies to provide benefit services to the Fund for the Fund's beneficiaries. One of these companies was Health Corporation of America (HCA), which provided and administered dental benefit coverage. Cusumano was president of HCA. In that capacity he appeared before the Board at its regular meetings.

In the early 1980's the Board instructed Bogan to solicit bids for life insurance benefit coverage to be provided by the Fund. Although he was not an official of the Fund, at some point not disclosed by the record, Cusumano learned of the Board's plan to purchase life insurance coverage. Thereafter Cusumano approached insurance agent Dennison Fincke to discuss Fincke's becoming the agent for the life insurance plan. Cusumano explained that he himself was not allowed to be the broker for life insurance coverage because he was already a vendor for the dental plan. Cusumano told Fincke that he and Fincke would "split the commission 50-50." When Fincke advised Cusumano that he had obtained a bid from an insurance company that would yield a fifteen percent commission, Cusumano instructed Fincke to obtain a bid providing a twenty percent commission. Cusumano and Fincke discussed how Fincke would set up and use a dummy offshore corporation to avoid paying taxes on the commissions.

Cusumano also met with Bogan to solicit his agreement to entertain Fincke's bid, telling him that "he would be taken care of" if the Board accepted Fincke's bid. Bogan recommended Fincke's bid to the Board, which approved it. Fincke's bid contained a misrepresentation of the amount of the commission, proposing an annual $12,000 commission when in actuality he would receive almost $100,000 annually.

From 1982 to 1988 Fincke received monthly commission checks of approximately $8000 as agent for the life insurance plan. Fincke deposited the checks as he and Cusumano had agreed and paid Cusumano his one-half share in cash. Cusumano paid Bogan $400 a month. In 1986 Fincke set up a bank account in the Cayman Islands for the commission payments, and Cusumano traveled to the Cayman Islands twice to collect his share from Fincke. Thereafter, Fincke sent Cusumano the payments by check, which Cusumano then deposited into his father's or secretary's bank account.

On February 22, 1990, Cusumano was charged in a 49-count indictment as follows: one count of conspiracy under 18 U.S.C. § 371; four counts of embezzlement from an employee benefit plan under 18 U.S.C. § 664; thirty-five counts of receipt of kickbacks relating to an employee benefit plan under 18 U.S.C. § 1954; seven counts of laundering the proceeds of an unlawful activity under 18 U.S.C. § 1956; and two counts of foreign travel in aid of a racketeering enterprise under 18 U.S.C. § 1952. All counts save the conspiracy and money laundering counts also charged Cusumano with aiding and abetting under 18 U.S.C. § 2. Bogan was also charged in the indictment but later entered into a plea agreement. Both Bogan and Fincke appeared as government witnesses in Cusumano's trial.

On July 25, 1990, the jury returned a verdict of guilty on all counts. The district court imposed multiple three and six year prison terms for Cusumano's pre-Guidelines conduct and multiple Guidelines terms of 71 months, all to run concurrently. Significant fines and restitution were also imposed under the Guidelines. Final judgment of conviction and sentence was entered December 7, 1990, and Cusumano appealed to this court.


Cusumano seeks acquittal on all counts except the embezzlement counts, as to which he seeks a new trial. He also challenges certain aspects of his prison sentence under the Sentencing Guidelines. Cusumano's primary argument for acquittal concerns his convictions under § 1954, and we turn first to that provision.

A. Section 1954

Cusumano contends that he is entitled to acquittal on the thirty-five counts directly related to the kickback scheme under 18 U.S.C. § 1954 (1988). That section subjects the following persons to criminal liability:

Whoever being:

(1) an administrator, officer, trustee, custodian, counsel, agent, or employee of any employee welfare benefit plan . . . [*fn1] or

(4) a person who, or an officer, counsel, agent, or employee of an organization which, provides benefit plan services to such plan

receives or agrees to receive or solicits any fee, kickback, commission, gift, loan, money, or thing of value because of or with intent to be influenced with respect to, any of his actions, decisions, or other duties relating to any question or matter concerning such plan . . . .*fn2

This court has characterized this provision broadly to reach "all persons who exercise control, direct or indirect, authorized or unauthorized, over the fund." United States v. Palmeri, 630 F.2d 192, 199-200 (3d Cir. 1980), cert. denied, 450 U.S. 967, 67 L. Ed. 2d 616, 101 S. Ct. 1484 (1981) (cited in United States v. Soures, 736 F.2d 87, 90 (3d Cir. 1984); United States v. Friedland, 660 F.2d 919, 925, 927 (3d Cir. 1981), cert. denied, 456 U.S. 989, 73 L. Ed. 2d 1283, 102 S. Ct. 2268 (1982)).

The § 1954 counts of the indictment charged that Cusumano. . .

did knowingly and unlawfully solicit and receive . . . a fee, kickback, commission, gift, money and thing of value, that is, currency and securities . . . from an insurance agent . . . because of and with intent to be influenced, in respect to [his] actions, decisions and other duties relating to questions and matters concerning the Fund, that is, the placement of insurance coverage for the Fund with an insurance agent . . . .

Cusumano raises two legal challenge to his § 1954 convictions. First, he asserts that the Fund was not an ERISA welfare benefit plan. Second, he contends that the Fund cannot be the subject of his § 1954 prosecution ...

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