Professional Documents
Culture Documents
DISTRICT OF MINNESOTA
Defendants.
Defendants.
Defendants.
NOW COMES the Plaintiffs, in order to file their Objections to Magistrate Nelson’s
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July 16, 2007, Order (04-2632, ECF 112; 05-461, ECF 88; and 05-1348, ECF Doc. No. 82),
pertaining to Plaintiffs’ Motion to Compel Discovery (05-1348, ECF Doc. Nos. 39 and 40),
INTRODUCTION
Magistrate Nelson denied Plaintiffs’ joint motion to compel the production of the tax
records, banking records and cell phone records of Defendant Steve Magner, a supervisor of
vacant buildings for the Neighborhood Housing and Property Improvement office (N.H.P.I.)
Plaintiffs sought these personal records to support claims that Defendant Magner had
committed the predicate acts of “attempted extortion” and “extortion” under the federal
Racketeering Act, 18 U.S.C. Section 1961, et seq. (hereinafter referred to as “RICO Act”).
Plaintiffs submit that the affidavits and sworn statement from four individuals that
were presented to the Magistrate on Plaintiffs’ Joint Motion to Compel, constituted direct
supervisor of code enforcement for Defendant City. Plaintiffs RICO claims include extortion
and attempted extortion as pleaded in Plaintiffs’ Complaints (see for example, Steinhauser
Plaintiffs were seeking Magner’s personal records as further evidence that Magner
had committed the RICO predicate act of “attempted extortion” and for evidence that he
On the issue of tax and banking records, Magistrate Nelson held that Plaintiffs had not
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produced evidence that Magner had derived any income from the alleged pattern of
racketeering (Order, page 3) and refused to order the production of those records.
Plaintiffs were also seeking Magner’s personal cell phone records as further evidence
Magistrate Nelson held that while these personal cell phone records would show
phone numbers and the length of calls made by Magner, these records “could not show any
improper conduct, which would depend on a showing of the particular content of those
conversations” and therefore these records were not discoverable (Order, page 3).
contrary to law.
FACTUAL BACKGROUND
produce: “The state and federal and state tax returns, personal bank records, and personal
cell phone records … for the years 1999 through 2006.” See Defendants’ Response to
Plaintiffs’ Request for Production of Documents (Set II) in Steinhauser, et al., Response No.
9, attached as Exhibit 6 to the Affidavit of John R. Shoemaker (05-1348, ECF Doc. No. 72
and attachments); and Defendants’ Response to Plaintiffs Harrilal and Johnson’s Request for
Defendants objected to production of these personal documents on the basis that the
request sought, “information which is irrelevant, immaterial and not likely to lead to the
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Government Data Practices Act, Minn. Stat. 13.43, Subd.4, as non-public.” See Defendants’
Shoemaker; and Defendants’ Response, No. 46 (Harrilal, et al), attached as Exhibit 7 to the
Plaintiffs filed as part of their motion, three (3) affidavits and one (1) sworn statement
from four individuals relating to two different properties describing Mr. Magner’s
commission of, at the very least, the predicate RICO acts of attempted extortion. Part of the
Julian Jayasuriya has provided a sworn Affidavit dated 6/22/05 [Exhibit 3, Affidavit
of Shoemaker]. Mr. Jayasuriya purchased a property owned by Nancy Osterman in
2003 after Ms. Osterman informed him that Magner had threatened to demolish her
condemned home if she did not sell her home to a buyer of Magner’s choosing at a
price drastically below the fair market value of her home. See Paragraphs 5 and 6,
Affidavit of Jayasuriya. Mr. Jayasuriya states that he purchased Osterman’s home for
approximately $90,000 in value. Paragraph 5, Affidavit of Jayasuriya. Mr. Jayasuriya
stated that Inspector Magner has on occasion threatened him with dire consequences
including condemnation of his properties when Mr. Jayasuriya expressed
disagreement with Magner’s methods of code enforcement and ethics. See Paragraph
7, Affidavit of Jayasuriya. Mr. Jayasuriya met with the St. Paul City Council on June
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15, 2005, and stated that no one from the City ever answered his questions as to who
was really benefiting from the forced demolition of his property or how Magner could
operate his own real estate placement firm or tie forcing sales of properties into Code
Compliance. See Paragraph 16, Affidavit of Jayasuriya. Mr. Jayasuriya stated that it
was his belief that the City had a problem controlling Magner and other code
enforcement, Paragraph 17, Affidavit of Jayasuriya, and that Mr. Jayasuriya was
concerned that Magner may be able to continue to retaliate against him for not giving
into his demands that Magner control the sale of14 Jessamine or other properties,
under cover of enforcing City Codes. See Paragraph 21, Affidavit of Jayasuriya.
Douglas Hayes has provided a notarized statement dated 6/10/07, wherein he supports
the claims made by Osterman in her affidavit [Exhibit 4, Affidavit of Shoemaker].
Mr. Hayes was living with Osterman at 14 Jessamine when condemned and a code
compliance required. Page 1, Statement of Hayes. Mr. Hayes worked on trying to
meet Magner’s code compliance demands. Magner stopped by the house periodically
to check on the progress. Magner eventually told Hayes that he might as well quit
working on the home as the home was going to the City Council and the home will be
demolished. Page 3, Statement of Hayes. Mr. Hayes informed Magner that he and
Osterman were thinking of selling the home. Magner replied that they could not just
sell the home to anyone but that they had to sell their home to someone Magner had
worked with before. Page 3, Statement of Hayes. Magner told Hayes that if he and
Osterman did not sell the home as directed, they would be left with a hole in the
ground. Page 4, Statement of Hayes. Magner told Hayes that Magner knew a guy
who he had worked with before who buys vacant homes and was someone who could
get the work done. Page 4, Statement of Hayes. Magner told Hayes that he and
Osterman should take whatever they could get or they would be left with a hole in the
ground. Hayes then called the buyer that Magner suggested and that buyer came to
the 14 Jessamine home to look it over while Hayes was present. Page 4, Statement of
Hayes. Hayes showed the buyer the code compliance inspection report, and the
buyer then prepared a purchase agreement proposal to buy the home for $40,000.00
that he handed to Hayes. Page 4, Statement of Hayes. Hayes states that he and
Osterman rejected the proposal because the home was worth approximately
$150,000.00. Pages 4 and 5, Statement of Hayes. Hayes states that the 8-15-03
Purchase Agreement that is attached to his statement is the same purchase agreement
presented to him by Magner’s buyer. Page 5, Statement of Hayes. Wally Nelson
admitted in his deposition that this Purchase Agreement was in fact his purchase
proposal. See Nelson’s Deposition, pages 79-80, Exhibit 3, Matthew Engel Affidavit.
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Lois Jacobs, a St. Paul property owner has provided a sworn Affidavit dated 6/11/07
[Exhibit 5, Affidavit of Shoemaker]. Ms. Jacobs details her experience with Magner
during 2004 and thereafter. Ms. Jacobs owns a home located at 1008 Farrington
Street that she purchased for her grandson to live in. She says that her home was in
good condition. In May 2004, her home was condemned by the City because the
electricity had been turned off for non-payment. Paragraph 3, Jacobs’Affidavit. Even
though Ms. Jacobs paid the overdue bill, the City would not remove the
condemnation. She says that after her home was condemned, Magner told her that her
home could not be re-occupied until she completed a code compliance. See
Paragraph 4, Jacobs’ Affidavit. Following the inspection results of the code
compliance inspection, Ms. Jacobs discovered that she would have approximately
$32,000.00 in renovation costs. She also states that she had considerable expenses in
repairing damages caused to her doors and windows from forced entries and boarding
by the City. While Ms. Jacobs home was under Magner’s control, he offered to buy
her home for $50,000.00 cash. Ms. Jacobs refused his offer. Paragraph 5, Jacobs’
Affidavit. Ms. Jacobs states that she notified certain City officials about her
experience with Magner and his offer to purchase her home. See Paragraph 7, Jacobs’
Affidavit. She told City officials that she thought it was improper for a City employee
involved in condemnation of her home to then make an offer to purchase the home.
Even though she pleaded with City officials, her home remained condemned and the
City has continued to require a code compliance. See Paragraph 8, Jacobs’ Affidavit.
ISSUE
contrary to law in denying Plaintiffs’ motion to compel. The discovery issue presented to
Magistrate Nelson was whether it was proper to compel the production of personal tax
returns, bank records and cell phone records of Defendant Magner. Plaintiffs submit that
discovery of Mr. Magner’s tax returns, bank records and cell phone records is reasonably
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Plaintiffs direct the Court’s attention to Plaintiffs’ Joint Letter Brief in Support of
Plaintiffs’ Motion to Compel and supporting affidavits and exhibits (05-1348, ECF Doc. Nos.
65, 71 and 72) for a more complete statement of Plaintiffs’ arguments and authorities.
Magistrate Nelson stated in her Order that, “Parties generally are entitled to conduct
liberal discovery into any relevant non-privileged material. Fed. R. Civ. P. 26(b)(1) (Order,
page 2). Rule 26 of the Federal Rules of Civil Procedure, provides that where the requested
discovery “appears reasonably calculated to lead to the discovery of admissible evidence, the
Given the nature of Plaintiffs RICO claims of mail fraud, wire fraud, bank fraud,
attempted extortion and extortion, Magner’s tax, banking and personal cell phone records fall
within the proper scope of discovery as promulgated by the Rules. Plaintiffs’ request is not
unreasonable, overbroad, or unduly burdensome. Plaintiffs are seeking the bank records, tax
returns and personal cell phone records from one of the Defendants from three (3) cases and
only where the evidence clearly shows “attempted extortion” by Magner in his code
enforcement role against owners of single family properties, properties similar to Plaintiffs’
properties.
“Attempted extortion” is an illegal predicate act under the RICO Act. 18 U.S.C. §
1961. Under the RICO Act, “Racketeering activity” is defined as, “(A) any act or threat
involving…extortion, or (B) any act which is indictable under any of the following
provisions of title 18, United States Code §1951 (relating to interference with commerce,
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The Hobbs Act provides that: “(a) Whoever in any way or degree obstructs, delays, or
section shall be fined under this title or imprisoned not more than twenty years, or both.” See
18 U.S.C. §1951(a). The Hobbs Act further defines extortion as “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 U.S.C. § 1951(b)(2) (emphasis added).
Federal Courts have also recognized “attempted extortion” as a predicate act within
the RICO Act. See McLaughlin v. Anderson, 962 F.2d 187, 194 (2nd Cir. 1992) ( financing
officer alleged threat to lose successful bidder's forms unless bidder entered joint venture
H.U.D. project, was use of fear of economic loss needed for Hobbs Act extortion claim and
predicate act of attempted extortion for civil RICO claim); see also Dooley v. Crab Boat
Owners Ass'n., 271 F.Supp.2d 1207, 1214 (N.D.Cal.2003) (defendants attempts through
threats and property damage to obtain control over fishing company's intangible property
could amount to attempted extortion, Hobbs Act violation, and RICO predicate acts).
The predicate acts of “attempted extortion” and “extortion” relate to the other
predicate acts detailed by Plaintiffs in their Complaints to show relatedness and continuity,
including mail fraud, wire fraud and bank fraud, and other acts of Magner and other
Defendants, many of who were members of NHPI. In order to prove a pattern of racketeering
activity, Plaintiffs must show that “the racketeering predicates are related, and that they
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amount to or pose a threat of continued criminal activity.” H.J. Inc. v. Northwestern Bell Tel.,
492 U.S. 229, 239 (1989). The “relatedness” element of the pattern test embraces “criminal
acts that have the same or similar purposes, results, participants, victims or methods of
commission, or otherwise are interrelated by distinguishing characteristics and are not isolated
In seeking the tax returns and bank records of Magner, Plaintiffs were seeking
additional evidence that Magner had committed a RICO predicate act of “attempted
extortion”. The bank records, for example, could in fact show that at the time Jacobs claims
Magner offered her $50,000 in cash to buy her condemned property subject to code
compliance requirements by Magner, that Magner in fact had $50,000 in available funds.
That would constitute evidence to support a claim of attempted extortion. Magner’s tax
returns could show “other income” that would have been available to him for carrying out his
Plaintiffs are seeking the evidence that Magistrate Nelson states Plaintiffs do not have
– the bank records and tax returns - that would show Magner derived income and committed
“extortion,” a second RICO predicate act. These financial records clearly fall within the
admissible evidence,” and be related to their claims, as these records could show that Magner
has derived income from the alleged extortion and pattern of racketeering.
In Dooley v. Crab Boat Owners Ass’n, the Defendants contended that none of the acts,
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even if proved, could be considered extortion or attempted extortion because defendants did
not obtain or try to obtain property. 271 F.Supp.2d at 1212. The court held that defendants
attempted to acquire “something of value” through their threats, warnings and property
The Federal District Court for the Eastern District of New York has held that where
claims of fraud, unjust enrichment, and RICO conspiracy were brought against physicians
physician's financial records, including tax returns, were discoverable as relevant to show that
the physicians profited from the willingness to order tests that were billed to an insurer as
reimbursable personal injury protection (PIP) benefits by medical clinics. See State Farm
Mut. Auto. Ins. Co. v. CPT Medical Services, P.C, 375 F.Supp.2d 141 (E.D.N.Y.2005). The
Federal District for the Eastern District of Pennsylvania has held that given the broad
financial records requested by a plaintiff from a defendant were relevant in a civil RICO
action against the defendant and members of his family, where the financial records pertained
to the transaction involving family members and the suit was based on their allegedly
fraudulent transactions. See Constitution Bank v. Levine, 151 F.R.D. 278 (E.D.Pa.1993).
evidence that he has derived any income from the alleged pattern of racketeering” was clearly
erroneous and contrary to law. Plaintiffs are seeking to show evidence Magner “derived
income” from the alleged pattern of racketeering through his bank records and tax returns.
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Plaintiffs have already presented evidence of the predicate act of “attempted extortion.”
examine Magner’s bank records and tax returns to determine if in fact he has derived any
The fact the Magner was unsuccessful in his attempted extortion, or that he did not
derive income from those individuals, does not mean that an illegal predicate act was not
committed or that discovery of his bank records and tax returns should not be allowed. As the
Court held in MacLaughlin, “that the extortion effort ultimately failed can not exonerate
Anderson, since Macgall alleged, and the Hobbs Act forbids, attempted extortion.” See
Magistrate Nelson also denied Plaintiffs’ request to compel the production of Magner’s
personal cell phone records because “the information that Plaintiffs seek – the number and
frequency of their (Magner and Nelson’s) phone conversations – could not show any improper
conduct, which would depend on a showing of the particular content of those conversations.”
(Order, page 3). This determination is clearly erroneous and contrary to law.
Again, “Parties generally are entitled to conduct liberal discovery into any relevant
non-privileged material,” and “Parties may obtain discovery regarding any matter, not
privileged, that is relevant to the claim or defense of any party.” Fed. R. Civ. P. 26(b)(1).
Plaintiffs contend that the number and frequency of Magner and Wally Nelson’s phone
conversations – not just the content of those conversations - are in fact relevant to Plaintiffs’
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claims. The amount of time Magner was spending on his personal cell phone talking to
Nelson during City business hours and the frequency of those calls during those hours, would
claimed. Additionally, phone numbers of other property owners similarly subject to attempted
extortion and/or extortion may be discovered in Magner’s cell phone records. Other phone
numbers may lead to fellow conspirators involved in racketeering activity with Magner.
CONCLUSION
In sum, given the nature of the claims against Magner, his tax, banking and personal
cell phone records fall within the proper scope of permissible discovery under the Federal
Rules of Civil Procedure and the Court should allow such discovery. Plaintiffs are agreeable
(1) Overrule Magistrate Nelson’s Order denying discovery of the tax records, banking
(2) Compel production of Magner’s state and federal tax returns, personal bank records,
and personal cell phone records for the years 1999 through 2006, as this information is
(3) Award reasonable attorney fees and costs in bringing this motion; and
(4) Order such other and further relief, at law or in equity, to which Plaintiffs may be
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justly entitled.
Respectfully submitted,
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