Employment Law: RICO, Bribery and Employee Misconduct-Employers’ remedies!

In a recent case, SCJ was allowed to proceed with Bribery, and Racketeering under state law against an employee and several carriers that were awarded transportation contracts by SCJ’s employee. This allowed SCJ to recoup a significant part of the hundreds of millions of dollars the employee misused and provided to individuals that provided him with bribes, gifts and prostitutes.  Employers have recourse against individuals that acted in concert with the employees misdeeds to recoup their business losses.

S.C. Johnson had an employee by the name of Milton Morris was Director of its Transportation Department from 1988 to 2004.  S.C. Johnson learned that Mr. Morris was involved in a variety of illicit activities. Mr. Morris provided a variety of contracts to individuals that provided him cash, goods, services, travel monies, (including prostitutes).  In return, Mr. Morris awarded business that the carriers would not have received and agreed to have S.C. Johnson pay above market rates for many of these contracts.  On October 18, 2004, Mr. Morris was terminated for these actions.  Mr. Morris was later criminally prosecuted and convicted of these actions.

S.C. Johnson filed a complaint in Wisconsin State Court against Mr. Morris, and then added four trucking companies and their owners, adding two more companies and three of their employees and another former employee of SCJ a Katherine Scheller. The state court allowed the claims for:  1) fraudulent misrepresentation by omission; 2) civil conspiracy to violate the Wisconsin Bribery statute; 3) civil conspiracy to commit fraud; 4) violation of the Wisconsin Organized Crime Control Act; and 5) aiding and abetting a breach of a fiduciary duty.  The Defendants moved to dismiss pursuant to the Federal Aviation Administration Authorization Act of 1944.  The state court denied the motion to dismiss finding that the claims did not involve the amount or price that was charged, but the tortious nature of the Defendant’s conduct.  S.C. Johnson prevailed at trial and was awarded 203.8 million dollars.

Later, S.C. Johnson filed a federal complaint against other defendants it asserts were discovery later after discovery was conducted in the other matter.  On August 10, 2010, SCJ filed a complaint against Transportation Corporation of American Inc., Stevens Transport Inc, Far Side Trucking Inc., and Graham Kent Pharr (collectively Carriers or Defendants).  Complaint was filed in the Eastern District of Wisconsin and alleged diversity as a basis for jurisdiction.  The Complaint alleged that the Carriers conspired with Morris to acquire business they otherwise would not have acquired and were paid above market rates for their services by SCJ.  The Carriers picked up Morris Tabs for meals, golf stays at luxury hotels and for the provision of prostitutes.  SCJ also alleged that Morris received cash bribes from these Carriers.

The Carriers or Defendants moved to dismiss arguing preemption by the Federal Aviation Administration Authorization Act of 1944. However, SCJ was allowed to proceed with the Bribery and Racketeering charges against the Transportation Corporation of American Inc. and the other three Defendants.  Thus, SCJ was able to recoup much of the losses stemming from Mr. Morris nefarious activities and misconduct.  Thus, Employers that are vigilant and investigate their employee’s misconduct are not only able to prevent the continuation of the misconduct, but to recoup the costs, even if the individual employee may have spent all of his personal funds.

If you are dealing with similar circumstances relating to an employee, then feel free to contact us to learn of your options in recouping the costs from the employee’s misconduct.  SCJ Recovers Millions in Business Losses from Employee’s Misdeeds

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