stake in the venture

In an investigation of call-girl activity the police focused their attention on three prostitutes actively plying their trade on call, each of whom was using Lauria’s telephone answering service, presumably for business purposes. On January 8, 1965, Stella Weeks, a policewoman, signed up for telephone service with Lauria’s answering service. Mrs. Weeks, in the course of her conversation with Lauria’s office manager, hinted broadly that she was a prostitute concerned with the secrecy of her activities and their concealment from the police. She was assured that the operation of the service was discreet and “about as safe as you can get.” It was arranged that Mrs. Weeks need not leave her address with the answering service, but could pick up her calls and pay her bills in person. On February 11, Mrs. Weeks talked to Lauria on the telephone and told him her business was modelling and she had been referred to the answering service by Terry, one of the three prostitutes under investigation. She complained that because of the operation of the service she had lost two valuable customers, referred to as tricks. Lauria defended his service and said that her friends had probably lied to her about having left calls for her. But he did not respond to Mrs. Weeks’ hints that she needed customers to make money, other than to invite her to his house for a personal visit to get better acquainted. In the course of his talk he said “his business was taking messages.” On February 15, Mrs. Weeks talked on the telephone to Lauria’s office manager and again complained of two lost calls, which she described as a $50 and a $100 trick. On investigation the office manager could find nothing wrong, but she said she would alert the switchboard operators about slip-ups on calls. On April 1 Lauria and the three prostitutes were arrested. Lauria complained to the police that this attention was undeserved, stating that Hollywood Call Board had 60 to 70 prostitutes on its board while his own service had only 9 or 10, that he kept separate records for known or suspected prostitutes for the convenience of himself and the police. When asked if his records were available to police who might come to the office to investigate call girls, Lauria replied that they were whenever the police had a specific name. However, his service didn’t “arbitrarily tell the police about prostitutes on our board. As long as they pay their bills we tolerate them.” In a subsequent voluntary appearance before the grand jury Lauria testified he had always cooperated with the police, but he admitted he knew some of his customers were prostitutes, and he knew Terry was a prostitute because he had personally used her services, and he knew she was paying for 500 calls a month. Lauria and the three prostitutes were indicted for conspiracy to commit prostitution, and nine overt acts were specified. Subsequently the trial court set aside the indictment as having been brought without reasonable or probable cause. The People have appealed, claiming that a sufficient showing of an unlawful agreement to further prostitution was made.

In the 1970s petitioners James E. Gray, a former Kentucky public official, and Charles J. McNally, a private individual, along with Howard P. "Sonny" Hunt, participated in arrangements involving the Commonwealth's insurance contracts. After Democrat Julian Carroll was elected Governor in 1974, Hunt became chairman of the state Democratic Party and obtained de facto control over selecting the insurance agencies from which Kentucky would purchase its policies. In 1975 the Wombwell Insurance Company agreed with Hunt that, in exchange for continuing as the Commonwealth's agent for a workmen's compensation policy, it would share commissions exceeding $50,000 a year with other agencies designated by Hunt. Between 1975 and 1979 Wombwell funneled $851,000 in commissions to 21 agencies specified by Hunt, including Seton Investments, Inc., a company controlled by Hunt and Gray and nominally owned and operated by McNally, which received approximately $200,000. Gray served as Secretary of Public Protection and Regulation from 1976 to 1978 and as Secretary of the Governor's Cabinet from 1977 to 1979. Prior to his 1976 appointment, Hunt and Gray had established Seton for the purpose of receiving the commission payments, which were used to benefit Gray and Hunt. Pursuant to Hunt's direction, Wombwell also made payments through the Snodgrass Insurance Agency that ultimately went to McNally. Hunt later pleaded guilty to mail and tax fraud charges and received a three-year prison sentence. Petitioners were charged with one count of conspiracy and seven counts of mail fraud; six of the mail fraud counts were dismissed before trial. The remaining mail fraud count was based on the mailing of a commission check to Wombwell by the insurance company that had secured coverage for the State. It alleged that petitioners had devised a scheme to defraud the citizens and government of Kentucky of their right to have the Commonwealth's affairs conducted honestly. The count also charged that petitioners sought to obtain money and other things of value by means of false pretenses and the concealment of material facts. The conspiracy count alleged that petitioners had conspired to violate the mail fraud statute through that scheme. It further alleged that they had conspired to defraud the United States by obstructing the collection of federal taxes. After trial in the District Court the jury convicted petitioners on both the mail fraud and conspiracy counts, and the Court of Appeals for the Sixth Circuit affirmed the convictions in 1986. The Supreme Court granted certiorari in 1986.

Elton “Butch” Bryan served as Director of the West Virginia Lottery after his appointment by Governor Gaston Caperton in April 1990. In early 1991 the Lottery began an open bidding process for its $2.8 million advertising contract and formed a seven-member evaluation committee that scored presentations and recommended the Arnold Agency. Bryan and the Governor instead selected the Fahlgren Martin Agency, directed Deputy Director Tamara Gunnoe to surrender the evaluation forms to legal counsel, and instructed her to give false testimony to the Lottery Commission on April 24, 1991, claiming the committee had recommended Fahlgren Martin without numerical scores. When the Department of Administration questioned the absence of quantitative data, Bryan directed Gunnoe to prepare false memoranda of support and continued the misrepresentations until the Purchasing Division approved the contract, which was signed on August 6, 1991, after which the Lottery mailed checks pursuant to its terms. In 1991 and 1992 Bryan also participated in planning a statewide video lottery expansion, directed the drafting of a Request for Proposals that favored Video Lottery Consultants, supplied VLC with an advance copy of the unpublished RFP, and steered the evaluation process toward VLC, although the contract was never awarded after Bryan received a federal grand jury subpoena in January 1993. During the same period Bryan purchased shares of IGT, GTech, and VLC on the basis of confidential nonpublic information obtained in his capacity as Lottery Director. In connection with the ensuing investigation Bryan appeared before a federal grand jury and answered questions about who had participated in drafting the video lottery RFP. A federal jury in Charleston, West Virginia convicted Bryan in September 1993 of two counts of mail fraud, one count of wire fraud, one count of securities fraud, and one count of perjury. The district court sentenced Bryan to 51 months in prison, and Bryan appealed to the Fourth Circuit.