State v. Wang ( 2019 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
THE STATE OF DELAWARE,
Plaintiff,
C.A. NO.: N16C-05-138 AML
Vv.
DA ZHONG WANG,
Nee Nee Neer ree eee eee nee” eee ee”
Defendant.
Submitted: July 16, 2019
Decided: October 31, 2019
MEMORANDUM OPINION
Oliver J. Cleary, Esquire, and Zoe Plerhoples, Esquire, of the STATE OF
DELAWARE DEPARTMENT OF JUSTICE, Wilmington, Delaware, Attorney for
Plaintiff.
Brian T.N. Jordan, Esquire, of JORDAN LAW, LLC, Wilmington, Delaware,
Attorney for Defendant.
LeGrow, J.
The defendant in this civil racketeering action owned and operated a series
of massage parlors across the state. Over the course of 13 months, three different
massage therapists at two different locations offered undercover police officers sex
in exchange for money. After the third such incident, the defendant criminally was
charged and ultimately pleaded guilty to permitting prostitution at his Rehoboth
business. During the same time period, the sewer at a third location was clogged
with hundreds of used condoms on two separate occasions. Police officers
investigating the businesses found that the employees who worked there spoke
little to no English and lived in the establishments. Investigating officers also
observed sexually suggestive online advertisements for the defendant’s massage
businesses.
At trial, against this record, the defendant denied knowing that his
employees routinely were engaging in prostitution. His testimony strained
credulity. After considering the evidence, I find the State proved that the
defendant conspired with his employees to offer massage customers sex in
exchange for money. I therefore conclude the State proved the defendant civilly is
liable for three violations of Delaware’s racketeering statute. My reasoning
follows.
FACTUAL AND PROCEDURAL BACKGROUND
These are the facts as I find them after trial and after weighing the testifying
witnesses’ credibility and the exhibits admitted into evidence through their
testimony. Da Zhong Wang, the defendant, is a Chinese citizen who formerly
operated a handful of massage parlors in Delaware. These establishments included
the Relaxed Spa in Rehoboth Beach (the “Rehoboth location”), the Massage
Center in Middletown (the “Middletown location”), and Da Wang’s Bodyworks in
Dover (the “Dover location”).
As described more fully below, beginning in late 2013 and extending
through 2014, various law enforcement organizations began investigating Wang’s
businesses for a number of reasons, chief among them a suspicion that the
masseuses at the various locations regularly were prostituting themselves during
massages. Those investigations culminated in Wang’s arrest in December 2014 for
Promoting Prostitution and Permitting Prostitution. Wang ultimately pleaded
guilty to Permitting Prostitution, a misdemeanor offense.! In 2015, the Delaware
Board of Massage and Bodywork (the “Board”) suspended Wang’s certified
massage technician license, finding that he violated a number of the Board’s laws
and regulations.” Those violations included not displaying his license, not listing
his license number on his business cards, not maintaining appropriate business
' Trial Exhibit (hereinafter “TX”) 31.
2 TX 36.
records, and not cooperating with the Division of Professional Regulation’s
investigators.> By 2015, Wang had closed all his Delaware locations and moved to
New York.
In May 2016, the State filed this action seeking asset forfeiture and civil
penalties based on Wang’s alleged violation of the Delaware Organized Crime and
Racketeering Act* (the “RICO Statute”). After discovery had concluded, both
parties filed motions for summary judgment. The Court ultimately denied those
motions, ruling that disputed issues of material fact precluded judgment as a matter
of law in favor of either party.” In April 2019, the parties tried a two-day bench
trial in this Court solely addressing the issue of whether Wang was liable under the
statute. In the event the Court determines Wang is liable, the parties anticipate
further proceedings on the issue of remedies. At the conclusion of the trial, the
Court allowed the parties to submit post-trial briefs, but determined oral argument
was not necessary.
At trial, the State’s evidence focused on investigations and evidence from all
three locations. The State argues that evidence, considered cumulatively, shows
Wang engaged in a pattern of racketeering activity and conspired with his
employees to do so. Wang generally denies knowledge of any prostitution
3 Td. at 2.
411 Del. C. §§ 1501-1511.
> State v. Wang, 2018 WL 2202274, at *1 (Del. Super. May 11, 2018).
3
activities at two of the three locations, gives little acknowledgment to his guilty
plea to permitting prostitution at the third location, and argues the State’s other
evidence does not meet its burden of proving racketeering by a preponderance of
the evidence.
For the reasons explained below, the State’s evidence satisfied its burden of
proof in this case. Before delving into the specifics of that evidence, however, I
first address my reasons for concluding that Wang’s testimony was not credible. I
then address the evidence at each of the three locations that are the subject of the
State’s case. In a nutshell, considered as a whole, the record demonstrates that
Wang was aware of and encouraged prostitution at his establishments in order to
increase business. His self-proclaimed ignorance was not convincing, and the
State has shown that Wang violated three different sections of the RICO Statute.
A. Wang’s Credibility
Wang testified first at trial. He was, on the whole, not a credible witness, as
his testimony was inconsistent internally and contradicted by evidence admitted
during trial and by the facts to which the parties stipulated before trial. Some of
those inconsistencies were minor, but they nonetheless were telling. For example,
Wang testified that he emigrated from China and the only places he has lived in the
United States are New York, Chicago, Maryland, and Delaware.® He represented
to the Delaware Division of Professional Regulation, however, that he was licensed
to practice massage in California and he also testified that he studied in Boston.’
Further contradicting himself, Wang testified he studied massage in Boston and
Chicago, but his application for a massage license in Delaware listed an institution
in California as his place of study. At trial, Wang denied attending that
institution.’
Other instances of Wang’s inconsistencies or prevaricating are more central
to the issues in this case. For example, Wang initially denied pleading guilty to
Permitting Prostitution or any other prostitution offense, despite documentation
proving otherwise.'?
Wang also testified on direct examination that he did not
know why his wife, Xiu Juan Zhang, was arrested by Middletown police in
January 2014.'' Wang went so far as to claim that he never discussed this
seemingly important event with the woman to whom he was married.'? On cross-
examination, however, in an effort to explain why Xiu Juan Zhang was present at
his Dover location after he purportedly fired her for being arrested, Wang testified
° State v. Wang, C.A. No. N16C-05-138 AML (Trial Transcript) (hereinafter “Trial Tr.”) (Apr.
22, 2019) 9.
1 Td. at 10; TX 10.
8 Compare Trial Tr. at 10, with TX 10.
° Trial Tr. at 10.
'0 Td. at 43-44. Wang later admitted to pleading guilty to Permitting Prostitution. See State v.
Wang, C.A. No. N16C-05-138 AML (Trial Transcript) (Apr. 23, 2019) 16-17.
'! Trial Tr. at 30-34.
!2 Td. at 33; see also id. at 27-28 (Wang testified he and his wife were married until mid-2015).
5
that he allowed her to live in that location because she could not return to New
York after her prostitution arrest.'2 Compounding this inconsistency, Wang
testified that Xiu Juan Zhang’s prostitution arrest was one of the reasons the two
ultimately divorced.'4 Wang’s testimony also was inconsistent regarding how he
found prospective employees.'? Moreover, his testimony about how he paid his
employees differed entirely from the statements he gave police during a December
2014 interview.'®
As a result of these inconsistencies, as well as my observations of Mr. Wang
during trial, I have accepted very little of his testimony as either factual or
believable. Contrary to Mr. Wang’s argument, this Court is not required to accept
even his “unrebutted” testimony as credible.'’ Accordingly, the factual
background that follows mentions very little about Mr. Wang’s version of events,
since I have concluded that version largely is counter-factual.
'3 Td. at 46-47.
'4 Td. at 50-51.
'5 Compare id. at 16-17 (testifying that everyone he hired he knew personally or was referred by
someone he knew personally), with id. at 45 (testifying that he also located employees by
advertising in a Chinese language newspaper).
'6 Compare id. at 17-18 (testifying he paid employees $800-$1000 a month depending on the
amount of work they performed and customer feedback), with State v. Wang, C.A. No. N16C-05-
138 AML (Pretrial Stipulation) (Mar. 15, 2019) § 2(x) (‘The Defendant admitted to the police
that he received $40 from the therapists for every massage he provided. . . . [and] that he paid the
therapists the remaining $20 they received.”).
'7 See Def.’s Answering Br. 25; Wright v. State, 25 A.3d 747, 754 (Del. Aug. 1, 2011) (“As the
trier of fact, it was for the trial judge to determine whether [the testimony was] credible.”).
6
B. The Middletown investigation and findings
In summer 2013, Middletown Police Detective Timothy Hoffecker began
investigating Wang’s Middletown location for possible prostitution activity.’
Police officers conducted surveillance of the location during the day and at night,
and Hoffecker also conducted an online search of the business based on the phone
number associated with the location.'? During the surveillance, Hoffecker observed
that the Middletown location’s windows completely were covered with curtains
and posters.””? During his internet search, Hoffecker found several advertisements
associated with the Middletown location’s phone number, including
advertisements on websites for people searching for escorts. Hoffecker also
observed that many of the advertisements showed pictures of partially clothed
Asian females.”! Although the advertisements all listed the Middletown location’s
phone number, at least one of the advertisements referred to additional locations in
Smyrna and Dover.”
Middletown police then conducted an undercover investigation using a
Delaware State Police officer. That officer, who had conducted at least 50
prostitution investigations, went to the Middletown location on November 18,
'8 Trial Deposition of Timothy Hoffecker (hereinafter “Hoffecker Dep.’”) 4-5.
'9 Td. at 6.
20 Td, at 6-7.
21 Td, at 7-10.
2 Id. at 10-11. Although it was not the focus of the State’s evidence, Wang also owned a
massage establishment in Smyrna during the time of the Middletown investigation. Pretrial
Stipulation at § 2(c).
2013 and paid for a massage. At the end of the massage, the masseuse instructed
the officer to turn over, and she then grabbed his genitals.77>_ The two discussed the
officer paying additional money for sexual stimulation and agreed upon a price of
4 The masseuse
$30 before the officer stated he did not have enough money.’
encouraged him to come back the next day “and pay the rest and finish.”*? The
undercover officer left the premises and immediately reported the interaction to
Hoffecker.
Middletown police obtained and executed a search warrant for the premises
on November 18, 2013. When the warrant was executed, two adults were working
at the establishment: Wang and Ms. Chunyan Li.2® The undercover officer
positively identified Ms. Li as the masseuse who had given him a massage and
offered to perform sexual acts in exchange for money.”’ In addition, Detective
Hoffecker observed several signs that both Ms. Li and Mr. Wang were living on
the premises. The searching officers found more than $2,000 in cash among Ms.
Li’s belongings. Hoffecker arrested Ms. Li for prostitution. During a post-
Miranda interview, Ms. Li denied engaging in prostitution. She also explained that
*3 Trial Deposition of Jason M. Russo (hereinafter “Russo Dep.”) 6-7. Wang had a standing
hearsay objection at trial regarding the admissibility of any of the statements the masseuses made
during the massage or after their arrest. None of the masseuses testified. As explained in the
Analysis section below, those statements are not hearsay because they are coconspirator
statements under Del. Unif. R. of Evid. 801(d)(2)(E).
*4 Russo Dep. at 6-7, 13-14.
25 Td. at 7.
6 Hoffecker Dep. at 11-12.
27 Td. at 14-15.
she worked for Mr. Wang and he received $40 for each massage she performed,
while she retained the remainder along with any tip that was paid.22> Mr. Wang
described a similar arrangement in his interview with the police, although he
testified to an entirely different compensation arrangement at trial.2? Mr. Wang
also told police that his employee handbook specifically prohibited masseuses
from engaging in any “illegal activity.”>°
On January 9, 2014, another undercover police officer purchased a massage
at the Middletown location and experienced a similar interaction. At the
conclusion of the massage, the masseuse, Ms. Xiu Juan Zhang (“Ms. Juan Zhang”),
who was married to Mr. Wang, held the officer’s hand while staring at his
genitals.?! When the officer asked if she wanted to do anything else, she told the
officer it was up to him, and the two negotiated for a period of time regarding a
price for additional sexual acts. As before, when the officer informed the masseuse
that he did not have enough money, she advised him to bring the extra $50 with
him next time? = Although much of their communication was non-verbal, the
officer testified he had no doubt in his mind that Ms. Juan Zhang was offering to
perform a sexual act with him in exchange for money.*?
*8 Td. at 15-16.
2° Trial Tr. at 17-18, 48; Hoffecker Dep. at 17-18.
3° Hoffecker Dep. at 18.
3! Trial Deposition of Michael A. Terranova, Jr. (hereinafter “Terranova Dep.”) 11-12.
32 Td. at 12-14.
33 Td.
Again, Middletown police obtained a search warrant and executed it the
same day as the undercover operation. When they arrived, Wang and Ms. Juan
Zhang were present, and the undercover officer identified Ms. Juan Zhang as the
masseuse who solicited money in exchange for sex. Both Wang and Ms. Juan
Zhang had a substantial amount of cash in their possession and both appeared to be
living at the premises.*> Ms. Juan Zhang was arrested for prostitution. Mr. Wang
was interviewed, denied any knowledge regarding his employee engaging in
prostitution, and was not charged with any crime.
C. Operations at the Dover location
Although no prostitution investigation specifically was conducted at the
Dover location, the State presented evidence at trial that supported a conclusion
that sexual acts regularly were occurring on the Dover premises and that Wang was
aware of that fact. Specifically, in April 2014, employees from the Dover location
contacted Dover Public Works about a clogged sewer line. The Public Works
department ultimately discovered that the source of the problem was a large
number of unwrapped condoms clogging the portion of the sewer line that
exclusively was used by Wang’s Dover business.*° It appeared those condoms had
been flushed down the toilet.*” Dover Fire Marshal Timothy Mullaney personally
34 Td. at 14-15; Hoffecker Dep. at 20-21.
35 Hoffecker Dep. at 20-23.
36 Trial Tr. at 115-18.
37 Tq. at 117.
10
observed the clog and testified that hundreds to thousands of loose condoms
appeared to have been flushed down the toilet.*®
In December 2014, the Dover location’s sewer line clogged again. That clog
also was caused by hundreds of loose condoms.*? Mullaney and Steven Getek, an
inspector for the Division of Public Regulation, then inspected the Dover
premises.*? There, Mullaney observed two women cooking a meal and apparently
living at the property. Mullaney also observed several Dover municipal code
violations, which prompted him to close the business.‘ Getek observed and
photographed personal clothing hanging in a makeshift closet, the makings of a
kitchen, and other personal belongings indicating people were living on the
property.” Xiu Juan Zhang was one of the two women at the business during the
inspection, even though Wang claimed to have fired her after her arrest several
months earlier. When asked about her presence, however, Wang explained to
police that Xiu Juan Zhang “must have just stopped by.”
D. The Rehoboth investigation and arrests
Around the same time that Mullaney and Getek were investigating the Dover
location, Delaware State Police were investigating possible prostitution at the
38 Td. at 116-17.
39 Td. at 117.
40 Td. at 119-20.
“1 Td. at 120-23.
“2 Td. at 66-67; TX 24.
3 Trial Deposition of Dallas Reynolds (hereinafter “Reynolds Dep.”) 16; Trial Tr. at 125-26.
11
Rehoboth location.“* Surveillance of the location revealed customers actively
entering and leaving the business throughout the day.** On December 4, 2014,
Delaware State Police conducted an undercover operation at the Rehoboth
location.“ Posing as a customer, a police officer purchased an hour massage.
During the massage, the masseuse offered to perform a sexual act on the officer for
additional money. The officer and the masseuse then discussed what types of
sexual acts she was willing to perform and for what amount.‘7 The officer
ultimately declined any additional “services,” and left the premises.”*
Delaware State Police returned later that day with a search warrant for the
premises. The undercover officer identified the masseuse who solicited him.”
That woman, later identified as Meizhu Zhang, was arrested and charged with
prostitution. Getek’s investigation revealed she previously had been convicted of
prostitution in Massachusetts.°°
The officers participating in the search found Meizhu Zhang’s backpack,
which contained a “large amount” of condoms and a large sum of money.”!
4 Trial Deposition of Larry Smith (hereinafter “Smith Dep.”) 5-6.
45 Reynolds Dep. at 5-7; Smith Dep. at 6-7.
46 Smith Dep. at 5-6.
47 Td, at 7-10.
48 Td. at 9-10.
49 Td.; Trial Tr. at 10-11.
°° Trial Tr. at 75-76; TX 25-26.
>! Trial Tr. at 63.
12
Delaware State Police also observed indications that people were living in the
establishment, including the presence of a makeshift kitchen.”
On December 17, 2014, Getek, Mullaney, and Delaware State Police
Corporal Dallas Reynolds interviewed Wang in Dover with the assistance of a
Chinese interpreter.°> During the interview, Wang indicated he lived in New York
and visited his businesses every few days, although he was unable to provide a
New York address.** Wang also confirmed that his female employees lived in his
businesses.°>
After the interview, Wang was arrested and charged with Promoting
Prostitution, a Class E felony, and Permitting Prostitution, a Class B
misdemeanor.*© On August 19, 2015, Wang pleaded guilty to Permitting
Prostitution and was sentenced by the Superior Court in Sussex County.°’ By
pleading guilty, Wang admitted that he had “possession or control of premises
which [he knew were] being used for prostitution purposes[] [and] fail[ed] to halt
or abate such use within a reasonable period of time.”
>? Td.
°3 Reynolds Dep. at 13-14.
>4 Td. at 15; Trial Tr. at 82-83.
5 Trial Tr. at 83.
© 11 Del. C. §§ 1352, 1355; see TX 31.
7 TX 31.
811 Del. C. § 1355.
13
ANALYSIS
The State contends the evidence adduced at trial demonstrates that Wang
was operating a criminal enterprise in violation of Delaware’s RICO Statute. That
statute defines the following as violations:
§ 1503 Violations.
(a) It shall be unlawful for any person employed by, or associated
with, any enterprise to conduct or participate in the conduct of the
affairs of the enterprise through a pattern of racketeering activity or
collection of an unlawful debt.
(b) It is unlawful for any person, through a pattern of racketeering
activity or proceeds derived therefrom, to acquire or maintain, directly
or indirectly, any interest in or control of any enterprise, real property
or personal property, of any nature, including money.
(c) It is unlawful for any person who has received any proceeds
derived, directly or indirectly, from a pattern of racketeering activity
in which such person has participated, to use or invest, directly or
indirectly, any part of such proceeds or any proceeds derived from the
investment or use thereof, in the acquisition of any interest in, or the
establishment or operation of, any enterprise or real property.
(d) It is unlawful for any person to conspire or attempt to violate any
of the provisions of subsection (a), (b) or (c) of this section.*?
The State filed seven racketeering counts against Wang: one for each of the three
acts of prostitution committed by his employees, one for his own Permitting
Prostitution conviction, and one for each alleged violation of 11 Del. C. § 1503(a)-
(c). For the reasons set forth below, I conclude the State has proved by a
° Id. § 1503.
14
preponderance of the evidence that Wang is liable for three violations of the RICO
Statute.
I. The State proved that Wang conspired with his employees to engage in
prostitution at his Delaware establishments.
In his post-trial brief, Wang focuses on whether the State proved by a
preponderance of the evidence that he conspired with the massage therapists at the
Middletown location to engage in prostitution. Wang reasons that if the State
cannot prove such a conspiracy, the massage therapists’ statements are
inadmissible hearsay. Moreover, Wang argues that without those statements, the
State cannot prove the necessary number of predicate acts to support their RICO
claims.
Wang argues the massage therapists’ statements to the undercover officers
during the massage, as well as their statements when interviewed by police,
constitute hearsay and therefore are not admissible against Wang in this case.
The State, however, contends the statements are not hearsay because Wang and the
therapists conspired to engage in a pattern of prostitution during massages
performed at Wang’s various businesses.
6° Wang timely objected to the evidence at trial. Because the trial was a bench trial, and because
the Court is permitted to consider the statements themselves in making the preliminary
determination of admissibility under Rule 801, the Court allowed the State to admit the evidence
at trial and reserved decision on admissibility until the Court had heard all the evidence and
considered the parties’ post-trial briefs. This constitutes my decision regarding the admissibility
of the statements.
15
Delaware Rule of Evidence 801 (“Rule 801”), like its federal counterpart,
identifies statements that are “not hearsay.” Those statements include, pertinently,
certain statements by a party’s coconspirator. Specifically, Rule 801(d)(2)(E)
States:
A statement that meets the following conditions is not hearsay: . . . (2)
An Opposing Party’s Statement. The statement is offered against an
opposing party and: . . . (E) was made by the party’s coconspirator
during and in furtherance of the conspiracy; provided that the
conspiracy has first been established by a preponderance of the
evidence to the satisfaction of the court.°!
In order to admit the statements under Rule 801(d)(2)(E), the State must
show by a preponderance of the evidence that (1) a conspiracy existed; (2) the
coconspirator and the defendant against whom the statement is offered were
members of the conspiracy; and (3) the statement was made in the course of and in
furtherance of the conspiracy.” In deciding whether the State has met its burden,
the Court may consider the statements themselves.”
The evidence the State presented establishes by a preponderance of the
evidence that Wang and his employees conspired to solicit money from customers
in exchange for various sexual acts.®' Under Delaware law, the State was required
61 D).R.E. 801(d)(2)(E).
6 Reyes vy. State, 819 A.2d 305, 312 (Del. 2003); see also Bourjaily v. U.S., 483 U.S. 171, 175
(1987).
63 Bourjaily, 483 U.S. at 177-81; Lloyd v. State, 534 A.2d 1262, 1264-65 (Del. 1987); see also
D.R.E. 104(a).
64 Proof by a preponderance of the evidence means proof that something is more likely true than
not true. In other words, something is proved by a preponderance of the evidence when the
16
to prove that Wang and each of the massage therapists agreed to commit an
unlawful act and one or more of them committed an overt act in pursuit of that
65 Here, the statements the massage therapists made corroborate other
conspiracy.
evidence that Wang knew prostitution was occurring at his establishments and that
he encouraged or allowed it to continue to drive customers to his businesses.
Although Wang endeavored at trial to paint the massage therapists as rogue
employees who deceived him so they might earn extra money on the side, the
evidence does not support that conclusion. Wang allowed his employees to live in
the locations where they worked, and he lived there with them at times. The
advertisements for those locations included the Middletown phone number
alongside pictures of scantily clad, young Asian women. Police officers observed
those advertisements on websites targeting people searching for escorts. The
therapists’ statements and nonverbal communications were very similar,
suggesting an effort by Wang (the common denominator between the three
therapists) to teach methods of solicitation. Wang did not conduct any background
checks on his employees, even after the first prostitution arrest, and allowed Xiu
Juan Zhang to continue to live and work at his Dover location even after she had
evidence in favor of the factual finding has the more convincing or greater force than the
evidence against it. See MRPC Christiana LLC v. Crown Bank, 2017 WL 6606587, at *5-6 (Del.
Super. Dec. 26, 2017); Bank of New York Mellon v. Henry, 2017 WL 3902631, at *1 (Del. Super.
Sept. 5, 2017); Cuonzo v. Shore, 2008 WL 193298, at *4 (Del. Super. Jan. 24, 2008).
65 See 11 Del. C. § 512; Holland v State, 744 A.2d 980, 982 (Del. 2000); State v. Wallace, 214
A.2d 886, 889-90 (Del. 1963).
17
been arrested for prostitution. Wang took no steps to curtail prostitution, even after
the two Middletown arrests and the April 2014 sewer clog at the Dover location.
Instead, he pleaded guilty to knowing that prostitution was occurring at the
Rehoboth location six months later and not taking any steps to prevent it from
happening.
Although the State did not offer evidence that Wang directly received any
proceeds from the massage therapists’ prostitution, it is logical and reasonable to
infer from the evidence that he encouraged that activity in order to increase the
number of customers who frequented his establishments. Even if those customers
paid the massage therapists directly for sexual services, and even if the therapists
retained all those additional funds, Wang benefited from the increase in sales of
massage services. Moreover, Wang himself testified at trial that he collected all
the money customers paid for their massages and then paid his employees a
monthly amount based on their performance and on customer satisfaction. That
evidence is more persuasive than Wang’s rote insistence that he trained his
employees not to commit any vaguely defined “illegal acts.”
Wang repeatedly emphasizes in his post-trial brief that neither he nor the
therapists ever were charged with conspiracy, and that Detective Hoffecker, the
police officer leading the Middletown investigation, testified that if someone is not
charged with a crime, it is safe to assume that Hoffecker concluded there was no
18
t.°° Emphasizing that probable cause is a lower
probable cause to support an arres
standard than preponderance of the evidence, Wang argues that Hoffecker’s
conclusion that he did not have probable cause to charge Wang with conspiracy
necessarily requires a finding that no conspiracy was proved at trial. According to
Wang, “the State has provided no evidence that bridges the gap between Mr.
Hoffecker’s finding that no probable cause existed to charge Mr. Wang with any
crime related to the Middletown investigation and the State’s current burden to
show it is more likely than not that Mr. Wang committed predicate acts of
racketeering . . . [or] that a conspiracy existed... .”°’ But, as explained above,
Detective Hoffecker lacked the complete context of Wang’s involvement, which
became clear only after the ensuing investigations of the Dover and Rehoboth
locations. Accordingly, what Detective Hoffecker believed the evidence showed
in November 2013 and January 2014 is not indicative of what the State proved at
trial.
The evidence admitted during trial and summarized above satisfies the
State’s burden to prove that a conspiracy existed, that Wang and each of the three
massage therapists (most likely along with unknown others) conspired to engage in
prostitution, and that Wang profited from that arrangement.® It therefore is plain
66 See Answering Br. at 3-4, 18; see also Trial Tr. 28-30.
67 Answering Br. at 18.
68 It may well be that the massage therapists were not willing participants in this conspiracy and
that they were the victims of sex trafficking. That issue was not before the Court in this trial and
19
that the statements the therapists made to solicit the undercover police officers
were in furtherance of that conspiracy. The State also argues the statements the
therapists gave to the police after their arrest are admissible under Rule
801(d)(2)(E). Generally, a conspiracy ends when its principal objective is
accomplished.” After that point, statements made by one member of the
conspiracy are not admissible under Rule 801(d)(2)(E) unless “evidence is
introduced indicating that the scope of the original agreement included acts taken
to conceal the criminal activity.””°
The State also satisfied that additional evidentiary burden. First, the notion
that the conspiracy between Wang and the massage therapists ended when each
individual act of sexual solicitation was complete is contrary to the evidence. The
conspiracy, as I have explained above, involved an agreement to solicit money
from massage customers in exchange for performing sexual acts. That conspiracy
continued as long as Wang employed the women and the completion of one
particular act of prostitution did not accomplish the conspiracy. Second, there was
evidence that the therapists attempted routinely to conceal their activities by using
nonverbal communications and by attempting to determine whether a customer
therefore the evidence does not permit a conclusion either way. Resolving that issue is
immaterial for purposes of the pending RICO claims, but the Court would be remiss not to
recognize the possibility that Wang used his position as the employees’ boss and landlord to
force them into prostitution.
6 Reyes, 819 A.2d at 312.
10 Td.
20
might be an undercover police officer. Therefore, the conspiracy was not over
when each individual therapist was arrested, and even if the conspiracy was
complete, the agreement included taking efforts to hide the nature and extent of the
activity. Accordingly, although they only marginally are relevant, I conclude the
therapists’ statements to police after their arrests also were admissible under Rule
801(d)(2)(E).
In short, the therapists’ statements were admissible, and those statements
support a finding that Chunyan Li and Xiu Juan Zhang engaged in the predicate
7! The police officers gave credible testimony regarding
acts charged by the State.
those therapists’ conduct during the massages, and I conclude that Ms. Li and Ms.
Juan Zhang offered to perform sexual acts on the officers in exchange for money.
As explained below, those predicate acts form part of the basis for a finding that
Wang civilly is liable under the RICO Statute.
II. The State proved that Wang civilly is liable for three violations of the
RICO Statute.
As explained above, the RICO Statute establishes civil and criminal liability for
ersons participating in an “enterprise” that is engaged in a “pattern of racketeerin
p p pang rp gag p g
71 Wang does not dispute that Meizhu Zhang and Wang engaged in predicate acts at the
Rehoboth location, but he argues those criminal convictions only were one predicate act, not
two, because the charges arose from a single event and are “closely related and connected in
point of time and place.” See Answering Br. at 27. Although I agree that those two convictions
only constitute one predicate act, that conclusion does not aid Wang’s case because the two
Middletown incidents of prostitution are two additional predicate acts, thereby satisfying that
portion of the statute.
21
activity.” An “enterprise,” according to the statute, includes “any individual, sole
proprietorship, partnership, corporation, trust or other legal entity; and any union,
association or group of persons associated in fact, although not a legal entity.”
The statute further defines a “pattern of racketeering activity” as:
2 or more incidents of conduct:
a. That:
1. Constitute racketeering activity;
2. Are related to the affairs of the enterprise;
3. Are not so closely related to each other and connected in point of time
and place that they constitute a single event; and
b. Where:
1. At least 1 of the incidents of conduct occurred after July 9, 1986;
2. The last incident of conduct occurred within 10 years after a prior
occasion of conduct; and
3. As to criminal charges, but not as to civil proceedings, at least 1 of
the incidents of conduct constituted a felony under the Delaware
Criminal Code, or if committed subject to the jurisdiction of the United
States or any state of the United States, would constitute a felony under
the Delaware Criminal Code if committed in the State.”
“Racketeering” separately is defined as engaging in, attempting to engage in, or
conspiring to engage in or to solicit, coerce, or intimidate another person to engage
in any felony under Delaware law or any misdemeanor under, inter alia, Chapter 5,
Title 11 relating to prostitution.” The case law interpreting both the RICO Statute
? 11 Del. C. § 1502(3). The word includes both “illicit as well as licit” enterprises. Id.
Td. § 1502(5).
74 Td. § 1503(9).
22
and its federal counterpart further explain the elements of both the “enterprise” and
“pattern” portions of the State’s burden.”
A. Wang’s massage businesses constituted an “enterprise” under the
RICO Statute.
Wang’s post-trial brief does not address whether the businesses were an
“enterprise” for purposes of the RICO Statute. Even if Wang contested that
element, it is plain from the record that the State carried its burden in this regard.
Wang incorporated a series of massage businesses across the state and conducted
those businesses as legitimate, legal organizations with a separate corporate
existence. Although those massage businesses were not a “chain” in the traditional
sense of the word, they all were controlled and run by Wang, who used the same
sources to solicit employees, the same criteria to set employee pay, and the same
training manual and practices to govern those employees.
Those massage businesses were, if nothing else, an “association-in-fact
enterprise.” Such an enterprise is demonstrated when the State proves: (i) that the
enterprise was an ongoing organization with a framework for making and carrying
out decisions; (ii) the associates functioned as a continuing unit; and (iii) the
enterprise was distinct from the pattern of racketeering in which it was engaged.”
Here, Wang’s massage parlors operated as legitimate businesses with storefronts,
™ See Stroik v. State, 671 A.2d 1335, 1340 (Del. 1996) (“Since the Delaware RICO statute is
essentially an adaptation of its federal counterpart, reliance on federal precedent in this limited
factual setting is warranted.”).
76 Id. at 1341; see also U.S. v. Bergrin, 650 F.3d 257, 265 (3d Cir. 2011).
23
some level of record-keeping, customer incentives, and employees. Wang traveled
between the businesses, supervising and training the employees. Notwithstanding
the ongoing criminal conduct occurring during massages, the locations otherwise
functioned as a legitimate business with Wang at the helm.”’ The State also proved
Wang and his employees functioned as a continuing unit, occupied identifiable
positions within the organization, and performed assigned responsibilities.”
Finally, the enterprise existed separate and apart from the pattern of racketeering
activity, and the business could have conducted its affairs without committing the
predicate acts.”
B. Wang and his employees engaged in a pattern of racketeering
activity.
Although he does not challenge the existence of an enterprise, Wang does
argue the State failed to prove that the enterprise engaged in a pattern of
racketeering activity. Wang first argues the State did not sufficiently prove that
any prostitution occurred at the Middletown location because he contends the
massage therapists’ statements were not admissible under Rule 801(d)(2). That
argument is addressed and rejected above. Wang also separately argues the State
did not prove that Wang knew what his employees were doing, and Wang argues it
equally is plausible they engaged in this activity without his knowledge or consent.
77 See Stroik, 671 A.2d at 1341.
8 Td.
” Td.
24
Wang’s argument is unpersuasive. I already concluded that the State proved
Wang conspired with his massage therapists to engage in a pattern of prostitution,
and the facts supporting that conspiracy dispel Wang’s contention that he merely
was an innocent bystander unaware of his employees’ criminal scheme. The
State’s evidence, considered as a whole, demonstrates a pattern of racketeering
activity at Wang’s three locations.
In order to prove such a pattern, the State must prove a “relationship”
between the predicate acts and “the threat of continuing activity.”8° With respect
to relatedness, the predicate acts must be something more than isolated incidents or
81 Relatedness
sporadic activity in order to satisfy the requirement of a “pattern.
may be proved in a variety of ways, including 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
events.”®? Here, the three undercover operations revealed the massage therapists
engaged in similar methods of soliciting clients, offered to exchange sex for similar
amounts of money, and had similar relationships with Wang. All the therapists
lived at Wang’s businesses and were compensated by him in the same way. Those
similarities, combined with the circumstantial evidence of ongoing acts of
8° HJ. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 239 (1989).
8! Td. at 237-39; Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 n.14 (1985).
82 HT. Inc., 492 U.S. at 240.
25
prostitution, including the condoms clogging the sewer and the sexually suggestive
online advertisements, satisfies the relatedness requirement.
Similarly, the nature of these acts of prostitution and the manner in which
the solicitations took place establishes there was a threat of continuity had the State
not taken steps to shut down Wang’s businesses. Between November 2013 and
December 2014, therapists offered sex in exchange for money to three different
undercover police officers. Again, coupled with the State’s other circumstantial
evidence, prostitution appeared to be Wang’s regular way of doing business, and
the predicate acts carried a specific threat of repetition extending indefinitely into
the future.®?
C. The State proved that Wang violated Sections 1503(a), 1503(b), and
1503(c) of the RICO Statute.
The State’s complaint against Wang alleges seven violations of the RICO
Statute. Four of the seven counts relate to each of the four predicate acts the State
identifies (the three acts of prostitution and Wang’s conviction for Permitting
Prostitution). The State does not identify any case law suggesting each individual
predicate act constitutes a separate RICO violation. Rather, as J read the Act, those
predicate acts form the “pattern of racketeering activity,” and the State may seek a
judgment based on each violation of Section 1503 the State successfully proves.*4
83 See id. at 242.
84 11 Del. C. § 1503, titled “Violations”; id. § 1505(b) (“The Attorney General may institute
proceedings under § 1503 of this title and in addition for damages, civil forfeiture and a civil
26
In my view, based on the factual findings set forth herein, the State proved that
Wang committed three violations of Section 1503. First, Wang was associated
with the enterprise discussed above and conducted its affairs through a pattern of
racketeering activity.8° Second, Wang, through that pattern of racketeering activity
and the proceeds derived therefrom, maintained control of his businesses and the
real and personal property associated with those businesses.®° Finally, Wang
received proceeds derived from the pattern of racketeering activity in which he
participated, and he used those proceeds to operate his enterprise, including paying
for the employees, providing them housing, and otherwise conducting his various
massage businesses.®’
CONCLUSION
For the reasons set forth above, the Court finds Wang liable for three
violations of the RICO Statute. The parties shall confer and provide the Court a
status update within 30 days regarding their proposed schedule to address the
damages and penalties portion of the case. IT ISSO ORDERED.
penalty of up to $100,000 for each incident of activity constituting a violation of this chapter.’”)
(emphasis added).
85 Td. § 1503(a).
86 Td. § 1503(b).
87 Td. § 1503(c).
27