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ARTICLES
White Collar Crime: What is RICO?
February 2000
Introduction
In California, RICO convictions allow for an increase in damage award because of the structure of the statute. RICO, the Racketeering Influenced Corrupt Organizations act, was passed by Congress as part of the Organized Crime Control Act of 1970. In its statement of findings and purpose for the act, Congress stated that the law was a response to highly sophisticated, diversified, and widespread organized criminal activity. Congress found that organized crime drained billions of dollars from the economy through force, fraud and corruption, in such activities as syndicated gambling, loan sharking, theft and resale of stolen property, prostitution, and distribution and sale of narcotics. The money and power derived from these activities were then used to corrupt legitimate businesses and labor unions. To redress the problem of organized crime, RICO increased criminal penalties, improved evidence-collection methods, and provided other legal apparatus to fight racketeering. Since its passage, RICO has been both praised and criticized.
RICO and Organized Crime
Organized crime took hold during the days of Prohibition, when gangsters such as Al Capone created powerful criminal enterprises manufacturing and selling illegal liquor. Whereas a single criminal or small group of criminals engaged in continuing criminal activity are usually arrested and imprisoned, organized crime has the power to fight the criminal justice system through force, bribery, blackmail and even murder. Further, the larger and more sophisticated a criminal enterprise, the better able it is to hide its illegal activities and the money it derives from them. Organized crime bosses typically maintain legitimate businesses, behind whose operations and account books they conceal criminal operations. Capone was finally seized when the government arrested his bookkeeper and found documentation of his illegal income.
After Prohibition, organized crime continued to flourish, evolving as the economy did and pushing into new areas of crime, such as the illegal narcotics trade. Law enforcement officials wanted better ways to fight the criminal syndicate, and RICO was Congress's answer. Whereas police and prosecutors had always had various criminal laws to fight organized crime's individual activities, RICO made the commission of organized crime itself a crime.
RICO defines an "enterprise" as any individual, partnership, corporation, association, or other group of associated individuals. Such an enterprise violates RICO by engaging in a "pattern of racketeering activity," which includes commission of any offense listed in the statute at least twice within ten years (so long as one of the offenses occurred after passage of RICO). The offenses in the statute included murder and threat of murder, kidnapping, gambling, arson, robbery, bribery, extortion, counterfeiting, prostitution, illegal gambling, interstate transport of stolen property, bankruptcy and securities fraud, and crimes involving government benefits and labor unions. RICO contains both criminal penalties and civil remedies. The criminal penalties include a fine and imprisonment. RICO also provides for forfeiture to the government of property used in the criminal enterprise.
Prosecutors were pleased with RICO and used it to mount an assault on organized crime. By using multiple commission of individual crimes to show a pattern of racketeering activity, the government was able to impose new fines and prison sentences that were not previously available. They were also able to seize property used for the illegal activity, preventing others from keeping operations going once convicted members went to jail. RICO's criminal fines have been raised from $25,000 in the original act, to $250,000 or twice the gross profits or losses caused by the criminal activity. Judges may impose prison sentences up to 20 years, or life in certain circumstances.
In time, private plaintiffs began to bring RICO claims under the law's civil provisions. The law's potential for triple damages provides a strong incentive for plaintiffs to bring claims. It also provides incentive for defendants to settle rather than expose themselves to a triple damage award. Whereas the criminal penalties under RICO require a conviction, the civil remedies do not, except in the area of securities law. RICO has been applied to a broad range of claims, including health care fraud, white collar crime, and sexual harassment. The Supreme Court even upheld the use of RICO against abortion protesters.
Most RICO claims today occur under the civil provisions of the statute. Treble damages provide a strong incentive to sue, and the statute also allows court costs, attorney fees and injunctive and other equitable relief. Yet private plaintiffs must overcome certain hurdles which defeat many RICO claims. These hurdles include standing, preemption, and statute of limitations. Standing means that the plaintiff must show that the alleged RICO violation was the cause of his loss; only the persons injured by a RICO violation can bring a suit against the enterprise. Preemption occurs where the legislature has created a different statute to address a particular wrong. In that situation, RICO is preempted and any claim must be brought under the other applicable statute. Also, RICO claims must be brought within the statute of limitations, the period set by law after which no claim may be filed. Statutes of limitations require cases to be brought within a certain time period because, over time, proving the case one way or the other becomes too difficult and unreliable.
Conclusion
RICO is used by criminal prosecutors and civil plaintiffs alike to address organized criminal activity. Its widespread use in the civil context has received both praise and criticism. Victims of racketeering activity find it easier to bring claims if they can pursue more than their losses, and seek costs and attorney fees as well. RICO defendants have argued, however, that the civil remedies go too far, forcing them to expend resources to fight or settle claims when there is no underlying criminal conviction. Criminal charges must be proved beyond a reasonable doubt, a higher standard than a civil suit, which requires only a preponderance of the evidence, or a showing that the alleged conduct more likely than not occurred. RICO actions can be very complex and involve high stakes. The assistance of competent counsel is advisable in bringing or defending a RICO claim.
If you need help asserting or defending a claim under RICO, please contact our offices at 949-719-2669 or e-mail at rmonaco@monacolawoffice.com.
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