Chapter 14 - § 14.10 • RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT

• Jurisdiction: Colorado

§ 14.10 • RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT

The PSLRA also amended 18 U.S.C. § 1964(c) to remove any conduct that would have been actionable as fraud in the purchase or sale of securities as a "racketeering activity" under civil RICO. See Popp Telecom, Inc. v. American Sharecom, Inc.,¹⁴⁸ where the Eighth Circuit dismissed a RICO claim, holding that the PSLRA applied to all securities-based RICO claims commenced after its effective date, even when the conduct occurred prior to the effective date of the PSLRA. In Powers v. Wells Fargo Bank, N.A.,¹⁴⁹ the court held that the PSLRA prohibition against RICO claims did not merely apply to class actions, but to all actions against defendants arising under the securities laws — except where the defendant has in fact been convicted.¹⁵⁰

The Conference Committee noted that a plaintiff may not plead mail fraud or wire fraud as a predicate offense under civil RICO if such offenses are based on conduct that would have been actionable as securities fraud. This limitation on civil RICO does not, however, apply when the defendant has been criminally convicted in connection with the fraud. See also Hollinger International, Inc. v. Hollinger, Inc.,¹⁵¹ where International sued Hollinger, Inc. (owning 32 percent of International's equity and 73 percent of its voting rights) and various individuals for looting International of more than $380 million. International alleged RICO violations. The district court dismissed the RICO counts on the basis of 18 U.S.C. § 1964(c), holding that when "the SEC or the class plaintiffs base their securities fraud claims on the conduct as alleged in the RICO action [which is] 'actionable' as securities fraud," the RICO claims must be dismissed.¹⁵²

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Notes:

^[148] Popp Telecom, Inc. v. Am. Sharecom, Inc., 361 F.3d 482 (8th Cir. 2004).

^[149] Powers v. Wells Fargo Bank, N.A., 439 F.3d 1043 (9th Cir. 2006).

^[150] 18 U.S.C. § 1964(c) provides that the...