Checking the balance: prosecutorial power in an age of expansive legislation.

• Author: Morvillo, Robert G.
• Position: Tenth Survey of White Collar Crime

1. INTRODUCTION

   Over the past several decades, the federal prosecution of white collar crime has become increasingly punitive, often at the expense of those who are accused (but have not yet been convicted) or of those who are convicted of crimes previously considered relatively minor. The increasingly draconian nature of white collar prosecutions results from two independent trends.

   First, as the steady increase in street crime has contributed to a general societal fear and insecurity and a corresponding decrease in the quality of life, politicians have responded by introducing and enacting legislation to get "tough" on criminals. Unfortunately little of this legislation has been thought through carefully to maintain the precious balance of rights and powers necessary to make the criminal justice system function fairly. In particular, the increasing emphasis on crimes of violence, especially narcotics and organized crime activity, has led legislators to arm prosecutors with ever more powerful weapons in the so-called War on Crime. Examples on the federal level include the Racketeer Influenced and Corrupt Organizations Act (RICO);(1) the Criminal Enterprises Act;(2) the Criminal Forfeitures Act;(3) the Money Laundering Act;(4) the Bail Reform Act;(5) and the Safe Streets Act.(6) In addition, federal legislators have responded to the public outcry and to pressure from prosecutors by substantially increasing penalties and imposing mandatory minimum sentences under the Federal Sentencing Guidelines. This power has given prosecutors greater leverage to virtually compel plea bargaining, force cooperation, and in essence determine the length of sentences. The resulting change in the balance of power between the prosecution and the defense has had a profound effect on the daily life of the criminal defense attorney and is widely perceived to have resulted in many more unsound prosecutions. Although this legislation was generally intended to address racketeering and narcotics related crime, its breadth has permitted prosecutors to import it into white collar cases.

   Second, prosecutors have compounded the problem by failing to resist the temptations to use these powers, conferred by a politically intimidated Congress, in the context of white collar crime. Historically, federal prosecutions emphasized crimes against individuals and property. Beginning in the mid-1970s, following Watergate and the foreign government bribery scandals, the federal government began targeting white collar crime as a high priority. Resources were diverted from more traditional concerns such as bank robbery, which was shunted to the states, to the more exotic and complex types of crimes such as insider trading, corruption, and fraud. This shift was justified by statistics demonstrating the societal cost of white collar crime as well as a political impetus to punish the crimes of the rich as severely as crimes of the poor. At the same time, the prosecution of white collar crime has proved exceedingly popular with the media, a phenomenon not lost on many politically ambitious prosecutors.(7)

   Prosecutors have had the power to engineer this shift in priorities because they enjoy virtually unfettered discretion in fashioning and filing accusations. Based in part on the presumption that prosecutors act in good faith, courts have largely acquiesced in the government's charging practices and virtually ignored the prosecutors' increased and sometimes abusive use of the grand jury.(8) Even where courts have imposed limits on excessive charging practices, Congress has responded by overturning the rulings through legislation.(9) In sum, as prosecutors were developing an avid interest in white collar cases, Congress was busily arming them with new weapons, designed to combat narcotics and organized crime, which prosecutors quickly diverted toward white collar cases as well. Thus fraud, tax, and bribery cases are now commonly converted into harsher RICO and money laundering cases with their accompanying forfeiture features and increasingly punitive sentences applying equally to white collar and street crime.

2. WHITE COLLAR PROSECUTIONS BASED ON LAWS INTENDED FOR

   OTHER PURPOSES

   1. RICO

      RICO is perhaps the most notable example of legislation that has been employed in unanticipated ways. As RICO'S twenty-fifth birthday approaches,(10) not everyone in the criminal justice system is preparing to celebrate. While undoubtedly aware of its existence, prosecutors did not begin to fully avail themselves of the statute's use until the 1980s. Since that time, its use has expanded beyond those areas it was originally designed to combat to include within its ambit conduct that few envisioned as "racketeering activity."

      The original bills that grew into RICO were intended to cope with the threat of organized crime's infiltration into legitimate business.(11) In passing the Organized Crime Control Act, of which RICO was a part, Congress called for a "frontal attack" against organized crime.(12) To emphasize its intent, Congress directed that RICO be interpreted "liberally . . . to effectuate its remedial purposes."(13) Notably, RICO is the "only substantive federal criminal statute that contains such a directive."(14)

      In its zeal to eradicate organized crime, Congress wrote legislation that lent itself to expansion beyond the parameters originally set. Although the list of "predicate" crimes that could form part of the pattern of racketeering was to be confined to crimes that were supposedly "characteristic" of organized crime, the resourcefulness of organized crime forced legislators to include virtually every serious federal crime. Thus, in a sense, the application of RICO to white collar crimes and political corruption is not only the responsibility of hyperactive prosecutors or acquiescent judges, as some would claim, but follows from a straight-forward application of the language chosen by Congress.(15) According to the statutory language, all that is necessary to convict a person or entity of a RICO violation is proof of two related crimes committed during a specified period; that is enough, according to the statute, to constitute a "pattern of racketeering." More recent judicial interpretations of section 1962(c) require proof that the defendant participated in the operation or management of the enterprise(16) through predicate acts that are interrelated and continuous.(17)

      Remarkably, Congress did not debate the radical changes that RICO has made in the federal criminal area. Undoubtedly, those effects were not anticipated in 1970 when it was enacted. In fact, there were few RICO prosecutions at all during the 1970s. Since then, however, prosecutors' ability to use (some would say abuse) RICO, and the courts' willingness to let them, has been plainly apparent to all observers, including Congress. Indeed, Rico-bashing has become popular sport among some of the more influential newspapers and business publications.(18) Rather than cutting back on the statute, however, in 1984 Congress broadened the law by including, among other things, the controversial forfeiture provisions. Congress further exacerbated the problem in 1986, in 1988, and again in 1989 when it added new predicate offenses - including such broad offenses as credit card fraud, money laundering, obscenity, and bank fraud - to the growing list of racketeering acts that comprise a RICO violation. By this time, of course, Congress understood that the RICO statute was being employed beyond its anticipated use. Yet with little analysis as to the implications of this development, it expanded the reach of the statute.

      That RICO has proved to be of great practical benefit to prosecutors is obvious and well-recognized; less accepted, however, is the fact that prosecutors have sometimes employed these benefits in an overbroad and abusive manner. For example, prosecutors have prosecuted relatively straightforward offenses in a novel manner in order to take advantage of RICO'S provisions. Specifically, although criminal tax fraud is not a RICO predicate offense, the government has prosecuted several defendants under RICO by recasting tax violations as violations of the mail and wire fraud statutes.(19) In one case, the government charged the owner of a gas station chain with violating RICO for failure to pay state sales tax even though that tax evasion was not a crime under applicable state law at the time the fraudulent returns were filed. The court upheld the prosecution of the state sales tax delinquencies as federal mail fraud violations reasoning that failure to pay the sales tax deprived the state of its property right to bring a civil tax enforcement action.

      As a result of his RICO conviction, the defendant forfeited the amount of the tax outstanding as well as all his affiliated gasoline corporations, which were worth twice that amount.(20)

      Application of RICO results in vastly increased penalties: RICO forfeitures provide substantially greater financial penalties than those pursuant to individual federal crimes and RICO gives the government a method of restraining the assets of a defendant before trial to assure their availability for forfeiture upon conviction.(21) The ability to "freeze" assets is particularly subject to abuse, as it can force even a substantial financial institution out of business before it has been tried or convicted. The obvious result is that institutions may be pressured into pleading guilty in order to avoid the draconian consequences of RICO'S remedies.

      A notable example is the "Princeton/Newport" case, involving a financially healthy entity which went out of business, in part, as a result of a pretrial restraining order in a RICO prosecution based on false statements on tax returns.(22) In that case, the government sought and obtained a pretrial seizure order freezing more than $1 billion in assets of entities that had not been indicted (although some of their...