Racketeer influenced and corrupt organizations.

• Author: McCarrick, Terence J., Jr.
• Position: I. Introduction through III. Defenses D. "Horizontal Preemption" or "Primary Jurisdiction," p. 1601-1631 - Annual Survey of White Collar Crime

1. INTRODUCTION II. ELEMENTS OF THE OFFENSE A. RICO Person B. Two or More Predicate Acts of Racketeering Activity C. Pattern D. Enterprise 1. Types of Enterprises 2. Proving the Enterprise 3. Person-Enterprise Rule E. Effect on Interstate Commerce F. Prohibited Acts 1. Investment of Racketeering Proceeds 2. Illegal Acquisition of Enterprise Interest 3. Conducting an Enterprise Through Racketeering Acts 4. Conspiracy III. DEFENSES A. Invalidity of One or More Predicate Acts B. Limitation of Actions C. Withdrawal from Conspiracy D. "Horizontal Preemption" or "Primary Jurisdiction" E. "Reverse Vertical Preemption" F. Constitutional Challenges IV. CRIMINAL PENALTIES A. Overview B. Forfeiture 1. "Seize and Freeze" Orders 2. Rights of Innocent Third Parties 3. Attorney's Fees C. Sentencing V. CIVIL RICO A. Civil Penalties B. Civil Cause of Action for Private Parties 1. Standing 2. The Person/Enterprise Distinction 3. Statute of Limitations VI. NON-TRADITIONAL USES OF THE RICO STATUTE A. Protests B. Tobacco Litigation C. Health Care Fraud D. Police Misconduct I. INTRODUCTION

   Congress designed the Racketeer Influenced and Corrupt Organizations Act ("RICO"), (1) enacted as Title IX of the Organized Crime Control Act of 1970, (2) to combat organized crime. (3) RICO aims to eliminate organized crime by bringing the "highly diversified acts of a single organized crime enterprise under RICO's umbrella" (4) and "to curb the infiltration of legitimate business organizations by racketeers." (5) RICO, however, has broad application beyond the organized crime context because Congress mandated that RICO "be liberally construed to effectuate its remedial purposes." (6) Thus, the Supreme Court has held that RICO may be applied to legitimate businesses (7) and to enterprises without a profit motive. (8) Although the Supreme Court adheres closely to the congressional mandate of RICO's "liberal construction" clause, (9) it has acknowledged that this clause is not without limits. (10)

   Prosecutors use RICO in a wide variety of criminal contexts" because it has been construed liberally, (12) it does not require mens rea beyond that necessary for the predicate acts, (13) and it provides for severe sanctions in addition to those a defendant may receive for the underlying offenses. (14)

   In addition to criminal actions, RICO permits private plaintiffs and the government to seek redress in civil actions. (15) Under [section] 1964, the Attorney General (16) or a private plaintiff (17) may bring a civil action in either state or federal court. (18) RICO provides equitable relief through divestiture of the defendant's interest in the enterprise, restrictions on future activities or investments, and dissolution or reorganization of the enterprise. (19) While this Article focuses primarily on the criminal aspects of RICO, the close relationship between criminal and civil RICO actions necessitates some discussion of civil cases.

   This Article generally addresses RICO prosecutions for white collar crimes. Section II discusses the elements of a RICO offense. Section III addresses a variety of potential defenses to RICO prosecutions. Section IV addresses criminal penalties for RICO violations, including those under the United States Sentencing Guidelines ("Guidelines"). Section V provides a discussion of civil RICO. Section VI describes several recent developments in this area of the law.

2. ELEMENTS OF THE OFFENSE

   Section 1962 of RICO prohibits "any person" (20) from: (i) using "income Derived ... from a pattern of racketeering activity or through collection of an unlawful debt" (21) to acquire an interest in an enterprise affecting interstate commerce; (22) (ii) acquiring or maintaining through a pattern of racketeering activity, or through collection of an unlawful debt, an interest in an enterprise affecting interstate commerce; (23) (iii) conducting, or participating in the conduct of, the affairs of an enterprise affecting interstate commerce "through a pattern of racketeering activity or collection of unlawful debt"; (24) or (iv) conspiring to participate in any of these activities. (25)

   To prosecute a defendant under RICO, the government must prove that the defendant: (i) through the commission of two or more acts; (ii) constituting a pattern of racketeering activity; (iii) directly or indirectly invested in, maintained an interest in, or participated in, an enterprise; (iv) the activities of which affected interstate or foreign commerce. (26) Parts A through E of this Section examine the elements of a RICO offense. Part F addresses prohibited acts.

   1. RICO Person

      Under RICO, the term "person" "includes any individual or entity capable of holding a legal or beneficial interest in property." (27) This broad definition allows for a variety of entities other than a natural person to qualify under RICO as a

      "person," including unincorporated political associations, (28) public utilities, (29) and others. (30)

      Under RICO, corporate officers are "persons" distinct from the corporations they run, and they are therefore capable of being prosecuted under the statute. (31) Such liability is not limited to upper management and can apply as well to the lower management of an enterprise, even if the lower-ranking individuals were under the direct control of their superiors. (32)

   2. Two or More Predicate Acts of Racketeering Activity

      A RICO offense requires two or more predicate acts of "racketeering activity." (33) RICO defendants need not be convicted of each underlying offense before a RICO offense is charged. (34) In fact, offenses for which the defendant has been acquitted

      Transactions Reporting Act; (41) (vi) acts indictable under [section][section] 274, 277, or 278 of the Immigration and Nationality Act if such acts are done for profit; (42) and (vii) any act that is indictable under any provision listed in [section] 2332b(g)(5)(B). (43) In the Comprehensive Crime Control Act of 1984, (44) Congress extended the definition of "racketeering activities" under RICO to include dealing in obscene materials (45) as well as the non-reporting of currency and foreign transactions. (46) The Antiterrorism and Effective Death Penalty Act of 1996 (47) further extended the RICO provisions to include various immigration crimes. (48) Recently, Congress passed the "SAFE DOSES" Act, which designates the theft of prescription drugs and medical devices as RICO predicate acts. (49) Congress, however, has restricted the definition of "racketeering activities" in other areas, specifically prohibiting use of unconvicted securities fraud as a predicate act under RICO. (50)

   3. Pattern

      RICO applies only where the commission of two predicate acts constitutes a "pattern of racketeering activity." (51) While the statutory definition of "pattern of racketeering activity" requires at least two acts of racketeering that occur within ten years of each other, (52) proof of such acts, without more, may not suffice to establish a RICO violation. (53) There must also be proof that the predicate acts are continuous and interrelated. (54) Thus, "two isolated acts of racketeering activity do not constitute a pattern." (55)

      In H.J. Inc. v. Northwestern Bell Telephone Co., (56) the Court held that the government must establish both a relationship between the predicate acts and continuity of those acts to prove a "pattern of...