Racketeer influenced and corrupt organizations.

AuthorMcCarrick, Terence J., Jr.
PositionIII. Defenses E. "Reverse Vertical Preemption" through VI. Non-Traditional Uses of the RICO Statute, p. 1631-1659 - Annual Survey of White Collar Crime
  1. "Reverse Vertical Preemption"

    The Supreme Court has established several abstention doctrines requiring federal courts with proper subject matter jurisdiction to "stay its hand" when promoting an overriding policy, such as the maintenance of a specific relationships between the national government and the states. (229) Two such doctrines are the "Pullman abstention" doctrine (230) and the "Burford abstention" doctrine. (231) The Pullman abstention doctrine requires that federal courts refrain from deciding cases that raise potentially dispositive questions of serious, unsettled state law upon which state decisions may render a decision on the merits of the federal dispute unnecessary. (232) The Burford abstention doctrine allows federal courts to refrain from deciding cases when the subject matter of the dispute is the subject of extensive state administrative regulation and a federal decision would risk serious disruption of a state administrative scheme. (233)

    In DeMauro v. DeMauro, (234) the First Circuit confronted a RICO action that was intermingled with a divorce proceeding. (235) The court implemented a limited form of the Burford abstention doctrine because staying the federal proceedings would reduce the "risk of interfering with interim state allocations and permit the federal court to tailor any final federal judgment to avoid undermining the divorce court's allocation of property." (236) The Second Circuit, however, refused to implement abstention under Burford in a RICO case where the predicate acts were solely federal law violations and a treble damage award would not interfere with state administrative processes. (237)

  2. Constitutional Challenges

    RICO has faced several constitutional challenges under the First Amendment, Eighth Amendment, Tenth Amendment, equal protection, double jeopardy, due process and vagueness.

    Traditionally, courts have found that RICO does not violate the Fifth Amendment's protections against double jeopardy, (238) in prosecutions of separate actions (239) or at sentencing when consecutive sentences are imposed for separate RICO and predicate offense convictions. (240) Challenges to the imposition of consecutive sentences under the Double Jeopardy Clause have failed, because RICO actions contain elements beyond the scope of the predicate acts and convictions based on the predicate offenses require proof of elements not contained in RICO. (241)

    First Amendment challenges to the application of RICO also generally fail. Individuals in violation of RICO cannot claim the protections of the First Amendment's right of association when that association is part of a plan to commit a crime. (242) The Supreme Court has also rejected challenges to RICO under the First Amendment right of free speech, determining that no unconstitutional "chilling" effect results from the forfeiture of assets as punishment for past actions. (243) RICO forfeiture provisions, however, have survived challenges claiming that those provisions are overbroad and in violation of the First Amendment. (244)

    The Eighth Amendment (245) is limited in its application to fines, forfeitures, or imprisonment imposed for RICO violations. The forfeiture provisions of RICO are analyzed under the Excessive Fines Clause in the Eight Amendment (246) where RICO forfeitures can be limited when the amount of forfeiture is grossly disproportionate to the underlying offense. (247) Courts have also held that sentences under RICO do not violate the Eighth Amendment's prohibition against cruel and unusual punishment. (248)

    Courts have also rejected claims based on the Equal Protection Clause. The Seventh Circuit has held that prosecutorial discretion in deciding what types of RICO offenses and predicate acts to charge a defendant with does not violate principles of equal protection unless the prosecutor discriminates based on race, religion, or other arbitrary categories. (249) Moreover, it is not unconstitutionally

    discriminatory to apply RICO to defendants who are not engaged in organized crime if the defendants "strive[d] to emulate the achievements of their brothers in organized crime." (250) The First Circuit rejected the argument that RICO violates principles of equal protection by allowing two predicate acts to be convicted under RICO, but only one predicate act to be convicted under "loan sharking." (251)

    Courts have also considered the constitutionality of RICO under the Due Process Clause. (252) Courts have first considered whether a defendant's due process rights are violated when the trial court orders a pre-trial restraint of assets without exempting assets necessary for retention of defense counsel. At least one federal circuit has held that due process requires the trial court to conduct "a prompt hearing at which the property owner can contest the restraining order." (253) Second, courts have considered allegations that RICO is unconstitutionally vague. Despite the different interpretations of RICO, the statute has survived facial and as applied challenges of constitutional vagueness to the "pattern" and "enterprise" requirements. (254) Courts have also rejected vagueness challenges based on the underlying predicate offenses. (255) Cases involving organized crime tend to be least likely to raise successful vagueness challenges. (256)

    Courts have also rejected arguments that RICO unconstitutionally intrudes upon state sovereignty in violation of the Tenth Amendment. (257) The Commerce Clause (258) gives Congress the authority to regulate racketeering activity affecting interstate commerce. (259) RICO jurisdiction is established when a defendant associates with an enterprise that affects interstate commerce. (260) The government is not required to prove that the predicate acts affected interstate commerce, as long as the racketeering activity itself affects interstate commerce. (261)


  3. Overview

    Individuals convicted under RICO can be imprisoned for up to twenty years, fined, or both, in addition to being subject to mandatory asset forfeiture. (262) The forfeiture provisions permit the government to seek pre-indictment restraining orders (263) and forfeitures of property transferred to third parties. (264) In addition to empowering the government to bring criminal charges under [section] (1963), the RICO statute allows the government to bring civil suits to obtain equitable relief and recover damages against the racketeer under [section] (1964). (265) Private parties whose business or property is injured because of a RICO violation may also bring civil suits against racketeers to recover damages. (266)

  4. Forfeiture

    1. "Seize and Freeze" Orders

      If a jury determines that a defendant violated RICO, the district court must order forfeiture of the defendant's interest in or property deriving from the RICO enterprise. (267) "All right, title, and interest" in forfeitable property vests in the government at the time of the [section] (1962) violation. (268) Section (1963a) describes a broad array of interests that are subject to forfeiture. (269) Section (1963b) defines forfeitable property as real property, and tangible and intangible personal property. (270) Rather than limiting forfeiture proceeds to only those personally obtained by a defendant, many circuits find defendants jointly and severally liable for all proceeds obtained by the co-conspirators. (271)

      Section 1963(d) authorizes courts to issue temporary restraining orders (272) or injunctions to preserve the forfeitable property until the adjudication concludes. (273) Under [section] 1963(d), a district court may enter such an order prior to the filing of an indictment or information if: (i) the government gives notice to persons with an interest in the property; (ii) there is a substantial probability that the property will both be deemed forfeitable and become unavailable without the court's order; and (iii) the need to preserve the property outweighs any hardship the order may cause. (274) A ten-day ex parte order may be granted when the government has probable cause to believe that notice would jeopardize the availability of forfeitable property. (275) Upon request, the court must conduct a hearing on the ex parte order at the earliest possible time and prior to the expiration of the temporary order. (276) A district court's interlocutory denial of a motion to dissolve a pretrial conspiracy asset restraining order may be immediately appealed. (277) If the defendant is convicted and the court enters a judgment of forfeiture, the court will authorize the Attorney General to seize all forfeitable property. (278) Section (1963m) provides that, when otherwise forfeitable property cannot be seized, the defendant must forfeit substitute assets up to the value of that property. (279) The Supreme Court has not resolved the question of whether and when courts may place pre-trial conviction restraints on substitute assets. The Third, Seventh, and Eighth Circuits, however, have found that the statutory language of RICO prohibits pretrial restraints on substitute assets. (280) Similarly, the Fifth, Sixth, and Ninth Circuits have not permitted pretrial restraints on substitute assets in cases involving criminal forfeiture provisions of statutes with language similar to the RICO forfeiture provision. (281) The Second Circuit has found that [section] (1963d) does not include substitute assets under [section] (1963m), though it recognized a limited exception under circuit precedent for pretrial restraint of substitute assets when a restraint burdens unindicted third parties. (282) In contrast, the Fourth Circuit has held that Congress intended to allow pretrial restraints on substitute assets. (283)

    2. Rights of Innocent Third Parties

      Property transferred by the defendant to third persons after the alleged [section] 1962 violation is subject to forfeiture (284) and pretrial restraint. (285) A third- party purchaser may seek relief from the...

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