Racketeer influenced and corrupt organizations.

• Author: Phillips, Eleanor T.
• Position: I. Introduction through III. Defenses C. Withdrawal from Conspiracy, p. 1507-1536 - Thirtieth 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. Sentencing C. Forfeiture 1. "Seize and Freeze" Orders 2. Rights of Innocent Third Parties 3. Attorney's Fees 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. Labor Unions C. Tobacco Litigation D. Health Care Fraud E. 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) Consistent with Congressional mandate, Courts have "liberally construed" (6) RICO to extend beyond the organized crime context. Specifically, the Supreme Court has held that RICO may be applied to legitimate businesses (7) and to enterprises without a profit motive; (8) however, despite acknowledging congressional intent, (9) the Supreme Court has acknowledged that the "liberal construction" clause is not without limits. (10)

   Prosecutors bring charges under RICO in a wide variety of criminal contexts (11) because (1) it has been construed liberally; (12) (2) it does not require mens rea beyond that which is necessary for the predicate acts; (13) and (3) it prescribes severe sanctions in addition to those that 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 the defendant's future activities or investments, and dissolution or reorganization of the enterprise. (19) This Article focuses primarily on the criminal aspects of RICO, but 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 discusses civil RICO. Section VI details 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) Under this broad definition, "person" does not refer exclusively to natural persons, but rather, is interpreted to include a variety of entities such as unincorporated political associations, (28) public utilities, (29) and others. (30)

      Notably, RICO classifies corporate officers as "persons" distinct from the corporations they run and indicates that these "persons" may be 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) The prosecution is permitted to bring a RICO charge before a RICO defendant is convicted of each underlying offense. (34) In fact, offenses for which the defendant has been acquitted may serve as the basis of a RICO offense. (35)

      Under [section] 1961(1), "racketeering activity" necessary to support a RICO claim is "conduct that is 'chargeable' or 'indictable' under a host of state and federal laws." (36) The broad assortment of state and federal crimes include: (i) certain acts that are chargeable under state laws and punishable by imprisonment for more than one year; (37) (ii) acts that are indictable under specified provisions of Title 18; (38) (iii) acts that are indictable under specified provisions of Title 29; (39) (iv) federal offenses that involve bankruptcy, securities fraud, or controlled drugs; (40) (v) acts that are indictable under the Currency and Foreign 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) however, Congress, has restricted the definition of "racketeering activities" in other areas...