Racketeer influenced and corrupt organizations

• Author: Brynne Peluso/Mariah Breit/Natalie Cappuzzo/Katelyn Gloe/Alexandra Peterson
• Pages: 1197-1244

RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1198

II. ELEMENTS OF THE OFFENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1199

A. RICO Definition of “Person”. . . . . . . . . . . . . . . . . . . . . . . . 1200

B. Two or More Predicate Acts of “Racketeering Activity”. . . . . 1201

C. Pattern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1202

D. Enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1205

1. Types of Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . 1206

2. Proving the Enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . 1208

3. Person-Enterprise Rule. . . . . . . . . . . . . . . . . . . . . . . . . . 1209

E. Effect on Interstate Commerce . . . . . . . . . . . . . . . . . . . . . . . 1210

F. Prohibited Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1210

1. Investment of Racketeering Proceeds . . . . . . . . . . . . . . . 1210

2. Acquisition of Enterprise Interest . . . . . . . . . . . . . . . . . . 1211

3. Conducting an Enterprise Through Racketeering Acts . . . 1212

4. Conspiracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1213

III. DEFENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1214

A. Invalidity of One or More Predicate Acts . . . . . . . . . . . . . . . . 1214

B. Limitation of Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1215

C. Withdrawal from the Conspiracy . . . . . . . . . . . . . . . . . . . . . . 1216

D. “Horizontal Preemption” or “Primary Jurisdiction”. . . . . . . 1217

E. “Reverse Vertical Preemption”. . . . . . . . . . . . . . . . . . . . . . . 1220

F. Constitutional Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . 1220

IV. CRIMINAL PENALTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1224

A. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1224

B. Sentencing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1224

C. Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1226

1. “Seize and Freeze” Orders . . . . . . . . . . . . . . . . . . . . . . . 1226

2. Rights of Innocent Third Parties . . . . . . . . . . . . . . . . . . . 1228

3. Attorney’s Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1229

V. CIVIL RICO ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1230

A. Civil Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1230

B. Civil Cause of Action for Private Parties . . . . . . . . . . . . . . . . 1231

1. Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1232

2. The Person/Enterprise Distinction . . . . . . . . . . . . . . . . . . 1235

3. Statute of Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . 1235

VI. NON-TRADITIONAL USES OF THE RICO STATUTE . . . . . . . . . . . . . . . . . 1237

A. Protests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1237

B. Labor Unions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1238

C. Tobacco Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1239

1197

D. College Admissions Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . 1240

E. Health Care Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1240

F. Police Misconduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1242

G. Cannabis Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1242

H. Wall Street Prosecution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1243

I. INTRODUCTION

Congress designed the Racketeer Influenced and Corrupt Organizations Act

(“RICO”)

1

to combat organized crime in the United States.

2

Enacted as Title IX of

the Organized Crime Control Act of 1970,

3

RICO enhanced sanctions, constructed

new legal tools for prosecutors to use in the evidence-gathering process, and cre-

ated new remedies to tackle the unlawful activities of criminal syndicates.

4

RICO

brings the “highly diversified acts of a single organized crime enterprise under

[one] umbrella”

5

in an attempt to “curb the infiltration of legitimate business

organizations by racketeers.”

6

Although RICO was enacted to target organized

crime, Congress chose to enact a broad statute reaching more than just the prover-

bial “mob.”

7

Consistent with congressional intent,

8

courts have liberally construed

9

RICO to reach even legitimate businesses

10

and organizations without a profit

motive.

11

However, the “liberal construction” clause is not without limits—it is

“not an invitation to apply RICO to new purposes that Congress never intended.”

12

1. 18 U.S.C. §§ 1961–1968.

2. Organized Crime Control Act of 1970, Pub. L. No. 91-452, 84 Stat. 922, 923 (1970).

3. Id. at 941 (codified as amended in sections of 18 U.S.C. §§ 1961–1968).

4. Id. at 923.

5. United States v. Irizarry, 341 F.3d 273, 292 n.7 (3d Cir. 2003) (quoting United States v. Eufrasio, 935 F.2d

553, 566 (3d Cir. 1991)).

6. Sinclair v. Hawke, 314 F.3d 934, 943 (8th Cir. 2003) (quoting Atlas Pile Driving Co. v. DiCon Fin. Co.,

886 F.2d 986, 990 (8th Cir. 1989)).

7. See H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 248 (1989).

8. See Organized Crime Control Act, § 904(a), 84 Stat. at 947 (mandating RICO Act “be liberally construed to

effectuate its remedial purposes”).

9. See Nat’l Org. for Women, Inc. v. Scheidler (NOW I), 510 U.S. 249, 257–58 (1994) (finding RICO statute

can be broadly applied to the detrimental activities of almost any group of individuals, even those without profit-

seeking motives). The breadth of RICO, however, is the subject of much criticism. See generally Neil Feldman,

Spiraling Out of Control: Ramifications of Reading RICO Broadly, 65 DEF. COUNS. J. 116 (1998); Douglas E.

Abrams, Crime Legislation and the Public Interest: Lessons from Civil RICO, 50 SMU L. REV. 33, 56–57

(1996).

10. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 499 (1985). RICO is also applicable to criminal enterprises

that have not yet infiltrated, or are not associated with, legitimate business. See United States v. Patrick, 248 F.3d

11, 19 (1st Cir. 2001) (upholding RICO conviction of gang members involved in drug trafficking enterprise that

had not “infiltrated legitimate businesses”).

11. See NOW I, 510 U.S. at 258–59 (holding abortion clinics could maintain RICO action against anti-

abortion groups who had no economic motive).

12. Reves v. Ernst & Young, 507 U.S. 170, 183 (1993); see Baisch v. Gallina, 346 F.3d 366, 376 (2d Cir.

2003) (citing Reves, 507 U.S. at 179); see also Att’y Gen. of Can. v. R.J. Reynolds Tobacco Holdings, Inc., 268

F.3d 103, 129 (2d Cir. 2001) (concluding RICO’s text and legislative history do not afford a civil remedy to a

foreign nation for tax evasion by a U.S. company); Chappell v. Robbins, 73 F.3d 918, 921–23 (9th Cir. 1996)

1198 AMERICAN CRIMINAL LAW REVIEW [Vol. 60:1197

Prosecutors invoke RICO in a wide variety of criminal contexts.

13

Given

RICO’s broad applicability, the requisite mens rea is merely that of the “predicate

acts,” or underlying offenses.

14

Furthermore, RICO imposes severe sanctions that

supplement those of each underlying offense.

15

RICO also provides a private right of action for any person “injured in his busi-

ness or property” by a RICO violation.

16

The Attorney General

17

or a private plain-

tiff

18

may bring a civil action in either state or federal court,

19

and if a final

judgment is entered against the defendant in any criminal proceeding also brought

under RICO, the defendant is estopped from denying the predicate acts in subse-

quent civil proceedings.

20

RICO provides equitable relief through the 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.

21

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 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 offenses. Section VI details recent

developments in this area of law.

II. ELEMENTS OF THE OFFENSE

RICO prohibits “any person”

22

from: (i) using income derived from a pattern of

racketeering activity or through “collection of an unlawful debt”

23

to acquire an

(declining to presume RICO abrogates common law legislative immunity protection absent clear legislative

intent or statutory language).

13. See generally G. Robert Blakey & John Robert Blakey, Civil and Criminal RICO: An Overview of the

Statute and Its Operations, 64 DEF. COUNS. J. 36, 43 (1997). Since the passage of RICO, thirty-three States have

adopted similar legislation to address organized crime within their jurisdiction. See JOHN E. FLOYD, AMERICAN

BAR ASS’N, INTRODUCTION: RICO STATE BY STATE (2d ed. 2011).

14. See infra Section II.B (defining “predicate acts”); Gil Ramirez Grp., L.L.C. v. Hous. Indep. Sch. Dist., 786

F.3d 400, 412 (5th Cir. 2015); United States v. Rosenthal, 334 F. App’x 841, 843 (9th Cir. 2009); Bruner Corp. v.

R.A. Bruner Co., 133 F.3d 491, 495 (7th Cir. 1998) (noting mens rea requirement is satisfied if defendant knew

predicate offense was illegal); United States v. Baker, 63 F.3d 1478, 1493 (9th Cir. 1995).

15. 18 U.S.C. § 1963.

16. Id. § 1964.

17. Id. § 1964(b).

18. Id. § 1964(c).

19. See Tafflin v. Levitt, 493 U.S. 455, 458 (1990). RICO also reaches foreign conduct if the acts establishing

a pattern of racketeering violated a predicate statute that is itself extraterritorial. See RJR Nabisco, Inc. v.

European Cmty., 579 U.S. 325, 340 (2016).

20. 18 U.S.C. § 1964(d).

21. . Id. § 1964(a).

22. Id. § 1962(a).

23. Id.; id. § 1961(6) (defining “unlawful debt”).

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