Racketeer influenced and corrupt organizations.

Author:Squire, Russell
Position:III. Defenses through VI. Non-Traditional Uses of the Rico Statute, p. 1181-1211 - Twenty-Seventh Annual Survey of White Collar Crime
 
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  1. DEFENSES

    This Section addresses potential defenses to RICO prosecutions. Part A describes how the invalidation of one or more underlying predicate acts can impact a RICO conviction. Part B discusses the statute of limitations for criminal and civil RICO violations. Part C examines a defendant's withdrawal from a conspiracy as a defense under [section] 1962(d). Parts D and E both discuss preemption challenges to RICO. Specifically, Part D addresses challenges based on the "primary jurisdiction" or "horizontal preemption" defense, while Part E describes approaches using the "reverse vertical preemption" theory. Finally, Part F considers constitutional challenges to RICO.

    1. Invalidity of One or More Predicate Acts

      Courts may reverse a RICO conviction in two situations: (i) when it appears that the jury based the RICO conviction on invalidated convictions; (183) or (ii) when the jury did not indicate which of the predicate acts formed the basis of the conviction. (184) Most circuits agree that a RICO conviction may be sustained despite invalidation of multiple predicate acts so long as valid convictions remain to support the legal sufficiency of at least two predicate acts. (185)

      Courts face a more difficult issue when no substantive convictions remain to serve as the two predicate acts required for a RICO conviction. Without any indication as to which predicate acts served as the basis for the RICO conviction, there is a risk that the jury may have relied on legally insufficient acts. The Supreme Court has not ruled definitively on this issue with regard to RICO. In Griffin v. United States, (186) the Court held that a verdict in a multi-object conspiracy conviction should be sustained if the evidence is adequate to support conviction as to any one of the objects. (187) Four circuits have extended the Griffin reasoning to RICO convictions. (188)

    2. Limitation of Actions

      Although RICO contains no explicit statute of limitations period, in Agency Holding Corp. v. Malley-Duff & Associates, Inc., (189) the Supreme Court defined limitation periods for criminal and civil RICO actions. (190) For criminal RICO prosecutions, the Supreme Court applied a five-year statute of limitations period because Congress explicitly provided that term as the default statute of limitations for criminal actions. (191) For civil actions, the Court held that the statute of limitations is four years. (192)

      The "last predicate act" accrual method is used for criminal RICO actions to determine when the five-year statute of limitations begins to run. (193) This method allows for punishment of all predicate acts, no matter when committed, if "the government ... demonstrate[s] that a defendant committed at least one predicate racketeering act within the limitations period." (194)

      Courts have applied the "last predicate act" method differently depending on which subsection of [section] 1962 forms the basis of the criminal action. The Fourth Circuit has held that the statute of limitations for criminal RICO [section] 1962(a) offenses begins to run upon the investment of the income, as opposed to the illegal activity from which the income was derived. (195) In contrast, the statute of limitations for actions arising under criminal RICO [section] 1962(b) and (c) offenses begins to run when the last illegal predicate act necessary for the RICO conviction is committed. (196) For a criminal RICO conspiracy action arising under [section] 1962(d), "the statute of limitations ... does not begin to run until the objectives of the conspiracy have been either achieved or abandoned," (197) even if the actual illegal predicate acts occurred more than five years prior to the RICO action's initiation. (198)

    3. Withdrawal From Conspiracy

      A defendant can assert withdrawal from the conspiracy as a defense to an action brought under [section] 1962(d) through proof that he took affirmative steps, inconsistent with the objectives of the conspiracy, to disavow or to defeat the conspiratorial objectives. (199) Additionally, the defendant must have either made a reasonable effort to communicate those steps to his co-conspirators or disclosed their scheme to law enforcement authorities. (200)

      Several circuits have held that resignation from the enterprise, without more, does not constitute withdrawal as a matter of law. (201) Other circuits have held that when a defendant makes a prima facie case of withdrawal, by demonstrating he took affirmative steps to withdraw from the enterprise and communicate that withdrawal, the government "cannot rest on its proof that he participated at one time in the illegal scheme." (202) The government must impeach the defendant's proof or bring forward some other evidence to rebut the defendant's proof of withdrawal. (203) The Third Circuit has held that mere silence by a defendant after affirmative withdrawal will not allow a presumption of continuation. (204) The Third Circuit also found that, while a defendant may withdraw from the conspiracy by completely severing ties with the enterprise, he may be deemed a party to the conspiracy if he continues to take actions that further the goals of the conspiracy and continues to receive benefits from the conspiracy. (205)

    4. "Horizontal Preemption" or "Primary Jurisdiction"

      RICO actions often involve conduct that is itself the subject of pervasive administrative regulation; therefore, some RICO defendants have asserted a "horizontal preemption" or "primary jurisdiction" (206) defense. This defense contends that the RICO claims are preempted or otherwise outside the court's jurisdiction because an administrative body has the duty of regulating the challenged conduct. (207) The doctrine of primary jurisdiction applies to "claims properly cognizable in court that contain some issue within the special competence of an administrative agency. It requires the court to enable a 'referral' to the [appropriate] agency, staying further proceedings so as to give the parties reasonable opportunity to seek an administrative ruling." (208)

      Defendants invoke the "primary jurisdiction" defense most frequently in labor law cases. (209) Specifically, they claim that the alleged racketeering activity is conduct that is an "unfair labor practice," (210) which is regulated by the National Labor Relations Board ("NLRB") under the National Labor Relations Act ("NLRA"). (211) If a court finds that "the existence of the predicate acts depends wholly upon a determination that a violation of federal labor law occurred, jurisdiction is preempted." (212) However, there are several exceptions to the "primary jurisdiction" defense in labor law cases.

      RICO charges are not preempted by federal labor law when the underlying offenses fall within the labor related activities expressly included in the RICO statute at [section] 1961(1)(c). (213) In addition, courts seem unwilling to apply the primary jurisdiction doctrine in cases where labor disputes are only collaterally related to the RICO charge. (214) Finally, if the predicate acts are illegal independent of labor law, they are not preempted. (215)

      In a different scenario, the Second Circuit found horizontal preemption inappropriate in a situation where the district court needed to assert comprehensive control over complex litigation and to provide for administrative convenience. (216) The court held that a district court could, under a consent decree arising from RICO litigation, issue orders normally within the NLRB's exclusive province. (217)

      RICO defendants in non-labor law cases also have attempted to invoke the primary jurisdiction defense, but with less success. (218) While this defense has proved successful in actions against public utilities where the "filed rate" doctrine bars courts from setting rates different from those filed with the agency, (219) it has received much less favor in other non-labor contexts. A federal court may not defer to an administrative agency if the claim at issue is of a type, such as fraud or deceit, that is "within the conventional competence of the courts and [where] the judgment of ... the agency with concurrent jurisdiction [is] not likely to be helpful." (220) Also, a federal court usually will not apply the primary jurisdiction doctrine to defer to a state administrative agency. (221)

    5. "Reverse Vertical Preemption"

      The Supreme Court has established a number of abstention doctrines that require a federal court with proper jurisdiction over the subject matter of a dispute to nonetheless "stay its hand" in order to promote an overriding policy, such as the maintenance of a particular relationship between the national government and the states. (222) Two such doctrines are the "Pullman abstention" doctrine. (223) and the "Burford abstention" doctrine. (224) The Pullman abstention doctrine requires a federal court to refrain from deciding a case that raises a potentially dispositive question of serious, unsettled state law on which a state decision may render unnecessary a decision on the merits of the federal dispute. (225) The Burford abstention doctrine allows a federal court to refrain from deciding a case if 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. (226)

      In DeMauro v. DeMauro, (227) the First Circuit confronted a RICO action that was intermingled with a divorce proceeding. (228) 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." (229) By contrast, the Second Circuit has held that abstention under Burford was inappropriate in a RICO case where the predicate acts were solely federal law violations and a treble damage award...

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