INTRODUCTION II. ELEMENTS OF THE OFFENSE A. Two or More Predicate Acts of Racketeering Activity B. Pattern C. Enterprise 1. Types of Enterprises 2. Proving the Enterprise 3. Person-Enterprise Rule D. Effect on Interstate Commerce E. 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. RECENT DEVELOPMENTS IN THE RICO STATUTE A. Protests B. Tobacco Litigation C. Health Care Fraud D. Divorce 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 a RICO's umbrella," (4) and "to curb the infiltration of legitimate business organizations by racketeers." (5) However, RICO also has broad application beyond the organized crime context because Congress mandated that RICO "be liberally construed to effectuate its remedial purposes." (6) 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 has reaffirmed its reliance on the "liberal construction" clause of RICO, (9) the Court has acknowledged that this clause is not without limits. (10)
Prosecutors use RICO in a wide variety of criminal contexts (11) 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 of RICO, 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 the now advisory United States Sentencing Guidelines ("Guidelines"). Section V provides a discussion of civil RICO, and Section VI describes several recent developments in this area of the law.
ELEMENTS OF THE OFFENSE
Section 1962 of RICO prohibits "any person" (20) from: (i) using income derived from a pattern of racketeering activity or from the collection of an unlawful debt to acquire an interest in an enterprise affecting interstate commerce; (21) (ii) acquiring or maintaining through a pattern of racketeering activity or through collection of an unlawful debt (22) 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 through collection of an 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 constituting a pattern of racketeering activity; (ii) directly or indirectly invested in, maintained an interest in, or participated in, an enterprise; (iii) the activities of which affected interstate or foreign commerce. (26) Parts A through D of this Section examine the elements of a RICO offense. Part E addresses prohibited acts. Finally, Part F assesses the scope of outsider liability.
Two or More Predicate Acts of Racketeering Activity
First, a RICO offense requires two or more predicate acts of "racketeering activity." (27) RICO defendants need not be convicted of each underlying offense before a RICO offense is charged. (28) In fact, underlying offenses for which the defendant has been acquitted may serve as the basis of a RICO offense. (29)
Under [section] 1961(1), the term "racketeering activity" includes a broad assortment of state and federal crimes. These crimes include: (i) certain acts that are chargeable under state laws and punishable by imprisonment for more than one year; (30) (ii) acts that are indictable under specified provisions of Title 18; (31) (iii) acts that are indictable under specified provisions of Title 29; (32) (vi) federal offenses that involve bankruptcy, securities fraud, or controlled drugs; (33) (v) acts that are indictable under the Currency and Foreign Transactions Reporting Act; (34) (vi) acts indictable under [section][section] 274, 277, or 278 of the Immigration and Nationality Act, if such acts are done for profit, (35) and any act that is indictable under any provision listed in [section] 2332b(g)(5)(B). (36) In the Comprehensive Crime Control Act of 1984, (37) Congress extended the definition of "racketeering activities" under RICO to include dealing in obscene materials, (38) as well as the non-reporting of currency and foreign transactions. (39) The Antiterrorism and Effective Death Penalty Act of 1996 (40) further extended the RICO provisions to include various immigration crimes. (41) However, Congress has restricted the definition of "racketeering activities" in other areas, prohibiting the recognition of unconvicted securities fraud as a predicate act under RICO. (42)
RICO applies only where the commission of two predicate acts constitutes a "pattern of racketeering activity." (43) While the statutory definition of "pattern of racketeering activity" requires at least two acts of racketeering occurring within ten years of each other, (44) simply proving two acts may not be sufficient to establish a RICO violation. (45) The Supreme Court has stated that a "pattern of racketeering" can only be established if the predicate acts are continuous and interrelated. (46) Thus, "two isolated acts of racketeering do not constitute a pattern." (47)
In H.J. Inc. v. Northwestern Bell Telephone Co., (48) 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 racketeering activity" for RICO purposes. (49) These requirements, referred to as the "continuity plus relationship" test, (50) must be proven independently, but the Court has recognized that evidence establishing the two elements will often overlap. (51)
In H.J. Inc., the Court looked to a provision of the Organized Crime Control Act of 1970 (52) for guidance in defining the relationship component of the pattern requirement of RICO: "[c]riminal conduct forms a pattern if it embraces criminal acts that have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events." (53)
The "continuity" component is met by either closed-ended continuity, defined as "a series of related predicates extending over a substantial period of time," (54) or open-ended continuity, defined as conduct that poses a threat of extending into the future. (55) The Court suggested a case-by-case examination of this issue, noting that the existence of a "threat of continued racketeering activity" is a function of particular facts. (56) The Court offered a non-exhaustive list of situations that may constitute a pattern, (57) and stated "development of these concepts must await future cases." (58)
With this guidance, the circuits have reached varying conclusions regarding what conduct constitutes a pattern of racketeering. The primary reason for this difficulty is the potential tension between the two prongs of the pattern requirement: "relationship" and "continuity." (59) Nine federal circuit courts of appeal consistently apply some form of the "continuity plus relationship" test. (60) These circuits use a two-tiered analysis for the continuity prong, focusing on the length of time and number of acts required for continuity. (61) Either closed-ended or openended continuity satisfies the continuity test in these circuits. (62) These circuits also take a lenient approach to the relationship prong. (63) The remaining "continuity plus relationship" circuits have yet to clearly define the elements of the test. (64)
The Seventh and Tenth Circuits employ the H.J. Inc. test and consider duration and open-endedness of the racketeering activity, but cling to the multi-factor test applied prior to H.J. Inc. (65) The Fourth Circuit, using a hybrid approach, adopted the "continuity plus relationship" test to determine pattern, (66) but also reaffirmed its commitment to its prior multi-factor test as a means of determining the continuity prong of the pattern element. (67) The Fourth Circuit broadly interprets the continuity requirement because there is "no question but that a single scheme may be sufficient to establish a pattern." (68)
Racketeer influenced and corrupt organizations.
|Position:||Twenty-Second Annual Survey of White Collar Crime|
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