Should courts impose RICO's pretrial restraint measures on substitute assets?

• Author: Rosenthal, James M.
• Position: Racketeering Influenced and Corrupt Organizations Act

Introduction

When Congress enacted the Racketeer Influenced and Corrupt Organizations Act (RICO)(1) in 1970 to curb the infiltration of organized crime into legitimate business, it resurrected an old common law punishment: in personam asset forfeiture.(2) As originally enacted, RICO mandated that upon conviction a defendant had to forfeit afl of his assets that were "tainted" by a connection with the crime.(3) Any proceeds derived from or involved with the racketeering activity would be deemed tainted and thus potentially forfeitable upon a finding of guilt. For example, if an individual earned ten thousand dollars from his participation in racketeering and subsequently used the funds to purchase an automobile, it would be subject to forfeiture upon conviction as tainted property. Moreover, in order to ensure that the defendant's property would be obtainable in the event of a forfeiture order, RICO included a limited pretrial restraint provision permitting courts to enter restraining orders against assets potentially subject to forfeiture.(4)

In the Comprehensive Forfeiture Act (CFA) of 1984,(5) Congress significantly amended RICO's forfeiture section in an effort to bolster the war against organized crime by attacking its economic base. In the CFA, Congress responded to concerns that prosecutors underutilized RICO's forfeiture provisions.(6) A principal feature of this attempt to promote the use of asset forfeiture was the expansion of RICO's pretrial restraint powers. Before the 1984 Act, courts could order restraints only after the filing of an indictment or information.(7) Because defendants were often aware of potential RICO prosecutions before formal charges were brought, they were usually able to protect their tainted assets from forfeiture by concealing them from the court.(8) Congress addressed this problem in 1984 by amending RICO's pretrial restraint provision to permit the imposition of restraints before an indictment or information.(9)

Two years later, Congress again amended RICO to provide for the forfeiture of assets unconnected with the RICO offense when the defendant's tainted assets are unavailable.(10) For instance, a person convicted of a racketeering offense may have purchased a home years before the crime took place with money earned from a legitimate job. Under the so-called substitute asset provision, such property is available for forfeiture when assets directly tainted by the crime are unavailable at the time of conviction. As with the 1984 expansion of pretrial restraints, this substitute asset provision sought to strengthen RICO's forfeiture powers by enabling courts to enter forfeiture orders even when the defendant had successfully concealed his tainted assets.

Although it is clear that substitute assets are forfeitable after conviction, there is considerable uncertainty in the federal courts about whether substitute assets may be subjected to pretrial restraint. RICO's pretrial restraint provision explicitly applies to tainted property, but it is silent regarding substitute assets." Both the Second(12) and Fourth(13) Circuits have ruled that RICO's pretrial restraint measures may be applied to substitute assets. The Third Circuit has disagreed, refusing to apply RICO's pretrial restraint provision to substitute assets.(14)

A similar controversy about the propriety of the pretrial restraint of substitute assets has arisen under the Continuing Criminal Enterprise statute (CCE).(15) The forfeiture provisions of the CCE are essentially identical to those of RICO.(16) As with RICO, federal courts disagree as to whether the CCE's pretrial restraint measures extend to substitute assets. The Fifth(17) and Ninth(18) Circuits have held that the statute's pretrial restraint provision does not reach substitute assets.(19) By contrast, several district courts in other circuits have permitted the application of the CCE's pretrial restraint measures to substitute property.(20) Because courts generally treat the forfeiture provisions of RICO and the CCE as interchangeable,(21) this Note relies on the case law of both statutes; for the sake of simplicity, however, its discussion is limited to whether courts may order the pretrial restraint of substitute assets under RICO.(22)

This Note argues that courts should not apply RICO's pretrial restraint measures to substitute assets. Part I examines the text of RICO's forfeiture provisions in light of recent rulings by the Supreme Court providing guidance in interpreting the statute. Part I concludes that the statute's plain meaning limits pretrial restraint measures to tainted assets. Part II examines language in the legislative history of an earlier attempt to add a substitute asset provision to RICO and in the 1984 change from broad to specific language in the pretrial restraint provision. From this language, Part II concludes that Congress did not intend for the pretrial restraint provision to apply to substitute assets. Finally, Part III examines the difference between tainted and substitute assets in fight of the greater concern for defendants' property rights that is manifested in the earlier stages of RICO prosecutions. Part III contends that the potential hardships associated with restraining orders and the risk of erroneous deprivation are good reasons for differentiating between tainted and substitute assets for purposes of pretrial restraints. This Note concludes that when a court finds that a portion of a defendant's tainted assets is unavailable before trial, it should not try to compensate for this missing sum by restraining substitute assets.

1. The Plain Language of RICO's Forfeiture Provisions

   The Supreme Court has held that construction of RICO, like construction of other statutes, should begin by looking at the language of the statute.(23) Unambiguous language is conclusive in the absence of a clearly expressed legislative intent to the contrary.(24) This Part examines the statutory language of RICO's forfeiture section to determine whether courts may enter restraining orders against substitute property. Section I.A focuses on section 1963(d), the pretrial restraint provision, and concludes that the wording of this subsection unambiguously indicates that RICO's pretrial restraint measures do not apply to substitute assets. Section I.B considers the language and structure of the entire forfeiture section to provide a meaningful context for the specific language of section 1963(d). This section concludes that reading the statute as a whole confirms the view that section 1963(d) is not designed to apply to substitute assets. Finally, section I.C argues that RICO's liberal construction mandate does not alter this statutory analysis. This Part concludes that the statutory language of section 1963 indicates that RICO does not provide for the pretrial restraint of substitute assets.

   1. An Examination of RICO's Pretrial Restraint Provision

      Section 1963(d), RICO's pretrial restraint provision, states that a court may enter a restraining order "to preserve the availability of property described in subsection (a) for forfeiture."(25) Subsection (a) defines tainted assets and makes no reference to substitute assets:

      (1) any interest the person has acquired or maintained in violation of section 1962; (2) any -

      (A) interest in;

      (B) security of;

      (C) claim against; or

      (D) property or contractual right of any kind affording a source of influence over; any enterprise which the person has established, operated, controlled, conducted, or participated in the conduct of, in violation of section 1962; and (3) any property constituting, or derived from, any proceeds which the person obtained, directly or indirectly, from racketeering activity or unlawful debt collection in violation of section 1962.(26)

      Substitute assets are defined in subsection (m) as any property of the defendant not already identified as a tainted asset under subsection (a).(27) Thus, RICO's pretrial restraint measure refers only to subsection (a) - the tainted asset subsection, not subsection (m) - the substitute assets subsection. The plain language of this provision therefore appears to preclude the application of pretrial restraints to substitute assets.(28)

      In United States v. Monsanto,(29) the Supreme Court emphasized the importance of interpreting forfeiture and restraint provisions consistently with their plain language. In Monsanto, the district court had entered a restraining order, as provided by section 853(e)(1)(A) of the CCE, on property the defendant allegedly had accumulated in the course of narcotics trafficking.(30) The defendant moved to vacate the restraining order so that he could use the frozen funds to retain counsel. He argued that the forfeiture provisions of the CCE should be interpreted to include an exemption for assets used to pay an attorney. The Court rejected this argument, emphasizing that nowhere in the CCE's forfeiture section was there any recognition of an exemption for attorney's fees.(31) In response to contentions that such a ruling ran counter to Congress's intent, the Court stressed the plain meaning of the statute and stated that "the statute, as presently written, cannot be read any other way."(32) Likewise, section 1963(d)(1) refers only to tainted assets as property subject to pretrial restraints, and cannot be read any other way.

   2. Examining the Statute as a Whole

      Examination of the plain meaning of RICO's pretrial restraint provision is only the first step in determining its meaning; the statute must also be read as a whole to provide a context for the plain language of section 1963(d).(33) RICO's forfeiture provisions, when read as a whole, reveal that the statute treats tainted assets and substitute assets as two entirely distinct forms of property.(34) When adding a substitute asset provision to RICO, Congress did not simply amend section 1963(a) to allow for the forfeiture of any other property in the event that the...