RICO: An Introduction | law of the free man

the Racketeering and Corrupt Organizations Act (“RICO”) was enacted in 1970. Although RICO provides both civil remedies and criminal penalties, the number of RICO civil claims far exceeds the number of RICO criminal cases filed each year.

RICO provides civil action against persons engaged in a “pattern of racketeering activity” or “collection of illegal debt”. A successful plaintiff may recover treble damages, costs and attorneys’ fees.

RICO is, however, a complicated and complex legislative scheme with many potential pitfalls. Yet, a RICO civil claim involves several standard key issues. We address several of these fundamental questions below.

The core of a RICO case is the existence of a racketeering business model. Under the law, “racketeering activity” includes a host of offences. Section 1961(1) defines the term to include any crime listed in Subdivisions A, B, C, D, E, F or G of Section 1961(1).

Among other things, “racketeering activity” includes “any act that is prosecutable under” a list of federal criminal statutes. The list covers a wide range of violations, for example, violations of hobbs law, 18 USC § 1951 (extortion); 18 U.S.C. §§ 1341 (postal fraud) and 1343 (electronic fraud); 18 USC § 1831 (economic espionage); 18 USC § 1832 (theft of trade secrets); 18 USC § 1952 (travel law); 18 USC §§ 1956, 1957 (money laundering); and 18 USC §§ 2318-2320 (copyright infringement).

Mail and wire fraud are the most common underlying acts.

Notably, there must be a connection with interstate or foreign commerce – this is a jurisdictional element of a RICO civil claim. Thus, the underlying acts will often occur in multiple states.

Who is a RICO “person”?

A RICO person “includes any person or entity capable of holding a legal or beneficial interest in property.” This definition defines those who can be charged under RICO. Although the definition clearly includes a natural person, as well as a corporation, union, partnership, and sole proprietorship, it is unclear whether the definition encompasses a government entity.

What is a RICO business?

A plaintiff is required to show that the defendant conducted the affairs of a company through a pattern of racketeering activity. The person and the business must generally be separate; but, of course, a Rico person can be a part of a company.

A RICO business includes “any individual, partnership, corporation, association or other legal entity, and any syndicate or group of individuals associated in fact but not being a legal entity”. Courts have interpreted the word “business” broadly, and the definition encompasses both legitimate and illegitimate businesses. The statutory list is not exhaustive but merely illustrative.

What is a RICO “model”?

A “regularity” can exist when a combination of two or more offenses has occurred during a given period. In Sedima, SPRL c. Imrex Co., 473 US 479 (1985), the Supreme Court held that the RICO model element requires more than mere proof of two underlying acts of racketeering. On the contrary, a proof of “continuity plus relationship” is necessary. Nevertheless, the Supreme Court has repeatedly recognized that Congress had a fairly flexible concept of a model in mind.

The Supreme Court said that:

A “pattern” is an “arrangement or order of things or activities”. . . . It is not the number of predicates but the relationship they maintain with each other or with an external organizing principle that makes them “ordered” or arranged.

The Court further explained that “[C]criminal behavior forms a pattern if it encompasses criminal acts that have the same or similar objectives, results, participants, victims, or methods of perpetration, or that are otherwise linked by distinguishing characteristics and are not events isolated”.

Acts of racketeering do not have to be similar or directly related to each other; rather, it is sufficient that the acts of racketeering are related in some way to the business of the accused company, including, for example, that: (1) the acts of racketeering furthered the objectives of the company or benefited the business, (2) the business or the defendant’s role in the business enabled the defendant to commit or facilitated the commission of the acts of racketeering, (3) the acts of racketeering were committed at demand or in the name of the company, or (4) the acts of racketeering had the same or similar objectives, results, participants, victims or methods of commission.

The continuity requirement is also satisfied where the predicates are a regular means of carrying on the defendant’s ongoing legitimate business (in the sense that it is not a business that exists for criminal purposes), or conduct or participate in any ongoing and legitimate “RICO business”. .”

A claimant can demonstrate a pattern by establishment that the underlying acts pose a threat of continued criminal activity, which is usually demonstrated by showing either:

  • Closed continuity. Prove “a series of related predicate acts extending over a substantial period of time”.
  • Open continuity. A threat of “continuing criminal activity extending indefinitely into the future”, in light of the nature of the business and the alleged underlying acts.

RICO Offenses

There are four separate and distinct RICO violations set forth in Section 1962: (a) acquiring or operating a business using the proceeds of racketeering; (b) control a business using racketeering activities; (c) directing the affairs of a company using racketeering activities; and (d) conspiring to acquire, control or conduct.

Each of the subsections incorporates the basic elements of “business” and a “racketeering business model”.

Section 1962(a)

Under section 1962(a), it is a violation to invest the proceeds of racketeering activity in a business that affects interstate commerce.

To prove a violation of Section 1962(a), a plaintiff must prove the following:

  1. Existence of a business;
  2. The company engaged in, or its affected activities, interstate or foreign commerce;
  3. The defendant derived income, directly or indirectly, from a pattern of racketeering activity or the collection of an illegal debt in which that person participated as a principal; and
  4. The defendant used or invested, directly or indirectly, part of this income, or the proceeds of this income, in the acquisition of an interest in the business or in the establishment or operation of the business.

Section 1962(b)

Section 1962(b) is the least used of the four RICO subsections. Under section 1962(b), it is a violation to acquire or retain an interest in a business affecting interstate or foreign commerce through racketeering activity or the collection of an illegal debt.

To prove a violation of Section 1962(b), a plaintiff must prove the following:

  1. Existence of a business;
  2. The company engaged in, or its affected activities, interstate or foreign commerce;
  3. The defendant acquired or retained, directly or indirectly, an interest in or control of the company; and
  4. Defendant acquired or maintained the interest through a pattern of racketeering activity or through the collection of an illegal debt.

Courts have held that a plaintiff must allege a specific connection between control of the named company and the alleged racketeering activity.

Section 1962(c)

Subsection (c) is by far the most frequently used and most important substantive RICO provision. Under section 1962(c), it is a violation to conduct the business of a company affecting interstate or foreign commerce “by” a pattern of racketeering activity or by the alternative theory of collecting an illegal debt. .

To prove a violation of Section 1962(c), a plaintiff must prove the following:

  1. Existence of a business;
  2. The company engaged in, or its affected activities, interstate or foreign commerce;
  3. The defendant was employed by or associated with the company;
  4. The defendant directed or participated, directly or indirectly, in the conduct of the affairs of the company; and
  5. The defendant participated in the business of the company through racketeering or illegal debt collection activities.

Section 1962(d)

Under section 1962(d), conspiring to commit any of the three RICO substantive offenses is a violation.

To prove a violation of Section 1962(d), a plaintiff must prove the following:

  1. The existence of a business (or that a business would exist);
  2. That the company was (or would be) engaged in, or that its activities affected (or would affect) interstate or foreign commerce; and
  3. That each defendant knowingly agreed that a conspirator would violate 18 USC § 1962(c).

The Supreme Court has held that to establish a RICO conspiracy offense under section 1962(d), it is not necessary that the defendant “has himself committed or agreed to commit the required two underlying acts”. for a material RICO offense under section 1962(c)”. The Supreme Court explained:

A conspiracy may exist even if a conspirator does not agree to commit or facilitate each element of the substantive offence. The partners in the criminal plan must agree to pursue the same criminal objective and can divide the work, but each is responsible for the actions of the other. If the conspirators have a plan that calls for some conspirators to commit the crime and others to provide support, the supporters are as guilty as the perpetrators.

Thus, to establish a criminal charge of RICO conspiracy, the United States is not required to prove that an accused committed an act of racketeering or an overt act.

As such, the RICO conspiracy provision is therefore even more comprehensive than the general conspiracy offense in 18 USC § 371.

The Court added that:

A conspirator must intend to further an enterprise which, if carried out, would satisfy all the elements of a substantive criminal offence, but it is sufficient that he adopts the objective of furthering or facilitating the enterprise criminal. He can do this in several ways, unless he agrees to undertake all the acts necessary to carry out the crime. One can be a conspirator by agreeing to facilitate only some of the acts leading to the substantive offence. It is elementary that a conspiracy can exist and be punished whether or not the substantial crime ensues, for conspiracy is a distinct evil, dangerous to the public, and therefore punishable in itself.

It makes no difference whether the substantive offense under § 1962(c) requires two or more underlying acts. The RICO conspiracy provision affects a defendant who has not himself committed or agreed to commit the two or more underlying acts necessary to establish the underlying offense.

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