Continuing its protests of abusive criminal prosecutions under the Racketeer Influenced and Corrupt Practices Act (‘RICO”), The Wall Street Journal recently shone a particularly bright spotlight on this dangerous law. RICO, a federal statute passed in 1970, was intended to aid in the fight against organized crime which infiltrated and corrupted legitimate businesses. But RICO is so broad that prosecutors have been able to use it as the basis for bringing crushing, criminal proceedings against purely legitimate businesses.
The statute makes it unlawful for any person, through a “pattern of racketeering,” to acquire or maintain any interest in or control over an enterprise engaged in or affecting interstate commerce or to invest income received from a pattern of racketeering in such an enterprise. The statute defines “racketeering activity” to include such crimes as murder, arson and robbery, but also mail fraud and wire fraud (basically, fraud effected by any use of the mail or by wire, radio or television) and securities fraud. A “pattern of racketeering” is simply two or more acts of racketeering activity.
A criminal RICO charge is no laughing matter. Aside from the possibility of imprisonment and the forfeiture of the proceeds of the racketeering activity and any interest in the legitimate “enterprise” obtained through racketeering activity, a RICO defendant is subject to an unusual provision. RICO provides for the sweeping pretrial (even pre-indictment, in some cases) restraints on the assets of the legitimate enterprise. (There is, incidentally, a civil cause of action under RICO for any person injured by a violation of the Act. To encourage the assertion of claims, winning plaintiffs in civil RICO actions are awarded treble damages and costs, including attorney fees.)
RICO’s language is broad, and it has often been broadly interpreted by the courts. Moreover, certain of its predicate crimes (mail fraud, wire fraud and securities fraud) are, as described by The Wall Street Journal, “notoriously open-ended.” The consequence? Not only may a business or an individual be charged with a securities law violation, for example, that should not be illegal to begin with, but if the “crime” is a predicate crime under RICO, the defendant may be subject to pretrial restraints and penalties that could cow even the most determined resisting—and innocent—defendant into plea bargaining and settling. It is RICO that is widely blamed for the demise of Princeton/Newport Partners, an investment firm forced into dissolution before a trial of the (primarily tax-related) charges against it. Indeed, many believe that RICO charges and the threat of pretrial restraints against Drexel Burnham Lambert, resulting in a $650 million settlement, were a significant factor in that firm’s demise.
The Wall Street Journal article focused on an excerpt from a transcript of an FBI wiretap of Boston mob leader Gennaro Angiulo and his deputy, Ilario Zannino, that shows how RICO has been turned on its head to attack legitimate businesses more often than the mob (who, by the way, are making most of their money doing things that should not be illegal either!):
Zannino: We’re a shylock [loan shark].
Angiulo: We’re a shylock.
Zannino: Yeah.
Angiulo: We’re a [expletive] bookmaker.
Zannino: Bookmaker.
Angiulo: We’re selling marijuana.
Zannino: We’re not infiltrating.
Angiulo: We’re illegal here, illegal there . . .
arsonists. We’re every [expletive] thing.
Zannino: Pimps.
Angiulo: So what?
Zannino: Prostitutes.
Angiulo: The law does not cover us, is that right?
Zannino: We’re not infiltrating legitimate businesses.
Angiulo: I wouldn’t be in a legitimate business for all the[expletive] money in the world.
Copyright © The Association for Objective Law. All rights reserved. Republished in Capitalism Magazine by permission of TAFOL.
