Time to reform RICO
THE civil provisions of RICO, the Racketeer Influenced and Corrupt Organizations Act, need reform. Intended to help the Justice Department in its campaign against organized crime, RICO has become a growth industry for the nation's lawyers. What we could call a ``classic'' civil RICO case might go like this: A beverage distributor is infiltrated by a crime syndicate, whose goons go about making it clear to local retailers that if they don't buy their beverages from this particular distributor, they will find the air let out of their tires, or worse. The authorities catch up with the mobsters, who are then tried, convicted, and imprisoned for extortion.
Meanwhile, an honest distributor has seen his business fall apart because he declines to use the same sales techniques as his mob-infiltrated competitor. Unlike the retailers, he has not suffered directly from extortion. But RICO's civil provisions would allow him to sue the mobsters in federal court, for treble damages plus legal fees, on grounds that his business had suffered as a result of ``a pattern of racketeering activity'' by the infiltrated distributorship.
This is the theory. To file a civil RICO suit, a plaintiff must allege a ``pattern of racketeering activity'' in any of several criminal offenses, including extortion, arson, and murder -- as well as mail fraud, wire fraud, and fraud in the sale of securities.
It is the fraud provisions that have opened RICO wide as a barn door. The statutes governing fraud, an offense where states generally claim jurisdiction, are written very broadly. District attorneys do not have unlimited resources, and so they use discretion to determine who actually gets prosecuted.
But would-be civil RICO plaintiffs have no such inhibitions. Note that they need only allege the criminal offenses to have grounds for their civil suits. Note, too, that mail fraud, wire fraud (i.e., over the telephone), and fraud in the sale of securities can be construed to cover just about any misrepresentation in the business world, even one of no interest to the district attorney. In other words, RICO provisions aimed at organized crime are now being used in lawsuits that do not necessarily involve organized crime.
The list of stock brokerages sued under RICO reads like a Who's Who on Wall Street. RICO has been even more dangerous for smaller firms whose good name in their community is their stock in trade.
RICO is out of control not only because it is so easy to claim grounds for a suit, but because the appeal of treble damages plus legal fees has proved irresistible for plaintiffs and their lawyers.
Moreover, federal courts have a certain cachet which state courts lack, and the last straw is that the name of the act has pushed many defendants to settle rather than fight such suits for fear of being publicly labeled ``racketeers.''
None of this should blind us to the fact that ``legitimate businesses'' sometimes commit fraud and other white-collar crimes. In such instances RICO's civil remedies could be as helpful as they are to the honest beverage distributor cited above.
One interesting proposal for reform is to disallow RICO suits unless the defendant has actually been convicted of one of the offenses that can trigger a RICO suit -- what the lawyers call ``predicate offenses.'' This would mean that aggrieved parties would still have redress against criminal fraud, but it would eliminate the problem of plaintiff-as-do-it-yourself-district-attorney.
The Supreme Court has upheld civil RICO suits against ``legitimate business,'' saying that if Congress had intended to limit RICO to usual mob activities -- extortion, arson, murder -- it should have said so.
The courts should not have to write laws because Congress can't be bothered to write them properly. Congress needs to take another look at RICO.