RICO Act of 1970 Essay
Racketeer Influenced and Corrupt Organizations Act of 1970
The Racketeer Influenced and Corrupt Organizations Act of 1970 (RICO) was originally put in place to combat the mafia but has become increasingly used to combat corporate schemes as well. The first thing to know is what a racketeer is. A racketeer is defined as a person who obtains money illegally, as by bootlegging, fraud, or extortion. There are lists in other cases used to describe a racketeer using words from arson all the way to witness tampering . The Racketeer Influenced and Corrupt Organizations Act was imposed mainly to be able to prosecute bosses who may order a killing or some other type of illegal activity but have no physical connection with the crime per say .
RICO has the threat of imposing treble damages on defendants that fall within the scope of this law. RICO is in a class of certain laws that qualify for treble damages and are feared by defendants. Treble damages can impose damages three times the actual financial amount lost. It has been said to be a great thing in criminal court, but has been abused in the civil courts. With the provision of treble damages and only having to show a pattern many civil cases pose the threat of a RICO case that don’t deserve it. RICO has been used to go after the Hell’s Angels, Mafia boss John Gotti, and the Bank of New York Mellon in an international case with Russia .
RICO is one of the twelve titles in the Organized Crime Control Act of 1970, which was designed to combat organized crime. RICO was aimed at trying to stop the infiltration of organized crime into the business community. It does this by being able to prosecute only by being able to show a pattern of activity and it created powerful criminal and civil penalties. Those treble damages aforementioned were designed to be able to destroy the economic base of organized crime.
RICO defines what racketeering activities are and lists a large number of crimes in which members of organized crime commonly engage. It also lists several crimes that aren’t associated with organized crime in the attempt to blanket whatever organized crime may attempt to do, but has resulted in not limiting the RICO application by courts to just organized crime. RICO defines an enterprise as an individual, partnership, corporation, associate, or other legal entity, and union or group of individuals associated in fact although not a legal entity.
There has been a lot of dissention in the courts over this definition as to whether or not an enterprise may be illegitimate. RICO defines a pattern of racketeering activity as requiring at least two acts of racketeering activity. Only requiring two acts to show a pattern has caused trouble in the courts, because of how much it leaves open to interpretation and it’s a very broad definition .
A famous case that was brought about under the RICO law was the U.S. Government’s racketeering case against big tobacco. It was in 1999 when the Department of Justice filed a racketeering lawsuit against the major cigarette manufacturers and two industry affiliated organizations. The U.S. Government was going after $280 billion in penalties on the grounds that the tobacco companies had conspired to deceive the public about the dangers of smoking.
The Department of Justice charged the companies with purposely and fraudulently misleading the public and alleged that “the Defendants have engaged in and executed and continue to engage in and execute a massive 50 year scheme to defraud the public, including consumers of cigarettes, in violation of Rico”. [Taken from DOJ Final Proposed Findings of Fact (FPFF), Executive Summary, page 1.]
The DOJ’s said that starting back in 1953 the Defendant tobacco companies met and engaged in a conspiracy to launch a public relations campaign to counteract the growing body of scientific evidence that showed cigarettes to be harmful, while at the same time their own internal scientific research confirmed the findings that cigarettes caused disease, death, and addiction.
Parts of the Government’s case were dismissed such as the government seeking reimbursement for tobacco related disease medical expenses paid as required by Medicare. These claims were dismissed and the ruling was that the statutes did not permit the type of recovery sought by the government. The case was heard by a single federal judge, because equitable relief that the DOJ was seeking is only granted by a judge.
In the process of the case Phillip Morris (one of the defendants) was said to have made a strong and successful effort to exert some political influence over the case. Phillip Morris supposedly silenced the Whitehouse on the suit, reducing the federal funding for the suit, neutralized political pressure, and created a more beneficial atmosphere for the company during litigation.
The case took a total of 6 years of litigation and 9 months at trial. The judge ruled in the case that the Government had proven its case and found that the tobacco company defendants had violated the Racketeer Influenced and Corrupt Organizations Act. The judge’s findings were that the defendants publicly distorted and minimized the hazards of smoking for decades. They concealed and suppressed research data and other evidence that showed nicotine is addictive, and withheld that information about their internal research on addiction from the American public, the government, and the public health community.
The defendants falsely denied that they can and do control the level of nicotine delivered to smokers to create and sustain addiction. From the 1950’s to present, different tobacco companies have intentionally marketed cigarette to young people under the age of 21 to recruit replacement smokers. Defendants publicly denied, while internally acknowledging, that secondhand tobacco smoke is hazardous to nonsmokers .
Another famous case dealing with racketeering is the scandal involving Drexel and Michael Milken in the late 1980’s. Michael Milken was a wizard of junk bonds for the company Drexel Burnham Lambert Inc. At the time Drexel was the first Wall Street investment house prosecuted under RICO. Drexel was also one of the most sweeping investigations of the securities industry since those following the stock market crash of 1929.
There was debate in the justice department beforehand whether a RICO stature should be used against Drexel who was a nationwide investment firm with ten thousand employees and hundreds of thousands of customers. The SEC filed a civil complaint against Drexel charging that it traded on inside information and violated a series of securities laws when it financed 18 different stock transactions. The complaint alleged that the effect was to defraud its clients of earnings. In many of these 18 transactions Boesky and Milken were working secretly together according to the charges .
Milken had become famous in the 1980’s for pressing the use of junk bonds, which are unrated or below investment grade bonds, to finance takeovers and mergers. Super rich traders could buy a firm’s debts, and then use the stock leverage they gained to take over the firm. Most of the time this resulted in the profits being scooped up, firms dying off, and their workers ending up laid off or fired. Most of the charges the in the SEC complaint involved takeovers.
Milken was indicted on 98 counts of securities violations and was also implicated on the nation Savings and Loan scandal. Milken was basically accused of using a wide range of network contacts to manipulate stock and bond prices. He denied any implication with the fraud cases but plead guild to six counts of “technical” violations that were not RICO charges to drastically lessen his sentence.
He was sentenced to ten years in prison but ended up being shorter because of his help and testimony in other cases. Through this time of Milken being in prison, Drexel ended up pleading no contest to lesser felonies that were not RICO charges, but went of business from having to pay out all of the settlements and it filed bankruptcy. .
“Kids for Cash” is the media term given to another famous RICO case that involves racketeering charges dealing with bribes and kickbacks. Two judges in Pennsylvania were receiving bribes and kickback from a juvenile detention facility for sending kids to jail. The judges didn’t fund or send sentenced kids to the county jail effectively shutting it down. Then they supposedly replaced it with a cash cow, which was a privately owned lockup built buy friends of the two judges.
They forged a deal for the county to pay $58 million for a ten year period for its use. Conahan was serving as president judge of the Luzerne County Common Pleas Court, and that position allowed him to control the county-court budget. The judge Mark Ciavarella is the judge who sent away all the children. Kids that were sent to jail included a thirteen year old that threw a piece of steak at his mother’s boyfriend, a eleven year old for calling the police after his mother locked him out of the house, and a fourteen year old for writing “Vote for Michael Jackson” on a few stop signs.
It was found that public defenders, teachers, and court employees all saw what was going on and they did nothing. Ciavarella would direct probation officers to talk kids out of exercising their right to council even. What brought the case to light were some local reporters who broke the story, a wistle-blowing family court judge, some Juvenile Law Center attorneys, and some parents.
Ciaverella was found guilty on twelve out of thirty nine charges including racketeering, money laundering, and conspiracy in connection with about one million dollars payment from Robert Mericle, the developer of the PA child Care center. He was acquitted on charges of bribery and extortion. He is 61 years old and sentenced to 28 years in prison. More than one thousand former defendants in Luzerne County Juvenile Court who claim their rights were violated in the kids-for-cash case and 548 of their parents would split about $12.2 million from a proposed settlement of $17.75 million with the developer Robert K Mericle. Mericle admitted to paying $2.1 million to the two judges .
RICO laws have given the justice department the ability to reach beyond just the person that committed a certain crime. Now the people sending the orders to commit crime have consequences for their actions as well. Just because there is not a physical connection with the crime doesn’t mean now that individuals can’t be charged with a crime. The treble damages provided often scare defendants enough that deals are much easier for the prosecutors to make for lesser. These laws have been given some teeth and therefore have become a very effective tool for the justice system in America.
The Racketeering Influenced and Corrupt Organizations Act of 1970 has become increasing used as time has gone one. Its bounds inside the courts have expanded and its scope has widened as well. Originally intended for organized crime it is now being used there and in the corporate sector, public sector, and even Wall Street.
What’s a racketeer. (2004). Journal of Commerce, 19.
Sourcewatch.org. (2009, november 29). Retrieved september 26, 2013, from The U.S. Government’s racketeering case against Big Tobacco: http://www.sourcewatch.org/index.php?title=The_U.S._Government%27s_racketeering_case_against_Big_Tobacco The U.S. Racketeer and Influenced and Corrupt