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Racketeer Influenced and Corrupt Organization Act ( RICO ) – Definition

Cite this article as: Jason Mance Gordon, "Racketeer Influenced and Corrupt Organization Act ( RICO ) – Definition," in The Business Professor, updated January 5, 2015, last accessed April 9, 2020, https://thebusinessprofessor.com/knowledge-base/racketeer-influenced-and-corrupt-organization-act-rico/.
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Racketeering Influenced and Corrupt Organizations Act
This video explains the Racketeering Influenced and Corrupt Organizations Act or RICO Act.

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What is the “Racketeer Influenced and Corrupt Organizations Act” (RICO)?

This law imposes criminal and civil liability upon those businesspersons who engage in certain prohibited activities that directly affect interstate commerce. The law is commonly used to impose criminal sanctions and forfeiture of resources used in furtherance of the criminal enterprise. Elements of a RICO action include:

  • Involvement in an Enterprise – This may include using or investing income from prohibited activities to acquire an interest in or to operate an enterprise; acquiring or maintaining an interest in or control of an enterprise; or conducting or participating in the conduct of an enterprise while being employed by or associated with it.
  • Pattern of Racketeering – Racketeering is defined as “any act or threat” involving a specified state crime or any “act” subject to indictment under various federal statutes. There must be some pattern of or recurring activity constituting racketeering.

The law makes it unlawful for any person employed by or associated with any enterprise to conduct or participate in a violation of the law. The law foresees two separate entities — person and the enterprise. Generally, employment alone is insufficient to hold someone liable under RICO.

History of RICO

In order to combat organized crime in the United States, the Racketeer Influenced and Corrupt Organizations Act, which is popularly called “RICO”, was passed in 1970. By design, RICO as a federal law allows prosecution, criminal penalties and civil punishments for racketeering activity performed as part of an ongoing criminal organization. Racketeering activity has to do with crimes committed through extortion or coercions, it is usually associated with organized crimes. RICO was designed to combat racketeering and its provisions include trials for leaders of racketeering groups, so, the leader necessary doesn’t have to execute the criminal act but because he gave the orders, he is tried for crimes.

Racketeering acts are organized crimes which involve the use of intimidation and force to extort things of financial values from people. As part of the Organized Crime Control Act of 1970, RICO was enacted by section 901(a) of this Act. The Racketeer Influenced and Corrupt Organizations Act was drafted by Robert Blakey, an adviser of the U.S Senate Government Operations Committee, the drafting was however monitored by John Little McClellan, who was the committee’s chairman. RICO was passed in 1970 after the approval of the Congress of the U.S. After this Act was enacted 33 states adopted RICO into their state laws to prosecute offenders or criminal organizations.

Not just any offender can be tried using the provisions of RICO. As contained in this Act, for a person to be charged with racketeering, they must have a record of at least two acts of racketeering drawn from a list of 35 crimes, both federal and state within a period of 10 years. A fine of $25,000 and 20 years of imprisonment can be meted out to a person convicted of racketeering, all extorted possessions will also be impounded.

Private individuals who suffer damages in business or property due to racketeering act are also permitted by RICO to file a civil suit. The complainant must however be able to defend that there is really an enterprise. Other provisions of RICO such as seizure of assets, the transfer of forfeitable property and skepticism of prosecutors regarding these are also discussed. It is

State laws

In 1972, after the RICO Act has been enacted, a total number of 33 states also enacted RICO into their state laws in order to prosecute organized crimes and racketeering activities. States such as Puerto Rico and the US Virgin Islands use state RICO laws to create legal punishments for state offenses that are related to organized crimes.

These state RICO laws are also referred to as ‘Little RICO Acts’, they however follow the patterns of the federal RICO laws. State laws allows offenders to be tried and prosecuted, the criminal prosecution can include payment of fine, seizure of ill-gained properties among others.

RICO predicate offenses

Offenses that can be prosecuted under RICO aws both at the state and federal level are all forms of racketeering activities and any violation of the statutes of a state. Such violations include extortion, gambling, murder, bribery, kidnapping, arson, robbery and false dealings.

Other offenses that are also prosecuted under RICO laws are;

  • Embezzlement and fraud,
  • Money laundering and gambling,
  • Criminal copyright infringement,
  • Drug trafficking,
  • Terrorism,
  • Obscene dealings,
  • Security fraud and bankruptcy fraud,
  • Bribery and theft, and other racketeering acts.

All the criminal acts listed above are regarded as RICO predicate offenses and individuals guilty of any of the crimes are liable to prosecution and punishments.

 

Discussion: Do you think this statute goes too far by allowing the government to charge individuals who are not directly involved in the criminal activity? Is the ability to reach those facilitating a criminal activity (and their assets) necessary to the administration of justice?

Discussion Input

  • Some might argue that RICO is far to broad in its reach. It allows law enforcement extensive reach in charging anyone connected with a criminal enterprise in any way. It also allows for the seizure of assets from anyone implicated in the crime. Most would agree that granting this wide reach is necessary for the efficient administration of justice, others would argue that it infringes upon individual liberties. Some might also argue that it grants the government too much power and invites abuse.

Practice Question: Gloria makes a living by illegally importing cocaine into Florida from Colombia, SA. She does not have any hands on the process. Rather, she hires every part of the activity. Once the drugs arrive, she hires Terry to pack them in the trunk of a car and sends them to a distributor in New York. She hires Robert to drive the vehicle carrying the drugs. On the way, Robert is stopped and arrested by North Carolina police officers. The Federal Bureau of Investigation gets involved and traces the scheme back to Gloria. How can the FBI potentially charge Gloria for her involvement in drug trafficking?

Proposed Answer

  • The FBI can likely charge Gloria with the involvement in an illegal enterprise as prohibited under the provisions of the RICO Act. To convict a defendant under the Racketeer Influence and Corrupt Organizations Act (RICO), the government must prove that the defendant engaged in two or more instances of racketeering activity and that the defendant directly invested in, maintained and interest in, or participated in a criminal enterprise affecting interstate or foreign commerce. The RICO also provides that it is unlawful for any person to conspire to violate any laws that prohibit racketeering activities under the law. Gloria participated in, financed, and associated in an illegal enterprise with sole aim of making profits. The fact that Gloria did not personally handle the drugs is not relevant, however what is important is that she hires/pays for every service provided by the persons who help pack, repackage, and transport and sell the drugs. https://www.nolo.com/legal-encyclopedia/content/rico-act.html

Academic Research

Engle, Eric Allen, Extraterritorial Human Rights and the Racketeer Influenced and Corrupt Organizations Act (RICO) after Morrison v. National Australia Bank Ltd. (May 28, 2012). Book chapter in: Professor Manoj Kumar Sinha (ed.) Business and Human Rights, 2013.. Available at SSRN: https://ssrn.com/abstract=2069636 or http://dx.doi.org/10.2139/ssrn.2069636

Levin, Benjamin, American Gangsters: RICO, Criminal Syndicates, and Conspiracy Law as Market Control (February 9, 2012). Harvard Civil Rights- Civil Liberties Law Review (CR-CL), Vol. 48, No. 1, p. 105, 2013. Available at SSRN: https://ssrn.com/abstract=2002404

Pierson, Pamela Bucy, RICO Enterprises: The Mob and Fraud (June 27, 2012). Temple Law Review, Vol. 85, 2013 (Forthcoming); U of Alabama Legal Studies Research Paper No. 2179206. Available at SSRN: https://ssrn.com/abstract=2179206

Porter, Wes R., White Collar Crime: RICO (November 30, 2010). WHITE COLLAR CRIME SERIES, Thomson Reuters, H. Lowell Brown, Thomson Reuters, eds., 2011. Available at SSRN: https://ssrn.com/abstract=1948106

Engle, Eric Allen, Extraterritorial Human Rights and the Racketeer Influenced and Corrupt Organizations Act (RICO) after Morrison v. National Australia Bank Ltd. (May 28, 2012). Book chapter in: Professor Manoj Kumar Sinha (ed.) Business and Human Rights, 2013.. Available at SSRN: https://ssrn.com/abstract=2069636 or http://dx.doi.org/10.2139/ssrn.2069636

Levin, Benjamin, American Gangsters: RICO, Criminal Syndicates, and Conspiracy Law as Market Control (February 9, 2012). Harvard Civil Rights- Civil Liberties Law Review (CR-CL), Vol. 48, No. 1, p. 105, 2013. Available at SSRN: https://ssrn.com/abstract=2002404

Gordon, Randy, Crimes that Count Twice: A Reexamination of RICO’S Nexus Requirements Under 18 U.S.C. § 1962(C) (2007). 32 Vt. L. Rev. 171 (2007). Available at SSRN: https://ssrn.com/abstract=2362388

Miller, Jeremy M., Rico and the Bill of Rights: An Essay on a Crumbling Utopian Deal. Commercial Law Journal, Vol. 104, pp. 336, 1999 . Available at SSRN: https://ssrn.com/abstract=926602

Blakey, G. Robert, Rico: The Genesis of an Idea. Trends in Organized Crime, Vol. 9, No. 8, 2006; Notre Dame Legal Studies Paper No. 08-18. Available at SSRN: https://ssrn.com/abstract=1142930

Mullenix, Linda S., Complex Litigation: RICO Class Actions (November 2004). Vol. 26 Nat’l L.J. 10 (Nov. 29, 2004); U of Texas Law, Public Law Research Paper No. 438. Available at SSRN: https://ssrn.com/abstract=2278306

Racketeer Influenced and Corrupt Organizations (RICO): Basic Concepts-Criminal and Civil Remedies, Blakey, G. R., & Gettings, B. (1980). Temp. LQ, 53, 1009. Despite the efficacies of the 1970 Racketeer Influenced and Corrupt Organizations Act (RICO), there are still some controversial arguments against it. RICO laws are drafted to cause a decline in criminal organizations or enterprises by prosecuting organized criminals. This paper examines the RICO statute, that is the prosecution and defense of individuals who engage in organized crime. It also investigates how RICO laws are enforced and controversies associated with these laws and their enforcement. It also explores futuristic factors and how these will affect the future of RICO investigations and prosecutions.

Racketeer Influenced and Corrupt Organizations, 18 USC 1961-68: Broadest of the federal criminal statutes, Atkinson, J. (1978). J. Crim. L. & Criminology, 69, 1. This paper highlights the 1970 RICO Act as a very effective arm of Organized crime control Act passed by the congress of the United States. This paper seeks to define how the Racketeer Influenced and Corrupt Organization, its statute both at the federal and state levels, what its laws are and how these laws are enforced. Explored in this paper is also the twenty four federal crimes and 8 state crimes that can be tried using the RICO laws. Racketeering activities are exemplified in this paper as well as other substantive crimes or acts that are punishable under RICO.

Racketeer Influenced and Corrupt Organizations (RICO)-Securities and Commercial Fraud as Racketeering Crime after Sedima: What Is a Pattern of Racketeering …, Black, B. (1985). Pace L. Rev., 6, 365. This is a study carried out by Babara Black in 1985 on Racketeer Influenced and Corrupt Organization, RICO and its position on what patterns of Racketeering activities are. This study aims to discuss why securities and commercial frauds are classified as racketeering crime under RICO.  According to this study, the Racketeer Influenced and Corrupt Organizations Act was enacted to truncate racketeering activities and decrease the infiltration and corruption of business by organized crime. Although, the statute of RICO was initially ignored by civil litigants, these litigants before fully aware of the utility of RICO’s civil provisions in 1980. This study aims to define the patterns of racketeering activities.

Application of Respondeat Superior Principles to Securities Fraud Claims Under the Racketeer Influenced and Corrupt Organizations Act (RICO), Black, B. (1984). Santa Clara L. Rev., 24, 825. This paper examines the application of RICO laws to security fraud claims under the RICO act.It studies the applications of RICO laws and how its statutory language give room for applications beyond the primary purpose of the RICO act. The application is seen to have extended to ordinary commercial and business fraud claims. Instances are situations where claimants give allegations of securities frauds because the provision of RICO allows that any plaintiff who establishes damages resulting from a racketeering violation can recover treble damages. There is however a tendency that some plaintiffs give allegations to get settlement values for their claims.

Application of the Racketeer Influenced and Corrupt Organizations Act (RICO) to Securities Violations, Pray, J. L. (1982). J. Corp. L., 8, 411. This paper examines how the laws of RICO are applied to security violations. According to the act, any individual that fraudulently buys or sells securities or engage in security fraud is exposed to criminal penalties and sanctions of the Racketeer Influenced and Corrupt Act. Securities frauds are also regarded as stock or investment frauds, these are tricky ways of coercing investors to buy or sell based on falsified information. This paper studies and explains how securities violations and offences became predicate RICO offenses.

Civil RICO: How ambiguity allowed the Racketeer Influenced and Corrupt Organizations Act to expand beyond its intended purpose, Coppola, L., & DeMarco, N. (2012). New Eng. J. on Crim. & Civ. Confinement, 38, 241. Upon the enactment of the Racketeer Influenced and Corrupt Act in 1970, there are certain provisions and statutes of the Act. However, due to some controversies on the provisions of the RICO laws, RICO has been seen to be applied to many offenses different from its primary purpose. This paper examines how ambiguity and inexactness has made RICO to expand beyond its intended purpose. This paper highlights how RICO is evolving into something which is quite different from its original conception. It also examines the factors responsible for RICO drifting away from its original purpose.

Georgia Racketeer Influenced & Corrupt Organizations Act, Garland, E., & Samuel, D. (1983). Ga. St. BJ, 20, 34. This paper presents a study on the Georgia Racketeer Influenced Corrupt Organizations. It examines Georgia as one of the states that developed state RICO laws from the federal Racketeer Influenced and Corrupt Organizations Act. Georgia’s RICO was passed in 1980 by the general assembly and prosecutors in the state use the RICO laws in diverse criminal cases. This article gives a description of Georgia’s RICO and its significant features as different from the federal RICO Act. This article also examines specific issues related to the federal Racketeer Influenced and Corrupt Organizations Act and how these issues can also affect Georgia RICO.

Racketeer Influenced and Corrupt Organizations Act: Powerful New Tool of the Defrauded Securities Plaintiff, MacIntosh, J. G. (1982). U. Kan. L. Rev., 31, 7. Plaintiffs of securities crime and frauds have been seen in recent times to be leveraging on the provisions of RICO Act to prosecute offenders and also recover treble damages. Furthermore, RICO has been attending to certain cases that were not included in its structure upon enactment. This paper however examine powerful new tools that can be used by defrauded securities plaintiffs. This paper explores RICO and securities frauds, securities violations, treble damages and claims of securities plaintiffs. It presents effective new tools of the defrauded securities plaintiff.

RICO Reform: Weeding Out Garden Variety Disputes under the Racketeer Influenced and Corrupt Organizations Act, Nonna, J. M., & Corrado, M. P. (1989). John’s L. Rev., 64, 825. The discussions of this paper premise on Racketeer Influenced and Corrupt Organization Act reform following the criticisms against RICO in recent years. Although, there have been many attempts to reform RICO in recent years, these attempts have not been successful due to certain factors. This article however discusses weeding out garden-variety disputes under the Racketeer Influenced and Corrupt Organization Act. The paper finds out that using the ‘garden variety’ as a weapon to curtail the statute of RICO would yield positive results. This paper examines this ‘weeding out garden-variety disputes’ as an effective strategy to RICO reform.

Vicarious Civil Liability Under the Racketeer Influenced and Corrupt Organizations Act, Dwyer Jr, T. E., & Kiely, S. (1984). Cal. WL Rev., 21, 324. In a RICO scheme, a corporate employer cannot be liable for vicarious civil liability unless he is proven otherwise by the prosecutor. This paper examines one of the controversies that emanated from the provision of the RICO Act. This controversy of whether the RICO act contemplates vicarious civil liability. Civil liability in an ordinary sense is based on the liability or fault of another, this article therefore examines the statute of RICO as regards respondeat superior liability for a corporate employer whose agent has violated law or involved in RICO predicate offenses.

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