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RICO 101

There are a number of federal (and state) statutes that impose civil and criminal penalties on organized crime defendants. We are focusing here on the crimes defined in the federal RICO statute, 18 U.S.C. § 1962.

Before we get started, you may wish to look at the previous "101" posts:

Conspiracy
Mail and wire fraud part one (jurisdictional elements)
Mail and wire fraud part two (elements in common)
Obstruction of justice
Hobbs Act
Travel Act
Money Laundering

Three different substantive criminal violations are proscribed by 18 U.S.C. § 1962:

Section 1962(a) makes it a crime to invest the proceeds of a pattern of racketeering activity or from collection of an unlawful debt in an enterprise affecting interstate or foreign commerce. For example, a narcotics trafficker violates this provision by purchasing a legitimate business with the proceeds of a pattern of multiple drug transactions.

Section 1962(b) makes it a crime to acquire or maintain an interest in an enterprise affecting interstate or foreign commerce through a pattern of racketeering activity or collection of an unlawful debt. For example, an organized crime figure violates this provision by taking over a legitimate business through a pattern of extortionate acts or arsons designed to intimidate the owners into selling the business to him.

Section 1962(c) makes it a crime to conduct the affairs of an enterprise affecting interstate or foreign commerce "through" a pattern of racketeering activity or through the alternative theory of collection of an unlawful debt. For example, an automobile dealer violates this provision by using the dealership's facilities to operate a stolen car ring through a pattern of predicate violations.

Criminal RICO: 18 U.S.C. §§ 1961-1968 A Manual for Federal Prosecutors § I.A. (U.S. Dept. of Justice May 2016) (emphasis added) [hereinafter RICO Manual].

"Subsection (b) of section 1962 has been used very rarely by prosecutors." Pattern Crim. Jury Instr. 10th Cir. 2.75 (2018). "In general, Section 1962(b) should be reserved for the classic cases involving infiltration of legitimate businesses by organized criminal groups." RICO Manual § III.B.

Section 1962 does not require any mens rea beyond that necessary for the predicate acts. The language of § 1962(a) in particular is rather broad, since a defendant could derive income "from a pattern of racketeering activity" without ever having committed a racketeering act, without knowing of the commission of a racketeering act, or without even knowing that the income is derived from racketeering activity. See Pattern Crim. Jury Instr. 10th Cir. 2.74.2 (2018). In any event, it is DOJ policy to require allegations and proof that defendants acted knowingly or intentionally. RICO Manual § VI.C. And, "as a matter of policy, a RICO prosecution under Section 1962(a) will not be approved unless the RICO defendant is actually charged with the underlying pattern of racketeering activity." RICO Manual § III.A.

There need not be any proof that a RICO defendant or a RICO offense had any nexus to organized crime. See H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 243-49 (1989).

An enterprise is "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. §1961(4).

An association-in-fact enterprise is a "group of persons associated for a common purpose of engaging in a course of conduct." United States v. Turkette, 452 U.S. 576, 583 (1981). It "must have at least three structural features: a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associations to pursue the enterprise's purpose," but the enterprise "need not have a hierarchical structure or a 'chain of command.'" Boyle v. United States, 556 U.S. 938, 945-49 (2009). An association-in-fact enterprise may include purely illegal criminal associations, and there is no requirement that the enterprise have any economic purpose. Pattern Crim. Jury Instr. 10th Cir. 2.74.3 Comment (2018); National Organization for Women, Inc. v. Scheidler, 510 U.S. 249, 259 (1994).

"The Fourth and Eighth Circuits have held that the government must prove that the association or enterprise exists separate and apart from the pattern of racketeering in which it engages." Model Crim. Jury Instr. 8th Cir. 6.18.1962D Note (2017).

A defendant participates in the conduct of an enterprise's affairs by participating in the operation or management of the enterprise. Reves v. Ernst & Young, 507 U.S. 170 (1993). Congress did not intend to penalize all of the employees of a RICO enterprise, "but only those, who by virtue of their association of employment, play a part in directing the enterprise' affairs. An attorney or other professional does not conduct an enterprise' affairs through run-of-the-mill professional services." Model Crim. Jury Instr. 8th Cir. 6.18.1962A Comment (2017) (citation omitted). Lower level participants may be prosecuted if they act under the direction of upper management, knowingly furthering the aims of the enterprise by implementing management decisions or carrying out the instructions of those in control, or knowingly perform acts, functions, or duties that were necessary to, or helpful in, the operation of the enterprise. Mod. Crim. Jury Instr. 3rd Cir. 6.18.1962C-5 (2013); Reves v. Ernst & Young, id. at 184.

This "operation or management test" applies to the principal. If the defendant is charged as an aider or abettor under 18 U.S.C. § 2, proof that he or she aided or abetted another person who was involved in the operation or management of the enterprise would be sufficient. Mod. Crim. Jury Instr. 3rd Cir. 6.18.1962C-5 Comment (2013). Similarly, the operation or management test would not limit liability for a conspiracy (or Pinkerton liability) for a substantive § 1962(c) offense committed by the defendant's co-conspirator. Id.

Racketeering activity is defined in a very long list of state and federal crimes at 18 U.S.C. § 1961(1). See RICO Manual § II.A.

A pattern of racketeering activity "requires at least two acts of racketeering activity, one of which occurred after the effective date of [the RICO act] and the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity." 18 U.S.C. § 1961(5). Case law has established that the government must also "show that the racketeering predicates are related and that they amount to or pose a threat of continued criminal activity." H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 239 (1989). See also Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985).

Unlawful debt is defined in 18 U.S.C. § 1961(6) (basically, debts incurred in connection with the business of gambling or lending money at a usurious rate).

The enterprise and the defendant must be separate and distinct (the distinctness principle) in § 1956(c) and (d) cases. See Cedric Kushner Promotion Ltd. v. King, 533 U.S. 158, 161, 166 (2001); Model Crim. Jury Instr. 8th Cir. 6.18.1962D Note (2017); RICO Manual § II.D.7.

"No RICO criminal indictment or information or civil complaint shall be filed, and no civil investigative demand shall be issued, without the prior approval of the Criminal Division." JM 9-110.101. Guidelines are set forth at JM 9-110.200. See also RICO Manual § I.C.

The conspiracy provision at § 1962(d) does not require proof of an overt act. Note, however, that a conspiracy crime cannot be used as predicate racketeering acts for a RICO conspiracy charge ("conspiracy to conspire"). See RICO Manual § III.D.6.c. Convictions for conspiracy and a substantive count do not merge. Id. § VI.B.

Regarding the extraterritorial application of RICO, see RJR Nabisco, Inc. v. European Cmty., 136 S.Ct. 2090 (2016).

The maximum term of imprisonment is twenty years, or "for life if the violation is based on a racketeering activity for which the maximum penalty includes life imprisonment." 18 U.S.C. § 1963(a). This language arguably imposes a mandatory life sentence where the racketeering act permits a maximum life sentence. The Department of Justice, however, reads this as a maximum, not minimum sentence. RICO Manual § IV.A.

The Sentencing Guidelines range can be readily ascertained by using the Federal Sentencing Guidelines Calculator.

The Apprendi rule applies in any case where the government seeks a sentence of more than twenty years, so "the indictment must track the charging language of the underlying statute." RICO Manual § IV.B.

Title 18 U.S.C. §§ 1963(a)(1)-(3) prescribes mandatory forfeiture of the proceeds and interests obtained from the racketeering activity, and all of the defendant's interests in the charged enterprise. Title 18 U.S.C. § 1963(d) authorizes restraining orders or other actions necessary to preserve the availability of the property for forfeiture. Proposed restraining orders under § 1963(d) must be reviewed and approved by the Criminal Division. See Criminal Resource Manual 2084 (DOJ 1997).

(11/22/19)

 
 
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