The Racketeer Influenced and Corrupt Organizations Act. The Act appears at Title 18 of the United States Code, section 1961, et. seq.
The RICO Act was passed by the United States Congress to enable persons financially injured by a pattern of criminal activity to seek redress through the state or federal courts.
When was the RICO Act passed by Congress?
Like any controversial piece of legislation, Congress debated the passage of the RICO Act, or a similar statute, for years — if not decades. The RICO Act itself was passed in 1970, but once a law is passed, it usually is not enforced immediately. Such was the case with RICO. It took a few years for the Department of Justice to gear up for the enforcement of the statute. Civil RICO claims did not become common until the early 1980’s.
Can a plaintiff bring a civil RICO claim against a defendant even if the defendant did not commit any crime?
Every RICO claim must be based on a criminal violation or, as the statute states, an “act of racketeering.” “Acts of racketeering” are all serious crimes and are listed in section 1961(1) of the RICO Act. A civil plaintiff must not only prove that the defendant engaged in acts if racketeering, but must also prove that these acts constituted a “pattern” and must prove all of the other elements of a civil RICO claim. The burden of proof that must be sustained by a civil plaintiff is, however, less onerous than the burden imposed upon criminal prosecutors. A civil plaintiff need only convince a jury by a preponderance of evidence that the defendant committed the acts of racketeering; whereas, a criminal prosecutor must establish the acts of racketeering beyond the reasonable doubt of the jury. The other difference between a civil and criminal RICO claim is the resulting penalties. If a plaintiff succeeds in establishing a civil RICO claim, he or she will be awarded monetary damages, in particular three times the actual damages established at trial plus the plaintiff’s attorneys’ fees and costs. If a prosecutor establishes a criminal RICO claim, the defendant goes to jail. The greater burden of proof imposed upon a prosecutor arises from the fact that the end result of a successful criminal prosecution is the loss of the defendant’s liberty, not just his money.
If I obtain a judgment against a defendant under RICO, what prevents the defendant from declaring bankruptcy and getting the judgment discharged?
A debtor cannot discharge debts arising out of intentional malicious or criminal conduct by filing for bankruptcy. Thus, if a plaintiff succeeds in obtaining a judgment against defendant under RICO, that judgment generally cannot be discharged in bankruptcy
Why do people complain that RICO is used against corporations?
When originally passed by Congress in 1970, the RICO Act was aimed at reducing and eventually eliminating the influence of the Mafia and other organized criminal syndicates over the United States economy. In United States v. Turkette, 452 U.S. 576 (1981), the Supreme Court held that RICO applied to both legitimate and illegitimate RICO enterprises. Before that decision, many lower courts attempted to limit RICO to “criminal”, “illegitimate” or “racketeering” enterprises. Given the ruling in Turkette, RICO could be used not only against the Mafia and other criminal organizations but it could be used against corporations, political protest groups, labor unions, loosely knit-groups of people. Literally, a RICO claim could be based upon the activities of any group or organization whose members pursue a common goal.
Many people believed that such an interpretation went well beyond the original intentions of Congress when it passed the RICO Act. Critics of the Turkette decision complained that the RICO Act should be limited to the Mafia, or drug gangs or other clearly criminal groups. But how can one develop a workable and objective limitation? How does one define a “clearly criminal” group? Are such enterprises made up of only Italians or Colombians? The lower court’s were never able to answer this question, instead, they basically said: “we don’t know how to define a ‘criminal’, ‘illegitimate’ or ‘racketeering’ enterprise but we know one when we see one.” That’s not a legal standard that the Supreme Court is likely to approve – nor is it likely to approve a definition based on any racial or ethnic stereotype — especially when the statute does not provide for such a limitation. So, in Turkette, the Supreme Court ruled that when Congress used the term “enterprise” without limitation, Congress meant for RICO to apply to all enterprises — legitimate or illegitimate.
It is true: RICO has been used in ways that Congress could not have envisioned in 1970 when the statute was passed. If the statute is being improperly exploited, however, it is up to Congress to amend the statute and provide some limitations. Apparently, Congress does not believe that the RICO Act is being used or interpreted improperly because very little has been done by Congress to curb its expansive use. Congress did impose a major limitation on civil RICO claims in 1995, when it amended the statute to require that a defendant be criminally convicted of securities fraud before the defendant could be subject to a civil RICO claim predicated upon a violation of the securities laws.
Given that the term “enterprise” includes any legitimate or illegitimate organization, and given that a RICO claim can be based on violations of the mail or wire fraud statutes (which are extremely broad, see below), RICO can be used in an unlimited number of factual scenarios. RICO is criticized because when it was passed, people assumed it presented a problem only for mobsters, now – depending upon the circumstances – practically anyone could find themselves answering to a RICO claim. The uncertainty of RICO’s scope and application is unsettling to many practitioners and potential defendants.
I have heard the RICO Act criticized because it includes mail and wire fraud as acts of racketeering upon which a RICO claim can be based. What is the problem with the mail and wire fraud statutes?
The mail and wire fraud statutes are very, very broad. Before RICO, the mail and wire fraud statutes could be enforced only by U.S. Attorneys, who didn’t have time to prosecute everyone engaged in conduct that potentially violated the statutes.
When Congress included mail and wire fraud as predicate acts under RICO, however, it allowed every attorney in the country to use the mail and wire fraud statutes to the advantage of their clients. Many, many courts have noted that RICO’s inclusion of mail and wire fraud basically federalized state common law claims of fraud in the business context i.e.,: every business uses the mails or wires, so if a business engages in fraud, it has arguably and automatically violated the mail and wire fraud statutes as well.
Here’s a pretty common example of how RICO is used in this context: a manufacturer designs a product, it is tested, 99 out of 100 times the product works as intended; the one failure generates a report from an engineer that says the product may not work as well as the competitor’s product; distribution of the product goes forward; for ten years the product’s advertisements say, “this product works better than the competitors;” after ten years a plaintiff sues the manufacturer claiming that the product is defective; pursuant to this suit, the plaintiff discovers the engineer’s report from 10 years earlier saying that the product doesn’t work as well as the competitor’s product. Based on the engineer’s eport, the plaintiff amends her complaint to allege that the advertisements were fraudulent, that the advertisements were distributed by mail and wire, that the advertisements constituted a pattern of misrepresentations that lasted a substantial period of time, and that the manufacturer, its law firms, its ad agency and its customers constituted an enterprise through which the manufacturer engaged in a pattern of racketeering (i.e., mail and wire fraud). Voila — a simple product defect claim is now a RICO claim!
I’ve heard some RICO defendants complain that the Department of Justice abuses RICO’s broad powers to confiscate a defendant’s property primarily for the purpose of reducing the national debt. Does this complaint have any validity?
This complaint doesn’t have much merit. I personally don’t believe that criminal forfeitures have made much of a dent in the nation’s debt. The government certainly spends more money on law enforcement than it seizes through forfeiture. I would say such statements serve as good sound bites for the media, but do not hold much, if any, truth.
Given that one of the original purposes of the RICO Act was to seize all of the assets of criminal organizations and basically cripple the economic strength of these groups, in the 40 years since it was passed, has the RICO Act economically crippled the Mafia or other criminal groups?
I think RICO prosecutions have worked to a certain extent. For example, there used to be many casinos in Las Vegas that were known fronts for the Mafia. I don’t think that’s the case any more (at least it’s not a matter of public knowledge any more).
On the other hand, maybe the forfeiture provisions have simply caused the Mafia to become more sophisticated in its use of legitimate business, i.e., caused the Mafia to set up more levels of ownership to place them further from the apparent center of control; caused the Mafia to use strawmen or nominees to hold their ownership interest so that (on paper) the Mafia doesn’t appear to have any ownership interest in the enterprise; or caused the Mafia to become more sophisticated in its use of off-shore accounts where it is impossible or more difficult for the government to trace the true source of funding. So maybe the success of RICO is only skin-deep.
Is it true that you can be convicted of a RICO violation if you just have a drink or other incidental social contact with a criminal?
No, that’s not true. If, in fact, two people were simply having a drink, and one of the persons was a racketeer and the other was a wholly innocent individual without knowledge of or participation in the criminal acts of the racketeer, the innocent person cannot be convicted of a RICO violation. An innocent meeting, by itself, should not give rise to an inference that the innocent person is conspiring with the racketeer to engage in a pattern of racketeering. To be convicted of conspiring to violate the RICO Act, the government must generally prove that the conspirator had knowledge of the racketeer’s criminal endeavor and agreed to do something, or did something, that furthered, advanced or concealed that endeavor. In this regard, the Supreme Court has commented on the level of participation necessary to support a conviction: “If conspirators have a plan which calls for some conspirators to perpetrate the crime and others to provide support, the supporters are as guilty as the perpetrators.”
Readers, however, must not confuse the level of proof necessary to support a conviction with the level of proof necessary to obtain a search warrant or indictment. A conviction can result only if the government proves the crime beyond reasonable doubt, but the government may obtain a search warrant merely upon probable cause. For instance, assume the government suspected Mobster #1 of murder and had Mobster #1 under surveillance. Mobster #1 meets with Mobster #2 and they talk about the Super Bowl and have a drink. This meeting and the mobsters’ respective histories, may constitute probable cause to believe a criminal conspiracy exists between the two mobsters and for the government to obtain a search warrant. If no evidence is found during the search that links Mobster #2 to the murder, then the probable cause should vanish. If evidence is found during the search that links Mobster #2 to the murder, then that evidence may give rise to probable cause sufficient to support an indictment of Mobster #2 for conspiracy to murder. In other words, a simple meeting like this could spark a chain reaction that ultimately leads to evidence supporting a conviction, but the meeting alone should not serve as sufficient basis for a conviction.
What does it mean to engage in a “pattern of racketeering activity”?
A “pattern of racketeering activity” first requires that the suspect engage in criminal activity (i.e., racketeering activity). The term “racketeering activity” is defined in section 1961(1) of the RICO Act. Racketeering activities, upon which a RICO claim can be based, include a number of state criminal violations, such as murder, kidnapping, bribery, and arson, among others. Racketeering activities also include may federal crimes, such as mail fraud, wire fraud, bank fraud, obstruction of justice, interstate transportation of stolen property, and extortionate extensions of credit, among others. The list of crimes upon which a RICO claim can be based is long, and if you think you have a RICO claim, it is best to review all of the crimes listed in section 1961(1) to determine whether any of these crimes are presented by the facts of your case. If, however, the facts of your case do not give rise to any of the crimes listed in section 1961(1), then you do not have “racketeering activity” upon which a RICO claim can be based and you cannot bring a RICO claim. If you determine that the defendant has committed an act of racketeering numerated in section 1961(1), then you must determine whether the defendant’s commission of the racketeering activities constitutes a pattern.
The RICO Act defines a pattern as “at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years . . . after the commission of a prior act of racketeering activity.” The statute’s definition, however, became irrelevant for all practical purposes when the United States Supreme Court rendered its decision in H.J. Inc v. Northwestern Bell Tele. Co., 409 U.S.299 (1989).
In H.J. Inc., the Supreme Court ruled that the factors of “continuity” plus “relationship” combine to form a pattern. A series of criminal acts satisfy the “continuity” requirement if they last for a substantial period of time (generally a year or more) or if they threaten to continue indefinitely. An example of the last type of continuity occurs when a mobster threatens: “pay me two thousand dollars a month or I’ll break your legs” and is arrested after the victim makes two payments. The pattern lasted only two months, but it threatened to continue indefinitely, i.e., but for the mobster’s arrest, he would have continued to collect two thousand dollars per month forever and ever.
In addition to being sufficiently continuous, the criminal acts must also pass the “relationship” test, i.e., have “the same or similar purposes, results, participants, victims, or methods of commission, or otherwise [be] interrelated by distinguishing characteristics and are not isolated events.” If the defendant’s racketeering activities satisfy the factors of “continuity” and “relatedness,” then the defendant will be found to have engaged in a “pattern of racketeering.”
If RICO is such a broad statute, why are RICO criminal cases so rare? Why don’t the government prosecutors use the RICO Act as much as the civil plaintiff attorneys?
In civil litigation, RICO is a rare tool that enables a civil plaintiff to recover not only his or her actual damages, but three times the actual damages (as a penalty) plus the plaintiff’s costs and attorneys’ fees. Very few statutes (state or federal) allow a civil plaintiff such an enormous windfall if they are successful. Accordingly, there is a huge incentive for a civil plaintiff’s attorney to try to construct a civil RICO claim in every action that the attorney may bring. Although RICO is a cumbersome statute, pleading a RICO claim has value to civil plaintiff’s attorneys. Even though a civil plaintiff’s attorney believes the claim may be dismissed (voluntarily or involuntarily) before trial, the RICO claim has substantial settlement value for so long as the defendant potentially faces liability under the RICO act.
The RICO Act, however, does not provide government prosecutors with a similar windfall in the criminal context. Criminal sentences available under the RICO Act are no longer or shorter than criminal sentences for many other crimes. Thus, a prosecutor has no reason to charge a defendant with a RICO violation if the prosecutor believes he can get a conviction on the basis of any of the defendant’s individual acts of racketeering. For example, if someone engaged in mail fraud, extortion and murder, the prosecutor would only need to prove the elements of mail fraud, extortion and murder beyond a reasonable doubt to obtain a conviction on all three counts. Whereas to obtain a RICO conviction, the prosecutor would have to prove all the elements of mail fraud, extortion and murder beyond a reasonable doubt AND also prove the elements of a RICO claim (e.g., operation and management, pattern, enterprise, etc.) beyond reasonable doubt. If a prosecutor will not undertake the added complexities of a RICO claim unless it is absolutely necessary to do so. A RICO claim may be necessary in a criminal action if the defendant never personally engaged in or specifically ordered any criminal actions. You can be convicted under the RICO Act for simply operating and managing a criminal enterprise through a pattern of racketeering. The RICO Act maybe the only way to convict the “Godfather-type” figures in any criminal scenario, but otherwise if the defendant has blood on his hands, there are usually easier ways to get a conviction.
How can the RICO Act be used against political protest groups like the pro-life movement or PETA?
Civil RICO claims have been brought against political protest groups like the pro-life movement and PETA to recover for the economic losses caused by their protest activities. In the claims against the pro-life movement, abortion clinics and doctors who perform abortions claim that the pro-life protestors block the entrances to their clinics, threatening employees and patients if they enter, sometimes breaking into the clinics and destroying medical equipment, sometimes threatening doctors with death if they continue to perform abortions, and sometimes doctors who perform abortions have been murdered by pro-life protestors. The clinics and doctors claim that the pro-life protestors engage in a pattern of extortion (with their threats), murder, and arson (if the clinics are burned down). PETA has been accused of engaging in similar activities against companies and laboratories that perform animal testing or against agricultural facilities raising animals for human consumption.
Obviously, to the extent a protest group destroys property, injures people, murders people and threatens the life of particular people, they have crossed the line of free and protected speech and engaged in criminal behavior that may be compensable under the RICO Act and under many other common law claims. Mainstream protest groups are, thus, not likely to engage in such activities. Rather, the mainstream protest activities occupy a large gray area between free speech and criminal activity. Whether particular activities constitute extortion depend upon a case-by-case analysis. Generally speaking, however, websites or posters that simply provide the names of doctors who perform abortions are not likely to be considered extortionate. Posters or websites that give rewards to people who murder particular doctors, however, might constitute racketeering activity. Protest rallies where speakers voice their opinion that it is admirable to sacrifice lives in furtherance of the cause (without identifying whose life should be sacrificed) are not likely engaged in racketeering activity. Protest rallies that call upon people to burn down a particular clinic or to attack the workers or patients of a particular clinic may be engaged in racketeering activity.
Whether these protest activities constitute racketeering largely depends upon whether they qualify as acts of extortion or coercion under state law. Such protest activities are not likely to constitute a violation of the Hobbs Act, which is the federal extortion statute. Under the Hobbs Act, a defendant engages in extortion only if he “obtains” or attempts to “obtain” the property of another “with his consent, induced by wrongful use of actual or threatened force, violence, fear, or under color of official right.” Since these protest activities do not obtain or attempt to obtain the property of another (they simply attempt to interfere with the business of another), it is difficult to depict them as acts of extortion.
Can RICO be used to prosecute members of terrorist groups, like Al-quada?
Under most circumstances, terrorist organizations could be prosecuted under RICO. Legally speaking, there is little difference between gunning down 5 members of a rival Mafia family and gunning down 5 innocent tourists in an airport concourse. Every time a bomb explodes, it is an act of arson, so a series of bombings over a period of months or years could constitute a pattern of arson, i.e., a pattern of racketeering. Likewise, every time a plane crashes into a building, it is an act of arson and thousands of acts of murder. RICO would be a good way to convict an individual like Osama bin Laden, who basically acts as the “Godfather” of the terrorist group. Bin Laden did not personally fly any planes into the World Trade Center but, one could allege that bin Laden operated and managed a criminal enterprise (i.e., an association in fact enterprise consisting of the pilots who flew the planes and the persons who provided financial and logistical support) that engaged in a pattern of racketeering activity (i.e., a pattern of passport fraud, murder, arson, mail and wire fraud, extortion). If the evidence supported such claims, the government could imprison bin Laden under RICO. The victims of the World Trade Center attack could bring civil suit against bin Laden for all the economic losses resulting from the attack, e.g., the loss of the planes, buildings, businesses, equipment. The losses associated with the deaths of individuals, including lost wages and pain and suffering, would more than likely not be compensable under RICO since RICO allows only for the recovery of injuries to business or property. Although Al-quada has not yet faced any RICO claims, other alleged “terrorist groups” or their members have, such as the Ku Klux Klan and the Skin-heads. Remember, however, one person’s terrorist group is another person’s political protest group. The key isn’t whether the group is labeled or considers itself a terrorist group or a protest group; the key is whether it has engaged in racketeering activities.
Who wrote the RICO Act? Professor Robert Blakey now at Notre Dame Law School? Or Thomas E. Dewey the famous prosecutor in the 1930s?
Blakey is generally credited with drafting the RICO Act as it currently exists. As for Dewey, I have to believe that anyone who was ever involved in prosecuting organized crime dreamed of the day when a statute like the RICO Act would exist. Dewey and many others throughout history no doubt envisioned a RICO-type statute.
Throughout his reign as the Director of the FBI (1924-1972), however, J. Edgar Hoover denied the existence of organized crime in America. Given Hoover’s influence within the United States government, it was probably very difficult to pass or enforce a law such as RICO. One must wonder if there is more than a coincidental connection between the demise and death of Hoover and the passage and effective enforcement of RICO.
When you were with the firm of Jones, Day, Reavis & Pogue in Washington, DC and worked on the famous BCCI scandal, did you meet Clark Clifford, the former Secretary of Defense?
I worked on the BCCI case as an associate at Jones Day and in that capacity I read practically every speech given by Clifford, every statement he ever gave, and every document he ever wrote, but the one time I “met” Clifford had nothing to do with my involvement in the BCCI case.
I met Clifford one night in what used to be the offices of his law firm, Clifford & Warnke. As Clifford sank deeper and deeper into the scandal, his law firm collapsed and was forced to sublet its office space to other attorneys. Two friends of mine were starting their own law firm and sublet some of Clifford & Warnke’s old space. I was there one night, sitting in the office of one of my friends. It was late around 9:00 or 10:00. The entire office was dark, with the exception of a few lamps here and there. All of the sudden Clifford appeared in the doorway of my friend’s office. He looked haggard, very tired, almost in a trance. He simply said in a raspy voice, “do you have a pencil I can borrow.”
My friend gave him a pencil, and he disappeared as quickly as he had appeared. It was quite shocking to me. Here was this great icon of American law and politics — a man I had studied, read about, and admired in college — totally defeated, stumbling around the dark ruins of his once almightily kingdom, hoping to find someone willing to loan him a simple pencil.
This encounter caused me to take a second look at Clifford and my role in his demise, and I still frequently ponder how such a great man could experience such a complete fall from grace. One rule that I have found universally true in life is that one’s greatest strength is also one’s greatest weakness. Clifford’s inherent greatness was what caused him to ascend to such a height and also what caused him to fall.
Clifford had an uncanny ability to succeed. Unlike others, he could map out the most direct course between the present and any future success he saw for himself, for politicians, for clients, for agencies, for the country, for almost anyone. I think he was truly a man who seldom experienced failure, and if he ever did, he was smart enough to rationalize the failure into a success. He grew so confident in this ability to succeed, his inherent greatness, that when the BCCI situation came about he not only believed but was confident that his association with BCCI would guarantee success for everyone, and for the U.S. economy most importantly. He never once thought, before or after the scandal came to light, that his role in the affair was anything but proper, and certainly would never consider his actions illegal. In his mind, I truly believe he did not think it possible for him to do anything wrong in the context of law and politics. I am sure that to his death Clifford believed he had acted properly and that he, more than anyone, wanted a trial to prove his innocence and to once again turn defeat into victory. Due to health complications and other factors, however, Clifford was never tried for his role in the BCCI scandal, so no one will ever know or determine with certainty the true nature of his actions in the affair that tainted the end of an otherwise brilliant career.
When you bring a RICO claim against a business, don’t a lot of people think that the business is somehow related to the Mafia? Isn’t the threat of such an implication a powerful tool for plaintiffs to use against corporations when the plaintiffs want to settle?
If people don’t understand the statute, it can be an embarrassing implication that the corporation is associated with the Mafia, but in today’s world, I doubt if there’s a single Fortune 500 company that hasn’t been sued under RICO. Being sued in a RICO case says nothing about whether you’re connected to the Mafia. Business persons don’t like being sued under any circumstances, and today I think most sophisticated business people simply see a RICO claim as “just another frivolous claim.” If the business people don’t see it that way, their lawyer will. So I don’t think accusing someone of a RICO violation is a very powerful tool any more, especially since there are so many requirements for a plaintiff to meet in bringing a RICO claim and, since those requirements are usually not met, the claims can be gotten rid of quickly if you get the right judge.
Can a governmental agency, such as the FBI or the Department of Justice or my local city or county council violate the RICO Act?
Although this question has not been addressed by the United States Supreme Court, the circuit courts of appeals who have considered the question generally agree that governmental entities cannot be named as defendant persons under the RICO Act and, thus, cannot be held civilly or criminally liable for violations of the statute. Various reasons have been expressed for allowing governmental entities to escape liability under RICO. The United States Court of Appeals for the Ninth Circuit has held that “government entities are not capable of forming [the] malicious intent” necessary to support a RICO action. Pedrina v. Chun, 97 F.3d 1296, 1300 (9th Cir. 1996) (quoting Lancaster Community Hospital v. Antelope Valley Hospital, 940 F.2d 397, 404 (9th Cir. 1991)), cert. denied, 520 U.S. 1268 (1997). The Ninth Circuit also considers it bad policy to hold the “body-politic” liable for the criminal actions of a single government agent or a group of government agents obviously operating beyond the scope of their authority. Lancaster Community Hospital, 940 F.2d at 404. The United States Court of Appeals for the Sixth Circuit has ruled that federal government entities cannot be held liable under RICO because “racketeering activity” occurs only if the defendant is “chargeable”, “indictable”, or “punishable” for violations of the crimes listed in section 1961(1). Because “a federal agency is not subject to state or federal criminal prosecution,” a federal governmental entity cannot possibly violate the RICO Act. Berger v. Pierce, 933 F.2d 393, 397 (6th Cir. 1991).
The inquiry does not end merely because a governmental entity cannot be held liable under RICO. An individual government agent can still face personal liability under RICO if she violated the RICO Act and if she cannot assert any sovereign or governmental immunity defense. Usually, such a defense is not available to a government agent who engages in racketeering activity because acts are racketeering are not within the scope of the agent’s authority as an employee of the government.
Also, even though a government agency cannot be named as a defendant person under RICO, a government agency may still serve as the enterprise through which a defendant engages in a pattern of racketeering. Any governmental agent extorting persons “under color of authority” is participating in the conduct of the governmental entity’s affairs through a pattern of racketeering activity. Governmental entities may also be an enterprise if they are a passive instrument through which the racketeering acts are committed, advanced or concealed, or a governmental entity may also be a victim enterprise, e.g., if outsiders were operating or managing the affairs of the enterprise through bribery, for example. Being named as an enterprise, however, does not expose the governmental entity to any liability.
Because Congress did not subject civil RICO claims to a statute of limitations, is it true that a civil RICO claim cannot be barred by a statute of limitations defense?
Congress did fail to subject federal civil RICO claims to a statute of limitations. This oversight, however, was remedied by the United States Supreme Court inAgency Holding Corp. v Malley-Duff & Associates, Inc., 483 U.S. 143 (1987), where the Supreme Court borrowed the four-year limitations period applicable to civil claims under the Clayton Antitrust Act and imposed the same limitations period on all civil RICO claims. Since the Supreme Court’s decision in Rotella v. Wood, 528 U.S. 549 (2000), courts have also agreed that RICO’s statute of limitations begins to run when the victim knew or reasonably should have known of its injury. In other words, once the victim knows or reasonably should know of his injury, he has four years to discover the other elements of his RICO claim and to bring an action in court.
Am I correct in assuming that RICO’s statute of limitations cannot bar a civil RICO claim so long as the defendant continues to engage in acts of racketeering?
As stated above, the statute of limitations on civil RICO claims begins to run whenever a victim knows or reasonably should know of its injury. The Supreme Court has held that RICO imposes a duty of diligence on all victims who wish to seek redress through the statute. Accordingly, once the victim knows of his injury or reasonably should know of his injury, he cannot sit back on his rights, refrain from bringing a civil RICO claim and thereby allow the defendant to continue to engage in acts of racketeering that will increase the amount of the victim’s monetary claim against the defendant. Once a victim is aware of its injury, it has four years to bring a claim.
Many times, however, a defendant will conceal the plaintiff’s injury by making false promises, or by engaging in a number of other fraudulent statements. Likewise, a defendant may conceal the pattern of racketeering by similar means. Under these circumstances, the doctrine of fraudulent concealment may toll the running of the statute of limitations for so long as the defendant’s affirmative acts of concealment prevent the defendant from discovering his injury or the pattern of racketeering. Once the victim has actual knowledge of his injury or the pattern of racketeering, however, the statute of limitations will not be tolled – regardless of the defendant’s efforts to further conceal the victim’s claim. There are many equitable tolling doctrines that may come into play in any civil RICO scenario. Other such doctrines include (but are not limited to) duress, infancy, and incompetence. One must consult with an attorney to determine the appropriate application of the statute of limitations or any tolling doctrine with regard to the particular facts of a case.
The defendant’s actions first injured me many, many years ago, but the defendant’s actions continue to injure me today, there’s no way the statute of limitations can bar my claim so long as I continue to be injured?
RICO violations often result in continuing injuries. For example, a defendant may pay an employee bribes for decades in exchange for the employee reducing charges from his employer to the defendant. Or, a person may buy a defective furnace on the basis of fraudulent advertisements, for years the person incurs several thousand dollars fixing the furnace and ten years after the initial purchase, the person has to buy a replacement furnace. If the employer knew of the bribes in the first year of the scheme, his RICO claim will be barred if he failed to file an action based on the bribe scheme with four years of acquiring knowledge of the bribe scheme, even if the bribe scheme lasted a total of ten years. Likewise, the furnace purchaser’s claim would be barred four years after the maintenance expenses should have informed the purchaser that the furnace did not operate as promised in the advertisements. The acquisition of a new furnace, six years after the purchaser acquired knowledge that it did not perform as advertised, will not restart the statute of limitations. The courts are likely to deem all of these injuries “continuing injuries,” i.e., one long continuing injury. Once the victim has knowledge or reasonably should have knowledge of such an injury, they must bring a claim within four years. RICO’s statute of limitations is restarted only with regard to a new and independent injury and then, the statute of limitations is restarted only with regard to the new and independent injury. To constitute a new and independent injury, the injury must basically arise from a pattern of racketeering separate and apart from the pattern that caused the earlier injuries. For example, if a person injured by a defendant’s pattern of arson doesn’t file a claim within four years of her injury (and there is no applicable tolling doctrine), the claim based upon the pattern of arson will be barred. If, however, the same plaintiff is injured by a pattern of mail fraud arising out of an unrelated invoicing scheme, whereby the plaintiff was over-billed for the defendant’s serves, and that scheme began just 3 years ago, the plaintiff still has a year to file the claim.
Do insurance policies cover damages awarded a plaintiff in a civil RICO claim?
The answer to this question depends upon the insurance policy(ies) in question. Generally, most insurance policies exclude from coverage any damages caused by intentional misconduct. For example, if you intentionally drove your car into an electrical pole, you couldn’t reasonably expect your comprehensive insurance coverage to reimburse you for the damage – otherwise, we could all intentionally abuse our property, but insurance rates would be so expensive that no one could afford insurance. Likewise, a corporate officer cannot intentionally mislead consumers and expect the corporation’s insurer to reimburse the corporation for the damages. Because all criminal violations arise out of intentional conduct, i.e., you cannot negligently commit a crime, and because all RICO claims arise out of criminal activity, it is unlikely that an insurance policy will cover any judgment obtained on the basis of a RICO violation.
Although insurance coverage may not apply to RICO claims, corporate officers and directors may very well have indemnification agreements with their corporate employers that obligate the employer to reimburse the officer or director for any judgments arising out of his employment. If the officer’s conduct constituting the RICO violation was authorized by the corporation, and within the scope of his employment, the corporation will likely be obligated to indemnify (or reimburse) the officer for any judgment obtained – assuming an indemnification agreement exists.