What Is RICO And How Does It Work?

What Is RICO And How Does It Work?

The RICO law has a wide range of implications for both civil and criminal law. It has a place in history as the legislative linchpin for helping bring down several organized crime figures. But the law is also nuanced and filled with detail. It can leave people wondering the precise nature of this important law. What is RICO law? And how does it work in actual practice?

The History of RICO

RICO is the acronym for the Racketeer Influenced and Corrupt Organizations Act, passed by the United States Congress in 1970 and signed into law by then-President Richard Nixon.

The purpose of RICO was to take direct aim at organized crime, particularly the difficult-to-pin-down La Cosa Nostra gangs that were based in New York but ran lucrative operations around the country.

Law enforcement officials faced a problem. They might make arrests and convictions of individuals operating at lower levels. But they couldn’t get at the entire organization.

A hypothetical example can illustrate the problems law enforcement faced prior to RICO. Under pre-1970 law, someone might be convicted of bookmaking. Police might know–at least on a commonsense basis–that the bookmaker was also connected to a person that had been arrested for extortion, along with an accountant under investigation for embezzlement and money laundering. But there was no legal mechanism to tie them together.

Getting the bookmaker to implicate their confederates was necessary. A law enforcement official would have the power to offer a lesser sentence—or even none at all—in exchange for testimony. But there was a problem.

The criminal penalties for bookmaking, taken on their own, weren’t severe enough to motivate the arrested person to give up any more information on a superior whose potential for intimidation likely outweighed the fear of a comparatively short prison sentence.

Furthermore, even in the unlikely event authorities could tie the bookie, strongman, and accountant all together, they were still the lower-level players in the operation. There was no way to get to the real criminal pulling the strings and giving the orders.

This problem faced by law enforcement took its place in popular culture in the 1974 movie classic Godfather II. There’s a scene of congressional testimony where a lower level “soldier” tells the U.S. Senate that the family “has a lot of buffers” that insulate the top brass.

The RICO law was aimed at breaking through those buffers.

How RICO Works

The 1970 law laid out 35 specific “predicate acts”, which is basically the original crime committed by an individual. These include several crimes that are often associated with the mafia, from gambling to bribery to embezzlement to money laundering. The list goes on to include terrible crimes, from human trafficking to murder.

There are plenty of white-collar crimes listed as predicate acts, including securities fraud, copyright infringement and the theft of union monies. Additionally, street crime, like robbery, might place a defendant at risk of RICO charges.

To take the predicate acts to the next level and define it as racketeering activity, the prosecution must then establish the following:

  • That a criminal enterprise does exist
  • That the defendant is a part of said enterprise
  • That the defendant has committed at least two prior predicate acts

The Challenge of Proving a Criminal Enterprise

Like all other charges brought under the criminal code, all of this must be proven in a way that meets the prosecutor’s burden of beyond a reasonable doubt.

You might imagine that it takes a lot of diligence to secure a RICO conviction-- and you would be right. Let’s go back to our example of the bookmaker, extortionist, and embezzling accountant. It’s already a significant legal hurdle simply to secure proof of their guilt of the basic crime beyond a reasonable doubt, but if the prosecutor wants a RICO conviction, he must prove it three more times.

Simply proving a criminal organization actually exists is no easy feat. La Cosa Nostra has a place in American lore today, but for a long time, there was debate over whether it was simply a conspiracy theory. It took mass arrests of over 100 people at a 1957 “summit” in upstate New York for the existence of this criminal operation to become an accepted fact.

But if a prosecutor is even considering bringing RICO charges against our hypothetical trio, it’s likely the District Attorney is already confident they can prove the existence of the enterprise. In fact, the very point of the arrests would be to get to the illegal operation.

Proving Membership In A Criminal Enterprise

So, one must prove that these people actually belong to this organization. Suffice it to say, there aren't any membership cards handed out. One method of gaining proof would be to subpoena emails and phone records and prove a pattern of communication that a reasonable person would assume meant a professional connection. The government might also rely on forensic accountants to follow money trails and make a connection.

Finally, even after all that has been proven, it still must be shown that the criminal activity itself is a pattern. Let’s say the accountant accepted a bribe to do a one-off job. They face the consequences of that action, but it doesn’t mean they are a full-fledged member of the organization. Meeting RICO standards means showing that they’ve done other predicate acts at least two more times and within a ten-year time period.

Proving The Predicate Acts

The Supreme Court has become more involved in such cases in intervening years and interpreted the RICO law in ways that make it more friendly to prosecutors.

For example, let’s say that a criminal organization is relatively young. So young that finding the two additional crimes is not realistically possible Do prosecutors have to wait until this fledgling criminal enterprise has been around a longer period of time? That would certainly seem to contradict law enforcement’s basic goal of securing public safety. The Supreme Court stepped in.

The Court ruled that prosecutors can meet the burden of an individual committing two predicate acts, by instead establishing that it is likely the organization will commit future illegal acts. It’s not an easy burden to meet, but it can ensure that a criminal syndicate won’t get off the hook simply because they’re too young.

Why the high bar of proof? Why must the government prove all the above, when they presumably already have evidence of the person’s guilt? The reason is the severity of penalties handed out under RICO.

A person convicted of bookmaking in Florida (absent the context of RICO) faces a maximum penalty of five years in prison. But if convicted under the RICO statute, they could face 20 years behind bars.

The consequences for this are enormous and not just for the person facing the jail time. The bookmaker on their own might well be considered fairly harmless. But the prosecutor might be very interested in who the bookmaker is kicking percentages of their take up to.

Facing five years in prison, the bookmaker is not likely to give over information on a powerful crime boss. But if that person were facing 20 years in jail, plus the potential forfeiture of property, they might be compelled to start talking.

Now law enforcement is in a better position to bargain for testimony against their real target, the very head of the illegal organization once the existence of their “racket” has been confirmed. If the boss can be identified and proven to be a part of the organization, they can be held legally accountable for the crimes committed by those to whom they gave orders. The boss can be charged on the grounds of “furthering the criminal enterprise” through their financial backing.

It was through this law and its diligent application, that many top figures in organized crime were finally held accountable.

Other Ways RICO Is Used

Like any law, RICO’s application has evolved considerably in the 52 years since it was signed into law. Organized crime might have been the original target, but RICO can also be used against otherwise legitimate businesses.

Pharmaceuticals

Pharmaceutical executives have been convicted under RICO for what is happening in the opioid epidemic. In this case, prosecutors were able to tie together the otherwise disparate crimes of drug distribution, mail fraud, and breach of duty. The opioid crisis was driven by the cooperation of Big Pharma with willing doctors and RICO provided the legal means to connect basic healthcare fraud to a broader operation.

Financial Schemes

Ponzi schemes, with their reliance on a number of complicit financial counselors, are also ripe for RICO application. Predatory lending, where a borrower are deceived about the terms of a loan could also find purchase with RICO laws. And although those who originally wrote the RICO law probably didn’t foresee the world of cybercrime, this is another arena where prosecutors find RICO a valuable tool.

RICO, applied properly, can do a great deal of good. But misapplied, it can be disastrous for people who are either flat-out innocent or at least not part of a nefarious organization. Those people require a vigorous defense.

Defense Against RICO Charges

The lender that wrote a deceptive loan might have also been deceived by a higher-up, The doctor that prescribed an addictive painkiller might have been honestly misled. Anyone can find themselves swept up in the racketeering net. The severity of the penalties might scare the wrongfully charged into pleading guilty when that really isn’t in their best interest.

If you’re facing a RICO charge or the threat of it, the Law Office of Armando J. Hernandez, P.A is committing to providing the type of vigorous defense you deserve. Attorney Hernandez has nearly 20 years of experience with these types of cases, and he has also gained valuable insight as a prosecutor. Our office understands the system from both sides, and we leverage that knowledge on behalf of our clients. Don’t face a RICO charge by yourself. Let us help you. Call today at (305) 400-0074 or contact us online.

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