Ultimate Guide to the Racketeer Influenced and Corrupt Organizations (RICO) Act
The federal RICO Act is a broad statute that the U.S. Department of Justice (DOJ) uses to file criminal charges in a wide range of circumstances. For individuals and organizations targeted under RICO, asserting an effective defense requires a comprehensive understanding of the statute and its surrounding case law.
For many people, the term “racketeering” conjures up images of Prohibition-era organized crime. But, the federal Racketeer Influenced and Corrupt Organizations (RICO) Act – which was not signed into law until 1970 – is far broader in scope, and today the U.S. Department of Justice (DOJ) uses RICO to prosecute individuals and organizations for a broad spectrum of alleged criminal activities. As the DOJ’s Justice Manual explains:
“The purpose of the RICO statute is ‘the elimination of the infiltration of organized crime and racketeering into legitimate organizations operating in interstate commerce.’ . . . However, the statute is sufficiently broad to encompass illegal activities relating to any enterprise affecting interstate or foreign commerce.”
The Four Main Prohibitions of the RICO Act
The RICO Act contains four main prohibitions, all of which appear in Section 1962 of Chapter 18 of the United States Code (18 U.S.C. § 1962). Subsequent provisions of the statute establish the penalties for RICO violations and assign specific procedural requirements to federal prosecutions under RICO. The statute’s four main prohibitions are:
- Using Proceeds from Racketeering Activity – Under 18 U.S.C. § 1962(a), it is illegal, “for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of an unlawful debt in which such person has participated as a principal . . . to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.”
- Engaging in a Pattern of Racketeering Activity – Under 18 U.S.C. § 1962(b), it is illegal, “for any person through a pattern of racketeering activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.”
- Participating in a Racketeering Enterprise – Under 18 U.S.C. § 1962(c), it is illegal, “for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity . . . .”
- Conspiring to Racketeer – Under 18 U.S.C. § 1962(d), it is illegal, “for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of [18 U.S.C. § 1962].”
The Five Elements of a RICO Act Violation
In 1985, the U.S. Supreme Court outlined four primary elements that are required in order for the RICO Act to be implicated in a federal criminal proceeding. As summarized in the DOJ’s Criminal Resource Manual, these are, “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.”
However, as the Criminal Resource Manual goes on to explain, the courts in some federal jurisdictions require more in order for a RICO violation to be proven. These courts examine five more-specific elements to determine whether a violation has been committed:
- Is there an “enterprise”?
- Has the enterprise affected interstate commerce?
- Was the defendant associated with or employed by the enterprise?
- Did the defendant engage in a “pattern of racketeering activity”?
- Did the defendant “conduct or participate in the conduct of the enterprise through . . . the commission of at least two acts of racketeering activity?”
For purposes of establishing a RICO Act violation, 18 U.S.C. § 1961(4) defines an “enterprise” is defined as, “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” There are two key points to note about this definition. First, an “enterprise” does not have to be constituted by a formal legal entity—an informal group of individuals is sufficient to constitute an illegal enterprise for purposes of the statute. Second, even a single individual can be classified as an “enterprise” for purposes of pursuing a federal criminal prosecution under the RICO Act.
Under 18 U.S.C. § 1961(5), a “pattern of racketeering activity” requires the commission of two acts of racketeering activity within a 10-year period, excluding any period of imprisonment. “Racketeering activity” can take many different forms, including (but not limited to):
- Any act or threat involving murder, kidnapping, gambling, arson, robbery, bribery, or extortion
- Dealing in obscene matter
- Dealing in a controlled substance
- Theft from interstate shipments
- Bank, insurance, healthcare, securities, or government fraud
- Immigration fraud
- Identity theft
- Hacking and other cybercrimes
- Obstruction of a criminal investigation or obstruction of justice
- Witness tampering or retaliation
- Human trafficking
- Economic espionage and intellectual property theft
Criminal Prosecution and Civil Liability for RICO Act Violations
The RICO Act includes provisions for both civil and criminal enforcement. All violations of 18 U.S.C. § 1962(a) through (d) can support criminal charges, and both the federal government and private parties can institute civil action to prevent and recover losses from illegal racketeering activities. The DOJ has published extensive manuals on the civil and criminal enforcement of RICO, which can be found here;
Criminal Penalties for Violating the RICO Act
Under 18 U.S.C. § 1963, RICO violations can lead to four primary types of criminal penalties. These are: (i) statutory fines, (ii) federal imprisonment, (iii) forfeiture, and (iv) a restraining order or injunction.
1. Statutory Fines
Individuals convicted of violating Section 1962 of the RICO Act can be fined in accordance with 18 U.S.C. § 3571. For felony offenses, Section 3571 imposes a maximum fine of $250,000 per offense, provided that, “[i]f any person derives pecuniary gain from the offense, or if the offense results in pecuniary loss to a person other than the defendant, the defendant may be fined not more than the greater of twice the gross gain or twice the gross loss.”
2. Federal Imprisonment
In most cases, the maximum federal prison term for a RICO Act violation is 20 years. However, a life sentence can be imposed if the violation, “is based on a racketeering activity for which the maximum penalty includes life imprisonment.”
Section 1963 also calls for the forfeiture of any assets or interests obtained as a result of racketeering activity. This includes, but is not limited to, real property, tangible property, intangible property, business interests, contractual rights, and claims against individuals or businesses (i.e. claims to recover debts).
4. Restraining Order or Injunction
In order to ensure that property that is subject to forfeiture can be seized, Section 1963 allows federal judges to issue, “a restraining order or injunction, require the execution of a satisfactory performance bond, or take any other action to preserve the availability of property,” that the defendant acquired through illegal racketeering activity.
Civil Remedies for RICO Act Violations
In addition to criminal prosecution, the RICO Act allows for the institution of civil enforcement action by the federal government as well. The U.S. Attorney General may institute a civil action requesting that the judge, “order any person to divest himself of any interest, direct or indirect, in any enterprise; impos[e] reasonable restrictions on the future activities or investments of any person . . . ; or order dissolution or reorganization of any enterprise.”
The RICO Act also provides a private right of action to individuals and businesses that are harmed by illegal racketeering activities. If successful, a plaintiff in a RICO Act lawsuit can recover treble (triple) damages, costs, and attorneys’ fees.
Criminal Prosecution Under Other Federal Statutes in Relation to RICO Violations
Due to the breadth of the RICO Act – classifying individuals as “enterprises” and applying to most types of federal criminal activity – violations of the RICO Act will often trigger prosecution under other federal statutes as well. In fact, in many cases, targets of federal investigations and defendants will face multiple charges carrying the collective potential for millions of dollars in fines and decades of federal imprisonment. For example, RICO Act violations will generally implicate the federal mail fraud, wire fraud, money laundering, and tax evasion statutes, and specific types of violations (such as fraud schemes and cybercrimes) can implicate a host of other substantive criminal statutes. As a result, individuals facing allegations under the RICO Act need to engage defense counsel who is experienced in handling all types of federal criminal cases.
Speak with a Federal Defense Attorney at Oberheiden P.C.
Oberheiden P.C. is a federal defense law firm with a nationwide presence. If you have questions or concerns about being targeted under the RICO Act, we encourage you to get in touch. To speak with one of our senior federal defense attorneys in confidence, call 888-680-1745 or request a free case assessment online now.
Dr. Nick Oberheiden, founder of Oberheiden P.C., focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation.