What is RICO & How To Defend Against It
Defending against a RICO action –or– What is RICO and why am I being sued for it?
RICO is an acronym, standing for the Racketeer Influenced and Corrupt Organizations Act. In a nutshell, it’s a complicated set of laws that is targeted at groups of people or businesses who are part of organizations that scam/defraud people. RICO started with the primary purpose of targeting mafia-style operations, but the law covers a much wider group now.
If you’re facing a RICO claim, don’t panic
If you are facing a civil RICO charge (i.e. someone has claimed to be a victim of a fraudulent scheme, and has pointed a finger at you), the good news is: RICO requires very specific things to be alleged and proven. Put simply, it is not easy for a plaintiff (i.e. the individual or business claiming to be a victim) to prove its case due to the many legal hurdles and factual requirements imposed by RICO. For a discussion of those requirements, see my blog post: What You Should Consider before Filing a RICO claim.
However, it is important you take the RICO accusations seriously. If a plaintiff wins the case, RICO awards the plaintiff “treble damages”—an outdated way to say triple damages. That means, if a plaintiff accuses you of defrauding it of $500,000, you’d owe $1,500,000 if you lost. Congress did this to effectively drive organized crime out of business.
It also encourages plaintiffs and plaintiffs’ counsel to file RICO claims to (a) shoot for triple damages, and (b) have a bigger threat to encourage defendants to settle. This makes it incredibly important for you to seek out an attorney experienced in RICO. You need to know early how strong the claims are against you and how likely it is your accusers can prove the many things that must be proven under RICO.
A brief primer on RICO: What does RICO require?
Briefly, most legitimate RICO claims can be described informally as claims against fraudulent operations. This means RICO is not just proof that fraud occurred. For instance, assume Abe defrauded Bill. RICO requires that Abe and his cronies repeatedly defrauded Bill over a set period of time; using telephone, mail, fax, e-mail, or the internet; and Abe and his cronies were specifically organized to commit the frauds as a group.
Does this sound substantially more complicated than simply saying that someone ripped someone else off? It is. RICO requires a plaintiff to prove predicate offenses. That means, a plaintiff first needs to prove several occurrences of specific types of fraud (where each would be a basis for a lawsuit on their own), then prove a specific type of organization was operating to commit those frauds.
For example, Abe tells Bill about a great investment opportunity. Abe repeatedly e-mails Bill false and misleading information about the opportunity. Bill relies on that information and wires a $500,000 investment to Abe for the business opportunity. But there is no business opportunity—and Abe pockets the half-million, telling Bill the investment didn’t work out.
Based upon the above facts, Bill has a strong wire fraud lawsuit against Abe. Abe used the “wires” (here, e-mail) to send Bill fraudulent information to persuade Bill to give him $500,000. Basically, Abe used lies and technology to steal from Bill.
But does Bill have a RICO claim? No. RICO requires an “enterprise”—some sort of organization, formal or informal, where a group of people work together to swindle. Here, we only have dishonest Abe.
So how could this situation be a RICO violation? Assume Abe also had: a secretary, who sent additional e-mails to Bill to provide misleading information; a “senior investor,” who falsely told Bill she had already invested and had made fabulous profits; and an “investment analyst company,” that was established to provide Bill fake, “third party” reports on how good of an investment this was. These individuals are all working together in a criminal enterprise to defraud people.
We still don’t have quite enough for a successful RICO claim. But assume that this group of people were misleading, not only Bill, but others out of their money. That criminal enterprise has a continuing presence. Now, we have a potential RICO claim: a criminal enterprise working together to defraud people through use of the “wires”—e-mail, internet, etc.
The criminal enterprise required under RICO can be organized in different ways. Sometimes, it is a group of people, as above, who are working together but have no formal legal connection—like being part of the same company.
But sometimes, the entire criminal enterprise is a group of people from the same company. For example, assume Abe worked at a well-known bank. The bank is a legitimate business establishment and provides investments and loans regularly to customers. However, Abe realizes he can use the good name of the bank to scam people, in the manner he did Bill. So Abe, as above, talks his secretary and some other people working at the bank to join in on the scheme. This informal organization of bank personnel could be a RICO enterprise. In this situation, the bank itself is a victim of the criminal activity.
And again, a RICO enterprise has to have a continuing scheme and has to commit predicate offenses. Most commonly, a RICO enterprise engages in mail and/or wire fraud—using mail, e-mail, websites, etc. to lie, cheat, mislead, or otherwise defraud victims. However, there are other offenses that count towards having a RICO enterprise, including kidnapping, arson, drug dealing, and bribery.
Ultimately, a civil RICO violation is not an easy thing to prove, but it has serious consequences when proven.
Where to go from here?
A RICO claim is a serious matter: threatening triple damages and involving the longer, more formal (and thus, more expensive) litigation of federal court. Contact an attorney experienced in RICO law, as early as possible, to review your case. An experienced attorney can assure you are presenting your strongest defenses and seek to end your case as quickly and decisively as possible.
How I can help: Colorado Appeals Lawyer Asa C. Garber represents clients in RICO matters. Prior to private practice, Mr. Garber assisted several judges in addressing complex RICO litigation while serving as a judicial clerk. This behind-the-bench perspective allows Mr. Garber to focus RICO defense strategies on what the judge is looking for to resolve your RICO claim as quickly as possible.