Civil RICO

Originally published by Jason B. Freeman.

What is RICO?

Congress enacted the Racketeer Influenced and Corrupt Organizations (RICO) Act in 1970. Originally intended to combat organized crime and criminal syndicates, such as the Mafia, over time RICO has been expanded to prohibit a much broader array of conduct and targets. Rather than punishing isolated criminal acts, RICO is intended to reach members of criminal enterprises who engage in a pattern of racketeering activity.

Elements of a RICO Claim

In order to establish a RICO violation, four basic elements must be proven: a pattern of racketeering activity, a culpable person with the requisite mens rea, an enterprise, and an effect on interstate commerce. However, additional elements may be necessary depending on the nature of the claim for civil liability.

A “pattern” of racketeering activity can be established in two ways. In order to establish “closed-ended continuity,” a plaintiff must demonstrate that a series of related predicate acts were committed over a substantial period of time. Alternatively, in order to establish “open-ended continuity,” a plaintiff must demonstrate a threat of continuing criminal activity that extends beyond the initial period of time when the predicate acts were originally committed. This determination is based upon the nature of the enterprise and the type of prohibited acts committed. A plaintiff must also demonstrate that the prohibited acts were “continuous and interrelated”—that is, they must have had similar goals, purposes, methods, or results.

A person may be found to be a culpable person if they are found to have had the requisite mens rea and to have engaged in prohibited acts. To prevail on a civil RICO claim, a plaintiff must identify a culpable person who actually committed the RICO violation or conspired to do so. However, under the RICO statute, the “culpable person” can be any individual or entity capable of holding a legal or beneficial interest in property. The plaintiff must also be able to demonstrate that the culpable person possessed the mental state required to commit the alleged predicate offenses. In other words, it must be shown that the defendant intended to commit predicate acts despite having the knowledge that those acts were illegal. Generally, the requisite mental state depends upon the jurisdiction of the suit as well as the type of predicate act committed.

Under RICO, any legal entity, individual, or group of associated individuals may be considered an enterprise. Informal associations, or association-in-fact enterprises, may still be considered enterprises if it can be shown that the individuals involved worked together in furtherance of a common illegal interest. Additionally, the enterprise must be a distinct and separate entity from the established culpable individual.

What are Predicate Acts?

Predicate acts are independently illegal, racketeering activities. Under RICO, certain specifically enumerated federal crimes and certain state offenses are prohibited and are deemed “predicate acts” necessary to state a claim under RICO.  The list of prohibited activities includes, among others, wire or mail fraud, money laundering, counterfeiting, embezzlement, illegal gambling, extortion, and bribery.

Types of RICO Claims

Generally, RICO prohibits four different types of activities: investment of racketeering income in an enterprise, acquisition or control of an enterprise due to a pattern of racketeering activity, operation of a RICO enterprise, and RICO conspiracy. Of these four types of activities, plaintiffs in civil RICO actions most commonly rely on 18 U.S.C. § 1962(c), conducting the affairs of an enterprise through a common pattern of racketeering activity.

Defenses

Due to the complexity of the elements that a plaintiff must prove, defendants in civil RICO actions often argue that a plaintiff has failed to satisfy one or more of these requirements. Other common defenses to civil RICO claims include preemption and the expiration of the statute of limitations. The statute of limitations on a RICO claim requires that a plaintiff bring the claim within four years from the date that the claim accrued rather than within four years from when the predicate acts occurred.

Civil Remedies

A civil RICO claim provides for a lesser burden of proof than in criminal proceedings. The burden of proof in a Civil RICO case is satisfied by a preponderance of the evidence. In order for a civil claimant to prevail, the jury must find that it is more likely than not that the racketeering activities did occur.

Successful plaintiffs are able to recover “treble damages,” meaning three times the amount of damages caused by the defendant’s actions.

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