The Federal Racketeer Influenced and Corrupt Organizations (“RICO”) Act, 18 U.S.C § 1961, was passed in 1970. It provides for extended criminal penalties and civil causes of action for acts performed as a part of an ongoing criminal organization. RICO specifically focuses on racketeering and is aimed at leaders of a syndicate to be tried for the crimes for which they ordered others to do. In the context of a business, racketeering activity under RICO usually involves plans to defraud and violate federal mail and wire fraud statutes.
What is a RICO Violation?
Under federal law proof of a plan to defraud is only a fraction of a RICO claim. A plaintiff must do more than simply allege that a defendant used “deceptive practices to induce the unwary to give up money or some other tangible property.” Atlas Pile Driving Co., v. DiCon Financial Co., 886 F.2d 986, 991 (8th Cir. 1989). It is a common misconception that RICO applies merely to gangsters and other types of organized crime however; corporations and regular business people are well within the scope of the RICO statute. The United States Supreme Court has stated that RICO applies to both illegitimate and legitimate enterprises. The following is a discussion of the elements needed for a RICO claim.
RICO states it is unlawful “for any person to conduct an enterprises affairs through a pattern of racketeering activity.” This portion of the statute mandates that a RICO claim names an actual defendant and not only the RICO enterprise. There is some confusion about what is considered a “defendant person” and “an enterprise.” However, there are very few limitations on who can be named a defendant under RICO. This is because the statute states “any individual or entity capable of holding a legal or beneficial interest in property” may be a defendant “person.”
A RICO claim requires the plaintiff to name not only a defendant person but also an enterprise. The enterprise is necessary because that is what is operated and managed by the defendant through which the pattern of racketeering is conducted. The most common RICO scenario is that the enterprise is a perpetrator enterprise such as a corporate CEO who perpetrates a scheme to defraud through his or her corporation. On the flip side the enterprise itself might also be a victim of the defendant’s fraud. Since only defendants are liable for a violation under RICO the plaintiff does not have to show that the enterprise itself has committed a crime, as long as the enterprise is operated by the defendant through a pattern of racketeering.