The Racketeer Influenced and Corrupt Organization Act (RICO), passed in 1970, is a sprawling and complex statute designed to penetrate organizations and impose liability on those who orchestrate criminal acts but insulate themselves with layers of underlings and bureaucracy. RICO imposes criminal penalties on those who orchestrate these criminal acts, and also provides a civil cause of action to those whose business or property has been damaged as a result. For a variety of reasons, criminal RICO has fallen into disfavor. Civil RICO, which is an optimal tool to pursue fraud, has never reached its potential for use in fraud cases. This Article explores this phenomenon and provides a roadmap for RICO’s appropriate use in fraud cases.
This Article proceeds in six Sections. Section II provides an overview of RICO, focusing on the public policy rationale of the statute. Section III reviews the organized crime context in which RICO was passed. Section IV explains why RICO is an especially effective tool against white-collar crime. Section V addresses the biggest stumbling block in RICO’s use against white-collar crime: the notion of “RICO enterprise.” “Enterprise” is at the heart of the RICO statute. It is also the most amorphous and confusing aspect of RICO. Unfortunately, the case law that has developed regarding RICO enterprise is especially muddled, inconsistent, and in some instances, wrong. This confusion has led, in large part, to RICO’s inappropriate use in fraud cases. Section V strives to bring some order to the enterprise chaos. It identifies typical “enterprise” scenarios in the white-collar arena, involving corporations, subsidiaries, officers, directors, owners and agents. Section VI demonstrates this vitality of the guidance provided in Section V by applying it to a hypothetical pharmaceutical fraud. Section VII concludes with observations for future use of civil RICO.
The goal of this Article is to encourage vibrant but appropriate use of RICO in white-collar cases. As this Article discusses, the looming threats to global economic stability posed by fraud are great. Our society needs every effective tool available to address these threats. We should not allow RICO, which is an optimally effective tool, to languish in a morass of confusing jurisprudence.