Is This Executive a `Racketeer'?
WHEN enacted in 1970, the Racketeer Influenced and Corrupt Organizations Act (RICO) was viewed as a potent new weapon against the mob. It was designed to reach crime overlords by penetrating the often sophisticated businesses through which they operate. The law allows prosecutors to establish an illegal ``pattern'' by linking seemingly disparate crimes. The punishment for a RICO pattern is far more severe than for the individual crimes.
When RICO is mentioned today, though, it's seldom in connection with drug kingpins, gambling czars, or political bribery. RICO has become the legal weapon of choice whenever business wrongdoing is alleged.
And not just by prosecutors. The law also permits civil suits by consumers and other private parties; it even provides an incentive for suits by ``private attorneys general'' - victorious plaintiffs can recover triple damages.
A lot of people - from Wall Street to the American Civil Liberties Union, even some federal judges - say RICO is abused.
The law's provisions are broad, allowing prosecutors and plaintiffs to range beyond organized-crime activities to white collar crime like fraud, tax evasion, and securities-law violations. These doubtless deserve tough penalties, but the lax evidence requirements of RICO - allegations are enough - have raised fundamental questions of equity.
Besides its stiff penalties, RICO grants DAs sweeping powers to seize a defendant's assets before trial, to prevent their dissipation. RICO opponents claim that asset seizures can cripple a business before the trial ever begins, and that prosecutors use seizures as a club to extract favorable plea bargains.
Similarly, critics charge that civil plaintiffs are misusing the threat of triple damages to win harassment settlements from companies anxious to avoid devastating financial exposure and ``racketeer'' publicity.
RICO's supporters counter that civil RICO suits for the first time give consumers a real cudgel against business fraud. On the criminal side, they say that recent clarifications of Justice Department guidelines have trimmed back some of the prosecutorial discretion that has raised a furor in corporate suites. The updated guidelines generally prohibit the use of RICO to prosecute alleged tax fraud. They also limit pretrial asset seizures that would harm third parties, or impair a company's ability to conduct ordinary business, or that are disproportionate to the crime alleged.
The Senate Judiciary Committee this week began consideration of a bill to narrow application of RICO in civil cases, and the House plans to follow suit.
RICO's harshest critics want nothing less than the act's repeal. That seems unnecessary, especially in light of the new Justice Department guidelines. But RICO should be examined closely to ensure that it doesn't contravene the bedrock principles of American jurisprudence: due process and the presumption of innocence.
