double-jeopardy federalism fraud law Post racketeering RICO

RICO Is Not So Suave

While researching the RICO statutes, I was astonished to find two disturbing applications of these laws. First, when RICO intersects with mail and wire fraud statutes, it allows the federal government to turn underlying offenses outside the scope of RICO into actual RICO offenses. Second, the federal government can prosecute an offender both under RICO and on the underlying crimes that constitute a RICO violation, creating a scenario equivalent to double jeopardy. After the cut, I will explain what the RICO statute is, how these two applications work, and why this is injust.

RICO stands for the Racketeer Influenced and Corrupt Organizations Act codified in 18 U.S.C. 1961-68. RICO was created to deal with organized crime but Congress judiciously wrote it broadly enough to deal with a range of criminal and civil cases, enabling federal prosecutors to utilize RICO to go after everything from accounting firms to abortion clinic protestors to Don King. In the simplest terms, a RICO violation consists of two elements: (1) a person commits repeated "predicate acts" constituting a "pattern of racketeering activity" and (2) those acts involve an entity known as a RICO "enterprise" used in a manner specified by the statute. There are all sorts of rococo curlicues when it comes to the specific language and Supreme Court cases have delved into ornate statutory construction to determine what exactly "enterprise" or "pattern" means when dealing with edge cases, but good common sense is all that is needed to envision the normal application of RICO.

But common sense flies out the window when you combine RICO with federal wire and mail fraud statutes. The requisite violative acts of the enterprise consist of a slew of federal crimes and also a good number of state crimes that are substantive, if not literal, analogues of the laundry list of offenses listed in the statute. Although this greatly expands the scope of federal control over the traditional domain of the State police power by federalizing any state crimes that meet the RICO standard, this clearly stemmed from Congressional intent. While I lament the continued federalization of all crime, it is fully within the Constitution for Congress to enact such a statute. What I find particularly egregious is the use of mail and wire fraud statutes to expand the scope of RICO beyond its already extremely broad ambit.

Mail and wire fraud is easy to prove. It is the interstate use of the mail or wires to engage in a scheme to defraud. Almost every fraudulent activity can be shown to have an interstate mail component. If your credit card statement that records a fraud is sent from Visa's headquarters to your state, the interstate element is met. If you mail a fraudulent document to a government authority which in turn mails it somewhere else, the interstate element is met. The trouble arises when mail fraud is used as the criminal underpinning of a RICO prosecution. It doesn't matter whether the underlying fraud or crime is within the jurisdiction of RICO because mail and wire fraud explicitly is. For example, if repeated perjury resulted from fraudulent depositions mailed to a court from another state, then not only is there perjury, there is also mail fraud. Further, if this mail fraud activity meets the requirements for RICO, then in effect a RICO prosecution can be brought for the underlying crime of perjury cloaked in the guise of mail fraud. This happened in United States v. Eisen, 974 F.2d 246 (2d Cir. 1992). Tax fraud is another substantive area that can be abused in the same way. Tax fraud is not a predicate crime for RICO but it involves mail fraud in almost every case since the fraudulent tax return has to be sent to the IRS. Again, this is not a theoretical example and was the theory under which United States v. Regan, 937 F.2d 823 (2d Cir. 1991) was brought.

This is a concern for two reasons. First, it gives the government more latitude than it should have under the RICO statute. It is always a concern when the federal government's power is not expressly constrained in a criminal statute because it gives prosecutors the ability to over-apply a law. In this case, they have been able to get away with it because there has been no direct challenge of RICO under the void for vagueness doctrine. It is not fair to expect people to understand that RICO will be applied far beyond its expressly stated limitations. Consequently, it is not fair to punish people for committing "crimes" that only become crimes after judicial acrobatics. Second, this broad application of RICO raises federalism issues already alluded to above. The RICO statutes are so far-reaching that ordinary state criminal and civil cases get federalized for no good reason. From the inception of the Constitution, the police power has always been within the realm of the State. There were only three federal crimes in 1800. Now there is a veritable thicket of federal crimes, often needlessly duplicating state statutes or, as in this case, asserting power over the States for no discernable reason.

The second issue I have with RICO is quite simple: it enables prosecutors to violate the spirit of the double jeopardy rule. The Fifth Amendment states that no person "shall [be] subject for the same offense to be twice put into jeopardy of life and limb." In layman's terms, this says that you cannot be tried for the same crime twice. This is a cornerstone of the American criminal justice system and its jurisprudence. Yet, in the case of RICO, its animating spirit can be circumvented through an overweening technical reading. The government may prosecute a defendant under RICO based on the specified predicate acts necessary for a RICO conviction, such as arson or kidnapping, AND the government can later prosecute the same defendant for the predicate criminal act itself. The Supreme Court itself has upheld this interpretation in the depressing case of Garrett v. United States. To be fair, the Court in that case made certain to indicate that this was possible under the specific facts of this case, but while this leaves wriggle room for future cases, it still functions as persuasive precedent beyond obiter dicta. It is dishonest for the government to create a crime and then create a new crime based on the repetition of that crime in certain situations and then be able to prosecute an individual for both. While I appreciate the Kafkaesque/Borgesian quality to such an interpretation, I prefer my fabulist literature to stay fabulist and not creep into dreary social realism.

RICO is mostly a good and worthwhile statute, as it makes it easier to prosecute criminal organizations which do substantial economic and moral harm to the country. But the application of RICO needs to be constrained in a few very specific circumstances to ensure that it is used primarily to positive and fair ends and is not abused in ways that constrain or injure our liberty.

EDIT: I struck out the last paragraph because RICO is much worse than I thought. A former federal prosecutor mentioned that he didn't like the statute because it was so easily abused. I neglected to mention that RICO is used often in the civil context where treble damages and attorneys' fees are awards if a claim is successful. This gives impetus to plaintiff firms to try to turn every run of the mill state fraud case into a RICO charge, glutting our courts with vexatious litigation. RICO is poorly written, overapplied, and frequently misused: a complete legislative failure.