The Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. 1961, et. seq. (commonly known as "RICO") is a federal act which permits both criminal and civil actions to be brought against "enterprises" that are alleged to have engaged in specific acts made illegal under federal or state law. Under RICO, certain acts are prohibited, including:

• Investment of income derived from Racketeering Activities in an enterprise engaged in Interstate Commerce.

• Acquisition or maintenance of interest in an enterprise that effects commerce through Racketeering Activities.

• Conduct or participation in an enterprise's affairs through a pattern of Racketeering Activities.

• Engaging in a conspiracy to do any of the above.

(See 18 U.S.C. 1962)

In addition to providing criminal penalties, 18 U.S.C. 1964 permits a civil claim, providing that "[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor[e] in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee, ... ."

A RICO claim must allege the following:

• "1) conduct;

• 2) of an enterprise;

• 3) through a pattern;

• 4) of racketeering activity."

Even if a complaint alleging a RICO claim adequately identifies an enterprise, it must also establish that the "person" associated with the enterprise conducted or participated, "directly or indirectly, in the conduct of such enterprises' affairs through a pattern of racketeering activity." To be liable under § 1962(c), that person "must participate in the operation or management of the enterprise itself," which means having "some part in directing those affairs," and must be separate and distinct from the enterprise. RICO "liability depends on showing that the defendants conducted or participated in the conduct of the 'enterprise's affairs,' not just their own affairs."

A RICO enterprise is defined by statute to mean an individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity. A RICO enterprise is "an ongoing 'structure' of persons associated through time, joined in purpose, and organized in a manner amenable to hierarchical or consensual decision-making." Although a business can be a RICO enterprise, a RICO enterprise can be shown "by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit." However, the "hallmark of an enterprise is a 'structure." There must be "a structure and goals separate from the predicate acts themselves."

A "Pattern of Racketeering Activity" requires at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity. Not all alleged criminal acts are "Racketeering Activities." Racketeering Activities relate to specified crimes, set forth in the statute. Unless acts which are defined as "Racketeering Activities" are alleged - a viable RICO claim is not alleged.

The following is a list of those crimes which are RICO predicates:

Racketeering Activity is: (A) any act or threat involving murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in a controlled substance or listed chemical which is chargeable under State law and punishable by imprisonment for more than one year; (B) any act which is indictable under any of the following provisions of title -bribery, sports bribery, counterfeiting, theft from interstate shipment, embezzlement from pension and welfare funds, extortionate credit transactions, fraud and related activity in connection with identification documents, fraud and related activity in connection with access devices, transmission of gambling information, mail fraud, wire fraud, financial institution fraud, procurement of citizenship or nationalization unlawfully, reproduction of naturalization or citizenship papers), the sale of naturalization or citizenship papers, obscene matter, obstruction of justice, influencing or injuring officer or juror generally, obstruction of criminal investigations, obstruction of State or local law enforcement, tampering with a witness, victim, or an informant, retaliation against a witness, victim, or an informant, false statement in application and use of passport, forgery or false use of passport, misuse of passport, fraud and misuse of visas, permits, and other documents, peonage, slavery, and trafficking in persons, interference with commerce, robbery, or extortion, racketeering, interstate transportation of wagering paraphernalia, unlawful welfare fund payments, prohibition of illegal gambling businesses, the laundering of monetary instruments, engaging in monetary transactions in property derived from specified unlawful activity, the use of interstate commerce facilities in the commission of murder-for-hire, illegal money transmitters, the sexual exploitation of children, interstate transportation of stolen motor vehicles, interstate transportation of stolen property, trafficking in counterfeit labels for phonorecords, computer programs or computer program documentation or packaging and copies of motion pictures or other audiovisual works, criminal infringement of a copyright, unauthorized fixation of and trafficking in sound recordings and music videos of live musical performances, trafficking in goods or services bearing counterfeit marks, trafficking in certain motor vehicles or motor vehicle parts, trafficking in contraband cigarettes, white slave traffic, biological weapons, chemical weapons, nuclear materials, an act which is indictable under the restrictions on payments and loans to labor organizations or relating to embezzlement from union funds, any offense involving fraud connected with a case under title 11 fraud in the sale of securities, or the felonious manufacture, importation, receiving, concealment, buying, selling, or otherwise dealing in a controlled substance or listed chemical, punishable under any law of the United States, any act which is indictable under the Currency and Foreign Transactions Reporting Act, any act which is indictable under the Immigration and Nationality Act, bringing in and harboring certain aliens, aiding or assisting certain aliens to enter the United States, or importation of alien for immoral purpose) if the act indictable under such section of such Act was committed for the purpose of financial gain, or any act that is indictable as an act of Terrorism.

In order to attach RICO liability to an enterprise, the Supreme Court requires a "continuity plus relationship" formula, saying "a plaintiff... must show that the racketeering predicates are related, and that they amount to or pose a threat of continued criminal activity." Courts have consistently assessed the presence of a pattern of racketeering activity by evaluating the allegations in the context of the following factors: 1) the number and variety of predicate acts; 2) the time period of the alleged activity; 3) the number of victims; 4) the presence of separate schemes; and 5) the occurrence of distinct injuries.

In addition, civil RICO claims require injury to "business or property." Personal injuries do not provide standing in civil RICO actions. The Supreme Court has made it clear that the term 'business or property' ... excludes personal injuries suffered. Pecuniary losses flowing from those personal injuries are also insufficient to confer standing. Thus, from a civil RICO context, personal injuries are insufficient to provide standing to pursue a RICO claim. Claims such as injury to mental health or emotional distress, sickness, poisoning and emotional distress, emotional distress due to loss of security and peace, injury stemming from the harassment and intimidation of federal witnesses, loss of income due to wrongful death of a family member/source of support, and the inability to pursue or obtain meaningful employment are insufficient to support a racketeering claim. In addition, in a civil RICO claim, a plaintiff must demonstrate that the defendant's actions "proximately caused" the injury. "Proximate cause" exists when there is "some direct relation between the injury asserted and the injurious conduct alleged. Thus, a Plaintiff can only recover to the extent that he has been injured in his business or property by the conduct constituting the violation. A plaintiff suing under civil RICO must show that his injury was proximately caused by the commission of the predicate acts.

Civil and Criminal RICO is a complex area of the law that requires both an understanding of the underlying crimes that make up RICO predicate acts and how those acts interplay with the alleged enterprise. While RICO claims are relatively infrequent, they are becoming more prevalent in business disputes based upon the threat of treble damages and the recovery of attorney fees. As such, businesses are seeing a rise in RICO claims. At R|S, our attorneys have substantial experience in defending claims alleging RICO and our attorneys aggressively defend such claims. Should you or your business be faced with a RICO claim, the attorneys at R|S are available to aggressively defend you and your business interests.