58 Notre Dame L. Rev. 237, *
Copyright (c) 1982 Notre Dame Law Review
University of Notre Dame
University of Notre Dame
1982
58 Notre Dame L. Rev. 237
LENGTH: 88985 words
ARTICLE: THE RICO CIVIL FRAUD ACTION IN CONTEXT: REFLECTIONS ON BENNETT v. BERG
G. Robert Blakey *
* Professor of Law, Notre Dame Law School. A.B. 1957, J.D. 1960, Notre Dame. Professor Blakey was the Chief Counsel of the Senate Subcommittee on Criminal Laws and Procedures of the United States Senate in 1969-1970, when the Organized Crime Control Act of 1970, Pub. L. No. 91-452, 84 Stat. 941 (1970), was processed.
SUMMARY:
... In Bennett v. Berg, the United States Court of Appeals for the Eighth Circuit, as a matter of "first impression in the Circuit Courts of Appeals," faced and resolved a number of significant issues in the construction of Title IX, the Racketeer Influenced and Corrupt Organizations (hereinafter "RICO") provisions of the Organized Crime Control Act of 1970. ... The Legislative History of RICO ... Noting that the bill "incorporated," inter alia, the recommendations of the ABA, he reviewed for the Senate, as he had done on March 11, the scope and impact of organized crime in the United States and discussed the various titles of the bill, concentrating on Title IX, now entitled "Racketeer Influenced and Corrupt Organizations (RICO)," on the infiltration of businesses and unions, and specifically noting such activities as bankruptcy fraud, the theft of securities and their fraudulent pledging, and the counterfeiting of hit records. ... (3) Both immediate victims of racketeering activity and competing organizations were contemplated as civil plaintiffs for injunction, damage, and other relief; ... Several actions had in fact been dismissed on a variety of grounds, including a failure to allege an "organized crime" or a "racketeering" connection, the failure to allege a predicate offense, the novel character of the theory of the violation of the predicate offense alleged, the failure to allege a "pattern" of racketeering activity, the failure to allege a "competitive" or "racketeering enterprise" injury, and the failure to distinguish in the complaint between the "person" and the "enterprise." ...
TEXT:
[*237] I. Introduction
[T]he office of all the Judges is always to make such . . . construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuation of the mischief, . . . and to add force and life to the cure and remedy, according to the true intent of the makers of the Act pro bono publico.
Heydon's Case, 76 Eng. Rep. 637, 638 (Ex. 1584).
In Bennett v. Berg, 1 the United States Court of Appeals for the Eighth Circuit, as a matter of "first impression in the Circuit Courts of Appeals," 2 faced and resolved a number of significant issues in the construction of Title IX, the Racketeer Influenced and Corrupt Organizations (hereinafter "RICO") provisions of the Organized Crime Control Act of 1970. 3 In Bennett, the plaintiffs, residents in a "life [*238] care" retirement village, sought treble damages and equitable relief under 18 U.S.C. § 1964 from a number of defendants, including named individuals, a not-for-profit corporation, the John Knox Village, attorneys, accountants, the firm of Snyder, Ernst & Muehling, and the Prudential Life Insurance Company, a mortgage lender. The district court dismissed the complaint, and an appeal was taken. On appeal, the defendants sought to sustain the dismissal by arguing that:
(1) no allegation of a connection between organized crime and the plaintiffs had been made;
(2) no allegation of a culpable "person" separate from the charged "enterprise" had been made;
(3) no allegation of an "enterprise" separate from the charged "pattern of racketeering activity" had been made;
(4) no allegation of a "pattern of racketeering" had been made;
(5) no allegation of "investment," "acquisition," or an association with the "conduct" of an enterprise through a pattern of racketeering activity had been made;
(6) no allegation of a cognizable "injury" had been made; and
(7) the equitable relief sought was not available to private plaintiffs. 4
The court of appeals reversed in part and affirmed in part the district court's dismissal of the complaint. Because the Bennett court's decision represents the first comprehensive effort by a court of appeals to treat a number of important issues regarding the construction of RICO in the context of civil litigation, it merits extended comment. 5 Before [*239] examining the court of appeals' opinion in that case, however, this article will discuss the facts of the case, the text of RICO, the legislative history of RICO, and the jurisprudence under RICO.
II. The Facts of Bennett v. Berg 6
The plaintiffs in Bennett alleged to be present and former residents, 423 in number, of the John Knox Village retirement community in Lee's Summit, Missouri. 7 Owned and operated by a not-for-profit corporation, the John Knox Village is the "largest retirement community of its kind in the country." 8 The residential community consisted of approximately 2,500 residents, who occupied units in the facility pursuant to "Occupancy Agreement" contracts. In return for the payment of an initial lump sum -- an "Entrance Endowment" -- the residents were entitled to occupy specific apartments for life. Endowments paid ranged from $ 9,000 to more than $ 50,000. In addition, the "Occupancy Agreement" provided for the payment of a monthly lodging and service charge, "in such amounts as determined by the Board of Directors of the Village." 9 More than fifty million dollars has been paid in endowments or collected in monthly fees. 10 The monthly charge was to cover fifty-one services and facilities, including tray and diet service, building and grounds maintenance, scheduled transportation, laundry service, and various forms of medical care. According to the complaint, the Village was also "promoted as being a religiously or spiritually oriented, Christian community." 11
The plaintiffs alleged, however, that the Village was in fact on [*240] the verge of bankruptcy, that service had markedly deteriorated, and that they faced the loss of the "life care" that they had expected and would have received but for the "fraud . . . in the inducement of residents to live in the community and in the operation of the Village." 12
According to the complaint, the various defendants, through the use of the mails, had fraudulently promoted the retirement community with materially false statements relating to its financial soundness. In addition, the lawyers, accountants, and the mortgage lender were alleged to have conspired to conceal from the plaintiffs the fraudulent promotion and operation of the Village, which included a pattern of self-dealing in breach of fiduciary duties. The complaint was drafted in eleven counts, two of which were premised on RICO, the rest of which were premised, under principles of pendent jurisdiction, on theories of common law fraud, breach of fiduciary duties, and specific Missouri statutes. Count I, a RICO count, prayed for treble damages, costs, and attorneys fees; Count II, a RICO count as well, prayed for equitable relief, including, if appropriate, the reorganization of the Village.
III. The Text of RICO
As the Supreme Court has repeatedly noted, the scope of a statute is to be determined in the first instance by examining its text. 13 Section [*241] 1964(c) of RICO authorizes "[a] person injured in his business or property by reason of a violation of Section 1962" to "sue." 14 A congressional grant of the right to sue conveys, in the absence of statutory limitations, the availability of all necessary and appropriate relief. Significantly, the right to sue clause of section 1964(c) reads "sue and," not "sue to." 15 Accordingly, all necessary and appropriate relief is included in the text of section 1964(c). Recovery of treble damages, costs, and attorney's fees is explicitly added.
Under section 1961(3), "person" is defined to include "any . . . entity capable of holding a legal or beneficial interest in property." 16 On its face, the text of section 1964 contains no modifiers. 17 It is difficult [*242] to see, therefore, how the plaintiffs in Bennett could have been excluded from the class of "persons" entitled to sue under it. The moneys obtained by the defendants through the alleged fraud, moreover, constituted "property." 18 Accordingly, it is also difficult to see how the plaintiff's injuries could have been excluded from the class of injuries meriting relief under section 1964(c).
Section 1962 19 is violated by "any person . . . associated with [*243] any enterprise . . . the activities of which affect . . . commerce, conduct[ing] . . . [the] enterprise's affairs through a pattern of racketeering activity. . . ." 20 As noted above, the definition of a "person," is, of course, not limited by language in the text of the statute. "Enterprise," too, is defined to include "any corporation." 21 "Pattern[ed]" [*244] activity means activity that is not "isolated" or "sporadic," but is "continu[ous] and relat[ed]." 22 Finally, "racketeering activity" may be conducted "through" the offense of "mail fraud." 23
As such, the possible application of RICO to the fact pattern alleged by the plaintiffs in Bennett should have been considered "neither absurd nor surprising." 24 If there were thought to be any [*245] ambiguity in the language of RICO, moreover, it should have been "liberally construed to effectuate its remedial purposes." 25 In addition, [*246] the application of RICO to the facts alleged would have been [*247] fully consistent with RICO's express purpose and statutorily stated findings of fact. 26 Congress found that "organized" criminal "activity" used "fraud" to "drain" "dollars" from the American economy [*248] and to "harm innocent investors." 27 Congress, therefore, passed RICO to "provid[e] enhanced sanctions and new remedies." 28 "Nothing on the face of . . . [RICO] suggests a congressional intent to limit its coverage. . . ." 29 In fact, the "words do not lend themselves to restrictive interpretation." 30 "The language of the statute . . . [is] the most reliable evidence of its intent. . . ." 31 "[I]n the absence of a clearly expressed legislative intent to the contrary, that language must ordinarily be regarded as conclusive." 32 Obviously, no contrary legislative intent was expressed on the face of RICO. It is appropriate, therefore, to determine if any was expressed in its legislative history. 33
[*249] IV. The Legislative History of RICO
A. The Origins of the Ideas in RICO
After the Special Committee to Investigate Organized Crime in Interstate Commerce (the Kefauver Committee) disclosed in 1951 the problem of organized crime's infiltration into legitimate business and state and local government, 34 the American Bar Association ("ABA"), in response to a request of the chairman of the Special Committee, Senator Estes Kefauver, established the ABA Commission on Organized Crime. 35 The Commission examined various legislative proposals to strengthen the law as it dealt with organized crime, including measures that recognized that "money . . . [was] the key to power in the underworld." 36 By 1960, the problem of criminal infiltration into labor unions had been fully documented by the Senate Select Committee on Improper Activities in the Labor or Management Field (the McClellan Committee). 37 Hearings, too, had been held exposing the structure of the national syndicate of organized crime known as the Mafia or La Cosa Nostra. 38 In addition, the Department of Justice had begun to move against racketeer infiltration of various unions by imaginatively utilizing antitrust theories. 39 Accordingly, [*250] the pervasive problem of organized crime 40 and racketeering 41 in the world of government, business, and unions 42 [*251] was well-known by 1967, when the President's Commission on Law [*252] Enforcement and the Administration of Justice (the Katzenbach Commission) made its monumental report and recommended a comprehensive crime control strategy. 43 Among other things, the Commission [*253] analyzed various aspects of organized crime, 44 but it paid special attention to infiltration of legitimate business. 45 It recommended the use of new approaches to control such infiltration. 46 Finally, the fundamental reexamination of federal criminal jurisprudence undertaken between 1966 and 1971 by the National Commission on Reform of the Federal Criminal Law (the Brown Commission) developed significant insights into the character of the issues that faced the Congress. 47
B. The Initial Stages of the Legislative Process
In 1967 Senator Roman L. Hruska proposed bills S. 2048 and S. 2049 to implement aspects of the Katzenbach Commission's recommendations, particularly the suggestion that antitrust theories be [*254] brought to bear on organized crime. 48 As originally introduced, S. 2048 focused on the use of unreported income from one line of business in another line of business, while S. 2049 dealt with the "investment" of proceeds from "criminal activity" in a "business enterprise." 49 Congressman Richard H. Poff introduced companion bills in the House. 50 Although no action was taken on them, they were studied by the ABA. 51 Significantly, while commenting that the [*255] "time tested machinery of the antitrust law contains several useful and workable features," the ABA suggested that the underlying theory of the antitrust law -- the maintenance of competition -- might make the direct use of the antitrust laws maladapted to the goal of curtailing organized crime's influence in the upperworld. The ABA expressed particular concern that antitrust concepts like "standing" and "proximate cause" -- "appropriate in a purely antitrust context" -- would create "inappropriate and unnecessary obstacles" in the way of persons injured seeking "treble damage recovery." 52 Accordingly, [*256] the ABA recommended that the Hruska and Poff bills be redrafted outside of the antitrust context to avoid the impact of restrictive antitrust precedent. 53
C. The Introduction of the Organized Crime Control Act
On January 15, 1969, Senator John L. McClellan introduced S. 30, the Organized Crime Control Act. The Act was drafted to implement a number of the recommendations of the Katzenbach Commission, although it did not at that time contain a RICO-type title. 54 On March 11, 1969, Senator McClellan made a major speech on the floor of the Senate, in which he reviewed the development of organized crime in the United States, including its structure and its activities in gambling, narcotics, loansharking, the infiltration of businesses, the takeover of unions, and the subversion of democratic processes. 55 In addition, Senator McClellan addressed the failure of traditional laws and law enforcement procedures to arrest its growth, and he analyzed the various provisions of S. 30 that were designed to change those laws and procedures. Noting the specific businesses infiltrated, Senator McClellan had this to say about that infiltration:
Usually, after [the] takeover [of a business] . . . defaulted loans are liquidated by professional arsonists burning the business and then collecting the insurance or by various bankruptcy fraud techniques, which are called "scam." . . . Often, however, the organization, using force and fear, will attempt to secure a monopoly in the service or product of the business. When the campaign is successful, the organization begins to extract a premium price from customers. Purchases by infiltrated businesses are always made from specified allied firms. With its extensive infiltration of legitimate business, [*257] organized crime thus poses a new threat to the American economic system. The proper functioning of a free economy requires that economic decisions be made by persons free to exercise their own judgment. Force or fear limits choice, ultimately reduces quality, and increases prices. When organized crime moves into a business, it usually brings to that venture all the techniques of violence and intimidation which it used in its illegal businesses. Competitors can be effectively eliminated and customers can be effectively confined to sponsored suppliers. The result is more unwholesome than other monopolies because the newly dominated concern's position does not rest on economic superiority. 56
Senator McClellan had this to say about the infiltration of unions:
Closely paralleling its takeover of legitimate businesses, organized crime has moved into legitimate unions. Control of labor supply through control of unions can prevent the unionization of some industries or can guarantee sweetheart contracts in others. It provides the opportunity for theft from union funds, extortion through the threat of economic pressure, and the profit to be gained from the manipulation of welfare and pension funds and insurance contracts. Trucking, construction, and waterfront entrepreneurs have been persuaded for labor peace to countenance gambling, loan-sharking and pilferage. All of this, of course, makes a mockery of much of the promise of the social legislation of the last half century. 57
Senator McClellan had this to say about the subversion of democratic processes:
To exist and to increase its profits, . . . organized crime has found it necessary to corrupt the institutions of our democratic processes, something no society can long tolerate. Today's corruption is less visible, more subtle and therefore more difficult to detect and assess than the corruption of the prohibition and earlier eras. Organized [*258] crime operates even in the face of honest law enforcement, but it flourishes best in a climate of corruption. As the scope of organized crime's activities has expanded, its efforts to corrupt public officials at every level of government have grown. For with the necessary expansion of governmental regulation of private and business activity, its power to corrupt has given organized crime greater control over matters affecting the everyday life of each citizen. The potential for harm today is thus greater if only because the scope of governmental activity is greater. 58
D. The Introduction of S. 1623
On March 20, 1969, Senator Hruska introduced S. 1623, the Criminal Activities Profits Act. 59 Senator Hruska noted Senator McClellan's [*259] March 11th speech, commenting that he "need not reiterate [*260] everything that the distinguished senator from Arkansas . . . set [*261] forth." 60 He did, however, want to "focus" 61 on the senator's point about the infiltration of the legitimate economy. 62 Senator Hruska then indicated that S. 1622 had been drafted to "synthesize" the earlier legislation on which he and Congressman Poff had worked and on which the ABA had favorably commented. 63 The bill, he said, 64 attacked "the economic power" of organized crime "on two fronts -- criminal and civil," but that the "criminal provision . . . [was] intended primarily as an adjunct to the civil provision," which he "consider[ed] . . . the more important feature" of the bill. 65 As introduced, S. 1623 in fact included express provisions for private equitable relief and treble damages. 66
[*262] E. The Introduction of S. 1861
On April 18, 1969, Senators McClellan and Hruska introduced S. 1861, the Corrupt Organizations Act. 67 Senator McClelland indicated that it was "in part a product of the testimony developed in four days of hearings on S. 30." 68 He also indicated that Congressman Poff had "been in contact with . . . [him] in reference to [the] bill." 69 As introduced, S. 1861 did not, however, expressly include provisions for private equitable relief or treble damages. 70 Its provisions only provided expressly for criminal sanctions and equitable relief sought in government suits. 71 Senator McClellan noted that S. [*263] 1861 drew "heavily upon the remedies developed in the field of antitrust," but he added that as sponsor of the bill he had "no intention . . . of importing the great complexity of antitrust law enforcement into" the enforcement of S. 1861. 72 Nor did he intend to "limit the remedies available to those which have already been established." 73 He wanted, he said, to retain the "ability of our chancery courts to formulate a remedy to fit the wrong." 74 In addition, Senator McClellan expressed his hope that "provisions [of S. 1861] might well be incorporated by way of an amendment into S. 30 itself." 75
[*264] The Department of Justice commented on S. 1861 on August 11, 1969. 76 A central concern of the Department was the breadth of predicate offenses. 77 It suggested that they were "too broad and would result in a large number of unintended applications, as well as tending toward a complete federalization of criminal justice." 78 A [*265] more circumscribed definition of the predicate offenses was suggested, which would be narrower, but still "broad enough to include most state statutes customarily invoked against organized crime," 79 a suggestion that was, at least in part, adopted by the Committee. 80
F. The Reporting of the Organized Crime Control Act In the Senate
On December 18, 1969, Senator McClellan reported for the Judiciary Committee S. 30, the Organized Crime Control Act, amended to incorporate S. 1861 as Title IX. 81 The Committee Report described Title IX in language that paralleled the Senator's March 11th speech, giving special attention to the infiltration of businesses and the taking over of unions. 82 The report noted, for example, that the stock exchange had been subjected to thefts, businesses [*266] had been liquidated by arsonists to collect insurance, bankruptcy fraud techniques had been employed, premium prices had been extracted from customers, and competitors had been eliminated. 83 Unions, the report continued, had been victimized by theft and used to extort, while profit had been gained by the manipulations of welfare and pension funds and insurance contracts. 84 Present laws were termed "inadequate to remove criminal influences from legitimate endeavors." 85 The Committee Report called for "[n]ew approaches that . . . [dealt] not only with individuals, but also with the economic base through which those individuals constitute[d] a serious threat to the economic well-being of the Nation," 86 including "a civil law approach of equitable relief broad enough to do all that is necessary to free the channels of commerce from all illicit activity." 87 While "it is necessary," the Report noted, "to free the channels of commerce from predatory activities, . . . there [was] no intent to visit punishment on any individual: the purpose [was] civil. Punishment as such [was] limited to the criminal remedies. . . ." 88 Title [*267] IX, "it [was] . . . emphasized, [was] remedial rather than penal." 89
[*268] The text of S. 30 as reported expanded its statement of findings and purpose, a blend of S. 30 and S. 1861, to note, inter alia, "fraud" as one of the activities of "organized crime"; 90 the original findings of S. 1861 had included "harm[ing] innocent investors and competing organizations" without relating the harm to "fraud." 91 In addition, the list of "racketeering activities" in Title IX was narrowed as the Department of Justice suggested, but it was also expanded to include mail fraud (18 U.S.C. § 1341), wire fraud (18 U.S.C. § 1343) and securities fraud. These fraud offenses complemented bankruptcy fraud, which was in S. 1623, and theft from interstate shipments (18 U.S.C. § 659) and transportation of property taken by theft or fraud (18 U.S.C. §§ 2314-2315), which were in S. 1861. Offenses relating to union corruption included embezzlement (18 U.S.C. § 664; 29 U.S.C. § 501(c)), corrupt welfare fund payments (18 U.S.C. § 1954), and the Taft-Hartley Act (29 U.S.C. § 186). Government corruption was attacked, inter alia, by the state offenses 92 of bribery and extortion and the federal offenses, not only of fraud, but also of bribery (18 U.S.C. § 201), obstruction of justice (18 U.S.C. § 1510), and extortion (18 U.S.C. § 1951). 93 While the Judiciary Committee favorably [*269] reported S. 30, Senators Philip A. Hart and Edward M. Kennedy [*270] filed individual views expressing concern that "the reach of [the] . . . bill . . . [went] beyond organized criminal activity." 94 Reflecting the view of the American Civil Liberties Union, they thought that if it were amended "to restrict its scope solely to organized criminal activity," it would contribute "important and useful means of eradicating organized crime." 95
G. Senate Debate on the Organized Crime Control Act
On January 20, 1970, Senator McClellan called up S. 30, as reported. 96 Noting that the bill "incorporated," inter alia, the recommendations of the ABA, he reviewed for the Senate, as he had done on March 11, the scope and impact of organized crime in the United States 97 and discussed the various titles of the bill, concentrating on Title IX, now entitled "Racketeer Influenced and Corrupt Organizations (RICO)," on the infiltration of businesses and unions, and specifically noting such activities as bankruptcy fraud, the theft of securities and their fraudulent pledging, and the counterfeiting of hit records. 98 The legitimate endeavors in which organized crime had been active were noted; the list included "accounting, banking, charities, construction, insurance, real estate, and stock and bonds." 99 Senator [*271] Hruska also spoke on the importance of Title IX, calling it "rather novel" and "a most promising and ingenious proposal" 100 and repeating that its "principal value . . . may well be found to exist in its civil provisions." 101 Senator Robert C. Byrd, too, spoke in favor of Title IX, noting how "arson" had been used by organized crime to put pressure on the A & P to purchase mob-manufactured detergent. 102 S. 30 was passed by the Senate, almost unanimously, on January 23, 1970. 103
H. House Consideration of the Organized Crime Control Act
In the House, S. 30 was referred to the Committee on the Judiciary on January 26, 1970. 104 On March 10, 1970, Congressman Poff 105 took the House floor to comment on it, and in particular on Title IX. He brought to the attention of the floor a "thoughtful and accurate" analysis of S. 30 prepared by the United States Chamber of Commerce, which included "several specific hypothetical examples, which aid[ed] the reader in understanding concretely the provisions of S. 30." 106 The Chamber of Commerce report included a [*272] detailed analysis of how the Senate bill would operate to attack a Mafia boss's takeover of a juke box corporation. 107 Congressman Poff also inserted in the House hearings a copy of the ABA Report. 108
The House hearings began on May 20, 1970. The Association of the Bar of the City of New York appeared on June 10, 1970, represented by Sheldon H. Elsen. 109 The Association's written statement suggested that Title IX went much too far, 110 as its reach extended beyond organized crime. In particular, the Association criticized the scope of "racketeering activity." 111 The point was repeated in oral [*273] testimony. 112 It provoked a detailed response from Senator McClellan on the Senate floor, the thrust of which was that the statute may well have been drafted in response to organized crime, but that as a legislature, Congress had a duty to enact comprehensive programs that need not be so circumscribed. Accordingly, it was not a valid objection to point out that the bill's scope was not limited to the problem that gave rise to it. In addition, he made a telling rejoinder to the ACLU's complaints about the scope of the bill beyond organized crime. There ought not be, he said, a double standard of civil liberties. Organized crime members, too, had rights, and if the bill was not objectionable as applied to them, it was not objectionable applied beyond them. 113
[*274] While S. 30 was pending in the House, the ABA formally endorsed [*275] it on July 15, 1970, although several amendments, including a private treble damage action, were suggested. Senator McClellan commented on the endorsement on the Senate floor, noting that the ABA's suggestion for the addition of treble damage relief was a "constructive contribution," 114 On July 23, 1970, Edward L. Wright, the President-elect of the ABA, testified before the House on S. 30, and presented to it the suggestion for the treble damage action amendment. 115
On September 30, 1970, S. 30 was favorably reported from the House Judiciary Committee. 116 When the bill was brought up for [*276] consideration, Judiciary Committee Chairman Emanuel Celler --without expressing any words of limitation -- described Title IX as, inter alia, authorizing "treble damage suits on the part of private parties who are injured." 117 During the debate, however, Congressman Abner J. Mikva, an opponent of the bill, objected, as he had in the Committee Report, to the reach of S. 30 beyond organized crime: "I ask my colleague from Virginia (Mr. Poff) this rhetorical question: where in the bill does one find a definition of organized crime?" 118 Congressman Poff responded that there was none, but that Congressman Mikva himself would probably have been among the first to object if the bill had been status-based legislation. 119 In addition, [*277] Congressman Mikva objected to the scope of "racketeering activity" on the ground of federalism, but his plea to narrow the scope of Title IX came to no avail. 120
[*278] On October 7, 1970, the House returned to S. 30. Congressman Poff, as had Congressman Celler, used no words of limitation in outlining the broad equitable powers given the courts by Title IX and the scope of the new treble damage relief. 121 Debate, however, again [*279] focused on "organized crime." Congressman Mario Biaggi offered an amendment that would have explicitly prohibited membership in the Mafia. 122 Congressman Poff argued against it on constitutional grounds, 123 noting in language virtually identical to Senator McClellan's 124 that there was no need to try to confine S. 30 to "organized crime," as it might properly be applied to others as well. Eventually, the House passed the bill by a vote of 431 to 26. 125
I. Senate Consideration of the House-Amended Bill
The Senate took up the House-amended bill on October 12, [*280] 1970. 126 Senator McClellan regarded most of the House amendments as largely minor changes or of "clarifying and strengthening" 127 effect. He suggested that a conference was not necessary. Senator Hruska, too, noted that the House changes "were not of major significance," and he agreed that a conference was not required. The Senate agreed to the motion to accept the House amendments by a voice vote. 128
The President signed the legislation on October 15, 1970. 129
J. Analysis of Legislative History
This review of the legislative history of S. 30 in general, and Title IX in particular, establishes the following points beyond serious question:
(1) Congress fully intended, after specific debate, to have RICO apply beyond any limiting concept like "organized crime" or "racketeering";
(2) Congress deliberately redrafted RICO outside of the antitrust statutes, so that it would not be limited by antitrust concepts like "competitive," "commercial," or "direct or indirect" injury;
(3) Both immediate victims of racketeering activity and competing organizations were contemplated as civil plaintiffs for injunction, damage, and other relief;
(4) Over specific objections raising issues of federal-state relations and crowded court dockets, Congress deliberately extended RICO to the general field of commercial and other fraud; and
(5) Congress was well aware that it was creating important new federal criminal and civil remedies in a field traditionally occupied by common law fraud.
Accordingly, neither the text nor the legislative history of RICO stood in the way of recovery by the plaintiffs in Bennett. It is appropriate, therefore, to turn to the jurisprudence under the statute.
V. The Jurisprudence Under RICO
Only a handful of civil actions have been brought under RICO. As such, its jurisprudence could hardly be said to have been authoritatively [*281] determined before Bennett. Several actions had in fact been dismissed on a variety of grounds, including a failure to allege an "organized crime" or a "racketeering" connection, 130 the failure to allege a predicate offense, 131 the novel character of the theory of the violation of the predicate offense alleged, 132 the failure to allege a "pattern" of racketeering activity, 133 the failure to allege a "competitive" or "racketeering enterprise" injury, 134 and the failure to distinguish [*282] in the complaint between the "person" and the "enterprise." 135 On the other hand, a majority of civil cases under RICO had either expressly 136 or impliedly 137 rejected a number of these contentions or [*283] were easily distinguishable. 138 The court in Bennett, therefore, wrote on a relatively clean slate, where it was free to reason on the merits and not unduly bound by precedent. 139 [*284] VI. The Opinion in Bennett v. Berg
A. The Question of Organized Crime
The court in Bennett did not devote much time to the challenge to the complaint on the ground that no allegation had been made of a connection between organized crime and the defendants. Writing for the court, Judge Henley noted that the contention had "some degree of support" from courts "swayed by Congress's evident concern with organized crime in the passage of RICO." 140 Nevertheless, the court was, Judge Henley wrote, "convinced that the better reasoned approach" rejected any attempt "to interpret RICO as creating a status offense." 141 The court relied on the legislative history of [*285] the statute, the opinions of its sister circuits in the criminal area, the majority trend in lower court opinions in the civil area, and the unanimous opinion of the commentators. Recognizing that its conclusion might, however, "tend to extend the net of the RICO Act to situations which otherwise might find a remedy only in the state courts," the court noted that "some federalization of state claims was not unanticipated by Congress." 142 As such, under the prevailing jurisprudence of the Supreme Court, Judge Henley observed, the court lacked "authority to restrict the reach of the statute." 143 Nor did the court see an opening of "the flood gates for federal adjudication of every common law fraud claim," for RICO claims had to involve "an enterprise which engages in or affects interstate commerce." 144
The court spent little time with the organized crime challenge. Similarly, little comment is warranted on its reasoning. No serious exception can be -- or ought to be -- raised to it. Indeed, it is difficult to see how the challenge could have been taken so seriously by the lower courts, not only in light of the text of the statute itself, but also its explicit legislative history. The blunt truth is that some lower courts have been more intent on redrafting than reading RICO. 145
[*286] B. The Question of Culpable "Person" Separate From the Charged "Enterprise"
Although here, too, the court devoted little time to the issue, the distinct person-enterprise challenge presented a far more complex question. Count I of the complaint sought treble damage relief from all defendants, except John Knox Village, leaving the Village in the role of the "enterprise" operated by the other defendants' allegedly illegal acts. Count II of the complaint, however, sought equitable relief from the Village, so it cast the Village in the role of "person." The court thought this made the "residential community" -- viewed as an association in fact -- the "enterprise." Prudential argued, therefore, that no "enterprise . . . [had been] alleged apart from the 'person' who 'associated with' an enterprise for purpose of racketeering." 146 Because the complaint had not "clearly set forth" its theories in separate counts, shifting the role of the Village from Count I (person) to Count II (enterprise), the court held that the RICO claim against the Village in Count II could not stand. 147 Nevertheless, [*287] the court suggested that on remand the plaintiffs be permitted to amend their complaint so that "justice" might be done and a decision reached on the merits, not merely the pleadings.
To be sure, the text of RICO requires the showing of two separate elements: "person" and "enterprise." But nothing in the statute [*288] compels the conclusion that the elements are mutually exclusive. 148 Nothing on the face of the statute, on the other hand, compels the conclusion that they are not mutually exclusive. Either reading of the statute would be consistent with its unadorned text. The resolution of the issue, however, ought to turn on which statutory construction is most consistent with Congress' expressed purpose to provide "enhanced sanctions and new remedies." 149 Obviously, too, Congress' characterization of RICO as "remedial" and its directive that RICO be "liberally construed" to implement that characterization ought to be brought into play. 150 Following that approach, the proper result [*289] should depend on the particular relationship between the "person," [*290] "enterprise," and "pattern of racketeering activity" that is involved in the violation of each of RICO's basic standards. In some situations, no objection ought to be raised to attributing to the "enterprise" civil liability or criminal responsibility for the conduct of the "person." In other situations, such an attribution would be perverse.
"Person" may, or course, include "any individual or entity capable of holding a legal or beneficial interest in property." 151 The concept [*291] of "enterprise" may be divided into four broad categories: (1) [*298] commercial entities (e.g. corporations, 152 partnerships, 153 sole proprietorships); 154 (2) benevolent organizations (e.g. unions, 155 benefit funds, 156 schools 157 ); (3) governmental units (e.g. the office of a governor, 158 [*299] a state legislator, 159 a court, 160 a prosecutor's office, 161 a police 162 or sheriff's 163 department, or an executive department or agency 164 ); or (4) associations in fact (licit or illicit). 165 The categories [*300] are not mutually exclusive. 166
"Patterns of racketeering activity" 167 may also be grouped into four broad, but not mutually exclusive categories: (1) violence; 168 (2) [*303] provision of illegal goods and services; 169 (3) corruption in the labor [*305] movement 170 or among public officials; 171 and (4) commercial and [*306] other forms of fraud. 172 Since RICO's standards make "unlawful" [*307] certain investments, acquisitions or conduct in connection with an "enterprises," the roles that the enterprise may play in a violation of these standards may be variously -- but not mutually exclusively -- described as "prize," "instrument," "victim," or "perpetrator." 173
A violation involving an unlawful investment will usually cast the enterprise in the role of a "prize." 174 Typically, a violation involving [*308] an unlawful acquisition will find the enterprise in the role of "prize" or "victim." 175 Violations involving the operation of an enterprise [*309] by a pattern of racketeering activity may find the enterprise in the role of an "instrument," 176 "victim," 177 or "perpetrator." 178 Where an enterprise is a "prize" or "victim," no salutory remedial purpose would be served by attributing the conduct of an individual involved in the pattern of racketeering activity to the individual or entity playing the role of the enterprise, whether for civil liability or criminal responsibility. Indeed, doing so would undermine the purpose of the Act. 179 On the other hand, the remedial purpose of the statute would be enhanced by such an attribution where the individual or entity was playing the role of "perpetrator." Vicarious and entity civil liability and criminal responsibility are well-established principles in federal jurisprudence; they should also serve well in implementing RICO's broad remedial purposes. 180
A more difficult issue, however, is presented by the role of "instrument." The enterprise is used in the unlawful conduct, but it is not its author in the same sense as it is when the enterprise is the "perpetrator." Nonetheless, it is not wholly innocent, as when it plays the role of purely a "prize" or "victim." The crucial issue comes down to determining the general impact of vicarious or entity [*324] liability in controlling the unlawful conduct. Should the risks of loss be shifted for civil liability? Would a broadening of the onus of criminal responsibility tend to alter the conduct of other individuals or those who are in charge of the entity, so that the unlawful conduct itself would be curtailed? On balance, the remedial purposes of RICO tip the judgment toward finding civil liability, but not criminal responsibility for the enterprise when its role is purely that of "instrument." 181 Indeed, once it is recognized that substantial policy [*325] justifications in certain cases support treating the "enterprise" as a "person" and that the result, in any event, may be achieved by artful pleading (as the Bennett court noted), requiring the plaintiff to plead a "person" separate from the "enterprise" can be seen to be artificial. Accordingly, the court of appeals wrongly decided in Bennett that a single RICO count may not treat an "enterprise" as both an "enterprise" and a "person."
C. The Question of an "Enterprise" Separate From the Charged "Pattern of Racketeering Activity"
The defendants in Bennett contended that the complaint failed to allege the existence of an "enterprise" distinct from the alleged pattern of "racketeering activity." The district court agreed, noting that the complaint portrayed the enterprise, the John Knox Village, as "pervasively fraudulent." 182 The court of appeals disagreed, finding that the Village had an existence separate from the fraud alleged, since it provided "numerous legitimate services"; 183 it was, moreover, an incorporated body under Missouri law.
The defendant's objection here did little more than echo the [*326] now discredited analysis of Sutton, Anderson, and Turkette. 184 At least where legitimate entities are involved, little difficulty exists in discerning and establishing the elements of "enterprise" and "pattern." The objection therefore represented little more than a shotgun approach that sought to raise all conceivable errors. 185 Appropriately, it was rejected.
D. The Question of "Pattern"
The defendant next contended that the complaint had failed to allege a "pattern of racketeering activity." In addition, they objected under Rule 9(b) of the Federal Rules of Civil Procedure to the specificity of the allegations of fraud. The court of appeals rejected the first contention out of hand, but it found "some merit" in the second objection. 186 The court was troubled that matters relating to time, place, and content had been alleged as to only some of the representations and particularized as to only some of the defendants. Nevertheless, while the court struck the offending allegations, the action was taken without prejudice to make proper amendment on remand.
Rule 9(b) requires all averments of fraud or mistake to state the circumstances with particularlity. 187 The rule is rooted in a concededly valid desire to protect defendants from lightly made claims, often advanced only for their settlement value as part of "strike" [*327] suits. 188 Nevertheless, the rule does not abrogate Rule 8, 189 and the two must be harmonized. 190 Ultimately, Rule 9(b)'s aim is to provide "adequate notice of plaintiff's claim of fraud." 191 Circumstances usually include such matters as the time, place, and content of false representations, the identity of the speaker, and what was lost. 192 In the context of the general jurisprudence of Rule 9, the court of appeals' decision was, therefore, wholly proper. 193
E. The Question of "Investment," "Acquisition," or "Conduct"
The defendants also argued that the plaintiffs had failed to allege that they had "invested" racketeering proceeds in an enterprise, [*328] "acquired an interest in" an enterprise through a pattern of racketeering activity, or "associated with" an enterprise in the conduct of its affairs through a pattern of racketeering activity. The court of appeals treated only the allegation of "association with," noting that it was the plaintiff's "strongest claim." 194 The court had no difficulty, however, in finding that the "multiple incidents" of mail and wire fraud and the "numerous allegations of particular false statements" 195 constituted conduct falling within the proscription of Section 1962(c). 196
Here, too, the defendant's challenge to the language of the complaint was little more than another effort to touch all bases in resisting the plaintiff's suit. It was clearly without merit, and it deserved the cursory treatment it received.
F. The Question of Cognizable Inquiry
The defendants also contended that the plaintiffs "failed to allege the kind of injury which supports standing to bring a civil RICO suit." 197 The plaintiffs had alleged several forms of monetary loss, including depreciated entrance endowment payments and higher monthly service charges. Defendants responded by arguing that such injury was not "injury to property" within section 1964(c), 198 which [*329] was, they suggested, limited to injury to "competitive or commercial interests." 199
The court of appeals termed the argument "troublesome," 200 and it noted that it had found favor with "some courts." 201 Nevertheless, [*330] it held that "commercial or competitive injury" [was] not required by . . . RICO." 202 To be sure, RICO was "intended . . . to combat the threat posed by racketeer influence in the free market system, [but] . . . Congress did not see the objectives of RICO and the antitrust laws as coterminous." 203 The court noted that "[d]ifferent policies under[lay] the two bodies of law." 204
The court of appeal's opinion is a refreshing model of clarity of expression and insight on this issue. It was precisely the possibility of the argument advanced by the defendants that led Congress to draft RICO outside of the antitrust statutes. 205 That defendants would make such a specious argument is understandable. That district courts would be persuaded by it is lamentable. 206 Appropriately, the court of appeals rejected the defendants' contentions.
G. The Question of Equitable Relief Not Available to Private Plaintiffs
Finally, the defendants argued that the equitable relief requested by the plaintiffs was not available to "private plaintiffs." 207 In [*331] addition to treble damage relief, the plaintiffs had sought to have the Village reorganized under section 1964(a). 208 The court of appeals, however, declined to "reach the difficult question whether . . . this equitable relief [was] available to private plaintiffs pursuant to 18 U.S.C. § 1964 and, if not, whether such relief may be granted under the court's general equitable powers." 209 The court added, without "endorsing or rejecting the opinions there expressed," that such scholarship as the court had discovered had concluded that "equitable relief [was] available to the private plaintiff." 210
It is, of course, wholly understandable that the court of appeals was reluctant to essay the scope of the district court's equity powers in the absence of a full record. Mr. Justice Cardozo put it well: "The plastic remedies of the chancery are moulded to the needs of justice, [b]ut . . . facts . . . are the coin which . . . [a court] must have in [its] . . . pocket if . . . [it is] to pay [its] way with legal tender. Until [it is] provided with a plentiful supply . . . [it would] do better to stay at home. . . ." 211 Nevertheless, scholarship is not so circumscribed. Comment may be usefully offered on the issue.
It is difficult to see how a court could conclude that RICO does not provide equitable relief for private parties. Section 1964(a) is a general grant of equitable power. It is not limited on its face or in its legislative history. Section 1964(b) grants the government authority to seek relief, an authority that it was necessary to set out lest old learning be used to circumscribe the new governmental power to seek equitable relief. 212 Nothing in section 1964(b) speaks in negative terms about an authorization for private parties to seek similar relief. Indeed, [*332] the governmental suits are to be brought on behalf of private parties. No satisfactory explanation can be offered as to why Congress would have precluded victims from seeking help themselves. Section 1964(c), moreover, says "sue and" and not "sue to." The contrary argument would have to suggest that by adding the right to secure treble damage relief to the general right to sue Congress somehow manifested an intention to subtract the right to obtain other forms of relief. How addition might be converted into subtraction in a remedial statute that must be liberally construed strains even the legal imagination. Section 1964 ought to be read as authorizing both governmental and private suits to obtain equitable relief. To the degree that any ambiguity might be thought to exist in the choice of language, the liberal construction clause and the remedial purpose of the statute come down on the side of finding private suits to be authorized and that full relief can be granted. No satisfactory rationale can be offered, in short, to explain why a court ought to feel itself circumscribed in doing full justice for a victim under RICO.
To be sure, arguments can be made to the contrary. The remedial purpose of the statute and its liberal construction clause can be ignored. Section 1964(b) can be read to carry with it a negative implication by inserting an "only" in its text. In addition, the "and" in section 1964(c) can be read to mean "to." As so interpreted, RICO would then authorize governmental suits for equitable relief, but private suits would be limited to the recovery of treble damages. Yet it takes but a brief examination of the consequences of this illiberal rewriting of section 1964 to realize that it could not be what Congress intended. Equity's hand would, in fact, be tied down in only one situation. Where damage was threatened but not yet suffered, RICO would not afford the private plaintiffs equitable relief. But where damage was sustained, the jurisdiction conferred on the court to grant treble damage relief would carry with it the power, under well-established principles of pendent jurisdiction, to grant equitable relief for the common law causes of action that would unquestionably also exist under state law. 213 Subject to general limitations on federal [*333] jurisdiction, 214 the relief would be complete. 215 Nevertheless, the terms and conditions under which justice might be done would be [*334] dependent, not upon the special jurisprudence of RICO, but the general federal jurisprudence of remedies and the elements of the state causes of action. 216
While the relief granted could in fact be complete, that difference might be determinative of the outcome in many situations where the issue in question involved providing provisional relief, fashioning temporary restraining orders, or granting temporary injunctions, 217 as well as affording ultimate relief of an equitable character. 218 Such [*340] a circumscribed interpretation of the statute would, of [*341] course, introduce great uncertainty to RICO litigation, 219 create questions of law exam complexity, 220 promote forum shopping under RICO's comprehensive jurisdiction, venue, and process provisions, 221 and produce a wholly unjustifiable lack of uniformity in the practical impact of a major federal statute on both plaintiffs and defendants. Nothing about the prospect, in short, commends itself to the thoughtful observer. It cannot be what Congress intended when it crafted RICO. It is to be sincerely hoped that it will not prevail and bring about a need for amendatory legislation.
VII. Conclusion
The court of appeals decision in Bennett must be placed in a larger context. The Supreme Court in United States v. Turkette commented that its decision that the concept of "enterprise" included illicit associations was "neither absurd nor surprising." 222 Similarly, it is neither absurd nor surprising that Congress decided in 1970 to make commercial and other forms of fraud subject to private civil relief. Nothing that has happened since then undermines that 1970 congressional policy judgment. 223
[*342] The most comprehensive study of fraud done in recent years was published in 1974 under the auspices of the Chamber of Commerce of the United States. 224 The Chamber estimated the direct economic cost of fraud as follows:
| Billions of Dollars | ||
|---|---|---|
| 1. | Bankruptcy Fraud | .08 |
| 2. | Bribery, Kickbacks & Payoffs | 3.00 |
| 3. | Consumer Fraud | 21.00 |
| 4. | Embezzlement | 7.00 |
| 5. | Insurance Fraud | 2.00 |
| 6. | Receiving Stolen Property | 3.50 |
| 7. | Securities Theft and Frauds | 4.00 |
[*343] Along with credit card and check fraud (1.10) and computer related crime (.10), the total figure came to more than 40 billion dollars per year. 225 That figure, however, omitted fraud against the government. Given the inflation rate since 1974, moreover, it would not be unreasonable to estimate a figure twice that today. 226 In addition, more detailed studies since 1974 of specialized areas of fraud indicate that the Chamber's figures substantially underestimated the scope of its economic impact. 227 Recent studies have, for example, focused on [*344] fraud against the government. In 1978, the Comptroller General reported that the opportunities for defrauding the government were virtually unlimited. 228 More than $ 250 billion worth of economic assistance programs then existed, many of which passed through state and local hands and could be the subject of RICO civil suits, if fraud were uncovered. In fact, the Department of Justice estimated a one to ten percent incidence of fraud: 2.5 to 25 billion dollars a year. 229 Other studies have focused on commodity investment [*345] fraud, 230 a field said to be "vast and growing." 231 It is estimated that $ 200 million is in fact lost through commodity investment fraud each year. 232 Arson-for-profit has been called the "easiest crime" 233 as well as the nation's "fastest-growing" crime. 234 Its economic and other impact is great. 235 Accordingly, it takes but a passing familiarity with the developing literature on fraud in our society to come to the firm conclusion that curtailing it is one of the unmet needs of our system of justice, both criminal and civil.
Resources devoted to investigation and prosecution of fraud, moreover, are not impressive. In 1977, the Section on Criminal Justice of the American Bar Association, under a federal grant, conducted a study of those resources. 236 The Section studied the [*346] Securities and Exchange Commission, the Federal Bureau of Investigation, the United States Postal Inspection Service, the Department of Health, Education and Welfare, the Internal Revenue Service, the Antitrust Division of the Department of Justice, various banking agencies, and selected state and local efforts. Its findings were deeply disturbing. The Section found that the "total federal effort against economic crime [was] . . . underfunded, undirected, and un-coordinated and [was] . . . in need of the development of priorities." 237 In addition, "available resources [were] . . . unequal to the task of combatting economic crime." 238 The "lack of resources," the Section found, "at the federal and local level [was] . . . a function of insufficient manpower and inadequately trained personnel." 239 The implications [*347] of that study for private enforcement under RICO are obvious.
While analogies to the jurisprudence of section 4 of the Clayton Act are limited in the RICO context, much can be learned from an [*348] analysis of the concept of private civil suits under that Act. Keeping the marketplace competitive is not, of course, the same as curtailing violence, inhibiting the consumption of illicit goods and services, or seeking to promote integrity among private fiduciaries or public officials. Nevertheless, what the Supreme Court has said of section 4 may be legitimately observed of RICO. In 1970, Congress authorized private civil remedies under RICO to create "a private enforcement mechanism that would deter violators . . . and . . . provide ample compensation to . . . victims." 240 Such "private . . . litigation is one of the surest weapons for effective enforcement." 241 Congress "created the treble-damage remedy . . . precisely for the purpose of encouraging private challenges to . . . violations." 242 Private suits in fact "provide a significant supplement to the limited resources available to the Department of Justice." 243 Accordingly, no need exists "to burden the private litigant beyond what is specifically set forth" in RICO itself. 244 No court ought to make a "niggardly construction of the statutory language." 245 Congress knew "that existing law, state and federal, was not adequate to address the problem, which was of national dimensions." 246 Efforts to circumscribe [*349] RICO in the courts should, therefore, be turned aside. As the court of appeals in Bennett v. Berg has now happily done, other courts should similarly redeem Congress' 1970 promise of new remedies for victims of crime, particularly in the fraud area. 247
FOOTNOTES:
n1 685
F.2d 1053 (8th Cir. 1982). A rehearing en banc in Bennett was granted on
September 17, 1982. Oral argument was held on January 13, 1983. n2 685
F.2d at 1057. n3 18
U.S.C. §§ 1961-1968 (1976). Judge Shadur in Parnes
v. Heinold Commodities, Inc., 548 F. Supp. 20, 21 n.1 (N.D. Ill. 1982)
wondered, "[g]iven . . . [RICO's] very awkward title and the convenient acronym
it generated . . . [whether] the person who christened the legislation was a
movie buff with a sense of humor . . . [for in] 'Little Caesar,' the first
Hollywood gangster movie of the '30s . . ., Edward G. Robinson played the thinly
disguised Al Capone leading role -- and was named 'RICO.'" Judge Shadur's
question was first raised by Newsweek reporters, Tony Marro and Elaine Shannon,
in a story on RICO that appeared in The Legal Times of Washington, Oct. 8, 1979,
at 32, col. 1. They reported that G. Robert Blakey, "who had a major role in
drafting the statute . . . will neither admit nor deny that the title was [so]
constructed." See Blakey & Gettings, Racketeer Influenced and Corrupt
Organizations (RICO): Basic Concepts -- Criminal and Civil Remedies, 53 TEMP.
L.Q. 1009, 1025 n.91 (1980) [hereinafter cited as Basic Concepts] for an
alternative, but not necessarily inconsistent explanation of the development of
RICO's title. The following state statutes are modeled on the federal act: ARIZ. REV. STAT. ANN. § 13-2312 (1978); CAL. PENAL CODE § 186 (West Supp. 1983); COLO. REV. STAT. § 18-17-101 (1981); 1982 CONN. PUB. ACTS 343; FLA. STAT. ANN. § 895.01 (West Supp. 1982); GA. CODE ANN. § 26-3401 (Supp. 1982); HAWAII REV. STAT. § 842-1 (1976); The Narcotics Profit Forfeiture Act, H.B. 2450, State of Ill. (1982); IND. CODE ANN. § 35-45-6-1 (Burns Supp. 1982); N.J. STAT. ANN. 2C:41 (West 1982); N.M. STAT. ANN. § 30-42-1 (Supp. 1978); OR. REV. STAT. § 166-715 (1981); 18 PA. CONS. STAT. § 911 (1978); R.I. GEN. LAWS § 7-15-1 (Supp. 1982); WIS. STAT. ANN. § 946.80 (Supp. 1982). Legislation is under consideration in Louisiana, New York, and Ohio. For newspaper coverage of the use of the state legislation, see Siegel, Arizona Hits Racketeers in Wallet, L.A. Times, May 3, 1982, at 1, col. 1; Granelli, Playing for Keeps With State RICO, The National Law Journal, July 5, 1982, at 1, col. 4.
n4 685
F.2d at 1057. For purposes of analysis, the order of the defendants'
appellate arguments has been altered. n5 The
courts of appeals for the Second, Sixth, and Seventh Circuits have also faced
civil RICO appeals. In Cullen
v. Margiotta, 618 F.2d 226 (2d Cir. 1980), the court of appeals dismissed an
appeal of the dismissal of a civil RICO suit for the failure to allege a
sufficient connection to interstate commerce, holding that certifying the orders
under Rule 54(b) of the Federal Rules of Civil Procedure as final was an abuse
of discretion. See United
States v. Margiotta, 688 F.2d 108 (2d Cir. 1982)(mail fraud and extortion
conviction of political leader of Nassau County, N.Y., upheld). In Grayson v.
Wooden, No. 80-5460 (6th Cir. Feb. 10, 1982), the court of appeals affirmed the
granting of a motion for summary judgment and the dismissal of a civil RICO
suit, since the plaintiff did not allege two acts of racketeering. In Cenco
Inc. v. Seidman & Seidman, 686 F.2d 449 (7th Cir.), cert. denied, 103
S. Ct. 177 (1982), the court of appeals affirmed the dismissal of a civil
RICO counterclaim, since only "indirect injury" was alleged. In USACO
Coal Co. v. Carbomin Energy, Inc., 689 F.2d 94 (6th Cir. 1982), the court of
appeals upheld the issuance of an injunction to preserve the status quo pendente
lite in a civil RICO suit. Neither Cullen nor Grayson merits further comment.
Cenco Inc. is discussed at text accompanying note 139 infra; USACO Coal Co. is
discussed at note 217 infra. n6 The
facts are taken from the opinion of the court of appeals, except where
supplemented, as noted, from the pleadings or papers. Since the appeal was heard
on the pleadings, the facts alleged in the pleadings were accepted as true. 685
F.2d at 1056 n.4 ("accept . . . factual allegations as true"), 1057-58 ("A
complaint must be viewed in the light most favorable to plaintiff"). In
addition, the court followed the "accepted rule that a complaint states a claim
unless it appears beyond doubt that the plaintiff can prove no set of facts in
support of his claim which would entitle him to relief." Conley
v. Gibson, 355 U.S. 41, 45-46 (1957); 685
F.2d at 1057. See McLain
v. Real Estate Bd., 444 U.S. 232, 246 (1980). The pleadings, too, were
construed to do "substantial justice" under FED. R. CIV. P. 8(f). 685
F.2d at 1058. n7 Brief
for Plaintiff-Appellant at 5, Bennett v. Berg, 685 F.2d 1053 (8th cir.
1982). n8
Complaint para. 1(a). n9 685
F.2d at 1056. n10
Complaint para. 1(c)(1). n11
Complaint para. 41. n12 685
F.2d at 1057. n13 It
ought to be, but apparently is not, a matter of embarrassment for lower court
judges and lawyers that the Supreme Court has felt the need, "repeatedly of
late," to point out that the "language of [a] statute" is the "starting point"
in ascertaining legislative intent. Lewis
v. United States, 445 U.S. 55, 60 (1980) (citing Reiter
v. Sonotone Corp., 442 U.S. 330, 337 (1979)); Touche
Ross & Co. v. Redington, 442 U.S. 560, 568 (1979); Southeastern
Community College v. Davis, 442 U.S. 597, 405 (1979). RICO, too, falls
within that basic rule. United
States v. Turkette, 452 U.S. 576, 580 (1980) ("[w]e look first to . . .
[RICO's] language"). See also United
States v. Apfelbaum, 445 U.S. 115, 121 (1980) (construction of Title II of
Organized Crime Control Act, "absent clear evidence of a contrary legislative
intent, a statute should be interpreted according to its plain language"); Iannelli
v. United States, 420 U.S. 770, 786-89 (1975) (construction of Title VIII of
Organized Crime Control Act, general rule of statutory construction must "defer
to a discernible legislative judgment . . . [as] act is a carefully crafted
piece of legislation"). Chief
Justice Burger it Diamond v. Chakrabarty, 447 U.S. 303, 318 (1980),
described the proper role of courts in construing statutes: We have emphasized in the recent past that "[o]ur individual appraisal of the wisdom or unwisdom of a particular [legislative] course . . . is to be put aside in the process of interpreting a statute. . . . Our task, rather, is the narrow one of determining what Congress meant by the words it used in the statute; once that is done our powers are exhausted.
See also Bread Political Action Comm. v. Federal Election Comm., 50 U.S.L.W. 4291 (U.S. March 18, 1982) ("plain language" controls "construction, at least in the absence of 'clear evidence' . . . of a 'clearly expressed legislative intent to the contrary'"); United States v. Martino, 681 F.2d 952, 954, 956 n.16 (5th Cir. 1982) (plain meaning controls construction of RICO in criminal context), cert. denied, 102 S. Ct. 2006 (1982), cert. granted sub nom. Russello v. United States, 51 U.S.L.W. 3497 (U.S. Jan. 11, 1983); USACO Coal Co. v. Carbomin Energy, Inc., 689 F.2d 94, 95 n.1 (6th Cir. 1982) ("literal reading of RICO is consistent with . . . Turkette and . . . Congress[ional] . . . inten[t] that RICO be liberally construed to effectuate its remedial purpose in a civil context"). See note 150 infra for an outline of the proper approach in the interpretation of RICO.
n14 18
U.S.C. § 1964(c) (1976) provides: Any person injured in his business or property by reason of a violation of Section 1962 of this chapter may sue therefore in any appropriate United States district court and shall recover three-fold the damages he sustains and the cost of the suit, including a reasonable attorney's fee.
n15 See,
e.g., Sullivan
v. Little Hunting Park, Inc., 396 U.S. 229, 239 (1969); Bell
v. Hood, 327 U.S. 678, 684 (1946). In Bell, the Court stated: "[I]t is [a]
well-settled [rule] that where legal rights have been invaded, and a federal
statute provides for a general right to sue . . . federal courts may use any
available remedy to make good the wrong done." See note 217 infra for a
discussion of Deckert
v. Independence Shares Corp., 311 U.S. 282 (1940), which broadly construed
the more narrow language of the securities laws. n16 18
U.S.C. § 1961(3)(1976) (emphasis added) provides: As used in this chapter
. . . .
(3) 'person' includes any individual or entity capable of holding a legal or beneficial interest in property.
The use of the term "includes" in the definition manifests an intent to adopt an illustrative, not an exhaustive definition. United States v. Huber, 603 F.2d 387, 394 (2d Cir. 1979), cert. denied, 445 U.S. 927 (1980) ("enterprise" illustrative not exhaustive since defined to include); State Farm Fire & Casualty Co. v. Estate of Caton, 540 F. Supp. 673, 681 (N.D. Ind. 1982) ("Includes is a term of enlargement, not of limitation"); United States v. Thevis, 474 F. Supp. 134, 138 (N.D. Ga. 1979), aff'd, 665 F.2d 616 (5th Cir. 1982) ("includes" rather than "means"). See note 166 infra.
n17 See Lewis
v. United States, 445 U.S. 55, 60, 62 (1980) ("directed unambiguously at any
person"; "no modifiers . . . present"; "on its face . . . contains nothing by
way of restrictive language"); Pfizer
Inc. v. India, 434 U.S. 308, 312 (1978) ("person" under § 4 of Clayton Act
given "naturally broad and inclusive meaning"). But see United
States v. Cooper Corp., 312 U.S. 600, 604 (1941) ("person" under § 4 of the
Clayton Act does not include "United States" as "in common usage, the term
'person' does not include the sovereign."). The broad reading of "person" under
§ 4 of the Clayton Act, 15
U.S.C. § 15 (1976) ought to be particularly persuasive authority for a
similar reading of § 1964, since § 1964 was modeled on antitrust law. S. REP.
NO. 617, 91st Cong., 1st Sess. 81 (1969); H.R. REP. NO. 1549, 91st Cong., 2d
Sess. 56-60 (1970). To the degree that RICO was drafted outside of the antitrust
provisions, it was to avoid restrictive antitrust precedent. State
Farm Fire & Casualty Co. v. Estate of Caton, 540 F. Supp. 673, 680 (N.D.
Ind. 1982) ("[S]ection 1964(c) was . . . cast as a separate statute
intentionally to avoid the restricted precedent of antitrust jurisprudence")
(emphasis added). See text accompanying notes 72-74 infra. RICO ought,
therefore, be read at least as broadly as the comparable antitrust provisions;
it should not be read as narrowly. n18 Such
"injury" has been held to be injury within § 4 of the Clayton Act, 15
U.S.C. § 15 (1976). Reiter
v. Sonotone Corp., 442 U.S. 330, 338 (1979) ("property" held to have
"naturally broad and inclusive meaning"). See note 199 infra for a detailed
analysis of the litigation in Reiter. See also Blue
Shield of Virginia v. McCready, 50 U.S.L.W. 4723, 4724-25 (U.S. June 21,
1982). n19 18
U.S.C. § 1962 (1976) provides: (a) It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of an unlawful debt in which such person has participated as a principal within the meaning of section 2, title 18, United States Code, to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. A purchase of securities on the open market for purposes of investment, and without the intention of controlling or participating in the control of the issuer, or of assisting another to do so, shall not be unlawful under this subsection if the securities of the issuer held by the purchaser, the members of his immediate family, and his or their accomplices in any pattern of racketeering activity or the collection of any unlawful debt after such purchase do not amount in the aggregate to one percent of the outstanding securities of any one class, and do not confer, either in law or in fact, the power to elect one or more directors of the issuer.
(b) It shall be unlawful for any person through a pattern of racketeering activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.
(c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.
(d) It shall be unlawful for any person to conspire to violate any of the provisions of subsections (a), (b), or (c) of this section.
The plaintiffs alleged violations of subsections (a) through (d). 685 F.2d at 1057. Nevertheless, the court of appeals chose to analyze only § 1962(c), since it was "the statutory section under which "[plaintiffs] state[d] their strongest claim." Id. at 1060 n.8. The court did not reach the plaintiffs' other claims. Id.
n20 Section
1962 states "standards" enforced through "criminal" and "civil" remedies.
Section 1963 sets out the criminal remedies. Section 1964 sets out the civil
remedies. See S. REP. NO. 617, 91st Cong., 1st Sess. 158 (1969)("section 1962 is
subject to the remedies of . . . sections 1963 and 1964."). Accordingly, § 1962
is not a criminal statute; it says "unlawful," not "criminal." Not all courts,
however, have recognized that the role of § 1962 is to set a legal standard, not
to define a crime. Compare Bays
v. Hunter Savings Ass'n, 539 F. Supp. 1020, 1023 (S.D. Ohio 1982) ("RICO has
a criminal provision (§ 1962) and a civil remedies provision (§ 1964) and there
can be no recovery of damages under § 1964 unless there has been a violation of
§ 1962."), with State
Farm Fire and Casualty Co. v. Estate of Caton, 540 F. Supp. 673, 675-76 (N.D.
Ind. 1982) ("Section 1964(c) refers to a 'violation' of the standards of
Section 1962, not to the criminal penalties of Section 1963. Section 1962 says
that acts in violation of it are 'unlawful,' not criminal. Criminal and civil
sanctions are applied to violations of Section 1962 by Section 1963 (criminal)
and Section 1964 (civil)."). State Farm, not Bays, correctly read the statutory
scheme, as the court of appeals noted in USACO
Coal Co. v. Carbomin Energy, Inc., 689 F.2d 94, 95 n.1 (6th Cir. 1982).
Indeed, RICO is not a criminal statute at all in the traditional sense, since
its violation depends on the commission of at least two acts that violate
independent criminal statutes; it does not "draw a line" between innocent and
criminal conduct. See McBoyle
v. United States, 283 U.S. 25, 27 (1931) (Holmes, J.). That line is drawn by
the offenses that constitute the "racketeering activity" of 18
U.S.C. § 1961(1) (1976 & Supp. 1980). United
States v. Swiderski, 593 F.2d 1246, 1249 (D.C. Cir. 1978), cert. denied, 441
U.S. 933 (1979). Note, too, that the class capable of committing a violation
of § 1963 is not defined by "person," but "whoever." "Whoever" is, in turn,
defined by 1
U.S.C. § 1 (1976) to include "corporations, companies, associations, firms,
partnerships, societies, and joint stock companies, as well as individuals." As
such, it does not extend to sovereign governments. United
States v. UMW, 330 U.S. 258, 275 (1946); United
States v. Cooper Corp., 312 U.S. 600, 604 (1941). See also Attorney
General v. City of Woborn, 322 Mass. 634, 637, 79 N.E.2d 187, 189 (1948)
(definition of "whoever" for civil and penal liability of unit of government).
Nothing in RICO purports, therefore, to make criminal penalties applicable to
state and local units of government. Civilly, however, state and local units of
government can sue and be sued, as they are "entities" capable of holding
property. Accordingly, it is also not necessary to have a criminal violation of
§ 1962 through § 1963 before a civil suit can be brought under § 1962 through §
1964. United
States v. Cappetto, 502 F.2d 1351, 1357 (7th Cir. 1974), cert. denied, 420
U.S. 925 (1975) (government equity suit); USACO
Coal Co. v. Carbomin Energy, Inc., 689 F.2d 94, 95 n.1 (6th Cir. 1982)
(private treble damage suit); Farmers
Bank v. Bell Mtg. Corp., 452 F. Supp. 1278, 1279-80 (D.C. Del. 1978)
(private treble damage); Heinold
Commodities, Inc. v. McCarty, 513 F. Supp. 311, 313-14 (N.D. Ill. 1979)
(private treble damage); Glusband
v. Benjamin, 530 F. Supp. 240, 241 (S.D.N.Y. 1980) (private treble damage);
State
Farm Fire & Casualty Co. v. Estate of Caton, 540 F. Supp. 673, 675-77 (N.D.
Ind. 1982) (private treble damage). See also note 59 infra (antitrust rule).
n21 18
U.S.C. § 1961(4) (1976) provides: As used in this chapter -- . . . . (4) 'enterprise' includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.
See Basic Concepts, supra note 3, at 1023-28; text accompanying notes 152-66 infra.
The district court "expressly declined to rule on the interstate commerce element of the complaints." 685 F.2d at 1064 n.17. Accordingly, the court of appeals did not pass on it. Id. Common methods used to prove an effect on commerce, on the other hand, include the movement of goods, money, or people among the states. See, e.g., United States v. Altomare, 625 F.2d 5, 8 (4th Cir. 1980) (supplies and materials purchased out of state by prosecutor's office); United States v. Martino, 648 F.2d 367, 379 (5th Cir. 1981) (arson ring used mails to obtain insurance proceeds by fraud), rev'd on other grounds en banc, 681 F.2d 952 (5th Cir.), cert. denied, 102 S. Ct. 2006 (1982) cert. granted sub. nom. Russello v. United States, 51 U.S.L.W. 3497 (U.S. Jan. 11, 1983); United States v. Morris, 532 F.2d 436, 442 (5th Cir. 1976) (interstate travel associated with rigged card game). Interstate phone calls, too, will suffice. United States v. Morelli, 643 F.2d 402, 411 (6th Cir.) (interstate phone calls to obtain money for illegal scheme), cert. denied, 453 U.S. 912 (1981). As such, the element would not have been difficult to meet under the facts as alleged. But see Fields v. National Republic Bank, 546 F. Supp. 123, 125 n.6 (N.D. Ill. 1982) (bank not thought to engage in interstate commerce). The dictum in Fields can hardly be squared with the general jurisprudence of commerce under RICO.
n22 S. REP.
NO. 617, 91st Cong., 1st Sess. 158 (1969). See United
States v. Starnes, 644 F.2d 673, 677-78 (7th Cir.) (single arson with mail
fraud sufficient), cert. denied, 102
S. Ct. 116 (1981); United
States v. Weatherspoon, 581 F.2d 595, 601-02 (7th Cir. 1978) (multiple
mailings in fraudulent operation of a Veterans Administration supported school
held sufficient); United
States v. Kaye, 556 F.2d 855, 860-61 (7th Cir.) (multiple payments to union
representative held sufficient), cert. denied, 434
U.S. 921 (1977). See generally United
States v. Weisman, 624 F.2d 1118, 1121-23 (2d Cir.) (bankruptcy and
securities fraud in operation of theatre; analysis of cases that acts need not
be related to each other, but may be related to the conduct of the affairs of
the enterprise), cert. denied, 449
U.S. 871 (1980); Basic Concepts, supra note 3, at 1029-31. n23 18
U.S.C. § 1961(1)(B). See, e.g., United
States v. Clark, 649 F.2d 534, 541 (7th Cir. 1981) (stock purchase
agreement). Rakoff, The Federal Mail Fraud Statute (Part I), 18 DUQ. L. REV. 771
(1980), is the best general treatment of the statute. See also Shaw, Mail and
Wire Frauds, in I MATERIALS ON RICO: CRIMINAL OVERVIEW, CIVIL OVERVIEW,
INDIVIDUAL ESSAYS 120 (Cornell Institute on Organized Crime, G. Blakey ed.,
1980) [hereinafter cited as MATERIALS]. While the scope of mail fraud is wide,
no honest person need fear a civil suit under RICO based on the underlying
theory of mail fraud, for good faith has always been a complete defense. Durland
v. United States, 161 U.S. 306, 314 (1896) (if evidence had shown that
defendant acted in good faith, "no conviction could be sustained."); United
States v. Martin-Irigona, 684 F.2d 485, 492-93 (7th Cir. 1982)("[G]ood
faith, or the absence of an intent to defraud, is a complete defense to a charge
of mail fraud."); United
States v. Curry, 681 F.2d 406, 417 (5th Cir. 1982) ("Because there was
evidence to support a good faith defense, it was reversible error to not include
the instructions."); New
England Enters. v. United States, 400 F.2d 58, 71 (1st Cir. 1968) (good
faith defense "settled law"), cert. denied, 393
U.S. 1036 (1969); United
States v. Westbo, 576 F.2d 285, 288 (10th Cir. 1978) ("entitled to
instruction covering good faith"). To date, the courts have declined to create an implied civil cause of action under either the mail fraud or wire fraud statutes. See, e.g., Ryan v. Ohio Edison Co., 611 F.2d 1170, 1177-79 (6th Cir. 1979); Bell v. Health-Mor, Inc., 549 F.2d 342, 346 (5th Cir. 1977).
n24 United
States v. Turkette, 452 U.S. 576, 587 (1981). n25 The
Organized Crime Control Act of 1970, Pub. L. No. 91-452, § 904(a), 84 Stat. 947
("The provisions of . . . [RICO] shall be liberally construed to effectuate its
remedial purposes."). RICO has been construed liberally in the application of
its criminal remedies. See, e.g., United
States v. Thompson, 685 F.2d 993, 997-98 (6th Cir. 1982) (extension of
"enterprise" to government); United
States v. Lee Stoller Enters., 652 F.2d 1313, 1317 (7th Cir. 1981), cert.
denied, 102
S. Ct. 636 (1982) (extension of "enterprise" to government); United
States v. Swiderski, 593 F.2d 1246, 1248 (D.C. Cir. 1978) (extension of
"enterprise" to illicit association), cert. denied, 441
U.S. 933 (1979); United
States v. Elliot, 571 F.2d 880, 899 (5th Cir.) (extension of "enterprise" to
illicit association), cert. denied, 434
U.S. 1021 (1978); United
States v. Frumento, 563 F.2d 1083, 1089-92 (3d Cir. 1977) (extension of
"enterprise" to government), cert. denied, 434
U.S. 1072 (1978); United
States v. Parness, 503 F.2d 430, 439 n. 12 (2d Cir. 1974) (extension of
"enterprise" to foreign corporation), cert. denied, 419
U.S. 1105 (1975). Even among those judges (and a law professor) who have
questioned applying the liberal construction clause in criminal prosecutions, no
objection has been voiced to applying it in civil actions. See, e.g., United
States v. Anderson, 626 F.2d 1358, 1369 (8th Cir. 1980) ("The extent of
judicial deference that should be accorded [to the liberal construction clause]
stands unclear."); United
States v. Grzywacz, 603 F.2d 682, 692 (7th Cir. 1979) (Swygert, J.,
dissenting) ("unclear whether Congress intended its directive to apply to those
sections which establish criminal liability or merely to the 'remedial'
provisions of Title IX"), cert. denied, 446
U.S. 935 (1980); United
States v. Davis, 576 F.2d 1065, 1070 (3d Cir. 1978) (Aldisert, J.,
dissenting) ("I detect nothing [in the liberal construction clause] that
precludes the application of the rule of narrow construction . . . to defining
crimes"); United
States v. Altese, 542 F.2d 104, 107 (2d Cir. 1976) (Van Graafeiland, J.,
dissenting) ("Notwithstanding" the liberal construction clause, choice to make
conduct a crime should be of harsher alternative only where language is "clear
and definite"), cert. denied, 429
U.S. 1039 (1977); United
States v. Mandel, 415 F. Supp. 997, 1022 (D. Md. 1976) ("Congress may
instruct courts to give broad interpretations to civil provisions, [but] it
cannot require courts to abandon the traditional canon of interpretation that
ambiguities in criminal statutes are to be construed in favor of leniency."),
rev'd, 591
F.2d 1347 (4th Cir.), aff'd by equally divided court en banc, 602
F.2d 653 (4th Cir. 1979), cert. denied, 445
U.S. 961 (1980); Bradley, Racketeers, Congress, and the Courts: An Analysis
of RICO, 65 IOWA L. REV. 837, 860 n.126 (1980) ("Presumably, . . . the
congressional statement is only applicable to the remedial civil portions of the
statute.") [hereinafter cited as Bradley]. See also United
States v. Computer Sciences, 689 F.2d 1181 (4th Cir. 1982) (liberal
construction clause overlooked, lenity followed, and "person" and "enterprise"
held mutually exclusive); United
States v. Rubin, 559 F.2d 975, 990-93 (5th Cir. 1977) (strict construction
followed, but forfeiture provision held to extend to union office), vacated and
remanded, 439
U.S. 810 (1978), reinstated in relevant part, 591
F.2d 278 (5th Cir. 1979), cert. denied, 444
U.S. 864 (1969). Rubin is discussed in note 177 infra; Computer Sciences is
discussed in note 181 infra. In fact, the clause has been implicitly or
explicitly given effect in civil RICO suits brought by the government, United
States v. Cappetto, 502 F.2d 1351, 1357 (7th Cir. 1974) (implicit), cert.
denied, 420
U.S. 925 (1975), and private parties, USACO
Coal Company v. Carbomin Energy Inc., 689 F.2d 94, 95 n.1 (6th Cir. 1982)
(explicit); State
Farm Fire & Casualty Co. v. Estate of Caton, 540 F. Supp. 673, 681 (N.D.
Ind. 1982) (explicit). Indeed, those judges (and the law professor too), who
have objected to the application of the liberal construction clause in criminal
prosecutions and suggested that strict construction or the rule of lenity should
apply have misunderstood both the clause and the rule. See note 150 infra. The
modern rule of lenity is rooted in two policies: the principle that fair warning
of criminality ought to be given, and the related principle that the moral
condemnation of criminality should be based on a legislative, not a judicial
determination. Dunn
v. United States, 442 U.S. 100, 113 (1979); United
States v. Bass, 404 U.S. 336, 347-48 (1971). The principle of fair warning,
however, is fully met when the predicate offenses are so construed. See United
States v. Swiderski, 593 F.2d 1246, 1249 (D.C. Cir. 1978) (notice stems from
predicate offenses), cert. denied, 441
U.S. 933 (1979). See note 20 supra. Once the policy of leniency has been
implemented in the construction of the underlying "racketeering activity," and
the line has been crossed in the sphere of criminality, not once, but twice, it
would be perverse to apply it again. Similarly, it is the violation of the two
predicate offenses that underwrites the basic moral condemnation of the
community. To the degree that RICO adds to that condemnation through liberal
construction, that construction and its condemnation are the product, not of a
judicial determination, but an express congressional direction. For a
comprehensive analysis of the background and rationale of the liberal
construction clause, see Note, RICO and the Liberal Construction Clause, 66
CORNELL L. REV. 167 (1980). The American Bar Association gave "unqualified"
support to the Organized Crime Control Act in 1970. It suggested only two
amendments, both adopted, to Title IX: the treble damage provision, and an
amendment giving courts discretion to close certain proceedings. Organized Crime
Control, Hearings on S. 30 and Related Proposals Before Subcomm. No.5 of the
House Comm. on the Judiciary, 91st Cong., 2d Sess. 538, 543-44 (1970) (testimony
of ABA President Edward L. Wright) [hereinafter cited as House Hearings].
Nevertheless, at the urging of the Section on Criminal Justice, the House of
Delegates of the American Bar Association adopted a recommendation that the
liberal construction clause be repealed, not only for criminal, but also civil
proceedings. ABA: REPORT TO THE HOUSE OF DELEGATES, SECTION ON CRIMINAL JUSTICE
12-13 (1982) [hereinafter cited as ABA]. See also notes 88 & 150 infra. The
fallacious reasoning employed by the Section to persuade the House reflects the
misguided minority judicial view, noted supra. There is also an echo of the
sound of a losing litigant in the ABA's plea that issues lost in a judicial
forum now be reversed in the legislative arena. The principal moving force
behind the ABA's position has been Mr. Barry Tarlow, a Los Angeles criminal
defense lawyer. See Burke, Did Jurors Hear About "Mafia Ties"?, National Law
Journal, Mar. 28, 1981, at 3, col. 1; Seigel, supra note 3, at 17. Mr. Tarlow
has written urging a narrow construction of RICO. See, e.g., Tarlow, RICO: The
New Darling of the Prosecutor's Nursery, 49 FORDHAM L. REV. 165 (1980)
[hereinafter cited as Tarlow]; Using the RICO Statute in Civil Litigation, The
National Law Journal, May 24, 1982, at 1, col. 3. He also filed an amicus curiae
brief for the California Attorneys for Criminal Justice in United
States v. Turkette, 452 U.S. 576, 577 (1980), which advocated that RICO be
held not to apply to illicit associations, a position that the Supreme Court
rejected eight to one. Like the Supreme Court, but unlike the ABA, it is
doubtful that Congress will be misled by Mr. Tarlow's efforts. See S. REP. NO.
307, 97th Cong., 1st Sess. 24-28 (1981) for the Judiciary Committee's rationale
for rejecting an amendment to the criminal code bill, S. 1630, which would have
imposed a rule of "strict" construction on the code; the committee adopted
instead a rule of "fair import." A significant majority of states has abolished the common law rule of strict construction either by expressly abrogating it or adopting some variation of "fair import" or "liberal" construction. ALA. CODE § 13A-1-6 (repl. 1982) ("fair import"); ALASKA STAT. § 11.81.100 (Supp. 1982) ("fair warning"); ARIZ. REV. STAT. ANN. § 13-104 (West 1978) (abrogated "fair import"); ARK. STAT. ANN. § 1-203, 1-204 (repl. 1976) ("fair warning"); CAL. PENAL CODE § 4 (West 1970) (abrogated "fair import"); COLO. REV. STAT. § 18-1-102(1)(a) (repl. 1978) ("fair warning"); DEL. CODE ANN. tit. 11, § 203 (rev. 1974) (abrogated "fair import"); GA. CODE § 26-102(b) (rev. 1982) ("fair warning"); HAWAII REV. STAT. § 701-104 (repl. 1976) ("fair import"); IDAHO CODE § 73-102(1) (Supp. 1982) (abrogated "liberal construction"); ILL. REV. STAT. ANN. ch. 1, § 1002 (West 1980) ("liberal construction"); IOWA CODE § 4.2 (West 1967) (abrogated "liberal construction"); KY. REV. STAT. § 500.030 (Baldwin 1975) ("liberal construction"); LA. REV. STAT. ANN. § 14:3 (West 1974) ("fair import"); ME. REV. STAT. ANN. tit. 1, § 71 (1979) ("plain meaning"); MASS. GEN. LAWS ANN. ch. 4, § 6 (Law. Co-op. 1980) ("common and approved usage"); MICH. STAT. ANN. § 28.192(2) (Callaghan 1981) (abrogated "fair import"); MINN. STAT. ANN. § 609.01 (West 1964) ("fair import"); MISS. CODE ANN. § 1-365 (1972) ("common and ordinary meaning"); MO. ANN. STAT. § 1.010 (Vernon 1969) ("liberal construction"); MONT. CODE ANN. § 45-1-102(2) (1981) (abrogated "fair import"); NEB. REV. STAT. § 29-102 (1979) ("fair import"); NEV. REV. STAT. § 193.030 (1979) ("fair import"); N.H. REV. STAT. ANN. § 625.3 (1974) (abrogated "fair import"); N.J. STAT. ANN. § 2C:1-2(c) (West 1982) ("fair import"); N.M. STAT. ANN. § 12-2-2 (1978) ("approved usage"); N.Y. PENAL LAW § 5 (McKinney 1975) (abrogated "fair import"); N.D. CENT. CODE § 29-01-29 (repl. 1974) (abrogated "liberal construction"); OR. REV. STAT. § 161.025(2) (1981) (abrogated "fair import"); PA. CONS. STAT. ANN. § 105 (Purdon 1973) (abrogated "fair import"); S.D. CODIFIED LAWS ANN. § 22-1-1 (Rev. 1979) (abrogated "fair import"); TENN. CRIM. CODE ANN. § 39-6-1706 (1982) ("liberal construction"); TEX. PENAL CODE ANN. tit. 1, § 1.05(a) (Vernon 1974) (abrogated "fair import"); UTAH CODE ANN. § 76-1-106 (1978) (abrogated "fair import"); WASH. REV. CODE § 9A.04.02(2) (1977) ("fair import"). Only two states expressly provide for strict construction. FLA. STAT. ANN. § 775.021 (West 1976); OHIO REV. CODE ANN. § 2901.04(A) (Page 1982). Modern courts have expressed no reservations about following the legislative directive setting aside the common law rule. See, e.g., State v. Roger A., 424 A.2d 1339, 1341 (N.H. 1981); People v. Ditta, 52 N.Y.2d 657, 659, 422 N.E.2d 515, 517, 439 N.Y.S.2d 855, 857 (1981). See also Turner v. State, 8 Okla. Crim. 11, 12, 126 P. 452, 455-56 (1912) (statutory abrogation and "fair import" followed) ("Judges and lawyers have been educated in and are accustomed to an antiquated system of procedure, and have been taught to look with reverance upon old legal theories, and are thereby unduly biased against any change in legal procedures. . . . When the Legislature has made a change in legal procedure, it is the duty of the courts to lay aside their preconceived ideas, and construe such legislation according to its spirit and reason. . . . The great trouble with the judiciary of the entire country is that many judges try to so twist and evade statutes as to enable them to substitute their own private views for regularly enacted statutes."). It may be wondered if the ABA has now committed itself -- at least in principle -- to seeking to reverse these legislative judgments, too. On how the liberal construction clause should be interpreted, see note 150 infra.
n26 The
Organized Crime Control Act of 1970, 84 Stat. 922-23 (1970) states:
Statement of Findings and Purpose
The Congress finds that (1) organized crime in the United States is a highly sophisticated, diversified, and widespread activity that annually drains billions of dollars from America's economy by unlawful conduct and the illegal use of force, fraud, and corruption; (2) organized crime derives a major portion of its power through money obtained from such illegal endeavors as syndicated gambling, loan sharking, the theft and fencing of property, the importation and distribution of narcotics and other dangerous drugs, and other forms of social exploitation; (3) this money and power are increasingly used to infiltrate and corrupt legitimate business and labor unions and to subvert and corrupt our democratic processes; (4) organized crime activities in the United States weaken the stability of the Nation's economic system, harm innocent investors and competing organizations, interfere with free competition, seriously burden interstate and foreign commerce, threaten the domestic security, and undermine the general welfare of the Nation and its citizens; and (5) organized crime continues to grow because of defects in the evidence-gathering process of the law inhibiting the development of the legally admissible evidence necessary to bring criminal and other sanctions or remedies to bear on the unlawful activities of those engaged in organized crime and because the sanctions and remedies available to the Government are unnecessarily limited in scope and impact.
It is the purpose of this Act to seek the eradication of organized crime in the United States by strengthening the legal tools in the evidence-gathering process, by establishing new penal prohibitions, and by providing enhanced sanctions and new remedies to deal with the unlawful activities of those engaged in organized crime.
See Lewis v. United States, 445 U.S. 55, 61 (1980) ("obvious breadth of the language may well reflect the expansive legislative approach revealed by Congress' express findings and declarations.").
n27 84
Stat. 922-23. See note 26 supra. n28 Id. at
923. It is a mistake to argue that the findings and statement of purpose that
now appear before the Organized Crime Control Act do not apply to Title IX or
have primary application to other titles. See, e.g., United
States v. Thompson, 685 F.2d 993, 1003 (6th Cir. 1982) (Lively, J.,
dissenting); Note, Racketeer Influenced and Corrupt Organizations Act: An
Analysis of the Confusion in Its Application and Proposal for Reform, 33 VAND.
L. REV. 441, 474 (1980). In fact, the basic findings appeared before S. 1861,
the predecessor of Title IX. Measures Relating to Organized Crime: Hearings on
S. 30, S. 994 . . . Before the Subcomm. on Criminal Laws and Procedures of the
Senate Comm. on the Judiciary, 91st Cong., 1st Sess. 61-62 (1969) [hereinafter
cited as Senate Hearings]; S. REP. NO. 617, 91st. Cong., 1st Sess. 83 (1969)
(Title IX "derived from" S. 1861). n29 United
States v. Culbert, 435 U.S. 371, 373 (1978) (apropos of an argument that
"racketeering" ought to be read into 18
U.S.C. § 1951 (1970)). n30 Id. See
also United
States v. Wurzbach, 280 U.S. 396, 398 (1930) ("[T]here is no warrant for
seeking refined arguments to show that the statute does not mean what it
says."). n31 United
States v. Turkette, 452 U.S. 576, 593 (1981). Chief Justice Marshall made
the same point more than 100 years ago: "[A] law is the best expositor of
itself." Pennington
v. Coxe, 6 U.S. (2 Cranch) 34, 52 (1804). n32 452
U.S. at 580. n33 While
RICO's legislative history establishes that Congress meant what it said, courts
have unfortunately and improperly read the absence of specific legislative
history on a particular point to negate the general language of the statute.
See, e.g., United
States v. Thompson, 669 F.2d 1143, 1145 n.2 (6th Cir.) (government held not
to be an "enterprise"), reversed en banc, 685
F.2d 993 (6th Cir. 1982). That approach is mistaken. Albernaz
v. United States, 450 U.S. 333, 341 (1981)("Congress cannot be expected to
specifically address each issue of statutory construction that may arise"); Standefer
v. United States, 447 U.S. 10, 20 n.12 (1980) (need not mention in committee
report); Harrison
v. PPG Indus., 446 U.S. 578, 592 (1980)("[i]n ascertaining the meaning of a
statute, a court cannot, in the manner of Sherlock Holmes, pursue the theory of
the dog that did not bark."). See also United
States v. Turkette, 452 U.S. 576, 591 (1981)(negative inference from
legislative history impermissible; one purpose cannot be read negatively as sole
purpose). Similarly, the technique of pointing to one expressed aspect of RICO's
legislative history -- a concern, for example, with organized crime (in the
classic mobster sense) and its infiltration of legitimate business -- and then
confining the application of RICO's general language, despite contrary
legislative history and the liberal construction clause, to that one aspect of
its legislative history is improper. See, e.g., Noonan
v. Granville-Smith, 537 F. Supp. 23, 29 (S.D.N.Y. 1981)(RICO count in
federal securities fraud litigation dismissed, as "[n]othing suggested in . . .
[complaint] even remotely brings . . . [it] within the ambit of . . . [the]
purpose 'to deal' with organized crime's control over business."). That
approach, too, is mistaken. Diamond
v. Chakrabarty, 447 U.S. 303, 315-16 (1980)(The "Court frequently has
observed that a statute is not to be confined to the 'particular application[s]
. . . contemplated by the legislators.'"). See Basic Concepts, supra note 3, at
1035 n.117 ("common mistake"). Nor is it proper to invoke the "spirit" rule of
Church
of Holy Trinity v. United States, 143 U.S. 457 (1892), for it has been
confined to "rare and exceptional cases." TVA
v. Hill, 437 U.S. 187 n.33 (1978) (quoting Crooks
v. Harrelson, 282 U.S. 55, 66 (1930)). n34 See
generally Basic Concepts, supra note 3, at 1014-15. n35 House
Hearings, supra note 25, at 544 (testimony of Edward L. Wright). While the
Kefauver Committee attracted a great deal of national attention in the 1950s,
the process of a national examination of organized crime and racketeering in
fact had its origins in the hearings held by Senator Royal S. Copeland in the
1930's. See Investigation of So-Called "Rackets," Hearings Before a Subcomm. of
the Senate Comm. on Commerce, 73d Cong., 2d Sess. (1933). S. REP. NO. 1189, 75th
Cong. 1st Sess. 1 (1937) contains a "complete picture" of the work of the
"Rackets Committee." n36 House
Hearings, supra note 25, at 544. n37 Basic
Concepts, supra note 3, at 1015 n.22. n38 Id. at
1015 n.23. n39 See,
e.g., Los
Angeles Meat & Provision Drivers Union v. United States, 371 U.S. 94
(1962); United
States v. Pennsylvania Refuse Removal Ass'n, 357 F.2d 806 (3d Cir. 1966); United
States v. Bitz, 282 F.2d 465 (2d Cir. 1960). n40 On the
many meanings of "organized crime," see Basic Concepts, supra note 3, at 1013
n.15. In addition, the tendency of some to identify "organized crime" with the
principal syndicate involved in it, the Mafia, has been decried by no less than
the sponsor of the Organized Crime Control Act, Senator John L. McClellan.
GAMBLING IN AMERICA: REPORT OF THE COMMISSION ON THE REVIEW OF NATIONAL POLICY
TOWARD GAMBLING 181-82 (1976) ("in none of the hearings or in the processing of
legislation in which I have been involved has the term been used in . . . [such
a] circumscribed fashion"). For a breakdown of the concept into "syndicate,"
"enterprise," and "venture," see ELECTRONIC SURVEILLANCE: REPORT OF THE NATIONAL
COMMISSION ON THE REVIEW OF FEDERAL AND STATE LAWS RELATING TO WIRETAPPING AND
ELECTRONIC SURVEILLANCE 190-92 (1976)(concerning statement of Commissioner
Blakey). See also United
States v. Compagna, 146 F.2d 524, 525, 526 (2d Cir.) (prosecution of motion
picture industry extortion by Capone syndicate), cert. denied, 324
U.S. 867 (1944); TASK FORCE REPORT: ORGANIZED CRIME, PRESIDENT'S COMMISSION
ON LAW ENFORCEMENT AND ADMINISTRATION OF JUSTICE 10 (1967) [hereinafter cited as
TASK FORCE REPORT]. The Second Circuit had this to say in United
States v. Carter, 493 F.2d 704 (2d Cir. 1974), in defining "organized crime"
in Title VI of the Organized Crime Control Act, codified at, 18
U.S.C. § 3503 (1976) (deposition taken where attorney general certifies
"organized criminal activity"): The fact that the alleged perpetrators are presumably respected and entrusted with responsibility . . . by stockholders does not suggest . . . that they are incapable of engaging in organized criminal activity. We all stand equal before the bar of criminal justice, and the wearing of a white collar, even though it is starched, does not preclude the organized pursuit of unlawful profit.
493 F.2d at 708. See United States v. Aleman, 609 F.2d 298, 303-04 (7th Cir. 1979), cert. denied, 445 U.S. 946 (1980).
n41 Burke
put it well to his son in 1793: "A very great part of the mischiefs that vex the
world arises from words. People soon forget the meaning, but impression and the
passion remain." E. BURKE, SELECTED WRITING AND SPEECHES 269 (P. Stanlis ed.
1963). Contrary to the contentions of defense counsel, "racket" and "racketeer"
have never been words limited to "organized crime" in the classic mobster sense.
Etymologically, the basic term is probably onomatopoeic. VIII THE OXFORD ENGLISH
DICTIONARY 94 (1933). Its principal meaning is "noise"; its secondary meaning is
"reveling" or "merrymaking"; and its tertiary meaning is "a fraudulent scheme,
enterprise or activity." WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY OF THE
ENGLISH LANGUAGE UNABRIDGED 1871 (1966). See also THE AMERICAN HERITAGE
DICTIONARY OF THE ENGLISH LANGUAGE (Morris ed. 1970) ("'racket': 1. A clamor;
uproar. 2a. A business that obtains money through fraud or extortion, b. An
illegal or dishonest practice;" "'racketeer': One engaged in an illegal
business."). Murrary I. Gurfein wrote: Racketeering, a term loosely applied to a variety of criminal schemes has not yet received exact legal definition. . . . It . . . applies to the operation of an illegal business as well as to the illegal operation of a legal business. . . . The word gained currency in the 1920s, but its origin remains obscure. . . . [T]he most plausible [theory notes that the] word racket has long been used to describe a loud noise and hence a spree or party or 'good time.' In the 1890s social clubs of young men in New York City, under the auspices of political leaders, gave affairs called rackets; since among their number there were members of neighborhood gangs, it was found easy to coerce local tradesman to buy tickets.
ORGANIZED CRIME IN AMERICA 181-82 (G. Tyler ed. 1962). Hence, "obtaining money by coercion or fraud" became "racketeering."
Similarly, the Supreme Court noted in United States v. Culbert, 435 U.S. 371, 375 (1978) that the Copeland Committee "found that . . . [racketeering] and the associated word 'racket' had 'for some time been used loosely to designate every conceivable sort of practice or activity which was either questionable, unmoral, fraudulent or even disliked, whether criminal or not.' S. REP. NO. 1189, 75th Cong., 1st Sess. 2 (1937)."
RICO, of course, follows this common usage by terming its predicate offenses "racketeering activity" and making, for example, the operation of an "enterprise" through a "pattern of racketeering activity" that "affects commerce" the gravamen of one of its standards of unlawful conduct. See, e.g., 18 U.S.C. §§ 1961 (1),(4),(5), 1962(c) (1976). This usage did not trouble the ABA Criminal Justice Section (or its Council) in 1970. See House Hearings, supra note 25, at 556-59. The principal objection voiced was to vagueness and overbreadth; the suggested amendments were requiring three (rather than two) acts within five (rather than ten) years to form a pattern; making the criminal forfeiture sanction discretionary (rather than mandatory); affording courts discretion in holding proceedings in private; and adding the remedy of treble damages in private suits. The Section has, however, now convinced the House of Delegates of the ABA to recommend to Congress that "criminal" be substituted for "racketeering" in RICO.
The present law brands the accused as a racketeer with resulting prejudicial impact on judges and juries. This stigma is particularly unfair since RICO is not applied solely to racketeers or offenses committed by racketeers but has also been applied to businessmen and politicians engaged in criminal conduct unrelated to traditional notions of organized crime.
ABA, supra note 25, at 4. If the suggestion of the ABA were carried to its logical conclusion, the Congress should also rename federally cognizable "murder," "rape," and "robbery" with less pejorative terms. Apparently the Section -- and now the House of Delegates -- has forgotten the proper role of social opprobrium in the administration of justice, criminal and civil. See, e.g., J. FEINBERG, DOING AND DESERVING 98, 100-05, 115-16 (1970)("At its best, in civilized and democratic countries, punishment surely expresses the community's strong disapproval of what the criminal did. Indeed, it can be said that punishment expresses the judgment (as distinct from any emotion) of the community that what the criminal did was wrong.")(emphasis in original); II J. STEPHEN, A HISTORY OF THE CRIMINAL LAW OF ENGLAND 81-82 (1883) ("[T]he sentence of the law is to the moral sentiment of the public in relation to any offence what a seal is to hot wax. . . . In short, the infliction of punishment by law gives definite expression . . . to . . . the moral or popular . . . part of morality."). On the role of euphemisms in encouraging public and official reluctance to enforce the law and providing rationalizations for the violators themselves in the "white-collar crime" area, see TASK FORCE REPORT: CRIME AND ITS IMPACT -- AN ASSESSMENT: TASK FORCE ON ASSESSMENT, PRESIDENT'S COMMISSION ON LAW ENFORCEMENT AND ADMINISTRATION OF JUSTICE 104-08 (1967)("most white collar crime is not at all morally neutral"); D. CRESSEY, OTHER PEOPLES MONEY 102 (1952) (that embezzlers rationalize their conduct as different from theft is important factor in behavior pattern). Indeed, it was persuasively argued in 1934 before the Copeland Committee that it was in part our failure to bring "white-collar crime" to justice that significantly contributed to the developments during prohibition of what all now concede to be "organized crime," a problem that did not end with prohibition's repeal:
Both crime and racketeering of today have derived their ideals and methods from the business and financial practices of the last generation. . . . It is a law of social psychology that the socially inferior tend to ape the socially superior. . . . It was inevitable that, sooner or later, we would succeed in "Americanizing" the "small fry" -- especially the foreign small fry. . . . All was relatively safe, since the legal profession was already ethically impaired through its affiliations with the reputable racketeers. . . . The idea that when prohibition is ended the racketeers . . . will meekly and contritely turn back to blacking shoes . . . is downright silly. They will apply the technique they have mastered to the dope ring. . . . They will find crafty lawyers all too willing to defend them from the "strong arm" of the law for value received. . . . So long as the lawless can get protection in return for keeping corrupt politicians in office, we shall not be free from the crime millstone about our necks.
Investigation of So-Called "Rackets": Hearings Before a Subcomm. of the Senate Committee on Commerce, 73rd Cong. 2d Sess. 710-11 (1934) (testimony of Harry Elmer Barnes). It will be interesting to see if the ABA can persuade Congress to so amend RICO. See also White Collar Crime: Hearings Before the Subcomm. on Crime of the House Jud. Comm., 95th Cong., 2nd Sess. 109 (1978) (testimony of Donald R. Cressey) ("It is not just that businessmen have a reckless disregard for the law. Also significant is the fact that they have a powerful voice in determining what the law shall be, how it shall be interpreted and enforced.").
Nevertheless, it must be conceded that "racketeer" is a "fighting word." See Chaplinsky v. New Hampshire, 315 U.S. 568, 574 (1942) ("Argument is unnecessary to demonstrate that the appellations 'damned racketeer' . . . [is an epithet] likely to provoke the average person to retaliation, and thereby cause a breach of peace."). Care must be used, therefore, in trying all RICO cases, criminal and civil, to see that the opprobrium rightly attaching to the conduct of one who violates RICO is not a factor in determining whether the conduct occurred and was engaged in by the person charged as a defendant. Where a RICO charge is improperly brought, it may, for example, warrant a new trial. Compare United States v. Guiliano, 644 F.2d 85, 88-89 (2d Cir. 1981) ("distinct risk that the jury was influenced in its disposition of the [case] . . . by the allegations of the RICO count"), with United States v. Sam Goody Inc., 506 F. Supp. 380, 391 (E.D.N.Y. 1981) (RICO charge facially proper for fraudulent operation of record store as "enterprise," where corporations and individuals charged as defendants); and United States v. Sam Goody, Inc., 518 F. Supp. 1223, 1225-26 (E.D.N.Y. 1981) (after dismissal of RICO charge, court "remain[ed] concerned about the effect of the . . . charge, particularly the 'racketeering' implications [although in a] normal case . . . might not order a new trial"), appeal dismissed, 675 F.2d 17, 26, 27 (2d Cir. 1982) ("less concerned" about possibility of prejudice but not clear and indisputably wrong) (Mansfield, J., dissenting in part: verdict "fairly-won and fully-supported" as prosecutor made clear not "organized crime or the mob"). That possibility alone ought to counsel care. In addition, a RICO conviction may warrant exercising discretion under the concurrent sentence doctrine to review the RICO count, even though it might not otherwise be necessary. United States v. Webster, 639 F.2d 174, 183 (4th Cir. 1981), modified on other grounds on rehearing, 669 F.2d 185 (4th Cir. 1982); United States v. Anderson, 626 F.2d 1358, 1361 n.2 (8th Cir. 1980). RICO convictions may also carry parole and other confinement consequences. See, e.g., Carter v. Carlson, 545 F. Supp. 1120, 1122 (S.D. W. Va. 1982) (RICO conviction warrants classification of prisoner in "sophisticated criminal activity").
n42 THE ABA
REPORT ON ORGANIZED CRIME AND LAW ENFORCEMENT 10 (1952-1953) [hereinafter cited
as ABA REPORT], for example, echoed the Kefauver Committee and observed:
[T]he largest single factor in the breakdown of law enforcement agencies in dealing with organized crime [documented by the Kefauver Committee was] the corruption and connivance of many public officials.
n43
PRESIDENT'S COMMISSION ON LAW ENFORCEMENT AND ADMINISTRATION OF JUSTICE, THE
CHALLENGE OF CRIME IN A FREE SOCIETY 200-09 (1967) [hereinafter cited as
PRESIDENT'S REPORT]. n44 The
Commission looked at the structure of the 24 "families" of the national
syndicate, id. at 193, as well as such organized crime activities as gambling,
id. at 188; loan sharking, id. at 189; narcotics, id.; the infiltration of
legitimate business, id.; labor racketeering, id. at 190; and political
corruption, id. at 191. n45 The
President's Crime Commission noted that legitimate businesses "rang[ing] from
accounting firms to yeast manufacturing" have been corrupted. PRESIDENT'S
REPORT, supra note 43, at 190. See Basic Concepts, supra note 3, at 1015 n.24.
n46 Basic
Concepts, supra note 3, at 1015 n.25. Two seminal papers commissioned by the
Commission were Cressey, The Functions and Structure of Criminal Syndicates, in
TASK FORCE REPORT, supra note 40, at 25, and Schelling, Economic Analysis and
Organized Crime, id. at 114. Each contributed important elements to the
development of RICO, particularly the concepts of "enterprise" and "pattern of
racketeering activity." Indeed, the concept of "enterprise criminalty" that RICO
embodies -- whether organized crime, white collar crime, or violent crime --
owes its origin, in significant part, to Professor Cressey's paper. See id. at
56-60 for a discussion of "organization" plus "crime." n47 The
Commission was created by Act of Nov. 9, 1966, Pub. Law No. 89-801, 80 Stat.
1516 (1966). Its chairman was Edmund G. Brown; its vice-chairman was Congressman
Richard H. Poff. Two of its members were Senators John L. McClellan and Roman L.
Hruska. In addition, staff work for the Commission examined a number of concepts
subsequently embodied in RICO. See, e.g., Consultants Report on Conspiracy and
Organized Crime, I WORKING PAPERS: NATIONAL COMMISSION ON REFORM OF FEDERAL
CRIMINAL LAWS 381 (1970) (Professor G. Robert Blakey) ("enterprise," "pattern of
racketeering"). The staff work is important, for it indicates how the
appropriate scope of the predicate offenses in RICO was narrowly conceived at
the earliest stages of the legislative process. The principle of selection followed in designating the 'racket' crimes is to include those crimes which experience has shown to be the specialities of the criminal syndicates, yielding illicit funds and power. Excluded from the list are ordinary crimes of violence, . . . ordinary commercial frauds, violators [sic] of antitrust, securities, and other regulatory laws.
Id. at 383-84. Subsequently, the scope of RICO was deliberately both widened and narrowed. See 18 U.S.C. § 1961 (1976). Ultimately, Congress decided that "ordinary commercial frauds" should be included in RICO; included, too, were "crimes of violence."
n48 Basic
Concepts, supra note 3, at 1015-16. See 113 CONG. REC. 17,997-18,002 (1967) for
Senator Hruska's introductory remarks discussing previous studies, the nature of
organized crime, and its infiltration into legitimate businesses; for example,
"brokerage houses" and "accounting firms." Id. at 17,998. He also noted that
"[m]ergers and acquisitions, real or imagined, were promoted. When stock values
soared to desired levels, profit-taking would occur. Then the helpless
management, stockholders, and creditors were left holding the bag." Id.
Accordingly, Senator Hruska was manifestly concerned even at this early stage of
RICO's processing with a wide range of victims, including stockholders and
creditors. n49 See S.
2048, 90th Cong., 1st Sess. (1967); S. 2049, 90th Cong., 1st Sess. (1967). The
original text of S. 2049 defined "criminal activity" more narrowly than the
ultimate text of RICO, largely excluding the fraud type offenses, although
bankruptcy fraud was included. "Persons" who could violate the bills were
limited to "individuals," "corporations," or other "legal entities." Id.
Criminal and civil remedies were provided for governmental and private suits.
Id. Professor Bradley, supra note 25, at 884, suggests that society "is not harmed further by the investment" of rackeetering proceeds. His reasoning has led one court to term the concept of the legal sterilization of the fruits of racketeering "basic[ally] irrational." United States v. Loften, 518 F. Supp. 839, 853 (S.D.N.Y. 1981). Professor Bradley's, and the court's, view is mistaken. It illustrates a common mistake in reading RICO. See Basic Concepts, supra note 3, at 1035 n.117. While RICO had as one of its purposes preventing the takeover of legitimate business by organized crime, it is myopic to read RICO as if that were its only purpose. RICO was also aimed at racketeering. United States v. Turkette, 452 U.S. 576, 591 (1981) ("deal[s] with problem at its very source"). Ultimately, organized crime's "revenue and power" stem from its illicit activities. Id.; United States v. Rone, 598 F.2d 564, 569 (9th Cir. 1979) (denied the source of income to use to invest), cert. denied, 445 U.S. 946 (1980). Accordingly, prohibiting the investment of racketeering proceeds makes engaging in racketeering itself less attractive. "[T]o the extent that profits earned in organized crime can be safely invested in legitimate activities to yield additional profits, the expected return to organized crime [in its illicit activities] is higher than it would otherwise be." R. POSNER, ECONOMIC ANALYSIS OF LAW § 7.6, at 176 (2d ed. 1977). "[T]he illegal market enterprises of [organized crime] . . . members generate a considerable illegal cash flow." A. ANDERSON, THE BUSINESS OF ORGANIZED CRIME 77 (1979). Attempting legally to sterilize that cash flow from direct or indirect investment in licit -- or illicit -- enterprises is, therefore, hardly irrational.
n50 Basic
Concepts, supra note 3, 1016 n.27. Congressman Bob Wilson, co-sponsor with
Congressman Poff, also noted, citing the Crime Commission, "accounting firms."
113 CONG. REC. 17,949 (1967). He also spoke of the "novel" approach of the
bills. Id. Congressman Poff had noted that the "package [would] not only sharpen
old tools but forge new tools of law enforcement." Id. at 17,947. Another
co-sponsor, Congressman Robert McClory, noted that "business racketeers" and
"criminal cartels" employ "staffs of attorneys, accountants, and business
consultants" to "protect themselves from suit and prosecution." Id. at 17,950.
See Lewis
v. United States, 445 U.S. 55, 63 (1980) (sponsor's statements entitled to
weight); Simpson
v. United States, 435 U.S. 6, 13 (1978). n51 The
ABA's report of its study is reprinted in 115 CONG. REC. 6994-95 (1969).
n52 The
Report observed: Some of the conduct of organized crime in legitimate businesses can be . . . reached by the existing antitrust laws. . . . Other activities of organized crime in legitimate businesses may or may not be subject to antitrust laws. Thus, some extortion tactics and business take-overs by organized crime might not be reached under the antitrust laws, particularly if they affected only the victimized business rather than resulted in a lessening of competition in an entire line of commerce. . . . As described above, S. 2048 and 2049 extend the use of the antitrust machinery as a weapon against organized crime.
. . . .
The Antitrust Section agrees that organized crime must be stopped. It further agrees that the antitrust machinery possesses certain advantages worthy of utilization in this fight. It therefore supports and endorses the principles and objectives of both S. 2048 and S. 2049, and similar legislation.
However, it prefers the approach of S. 2049. By placing the antitrust-type enforcement and discovery procedures in a separate statute, a commingling of criminal enforcement goals with the goals of regulating competition is avoided.
S. 2048, on the other hand, by inserting in the Sherman Act a provision which does not have as its primary objective the establishment or maintenance of free competition, may result in an undesirable blending of otherwise laudatory statutory objectives. Criminal conduct which violates existing antitrust laws can be proceeded against under those laws. Additional conduct sought to be reached should be attacked under separate legislation.
Moreover, the use of antitrust laws themselves as a vehicle for combating organized crime could create inappropriate and unnecessary obstacles in the way of persons injured by organized crime who might seek treble damage recovery. Such a private litigant would have to contend with a body of precedent -- appropriate in a purely antitrust context -- setting strict requirements on questions such as "standing to sue" and "proximate cause."
. . . .
For the foregoing reasons, the Section of Antitrust Law recommends that the House of Delegates adopt the attached resolution endorsing the principles and objectives of S. 2048 and S. 2049, and all similar legislation having the purpose of adapting the machinery of the antitrust laws to the prosecution of organized crime, but recommending that any such legislation be enacted as an independent statute and not be included in the Sherman Act, or any other antitrust law.
Id. at 6995. The ABA's recommendation for separate legislation was, of course, adopted. Accordingly, any suggestion that RICO actions be limited by antitrust-type limitations -- "competitive," "commercial," or "direct/indirect" injuries -- flies in the face of the very consideration that led to the drafting of RICO as a separate statute from the antitrust statutes that are so limited. Compare State Farm Fire & Casualty Co. v. Estate of Caton, 540 F. Supp. 673, 679-80 (N.D. Ind. 1982) ("contrary to express legislative history") and Crocker Nat'l Bank v. Rockwell Int'l Corp., No. C-81-4099 SC (N.D. Cal. 1982) ("by reason of" limitation rejected), with Harper v. New Japan Sec., 545 F. Supp. 1002, 1004-05, 1007 (C.D. Cal. 1982) ("by reason of" limitation imposed on civil RICO based on antitrust analogy that Congress considered). State Farm and Crocker were correctly decided; Harper was wrongly decided; the court's legislative history and policy analysis is contrary to what actually happened. Because the argument in Comment, Reading the "Enterprise" Element Back Into RICO: Sections 1962 and 1964(c), 76 NW. U.L. REV. 100 (1981), for adoption of a "competitive limitation" ignores significant aspects of the legislative history materials, it should be rejected. The proper approach is set out in Note, Civil RICO: The Temptation and Impropriety of Judicial Restriction, 95 HARV. L. REV. 1101 (1982) [hereinafter cited as Note, Judicial Restriction]. The Northwestern note's use of legislative history has been aptly termed "selective." Strafer, Massumi, Skolnick, Civil RICO in the Public Interest: "Everybody's Darling", 19 AM. CRIM. L. REV. 655, 707 (1982) [hereinafter cited as Civil RICO].
n53 115
CONG. REC. 6995 (1969). n54 Basic
Concepts, supra note 3, at 1017. n55 115
CONG. REC. 5872 (1969), reprinted in Senate Hearings, supra note 28, at 493-511.
n56 115
CONG. REC. 5874; Senate Hearings, supra note 28, at 496. The list included
"advertising, amusement, appliances, automobile, baking, ballrooms, bowling
alleys, banking, basketball, boxing, cigarette distribution, coal,
communications, construction, drugstores, electrical equipment, florists, food,
football, garment, gas, hotels, import-export, insurance, juke box, laundry,
liquor, loan, news services, newspapers, oil, paper products, radio, real
estate, restaurants, scrap, shipping, steel, surplus, television, theaters, and
transportation." Id. Here, too, the concern of Senator McClellan with the direct
victims -- the immediate business, the insurance company, and the customers --
is clearly manifested. More than the narrow class "competitor" was, in short, of
concern. n57 Id.
Here, too, the point must be made: when a union fund is looted, how are
competitors injured? Limiting civil suits under RICO to competitive injuries
would exclude union members from the class who could civilly sue under RICO,
hardly a result consistent with Senator McClellan's express concerns. Nor would
the members' injuries be solely "commercial" in character. But see Van
Schaick v. Church of Scientology, 535 F. Supp. 1125, 1136-37 (D. Mass. 1982)
(RICO injury must be "commercial"). Van Schaick was wrongly decided; it is
discussed in note 147 infra. n58 Senate
Hearings, supra note 28, at 497. What was said above about unions applies
equally to governments. How can they be hurt competitively or commercially?
Should they not be able to sue under RICO to vindicate their rights civilly?
State and local governmental units can sue under the antitrust statutes as
victims. See Hawaii
v. Standard Oil Co., 405 U.S. 251, 260-64 (1972); Chattanooga
Foundry v. City of Atlanta, 203 U.S. 390 (1906). Surely, RICO ought to be
read at least as broadly as the antitrust statutes on which its civil relief
provisions were modeled. See note 17 supra. n59 The
focus of the bill, as then drafted, was reflected in its title. The final scope
of RICO, too, is reflected in its title, which is not limited to investment in
or takeover of legitimate businesses, but extends to the operation of
"enterprises," lawful as well as unlawful, by "racketeering acts" defined to
include various forms of crime. See Basic Concepts, supra note 3, at 1025 n.91
(history of development of language of title). Assistant Attorney General Wilson
criticized S. 1623 because its "remedies [were not] . . . at least as broad as
the evil sought to be suppressed." Senate Hearings, supra note 28, at 387. He
called for legislation that went beyond investment and attacked operation too.
Id. He found S. 1861, however, more to his liking because it went beyond
investment, and because he foresaw the usefulness of its civil remedies that
could be invoked "by the lesser standard of proof, i.e. by a preponderance of
the evidence rather than beyond a reasonable doubt." Id. at 388.
Traditionally, of course, what measure of proof should be applied in establishing a civil "violation" of a statute has been left to the courts. Santosky v. Kramer, 102 S. Ct. 1388, 1395 (1982). The issue, however, is first a matter of legislative intent. Id. at 1403, 1404 n.2; Steadman v. SEC, 450 U.S. 91, 96 n.10 (1981) ("task of determining the appropriate standard of proof is one of discerning congressional intent."); Vance v. Terrazas, 444 U.S. 252, 265 (1980) ("traditional powers . . . to prescribe . . . standards of proof . . ."). Here that intent was clearly manifest in the legislative history as "preponderance of the evidence." Senate Hearings, supra note 28, at 388 (testimony of Assistant Attorney General Wilson) (testimony of Senator McClellan) ("preponderance"). See also House Hearings, supra note 25, at 106-07 (not "proof beyond reasonable doubt," but "[s]ince . . . civil sanctions would be remedial rather than punitive . . . [there would be] procedural equality."). Id. at 664 (remarks of Congressman Poff) "[T]itle IX is really in two parts, one criminal and one civil. The burden of proof under the civil-remedy section, section 1964, is much less.". Accordingly, the measure has been adopted by the courts. United States v. Cappetto, 502 F.2d 1351, 1357 (7th Cir. 1974) (government civil suit), cert. denied, 420 U.S. 925 (1975); State Farm Fire & Casualty Co. v. Estate of Caton, 540 F. Supp. 673, 677 (N.D. Ind. 1982) (private civil suit); Parnes v. Heinold Commodities, Inc., 487 F. Supp. 645, 647 (N.D. Ill. 1980) (same); Heinold Commodities, Inc. v. McCarty, 513 F. Supp. 311, 313 (N.D. Ill. 1979) (same); Farmers Bank v. Bell Mortgage Corp., 452 F. Supp. 1278, 1280 (D. Del. 1978) (same). Congressional intent might well be frustrated, however, should a specifically defined "organized crime" or "racketeering" type limitation focusing only on mobsters in the classic sense be adopted to curtail the scope of civil RICO, for then a civil RICO proceeding might well be thought to carry a "stigma" -- contrary to Congress's intent -- and powerful arguments could be made for the adoption of a higher measure of proof. See Civil RICO, supra note 52, at 715-17; Note, Judicial Restrictions, supra note 52, at 1107 ("RICO claims can stigmatize defendants only if courts restrict the applicability of the broad statutory language to proven organized criminals.") (emphasis added). Congress knew that the old "sanctions and remedies available" were "limited in scope and impact." The Organized Crime Control Act of 1970, Pub. L. No. 91-452, 84 Stat. 923 (1970). It sought, in RICO, to "establish . . . new remedies." Id. The implementation of those new remedies ought not now be frustrated by judicial fiat through the adoption of a "strained construction" of Title IX having no support in the "statutory language itself, nor in its legal history." United States v. Sutton, 642 F.2d 1001, 1004 (6th Cir. 1980) (en banc reversal of panel opinion excluding illicit "enterprises" from "enterprise" under RICO). Courts should, therefore, "decline . . . [any] invitation to emasculate Title IX." Id. See Stockwell v. United States, 80 U.S. (13 Wall.) 531, 547 (1871) (multiple damage award does not warrant different rules of evidence).
The general practice that obtains under the antitrust statutes, moreover, is equally suitable under RICO. A suit to restrain a violation of the antitrust statutes is civil, not criminal, in character. United States v. National Lead Co., 332 U.S. 319, 338, 348 (1947) ("civil, not a criminal proceeding"; "not . . . for punishment . . . [but] . . . future prevention"); Georgia v. Pennsylvania R.R., 324 U.S. 439, 446 (1945) ("civil, not a criminal, proceeding"). No prior criminal conviction is necessary before a civil suit may be brought. Standard Sanitary Mfg. Co. v. United States, 226 U.S. 20, 52 (1912) ("[T]he Sherman Act provides for a criminal proceeding to punish violations and suits in equity to restrain such violations, and the suits may be brought simultaneously or successively. The order of their bringing must depend upon the Government. . . . [An] action for damages by a 'person injured' . . . [need not] also wait."). A judgment may be returned against a defendant based on a showing not greater than a preponderance of the evidence. See Ramsey v. UMW, 401 U.S. 302, 307-11 (1971) (general rule of preponderance applies in treble damage antitrust suits against union, except as modified by Norris-LaGuardia Act (29 U.S.C. § 106) for question of authorization); South-East Coal Co. v. Consolidation Coal Co., 434 F.2d 767, 778 (6th Cir. 1970) (preponderance), cert. denied, 402 U.S. 983 (1971). No reason exists to vary the time-tested practice under theantitrust statutes or to repudiate the developing practice under RICO. See generally IX J. WIGMORE, EVIDENCE § 2498, at 327 (3d ed. 1940) ("Policy suggests that the . . . [reasonable doubt standard] should be strictly confined to its original field."); Steadman v. SEC, 450 U.S. 91 (1981) (preponderance standard followed for fraud determination in administrative hearing); SEC v. Joiner Corp., 320 U.S. 344, 350-51 (1943) (securities fraud; criminal proceedings beyond reasonable doubt; civil proceedings -- preponderance of the evidence).
Professor (now Judge) Posner, in ECONOMIC ANALYSIS OF LAW § 21.2, at 432 (2d ed. 1977), argues, however, based on the diminishing marginal utility of money income, that a "somewhat higher standard of persuasion than mere preponderance" should be adopted in civil matters. Posner reads the preponderance standard as an evaluation of the probability (.5) that an undeserving plaintiff will win or that a deserving plaintiff will lose. Posner's view is mistaken; it assumes that only one issue is faced in litigation; it also assumes that plaintiffs and defendants are relatively equal in wealth -- or at least wealth available for legal execution. In fact, there are four crucial areas in civil litigation: liability, causation, damages, and execution, and plaintiffs in certain classes of litigation may in fact not be relatively equal in wealth. To prevail, a plaintiff must win all -- or most -- of the issues in each area; if a preponderance of the evidence standard is applied to fact finding at each stage, the probability of winning for a deserving plaintiff is certainly not greater than .0625 (.5X.5X.5X.5). In addition, RICO type litigation, particularly where mob-type organized crime is in fact present, will also not involve plaintiffs relatively equal in wealth to defendants, and it will pose an especially difficult problem at the point of execution. In 1963, for example, the McClellan Committee looked into the organized crime operations of Santo Trafficante, the Tampa Florida Mafia boss. Nell G. Brown, the Tampa Chief of Police, testified: "We know of no legitimate businesses that are owned or controlled by Santo Trafficante. He owns no real estate, nor any other property, real or personal. His house, automobile and all his other possessions are held in the name of others." Organized Crime and Illicit Traffic in Narcotics: Hearings Before the Senate Perm. Subcomm. on Investigations of the Comm. on Government Operations, 88th Cong., 1st Sess. 519, 527-28 (1963) (testimony of Neil G. Brown). See also Forfeiture of Narcotics Proceeds, Hearings Before the Senate Subcomm. on Criminal Justice, Comm. on the Judiciary, 96th Cong., 2d Sess. 96-97, 114 (1980) (testimony of Irvin B. Nathan) (three problems: 1) ascertaining what the assets are, 2) reaching them if they are in the hands of third parties, and 3) preventing their dissipation before trial; problems compounded since "sophisicated criminals . . . have access to the best lawyers and accountants money can buy"); STRONGER FEDERAL EFFORT NEEDED IN FIGHT AGAINST ORGANIZED CRIME: REPORT BY COMPTROLLER GENERAL OF THE UNITED STATES 31-34 (1981) (problems in criminal forfeiture: 1) uncertain status of assets, 2) third party holdings, and 3) dissipation prior to seizure); ASSET FORFEITURE -- A SELDOM USED TOOL IN COMBATTING DRUG TRAFFICKING, REPORT OF COMPTROLLER GENERAL OF THE UNITED STATES 30-42 (1981) (same); J. CALIFANO, THE 1982 REPORT ON DRUG ABUSE AND ALCOHOLISM 97 (1982) ("greater use of federal statutes [like RICO] and [the Controlled Substances Act] should be amended to provide for the forfeiture of all profits of . . . enterprise"). It is not without significance, too, that Frank Diecidue, a Trafficante associate, has been prosecuted under RICO, albeit unsuccessfully, for murder in connection with the operation of a legitimate business. United States v. Diecidue, 603 F.2d 535, 553-55 (5th Cir. 1979), cert. denied, 445 U.S. 946 (1980). See also State Farm Fire & Casualty Co. v. Estate of Caton, 540 F. Supp. 673, 682 (N.D. Ind. 1982) ("Nor is it fanciful to suggest that organized crime figures' assets may be held by nominees or corporate shells."); Urban Indus. v. Thevis, 670 F.2d 981 (11th Cir. 1982) (one million dollars in jewelry and cash seized from fugitive in United States v. Thevis, 665 F.2d 616 (5th Cir. 1982) (RICO murder) subject to IRS lien rather than claim by judgment creditor of estate of victim). Accordingly, the moral and economic considerations underlying the structure of civil RICO may be simply stated. A preponderance standard makes sense at the point of unlawful conduct, for society ought to be assured that it is more likely than not that the defendant has violated RICO's standards. Thereafter, as in the antitrust area, while proof of cause and the fact of damage ought to have to be made out, how a plaintiff meets its burden of proof as to the amount of damage ought to be ameliorated considerably. See Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 123 (1969) ("damage issues . . . rarely susceptible of the kind of concrete, detailed proof"); Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 697-701 (1962) (fact of injury from violation may be inferred from circumstantial evidence); Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 264 (1946) ("jury . . . [may] return a verdict . . . even though damages . . . [can] not be measured with exactness"; "just and reasonable estimate . . . based on relevant data"); Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 562 (1931) (uncertainty as to extent of damages distinguished from uncertainty as to fact of damage); Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 379 (1927) ("damages are not rendered uncertain because they cannot be calculated with absolute exactness"). A theory of full compensation, too, warrants the award of multiple damages for victims of behavior that is also criminal. See note 89 infra. Finally, special precautions must be taken in the course of the litigation to assure that the defendant's assets, if they can be identified and found, will not be dissipated prior to judgment and execution. See note 217 infra.
n60 115
CONG. REC. 6993 (1969). n61 Id.
Senator Hruska's remarks, therefore, are illustrative, not exhaustive, of the
purposes of the bill. See United
States v. Turkette, 452 U.S. 576, 591 (1981) (negative inference
impermissible). n62 Senator
Hruska noted: Not only will organized crime bring to a business venture all the techniques of violence and intimidation which it used in its illegal business, but it is also a foregone conclusion that those individuals who have made a career of cheating and stealing will continue to do so in their new roles. The consumer public will suffer from inflated prices, shoddy goods, and outright frauds.
. . . .
In short, this entire matter of racketeer infiltration of legitimate business inevitably creates unfair competition. It is a situation made to order for the application of the Federal antitrust powers that have been in existence for many years.
115 CONG. REC. 6993 (1969). Here, too, Senator Hruska expresses a concern beyond those competitively injured.
n63 Id. at
6993. The ABA Report was inserted in the Congressional Record. Id. at 6994.
Senator Hruska explicitly said the redrafting to place the bills outside of the
antitrust statutes had been undertaken at the ABA's suggestion. Id. n64 Id.
n65 Id. at
6993-94. Senator Hruska observed: [T]he criminal provisions are intended primarily as an adjunct to the civil provisions which I consider as the more important feature of the bill. . . . I believe that the time has arrived for innovation in the organized crime fight. The bill is innovative in the sense that it vitalizes procedures which have been tried and proved in the antitrust field and applies them into the organized crime field where they have been seldom used before. Hopefully, experts on organized crime will be able to conceive of additional applications of the law. The potential is great. For these reasons the bill is worthy of careful consideration.
Id. at 6993. Here, too, Senator Hruska manifested an intent to go beyond antitrust precedent.
n66 See id.
at 6995-96. Note, however, that its "criminal activity" definition did not at
this time include mail fraud (18
U.S.C. § 1341), wire fraud (18
U.S.C. § 1343), the interstate theft-fraud provisions (18
U.S.C. §§ 659, 2314-2315), or securities fraud. Only bankruptcy fraud was
included. The express extension of RICO to other forms of fraud and the adoption
of the liberal construction clause came later. The American Bar Association
testified in support of S. 1623. Senate Hearings, supra note 28, at 268
(testimony of Rufus King) ("I . . . report that the American Bar Association
favors the measures."). n67 Basic
Concepts, supra note 3, at 1017. As the focus of the bill was not limited to the
investment of illegal funds, its title differed from that of S. 1623. n68 115
CONG. REC. 9567 (1969). n69 Id.
Congressman Poff's status as a major sponsor of the legislation, therefore,
continues to be clear. See note 50 supra. n70 Senator
McClellan later indicated that this was not because of opposition to the
concepts, but merely because "[d]etailed considration was not given [at the
time] to carrying the antitrust parallel out." 117 CONG. REC. 46,386 (1971).
n71 It is
likely, however, that a private cause of action would have been implied, as the
bill contemplated not only "fine, imprisonment, criminal forfeiture, and civil
divestiture dissolution [and] injunction" relief at the hand of the government,
but also "other relief." STATEMENT OF FINDINGS AND STATEMENT OF POLICY OF S.
1861, 115 CONG. REC. 9568 (1969). See Cort
v. Ash, 422 U.S. 66, 78 (1975). The findings of the bill, moreover, not only
noted the wide scope of organized crime in the United States (the language
parallels that which finally appeared before the entire bill as ultimately
enacted), but that "innocent investors" were "harmed." 115 CONG. REC. at 9568.
That these findings prefaced S. 1861, too, undermines the argument that the
findings before the text of the final Act cannot be used to interpret Title IX.
See Basic Concepts, supra note 3, at 1026 n.91. See also note 28 supra. In
addition, the legislation was termed "remedial," and its "liberal construction"
was mandated. 115 CONG. REC. at 9571. Finally, nowhere in his remarks did
Senator McClellan indicate that the express provision for suits by the
government was designed to exclude private suits. Compare Passenger
Corp. v. Passengers Ass'n, 414 U.S. 453, 458 (1974) (expressio unius est
exclusio alterius plus unequivocal legislative history held to preclude
not-expressed right), with Wyandotte
Co. v. United States, 389 U.S. 191, 200 (1967)(specific not exclusive). The
maxim is, in short, "by no means of universal conclusive application." H. BROOM,
LEGAL MAXIMS 668 (7TH Am. ed. 1874). The question always is "the intention of
the legislature." Id. at 664; SEC
v. Joiner Corp., 320 U.S. 344, 350-51 (1943)(Ejusden generis and expressio
unius est exclusio alterius gives way to intent and policy); United
States v. Barnes, 222 U.S. 513, 519 (1912) ("a rule of construction, not of
substantive law"). It depends on whether the intent is "general" or
"restrictive." H. BROOM, LEGAL MAXIMS 668 (7th Am. ed. 1874). Usually, where a
remedy is "cumulative" of others, the maxim is inapplicable. Id. Obviously, the
proposed bill was "cumulative," as its application depended on the commission of
"racketeering activity" already made criminal by independent federal and state
offenses. The intent to add to existing criminal and civil remedies on the
federal and state level is also manifest; it later became explicit in The
Organized Crime Control Act of 1970, Pub. L. No. 91-452, § 904(b), 84 Stat. 947
("Nothing in . . . [RICO] shall supersede any provision of Federal, State or
other law imposing criminal penalties or affording civil remedies."). Unless an
overlap existed, it would not have been necessary to speak of an intent not "to
supersede." Note, too, that the scope of the state offenses was wide: "any act
involving . . . danger of violence to life, limb or property . . . punishable by
imprisonment for more than one year." 115 CONG. REC. at 9560. However, mail
fraud (18
U.S.C. § 1341), wire fraud (18
U.S.C. § 1343), and securities fraud were not yet among its "racketeering
acts." These statutes were only added later. See generally Merrill,
Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 50 U.S.L.W. 4457 (U.S.
May 3, 1982) (implied cause of action for fraud found under Commodity Futures
Exchange Act). n72 115
CONG. REC. 9567 (1969). Senator McClellan commented: [S. 1861] . . . draws heavily upon the remedies developed in the field of antitrust. Nevertheless, Mr. President, I believe it necessary to make several clarifying remarks on the antitrust remedies this bill provides. The first is that the equitable remedies used in the field of antitrust always existed. Because the remedies have been effective in removing and preventing harmful behavior in the business segment of our economy, they show great promise as tools for attacking organized crime. There is, however, no intention here of importing the great complexity of antitrust law enforcement into this field. Nor is there any intention of using the antitrust laws for a purpose beyond the legislative intent at the time of their passage.
The many references to antitrust cases are necessary because the particular equitable remedies desired have been brought to their greatest development in this field, and in many instances they are the primary precedents for the remedies in this bill. Nor do I mean to limit the remedies available to those which have already been established. The ability of our chancery courts to formulate a remedy to fit the wrong is one of the great benefits of our system of justice. This ability is not hindered by the bill.
Id. Under S. 1861, as now under RICO, federal district courts were given "jurisdiction to prevent and restrain violations of Section 1962" (emphasis added). Since the operative language on which government injunctions were premised is identical to the operative language on which private civil suits are now based, 18 U.S.C. § 1964(c) ("injured in . . . business or property by reason of a violation of Section 1962") (emphasis added), it is appropriate to cite Senator McClellan's general comments on § 1964 on the need not to circumscribe private civil actions. State Farm Fire & Casualty Co. v. Estate of Caton, 540 F. Supp. 673, 680 (N.D. Ind. 1982). The final statute blends both types of actions in a common section; they should receive, therefore, a similar construction. As Mr. Justice Cardozo stated in Moore Ice Cream Co. v. Rose, 289 U.S. 373, 378 (1933): "There is a unity of verbal structure that is a symptom of an inner unity, a unity of plan and function." See Perrine v. Chesapeake & Delaware Canal Co., 50 U.S. (9 How.) 172, 187 (1850) (Taney, C.J.) ("an interpretation of [a] statute which . . . would render different sections inconsistent with each other cannot be the true one.").
n73 115
CONG. REC. 9567 (1969). n74 Id.
n75 Id. S.
1861, in fact, became Title IX of the Organized Crime Control Act. S. REP. NO.
617, 91st Cong., 1st Sess. 83 (1969), reprinted in 1970 U.S. CODE CONG. &
AD. NEWS 4010. Senator McClellan also said that he saw in S. 1861 "hope" of
removing the "profit potential" from certain kinds of crime, 115 CONG. REC. 9567
(1969), and he observed that the bill was "based upon the judgment that parties
who conduct organizations affecting interstate commerce through a pattern of
criminal activity are acting contrary to the public interest." Id. at 9568. The
purpose of the bill was, however, explicitly said to be "remedial rather than
penal." Id. Compare the action of Judge Ross Sterling dismissing a RICO count in
a criminal indictment, NEWSWEEK, Aug. 20, 1979, at 82 ("RICO was designed to
keep racketeers out of business not to make racketeers out of businessmen"),
which was reversed in United
States v. Uni Oil, 646 F.2d 946, 953 (5th Cir. 1981)("primarily enacted to
combat organized crime, [but] nothing in [its legislative] history, or the
language of the statute itself, expressly limits RICO's use to members of
organized crime"), with United
States v. Aleman, 609 F.2d 298, 306 (7th Cir. 1979)("If a defendant
qualifies as a racketeer able to accomplish the same illegal goals as organized
crime he qualifies for the punishment.") and Basic Concepts, supra note 3, at
1029 n.91 ("There is nothing in RICO that says that if legitimate businessmen
act like racketeers, they should not be treated like racketeers."). n76 Senate
Hearings, supra note 28, at 404-07. S. 1861 recast S. 1623. "Criminal activity"
was termed "racketeering activity." The scope of such activity was expanded to
include a wide range of state offenses as well as certain federal offenses,
including the interstate theft-fraud offenses (18
U.S.C. § 659 (theft from interstate shipments) and §§ 2314-2315
(transportation of stolen property)). "Person" was broadly defined ("any
individual or entity capable of holding property"). The concept of "enterprise"
was introduced; it was also broadly defined as "any individual, corporation,
legal entity or other group of individuals." Similarly, "pattern of racketeering
activity" was introduced; it was defined in the legislative history. 115 CONG.
REG. 9567 (1969). n77 Senate
Hearings, supra note 28, at 404-07. Hence, it is not correct to suggest that the
impact of RICO on federal-state relations was not brought to Congress'
attention. Congress, of course, after making certain modifications, went forward
with the legislation. United
States v. Turkette, 452 U.S. 576, 586-87 (1981)("existing law, state and
federal, . . . not adequate to address the problem, which was of national
dimensions"). n78 Senate
Hearings, supra note 28, at 404-07. It was because "state and federal [law] was
not adequate" that Congress acted. United
States v. Turkette, 452 U.S. 576, 587 (1981). It hardly sits well now to
attempt to circumscribe RICO on a theory that state law is adequate. Compare Adair
v. Hunt Int'l Resources Corp., 526 F. Supp. 736, 746-48 (N.D. Ill.
1981)(RICO not alternative or cumulative to other remedies), with Organized
Crime Control Act of 1970, Pub. L. No. 91-452, 84 Stat. 941, 947 (1970) (RICO
"shall [not] supersede . . . state . . . civil remedies"). Unless RICO was
"alternative" or "cumulative" no reason existed to be concerned about its
preemption of other federal or state law. While the Department of Justice
offered amendments, it also supported S. 1861, noting that its "principal
utility . . . [might] well be found . . . in its civil remedies . . . with . . .
[their] lesser standard of proof." Senate Hearings, supra note 28, at 406-07.
Not all of the witnesses who appeared in the senate hearings, however, endorsed
S. 1861. The American Civil Liberties Union objected to its breadth, commenting
that it would be "applicable in areas far removed from that which we
traditionally define as organized crime." Senate Hearings, supra note 28, at
475. It suggested that the bill be redrafted to "confine its reach to [the]
limited aim" of restricting illegitimate investment. Id. Accordingly, those who
now argue in court that an "organized crime" or "racketeering" type limitation
be read into RICO are merely offering in a judicial forum an amendment that
elected representatives declined to adopt in the legislative forum. On the
"civil liberties" implications of this "civil liberties" objection, see text
accompanying note 113 infra. The Supreme Court in United
States v. Culbert, 435 U.S. 371, 373-74 (1978) reversed the Sixth Circuit's
effort to read a "racketeering" limitation into the text of 18
U.S.C. § 1951. It noted the absence of the limitation in the text of the
statute and the vagueness problems that reading an undefined concept into the
statute would pose "impel[led] the conclusion that Congress intended to make
criminal all conduct within the reach of the statutory language." 435
U.S. at 380 (emphasis added). n79 Senate
Hearings, supra note 28, at 405. n80 See 18
U.S.C. § 1961 (1) (1976 & Supp. 1980). The generic incorporation of
state offenses was eliminated and a specific list of state offenses was
included. The list of federal offenses, however, was expanded, principally by
including fraud type offenses. See text accompanying notes 90-95 infra.
n81 S. REP.
NO. 617, 91st Cong., 1st Sess. 83 (1969). The Organized Crime Control Act in
general and RICO in particular have been criticized as poorly drafted and
ill-considered. See note 120 infra. On reporting the bill, Senator McClellan
observed: [This debate on the Organized Crime Control Act] is the culmination of a year of detailed study, hearings, and consultations, and a result of one of the most thoroughly gratifying bipartisan efforts in which I have participated since coming to the Senate.
116 CONG. REC. 585 (1970). The Senator then listed the groups whose opinions had been consulted and whose ideas and suggestions had been embodied in the bill, including:
[T]he President's Crime Commission, [T]he National Commission on Reform of Federal Criminal Laws, [T]he American Bar Association Project on Minimum Standards of Criminal Justice, [T]he Model Penal Code of the American Law Institute, [T]he Model Sentencing Act [of the] . . . National Council on Crime and Delinquency, [T]he Association of Federal Investigators, [T]he New York County Lawyers Association, [T]he American Civil Liberties Union, . . . [T]he National Association of Counties and [T]he New York State Bar Association. . . . The National Chamber of Commerce and the International Association of Chiefs of Police.
Id. The Supreme Court termed the Act in Iannelli v. United States, 420 U.S. 770, 789 (1975), a "carefully crafted piece of legislation."
n82 S. REP.
NO. 617, 91st Cong., 1st Sess. 76-78 (1969). The report quoted with approval the
findings of a special committee of the American Bar Association which recognized
"the depth of the penetration of the forces of organized crime into the fabric
of our society and our commercial life." Id. at 76. n83 Id. at
77. Here it is also clear that direct victims are included within the class to
be protected by RICO. n84 Id. at
78. n85 Id.
n86 Id. at
79. The committee report repeated Senator McClellan's earlier statement. See
note 75 supra. Title IX, the report noted, was "based upon the judgment that
parties who conduct organizations affecting interstate commerce through a
pattern of criminal activity are acting contrary to the public interest." S.
REP. NO. 617, 91st Cong., 1st Sess. 82. The report also quoted the Department of
Justice's comments on the value of the civil aspects of Title IX. The Department
of Justice noted that Title IX's civil provisions would allow the government to
intervene in situations which were "not susceptible to proof of a criminal
violation." The Department also cited the "lesser standard of proof" required,
the "greater potential than penal sanctions for actually removing the criminal
figure from [the] organization," flexibility, and the fact that the civil
remedies could be "effectively monitored by the court" as redeeming qualities of
Title IX's civil provisions. Id. n87 S. REP.
NO. 617, 91st Cong., 1st Sess. 79 (1969). The report also commented on 18
U.S.C. § 1964, noting that it "contain[ed] broad remedial provisions for
reform. . . . Although certain remedies are set out, the list is not exhaustive,
and the only limit on remedies is that they accomplish the aim set out of
removing the corrupting influence and make due provision for the rights of
innocent persons." Id. at 160. The report also noted that § 1964 was "remedial,
not punitive." Id. This technical commentary that includes no words of
limitation, but in fact expresses an intent not to limit the scope of § 1964, is
of great weight in interpreting the section. See S
& E Contractors v. United States, 406 U.S. 1, 13 n.9 (1972) ("In
construing laws we have been extremely wary of testimony before committee
hearings and of debates on the floor of Congress save for precise analysis of
statutory phrases by sponsors of the proposed law."). It goes without saying
that the Committee on the Judiciary's Report submitted by Senator McClellan is
an example of such precise analysis of § 1964. n88 S. REP.
NO. 617, 91st Cong., 1st Sess. 81 (1969). The Court in United
States v. Turkette, 452 U.S. 576, 593 (1981) termed RICO "both preventive
and remedial." Traditionally, of course, where a statute is both remedial and
penal, there is no valid objection to giving it a liberal construction. See,
e.g., Farmers'
and Mechanics' Nat'l Bank v. Dearing, 91 U.S. 29, 35 (1875) (statutory
forfeiture of interest where usurious rate charged). Accordingly, the Criminal
Justice Section of the American Bar Association's citation to FCC
v. American Broadcasting Co., 347 U.S. 284, 296 (1954) for the proposition
that when a statute carries civil and criminal sanctions strict construction
must obtain, ABA, supra note 25, at 14 n.5, is misleading. The Section failed to
note the traditional rule of Farmers' and those other cases prior to American
Broadcasting that were inconsistent with the Court's sweeping dicta. See, e.g.,
SEC
v. Joiner Corp., 320 U.S. 344, 350-51 (1943) (majority position of liberal
construction of state Blue Sky laws having criminal and civil sanctions noted,
but scope of "security" resolved by plain meaning rule; strict construction not
adopted). Nor did it note that American Broadcasting is of questionable
authority today on the additional ground that the Court declined to follow it in
Mourning
v. Family Publications Serv. Inc., 411 U.S. 356, 374-75 (1973) (plain
meaning, not strict construction applied, even though statute imposed criminal
and civil penalties). The Section's unfortunate lack of candor in its use of
precedent is lamentable. See MODEL CODE OF PROFESSIONAL RESPONSIBILITY EC 7-23
(1975)("directly adverse authority" should be brought to the attention of "the
tribunal"). It undermines the ABA's current position on RICO. See notes 25 supra
and 150 infra. n89 S. REP.
NO. 617, 91st Cong., 1st Sess. 82 (1969). See note 25 supra. When Congress
clearly classifies a remedy as not "penal," courts will not lightly reexamine
the question. United
States v. Ward, 448 U.S. 242, 248-51 (1980)(civil penalty classified as such
for all purposes, including self-incrimination). In addition, that
classification overrides federal common law that may have pointed in the other
direction. City
of Milwaukee v. Illinois and Michigan, 451 U.S. 204, 312-15 (1981) (statute
controls over federal common law). Accordingly, RICO has been appropriately
classified by the courts as "remedial," not penal. United
States v. Cappetto, 502 F.2d 1351, 1357 (7th Cir. 1974), cert. denied, 420
U.S. 925 (1975); State
Farm Fire & Casualty Co. v. Estate of Caton, 540 F. Supp. 673, 681, 683-35
(N.D. Ind. 1982) (RICO remedial for survivorship and statute of limitations
in private treble damage action). These holdings reflect, too, the judgment of
Congress since 1970. In reporting out S. 1630, the criminal code bill, the
Senate Judiciary Committee described RICO in these terms: [I]t is hoped the knowledge that a person will be subject to substantial civil damages will serve as an effective deterrent to the commission of . . . [a RICO] offense. [However,] [t]he purpose of the [treble damage civil recovery] . . . is remedial, not penal; adequate relief or compensation is the main goal.
S. REP. NO. 307, 97th Cong., 1st Sess. 1273 (1981). Here, the Committee cited United States v. Bornstein, 423 U.S. 303, 313-16 (1976), which articulated a theory of multiple compensation recovery under the False Claims Act. 31 U.S.C. §§ 231-233, 235 (1976). See also Brady v. Daly, 175 U.S. 148, 154-58 (1899)("certain sum" damages not "penal" or "penalty or forfeiture provision," theory of "full compensation" adopted; "remedial" provision; discussion of analogous multiple damage statutes as "remedial"); James-Dickinson Farm Mortgage Co. v. Harry, 273 U.S. 119, 125-26 (1927) (exemplary damages not penal for rule that penal provision not enforced by another jurisdiction); Sicolo v. Prudential Savings Bank of Brooklyn, 5 N.Y.2d 254, 157 N.E.2d 284, 184 N.Y.S.2d 100 (1959) (treble damage not penalty or forfeiture for immunity statute). See United States v. Kenny, 462 F.2d 1205 (3d Cir.), cert. denied, 409 U.S. 914 (1972); Manning Engineering Inc. v. Hudson County Park Comm'n, 74 N.J. 113, 376 A.2d 1194 (1977).
It has been suggested that the opinion in Cappetto is "unable to withstand careful scrutiny." United States v. Altese, 542 F.2d 104, 110 (2d Cir. 1976)(Van Graafeiland, J., dissenting). In making his criticism of Cappetto, Judge Van Graafeiland, however, relied on a student work, Note, Organized Crime and the Infiltration of Legitimate Business: Civil Remedies for Criminal Activity, 124 U. PA. L. REV. 192, 202-03 (1975), which argued that it was improper for Cappetto, 502 F.2d at 1358, to rely on a portion of the senate report that discussed Title VII, rather than Title IX, of the Organized Crime Control Act. In fact, it was proper, because 18 U.S.C. § 1955, which was enacted in Title VII, was incorporated into Title IX as a predicate offense. Cappetto was, moreover, not only correct when decided, but it has since been vindicated in United States v. Turkette, 452 U.S. 576 (1981). Compare the remarks of Senator Hruska on Title IX, found in 116 CONG. REC. 602 (1970), in which he recognized the relation between Title IX's "antitrust provision" and a "concentrated effort to strangle the narcotics traffic . . . [and] raid . . . the cartels of gambling." It is the student's work and not the opinion in Cappetto that is "unable to withstand careful scrutiny." Professor Bradley fell into the same error as the student. Bradley, supra note 25, at 851-58.
n90
Organized Crime Control Act of 1970, Pub. L. No. 91-452, 84 Stat. 921-22 (1970).
n91 See 115
CONG. REC. 9568 (1969). n92 Title
IX also now included a section making it explicit that it was intended to
supplement, not supplant, existing criminal and civil remedies. See Organized
Crime Control Act of 1970, § 904(b), Pub. L. No. 91-452, 84 Stat. 947 (1970). In
United
States v. Turkette, 452 U.S. 576, 586 n.9 (1981), the Supreme Court
responded to objections that RICO invaded local law enforcement by noting that
it "imposes no restriction upon the criminal justice systems of the states. . .
. That some of . . . [its predicate] crimes may also constitute . . . acts of
racketeering under RICO is no restriction on the separate administration of
criminal justice by the States." Similarly, that an action for common law fraud
could be brought in a state court ought not be a ground for restricting the
scope of civil RICO out of a professed concern for federalism. Accordingly,
cases like Adair
v. Hunt Int'l Resources Corp., 526 F. Supp. 736, 746-48 (N.D. Ill. 1981) are
wrongly decided. n93 RICO's
attacks on governmental corruption have provoked controversy, which has centered
around extending the concept "enterprise" to governmental units. Until
United States v. Thompson, 669 F.2d 1143 (6th Cir.), reversed en banc, 685
F.2d 993 (6th Cir. 1982) (plain meaning of "enterprise" includes
governmental units), the courts of appeal were unanimous in holding that
governmental units could be "enterprises." United
States v. Angelilli, 660 F.2d 23, 30-35 (2d Cir. 1981); United
States v. Grant, 622 F.2d 308, 313 (8th Cir. 1980); United
States v. Baker, 617 F.2d 1060, 1061 (4th Cir. 1980) (rejecting United
States v. Mandel, 415 F. Supp. 997, 1022 (D.Md. 1976)); United
States v. Bacheler, 611 F.2d 443, 450 (3d Cir. 1979); United
States v. Grzywacz, 603 F.2d 682, 685-87 (7th Cir. 1979), cert. denied, 446
U.S. 935 (1980); United
States v. Frumento, 563 F.2d 1083, 1089-92 (3d Cir. 1977), cert. denied, 434
U.S. 1072 (1978); United
States v. Brown, 555 F.2d 407, 415-16 (5th Cir. 1977), cert. denied, 435
U.S. 904 (1978); United
States v. Ohlson, 552 F.2d 1347, 1348 (9th Cir. 1977) (sub silentio).
Dissenting voices, however, were heard. Angelilli,
660 F.2d at 43 (Friendly, J., concurring); Grzywacz,
603 F.2d at 690 (Swygert, J., dissenting); Bradley, supra note 25, at
858-61; Tarlow, supra note 25, at 205-08. But see United
States v. Lee Staller Enters., 652 F.2d 1313, 1316-19, 1322 (7th Cir. 1981)
(en banc approval of Grzywacz) (Swygert, J., recanting dissent in light of
Turkette), cert. denied, 102
S. Ct. 636 (1981). Their argument was that the absence of explicit
legislative history and the assumed inapplicability of the civil remedies to
governmental units precluded governmental units from being "enterprises." But
see United
States v. Turkette, 452 U.S. 576, 585 (1981)("Even if one or more of the
civil remedies might be inapplicable to a particular illegitimate enterprise,
this fact would not serve to limit the enterprise concept."); Albernaz
v. United States, 450 U.S. 333, 341 (1981) ("Congress cannot be expected to
specifically address each issue of statutory construction that might arise.").
In addition, the concerns expressed about the inapplicability of the civil
remedies were rooted in constitutional considerations. See National
League of Cities v. Usery, 426 U.S. 833, 842-52 (1976)(commerce clause does
not authorize Congress to force upon states essential choices regarding integral
governmental functions); Kentucky
v. Dennison, 65 U.S. (24 How.) 66, 107-08 (1860)(Congress cannot force state
to return fugitive under Art. IV, § 2). But see Hodel
v. Virginia Surface Mining and Reclamation Ass'n, 452 U.S. 264
(1981)(Surface Mining Control and Reclamation Act, 30
U.S.C. § 1201 (1976) upheld under commerce clause against tenth amendment
considerations). Detailed comment on the absence of legislative history is
unnecessary. "[I]t is only the words of the bill that have presidential
approval." Schwegmann
Bros. v. Calvert Corp., 341 U.S. 384, 396 (1951)(Jackson, J., concurring).
"The language of the statute . . . [i]s the most reliable evidence of its
intent." Turkette,
453 U.S. at 593. The application of the plain meaning rule ought to resolve
the governmental-unit-as-enterprise issue, and it has. See note 150 infra. The
other concerns, too, seem misplaced. Antitrust statutes apply to municipalities
and state-owned corporations. Community Commun. Co.
v. City of Boulder, 102 S. Ct. 835 (1982); City
of LaFayette v. Louisiana Power & Light Co., 435 U.S. 389 (1978). There,
the Court has recognized "that remedies appropriate to redress violations by
private corporations [might not] . . . be equally appropriate for
municipalities." LaFayette,
435 U.S. at 401. Moreover, civil remedies, including injunctions, may be
directed at governmental units, at least where constitutional rights are at
stake. See, e.g., Monelli
v. Department of Social Services, 436 U.S. 658, 690-91 (1978) (pregnant
employee leave policy). Those governmental units may also include state
legislatures, the seat of state sovereignty in a democratic society. See, e.g.,
Baker
v. Carr, 369 U.S. 186 (1962)(reapportionment of legislature). Here,
corruption is at stake. While the Congress did not explicitly premise the
corruption aspects of the Organized Crime Control Act on the guaranty clause
(Art. 10, § 4: "The United States shall guarantee to every state . . . a
Republican Form of Government."), it followed the "tested and proven" path, as
"there . . . [was] a lack of precedent . . . to indicate whether legislation . .
. [could] be predicated upon it," House Hearings, supra note 25, at 676 (letter
of Assistant Attorney General Wilson), Congress may well have had that option.
STUDY DRAFT OF NEW FEDERAL CRIMINAL CODE, THE NATIONAL COMMISSION ON REFORM OF
FEDERAL CRIMINAL LAW 133 (1970)("Broad federal jurisdiction in . . . [the area
of local and state corruption] might be rested on . . . [the clause]." The
guaranty clause could be construed as a power to preserve these states from "any
intrusion of nonpolitical pecuniary influences into government.") See generally
The Constitution of the United States of America: Analysis and Interpretation,
S. DOC. NO. 82, 92d Cong., 2d Sess. 851-52 (1973)("[T]he object of the clause
seems clearly to have been more than an authorization . . . to protect . . .
against foreign invasion or internal insurrection. . . . [T]he authority
contained within . . . the clause has been largely unexplored."); W. WIECEK, THE
GUARANTEE CLAUSE OF THE U.S. CONSTITUTION (1972). Questions under it are matters
for "Congress to decide." Luther
v. Borden, 48 U.S. (7 How.) 1, 42 (1849). Cf. J.E.
Riley Co. v. Commissioner, 311 U.S. 55, 59 (1940) (affirmed even if wrong
reason given below). No court ought now hold that it is beyond the power of
Congress directly to attack corruption wherever it finds it, for where the
government itself is tainted, no other rights may be said to exist. n94 S. REP.
NO. 617, 91st Cong., 1st Sess. 215 (1969). n95 Id.
Accordingly, Congress' intent to protect more than legitimate business from
infiltration and unlawful competition by "organized crime" or "racketeers" in
the popular sense seems clear, not only from the words of the statute, but also
the comments of senators who did not fully support the bill. Cases like Barr
v. WUI/TAS Inc., 66 F.R.D. 109 (S.D.N.Y. 1975) (failure to allege "organized
crime" fatal to civil suit) have been, therefore, wrongly decided. See note 130
infra. Note, too, that this expansion of the list of predicate offenses took
place into the teeth of the objections of the Department of Justice that the
statute was "too broad" and would tend "to federalize" matters of state concern.
See text accompanying notes 76-80 supra. This concern was responded to by the
addition of § 904(b). See note 92 supra. n96 116
CONG. REC. 585 (1970). n97 Id. The
use of the March 11 speech to understand the intended scope of Title IX, not
then drafted, is therefore appropriate. n98 Id. at
591-92. Here, too, the class to be protected by the bill is hardly limited to
competitors; direct victims are clearly contemplated. Senator McClellan also
included in the Congressional Record a list of businesses and industries
corrupted; it included accounting, banking, insurance, and stocks and bonds. Id.
at 92. n99 Id. See
note 56 supra. n100 116
CONG. REC. at 602. n101 Id.
Senator Hruska described Title IX a prohibiting "any person employed by or
associated with [an enterprise engaged in interstate commerce]. . . from
conducting the enterprise's affairs by a pattern of racketeering activity." Id.
(emphasis added). Here, too, note the absence of words of limitation. Not all
senators, however, shared Senator Hruska's support for Title IX. Senator Stephen
M. Young, reflecting the ACLU position, objected that the bill's provisions "do
not restrict themselves solely to organized criminal activities." Id. at 852.
The ACLU statement, which Senator Young inserted in the Congressional Record,
also objected to the possible scope of Title IX as it incorporated "bankruptcy
fraud" and "mail fraud." Id. The statement was also the subject of testimony in
the House hearings, House Hearings, supra note 25, at 490, and was inserted in
the record of the committee. Id. at 499. n102 116
CONG. REC. at 607. This illustration, also noted by Senator McClellan, id. at
592, brings out the incongruity of the "competitive" injury limitation. It is,
of course, clear that other detergent companies ought to be able to sue the
mob-dominated company for the injuries to their "business." But what of the
"property" injuries to A & P and its insurance company? Other food stores --
the competitors of A & P -- are in fact helped by the arson. A & P and
its insurance company are injured. Should RICO relief be denied to them?
n103 The
vote was 73 to 1. 116 CONG. REC. 972 (1970). Subsequently, twenty-two additional
senators, not voting on final passage, announced that if present they would have
voted for the bill. 116 CONG. REC. 25,192 (1970). n104 116
CONG. REC. 1103 (1970). n105 In
light of Congressman Poff's relation with Senators McClellan and Hruska, see
notes 50 and 69 supra, it is appropriate to consider him one of RICO's sponsors.
The Supreme Court in United
States v. Turkette, 452 U.S. 576, 593 (1981) recognized his status, terming
him "a manager of the bill." As such, his comments are entitled to "weight." Lewis
v. United States, 445 U.S. 55, 63 (1980). When a sponsor inserts a
memorandum in the Congressional Record under these conditions, it becomes a
"weighty gloss" on the statute. Galvan
v. Press, 347 U.S. 522, 527 (1954). n106 116
CONG. REC. 6708 (1970). n107 The
report commented: A Mafia boss accepts all the shares in a juke box corporation in payment for an illegal gambling debt. Then he expands the number of cafes in which his machines are placed by having the cafe owners threatened and beaten. Soon, he dominates the music machine business in his city, has ruined his competitors, and raises the share of the machine income which he demands that the cafes pay him.
Under present law, the government may be able to obtain a criminal conviction, imprisonment and fine.
The trouble is that while the Mafia boss serves his prison term, other members of the syndicate run the business for him, and upon his release he resumes his brutal and monopolistic methods.
. . . .
Thus, in the illustration used above, a criminal prosecution (under Title IX as passed in the Senate) of the Mafia boss could also result in forfeiture to the government of his interest in the business, or a civil proceeding that could result in an order that he divest himself of the business and refrain from re-entering that line directly or indirectly. In either case, the court could supervise the sale of the business to see that it wound up in clean hands. A legitimate industry could be returned to lawful operation in a free enterprise system.
Id. at 6709-10. Here, too, it is appropriate to ask who should be able to sue. Only the other juke box companies? Why not the company taken over? Why not the cafe owners? The expansion of Title IX to include treble damage relief in the House, see text accompanying notes 114-15 infra, must be understood to have contemplated relief for all victims.
n108 House
Hearings, supra note 25, at 147-49 (letter from Frederick M. Rowe, Chairman,
Section of Antitrust Law, American Bar Association, to Congressman Poff,
containing American Bar Association -- Report No. 2 of the Section of Antitrust
Law). n109 Id. at
369. n110 Id. at
294 ("sweep far beyond the field of organized crime"). n111 Id. at
329. The report stated: [T]he crimes listed as "racketeering activity" include several categories which are plainly beyond the intention of the Senate Committee, as expressed in the Report, and which should not, in our view, be subjected to the severe penalties of Title IX. The Senate Report states: "Racketeering activity' is defined in terms of specific State and Federal criminal statutes now characteristically violated by members of organized crime." Senate Report 34. This statement is not supported, however, by the language of the statute, which includes as racketeering activity such things as theft from an interstate shipment regardless of the value of the property stolen (18 U.S.C. § 659), unlawful use of a stolen telephone credit card (18 U.S.C. § 1343), the "mom and pop" variety of illegal gambling business which, as we point out above, would be covered by Title VIII (proposed 18 U.S.C. § 19555), [and] any securities fraud case. . . .
Id. (citations omitted).
n112 Id. at
370. It is not, therefore, merely written testimony "less likely to have been
seen by or to have had impact on committee members." Guessefeldt
v. McGrath, 342 U.S. 308, 317 (1952). Indeed, Congressman Celler, the
Chairman of the House Judiciary Committee, engaged in this dialogue with Mr.
Elsen about Title X of S. 30: The CHAIRMAN: In other words, this section 10, title X, applies to all crimes?
Mr. ELSEN. Yes.
The CHAIRMAN. It is not limited to so-called organized crime offenders?
Mr. ELSEN. That is right. The underlying, triggering offense is not by any means limited to organized crime cases.
House Hearings, supra note 25, at 371.
Subsequently, Chairman Cellar had another dialogue with the Attorney General, who appeared and spoke in behalf of S. 30:
The CHAIRMAN:. . . . I would like to turn to title X. . . . My question is this: Is this special sentencing provision limited to so-called "organized crime" offenders . . .?
ATTORNEY GENERAL MITCHELL. It is not so limited, Mr. Chairman. . . . The CHAIRMAN. Of course, S. 30 is called the "organized crime" bill. . . . Maybe we should call it something else. I think it probably gives a misapprehension.
Id. at 185. See United States v. Schell, 692 F.2d 672, 674 (10th Cir. 1982) (not limited to organized crime). The scope of S. 30 beyond "organized crime" was, therefore, well-known to the Judiciary Committee in the House. Its application to commercial fraud, too, was not inadvertant. See House Hearings, supra note 25, at 401 (Report of the New York County Lawyer Association) (Since "fraud in sale of securities" would include "underwriters" in rule 10(b)(5) litigation, Title IX was thought to go beyond "its stated objective."). The Association observed: "Fraud in the sale of securities is simply not synonymous with racketeering." Id. Despite this testimony, Title IX was not only reported out, but the treble damage clause was added. Accordingly, those who seek to have the courts restrict the scope of the statute to curtail its application to fraud are refighting in the judicial forum a battle they lost in the legislative arena; they have sometimes won, where a court misreads the text and legislative history of RICO. See, e.g., Harper v. New Japan Sec., 545 F. Supp. 1002 (D.C. Cal. 1982). Harper was wrongly decided. See note 134 infra.
n113
Senator McClellan observed: [T]he curious objection has been raised to S. 30 as a whole, and to several of its provisions in particular, that they are not somehow limited to organized crime itself . . . as if organized crime were a precise and operative legal concept, like murder, rape, or robbery. Actually, of course, it is a functional concept like white collar crime, serving simply as a shorthand method of referring to a large and varying group of criminal offenses committed in diverse circumstances. The danger posed by organized crime-type offenses to our society has, of course, provided the occasion for our examination of the working of our system of criminal justice. But should it follow, as the [ACLU] and the New York City bar committee suggest, that any proposals for action stemming from that examination be limited to organized crime?
Mr. President, this line of analysis has a certain superficial plausibility, yet on closer examination we see that it is seriously defective in several regards. Initially, it confuses the occasion for reexamining an aspect of our system of criminal justice with the proper scope of any new principle or lesson derived from that reexamination. For example, our examination of how organized crime figures have achieved immunity from legal accountability led us to examine the sentencing practices and powers of our Federal courts [ultimately dealt with in Title X]. There we found that now our Federal judges, unlike many State judges, have no statutory power to deal with organized crime leaders as habitual offenders and give them extended prison terms. Having noted the lack of habitual offender provisions by considering one class of cases, we obviously learned that it was lacking in other classes, too. Is there any good reason why we should not move to meet that need across the board? . . . .
In addition, the objection confuses the role of the Congress with the role of a court. Out of a proper sense of their limited lawmaking function, courts ought to confine their judgments to the facts of the cases before them. But the Congress in fulfilling its proper legislative role must examine not only individual instances, but whole problems. In that connection, it has a duty not to engage in piecemeal legislation. Whatever the limited occasion for the identification of a problem, the Congress has the duty of enacting a principled solution to the entire problem. Comprehensive solutions to identified problems must be translated into well integrated legislative programs.
116 CONG. REC. 18,913-14 (1970). Senator McClellan later observed:
Nevertheless, the city bar committee attacks title IX and the statement in the Senate Report -- at 34 -- that the list of crimes the commission of which constitute one element of the prohibitions in title IX is a list of "specific State and Federal criminal statutes now characteristically violated by members of organized crime" --ABCNY at 41. The bar committee complains that the list is too inclusive, since it includes offenses which often are committed by persons not engaged in organized crime. The Senate report does not claim, however, that the listed offenses are committed primarily by members of organized crime, only that those offenses are characteristic of organized crime. The listed offenses lend themselves to organized commercial exploitation, unlike some other offenses such as rape, and experience has shown that they commonly are committed by participants in organized crime. That is all the title IX list of offenses purports to be, that is all the Senate report claims it to be, and that is all it should be.
Members of La Cosa Nostra and smaller organized crime groups are sufficiently resourceful and enterprising that one constantly is surprised by the variety of offenses that they commit. It is impossible to draw an effective statute which reaches most of the commercial activities of organized crime, yet does not include offenses commonly committed by persons outside organized crime as well.
Id. at 18,940. The point that S. 30's scope went beyond "organized crime" was also noted in the statement of Lawrence Speiser for the American Civil Liberties Union: "The offenses included [in 'racketeering activity'] go well beyond those associated with racketeering." House Hearings, supra note 25, at 499. It is, of course, a familiar rule that remarks "made in the course of legislative debate or hearings other than by persons responsible for the preparation or the drafting of a bill are entitled to little weight. . . . This is especially so with regard to the statements of legislative opponents who '(i)n their zeal to defeat a bill . . . understandbly tend to overstate its reach.'" Ernst & Ernst v. Hochfelder, 425 U.S. 185, 203-04 n.24 (1976) (citations omitted). Here, however, the point at issue was conceded to be correct, and it was defended as proper by the bill's principal sponsor.
n114
Senator McClellan observed: In recommending the passage of S. 30, the bar association also urged that the Congress give prompt consideration to seven specific amendments to the bill as it passed the Senate. In the main, I find these amendments generally acceptable. Indeed, they may be characterized as constructive contributions to the legislative process. For example, amendment No. 6 suggests that title IX of S. 30, dealing with racketeer-influenced and corrupt organizations, be amended to authorize private civil damage suits. . . .
116 CONG. REC. 25,190 (1970). If the treble damage amendment was to be "constructive," how could it be read to be more narrow than the equitable action already in the bill?
n115 His
prepared statement observed: In the portion seeking to add a proposed Section 1964, "Civil Remedies," we would recommend an amendment to include the additional civil remedy of authorizing private damage suits based upon the concept of Section 4 of the Clayton Act. Section 4 provides as follows:
Suits by persons injured; amount of recovery. -- Any person who shall be injured in his business or property by reasons of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount of controversy, and shall recover threefold the damages by him sustained, and the cost of the suit, including a reasonable attorney's fee.
House Hearings, supra note 25, at 543-44 (emphasis added). As underscored, President Wright's statement reflects a belief that private equitable suits were already contemplated by the bill.
n116 H.R.
REP. NO. 1549, 91st Cong., 2d Sess. (1970). The report commented on § 1964:
Subsection (a) contains broad provision to allow for reform of corrupted organizations. Although certain remedies are set out, the list is not meant to be exhaustive, and the only limit on remedies is that they accomplish the aim set out of removing the corrupting influence and make due provision for the rights of innocent persons.
Subsection (c) provides for the recovery of treble damages by any person injured in his business or property by reason of the violation of section 1962.
Id. at 57-58. Note here, as in the Senate, see note 87 supra, no words of limitation were included to restrict either equitable relief or treble damage suits in any fashion. In fact, as in the Senate, the language is expressly not restrictive. Note, however, that Congressmen William F. Ryan, John Conyers, Jr., and Abner J. Mikva, like Senators Hart and Kennedy, objected to the bill as it was "a tool to be employed for all." H. R. REP. NO. 1549, 91st Cong., 2d Sess. 187 (1970). It did not, they noted, "make [a] discrete segregation of mobsters." Id. In addition, they noted that the treble damage action "provide[d] invitation for disgruntled and malicious competitors to harass innocent businessmen engaged in interstate commerce." Id. They also raised, quoting Chief Justice Burger, the "burden the courts face" in terms "of case loads." Id. Their plea that Title IX "should not be adopted;" Id. at 189, was not accepted. Similar fears expressed now in a judicial forum should similarly be found wanting. See note 172 infra.
n117 116
CONG. REC. 35,196 (1970). Chairman Celler observed: Title IX is designed to inhibit the infiltration of legitimate business by organized crime. In addition to creating new Federal offenses punishable by traditional criminal sanctions of a fine of not more than $ 25,000 or a prison term up to 20 years, or both, title IX also creates civil remedies modeled on those found in the antitrust field. These include orders of divestment, prohibition against business activity and orders of dissolution or reorganization, and treble damage suits on the part of private parties who are injured. The title also authorizes forfeiture of any interest which has been attained in violation of the criminal provision.
Id.
n118 Id. at
35,204. See note 113 supra. n119
Congressman Poff observed: The gentleman inquired rhetorically as to why no effort was made to define organized crime in this bill. It is true that there is no organized crime definition in many parts of the bill. This is, in part, because it is probably impossible precisely and definitively to define organized crime. But if it were possible, I ask my friend, would he not be the first to object that in criminal law we establish procedures which would be applicable only to a certain type of defendant? Would he not be the first to object to such a system?
116 CONG. REC. 35,204 (1970). Congressman Poff had earlier described the classes of victims for whom Title IX was drafted, focusing on the infiltration of legitimate business by organized crime:
Whether the technique of infiltration is intimidation and violence or simply public purchase, the consequences of mob ownership of business concerns are always evil. Business competitors suffer unfair competition. Workers are victims of sweetheart labor contracts. And consumers are victims of inferior products and services, price fixing and most of the predatory practices of monopolies. Title IX mobilizes both the criminal and civil mechanisms of the Sherman Act and other antitrust statutes against the barons of organized crime.
116 CONG. REC. 35,201 (1970). A "competitive" or "commercial" injury limitation would limit recovery to "business competitors." Ignored would be Congressman Poff's "workers" and "consumers." Accordingly, such a limitation can hardly be squared with the language of Title IX or the expressed intent of one of its principal sponsors.
Congressman Poff had earlier responded to the critics of the bill, who suggested it was ill-drafted or thought-out, when he observed that in his
experience, no single measure [had] received more thorough consideration by a legislative committee than this bill. On numerous occasions, it required lengthy discussions in order to arrive at a consensus or compromise . . . . Precedents as contained in numerous court decisions were reviewed and weighed -- and every effort was made to produce a strong and effective tool with which to combat organized crime -- and at the same time deal fairly with all who might be affected by this legislation -- whether part of the crime syndicate or not.
Id. at 35,204 (emphasis added). Accordingly, no court ought now reweigh the "balance" between "opposing policy arguments," Mobil Oil Corp. v. Higginbotham, 436 U.S. 618, 623 (1978), strike a new "compromise," Mohasco Corp. v. Silver, 447 U.S. 807, 826 (1980) or make an effort to rewrite this "carefully crafted piece of legislation," Iannelli v. United States, 420 U.S. 770, 789 (1975). Congress has "announce[d its] . . . considered judgment." City of Milwaukee v. Illinois, 451 U.S. 304, 315 (quoting Mobil Oil Corp. v. Higginbotham, 436 U.S. 618, 625 (1978)). That ought to end the matter, absent constitutional considerations, which are not implicated. United States v. Turkette, 452 U.S. 576, 587 (1981) ("There is no argument that Congress acted beyond its power . . . . That being the case, the courts are without authority to restrict the application of the statute.").
n120
Congressman Mikva observed: I would point out to my colleagues a definition of racketeering activities, which brings into play the whole title IX and all kinds of things we have not yet talked about. This definition states that "any act or threat involving murder, kidnapping, gambling, arson, robbery, bribery, extortion, or dealing in narcotic or other dangerous drugs, which is chargeable under State law and punishable by imprisonment for more than one year" becomes an act of racketeering under this statute. What we have done in one fell swoop -- and the States-righters who may be in this room should listen -- is to incorporate as a part of the Federal law all of the offenses which heretofore have traditionally been treated as under State and local jurisdictions.
116 CONG. REC. 35,205 (1970). Here, too, the scope of RICO, as touching on state jurisprudence, was expressly recognized. In addition, fearing that treble damage suits might be used to injure legitimate businessmen, Congressman Mikva proposed an amendment establishing penalties for their "malicious" use. It failed. 116 CONG. REC. 35,332 (1970).
Remedies for malicious suits were left to the normal rules and procedures. See, e.g., FED. R. CIV. P. 9(b) (fraud must be pleaded with particularity); FED. R. CIV. P. 12(f) (court may strike scandalous matter); FED. R. CIV. P. 50(a)(b) (directed verdict and judgments not withstanding the verdicts); FED. R. CIV. P. 56 (summary judgment). See Christianburg Garment Co. v. EEOC, 434 U.S. 412, 419 (1978) (award of fees to defendant permitted for actions frivolous, unreasonable, or without foundation). Discovery, too, may be regulated in light of the nature of the complaint. Other remedies for abuse would include ethical standards, see MODEL CODE OF PROFESSIONAL RESPONSIBILITY EC 7-4 (1980) ("a lawyer is not justified in asserting a position in litigation that is frivilous"); or traditional tort law, see W. PROSSER, TORTS §§ 119-21 (4th ed. 1971) (dealing with malicious prosecution, wrongful civil proceeding, abuse of process). These normal rules of practice and procedure, as well as state and local remedies, at least, were thought adequate to guard against unwarranted RICO claims. See note 199 infra for a discussion of Reiter v. Sonotone, 442 U.S. 330 (1979), where similar fears were raised, but not thought of as sufficient to affect the outcome in the face of the plain language of a statute. They also speak to the "floodgate" concern that RICO fraud actions, frivolous or otherwise, might overwhelm the federal courts.
Indeed, the Boston Bar Association and the Massachusetts Association of Criminal Defense Lawyers argued to the Supreme Court as amici in United States v. Turkette, 452 U.S. 576 (1981), that "routine securities cases [can be] painted with the RICO brush, . . . the predicate acts being securities fraud, mail fraud or wire fraud." Civil RICO, supra note 52, at 673 n.137. The Government accepted "amici's illustration," but found such a construction of RICO "eminently reasonable." Id. In addition, the amici posited the fear that "the federal judicial system [would] . . . be faced with an invasion of garden variety commercial disputes masquerading as civil RICO claims. . . . The reputations of companies and individuals having no conceivable connection to organized crime . . . [would] be sullied." Id. at 673. The Supreme Court was unmoved. Accordingly, arguments to a court that RICO should be rewritten judicially fly in the face not only of the jurisprudence of the Supreme Court, but also of our society's deepest traditions of the separation of powers and the primacy of legislative law making. See 452 U.S. at 587 ("In the face of . . . objections [dealing with federal and state relations] Congress nonetheless proceeded to enact [Title IX] . . . . There is no argument that Congress acted beyond its power in doing so. That being the case, the Courts are without authority to restrict the application of the statute."). It may be observed, too, that the protestations of the Bar Associations against litigation are a bit much. See THE FEDERALIST No. 1. at 35 (A. Hamilton) (W. Kendall and G. Carey edition) (". . . a dangerous ambition more often lurks behind the specious mark of zeal for the rights of the people than under the forbidding appearance of zeal for the firmness and efficiency of government."); G. HEGEL, PHILOSPHY OF HISTORY, Part IV, § 3, ch. 2, at 537 (American Dome Library 1902) ("when liberty is mentioned, we must always be careful to observe whether it is not really the assertion of private interest which is clearly designated."). See note 172 infra.
n121
Congressman Poff observed: Title IX represents, in large measure, an adaptation of the machinery used in the antitrust field to redress violations of the Sherman Act and other antitrust legislation. I would not attempt to say who was first to suggest the re-tooling of the antitrust machinery to combat organized crime, but one of the earliest and stoutest proponents of such an approach was the American Bar Association. The Department of Justice has been consulted, of course, in drafting the legislation and fully supports Title IX.
Courts are given broad powers under the title to proceed civilly, using essentially their equitable powers, to reform corrupted organizations, for example, by prohibiting the racketeers to participate any longer in the enterprise, by ordering divestitures, and even by ordering dissolution or reorganization of the enterprise. In addition, at the suggestion of the gentleman from Arizona (Mr. Steiger) and also the American Bar Association and others, the committee has provided that private persons injured by reason of a violation of the title may recover treble damages in Federal courts -- another example of the antitrust remedy being adapted for use against organized criminality.
116 CONG. REC. 35,295 (1970) (remarks of Rep. Poff). Congressman Sam Steiger, neither a member of the Judiciary Committee nor a lawyer, had previously suggested that the Committee adopt a number of amendments to strengthen Title IX. See House Hearings, supra note 25, at 518. Congressman Steiger's statement applauded the "innovative . . . civil procedures and remedies [of Title IX, with their proof] by a preponderance of the evidence." Id. at 519-20. He called them "far more effective than existing" law. Id. He also called for the adoption of a private treble damage suit. Id. Following the ABA recommendations, Congressman Steiger announced his intention to offer a floor amendment to S. 30 to implement his suggestions. 116 CONG. REC. 35,227-28 (1970). At that time, he expressed his view that Title IX, as reported, did not authorize private equitable relief, despite its plain language ("to sue . . . and shall recover"). As he was not in charge of the bill, his opinion is "without weight in the interpretation of' the bill. McCaughn v. Hershey Chocolate Co., 283 U.S. 488, 494 (1931). In any event, he later conceded that the Committee version might well have been properly drafted. When he offered his amendment on the floor, he noted that he felt "presumptuous." 116 CONG. REC. 35,346 (1970). Chairman Celler, moreover, had just made a point of order, which was rejected, that the Committee members had not been served with a copy of the amendment. Id. Congressman Steiger conceded that he did "not claim specific expertise." Id. Congressman Poff then suggested that the amendment be withdrawn. Id. Congressman Steiger observed that he did "not have to be run over by a tank to get the word." Id. He added that under "the bill as it now stands . . . [innocent victims] may have . . . [the] option" to obtain "proper redress" (emphasis added). Id. Rather than "risk . . . defeat in the heat of parochial pride as regards . . . authorship," he withdrew the amendment. Id. Even had it been defeated, it would not have affected the plain language of the statute. See, e.g., Bryant v. Yetter, 447 U.S. 352, 376 (1980) ("failure to enact suggested amendment . . . not . . . most reliable indication of congressional intention"); Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 382 n.11 (1969); Fogarty v. United States, 340 U.S. 8, 13-14 (1950); United States v. UMW, 330 U.S. 258, 277 (1947). In addition, subsequent efforts to clarify the confusion created by Congressman Steiger's floor comments about private equitable relief cannot change the meaning of what was in fact passed. See Basic Concepts, supra note 3, at 1020 n. 67; United States v. Wise, 370 U.S. 405, 411 (1962) ("[S]tatutes are construed by the courts with reference to the circumstances existing at the time of passage." Subsequent efforts at amendment are of "no persuasive significance.").
n122 116
CONG. REC. 35,343 (1970) (remarks of Rep. Biaggi). Congressman Biaggi's
committment to organized crime control efforts is not unalloyed. See N.Y. Times,
Nov. 6, 1982, at 11, col. 1 (petition by congressman to court to suspend
sentence resulting from a RICO conviction). n123 116
CONG. REC. 35,344 (1970) (remarks of Rep. Poff). n124 See
note 113 supra. n125 116
CONG. REC. 35,363 (1970). n126 116
CONG. REC. 36,280 (1970). n127 Id. at
36,293. n128 Id. at
36,296. n129 Id. at
37,264. The President had indicated his support for civil remedies, including
treble damage actions, when he originally endorsed S. 30 in his message on
organized crime. See Senate Hearings, supra note 28, at 449-50. n130 Barr
v. WUI/TAS, Inc., 66 F.R.D. 109 (S.D.N.Y. 1975) (failure to allege
"organized crime"). Barr had been followed in other cases. See Waterman S.S. Corp.
v. Avondale Shipyards, 527 F. Supp. 256, 260 (E.D. La. 1981) (organized
crime "not alternative or cumulative to other remedies"). Adair
v. Hunt Intern Resources Corp., 526 F. Supp. 736, 746-48 (N.D. Ill. 1981).
See also Noonan
v. Granville-Smith, 537 F. Supp. 23, 29, (S.D.N.Y. 1981) (dismissal unless
"organized crime control over business"); Pepsi Cola Bottling Co. v. LeBlanc,
No. 80-15,835, slip. op. (D.S.C. 1982) ("association with organized crime"
essential element -- Barr "better reasoned"); City
of Atlanta v. Ashland Warren, 1982-1 Trade Cas. (CCH) P64,527 (N.D. Ga.,
Aug. 20, 1982) (Barr followed in civil suits, even though limitation rejected in
criminal prosecutions). See also Johnsen
v. Rogers, 551 F. Supp. 281, 284-86 (D.C. Cal. 1982) (not additional remedy
-- "racketeering enterprise injury" required); Salisbury
v. Chapman, 527 F. Supp. 577, 580-81 nn.4 & 6 (N.D. Ill. 1981). But see
Note, Judicial Restrictions, supra note 52, at 1106-09. n131
Grayson v. Wooden, No. 80-5460, slip. op. (6th Cir. 1982) ("bribery" under KY.
REV. STAT. § 521.020(1)(2), "extortion" under 18
U.S.C. § 1951, and "mail fraud" under 18
U.S.C. § 1341 in efforts by board of education to remove superintendent of
schools). n132 Kleiner
v. First Nat'l Bank of Atlanta, 526 F. Supp. 1019 (N.D. Ga. 1981)
(artificially high prime rate not recognized form of criminal conduct under 18
U.S.C. § 1341). But see Parr
v. United States, 363 U.S. 370, 391 (1960) ("reported decision involving
similar factual circumstances or legal theories is not determinative"). Kleiner
was wrongly decided. n133
Teleprompter v. City of Erie, No. 81-17, slip op. (W.D. Pa. 1981). n134 Landmark
Sav. & Loan v. Rhoades, 527 F. Supp. 206, 208 (E.D. Mich. 1981)
("racketeering enterprise injury" required); North
Barrington Dev., Inc. v. Fanslow, 547 F. Supp. 207, 210-11 (N.D. Ill. 1980)
("competitive injury" required). See also Johnsen
v. Rogers, 551 F. Supp. 281, 284-86 (D.C. Cal. 1982) (not additional remedy
-- "racketeering enterprise injury" required); Harper
v. New Japan Sec., 545 F. Supp. 1002, 1007 (C.D. Cal. 1982) ("not only . . .
predicate . . ., but injury of the type RICO was intended to prevent"); Alton v.
Alton, No. 82 Civ. O795 (S.D.N.Y. 1982)(racketeering enterprise limitation);
Erlbaum v. Erlbaum, [Current Transfer Binder]
FED. SEC. L. REP. (CCH) P98,772 (E.D. Pa. July 13, 1982). A variation of the
"competitive" injury limitation was adopted in Van
Schaick v. Church of Scientology, 535 F. Supp. 1125, 1137 (D. Mass. 1982)
(injury must be "commercial"). Van Schaick is carefully analyzed and rejected in
Civil RICO, supra note 52, at 705-07. See note 147 infra for a discussion of Van
Schaick. Rejected, too, is the "competitive" injury limitation. Civil RICO,
supra note 52, at 705-07; Note, Judicial Restriction, supra note 52, at 1109-14.
But see Bays
v. Hunter Sav. Ass'n, 539 F. Supp. 1020 (S.D. Ohio 1982) (fraud in failure
to disclose financing option). The "racketeering enterprise" limitation is questioned in Note, Judicial Restriction, supra note 52, at 1110 n.51 (undefined -- hard to distinguish from competitive). See also Meinkeke Discount Muffler Shops v. Noto, 548 F. Supp. 352, 354 (E.D.N.Y. 1982) (organized crime and racketeering enterprise injury rejected) (Basic Concepts, supra note 3, followed); Crocker Nat'l Bank v. Rockwell Int'l Corp., No. C-81-4099 SC (N.D. Cal. 1982)("misconduct typical of organized crime," "injury distinct from predicate act," "anti-competitive injury" limitations rejected as inconsistent with statute and "unworkable"); Lode v. Leonardo, No. 82 C 4122 (N.D. Ill. Oct. 12, 1982) ("Congress may not have envisioned that the civil remedies . . . would find . . . widespread use . . . . And such use . . . may well be somewhat undesirable. But . . . it is not the function of . . . [a] court to reject [a] claim on the ground that Congress must have meant something other than what it said."). The "racketeering enterprise" limitation, too, confuses criminal and civil responsibility. The concept "enterprise" is, of course, related to, but not identical with, the concept of "conspiracy." United States v. Griffin, 660 F.2d 996, 1000 (4th Cir. 1981), cert. denied, 102 S. Ct. 1029 (1982). Accordingly, while the "gist" of criminal responsibility is "conspiracy," Iannelli v. United States, 420 U.S. 770, 777 (1975), it is an act performed in furtherance of the conspiracy from which damages flow that forms the basis for civil responsibility.