RICO: An Abridged Sketch

CRS Report for Congress
RICO: An Abridged Sketch
Charles Doyle
Senior Specialist
American Law Division
Congress enacted the federal Racketeer Influenced and Corrupt Organization
(RICO) provisions as part of the Organized Crime Control Act of 1970. In spite of its
name and origin, RICO is not limited to “mobsters” or members of “organized crime”
as those terms are popularly understood. Rather it covers those activities which
Congress felt characterized the conduct of organized crime no matter who actually
engages in them. RICO proscribes no conduct that is not otherwise prohibited. Instead
it enlarges the civil and criminal consequences, under some circumstances, of a list of
state and federal crimes, a list to which Congress has added offenses on a fairly regular
RICO condemns: (1) any person, (2) who (a) invests in, or (b) acquires or maintains
an interest in, or (c) conducts or participates in the affairs of, or (d) conspires to invest
in, acquire, or conduct the affairs of (3) an enterprise (4) which (a) engages in, or (b)
whose activities affect, interstate or foreign commerce (5) through (a) the collection of
an unlawful debt, or (b) the patterned commission of various state and federal crimes.
Violations are punishable by fines, forfeiture, and imprisonment for not more than 20
years or life if one of the predicate offenses carries such a penalty.
Civil RICO permits anyone injured in their business or property by a RICO
violation to recover treble damages, costs and attorneys’ fees. In exceptional cases, at
least at the behest of the government, the courts will enjoin further RICO violations,
order divestiture, dissolution or reorganization, or restrict an offender’s future
professional or investment activities. RICO comes with tailored provisions for venue
and service of process, expedited judicial action in civil cases brought by the United
States, in camera proceedings, and for the use of civil investigative demands.
This is an abridgement of a report, which with citations, footnotes, and various
appendices, appears as CRS Report 96-950, RICO: A Brief Sketch.

Congressional Research Service ˜ The Library of Congress

A Closer Look at the Elements
Any person. Any person may violate RICO. The “person” need not be a mobster
or even a human being; “any individual or entity capable of holding a legal or beneficial
interest in property” will do. Although the “person” and the “enterprise” must be distinct
in the case of a subsection 1962(c) violation (conducting an enterprise’s activities through
racketeering activity), a corporate entity and its sole shareholder are sufficiently distinct
to satisfy the enterprise and person elements of a subsection (c) violation, and the
“person” and “enterprise” need not be distinct for purposes of subsection 1962(a)
(investing the racketeering activity proceeds in an enterprise) or subsection 1962(b)
(acquiring or maintaining an enterprise through racketeering activity) violations. On the
other hand, even though governmental entities may constitute or participate in a RICO
enterprise and may bring a RICO cause of action, they are not considered capable of a
RICO violation.
Misconduct. RICO addresses four forms of illicit commercial activity reflected in
the four subsections of section 1962: (a) acquiring or operating an enterprise using
racketeering proceeds; (b) controlling an enterprise using racketeering activities; (c)
conducting the affairs of an enterprise using racketeering activities; and (d) conspiring to
so acquire, control or conduct.
The first, 18 U.S.C. 1962(a), was designed as something of a money laundering
provision. It introduces several features of its own and has been described as the most
difficult to prove. Under its provisions, it is unlawful for
(1) any person
(2) who is liable as a principal
(a) in the collection of an unlawful debt or
(b) in a pattern of predicate offenses
(3) to use or invest
(4) the income from such misconduct
(5) to acquire, establish or operate
(6) a commercial enterprise.
The “person,” the pattern of predicate offense, and the enterprise elements are
common to all of the subsections. For purposes of 1962(a), however, a legal entity that
benefits from the offense may be both the “person” and the “enterprise.” The person must
have committed usury or a pattern of predicate offenses or aided and abetted in their
commission, and have received income that would not otherwise have been received as
a result. Some courts have also held that in a civil RICO case 1962(a) only applies to
legitimate enterprises and does not include instances where the proceeds of a racketeering
activity are simply plowed back into a corrupt enterprise.
The second proscription, 18 U.S.C. 1962(b), is much the same except that it forbids
acquisition or control of an enterprise through the predicates themselves rather than
through the income derived from the predicates. It makes it unlawful for
(1) any person
(2) to acquire or maintain an interest in or control of
(3) a commercial enterprise

(4) through
(a) the collection of an unlawful debt or
(b) a pattern of predicate offenses.
As in the case of subsection 1962(a), the “person” and the “enterprise” may be one
and the same. There must be a nexus between the predicate offenses and the acquisition
of control. Exactly what constitutes “interest” or “control” is a case by case
determination. The defendant must be shown to have played some significant role in the
management of the enterprise but a showing of complete control is not necessary.
Subsection 1962(c) makes it unlawful for
(1) any person,
(2) employed by or associated with,
(3) a commercial enterprise
(4) to conduct or participate in the conduct of the enterprise’s affairs
(5) through
(a) the collection of an unlawful debt or
(b) a pattern of predicate offenses.
Although subsection 1962(c) might appear facially less demanding than subsections
1962(a) and (b), the courts have not always read it broadly. Thus, in any charge of a
breach of its provisions, the “person” and the “enterprise” must ordinarily be distinct. The
requirement cannot be avoided by charging a corporate entity as the “person” and the
officers and employees through whom it must act as an “association in fact” enterprise.
A corporate entity and its sole shareholder, however, are sufficiently distinct for purposes
of subsection 1962(c).
Moreover, the Supreme Court has identified an entrepreneurial stripe in the “conduct
or participate in the conduct” element of 1962(c) under which only those who participate
in the operation or management of the enterprise itself meet the definition. Nevertheless,
conviction requires neither an economic predicate offense nor a predicate offense
committed with an economic motive.
Racketeering Activity. The heart of most RICO violations is a pattern of
racketeering activities, i.e., the patterned commission of two or more designated state or
federal crimes. The list of state and federal crimes upon which a RICO violation may be
predicated includes murder, kidnaping, gambling, robbery, arson, bribery, extortion,
dealing in drugs or obscene material, mail fraud, wire fraud, and federal crimes of
terrorism, to name a few.
To constitute “racketeering activity”, the predicate offense need only be committed;
there is no requirement that the defendant or anyone else have been convicted of a
predicate offense before a RICO prosecution or action may be brought. Conviction of a
predicate offense, on the other hand, does not preclude a subsequent RICO prosecution,
nor is either conviction or acquittal a bar to a subsequent RICO civil action.
Pattern. The pattern of racketeering activities element of RICO requires (1) the
commission of two or more predicate offenses, (2) that the predicate offenses be related

and not simply isolated events, and (3) that they are committed under such circumstances
that suggest either a continuity of criminal activity or the threat of such continuity.
i. Predicates: The first element is explicit in section 1961(5): “‘Pattern of
racketeering activity’ requires at least two acts of racketeering activity.” The two
remaining elements, relationship and continuity, flow from the legislative history of
RICO. That history “shows that Congress indeed had a fairly flexible concept of a pattern
in mind. A pattern is not formed by sporadic activity. . . . [A] person cannot be subjected
to the sanctions [of RICO] simply for committing two widely separate and isolated
criminal offenses. Instead, the term ‘pattern’ itself requires the showing of a relationship
between the predicates and of the threat of continuing activity. It is this factor of
continuity plus relationship which combines to produce a pattern.”
ii. Related predicates: The commission of predicate offenses forms the requisite
related pattern if the “criminal acts . . . have the same or similar purposes, results,
participants, victims, or methods of commission, or otherwise are interrelated by
distinguishing characteristics and are not isolated events.”
iii. Continuity: “Continuity” is a question of time. “A party alleging a RICO violation
may demonstrate continuity . . . by proving a series of related predicates, extending over
a substantial period of time. Predicate acts extending over a few weeks or months and
threatening no future criminal conduct do not satisfy this requirement.” But this does not
mean that no RICO violation has occurred in the absence of continuity. “Often a RICO
action will be brought before continuity can be established. . . . In such cases, liability
depends on whether the threat of continuity is demonstrated.” The Court characterized
a pattern, extending over a period of time but which posed no threat of reoccurrence, as
a pattern with “closed-end” continuity; and a pattern marked by a threat of reoccurrence
as a pattern with “open-ended continuity.”
In the case of a “closed-ended” pattern, the lower courts have been reluctant to find
predicate activity extending over less than a year sufficient for the “substantial period[s]
of time” required to demonstrate continuity. Whether the threat of future predicate
activity is sufficient to recognize an “open-end” pattern of continuity depends upon the
nature of the predicate offenses and the nature of the enterprise. “Though the number of
related predicates involved may be small and they may occur close together in time, the
racketeering acts themselves include a specific threat of repetition extending indefinitely
into the future, and thus supply the requisite continuity. In other cases, the threat of
continuity may be established by showing that the predicate acts or offenses are part of
an ongoing entity’s regular way of doing business.”
Collection of an Unlawful Debt. Collection of an unlawful debt may be the only
instance in which the commission of a single predicate offense will support a RICO
prosecution or cause of action. No proof of pattern seems to be necessary. The predicate
covers both usury and the collection of gambling debts.
Enterprise. The statute defines “enterprise” to include “any individual, partnership,
corporation, association, or other legal entity, and any union or group of individuals
associated in fact although not a legal entity.” The enterprise may be devoted to entirely
legitimate ends or totally corrupt objectives, and RICO reaches efforts involving both

governmental and nongovernmental enterprises. Finally as noted earlier, a corporation
or other legal entity may be both the defendant and the required “enterprise” under some
To satisfy RICO’s jurisdictional element, the corrupt or corrupted enterprise must
either engage in interstate or foreign commerce or engage in activities that affect interstate
or foreign commerce. An enterprise that orders supplies and transports its employees and
products in interstate commerce is “engaged in interstate commerce” for purposes of
RICO. As a general rule, the impact of the enterprise on interstate or foreign commerce
need only be minimal to satisfy RICO requirements. Where the predicate offenses
associated with an enterprise have an affect on interstate commerce, the enterprise is
likely to have an affect on interstate commerce. However, “where the enterprise itself
[does] not engage in economic activity, a minimal effect on commerce will not do.”
Conspiracy. Conspiracy under subsection 1962(d) is
(1) the agreement of
(2) two or more
(3) to invest in, acquire, or conduct the affairs of
(4) a commercial enterprise
(5) in a manner which violates 18 U.S.C. 1962(a), (b), or (c).
The heart of the crime lies in the agreement rather than any completed, concerted
violation of the other three RICO subsections. In fact, unlike the general conspiracy
statute, RICO conspiracy is complete upon the agreement even if none of the conspirators
ever commit an overt act towards the accomplishment of its criminal purpose. Moreover,
contrary to the view once held by some of the lower courts, there is no requirement that
a defendant commit or agree to commit two or more predicate offenses himself. It is
enough that the defendant, in agreement with another, intended to further an endeavor
which, if completed, would satisfy all of the elements of a RICO violation.
Consequences. The commission of a RICO violation exposes offenders to a wide
range of criminal and civil consequences: imprisonment, fines, restitution, forfeiture,
treble damages, attorneys fees, and a wide range of equitable restrictions.
i. Criminal Liability. RICO violations are punishable by fine or by imprisonment for
life in cases where the predicate offense carries a life sentence, and by imprisonment for
not more than 20 years in all other cases. Although an offender may be sentenced to
either a fine or a term of imprisonment under the strict terms of the statute, the operation
of the applicable sentencing guidelines makes it highly likely that offenders will face both
fine and imprisonment. The maximum amount of the fine for a RICO violation is the
greater of twice the amount of the gain or loss associated with the crime, or $250,000 for
an individual, $500,000 for an organization. Offenders sentenced to prison are also
sentenced to a term of supervised release of not more than 3 years to be served following
their release from incarceration. Most RICO violations also trigger mandatory federal
restitution provisions, i.e., the RICO offense will involve a crime of violence, drug
trafficking, or a crime with respect to which a victim suffers physical injury or pecuniary
loss. Moreover, property related to a RICO violation is subject to confiscation.

ii. Civil Liability. RICO violations may result in civil as well as criminal liability.
“Any person injured in his business or property by reason” of a RICO violation has a
cause of action for treble damages and attorneys’ fees. No prior criminal conviction is
required. Although the United States is apparently not a “person” that may sue for
damages under RICO, the term does include local governments, state agencies, and
foreign governments. On the other hand, private parties may not bring a RICO suit for
damages against the United States or other governmental entities.
In order to recover, the plaintiff must establish an injury to his or her business or
property directly or proximately caused by the defendant’s RICO violation. The injury
must involve a “concrete financial loss,” a “mere injury to a valuable intangible property
interest” such as a right to pursue employment will not do. The courts agreed generally
that section 1964(c) does not permit recovery for personal injuries since they are not
injuries to “business or property,” but sometimes disagree on what constitutes an
unqualified injury. If the underlying violation involves subsection 1962(a), it is the use
or investment of the income rather than the predicate offenses that must have caused the
injury. If the underlying violation involves subsection 1962(b), it is the access or control
of the RICO enterprise rather than the predicate offenses that must have caused the injury.
While a criminal prosecution requires no overt act, the courts demand that RICO
plaintiffs whose claim is based on a conspiracy under subsection 1962(d) prove an overt
act since a mere agreement cannot be the direct or proximate cause of an injury.
Moreover, the overt act itself must constitute a predicate offense.
Notwithstanding the apparent inability of the United States to sue for damages under
RICO, the Attorney General may seek to prevent and restrain RICO violations under the
broad equitable powers vested in the courts to order disgorgement, divestiture, restitution,
or the creation of receiverships or trusteeships. This authority has been invoked relatively
infrequently, primarily to rid various unions of organized crime and other forms of
corruption. There is some question whether private plaintiffs, in addition to the Attorney
General, may seek injunctive and other forms of equitable relief.
On the procedural side, the Supreme Court has held that: (1) state trial courts of
general jurisdiction have concurrent jurisdiction over federal civil RICO claims; (2) under
the appropriate circumstances parties may agree to make potential civil RICO claims
subject to arbitration; (3) the Clayton Act’s four year period of limitation applies to civil
RICO claims as well, and the period begins when the victim discovers or should have
discovered the injury; and (4) in the absence of an impediment to state regulation,
McCarran-Ferguson Act does not bar civil RICO claims based on insurance fraud