NCPA - National Center for Policy Analysis

In Corporate Scandals, Question Is To Invoke "RICO" Or Not

August 20, 2002

As its name implies, the main purpose of the Racketeering Influenced and Corrupt Organizations Act was to put mobsters in the slammer. But it has been used in cases ranging from major league baseball to HMOs. Prosecutors are debating whether to use it against today's corporate bad boys.

The law is a potent weapon, but it's also expensive and unwieldy.

  • RICO provisions include prison sentences of up to 20 years, forfeiture of any ill-gotten gains, and fines of up to two times any siphoned-off funds.
  • Once a criminal case is proved, a civil case can result in triple damages.
  • But legal experts caution that criminal prosecutors have a tougher case to prove under RICO because it's more difficult to put together all the predicate acts.
  • The best strategy may be to avoid RICO for the time being, and get a few simple convictions first.

Juries may have a difficult time accepting that a corporate executive who has never before run afoul of the law is equivalent to a mobster or racketeer.

While plaintiffs' lawyers may be licking their chops over RICO's provision of triple damages in civil suits, court rulings and congress have curbed civil complaints somewhat. The Private Securities Litigation Reform Act of 1995 prohibited plaintiffs from using RICO in a civil case unless the person or company had been criminally convicted.

Source: Christina Wise, "RICO Law, Powerful Tool in the '80s, Takes Back Seat in New Scandals," Investor's Business Daily, August 20, 2002.


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