Feature Articles

By John William Tuohy

     On February 26, 1985, a federal grand jury in Manhattan indicted Anthony Salerno, boss of the Genovese family, Paul Castellano, head of the Gambino family, Anthony Corallo, boss of the Lucchese family, Philip Rastelli, chief of the Bonanno family, Gennaro Langella, acting boss of the Colombo family, Aniello Dellacroce, underboss of the Gambino Family, Salvatore Santoro, underboss of the Lucchese family, Christopher Furnari, consigliere of the Lucchese family and Ralph Scopo, a member of the Colombo family, and the president of the Concrete Workers District Council, LIUNA.

     In effect, almost every member of the national Mafia commission was charged under the fifteen-count indictment (The United States v. Anthony Salerno et al) charged that the New York Mafia Commission directed the relationship among the Mafia families that were active in New York and authorized the 1979 murder of Carmine Galante, boss of the Bonanno family. It furthered charged that the Commission was carrying on a multi-million dollar extortion scheme described as the "Concrete Club."

     The indictments were the result of a mid 1980s plan by the FBI's New York office to bring down the entire leadership of the New York families in one sweeping attack and put together a task force code named GENUS. It's objective was to build RICO cases against each of the five New York families. The project took five years to build its case and eventually brought in two hundred agents. Its big break came after a microphone placed inside the dashboard of Anthony "Tony Ducks" Corallo, boss of the Lucchese family, picked Corallo explaining a series of schemes run by New York's five ruling Mafia families.

     On November 19, 1986, after six days of deliberation, the jury in the trial found the defendants guilty of all seventeen racketeering acts and twenty related charges of extortion, labor payoffs and loansharking. Each of the convicted men was sentenced to one hundred years without parole. In addition, Corallo and Santoro were fined, the amounts of $250,950 and $240,900 respectively.

     After 15 years of sitting on the sidelines, RICO, or the Racketeer-Influenced and Corrupt Organized Act of 1970, had earned its place in the annals of organized crime history. It was, as one FBI agent put it "The atomic bomb of organized crime and the darling of the DOJ"

     Still, to others, both inside and outside the mobs, RICO has become a powerful tool not only against the mob but also against seemingly ordinary people and businesses.

     To help us understand the expansive uses to which RICO has been put, we contacted Jeffrey E. Grell, an expert on RICO.

     Mr. Grell graduated magna cum laude, from Georgetown University Law Center in 1990. As an associate attorney with Jones, Day, Reavis & Pogue in Washington, DC from 1990-93, he helped develop the factual and legal arguments in support of RICO claims against the shareholders of the Bank of Credit and Commerce International, the infamous "BCCI".

     Mr. Grell is currently a partner with the Minnesota law firm of Leonard, Street and Deinard, is an Adjunct Professor at the University of Minnesota Law School where he teaches a course entitled Civil RICO.

     He is a member of the advisory board of the national publication Civil Rico Report. Jeff is the author of "Exorcising RICO From Product Litigation," William Mitchell Law Review, Vol. 24, No. 2, 1998; and "HMOs under RICO: Issues the courts are likely to confront, Civil RICO Report, Vol.16, No. 1, May 10, 2000.

     Mr. Grell can be reached the law firm of Leonard, Street and Deinard, 150 South Fifth Street, Suite 2300, Minneapolis, MN 55402. (612)335-1929 or jegrell@ricoact.com or visit his website: www.ricoact.com

TUOHY: In layman's terms, what is RICO?

MR. GRELL: The Racketeer Influenced and Corrupt Organizations Act. There are three ways in which someone can violate RICO:

(a) You can violate RICO by investing the proceeds of racketeering activity in an enterprise. These are usually money laundering cases. For example, a drug ring owns a legitimate car dealership but in addition to selling cars, the drug ring launders its cash through the car dealership's books.

(b) You can violate RICO by obtaining or maintaining control over an enterprise through a pattern of racketeering activity. For example, a small business has borrowed money from a loan shark; the businessman cannot repay the loan, so the loan shark demands that the business be signed over to him or he will kill the businessman.

(c) You can violate RICO by participating in an enterprise through a pattern of racketeering activity. A stereotypical example of such a violation occurs when an outsider bribes the employees of a company to get favorable terms under a contract with the company.

You can also violate RICO by conspiring to commit any of the substantive offenses described in paragraphs (a), (b) or (c). The examples provided are merely examples. There is an endless variety of conduct that may constitute a violation of RICO. The "term" enterprise also does not mean only businesses or a corporations. It can mean just about any group of people.

TUOHY: RICO had a rough start in 1970 because appeals courts differed on its proper use. In 1981, the dispute was settled by the United States Supreme Court with what many have termed "An overly generous interpretation." Jeff, what was the argument about in the appeals court and why is the Supreme Court's decision so roundly critized?

MR. GRELL: I believe you are talking about the Supreme Court's decision in United States v. Turkette, 452 U.S. 576 (1981). In that case, the Supreme Court held that RICO applied to both legitimate and illegitimate RICO enterprises. Before that decision, many lower courts were attempting to limit RICO to "criminal", "illegitimate" or "racketeering" enterprises.

     The problem with this limitation is two-fold:

     1) Congress did not limit RICO's definition of enterprise to "criminal", "illegitimate" or "racketeering" enterprises, so there was no basis for the courts to impose such a limitation;

     2) how does one fashion a workable definition of a "criminal", "illegitimate" or "racketeering" enterprises? Are such enterprises made up of only Italians or Colombians? The lower court's were never able to answer this question, instead, they basically said: "we don't know how to define a 'criminal', 'illegitimate' or 'racketeering' enterprise but we know one when we see one." That's not a legal standard that the Supreme Court is likely to approve -- especially when the statute does not provide for such a limitation. So, in Turkette, the Supreme Court ruled that when Congress used the term "enterprise" without limitation, Congress meant for RICO to apply to all enterprises -- legitimate or illegitimate.

     Of course, as a result of this decision, there is no limit to the type of enterprise to which RICO can apply: businesses, corporations, relatively informal groups of people working together for a common goal; political parties; unions; protest groups, and others all potentially fall within RICO's scope -- not just groups that fit the stereotypes of mobsters and drug rings.

     I would not say that the decision has been roundly criticized. If the Supreme Court was going to abide by the statute passed by Congress, it really had no choice but to rule the way it did. Critics of RICO have generally placed blame with Congress for RICO's breadth.

     The defenders of Congress respond by saying that RICO was intended to fight the mob, period.

     There was no way Congress could have foreseen the uses to which RICO would be put -- it's not Congress' fault, it's the fault of no-good plaintiffs lawyers who are creatively exploiting the breadth of the statute.

     It is true: RICO has been used in ways that Congress could not have envisioned in 1970 when the statute was passed. If the statute is being improperly exploited, however, it is up to Congress to amend the statute and provide some limitations. Apparently, Congress does not believe that the RICO Act is being used or interpreted improperly because very little has been done by Congress to curb its use. Congress did impose a major limitation on civil RICO claims in 1995, when it amended the statute to require that a defendant be criminally convicted of securities fraud before the defendant could be subject to a civil RICO claim predicated upon a violation of the securities laws.

     Before this amendment, people who claimed injuries by reason of securities fraud always brought actions under the securities laws and RICO. Congress apparently deemed that the former laws were alone sufficient to protect the interests of investors and that the latter introduced an unnecessary complex and overly punitive cause of action into the realm of securities litigation.

TUOHY: Regarding asset forfeiture. The common accusation from mobsters lawyers is that the Justice Department uses RICO forfeiture to appropriate assets, sell them at auction and balance its fiscal budget. You've worked with Justice, is there anything to the accusation, in your opinion?

MR. GRELL: There's nothing to this accusation. I don't think criminal forfeitures have made much of a dent in the nation's debt. The government certainly spends more on law enforcement than it seizes through forfeiture. I would say such statements serve as good sound bites for the media, but do not hold any truth.

TUOHY: Originally asset forfeiture was intended to further close down the Outfit by taking away its most valued possession, money, or illicitly obtained wealth. And so, the Feds seized bars, cars, large homes, etc. To your knowledge, has it worked?

MR. GRELL: I think it has worked to a certain extent. For example, there used to be many casinos in Las Vegas that were known fronts for the Mafia.

     I don't think that's the case any more (at least it's not a matter of public knowledge any more).

     On the other hand, may be the forfeiture provisions have simply caused the Mafia to become more sophisticated in its use of legitimate business, i.e., caused the mafia to set up more levels of ownership to place them further from apparent control; caused the mafia to use strawmen or nominees to hold their ownership interest so that (on paper) the Mafia doesn't appear to have any ownership interest in the enterprise; or caused the Mafia to become more sophisticated in its use of off-shore accounts where it is impossible or more difficult for the government to trace the true source of funding. So maybe the success of RICO is only skin-deep.

TUOHY: Lets clear up some common assumption about RICO. The common assumption of course, is that if, in this case lets use two known members of Organized Crime, if they are seen socializing in the same nightclub, and one mobsters is a suspect in a murder case, can both mobsters be convicted of the murder under RICO, even thought they were only having a drink. True or not true?

MR. GRELL: No, that's not true. If, in fact, two known mobsters were simply having a drink, and knew nothing about and did not discuss the murder, there should not be enough evidence to convict either mobster under RICO for the murders. The innocent meeting, by itself, should not give rise to proof of an enterprise engaging in the predicate act of murder.

     Readers, however, must not confuse the level of proof necessary to support a conviction with the level of proof necessary to obtain a search warrant or indictment. To obtain a conviction, the government must prove its case beyond a reasonable doubt. To obtain a search warrant, the government need only establish probable cause that the two are engaged in a criminal conspiracy.

     For instance, in your example, assume the government suspected Mobster #1 of the murder and had Mobster #1 under surveillance. Mobster #1 meets with Mobster #2 and they talk about the Super Bowl and have a drink. This meeting and the mobster's respective histories, may constitute probable cause to believe a criminal conspiracy exists between the two mobsters and for the government to obtain a search warrant. If no evidence is found during the search that links Mobster #2 to the murder, then the probable cause should vanish. If evidence is found during the search that links Mobster #2 to the murder, then that evidence may give rise to probable cause sufficient to support an indictment. In other words, a simple meeting like this could spark a chain reaction that ultimately leads to evidence supporting a conviction, but the meeting alone should not serve as sufficient basis for a conviction.

     By the way, to obtain a conviction on the basis of a RICO conspiracy, the government must establish beyond a reasonable doubt that the defendant participated in a criminal plan. In this regard, the Supreme Court has commented on the level of participation necessary to support a conviction: "If conspirators have a plan which calls for some conspirators to perpetrate the crime and others to provide support, the supporters are as guilty as the perpetrators."

TUOHY: RICO defines a pattern of racketeering as "two or more violations within ten year period of state and federal laws" This seems to me to be a dangerously broad definition, is it?

MR. GRELL: Yes, it is not only dangerously broad, it is unworkably broad -- that's why it's no longer the definition of a pattern.

     In HJ.Inc v.Northwestern_BellTele.Co_492_U_S__299__1989_H.J. Inc. v. Northwestern Bell Tele. Co.,HJ.Inc v Northwestern Bell Tele Co 492 U S 299 1989_492 U.S. 299 (1989), the United States Supreme Court effectively abolished the statutory definition of pattern and, based on the statute's legislative history, ruled that the factors of "continuity" plus "relationship" combine to form a pattern.

     A series of criminal acts satisfy the "continuity" requirement if they last for a substantial period of time (generally a year or more) or if they threaten to continue indefinitely. An example of the last type of continuity occurs when a mobster threatens: "pay me two thousand dollars a month or I'll break your legs" and is arrested after the victim makes two payments. The pattern lasted only two months, but it threatened to continue indefinitely, i.e., but for the mobsters' arrest, he would have continued to collect two thousand dollars per month forever and ever. In addition to being sufficiently continuous, the criminal acts must also pass the "relationship" test, i.e., have "the same or similar purposes, results, participants, victims, or methods of commission, or otherwise [be] interrelated by distinguishing characteristics and are not isolated events."

TUOHY: I spoke to a federal prosecutor who told me that if in a case where a conviction is vital, he wouldn't use RICO because its too cumbersome. However, to a layman, it seems that RICO is almost all encompassing, so why would it be clumsy to use?

MR. GRELL: A RICO case requires the proof of several crimes (not just one) and proof that those crimes satisfied the other elements of RICO.

     For example, if someone engaged in mail fraud, extortion and murder, the prosecutor would only need to prove the elements of mail fraud, extortion and murder beyond a reasonable doubt to obtain a conviction on all three counts.

     Most jurors have a good common sense understanding of what constitutes mail fraud, extortion, and murder, so they are not difficult concepts to express to a jury. With regard to a RICO claim based on the same acts, the prosecutor would need to prove only one count beyond a reasonable doubt: a RICO violation.

     To prove that one count, however, the prosecutor would need to establish the elements of mail fraud, extortion, and murder AND WOULD ALSO NEED TO PROVE that the criminal acts all formed a pattern (being sufficiently continuous and related), that the defendant "conducted or participated in the conduct of the enterprise" through the pattern of racketeering activity (i.e., the mail fraud, extortion and murder), that the enterprise affected interstate commerce, that the enterprise was distinct from the pattern of racketeering activity, that the enterprise was distinct from the defendant, etc., etc. Moreover, no jurors (not to mention most lawyers) are going to have a common sense understanding of what constitutes a pattern or how one conducts or participates in the conduct of an enterprise, what constitutes a pattern distinct from the enterprise, or what constitutes an enterprise distinct from the person. The jurors would have to learn all of these concepts through their experience at trial.

RICO is a very cumbersome statute, which is not a bad thing given its breadth and punitive nature. To get the great rewards of RICO, you should be required to jump through some pretty high hoops.

TUOHY: With the caveat that almost any law can be interpreted as a powerful tool for the government and a threat to our civil rights, is RICO a threat to the average citizen and our 1st amendment rights?

MR. GRELL: Yes, RICO can be and has been used to chill the exercise of First Amendment Rights. In National Organization for Women, Inc. v. Scheidler, 510 U.S. 249 (1993), the operators of abortion clinics brought a RICO claim against a prolife group.

     The clinics argued that the prolife group had engaged in a pattern of extortion by picketing the clinics (the picketing allegedly intimidated any one who was interested in using the clinic), physically threatening patients and doctors of the clinics, and on occasion breaking into the clinics and destroying property. The clinics argued that as a result of the prolife's extortionist activities they sustained economic losses in the form of fewer patients and destroyed property.

     The prolife group moved to dismiss the claim, arguing that they could not be held liable under RICO because the prolife movement is politically, not economically motivated. The Supreme Court denied the prolife group's motion to dismiss, ruling that the group's motive (and any enterprise's motive) was immaterial and that the prolife group could be sued under RICO. Similar claims have been brought against People for the Ethical Treatment of Animals ("PETA") who commonly raid farms and release animals (causing economic losses).

     Under Scheidler, any protest group whose activities may adversely impact the economic interests of their target can be sued by the target under RICO. Extrapolating from Scheidler, can political parties that adversely impact the economic interests of an opposing political party be sued under RICO?

     The answer is "yes" so long as such defendants activities meet the other requirements of the statute, e.g., the defendants have engaged in a pattern of racketeering activity.

     As RICO's use in the political and social arena grows and such claims move through the court system, I believe the issue will boil down to whether such protests or political speech constitutes extortion. If not, there is no RICO claim. The Courts will have to engage in a case-by-case analysis of whether the defendants were merely speaking or whether their activities went beyond mere speech and into the realm of unprotected speech (e.g., threats of physical violence) and/or unprotected activities (e.g., physical violence).

     The First Amendment guarantees freedom of speech, not freedom to threaten persons or to harm persons or property while speaking. If such protest groups are truly engaged in a pattern of extortion, and not speech, then they could be in trouble under RICO. So members of protest groups should speak (loudly or softly it makes no difference) but not carry a stick (big or small).

TUOHY: Professor Robert Blakey, once a member of Robert Kennedy's Justice Department and now a professor at Notre Dame Law School, is credited with creating RICO. However, I read that New York's Thomas E. Dewey had put the concept together back in the 1930s. Do you know anything about that?

MR. GRELL: I know that Blakely is generally credited with drafting the RICO Act as it currently exists. As for Dewey, I have to believe that anyone who was ever involved in prosecuting organized crime dreamed of the day when a statute like the RICO Act would exist. Dewey and many others throughout history no doubt envisioned a RICO statute.

     Throughout his reign as the Director of the FBI (1924-1972), however, J. Edgar Hoover denied the existence of organized crime in America. Given Hoover's influence within the United States government, it was probably very difficult to pass or enforce a law such as RICO.

     One must wonder if there is more than a coincidental connection between the demise and death of Hoover and the passage and effective enforcement of RICO.

TUOHY: You were with the firm of Jones, Day, Reavis & Pogue here in Washington, DC and worked on the famous BCCI scandal case. Did you meet Clark Clifford?

MR. GRELL: I worked on the BCCI case as an associate at Jones Day and in that capacity I read practically every speech given by Clifford, every statement he ever gave, and every document he ever wrote, but the one time I "met" Clifford had nothing to do with my involvement in the BCCI case.

     I met Clifford one night in what used to be the offices of his law firm, Clifford & Warnke.

     As Clifford sank deeper and deeper into the scandal, his law firm collapsed and was forced to sublet its office space to other attorneys. Two friends of mine were starting their own law firm and sublet some of Clifford & Warnke's old space. I was there one night, sitting in the office of one of my friends. It was late around 9:00 or 10:00. The entire office was dark, with the exception of a few lamps here and there. All of the sudden Clifford appeared in the doorway of my friend's office. He looked haggard, very tired, almost in a trance. He simply said in a raspy voice, "do you have a pencil I can borrow."

     My friend gave him a pencil, and he disappeared as quickly as he had appeared. It was quiet shocking to me. Here was this great icon of American law and politics -- a man I had studied, read about, and admired in college -- totally defeated, stumbling around the dark ruins of his once almightily kingdom, hoping to find someone willing to loan him a simple pencil.

     This encounter caused me to take a second-look at Clifford and my role in his demise, and I still frequently ponder how such a great man could experience such a complete fall from grace. One rule that I have found universally true in life is that one's greatest strength is also one's greatest weakness. Clifford's inherent greatness was what caused him to ascend to such a height and also what caused him to fall.

     Clifford had an uncanny ability to succeed. Unlike another, he could map out the most direct course between the present and any future success he saw for himself, for politicians, for clients, for agencies, for the country, for almost any one.

     I think he was truly a man who seldom experienced failure, and if he ever did, he was smart enough to rationalize the failure into a success. He grew so confident upon this ability to succeed, his inherent greatness, that when the BCCI situation came about he not only believed but was confident that his association with BCCI would guarantee success for everyone, and for the U.S. economy most importantly. He never once thought, before or after the scandal came to light, that his role in the affair was anything but proper, and certainly would never consider his actions illegal. In his mind, I truly believe he did not think it possible for him to do anything wrong in the context of law and politics. I am sure that to his death Clifford believed he had acted properly and that he, more than anyone, wanted a trial to prove his innocence and once again turn defeat into victory. Due to health complications and other factors, however, Clifford was never tried for his role in the BCCI scandal, so no one will ever know or determine with certainty the true nature of his actions in the affair that tainted the end of an otherwise brilliant career.

TUOHY: RICO was, essentially, drawn up as a tool to be used against the mob. Now, it appears that it can be used against almost anyone for almost anything. How did that happen?

MR. GRELL: The blame for this reality can be placed on the ability to base RICO claims upon violations of the mail and wire fraud statutes. The mail and wire fraud statutes are very, very broad.

     Essentially, anyone who uses the mails or wires to advance a scheme to defraud is guilty of mail or wire fraud.

     Before RICO, these statutes could be enforced only by U.S. Attorneys, who didn't have time to prosecute every one engaged in conduct that potentially violated the statutes.

     When Congress included mail and wire fraud as predicate acts under RICO, however, it allowed every attorney in the country to use the mail and wire fraud statutes to the advantage of their clients. Many, many courts have noted that RICO's inclusion of mail and wire fraud basically federalized state common law claims of fraud in the business context: every business uses the mails or wires, so if the business engages in fraud, they have arguably and automatically violated the mail and wire fraud statutes as well.

     Here's a pretty common example of how RICO is used in this context: a manufacturer designs a product, it is tested, 99 out of 100 times the product works as intended; the one failure generates a report from an engineer that says the product may not work as well as the competitor's product; distribution of the product goes forward; for ten years the product's advertisements say, "this product works better than the competitors;" after ten years a plaintiff sues the manufacturer claiming that the product is defective; pursuant to this suit, the plaintiff discovers the engineer's report from 10 years earlier saying that the product doesn't work as well as the competitor's product. Based on the engineer's report, the plaintiff amends her complaint to allege that the advertisements were fraudulent, that the advertisements were distributed by mail and wire, that the advertisements constituted a pattern of misrepresentations that lasted a substantial period of time, and that the manufacturer, its law firms, its ad agency and its customers constituted an enterprise in which the manufacturer participated through a pattern of racketeering (i.e., mail and wire fraud). Wahla -- a simple product defect claim is now a RICO claim.

TUOHY: The accusation against a corporation of being involved in a RICO case, something most people would reasonably interpret as the corporation being involved with the mob, that accusation itself could be a fairly powerful weapon for the accuser. Is it?

MR. GRELL: If people don't understand the statute, it can be, but in today's world, I doubt if there's a single Fortune 500 company that hasn't been sued under RICO. Being sued in a RICO case says nothing about whether you're connected to the Mafia. Business persons don't like being sued under any circumstances, and today I think most sophisticated business people simply see a RICO claim as "just another frivolous claim." If the business people don't see it that way, their lawyer will. So I don't think accusing someone of a RICO violation is a very powerful tool any more, especially since there are so many requirements for a plaintiff to meet in bringing a RICO claim and, since those requirements are usually not met, the claims can be gotten rid of quickly if you get the right judge.

TUOHY: Jeff, thank you for your time.

Mr. Tuohy can be reached at MobStudy@aol.com

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