Does RICO Apply to Conduct Overseas?

The Racketeer Influenced and Corrupt Organizations Act (RICO) is one of the most powerful anti-fraud statutes on the books. It can really level the playing field for victims of fraud and criminal conspiracies. Triple damages, costs and attorney’s fees are what make the law so attractive to plaintiffs.

Normally, RICO is applied to conduct occurring solely within the United States. The U.S. Supreme Court is now wrestling with whether or not RICO can apply to conduct occurring outside the U.S. With so much commerce occurring globally, the case takes on added importance.

At the center of the controversy is a lawsuit filed by the European Union against tobacco manufacturer R.J. Reynolds. In a shocking case, several European countries have accused R.J. Reynolds of helping Columbian and Russian crime syndicates smuggle drugs into Europe and then launder the money. The laundered money is then used to purchase cigarettes. No one has accused of R.J. Reynolds of the actual drug smuggling but they have been implicated in the subsequent money laundering activities.

During oral arguments last month, conservative Chief Justice John Roberts seemed troubled that the law would give the U.S. too much reach and would cause tension with other countries. The irony of this case, however, is that it isn’t the Justice Department trying to extend the law’s reach. The case was brought by foreign governments.

Justice Kagan believes that Congress was fully aware that the law could be extended to activities outside the United States. She believes post 911 amendments to the law suggest that Congress knew the law could be used outside the U.S.

The Justice Department is not a party to the action but has intervened and filed a brief asking the court to allow the law to be extended to conduct outside the U.S. but only if there was an injury within the U.S. If the court adopts that argument, the E.U.’s case against R.J. Reynolds probably fails.

To fully understand the importance of this debate, some background on RICO is necessary. The law was originally contemplated as a way for prosecutors to pursue biker gangs and other criminal enterprises. At the last minute, Congress amended the legislation to allow private litigants to also take advantage of the law.

At its heart, RICO focuses on conspiracies in which multiple parties conspire or work together to cause harm. By allowing litigants to pursue damages from all parties to the conspiracy, the law has become a powerful tool when correctly used.

To date we have not encountered a situation in which all the wrongdoing took place outside the United States. The case before the Supreme Court should clarify just how far the statute reaches and whether foreign wrongdoers acting outside the U.S. can still be held responsible for harm caused here.

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There are few law firms that routinely prosecute RICO claims. If used properly, it is a powerful tool. The rules are so complex, however, that many law firms see their RICO complaints tossed because of poor pleadings.

Judges don’t like RICO claims because they are extremely complex and often misused. The result is that often lawyers don’t understand the rules or miss the important technical aspects of the statute.

If you believe that you or your business is the victim of a conspiracy involving multiple bad actors, call us. We have extensive experience in bringing RICO claims against banks, lenders, special servicers and others.

For more information, contact attorney Chris Katers at [hidden email] or by telephone at (414) 777-0778. The author of this post, attorney Brian Mahany, can be reached at [hidden email]

MahanyLaw and Judge, Lang & Katers – RICO Lawyers

*RICO claims can often be handled on a hybrid or alternative fee basis. Minimum loss size is $10 million. We are a boutique lender liability and RICO litigation firm that handles cases in many jurisdictions.

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