Fifth Amendment Strategies

Posted on June 14, 2007 by Thomas Walker

In my last post I talked a bit about the impact of the Fifth Amendment in civil RICO cases, but I did not have time to discuss the strategies for dealing with the defendant’s dilemma. First of all, defense counsel should make a Rule 12(b)(6) motion to dismiss for failure to state a claim for which relief can be granted. If the RICO claim is dismissed before any discovery is undertaken, the defendant may avoid the Fifth Amendment dilemma altogether. This may not, however, be the end of the case. A plaintiff will often try to amend his deficient complaint. If that is successful, then the defendant will be faced with responding to discovery, which will likely expose him to criminal indictment. At this stage there are at least three motions to stay the prosecution of the RICO claims that should be considered by defense counsel: (1) motion to stay pending discovery on the non-RICO claims; (2) motion to stay pending mediation or arbitration; and (3) motion to stay pending completion of a parallel criminal proceeding.

A motion to stay pending non-RICO discovery may not be effective if the facts are such that discovery regarding the non-RICO claims will require the defendant to answer potentially incriminating questions. A motion to stay pending mediation or arbitration may be effective, but the defendant usually must have the ability to make the plaintiff an offer he can’t refuse. Although such a settlement will probably cause the defendant significant financial pain, at least he will not have too provide incriminating testimony. Finally, where the civil RICO defendant is a defendant in a parallel criminal prosecution or a target of an ongoing parallel grand jury investigation, a stay of the civil case may be granted in the discretion of the court.

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RICO and the Fifth Amendment

Posted on June 12, 2007 by Thomas Walker

The Fifth Amendment privilege against self incrimination presents a difficult dilemma for a civil RICO defendant. If he takes the Fifth, a presumption arises in the civil case that his testimony, if truthfully given, would be against his interests. As Supreme Court Justice Louis Brandeis declared, speaking for a unanimous court in United States ex. rel. Bilokumsky v. Tod,   263 U.S. 149, 153-54 (1923). “Silence is often evidence of the most persuasive character.” This follows the long ago established common law rule that suppression of evidence is an “admission by conduct” that the evidence would be unfavorable to the person responsible for its unavailability. There are a number of reasons that the law allows the finder of fact to draw a negative inference from a defendant’s invocation of the Fifth Amendment in a civil case.  Most importantly, allowing the defendant-witness to exclude incriminating information undermines the fact finder’s search for the truth.  If the privilege was allowed to be invoked without penalty in a civil case, the privilege places the private RICO plaintiff at a severe disadvantage.  This is especially true in RICO cases where civil liability arises from criminal conduct. The incantation of “I refuse to answer pursuant to my Fifth Amendment privilege. . .” precludes discovery and frustrates the truth-determining capacity of the litigation process.

On the other hand, if the defendant has potential liability for plaintiff’s claims and he doesn’t take the Fifth, he may end up giving the criminal prosecutor all the evidence he needs to send him to prison.

This dilemma faces every civil RICO defendant, if he has not already been criminally prosecuted. Every one familiar with the O.J. Simpson case knows that even an acquittal in a criminal case doesn’t mean the defendant is home free. The evidence developed in a criminal RICO case can make the civil RICO case much easier because the burden of proof in the civil case is typically by a preponderance of the evidence. The beyond a reasonable doubt burden simply doesn’t apply. In some states, including Idaho, fraud must be proved by clear and convincing evidence, which although a heavier burden than the preponderance standard, it is much less than beyond a reasonable doubt.

On the other side of the coin, a successful civil RICO prosecution can lead to a criminal prosecution. My last plaintiff’s RICO case, which we settled very advantageously, led to a grand jury indictment for embezzlement and related crimes. The prosecutor was happy to have all of the forensic accounting evidence we developed in the civil case demonstrating that the defendant had embezzled nearly $1 million over a 15-year period.
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