RICO Lawyer & Attorney : Thomas Walker : Cosho Humphrey Law Firm : RICO Act, Federal and State Racketeering Litigation, Boise Idaho

The White Collar Crime Prof Blog reported yesterday on an interesting issue presented in the Chronicle of Higher Education, Harvard Law Professor Takes New Tack Against RIAA (citing Jaikumar Vijayan, Computer World, Harvard professor offers new challenge to RIAA antipiracy campaign -Nesson claims Digital Theft Act, on which RIAA lawsuits are based, is unconstitutional) on whether the Digital Theft Act as used in a civil lawsuit is improper because the statute is limited to criminal matters.

Years back the issue would not have arisen as the overlap between criminal and third-party civil statutes did not exist.  With the Racketeer Influenced & Corrupt Organization Act (RICO) in 1970 we have seen statutes that allow for both criminal and civil enforcement, with the civil enforcement being extended beyond a government agency.  The rationale for these civil actions being allowed is that DOJ can't do it alone and allowing third-party civil actions can assist with enforcement. This was appealing with RICO because its initial focus was organized crime.  But RICO was interpreted broadly and went well beyond its roots and with it went the third-party civil actions. DOJ had and continues to have guidelines that restrict application of the statutes by providing oversight on prosecutorial discretion.  There are, however, no guidelines on the civil side.  This caused Congress to place additional limits on the civil side of RICO as seen in 18 U.S.C. 1964(c).

Other criminal statutes have seen attempts to be used in civil matters, such as the Foreign Corrupt Practices Act.  In Lamb v. Phillip Morris, Inc., 915 F.2d 1024 (6th Cir. 1024), the court did not allow the civil action. (See also Lewis v. Spock, 612 F. Supp. 1316 (N.D. Cal. 1985)).  Interestingly, one finds civil RICO actions that use the FCPA.

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Last spring I reported on a case filed in Russia by the Russian Federation against the Bank of New York Mellon (BONY) in which Russia sought to apply the United States’ RICO statute in the Russian court. The Wall Street Journal Law Blog reported this morning that the Russian Federal Customs Service failed to send a representative to appear in a Moscow court for the resumption of pretrial hearings.

As background: The Russian Federal Customs Service is suing BONY over an illegal wire transfer scheme from the 1990s, when two Russian émigrés — one of whom worked for BONY — moved $7.5 billion to American accounts from Russia via unlicensed wire transfers. They later pleaded guilty to various offenses under U.S. law. BONY, under a non-prosecution agreement with the DOJ, acknowledged failure to properly monitor wire transfer activity and paid a fine of $14 million. Now the Russians claim they, too, should be awarded a fine, to the tune of $22.5 billion, and are basing their argument on the RICO statute.

Russian Judge Lyodmila Pulova said the customs service had faxed her a petition requesting a delay until Oct. 15, and explaining only that the service’s lawyers were busy with other matters. Judge Pulova was unimpressed. She overruled the request and agreed to hear testimony from two of the bank’s U.S. experts ‒ including former attorney general Richard Thornburgh. When the witnesses finished, Pulova put off continuation of the hearing until Nov. 13.

BONY is using Gregory Joseph as a RICO expert. Mr. Joseph reportedly presented an 80-slide PowerPoint presentation to the court, explaining why he believes that the case would require the court to interpret U.S. criminal laws.

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In Liquidation Commission of Banco Intercontinental, S.A. v. Renta, --- F.3d ----, 2008 WL 2446320 (C.A.11 (Fla. June 19, 2008), the Eleventh Circuit Court of Appeals held that the Racketeer Influenced and Corrupt Organizations Act ("RICO") can be applied extraterritorially. This case is a civil RICO and fraudulent transfer case arising out of the 2003 collapse of Banco Intercontinental SA (BanInter), which at that time was among the largest banks in the Dominican Republic. After its collapse, the affairs of BanInter were taken over by the Liquidation Commission, a receivership established by the Dominican government. The Commission brought this suit against Luis Alvarez Renta, a Florida businessman, claiming that Renta, with the help of BanInter insiders, wrongfully diverted millions in BanInter funds to finance other business ventures and personal expenses.

Three RICO claims and one fraudulent transfer claim were tried to a jury, which returned a verdict for the Liquidation Commission in all respects. After trebling of the racketeering damages, the judgment totaled approximately $177 million.

Renta appealed, arguing that the entire case should have been dismissed for forum non conveniens, that the RICO claims should have been dismissed for unripeness and because the statute cannot apply extraterritorially. Judge Kravitch, writing for the panel of three judges, upheld the District Court’s judgment. With regarding to the extraterritorial issue, Judge Kravitch framed the initial question as whether Congress intended the statute in question to apply to conduct occurring outside the United States. The Court noted that some courts have held that RICO does not apply to conduct outside of the United States. However, the more widely accepted view, and the one the Eleventh Circuit adopted, is that RICO may apply extraterritorially if conduct material to the completion of the racketeering occurs in the United States, or if significant effects of the racketeering are felt in the United States.

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