FULL REPORT

Racketeering Law Comes Under Attack	March 17, 1989

Report Outline
Special Focus

Introduction

The Wall Street Journal called it a “monster.” A high Justice Department official, on the other hand, called it a “thermonuclear weapon” in the war on organized crime. “It” is RICO, the Racketeer Influenced and Corrupt Organizations Act. Passed in 1970, the federal racketeering law was scarcely used during its first decade of existence, but prosecutors and private lawyers alike have made up for that during the last 10 years. Gangsters and drug dealers, politicians and pornographers, securities firms and labor unions—all have been caught in its web. And as the law has expanded its reach, calls to rein it in have grown louder. Here's what is behind all the noise.

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Overview

Almost two decades after its enactment, RICO has come of age. Federal prosecutors have used the anti-racketeering law to cut a wide swath through organized-crime families and put crooked politicians behind bars from, coast to coast. Terrorists, white supremacists, pornographers, even Ferdinand and I meld a Marcos have felt RICO's sting. Private lawyers have discovered the statute as well. Lured by lucrative treble damage and attorney-fee provisions, lawyers representing big corporations, forlorn investors and a variety of other plaintiffs have filed racketeering suits against established businesses ranging from big accounting firms and white-shoe law firms to securities dealers, banks and Fortune 500 corporations.

But the growing use of the 1970 law—formally called the Racketeer Influenced and Corrupt Organizations Act—has brought with it growing criticism. RICO's looming presence in the government's successful plea negotiations with junk-bond dealer Drexel Burnham Lambert Inc. raised doubts on Wall Street and beyond about the leverage the law gives to prosecutors. Expansion of the law to obscenity cases was challenged on First Amendment grounds. And injection of racketeering allegations into private litigation of all sorts—sexual harassment, wrongful discharge and an array of what critics call “garden variety” fraud—has produced broad-based calls to restrict the law's civil remedies.

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