Rico Litigation and Defense: How to Fight Back or Assert Claims

The enterprise element requires proof of an ongoing organization, either a formal legal entity or an association in fact. The enterprise must be separate and distinct from the pattern of racketeering activity itself. The pattern element requires at least two acts of racketeering activity within 10 years. Courts require the additional showing of relatedness, meaning the acts must have the same or similar purposes or participants, and continuity, meaning the acts are part of long-term criminal conduct or threaten future criminal activity. Individuals or businesses that have received a RICO indictment or civil RICO complaint should immediately engage federal criminal defense counsel to evaluate whether the enterprise, pattern, and nexus elements can be established.

Predicate acts are the specific criminal violations that form the basis of the pattern of racketeering activity. RICO Section 1961 enumerates more than 35 qualifying categories, including wire fraud, mail fraud, bank fraud, extortion, and money laundering. Wire fraud under 18 USC Section 1343 and mail fraud under 18 USC Section 1341 are the most commonly charged RICO predicates. They apply broadly to any scheme to defraud using wire communications or the mail, and prosecutors frequently allege them in financial fraud cases. Defendants facing RICO allegations based on wire fraud or mail fraud should immediately engage wire fraud defense counsel to evaluate whether the alleged communications satisfy the statutory elements of each predicate act, because attacking each predicate act is a core defense strategy.

A criminal RICO conviction carries a maximum sentence of 20 years in federal prison per count, or life imprisonment if the racketeering activity includes a predicate act carrying a life sentence. The RICO sentence is served in addition to the sentences for the underlying predicate acts. Criminal RICO also mandates forfeiture of property derived from or used in the racketeering activity, and the government can seek pretrial restraint of those assets before any conviction. Defendants facing criminal RICO prosecution should immediately engage federal and state fraud defense counsel to challenge any pretrial asset restraint and develop a defense strategy.

The DOJ investigates criminal RICO cases using grand jury subpoenas, wiretaps, cooperating witnesses, and financial forensic analysis to build the required pattern of racketeering activity. RICO investigations typically span multiple years. Targets often have no knowledge that an investigation is underway until they receive a grand jury subpoena or a search warrant is executed. Organizations or individuals who learn they are the subject of a RICO investigation should engage corporate crime counsel immediately to manage the investigation response and develop a strategy.

To have standing to bring a civil RICO claim, the plaintiff must demonstrate injury in its business or property caused by a RICO violation. The injury must be the proximate result of the predicate acts, not a third party's intervening conduct. Civil RICO plaintiffs must plead each element with specificity under Rule 9(b). The rule requires identifying each alleged predicate act with particularity, identifying enterprise members, and alleging proximate causation between each predicate act and the specific injury suffered. Businesses or individuals who believe they have been victims of organized fraud should consult corporate fraud counsel to evaluate whether the facts support a civil RICO claim. The standing and causation requirements are demanding.

Civil RICO's mandatory treble damages provision entitles a plaintiff who establishes actual damages of one million dollars to a judgment of three million dollars. The mandatory attorney fee provision means the defendant must also pay the plaintiff's legal fees. The threat of treble damages and mandatory attorney fees makes civil RICO claims extraordinarily powerful settlement tools. Defendants facing a credible civil RICO claim have strong financial incentives to settle early. Defendants who have been served with a civil RICO complaint should consult civil settlements in lawsuits counsel immediately to evaluate the plaintiff's enterprise and pattern allegations.

The most effective RICO defense strategies focus on the pattern element. Courts have dismissed RICO claims where the predicate acts were isolated or episodic, or where the alleged pattern amounted to nothing more than a single business dispute. The enterprise element provides a separate basis for challenging RICO claims when the plaintiff cannot demonstrate an ongoing organization separate and distinct from the racketeering activity. Courts have held that a corporation and its employees alone cannot form a RICO enterprise. Individuals or businesses facing RICO allegations should immediately engage criminal defense counsel to evaluate all three defense avenues and develop a strategy targeting the claim's weakest elements.

RICO criminal asset forfeiture requires the government to establish that the property sought is proceeds of the racketeering activity, was used in the racketeering activity, or constitutes the defendant's interest in the enterprise. The government may seek pretrial restraint of assets even before any criminal conviction. Challenging a pretrial RICO asset restraint requires demonstrating that the assets are not traceable to the racketeering activity. The defendant must also show that the restraint is overbroad or that it violates the defendant's Sixth Amendment right to counsel. Working with an experienced RICO lawyer can significantly reduce criminal and civil liability exposure. Defendants facing RICO asset forfeiture or pretrial asset restraint should engage asset seizure and forfeiture counsel immediately to challenge the restraint.