Application of RICO to the Securities Industry
The Racketeer Influenced and Corrupt Organizations Act (RICO) was enacted as Title IX of the Organized Crime Control Act of 1970. It was designed to combat organized crime, but has broad application beyond this context since Congress mandated that RICO be liberally construed to effectuate its remedial purposes. In the case of Sedima, SPRL v. Imrex Co., the Supreme Court concluded that RICO is not limited to organized crime, but may be applied to legitimate businesses.
RICO has subsequently been used in prosecutions of white collar crime. The overarching purpose of RICO is to remove organized crime from the legitimate business community, but Congress has mandated that RICO be construed liberally and prosecutors use RICO for a wide variety of criminal contexts. Under Section 1964, the Attorney General or "any person injured in his business or property by reason of a violation of Section 1962" may bring a civil action in either state or federal court for redress. RICO provides equitable relief through divestiture of the defendant's interests in the enterprise, restrictions on future actions or investments, and dissolution or reorganization of the enterprise.
RICO has continually been expanded in business litigation as was the case when U.S. Attorney Rudolph Giuliani posed the use of RICO against the investment banking firm of Drexel Burnham Lambert in 1989. Had Giuliani used RICO, he could have driven the company out of business almost immediately. As this report will subsequently demonstrate, the threat of RICO was sufficient to lead Drexel to plead guilty to six felony counts of mail and securities fraud and to pay $650 million in fines and penalties. This highlights, according to Virginia G. Maurer, the fact that "RICO is an extraordinary weapon in the armament of the modern federal prosecutor and the modern business plaintiffà. RICO claims have be...