The Supreme Court determined in RJR Nabisco v. European Community that the Racketeer Influenced and Corrupt Organizations Act (RICO) — a statute created to fight organized crime across the country, can be applied to prosecute criminal acts outside of the United States and, in some cases, even create a private right of action.
Enacted in 1970, RICO is the federal racketeering statute that makes controlling certain "enterprises," such as a corporation or other less formal association of persons or other entities a crime when one can prove a pattern of criminal behavior. RICO has been the centerpiece of the government's efforts to combat organized crime, labor unions and other conspiratorial entities. It is also used to prosecute all manner of entities, including corporations, engaged in various forms of criminal conduct. RICO also includes a private right of action where parties injured in person or property by actions resulting in violations can bring a civil action that may include treble damages.
In this recently-decided matter, the European Community sued in the Eastern District of New York claiming that RJR Nabisco was working with organized criminal groups in South America and Europe, including, among other claims, a scheme to launder drug money.
After opposing decisions at the trial and appellate levels, the U.S. Supreme Court issued a writ of certiorari to determine whether the RICO statute applied to actions that occur outside of the United States. It held that RICO can, under certain circumstances (detailed in the opinion) apply to conduct that occurs outside of the United States. This actually adds extended reach for prosecutors to use in making RICO cases criminal. However, the decision also limits the ability of private RICO plaintiffs to pursue their civil claims if they can’t prove a domestic injury, which means that the European Community has no recourse.
Why does this matter to businesses? Because this is the second decision from the U.S. Supreme Court addressing business practices internationally, including whether warrants apply to property held outside of the country, which we discussed earlier this year. It is also important because the decision is a significant expansion of federal law across borders. The decision reduces the likelihood that the federal government will have to deal with foreign policy problems raised in subsequent litigation while at the same time confirms the federal government’s ability to bring a RICO lawsuit against a domestic business for criminality involving foreign conduct._____
*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.
Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.