but his frame of reference for determining "worth" is a system that does, in fact, not do justice. As such, I reject it. Congressman Boucher, moreover, seemingly forgets that RICO has more than a compensatory goal. The conduct that falls within its terms--systemic patterns of violence, provision of illegal goods and services, etc.--is conduct that should be unconditionally deterred. RICO is not, like some aspects of antitrust, a "regulatory offense." It also does not include strict liability, as the predicate offense are all fault-based. Society has a general stake in seeing that this sort of conduct is, therefore, sanctioned. From an economic point of view, it is a detail that is sanctioned in private civil litigation, rather than criminal prosecutions. Accordingly, private Civil RICO litigation plays an important public law function. The private enforcement that Congressman Boucher so vociferously decries is, in fact, enforcement that is in the public interest. Finally, included as Exhibit E in this letter is a letter of June 9, 1989, of Mr. Robert J. Cindrich, the former U.S. Attorney in Pittsburgh, to Ms. Roslynn Litman, sent in connection with a study being conducted by the Court of Appeals for the Third Circuit of the utilizations of the Federal courts. It makes many of my points better than I can; it is included in this letter with Mr. Cindrich's kind permission. V. RICO: An After Thought? I asked you During the course of the hearings, Mr. Jed S. Rakoff suggested that RICO's private civil enforcement mechanism was an "afterthought." to have a statement inserted in the hearing record at that point that would show that the private civil enforcement mechanism was an integral part of the RICO design from the beginning. Enclosed as Exhibit F to this letter is the supplementary statement. VI. RICO and LILCO Mr. Kenneth Feinberg testified before the Subcommittee on the LILCO litigation in New York. You may find it relevant to know that the Trial Lawyers for Public Justice and the National Institute of Municipal Law Officers filed an amici brief, which I prepared, in the Second Circuit urging that Chief Judge Weinstein's opinion be reversed. The brief may be relevant, not only for the legal reasoning it contains, but also for its review of the data on White-collar crime, particularly fraud, in the United States today. Enclosed as Exhibit G to this letter is the amici brief. VII. State RICO Legislation During the course of the hearings mention was made by state RICO legislation. Enclosed as Exhibit H to this letter is a chart that summarizes that legislation. Conclusion 84 Stat. It may be appropriate for me to end this letter on another philosophical note. In 1970, the Congress passed the Organized Crime Control Act, including RICO, to "strengthen [. . .] the legal tools in the evidencegathering process, [to] establish [. .] new penal prohibitions, and [to] provide [. .] enhanced sanctions and new remedies 923. Congress was concerned, among other things, with "fraud." Id. at 922. It found that "the sanctions and remedies available" under prior law were "unnecessarily limited in scope and import." Id. at 923. It then provided treble damage relief for "person[s] injured" in their "business or property" by violations of RICO. 18 U.S.C. § 1964 (a). Congress, after full debate, consciously chose not to limit the 1970 statute to organized crime; its application was to depend on what you did, not who you were--blue-collar, White-collar, or no collar at all. As Law is always more than rules and procedures, statutes and decisions, or courts, legislatures, and lawyers. Ultimately, it is ideology, that is, a set of beliefs and a system of integrated values that express a nation's view of justice. Law used to rest on religion or morals, matters on which we no longer share a consensus. Today, it rests on the consent of the governed. such, its legitimacy is ever in question. Increasingly, however, large segments of our society no longer feel included. Opportunity is denied to them, as they have neither adequate education nor meaningful work. Property and power are not distributed, as they once were, more or less evenly throughout our society. Sometimes, it seems, law is all that holds us together. When power is abused in our society, the powerless have only law for recourse. The great statutes that Congress enacted in the past--the antitrust statues, the securities statutes, etc.--were, at bottom, designed to secure power for the powerless, in those cases, freedom and integrity in the market place. RICO was drafted in that tradition. No law is perfect, or beyond legitimate reform, including RICO. But I implore you to exercise care, lest you so alter it that you do not right wrong, but do wrong. Your place in history will, in part, be written by how you work to reform RICO, that is, how you seek to respond to the twin challenges of modern forms of organized and White-collar crime. How you reform RICO will, in short, write into law your view of justice. Make it one that reflects the interests, not only of the powerful, who can take care of themselves, but also of the others, who have only people like you and the law to look to. Please include this letter with its Exhibits in your hearing record. Thank you. Respectfully, 3d G. Robert Blakey Enclosures Brian Ajhar EXHIBIT B BARRON'S July 3, 1989 Don't Mess with RICO Congress Should Spurn Effort To Curb It By BENJAMIN J. STEIN Is THIS the end of civil RICO? A powerful coalition of lawyers and lobbyists for the securities and defense industries are beating the fateful drums. They are all over Capitol Hill, dispensing money, gifts of other kinds, promises of future favor and their wisdom about the urgent necessity of gutting the civil portions of the Racketeer Influenced and Corrupt Organizations Act of 1970. Last week's decision from the U.S. Supreme Court in H.J. Inc. v. Northwestern Bell, reaffirming the broad reach of civil RICO and rejecting judicial efforts to narrow it, have rallied the anti-RICO troops. Unless something drastic happens, they will have their way with the Congress, as the deep-pocket boys usually do, and therein could lie a major loss for investors, taxpayers and anyone who loves and believes in free markets. ICO was Title IX of an anti-crime bill enacted during a major Nixon Administration effort to put teeth into anticrime campaign promises. The criminal part of RICO provided stiff penalties and the federalizing of prosecution of persons who gained control of enterprises through extortion, fraud, murder, robbery, blackmail and about 30 other specified of fenses. The civil side of RICO was passed in language similar to that of the antitrust statutes' civil side. Plaintiffs who had been damaged by the loss of property because of an interconnected series of wrongful acts, a "pattern or practice" of such acts, could bring suit. These included fraud, bribery, securities-law violations and Benjamin J. Stein is a writer, lawyer and economist. other financial crimes. Upon a victory, they could recover treble damages, just as in antitrust. The theory of the law was that it would enlist private citizens in the war against organized crime. However, there is no limitation in the law that would confine it only to violations by the Cosa Nostra. Little was heard from the civil side of RICO until a landmark 1985 Supreme Court decision. In Sedima, the high court ruled that to get into court under civil RICO, there did not have to be criminal conviction on the racketeering charge, nor did there have to be a distinct injury due to racketeering separate from the harm caused by any one of a number of specified wrongs. This reversed a number of lower court decisions. This holding was the one reaffirmed last week. Once Sedima was handed down, civil RICO suits grew rapidly, leading to the complaint by anti-RICO lobbyists that civil RICO allows frivolous, dangerous lawsuits over anything that a plaintiff feels like suing over. Suits over rabbinical succession, sexual harassment, wrongful discharge and even journalistic credits are cited as examples of how supposedly trivial matters have been dragged wrongfully under the mantle of RICO. Moreover, say the enemies of RICO, the courts are flooded with RICO cases, overburdening an already swamped federal judiciary. The treble-damages rule allows for ruinously large claims, say RICO's enemics. Further, they contend, RICO smears businessmen with the Godfather label who may, in fact, have committed just a bloodless little boo-boo, like fraud or bribery. These attacks on RICO are easily rebutted by fact. In the past three reporting years, there have been fewer than 1,000 new civil RICO cases per year in federal courts-less than 0.5% of all new filings. Two-thirds of all RICO cases never reach the discovery stage, let alone trial, because of federal trial rules that require strict standards of particularity and specificity. Federal rules allow the imposition of penalties and fees on plaintiffs filing frivolous RICO cases, and real-life fines of up to $1 million have been imposed. In a word, the courts are far from inundated with RICO trials, and federal procedures already allow early dismissal and punishment for silly RICO cases as they do with all federal civil cases. (The numbers of dismissals of RICO cases are not out of line with dismissals of federal claims generally.) Moreover, the supposedly trivial cases filed under RICO turn out not to be as laughable as they might seem. The sexual harassment case, for example, stems from a complaint of union coercion of a female carpenter in a fund-raising context, and union oppression was a spe cific offense under RICO. The was supposedly inconsequential wrongful-discharge case about claims by two former Ashland Oil executives that they were fired for whistleblowing in connection with the payment of huge bribes to foreign governments. (The case was settled by the payment of $25 million to the plaintiffs.) Further, the legal ability to collect treble damages almost never results in actual payment of treble damages. What cases make it to close to trial are almost always settled. In fact, it is difficult, if not impossible, to find a case where treble damages have been awarded. Keaneth Jost, a Washington lawyer who is an expert on civil RICO, quotes a former federal judge as saying that she never saw an unjust settlement or a defendant who was innocent who settled. No, the real problems with RICO's civil side have nothing to do with establishing fairness and justice in the federal courts. They have to do with the power of the securities industry, the defense industry and their friends to lift themselves above the law, to buy retroactive immunity, and to thwart the whole idea of equal justice. The emergence of civil RICO has coincided with the public revelation of truly massive fraud in the defense and securities industries. In recent years, major cases of purposeful overbilling, falsification of quality reports, delivery of shoddy or non-working merchandise and payoffs to government officials have involved big names in the defense industry, requiring the companies to repay the Treasury hum dreds of millions of dollars. This money comes from the corporations' treasuries, which is to say, from the stockholders. In other words, for the misdeeds and sometimes criminality of executives, stockholders are forced to lose equity in the companies. The stockholders are now saing under civil RICO in many of these cases to recover from the executives for the losses they caused their companies. The executives, of course, are defending themselves in court. But they are also using corporate funds to hire powerful lobbyists to buy them immunity by "reforming" RICO. RICO's "flaw in defenseindustry suits is not that it casts too wide a net. The "flaw" is that its net covers those accustomed to being too powerful to be covered. Even more than defense, the securities industry is the nation's main cockpit of fraud and abuse right now. The prosecutions of Dennis Levine, Ivan Boesky, Michael Milken, Lowell Milken, Paul Bilzerian and Boyd Jefferies have told the nation's investors over and over again that they have entrusted their money to scoundrels. If indictments are to be believed, blocking the workings of the free market has become an everyday thing in the nation's securities business, with the taking of money from investors a the bread and butter of all too many brokers and dealers and investment bankers. Fraud in communications with stockholders, self-dealing, breach of fiduciary duty, insider trading all with a view to using the securities markets not as a financing vehicle for industry but as a cheaper, better, safer ma trix for theft-all of this has become perilously close to the rule in securities trading and corporate governance. When a series of these acts occurs, the standard response is for the stockholders to sue under state or federal law. As a participant in a number of these suits, I can tell you how they work. Corporate officers and directors take a big chunk of the stockholders' money. Once in a blue moon, a stockholder is energized enough about the taking to find a lawyer to sue. The corporate officers and directors use the stockholders' money to 1 1 1 1 1 1 |