to use every appropriate tool to recover funds lost as a result of this illegal conduct. The RICO statute can be an important instrument to deter such improper behavior and to facilitate recovery of lost funds.

The FDIC's Use of RICO

Consistent with the role and function of the FDIC, the FDIC's use of RICO has been very restrained and limited. As receiver, the FDIC's goal is to recover funds for the receivership estate. Asserting a RICO claim may be an appropriate means of recovering funds, and it has been so used by the FDIC. In determining whether or not to initiate a RICO claim, the FDIC evaluates the strength of the claim, the damages incurred, the likelihood of success, the type and nature of defenses to be asserted, the anticipated recovery date, and the probable resources available to satisfy any judgment. A RICO claim can only be brought with the concurrence of the head of the Division of Liquidation, the General Counsel and the Chairman of the Board of Directors of the FDIC.

Although the use of RICO has been very restrained, RICO has proven to be an effective tool in deserving situations. In FDIC v. Renda, the RICO was used in a case involving a nationwide scheme to defraud banks through a practice known as "linked financing," as well as the largest union pension fund fraud ever prosecuted by the Justice Department's Organized Crime Strike

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Force. In FDIC v. Antonio, millions of dollars of fraudent loans were siphoned from a Denver bank to known members of organized crime on the east coast under the pretext of a gold purchase project.

We note, however, that such cases are difficult to investigate and prosecute, they often result in very vigorous and aggressive defenses, and the prospect for recovery is uncertain. However, we do believe that RICO can be an

important tool in the arsenal of the FDIC.

We anticipate that in our role as liquidator for insolvent savings and loan associations, there will be other instances where the use of RICO will be appropriate. While we do not anticipate a great number of RICO claims, we can anticipate that it will be used prudently and judiciously in order to recover funds for the receivership estates of failed institutions and to preserve and protect the deposit insurance funds.

Comments on H.R. 1046

With respect to specific provisions of H.R. 1046, we offer the following comments:

It is important that the legislation acknowledge the FDIC's right to assert

a RICO claim for treble damages as a "governmental entity" even when acting as receiver for a failed institution. Since, as receiver, the FDIC steps

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into the shoes of the failed institution, it should be made clear that the legislation provides the FDIC the right to assert a treble damage claim under RICO. Thus, we suggest that the legislation clarify the FDIC's right to sue for treble damages when suing either in its corporate or receivership capacities.

The legislation should also preserve the right of the FDIC to assert RICO claims in either federal or state courts. Congress has granted the FDIC this flexibility in dealing with failing financial institutions. The FDIC should have the option to choose the most appropriate form to assert its interests.

We are concerned about a provision in the legislation that would create a procedural affirmative defense of "good faith reliance" on regulatory decisions prior to the initiation of discovery. We are troubled that this affirmative defense may effectively preclude the ability to pursue appropriate claims promptly and may complicate the ability to prosecute the claim effectively because of inherent delay. We believe that such an affirmative defense can be effectively and properly adjudicated in the context of the trial on the merits without giving defendants a procedural right to delay discovery. This delay can permit ill-intentioned defendants to destroy documents, cover up illegal operations, complicate the tracing of funds, or otherwise impede the future discovery of wrongful acts.

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We think it appropriate that a fairly long statute of limitations be incorporated in the legislation. A six year statute of limitations is a

fair recognition of the difficulties in investigating and assembling appropriate lawsuits with a limited staff. Such an extended statute of limitations is not unfairly long to perpetrators of organized crime.

Finally, we support efforts to limit the treble damage provisions of RICO to true criminal conduct. We are troubled by converting legitimate business disputes into racketeering claims with the potential for treble damages, and support efforts to assure that RICO accomplishes only its intended

purpose.

Conclusion

RICO

In conclusion, we support efforts to refine the RICO legislation. is and should continue to be one tool to deter misconduct in our nation's commercial banks and to facilitate the recovery of funds by the FDIC following bank failures. It has been used sparingly by the FDIC, under strict controls and supervision to assure that its use is consistent with the statutory mission of the agency. We believe that it can continue to be a useful tool, and hope that the Committee will preserve its usefulness to the FDIC.

Mr. HUGHES. Mr. Boyle. Well, Mr. Boyle, are you accompanied by someone?

Mr. BOYLE. Yes, I am.

Mr. HUGHES. Would you identify them for the record.

Mr. BOYLE. I would like to introduce at this time and identify for the record the two attorneys who represented the county of Suffolk in the recent litigation which is still ongoing. It's on appeal in the second circuit, and that's the case that arises out of the construction of the Shoreham nuclear power plant on Long Island, and the title of the case is Suffolk County v. LILCO.

On my immediate right is Mr. Gregory O'Neill, and to his right is Ken McCallion. Both of them are experienced and were the actual trial lawyers in that case. I might add that Ken McCallion also was a former member of the Organized Crime Strike Force and has experience on the criminal prosecution level as well. Mr. HUGHES. Thank you. Welcome.

STATEMENT OF E. THOMAS BOYLE, ESQ., SUFFOLK COUNTY ATTORNEY, SUFFOLK COUNTY, NY, ACCOMPANIED BY GREGORY O'NEILL, ESQ., AND KENNETH MCCALLION, ESQ.

Mr. BOYLE. Mr. Chairman, Mr. Boucher, members of the subcommittee, I appreciate this opportunity to address you on such an important piece of legislation. Just to remove any ambiguity, I realize that the county attorney position in some jurisdictions means criminal jurisdiction. In New York, it's solely civil jurisdiction, and that's what brought about my involvement in a civil case, in the LILCO matter.

As you undoubtedly know, the county of Suffolk was involved in a case against a private utility company, Long Island Lighting Co., which arises out of the construction of the Shoreham nuclear plant. We received a plaintiff's verdict after an 8-week trial.

Thereafter, that verdict was set aside for lack of jurisdiction in the Federal courts, and that issue is now on appeal to the Second Circuit Court of Appeals and we expect to be filing the appellant's brief in that case on Monday. We would be pleased to provide the subcommittee with a copy of that brief should it feel it might be helpful in any of your deliberations.

Suffolk County's LILCO suit bears out the fallacy that existing State systems and criminal law enforcement are sufficient to fight fraud in governmental regulatory processes. Though allegations of LILCO's monthly collection of fraudulently inflated rate payments were brought to the attention of the New York State attorney general, and the U.S. attorneys for both the Eastern District and Southern District of New York, none of those offices took any action to investigate this type of systemic, criminal activity.

Moreover, no individual ratepayer on Long Island, and it's a district which has a population of approximately 2.5 million, had the commitment or the financial resources to bring an action against this utility giant. Suffolk County's suit against LILCO is a paradigmatic example of the important role that RICO can play in the hands of responsible local government.

Indeed, the New York State attorney general advised the Federal court, in the case in which we were involved, that a finding of