APPENDIX 5.-FACTS AND MYTHS CONCERNING RICO, SUBMITTED BY PROF. G. ROBERT BLAKEY White-collar crime is 'the most serious and in 1980, there is no reason to think that the Myth: RICO Applies to Mere Contract Disputes Fact: RICO Requires a Showing of Bad Faith, That is, A Good Faith Dispute Is Not Within RICO Fact: State Common Law Jurisprudence Alone Is Not Adequate to Deal with Sophisticated Forms of Fraud Myth: Since Law Enforcement Agencies Can be Depended Upon to Prosecute the Real Malefactors Private Enforcement Mechanisms Are Not Needed Fact: Law Enforcement Can Not Do the Whole Job Fact: Multiple Damage Suits Are The Heart of the Necessary Private Enforcement Mechanism 10.1 Myth: The Racketeer Label Leads Legitimate Business People to Settle Garden Variety Fraud Claims For Extortionate Amounts 10.2 Fact: The Racketeer Label Inhibits, Not IV. 11.1 Myth: Private Civil RICO Might not Lend Itself to Conclusion 26 26 28 I. Introduction. 1 On February 23, 1989, Senator Dennis DeConcini and Congressman Rick Boucher introduced S. 438/H.R. 1046, "The RICO Reform Act of 1989. "1 In large measure, the proposed legislation would set aside the right of victims of patterns of criminal conduct under RICO, Title IX of the Organized Crime Control Act of 1970, to obtain adequate civil redress. Drafted at the request of representatives of the securities and commodities industries and the accounting profession, the proposed legislation, in most litigation under the 1970 Act, would: (1) reduce the measure of damages from treble to (2) eliminate the provision for counsel fees for a (3) exclude the securities and commodities industries (4) apply its provisions retroactively to pending The 1 See, e.g., 135 Cong. Rec. S 1652-57 (daily ed. Feb. 23, 1989) (introduction of S. 438). Paradoxically, Senator DeConcini is chairman of the Special Committee on Investigations of the Select Committee on Indian Affairs, which is looking into allegations of wide-spread fraud against American Indians. See S. Rep. No. 100-510, 100th Cong., 2d Sess (1988). investigation grew out of a series of stories that appeared in the Arizona Republic. See editions of Oct. 4-11, 1987. The paper outlines, among other things, that "oil companies have looted billions of dollars worth of oil and gas from Indian and federal lands, sometimes aided by negligent or corrupt government officials." Id., Oct. 4, 1987, p. 3, col. 1. The oil companies will be one of the chief beneficiaries of the DeConcini legislation; the Indians will be one of the chief losers. See also N.Y. Times, May 10, 1989, p. 7, col. 3 (Chris Tucker, expert testifying before DeConcini Committee, on oil theft by oil companies: "Its very easy to steal from Indians. There are no checks and balances."); id. May 5, 1989, p. 16, col. 6 (Indians cheated out of millions of dollars of oil and oil royalties). 2 Appendix A includes a chart that compares the "RICO Reform Act of 1989" to present law. Until the recent investigation and indictment of Michael R. Milken, former head of Drexel Burnham Lambert Inc.'s junk bond operations, on 98 counts of RICO and criminal securities fraud for cheating his clients, the public controversy over RICO 2 largely focused on its private civil enforcement mechanism; it now includes its criminal sanctions. RICO authorizes the criminal forfeiture of ill-gotten gains and the interest of an offender in an enterprise run corruptly. United States v. Porcelli, 865 F.2d 1352, 1354-66 (2d Cir. 1989) (forfeitures upheld, but subject to 8th Amendment proportionality). It also authorizes the issuance, on a proper showing, of pretrial restraints or the posting of a bond to prevent the dissipation before verdict of assets subject to forfeiture. United States v. Regan, 858 F.2d 115, 120-22 (2d Cir. 1988) (restraint or bond upheld). Such pretrial remedies are a common feature of litigation. See, e.g., Republic of Philippines v. Marcos, 863 F.2d 1355, 1359, 1361 (9th Cir. 1988) (injunction upheld to prevent dissipation of assets); Int'l Control Corp. v. Vesco, 490 F.2d 1334, 1347 (2d Cir.) (injunction upheld to prevent impairment of assets), cert. denied, 417 U.S. 932 (1974). The Milken indictment seeks a $1.85 billion in forfeitures from Milken and his co-defendants. N.Y. Times, March 30, 1989, p. 1, col. 1. If found guilty, Milken's illegal earnings will have been exceeded only by those of Al Capone. Wall Street Journal, March 31, 1989, p. 1, col. 4. Milken has agreed to post a bond to secure his portion of the forfeiture of $700 million in cash and other assets and to post bail in the amount of $1 million. N.Y. Times, April 15, 1989, p. 1, col. 1. Drexel itself has agreed to plead guilty to securities fraud and pay $650 million in fines and sanctions. Id. While Drexel publicly protests it was unfairly forced to plead guilty, since it feared that pretrial restrains would put it out of business, it privately told its employees that, if indicted under RICO, it would "have the opportunity to post a bond to forestall any pretrial restraint, [which] will permit us to continue operations." Wall Street Journal, Feb. 15, 1989, p. 1, col. 1. It also informed the United States District Court that its plea will be "voluntary." Wall Street Journal, March 31, 1989, p. A4, col. 6 ("voluntarily and without coercion"). Newspaper columnists decry RICO's pretrial restraints as an unconstitutional interference with the presumption of innocence. See Wall Street Journal, Feb. 15, 1989, p. 1, col. 1 (commentary of William Safire and other criticized). In fact, defendants, on a proper showing, may be detained in jail pretrial consistent with the constitution. See, e.g., United States v. Salerno, 107 S. Ct. 2095 (1987). It is doubtful that greater pretrial rights ought to be afforded to property than liberty. Nevertheless, those who seek to reform RICO are not moving to alter its criminal provisions. N. Y. Times, March 12, 1989, p. 2C, col. 1 (Cong. Boucher: "[T]here is no sentiment to limit RICO on the |