8

[W]hite-collar

crime [is]--[a term] now
commonly used to designate those occupational
crimes committed in the course of their work
by persons of high status and social repute
[that]
only rarely dealt with
through the full force of criminal sanctions.

are

X X X

Serious erosion of morals accompanies [the
white collar offender's violation]. [Those
who so] flout the law set an example for
other businesses and influence individuals,
particularly young people, to commit other
kinds of crime on the ground that everybody
is taking what he can get.

The Challenge of Crime in a Free Society 47-48 (1967).

See Blakey, The RICO Civil Fraud Action, 58 Notre Dame L. Rev. 237, 280 (1983) (Civil Action):

[A] review of the legislative history of S. 30 [the Organized Crime Control Act] in general, and Title IX in particular, establishes the following points beyond serious question:

(1) Congress fully intended, after specific debate, to have RICO applied beyond any limiting concept like "organized crime" or "racketeering;"

(2) Congress deliberately redrafted RICO outside of the
antitrust statutes, so that it would not be limited by
antitrust concepts like "competitive," "commercial," or
"direct or indirect" injury;

(3) Both immediate victims of racketeering activity and
competing organizations were contemplated as civil
plaintiffs for injunction, damage, and other relief;
(4) Over specific objections raising issues of federal-
state relations and crowded court dockets, Congress
deliberately extended RICO to the general field of
commercial and other fraud; and

(5) Congress was well aware that it was creating
important new federal criminal and civil remedies in a
field traditionally occupied by common law fraud.
(emphasis in original).

Civil Action's review of the legislative history of RICO was cited with approval in Russello v. United States, 464 U.S. 16, 28 (1983).

9

3.1 Myth: RICO Was Designed To Deal Only With The Infiltration Of Legitimate Business.

See Oversight at 719 (remarks of David Albenda, New York Life Insurance Co):

The civil liability provisions of RICO were
intended by Congress to protect legitimate
businesses from infiltration by organized
crime.

3.2 Fact: RICO Was Designed, Not Only To Deal With The Infiltration of Legitimate Business, But Also Other Forms of Enterprise Criminality.

United

"[T]he major purpose of Title IX [was] to address the infiltration of legitimate business by organized crime." States v. Turkette, 452 U.S. 576, 591 (1982).

"[W]e are unpersuaded [, however,] that Congress confined RICO [to] only the infiltration of legitimate business." 452 U.S. at 590 (emphasis in original).

See generally Goldsmith, RICO and Enterprise Criminality: A Response to Gerald E. Lynch, 88 Col. L. Rev. 774 (1988).

4.1 Myth: RICO Applies To Every Business Transaction That Uses the Mails or Phones.

See 132 Cong. Rec. H. 9371 (Oct. 7, 1986, daily ed.) (remarks of Rep. Frederick C. Boucher):

[F]raud allegations are commonly made in
contract situations, and all that is needed
to convert a simple contract dispute into a
civil RICO case is the allegation that there
was a contract and the additional allegation
that either the mails or the telephones were
used more than once in either forming or
breaching the contract.

4.2 Fact: RICO Applies Only to Pattern of Unlawful Behavior, Not Single Transactions.

The circuit courts of appeal have made it abundantly clear that RICO does not apply to isolated acts. See, e.g., Roeder v. Alpha Industries, Inc., 814 F.2d 22 (1st Cir. 1987) (single bribe in three installments not "pattern" despite several communications). The Supreme Court, too, has now unanimously confirmed these decisions. H.J. Inc. V. Northwestern Bell Telephone Co., 5 Civil RICO Report No. 5 (June 27, 1989).

10

See generally, Note,

Reconsideration of Pattern in Civil RICO Offenses, 62 Notre Dame L. Rev. 83 (1986).

5.1 Myth: RICO Applies to Mere Contract Disputes.

See 132 Cong. Rec. H. 9371 (Oct. 7, 1986, daily ed.) (remarks of Rep. Frederick C. Boucher):

5.2

RICO is so broad-based that virtually any
party that has become embroiled in a
commercial dispute becomes a candidate for a
civil RICO case.

XXX

[V]irtually every type of contract dispute
has been turned into a RICO case.

Fact: RICO Requires a Showing of Bad Faith, That is, A Good Faith Dispute Is Not Within RICO.

None of RICO's predicate offenses is applicable on a showing of strict liability. Each requires a showing of mens rea or "criminal intent."

See, e.g., Durland v. United States 161 U.S. 306, 314 (1896) (mail fraud) (if evidence had shown that defendant acted in good faith, "no conviction could be sustained"); Bender v. Southland Corp., 749 F.2d 1205, 1216 (6th Cir. 1984) (RICO mail fraud requires intent to defraud); Dan River, Inc. v. Icahn, 701 F.2d 278, 291 (4th Cir. 1983) ("Criminal intent is either mail fraud or securities fraud [under RICO].")

necessary in

6.1 Myth: The General Remedies Against Litigation Abuse Are Inadequate.

See RICO Reform, Hearings before the House Subcommittee on Criminal Justice, 99th Cong., 1st and 2nd Sess. 177 (1985) (no effective means exist for controlling frivolous litigation under RICO) (statement of N. Minow reflecting views of Arthur Anderson & Co.).

6.2 Fact: The General Remedies Against Litigation Abuse Are Adequate.

See Report of the Proceedings of the Judicial Conference of the United States, Sept. 21-22, 1983, at 56:

Judge Hunter stated that the Subcommittee on
Judicial Improvements, at the request of
Judge Alfred T. Goodwin, had explored ways
and means to reduce frivolous or meritless
litigation in the courts and had canvassed
the various courts for ideas and suggestions.

11

After consideration of the suggestions
received, the Subcommittee concluded, as did
many judges, that the existing tools are
sufficient, but perhaps not fully understood
or utilized.

See, e.g., Ferguson v. M. Bank Huston, N.A., 808 F.2d 358, 360 (5th Cir. 1986) (Rule 11: monetary sanctions and injunction against further litigation under RICO); Spiegel v. Continental Illinois National Bank, 790 F.2d 638, 650-51 (7th Cir. 1986) (Rule 38 sanctions applied to RICO); Gordon v. Heimann, 715 F.2d 531 (11th Cir. 1983) (bad faith counsel fees in RICO: inherent power, Rule 11, and 28 U.S.c. § 1927); Bush v. Rewald, 619 F. Supp. 585, 604-06 (D.C. Hawaii 1985) (Rule 11 supports counsel fees for failure to investigate RICO facts); WSB Electric Co. v. Rank & File Committee to Stop the 2-Gate System, 103 F.R.D. 417 (N.D. Cal 1984) (RICO not applicable to labor dispute: Rule 11 sanctions applied); Financial Federation, Inc. V. Ashkanazzy (1984) Fed. Sec. L. Rep. (CCH) para. 91,489 (D.C. Cal. 1983) (Rule 11 award of $150,000 in legal fees in frivolous RICO claim), vacated and remanded, 742 F.2d 1461 (9th Cir. 1984), reinstated in unpublished opinion; King v. Lasher, 572 F. Supp. 1377, 1385 (S.D.N.Y. 1983) (dispute over will frivolous RICO claim; counsel fee awarded under Rule 11).

See N.Y. Times, March 17, 1989, p.10B, col. 3 (Christic Institute assessed $1 million for bringing frivolous RICO lawsuit).

See also Steven, J. in dissent in Hoover v. Ronwin, 466 U.S. 558, 601 (1984):

Frivolous cases should be treated as exactly
that, and not as occasions for fundamental
shifts in legal doctrine. Our legal system
has developed procedures for speedily
disposing of unfound claims; if they are
inadequate to protect [individuals] from
vexatious litigation, then there is something
wrong with those procedures, not with the

law.

See also Meyers v. Bethlehem Ship Building Corp., 303 U.S. 41, 51-52 (1938) (Brandeis, J.) ("Lawsuits often prove to . [be] groundless; but no way has been discovered for relieving a defendant from the necessity of a trial to establish the fact.")

7.1 Myth: State Common Law Jurisprudence Alone Is Adequate to Deal With Fraud.

12

at 634-35

See Oversight
Securities Industry Association):

Id.

(remarks of Edward I. O'Brien,

[H]undreds of years of common law
interpretation of state law fraud is

completely subverted to RICO.

XXX

abandon well

[The] nation [ought not]
over 200 years of common law development by
the states of what fraudulent practices are

at 590-91 (remarks of Richard P. Swanson, State Bar Association):

There are, and there have always been,

remedies for common law fraud and securities
fraud. There is no evidence whatsoever that
those remedies are inadequate. There is no
evidence of an epidemic of fraud in the last
20 years that would necessitate the broad,
new remedies which RICO provides.

New York

7.2 Fact: State Common Law Jurisprudence Alone Is Not Adequate to Deal with Sophisticated Forms of Fraud.

In the 18th and 19th century, state common law fraud jurisprudence was developed in the context of the then prevailing philosophies of laissez faire and caveat emptor, which were aptly summed up by Mr. Justice Dennison in Queen v. Jones [1794] Salk 397, 91 Eng. Rep. 330: "[W]e are not to indict one man for making a fool of another."

Congress found that sort of jurisprudence inadequate in 1970, when it enacted RICO. 84 Stat. 923. Writing in 1967, the President's Crime Commission, whose studies led to RICO, noted in its The Challenge of Crime in a Free Society 47-48 (1967):

Fraud is especially vicious when it attacks,
as it so often does, the poor or those who
live on the margin of poverty. Expensive
nostrums for incurable diseases, home
improvement frauds, frauds involving the sale
or repair of cars and other criminal schemes
create losses which are not only sizable in
gross but are also significant and possibly
devastating for individual victims." Id. at
33-34.

Since 1970, 28 states have enacted RICO-type legislation, 22 of which include the private multiple damage suit. Blakey, Equitable Relief under RICO, 62 Notre Dame L. Rev. 526, 596 (1987) (chart comparing federal and state RICO statutes). As