multiplied by whatever percent of chance that verdict is going to have. If you say that in any given case the stakes are tripled, that automatically increases the settlement value of the lawsuit.

One of the things that you have to do in looking at civil statutes is not only to analyze what the formal outcomes are supposed to be if everything gets properly proved, but what the impact is on the litigation and settlement process. Here, I think, the impact is to substantially strengthen the plaintiff's hand.

There are probably any number of cases where the plaintiff's hand should be strengthened. But once again, the issue is, can we single out what the situations are in which existing remedies are inadequate for plaintiffs? Also, can we define those and do something about them rather than pass something that is so broad that it applies virtually everywhere and leave it to the courts to try to invent ad hoc interpretations of the plain meaning of this statute to try to get around it?

Mr. BOUCHER. Thank you for that.

Let me also broach with you the problem that I see existing with the way in which the Administrative Office of the U.S. Courts is tracking the number of RICO cases. The civil intake form is very straightforward. It has to be appended to every civil case. It says at the bottom "check one box only." There are a number of boxes: Securities law, labor law, diversity of citizenship, truth in lending. Another of those boxes is RICO. So if the underlying case is a securities case or a truth in lending case or a labor law case, even though a RICO count has been appended, there is no assurance that the plaintiff's attorney will check the RICO box. He could just as easily check the other boxes, and in fact that happens on many occasions.

Is that your understanding?

Mr. LYNCH. I think that is exactly right. That is true of these forms. It's true of a lot of the statistics we rely on in the judicial system. There are overlapping ways in which cases can be classified, particularly if the person doing the classification is a lawyer who only gets the form handed to him and it is of no great importance to that lawyer. But even if the person filling out the form is a clerk who is supposed to make some objective decision about what box should be checked; there are too many different systems of classification, too many borderline cases. It is not always that easy to track.

As I said before, every judge I have ever spoken to has said these numbers are out of whack.

Mr. BOUCHER. Thank you for that.

Mr. Chairman, I will ask one followup question because I know others have questions.

If you take the raw figures that the Administrative Office produces from these intake forms, it shows about 1,000 RICO cases being filed annually, which is something less than 1 percent of the total civil caseload across the country. Yet, as you have indicated, Federal judges have a far different story to tell. The anecdotal evidence that I have from talking with a handful of Federal judges is that as many as a sixth of all of the civil cases on their dockets are civil RICO claims. So the numbers from the Administrative Office may be off by orders of magnitude.

Do you agree with that?

Mr. LYNCH. I agree with that generally. Whether the number is a sixth or something else, I don't know.

Mr. BOUCHER. Thank you, sir.

Mr. HUGHES. I would suggest part of the problem is probably they plead RICO as one of the counts in the complaint and it may not be classified as a RICO case but perhaps a contract case.

The gentleman from Pennsylvania.

Mr. GEKAS. I thank the Chair.

I was wondering whether or not our original concept in trying to reform RICO isn't still applicable and we may be too late for it. It seemed to me that that was one of the best solutions, and that is to require a prior conviction as the foundation for a civil RICO case. Have we totally left that concept and made it impossible to adopt?

Mr. LYNCH. There are certain problems with doing that, I suppose. The advantage of doing that is it would virtually wipe out civil RICO. There is a case to be made for doing that. There is a case to be made that we should scrap it and start over and this would in effect accomplish that.

The reason it would accomplish that is that there are far fewer criminal cases brought than civil cases. Many of those criminal cases, even ones that are brought under RICO, are brought against people who either don't have assets or whose assets are well hidden because they are criminally obtained. These are not people who most of their victims are going to be in a position to sue. It is one reason why this concept of cutting back civil RICO to those cases that involve organized crime is nice in theory but it is a little bit silly in practice. You don't see too many people suing the leadership of organized crime because they were injured by activities that organized crime engaged in.

Mr. GEKAS. It's impractical too, don't you think?

Mr. LYNCH. I think it's impractical to say that one is accomplishing anything or is leaving very much of civil RICO if one institutes that requirement. Maybe one could reasonably conclude that that is fine because there isn't much value to civil RICO. Certainly, taking the standpoint of law enforcement, it seems to me there isn't much value in civil RICO. Whether there is a value to individual plaintiffs is, of course, another question.

The original concept, I suppose, in having a civil provision was at least in part to supplement the efforts of Federal prosecutors by enlisting private attorneys general, by giving them some stake in pursuing various kinds of criminal activity. I would just submit that for those cases of the most serious kinds of criminal activity that is a pipedream and for other kinds of cases one runs the risk of overstimulating a civil suit.

Mr. GEKAS. So we are beyond that. We can't undergo an examination of that anymore and really make any political and practical sense out of it.

Mr. LYNCH. As far as political and practical sense, that depends on what the consensus is out there of all of the people who are privately interested in this. I think it is an idea that is preserved in part in the present bill, although the present bill does open up

wider areas of civil RICO than simply requiring conviction as a prerequisite would.

Mr. GEKAS. The two latest cases that ran concurrently, the Helmsley and Indelicato cases, cry out for immediate action on the part of the Congress, do they not?

Mr. LYNCH. Absolutely. It is worth taking 1 minute to describe them.

Indelicato is a case that is in the sort of core organized crime area, a criminal case in which a defendant was convicted of a RICO violation for the simultaneous murder of three people. It was a mob hit. He walked into a restaurant and killed three people. This was held to be a pattern of racketeering activity even though the three acts all took place at essentially the same moment.

Helmsley is a more ordinary kind of civil case.

Mr. GEKAS. Do you believe the package that we have in front of us will treat that kind of situation salutarily?

Mr. LYNCH. It would probably leave the plaintiffs in the Helmsley case with a remedy, although I would have to analyze that more carefully to be sure. That was a condominium conversion situation, and I don't think that is excluded by this bill. It wouldn't help Mr. Indelicato at all.

Mr. GEKAS. I would formally request, if you wouldn't mind helping us a little bit more, your taking those two cases and applying them to our proposed legislation and telling us how they come out or how the statute comes out.

Mr. LYNCH. I would be happy to do that.

Mr. GEKAS. Thank you.

I have no further questions.

Mr. HUGHES. We have a vote in progress. It will take us about 10 minutes. We are going to recess for 10 minutes, and I hope my colleagues will come back for another round.

[Recess.]

Mr. HUGHES. The Subcommittee on Crime will come to order. The gentleman from Florida, Mr. Smith, is recognized for 5 minutes.

Mr. SMITH of Florida. Thank you, Mr. Chairman.

Professor, in a recent Justice Department publication, I believe their civil RICO manual, the editor notes that State and Federal obscenity offenses are now RICO predicates and the manual more or less encourages U.S. attorneys to proceed against dealers in obscene materials through civil RICO suits.

Do you have any comments on this kind of approach?

Mr. LYNCH. I think it presents serious civil liberties problems. Obscenity is obviously a very difficult problem to figure out what are appropriate approaches to law enforcement. The Supreme Court recently decided a case arising out of Indiana based on the Indiana equivalent of RICO that insisted that in at least some respect a RICO prosecution or a RICO lawsuit against a dealer in pornography was subject to the same constitutional standards as any other kind of prosecution for pornography. Basically, the issue there was provisional remedy.

I think this is just another example of the way in which both civil and criminal RICO is susceptible to being adapted to just about any kind of problem. There is an incentive to adapt it to

whatever issue one feels strongly about because it provides very potent remedies, more potent than the remedies that would be available under other kinds of lawsuits.

Mr. SMITH of Florida. You wouldn't quarrel with the criminal RICO provisions where they provide the ability to use criminal RICO statutes for conversion of assets, et cetera, in the event that there is a pattern of racketeering based upon either convictions or allegations which are ultimately sustained, would you?

Mr. LYNCH. I would in one respect, and it is related to the problem with forfeitures even on the criminal side of RICO for any kind of crime that occurs in a corporate context. One of the forfeiture provisions which I think is little known to the general public is that not only are the proceeds of the crime forfeitable, but the defendant's interest in the enterprise is forfeitable. This means that somebody who owns a large block of stock in a company who engages in racketeering acts which form a pattern but which may not be a very substantial part of the company's overall business is liable to the loss of his entire interest in the company. There are cases where rather extensive forfeitures have been approved by courts and juries.

Mr. SMITH of Florida. Have they been challenged up to the Supreme Court level?

Mr. LYNCH. No, I don't think there has been an interest forfeiture case in the Supreme Court.

Essentially, the lower courts have ruled that the only limit on this is the cruel and unusual punishment provision. Since the only nondeath penalty case that was held cruel and unusual punishment in modern times was a case of life imprisonment for a handful of bad checks, it is hard to see how much people are going to get from that.

Mr. SMITH of Florida. That would be the only check on the relationship of the pattern to the overall business done by the organization or otherwise, the percentage of what might have been yielded or netted as a result of this is cruel and unusual punishment? Mr. LYNCH. Right. In theory, you could forfeit everything the person owns if it is all invested in the same business. The problem with the obscenity case is if somebody has a legitimate bookstore, putting to one side somebody who is selling only pornography, and they sell two copies of something that is illegal to sell, conceivably the entire bookstore could be forfeited to the Government and shut down. Which is a great deterrent if all you are interested in is keeping pornography off the shelves, but it may be too much of a deterrent if it makes the bookstore owner so leery of any material that could possibly be prosecuted that they keep out not only-Mr. SMITH of Florida. Then you have a question of censorship as a result.

Mr. LYNCH. That's right.

Mr. SMITH of Florida. There have been some significant changes in the application of the law. As I indicated before, there has been an expansion of the use of RICO in labor areas, 1964 (a) and (b). Do you see conflict either existing now or possibly coming to the fore vis-a-vis other existing labor laws?

Mr. LYNCH. Absolutely, though I am not a labor law expert. In general, one of the things that the Justice Department has done,

and I think once again has done commendably in terms of the actual application, has been to use RICO to go after corrupt labor union officials and indeed to use civil RICO in order to restructure corrupt labor unions.

I have no particular problem with the suits that they have brought, but the question once again is, do you as Members of Congress want to have labor laws that have been written by the representatives of the people with a view to deciding what is the appropriate structure of union democracy, or do you want to have that all superseded by prosecutors going on their own for whatever remedy the judge will think is the good thing to do with a particular union.

Mr. SMITH of Florida. Given that and your answers to the last question, where do you then draw the line or how do you draw the line when you have legitimate cases that are RICO cases that can be significantly drawn and are legitimately drawn and at the same time others where you roll over like that into other areas where there may be a pattern, there may be racketeering, et cetera, and yet you run afoul of what we are already trying to do in existing legislation?

Mr. LYNCH. I think the problem is that the concepts of this RICO law are just too broad. One has to identify in the labor area, for example, what are the laws that are being violated and are the penalties sufficient and are there other laws that need to be added in that area.

If you just say anybody who does bad stuff, we can go get them, different people are going to have different views of what are bad acts. If you pass a law that says anybody who commits any of a series of crimes can have the penalties doubled or anybody who commits a crime in the context of a labor union, the Justice Department can come in and seek whatever remedies by way of restructuring the union that the judge thinks are appropriate, you have just got too much breadth and no guidance in how it is going to be applied.

Mr. SMITH of Florida. With treble damages and forfeiture you also have a situation where it bears no relationship to the reality of what the crime was vis-a-vis the total amount of business or transactions made by that entity.

Mr. LYNCH. Yes. Conceivably so, especially with the forfeiture of the interest of the defendant in the enterprise.

Mr. SMITH of Florida. That arises in criminal RICO.

Mr. LYNCH. That's right.

Mr. SMITH of Florida. I am talking about in terms of even the treble damages here.

Mr. LYNCH. Treble damages at least bears a relationship, a three to one relationship.

Mr. SMITH of Florida. But it bears three to one on what the award is, not on what the percentage of the criminal activity might have been or the whole ball of wax.

Mr. LYNCH. Exactly right.

Mr. SMITH of Florida. Let's talk about a few hot checks. You could probably have passed $10,000 and be hit with a $50,000 or $100,000 or $250,000 or a $1 million RICO award. It bears no direct relationship.