Page Long, James E., commissioner of insurance, State of North Carolina, repre- Lerach, William S., Esq., Milberg, Weiss, Bershad, Specthrie & Lerach, San Diego, CA, and president-elect, National Association of Securities and Commercial Law Attorneys....... 420 123 23 Rakoff, Jed S., Esq., Mudge, Rose, Guthrie, Alexander & Ferdon, New York Sawyer, Harold S., attorney, Warren, Norcross & Judd, Grand Rapids, MI, and former Representative from the State of Michigan 483 Twist, Steve, chief assistant attorney general, State of Arizona, representing the National Association of Attorneys General 162 Waldman, Michael, legislative director, Public Citizen's Congress Watch... LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARINGS Blakey, G. Robert, professor, Notre Dame Law School: Prepared statement ...... Boucher, Rick, a Representative in Congress from the State of Virginia: Article, the Wall Street Journal, entitled "Get RICO Cases Out of My Courtroom," May 19, 1989..... 389 643 369 554 Boyle, E. Thomas, Esq., Suffolk County attorney, Suffolk County, NY: Brown, Judie, president, American Life League, Inc.: Prepared statement... Califa, Antonio J., legislative counsel, American Civil Liberties Union, Washington office: Prepared statement..... 462 336 Chiesa, Robert L., chairman, RICO Coordinating Committee, on behalf of the 444 Direnfeld, Barry, Esq., senior partner, Rivkin, Radler, Dunne & Bayh, and 654 544 DuBester, Ernest, legislative representative, American Federation of Labor and Congress of Industrial Organizations: Letter to Hon. John Conyers, Jr., chairman, Subcommittee on Criminal Justice, from Laurence Gold, general counsel, AFL-CIO, October 11, 1985. Prepared statement Eikenberry, Ken, attorney general of Washington, Olympia, WA: Letter to Feigin, Philip A., securities commissioner, State of Colorado, representing the Memorandum and order, application of RICO, U.S. District Court for the 248 243 163 142 282 Prepared statement 272 Focht, Theodore H., president and general counsel, Securities Investor Protection Corp.: Prepared statement.. 381 Gilbert, Pamela, consumer program director, U.S. Public Interest Research 394 Goelzer, Daniel, Esq., General Counsel, Securities and Exchange Commission: 516 Goldstock, Ronald, director, New York State Organized Crime Task Force: 615 Harrison, James L., Sr., president and chief executive officer, First Community Bankshares, representing the American Bankers Association: Prepared statement.. 257 Harrison, Marion Edwyn, general counsel, American Life League, Inc.: Prepared statement.... 462 Keeney, John C., Deputy Assistant Attorney General, Criminal Division, U.S. 90 Lacovara, Philip A., vice president and senior counsel for litigation and legal policy, the General Electric Co., Fairfield, CT; and chairman, Business/ Labor Coalition for Civil RICO Reform: Prepared statement 212 Lerach, William S., Esq., Milberg, Weiss, Bershad, Specthrie & Lerach, San Diego, CA, and president-elect, National Association of Securities and Commercial Law Attorneys: Prepared statement......... 423 Long, James E., commissioner of insurance, State of North Carolina, repre- Lynch, Gerald E., professor of law, Columbia University: Prepared statement.. Sawyer, Harold S., attorney, Warren, Norcross & Judd, Grand Rapids, MI, Prepared statement Resolution submitted by RICO Subcommittee of the National Association of Attorneys General 187 Waldman, Michael, legislative director, Public Citizen's Congress Watch: Zimroth, Peter L., corporation counsel of the City of New York: Prepared statement.......... 394 562 APPENDIXES Appendix 1.-Text of the Racketeer Influenced and Corrupt Organizations 735 745 Appendix 3.-RICO case standing order of the U.S. District Court for the 748 Appendix 4.-A Congressional Research Service Report for Congress, RICO: A 753 Appendix 5.-Facts and Myths Concerning RICO, submitted by Prof. G. 766 803 840 997 Appendix 6.—Ållegations of Litigation Abuse in Private Civil RICO Cases, submitted by Prof. G. Robert Blakey Appendix 7.-A detailed analysis of H.R. 1046, the RICO Reform Act of 1989, Appendix 8.-Slip opinion, H. J. Inc., et al. v. Northwestern Bell Telephone Appendix 9.-Brief for the National Association of Manufacturers as amicus Appendix 10.-Brief of the American Institute of Certified Public Accounts as amicus curiae in support of respondents in the case of H.J. Inc., et al. v. Northwestern Bell Telephone Co., et al. Appendix 11.-Statement of James T. Corcoran, vice president, government affairs, the Greyhound Corp. Appendix 12.-Correspondence with attachments to Hon. William J. Hughes from Frank Kelley, attorney general, State of Michigan, August 2, 1989........ Appendix 13.-Correspondence with attachments to Hon. William J. Hughes from J. Burleigh Arnold, special deputy receiver, Transit Casualty Co., Los Angeles, CA, August 10, 1989 Appendix 14.-Correspondence with attachment to Hon. William J. Hughes from Lynn Ross, deputy director and legislative director, National Association of Attorneys General, August 14, 1989. Appendix 15.-Correspondence with attached exhibits to Hon. William J. Hughes from Prof. G. Robert Blakey, Notre Dame Law School, August 16, 1989 Appendix 16.-Statement of the Anti-Defamation League........ 1025 1061 1097 1101 1109 1121 1124 1258 RICO REFORM ACT OF 1989 THURSDAY, MAY 4, 1989 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON CRIME, The subcommittee met, pursuant to notice, at 10:10 a.m., in room 2226, Rayburn House Office Building, Hon. William J. Hughes (chairman of the subcommittee) presiding. Present: Representatives William J. Hughes, Rick Boucher, Romano L. Mazzoli, Edward F. Feighan, Lawrence J. Smith, Bill McCollum, George W. Gekas, Michael DeWine, and Larkin I. Smith. Also present: Hayden Gregory, chief counsel; Edward O'Connell, counsel; Phyllis Henderson, clerk; Paul McNulty, minority counsel; and Charles Gilmore, intern. OPENING STATEMENT OF CHAIRMAN HUGHES Mr. HUGHES. The Chair has received a request to cover this hearing in whole or in part by television broadcast, radio broadcast, still photography, or by other similar methods. In accordance with committee rule 5(a), permission will be granted unless there is objection. Is there objection? [No response.] Mr. HUGHES. Permission is granted. Good morning and welcome to our first hearing on the Racketeer Influenced and Corrupt Organizations Act, the RICO Act. Since its enactment in 1970, RICO has proven to be a very effective weapon for law enforcement. The RICO Act, however, was used sparingly in the first 10 years of its existence and only in the last 8 years has there been definitive interpretations of its broad language by the U.S. Supreme Court. Indeed, there is a case pending before the Supreme Court during this term, H.J. Inc. v. Northwestern Bell, which will further refine what a "pattern of racketeering" entails. When the ordinary person hears of the RICO Act and such terms as "racketeering," "pattern of racketeering" and the like, they normally think of criminal law and organized crime. We will in fact be looking at this type of conduct during the course of our investigation. In recent years, however, there has also been a growing concern about the increased use of the RICO statute in many areas of civil commercial fraud which appears to be far afield of the conduct Congress was considering when the RICO Act was enacted. This (1) was noted in Supreme Court Justice White's decision in the 1985 Sedima case when he stated, "We nonetheless recognize that, in its private civil version, RICO is evolving into something quite different from the original conception of its enactors." Consistent with this observation we will be looking at various aspects of RICO litigation as it has evolved, particularly since the Sedima case, to determine if the law is being used properly and if it needs to be improved. We have before us H.R. 1046, the RICO Reform Act of 1989, which was introduced by our very distinguished colleague and member of the subcommittee, Rick Boucher of Virginia. I am sure his perspective on these issues will be of great assistance in this undertaking. We are delighted to have him as a member of the subcommittee this year. As most of you know, RICO reform legislation has been introduced and considered in the two previous Congresses. However, this is the first opportunity for the Subcommittee on Crime to conduct an indepth review since the issue was handled by another subcommittee in previous Congresses. I know that there is a tremendous amount of interest in reform of civil RICO by persons and organizations representing both sides of the issues as well as by several who are in between. A number of such interest groups have contacted the subcommittee to express their concerns and recommendations and to ask what they may expect from the subcommittee. My answer has been that you can expect a thorough and objective examination and analysis of all the issues raised by the RICO statute and by proposals to reform the legislation with an opportunity for all sides to be heard before we attempt to make any final decisions. This will take some time. I anticipate that several hearings will be necessary. Today, for example, we will not be hearing testimony from interested parties who represent the core constituency of civil RICO reform or from those who tend most to oppose such changes. The bill before us, H.R. 1046, reflects a lot of debate, discussion and compromise among various parties interested in the legislation. It has been called a compromise or consensus bill. Of course most of that took place in the closing days of the session. That is not the way we should legislate. But in any event, there was some consensus arrived at, and we are going to certainly take that into consideration. [The bill, H.R. 1046, follows:] |