restitution alone does not compensate victims for the psychological and emotional distress they have suffered, nor do they provide for interest on the money stolen. Treble damages help compensate these losses as well. Third, the existence of a federal forum provides necessary procedural benefits to victims of multi-state systemic criminal behavior. Current law does not require that a state court allow the plaintiffs in an interstate scheme to sue out-of-state defendants in one state's court. Not only could this result deprive victims of being able to receive compensation for their losses, but it may enable the crimes to continue unabated in other states. Furthermore, litigation of these complex criminal schemes would be open to inconsistent rulings on the same facts and would be much less efficient without the ability to bring suit in federal court. Victims of white-collar crime are often the elderly, poor, disabled and illiterate among the most vulnerable members of - For The society and those least able to protect their own interests. example, nine plaintiffs sued Atlantic Permanent Federal Savings and Loan claiming that the bank conspired with home-improvement dealers in a scheme to obtain second mortgages on lower- and middle-class homes without the knowledge of the homeowners. defendants allegedly targeted elderly, poor and handicapped people, and it is estimated that 500 to 750 people were victimized by this fraud. The nine named pliantiffs lost their homes as a result of this scam. Civil RICO enabled these impoverished victims to successfully sue the largest bank in Norfolk, Virginia for perpetrating this scheme. Tellingly, although civil RICO provides for automatic treble damages, the settlement agreement with the bank awarded less than actual damages to each victim. Clearly, treble-damage liability was important to encourage settlement, but did not result in "windfall" gains for any of the parties. It did, however, give these downtrodden people the means with which to vindicate their rights.. In another case, 423 residents of a retirement community successfully sued the mortgagee for participating in a scheme to fraudulently induce them to purchase life-time occupancy agreements. Many of the plaintiffs invested their life savings to purchase what they believed would be a residence to take care of their needs for the remainder of their lives. After $60 million had been paid into the village, these elderly, ill and disabled people discovered that the facility had always been financially unsound and faced possible collapse. Under the The victims of this scam used civil RICO to sue the perpetrators and save themselves from financial ruin. terms of the settlement agreement, the entire mortgage indebtedness of the village was cancelled, and more than $13 million was restored to the victims. In testimony before this subcommittee in 1986, the attorney in this case stated that "there is no question in my mind but that the results in our lawsuit would not have been attainable were it not for the RICO statute." III. THE FLOOD" Proposals to dilute civil RICO must be weighed against the absence of evidence of a pattern of abuse that would justify weakening its provisions. In fact, the record shows more a drizzle than a flood - and that courts are rigorously dismissing frivolous or nonmeritorious claims. First, there is no "flood" of meritless civil RICO claims against "legitimate" businesses. In fact, according to the - about 82 cases a month Administrative Office of the U.S. Courts, just 990 civil RICO cases were filed in 1987 out of a yearly federal docket of 233,300 cases. As of December 31, 1987, just 1,282 civil RICO cases were pending. Second, cases that are filed must withstand an increasingly rigorous definition of "pattern" in order to survive. A study of reported civil RICO cases for 1985 and 1986 shows that half did not survive a motion to dismiss. In fact, 40 percent of all cases were dismissed on "pattern" grounds alone. In short, judges today are perfectly equipped to screen out meritless civil RICO claims. The prevailing interpretation of "pattern" among the federal courts requires a showing of more than one criminal act and actual ongoing criminal behavior or the threat that the behavior will continue. Where a plaintiff alleges merely multiple mailings connected to the same fraud, an abuse commonly cited by RICO's opponents, courts will dismiss the suit for failing to show a "pattern" of activity. The Supreme Court has recently heard, and will shortly rule on, a case that will clarify even further the scope of "pattern." These facts indicate the proper route for RICO reform, if such reform is deemed necessary by Congress. If Congress wishes to protect innocent parties from suit, it should increase sanctions for frivolous suits, and enhance judges' ability to discriminate between cases that genuinely allege a pattern of activity and those that do not. In short, if civil RICO ain't broke, don't fix it. If it's somewhat broke, fix what's broke but in the fixing, don't wipe out the law's effectiveness. Unfortunately, some of the legislation currently moving through Congress would do just that. In the next section, we will analyze the proposals before this Subcommittee. IV. PROPOSED LEGISLATION: H.R. 4923 In June, Rep. Frederick Boucher introduced legislation to revise civil RICO (H.R. 4923) which is identical to legislation that recently passed the Senate Judiciary Committee (S. 1523, introduced by Sen. Howard Metzenbaum). This legislation, in seeking to address concerns about civil RICO, tilts unmistakably in favor of white-collar defendants and away from consumers and law enforcement. A. General elimination of automatic treble damages - and its fundamental flaw - is the The core of the bill reduction and elimination of treble damages in cases of egregious, ongoing criminal fraud. Law enforcement against such economic crime succeeds only when the potential penalty exceeds the gain from the illicit conduct. By limiting most plaintiffs to actual damages, H.R. 4923 dilutes deterrence and hinders private enforcement of the law a central component of white collar law enforcement. - This reduction to actual damages applies to all businesses, large or small; tax-exempt organizations; mutual funds; and other institutions, and to individual victims of crimes other than consumer fraud. Since institutional plaintiffs are best equipped to bring RICO suits statute - - and advance the deterrent effect envisioned in the they should not be discouraged from doing so by being limited to recovering actual damages. In addition, small businesses that have been victimized should be able to seek multiple damages because the disparity in power and resources between a small business and a large conglomerate is often as great as the gulf between an individual plaintiff and a business defendant. For example, one small firm in Washington state was put out of business by the illegal dumping of toxic wastes next to the firm's place of business. Through the use of civil RICO, the firm secured a multi-million-dollar settlement from Boeing, |