I want to turn now to Mr. Montague from Philadelphia, who has worked on business fraud and antitrust cases, and we welcome the time and attention you have given the subcommittee in coming here and preparing for this testimony. Welcome.

STATEMENT OF H. LADDIE MONTAGUE, ESQ., BERGER &
MONTAGUE, P.C., PHILADELPHIA, PA

Mr. MONTAGUE. Thank you, Mr. Chairman.

I am very pleased to be here, Mr. Chairman and Representative Edwards. I would like to depart from what I had prepared and really discuss some of the things that have been raised during the day. I am sorry that Representative Boucher isn't here, because I would like to address some of the reasons that he raised for needing an amendment to the present RICO.

I, for the record, support the present civil RICO Act the way it now exists.

Mr. CONYERS. Pull the mike just a bit closer, would you?

Mr. MONTAGUE. Yes. Representative Boucher said one of the concerns was how reputations were injured. Well, I agree with what Mr. Ehrenbard just said, but in any event, to the extent that the amendments do address that issue, I don't see where that is a problem. That, to me, is a difference without a distinction, because what we are really concerned about is the teeth of private enforcement and the deterrence, and I really don't believe that whether someone in a courtroom is labeled a racketeer or if one day in a newspaper the word racketeer is associated with their name, that really has a lasting effect on anything.

Second, the thing that troubled me most was his statement that substantial settlements are leveraged. I don't believe that there is any basis for that statement whatsoever. Personally, I have been involved in approximately three private RICO cases, and none have settled yet. One has been pending since 1983.

Second, I have extensive experience in antitrust litigation, particularly plaintiffs' antitrust litigation, and even more particularly in class action plaintiffs' litigation, for about 25 years.

Those cases, which were for treble damages, normally settle. They normally settle for less than single damages. In fact, in a class action when a judge has to approve a settlement as being fair and reasonable, the courts in assessing whether a settlement is fair and reasonable, assess it against what the maximum recovery would be for single damages. The courts disregard treble damages to determine whether it is going to be fair and reasonable. I just believe that that is a makeshift argument by people who are opposed to the clout that the present civil RICO bill has. I don't have to repeat why that clout is necessary in today's environment.

The third thing I would like to touch on is abuse. I will again pick up, but not repeat what Mr. Ehrenbard said. I think from Congress' point of view, abuse is not where a case has been brought into courts and has been dismissed. That is not an abuse. The courts have taken care of that. I think an abuse would exist if a case has been brought and plaintiff prevails, and Congress believes that the result is not intended and that an injustice results. I don't know of any instance of that under the RICO laws. I have made a

fairly extensive study of the RICO cases, because I have been on panels with the ABA, plus the cases I am in, and I don't know of any cases where a plaintiff has prevailed where the outcry has been that some unjust result has occurred.

I don't really believe where has been an abuse from Congress' point of view. As Mr. Ehrenbard said, as a law matures, there are attempts to stretch it; even the fifth amendment sometimes is invoked improperly. It is part of our judicial system.

I know that we are running late and I would like to make one point with respect to these RICO cases. I am presuming, maybe erroneously, that the members of this committee have not had the experience or at least extensive experience in litigating a complex and protracted case. I would like to just explain a little bit what that is like, and why the incentives of treble damages are needed. Almost all RICO cases, particularly in today's sophisticated society, are complex and protracted cases. A RICO case is not a case where you file a complaint, maybe take a deposition or two, and are ready to go to trial.

Mr. CONYERS. We have got a problem. The second bells have already rung on a recorded vote, and we are in a corner that is furtherest removed from the floor of the Congress. I know you are on a short time schedule. Will you be able to remain until we get back? Mr. MONTAGUE. Yes.

Mr. CONYERS. We will make it as quickly as we can.
Mr. MONTAGUE. Thank you very much.

[Recess.]

Mr. CONYERS. The subcommittee will come to order.

My colleague, Congressman Edwards, has noted that this is probably the greatest waste of lawyers' time to have us go to this many record votes on the floor and leaving you here when this testimony could have been accomplished in a relatively short period.

We apologize. As you know, this is unavoidable, but we are aware of the value of your time. We do appreciate your concern with the subject matter that would lend you to stay and hang in here with us on this matter.

Please continue, sir.

Mr. MONTAGUE. Thank you, Mr. Chairman. But lawyers' time pales in comparison to the importance of your votes. So we sit here very patiently.

Mr. CONYERS. Thank you.

Mr. MONTAGUE. Before the break, I was trying to impart to you the difficulty and the enormity of risks that are undertaken in a RICO case, that it is not a simple case where a complaint is filed and a few depositions are taken and you are ready to go to trial and if you lose, you lose, what is the big deal, you don't have a big risk.

The RICO case is, quite to the contrary, very complex. It requires a tremendous amount of document discovery, of attempting to trace funds that have been laundered very often through a series of secret foreign bank accounts ending up in Switzerland or someplace that like.

It requires taking depositions, mostly of either hostile witnesses or witnesses that are intimidated and concerned if they tell the

truth they are going to lose their jobs and livelihoods and that their family is going to be imperiled.

The defendants are normally represented by extremely skilled and experienced attorneys from the major law firms with great litigation resources. They use every single pretrial trick and motion and procedure and practice that is allowed and some that maybe aren't allowed.

It is just an incredible high-risk litigation and it requires a tremendous amount of effort and it is not a simple decision that a lawyer or client is going to undertake one of these cases.

Mr. CONYERS. So that the notion that lawyers that want to get off to a fast start, young lawyers, should go out and try to institute as many civil RICO suits as possible are going to get the biggest shock in their brand new careers. You know, this canard is tossed around in the Congress rather regularly, gentlemen, that there are people out here hustling RICO cases, as it were.

Mr. MONTAGUE. Well, I think lawyers that undertook that would be, using a colloquialism, eaten alive and they would regret the day they did it. These are very serious types of litigation and unless they are done properly and thoroughly, you don't stand a chance. I can just tell you that a case that we filed in 1983 against General Dynamics, and some of its former employees, involving kickbacks and laundering of money and bankruptcy, fraud and entering into an improper settlement, that is a case which I personally have been involved in and I have probably taken over 50 depositions and probably looked over 150,000 documents.

We had to defeat a motion to dismiss early on because they say we didn't plead RICO properly. That was in the early stages of civil RICO.

We won that. We then had a tremendous motion for summary judgment before the late, and I consider the great, Judge Edwin Weinfeld, which with the documents before him were higher than he was.

He denied that motion and, unfortunately, he died. Now that case is pending before a new judge that has to familiarize himself with that record and while we were ready to go to trial before Judge Weinfeld as the next case, who knows when we are going to go to trial.

I allude to that in the retroactivity part of my written statement and I won't repeat that here. But that is just another case that you have heard of today and, as you mentioned earlier, Mr. Chairman, there are probably many more of those out there.

With respect to the requirement of convictions, it almost seems it is ironic, if that is a strong enough word, that although it is acknowledged that the civil RICO should have an incentive to private enforcement of RICO violations, that the person who brings a suit on the tail of a criminal case reaps the reward and the person who uncovers the RICO violation and really takes an even greater risk and perhaps even uncovers it for the Justice Department, or the U.S. attorney, that person doesn't reap the award. That person gets single damages. I think the Supreme Court addresses that specifically in the Sedima case, 105 S.C. 3284. I think that was a specific recognition by the Supreme Court, when they said that the present statute doesn't require a conviction of RICO. The General Dynam

ics case raises a myriad of questions if that type of conviction was required. There, two of the defendants, as soon as they were indicted, left the country and they are hiding out and they are in places where they cannot be extradited. So they are currently fugitives from justice and can't be tried. Shouldn't they be subject to treble damages? Particularly where a codefendant who was tried and charged to have been in a RICO enterprise with those people was found guilty and it was affirmed on appeal.

Suppose, as often happens, that the Government gives immunity to a particular witness because they need the testimony and, therefore, that particular person is not convicted, but he is very involved in the violation, should he be not subject to treble damages?

Suppose in prosecutorial discretion, someone is not named as a defendant; or suppose the corporation for which these employees work closes its eyes to the particular violations involved, but the corporation was not prosecuted because it was on the periphery. The corporation could have stopped the violaion, but it didn't. Under the civil law, it may be responsible under respondeat superior, but because it is not sued or named as a defendant in a civil case, should it escape civil liability although its employee stood trial and was convicted?

Such a result doesn't make sense to me. I don't see the rationale behind it and what it leads to and what it gains for anybody. I don't see how the proponents of that rule can say it accomplishes anything, whereas it hurts the persons who have been injured under RICO.

I have made a few suggestions in my written statement, and I will stand on those, but there is one I would like to call to the attention of this committee. I do this alternatively because I strongly urge that the RICO statute civilly stay as it is, but if it has to be changed-

Mr. EDWARDS. Is that the view of all three witnesses, that the RICO statute should remain the same?

Mr. MONTAGUE. I can't talk for anybody but myself.

Mr. SKIRNICK. That is my view, Representative Edwards, and Chairman Conyers.

Mr. EHRENBARD. I only speak on the subject of retroactivity.

Mr. MONTAGUE. By the way, I am not opposed to this labeling amendment, but to me that is just meaningless. If, for some reason, there has to be in the wisdom of Congress a limitation on trebling of damages, I suggest that a standard be set for the court to follow and that rather than Congress saying this act and that act and that act shall be trebled or doubled and this act and that act shall not, because you really don't know what the facts are in every case and there may be facts which exacerbate a particular situation in a particular case, that that decision in the very least should be left to the court or to the trier of fact to determine, based on the set of guidelines that Congress feels is appropriate.

And, in fact, you have done that in both the proposed amendments with respect to what the trier of fact should consider with respect to punitive damages. But I really believe that if, in fact, there is going to be any limitation, Congress ought to set broad guidelines, not specific cases or instances, and let the trier of fact

With respect to retroactivity, I don't believe I can say anything any stronger than has already been said. I just endorse it wholeheartedly.

I just believe that in this particular climate, it is so important to keep the incentives that are in RICO and not to remove them from RICO, making it a less effective weapon to combat fraud in the marketplace.

I believe that a result that does lessen the clout of RICO will be a disservice to the public. I believe it is the victims of the business fraud that should be given the incentives to enforce the law and to deter future violations and that the legislation should not be passed which panders to the cries of abuse from those who have violated the law.

Thank you very much.

Mr. CONYERS. Thank you very much.

[The prepared statement of Mr. Montague follows:]