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:] 101ST CONGRESS 1ST SESSION H. R. 1046 To amend chapter 96 of title 18, United States Code (relating to Racketeer Influenced and Corrupt Organizations). I IN THE HOUSE OF REPRESENTATIVES FEBRUARY 22, 1989 Mr. BOUCHER (for himself, Mr. GEKAS, Mr. MICHEL, Mr. COLEMAN of Texas, Mr. BRYANT, Mr. MOAKLEY, Mr. HATCHER, Mr. PENNY, Mr. CLINGER, Mr. SMITH of Florida, Mr. CRAIG, Mr. DERRICK, Mr. SCHIFF, Mr. BURTON of Indiana, Mr. Denny Smith, Mr. Whittaker, Mrs. COLLINS, Mr. HAMMERSCHMIDT, Mr. RAHALL, Mr. KLECZKA, Mr. TALLON, Mr. FAWELL, Mr. SLATTERY, Mr. EMERSON, Mr. SPRATT, Mr. PORTER, Mr. LENT, Mr. MARLENEE, Mr. THOMAS of California Mr. FEIGHAN, Mr. KANJORSKI, Mr. MCEWEN, Mr. BROWN of Colorado, Mr. GORDON, Mr. JACOBS, Mr. LIVINGSTON, Mr. SCHAEFER, and Mr. WILSON) introduced the following bill; which was referred to the Committee on the Judiciary A BILL To amend chapter 96 of title 18, United States Code (relating to Racketeer Influenced and Corrupt Organizations). 1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 SECTION 1. SHORT TITLE. 4 This Act may be cited as the "RICO Reform Act of 5 1989". 2 1 SEC. 2. ADDITION OF PREDICATE OFFENSES. 2 Section 1961(1) of title 18, United States Code, is 3 amended (1) in subparagraph (A), by inserting "prostitution involving minors," after "extortion,"; (2) in subparagraph (B)— (A) by inserting before "section 201 (relating to bribery)," the following: "section 32 (relating to destruction of aircraft or aircraft facilities), sec tion 81 (relating to arson), section 112(a), (c)–(f) (relating to protection of foreign officials and other persons), section 115 (relating to acts against Federal officials and other persons),"'; (B) by inserting after "sections 471, 472, and 473 (relating to counterfeiting)", the following: "section 510 (relating to forging of Treasury or other securities), section 513 (relating to forgery of State and other securities),"; to (C) by inserting after "section 664 (relating embezzlement from pension and welfare funds)," the following: "section 875(a) (relating to threats and extortion),"; (D) by inserting after "section 1029 (relating to fraud and other activity in connection with access devices)," the following: "section 1030 (relating to fraud in connection with computers),"'; |