have been gored by you guys and by some private attorneys, and I think that is why we are in here. I don't think it is the people whose names end in vowels. I don't think they could probably catapult the case up to this position. It is the people whose ox is being gored. Let me proceed with a couple of quick questions. How about retroactivity, Mr. Twist? Mr. TWIST. Mr. Chairman and Mr. Mazzoli, the Association of Attorneys General strongly opposes retroactivity. Mr. MAZZOLI. Remember I asked the question this morning? Mr. TWIST. Yes. Mr. MAZZOLI. Does that affect just simply the measurement of damage or the standard or proof? Mr. Twist. Mr. Chairman and Mr. Mazzoli, I looked at the language after you raised the point. I think it is ambiguous. I think it could certainly be interpreted that it requires both. Mr. MAZZOLI. Mr. Feigin. Mr. FEIGIN. I would agree. I think it is likely to be interpreted to include the standard of proof, and I would also object to it. Although the intention is stated, I am not sure it would even preclude suits against the likes of Ivan Boesky and others. Mr. MAZZOLI. Mr. Long. Mr. LONG. Mr. Mazzoli, I would also point out to you that I made no comment about names ending in vowels. In fact, I am married to a Kentucky woman, so I am very careful about these things. Mr. MAZZOLI. I knew there was something very stable and sensible about you. Mr. LONG. We strongly oppose the retroactivity because we would lose in the case we brought for $75 million, and part of that tripling of the damages would resurrect one of your Kentucky insurance companies that went bankrupt because of one of us. Mr. MAZZOLI. We talked earlier today about treble damages. Some have called that the sword that people are being beaten about the head and ears with. I said then that in order to get a substantial amount of treble damages you have got to have a fairly substantial amount of original damages. Isn't that generally the case? If treble damages is being used as a bludgeon, it is probably because they have done something pretty wrong in the first place. Is that your opinion, Mr. Long? Mr. LONG. Yes, sir. In my case we sued for $75 million. It is costing us $125,000 a month just in the discovery process. The bludgeon has not worked. We have been in litigation for 21⁄2 years, and they told us some rather ugly things when we talked about settling. I wish it would work. Mr. MAZZOLI. Which also kind of answers the question of whether it is a bludgeon. Mr. Feigin. Mr. FEIGIN. I wanted to note, first of all, that Arizona, Colorado, and North Carolina all end in vowels too. As far as treble damages, certainly you must have a large actual damage to multiple into a large treble damage. Let me just note that last week at a panel discussion a prominent plaintiff's attorney who uses RICO frequently appeared and spoke. He indicated that the difference between a non-RICO and a RICO case based on his experience was the difference between something like a 50-percent of actual damages settlement and perhaps a 75- to 80-percent of actual damages settlement. So even with the existence of treble damages used as the so-called bludgeon, these plaintiff's are not even getting the actual damages in settlement. So when the public interest is considered, investment companies and the like, that is still quite a problem. Mr. MAZZOLI. Mr. Twist. Mr. TWIST. Mr. Chairman and Mr. Mazzoli, I would only add to that that I think the studies that have been done in the antitrust area confirm the experience that was reported at the conference that Phil attended. In fact, cited in testimony that has been in the Congress already are Judge Posner's studies when he was still a professor at the University of Chicago about the impact of treble damages in antitrust areas, and I think it is almost the same. Mr. MAZZOLI. Thank you. Thank you, Mr. Chairman. Mr. HUGHES. You have been a terrific panel. In fact, we have had excellent witnesses throughout the day. It has been a marathon session. We thank you for your contributions. I am going to keep the record open in the event some of my colleagues want to address some additional questions to you. We hope you will respond within a couple weeks. That concludes the hearing for today. [Whereupon, at 2:20 p.m., the subcommittee adjourned, to reconvene subject to the call of the Chair.] RICO REFORM ACT OF 1989 THURSDAY, JUNE 15, 1989 HOUSE OF REPRESENTATIVES, The subcommittee met, pursuant to notice, at 10:10 a.m., in room 2237, Rayburn House Office Building, Hon. William J. Hughes (chairman of the subcommittee) presiding. Present: Representatives William J. Hughes, Romano L. Mazzoli, Edward F. Feighan, Rick Boucher, Bill McCollum, and Larkin I. Smith. Also present: Hayden W. Gregory, chief counsel; Edward H. O'Connell, counsel; Phyllis Henderson, clerk; Paul J. McNulty, minority counsel; and Christopher Guisti, Postal Service detailee. 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's objection. Is there objection? [No response.] Mr. HUGHES. Hearing none, it is so ordered. Good morning and welcome to our second hearing on the Racketeering Influenced and Corrupt Organizations Act, the RICO Act. Today we have a great number of witnesses representing well-respected organizations, but with somewhat conflicting views on our very complex act, and an equally complicated reform proposal, the RICO Reform Act of 1989, H.R. 1046. With this in mind, I will keep my opening remarks very short and would urge all those participating today to be concise in their remarks in order that we can quickly get to the major substantive issues we should be addressing. In general we will hear testimony from the major private organizations with a direct interest in various aspects of RICO litigation as it has evolved, particularly since the Sedima case, to ascertain what, if anything, needs to be done to improve the RICO legislation. The specific proposal before us, H.R. 1046, was introduced by our colleague, Rick Boucher of Virginia, and his contribution has been and will be very important in our deliberations. His bill will be called a compromise bill by some of our witnesses today, and I believe the efforts over the last two Congresses that (207) have gone into developing this legislation are appropriate and necessary for such a major endeavor. There are others, however, that in good faith will disagree and say that H.R. 1046 will "gut" a valuable consumer protection statute. We have already heard this message at our first hearing. In any case, H.R. 1046 is a good starting point for our work, and our witnesses today, I am sure, will add considerably to our collective knowledge on this particular issue. Based upon this and subsequent information, I am confident that this subcommittee, as it has done many times in the past with complex issues, will make its own independent judgment on the issues and develop a balanced bill that we can support and justify throughout the legislative process. Our first panel today will be from the major supporters of this legislation, most of whom have worked hard for many, many years to generate support for changes in civil RICO. We welcome you here today. The Chair at this time recognizes the gentleman from Mississippi, who is the ranking republican today on this subcommittee. Mr. SMITH of Mississippi. Thank you, Mr. Chairman. I'd just like to commend the chairman for calling this subcommittee hearing today. I think we have assembled an outstanding group of panelists to hear from. So in the interest of moving on with the hearing and having an opportunity to hear experts on both sides of the issue, again, thank you very much. Mr. HUGHES. I thank the gentleman. Our first panelist is Mr. Philip Lacovara, who is vice president and senior counsel for the General Electric Co., who is appearing today as chairman of the Business Coalition on RICO Reform. Mr. Lacovara is a former partner in charge of the Washington office of Hughes, Hubbard & Reed. They can't be all bad with a name like that. Mr. Lacovara was counsel for the Watergate special prosecutor; Deputy Solicitor General of the United States; special counsel to the New York City police commissioner; and law clerk to the Circuit Court of Appeals Judge Harold Leventhal. Mr. Lacovara is accompanied by James Harrison, who has been a civil RICO defendant, and will be testifying on behalf of the American Bankers Association. Our second panelist is Mr. Kenneth Feinberg, who is a partner in the firm of Kaye, Scholler, Feirman, Hayes & Handler. He is here today to talk to us about his activity as court-appointed mediator in the Shoreham Nuclear Facility RICO litigation. Mr. Feinberg is adjunct professor of law at Georgetown University and has extensive experience in the Senate as an administrative assistant to Senator Kennedy; special counsel to the Senate Judiciary Committee, and as counsel to the Subcommittee on Administrative Practice and Procedure in the Senate. He also has been an assistant U.S. attorney in the Southern District of New York. Our third panelist is Mr. Tony Califa, who is Legislative Counsel for the Washington National Office of the American Civil Liberties Union. Prior to his present position, he served as Deputy Assistant Secretary for Litigation, Enforcement, and Policy at the U.S. Depart ment of Education; assistant attorney general in the litigation branch for the State of Colorado, and practiced law in Denver, CO. Our forth panelist is Ernest DuBester, the legislative representative for the AFL-CIO. Prior to this position, he was with the law firm of Highsaw & Mahoney, primarily practicing in the labor relations field and also with the National Labor Relations Board. Gentlemen, on behalf of the members of the Subcommittee on Crime, we welcome you here today. You each have had in your own right, distinguished careers. We have your prepared statements, which we've all read. They are very comprehensive, and, without objection, they will all be made a part of the record. We hope that you can summarize for us so we can get right to the questions. We will start with you, Mr. Lacovara. STATEMENT OF PHILIP A. LACOVARA, VICE PRESIDENT AND SENIOR COUNSEL FOR LITIGATION AND LEGAL POLICY, GENERAL ELECTRIC CO., FAIRFIELD, CT, AND CHAIRMAN, BUSINESS/LABOR COALITION FOR CIVIL RICO REFORM Mr. LACOVARA. Thank you, Mr. Chairman, I'm delighted to be here this morning. As you mentioned, I have submitted a lengthy statement, which comprehensively, I believe, covers the issues. I wanted to touch only on several of the issues that seem to have been the subject of the most interest in the discussions in recent months. First, the general background of the civil RICO reform effort is the widespread view-not only among business organizations, but as the other panelists here before you this morning illustrate, on the part of organized labor and the American Civil Liberties Union, and others who are not here this morning, such as the Federal judiciary-that the civil RICO statute is out of control and desperately needs revision. The array of supporters of this legislation gives the lie to any contention that it is special interest legislation. As indicated by the remarks of the Chief Justice and two votes by the Judicial Conference of the United States calling on Congress to reform this statute, this movement is born of a recognition that civil RICO is being used to bring cases into Federal courts that, if they belong anywhere, should be tried under State law under prevailing State concepts; or if they involve some Federal interest they are already governed by specific Federal statutes that Congress and the courts have developed to deal with those specific issues. The securities industries, the bank litigation, and so forth, are illustrations of areas in which civil RICO is being used to displace the standards that Congress and the Federal courts have evolved for dealing with problems in particular industries. So there is a widespread view that this statute is being abused in the sense that it is being used either to create Federal cases out of what ought to be State law or local disputes, or is being used to displace Federal standards that more aptly apply to the disputes. There's also been a controversy, Mr. Chairman, about whether this problem is big enough or widespread enough to warrant congressional action. Again, I would note that the Chief Justice and |