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Racketeering (RICO) / Illegally Conducting an Enterprise (Federal Charge)

Note: If you have been charged with Federal Racketeering / RICO or Illegally Conducting an Enterprise, contact our law firm immediately before speaking with the authorities. Speaking with us first could have a major impact on the outcome of your case.

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What is the RICO Act?

In 1970, the Federal Government enacted the Racketeer Influenced and Corrupt Organizations Act (“RICO”). RICO prohibits a person from utilizing a pattern of unlawful activities to infiltrate an interstate enterprise. For example, mobsters infiltrating legitimate businesses (such as casinos) through racketeering activities. Although the statute may have started out with this scenario in mind, it now applies well beyond these circumstances. Whether in the Phoenix area, or anywhere in Arizona, in order to state a RICO violation, under 18 U.S.C. §1961 “racketeering activity”, a criminal indictment must include the following elements:

  1. That a “person”, or any individual or entity capable of holding the legal or beneficial interest in a property
  2. Has utilized a “pattern of racketeering activity” or the proceeds thereof
  3. To infiltrate an interstate “enterprise”
  4. By (a) Investing the income derived from the pattern of racketeering activity in the enterprise; (b) acquiring or maintaining an interest in the enterprise through the pattern of racketeering activity; (c) conducting affairs of the enterprise through the pattern of racketeering activity; or (d) conspiring to commit any of the above acts.

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What are Federal Racketeering Charges?

As a general rule, regarding Element number (1) of the 18 U.S. Code §1961 , a principal owner (i.e., a “person”) is liable for the harm caused by his agents or employees when those agents were acting within the scope of their employment or apparent authority. Regarding Element number (2), in order to have a “pattern of racketeering activity” there must be two or more specified “predicate acts” which constitute a pattern showing a continuity and relationship. These approximate 56 predicate acts for a Federal RICO action are outlined in 18 U.S.C. §1961 (1)(B)-(F).

Arizona RICO charges offenses qualify as predicate acts generally if there is “any act or threat involving murder, kidnapping, gambling, arson, robbery, which is chargeable under state law and punishable by imprisonment for more than one year”. The Federal Government has now added acts of terrorism and acts committed under the Immigration and Nationality Act, (if committed for the purposes of financial gain a person is bringing in illegal aliens in general, or for immoral purposes).

Regarding Element number (3) above, in order to infiltrate an interstate “enterprise”, the Federal Government has defined an enterprise as including “any individual, partnership, corporation, association or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” The courts have interpreted this to mean that the enterprise needs to have an organization or structure beyond that which is necessary to commit the Racketeering acts themselves. In other words, it must have a structure whose purpose is separate from the predicate acts themselves.

Regarding Element number (4)(a), the Government must show that the defendant was investing the income derived from the pattern of racketeering activity in the enterprise. 18 U.S.C. §1962 (a) describes that it is unlawful for any person to use or invest any income, or the proceeds of any income, derived from the pattern of racketeering activity or the collection of an unlawful debt, to establish, operate or acquire any interest in the enterprise engaged in or affecting interstate commerce. The subsection further requires that the defendant “participated as a principal”. This helps prevent the situation in which this statute could be used to criminalize the conduct of a person who receives the proceeds of a pattern of racketeering activity innocently or unknowingly.

Additionally, the victim has to suffer an injury resulting from the investment of the unlawfully obtained proceeds of racketeering activity, as opposed to any injuries caused by the racketeering activities themselves.

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Element number 4(b) requires the Government to show that a defendant acquired or maintained an interest in the enterprise through a pattern of racketeering activity. The “interest” must be shown to be material in some relevant aspect. As to “control” this is not limited through stock or capital ownership. “Control” normally is thought to be the “kind of power that an owner of 51% or more of an equity would normally enjoy”. However, there is no requirement that “the defendant participate in the actual operation for management of the enterprise”.

Next, Element number 4(c) requires the Government to prove that the defendant was conducting the affairs of the enterprise through a “pattern of racketeering activity”. This particular element of RICO is probably one of the most complex. It involves the “operation or management test”. The U.S. Supreme Court held that one must “participate in the operation or management of the enterprise itself” to be subject to liability under this provision. Since the U.S. Supreme Court’s decision in Reves v. Ernst and Young, there have been many interpretive cases. The Ninth Circuit (the circuit that governs Arizona, California, Oregon, Washington, Idaho, Montana, Nevada, Alaska and Hawaii) has held that “simply performing services for the enterprise does not rise to the level of direction, whether one is ‘inside’ or ‘outside’”. In other words, defendant must actually be “directing” as opposed to “merely doing an act”.

The final Element, under 4(d), requires that the Government must prove a defendant was conspiring to omit any of the above acts. In other words, defendant must be in agreement with others to commit a certain act. The defendant is still responsible for conspiracy even if he or she did not commit the substantive acts that could constitute the violation itself. Also, conspiracy to violate RICO is not the same as a conspiracy to commit predicate acts. There must be an agreement to employ a pattern of racketeering activity, or the proceeds thereof, so as to effect an enterprise in one of the three ways set forth in one of those sections under 18 U.S.C. 1962(a), (b), or (c). In the Ninth Circuit, the court has also concluded that a parent corporation can conspire with its wholly own subsidiaries to violate 18 U.S.C. 1962(d).


Possible Punishments for Federal Racketeering (RICO) Racketeering / Illegally Conducting an Enterprise

In 1987, the United States Sentencing Commission presented its Sentencing Guidelines. One of the goals of the Sentencing Commission was to bring about tougher sentencing for “White Collar crimes”. Even the most minor White Collar felonies would draw incarceration under the guidelines. Until 2005, these guidelines were mandatory, then the U.S. Supreme Court’s decision in U.S. v. Booker changed the rules and held that the sentencing guidelines are now advisory in nature (in other words, the judge has much more discretion).

The sentencing guidelines assign a numerical offense level (ranging from number one to number forty three) for every Federal offense. Level one is the lowest, and level forty three is the highest (i.e., a level forty three results in life imprisonment). RICO offenses are automatically given a base offense level of nineteen or the level applicable to the predicate act, whichever is greater.

A defendant with no prior significant record who was assigned the minimum level (nineteen) would receive a sentence of thirty (30) to thirty seven (37) months in prison. This is the minimum. However, the guidelines also provide for a number of adjustments that can either increase or decrease an offense level. This means that a judge can tailor a particular sentence to a defendant based on the factors set forth in 18 U.S.C. §3553(a).

For a criminal defense attorney to be successful with reducing a sentence, it is important to know the judge and his particular sentencing philosophy. It is also necessary to review the probation officer’s Presentencing Report and any Sentencing Memorandums submitted by the prosecutor. At DM Cantor, we often bring in an outside Mitigation Specialist who prepares his own mitigation report. We sometimes use a private investigator to research any questionable information contained in the Presentence Report writer’s file or the prosecutor’s Sentencing Memorandum. Since the advent of Booker, the court is obligated to consider the individual circumstances of each particular case and then render a sentence “sufficient, but not greater than necessary” for an individual defendant, both in light of the sentencing guidelines and the factors set forth in 18 U.S.C. §3553(a).

Not only will a skilled RICO defense attorney attack the length of the sentence, but also the place of incarceration. Although the judge cannot dictate where a sentence will be served, he can recommend to the Bureau of Prisons where the sentence should be carried out. They normally will attempt to follow the judge’s recommendation. Where a Defendant is incarcerated is obviously important due to access to family, medical treatment, and overall quality of life. Our skilled Arizona Federal Racketeering (RICO)/Illegally Conducting an Enterprise defense attorneys will also address these issues during the sentencing procedure.

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Possible Defenses for Federal Racketeering (RICO)/Illegally Conducting an Enterprise

The main attack on a criminal Federal RICO charge is usually based in the insufficiency of the indictment. A seasoned defense attorney will attack whether an enterprise existed; that if it did exist, it did not affect interstate or foreign commerce; that the defendant was not associated with or employed by the enterprise; that the defendant did not engage in a pattern of Racketeering activity and; the defendant did not conduct or participate in the affairs of the enterprise through a pattern of Racketeering activity. Although it’s been said that a pattern consists of two or more predicate acts of Racketeering, the U.S. Supreme Court left that issue open in the Sedima case (under footnote fourteen) when they stated “Proof of two [predicate] acts . . . without more, does not establish a pattern”. The “more” which the court referred to as being necessary is that the predicate acts display “continuity and relationship”.

When attacking the fact that the enterprise exists separate and distinct from the predicate acts, this is usually not an issue with incorporated businesses. It becomes more of an issue if it involves an illegal association (such as a gang, mobsters, or merely a group of business associates who have never formally registered with the Arizona Corporation Commission). In regards to an “illegal enterprise”, the Government must prove that in addition to having a common purpose, a group of people have an ongoing organization with associates who function as a continuing unit. This is normally a very tough burden to meet.

As far as the Government proving employment or association with an enterprise, that is normally not difficult in legitimate business circumstances. However, this can be attacked if the defendant is not actually an employee of a legitimate business, merely peripherally connected (as long as he’s not “associated”) with that organization. The skilled attorney in Federal Racketeering (RICO)/Illegally Conducting an Enterprise will attack this element. In regards to “association in fact” for legal enterprises, this is much more touchy. As one court noted “robbing a bank twice would cause the robber to be ‘associated with’ the bank.)

Next, when attacking the Government’s claim that a defendant participated in the conduct of the affairs of the enterprise which is the same as a pattern of Racketeering activity, you must show that that activity was related to the enterprise itself. This cannot merely be a fortuitous connection to the enterprise. Again, it is necessary for a skilled Arizona Federal RICO defense attorney to attack the Government’s claim that the defendant was able to commit the predicate acts by virtue of his position in or control over the enterprise and that the predicate acts were related to the enterprise.

Finally, a skilled Arizona Federal RICO defense attorney will attack the claim of conspiracy. The Government must prove beyond a reasonable doubt that the defendant agreed to participate, directly or indirectly, in the affairs of the enterprise through a pattern of racketeering. This is where it becomes necessary to show that the defendant did not “know” that others were engaged in the illegal predicate acts or had conspired to engage in illegal predicate acts. Again, selecting the right defense attorney can make all the difference.

The “Common Defenses” which may apply in any criminal case are numerous and diverse. One of most common defenses we encounter is a “Miranda Rights Violation”. In Arizona, the standard of whether any inculpatory statement (i.e., a statement which tends to admit guilt) is admissible into evidence is based upon a “Voluntariness” standard. If we can demonstrate that the police coerced you (i.e., intimidated or tricked you) into making a confession or inculpatory statement, or that they did not properly read you your Miranda Rights, then we can suppress those statements and any evidence gathered as a direct result of those statements. In addition, “Denial of Right to Counsel” is another common defense which is often raised. This occurs when a suspect is in custody and requests to speak to their Attorney, but is denied and questioning continues

Other defenses for Federal Racketeering/RICO or Illegally Conducting an Enterprise may include challenging the validity of any search warrant, or whether there were any “forensic flaws” during the investigation of your case. Depending on what you have been charged with, this could include exposing flawed procedures regarding blood, breath, and urine testing; fingerprints analysis; DNA testing; ballistics; gunshot residue testing; computer analysis/”cloning hard drive” procedures; forensic financial accounting reviews; etc. Lastly, one of the most common defenses is exposing sloppy or misleading police reports which include everything from misstatements, false statements, flawed photo line-ups and inaccurate crime scene reconstruction.

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