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RICO-CHET!

Under a vague statute, even erstwhile respected executives can be branded as racketeers

Few corporate executives are unaware that a “racketeering” charge can come out of left field and proceed to make the next few years a misery and a burden. And as “creative” uses of the Racketeer Influenced and Corrupt Organizations Act (RICO) probe the edges of the legal universe, the question is not, “Who is subject to it?” but, “Who is not?”

The headlines tell us that RICO can bring down quarry of any size. And, should it seem a desirable tactic to the criminal prosecutor or civil plaintiff, a fine-mesh “conspiracy” net can haul in any number of startled small-fry.

Blackmail and extortion-the hallmarks of “racketeering”-are sometimes engendered by RICO itself. In the Drexel Burnham and Michael Milken cases, the procedure seems to have been, “First we kneecap you, then we talk.”

As Paul Craig Roberts observed in the Washington Times, “In an unprecedented action in U.S. legal history, [Drexel] was blackmailed with the approval of the Attorney General. To avoid being prosecuted as a racketeer and having all its assets seized prior to trial or conviction, Drexel had to admit (probably falsely) that it was guilty of criminal actions, pay the government $650 million, fire Mr. Milken, and withhold from him his pay for the previous year.”

A related news story noted that when a grand jury indictment was handed up, Milken and two others, “under the forfeiture provision” of RICO, “must pay the U.S. about $1.8 billion.”

That’s $1,800,000,000, okay? Mr. Milken may have thought himself well off, but that was “yesterday.” “Today” the Feds can reduce him to a “homeless” statistic.

In criminal RICO cases, the defendants’ assets can be frozen from the first day. In addition, the Justice Department can cause the defendant instant pauperization through forfeiture, as in Milken’s case.

The RICO act was originally part of the Organized Crime Control package of 1970. The admittedly revolutionary nature of RICO may have been one reason for its rather tentative use during the ’70s. Also, the intended targets of RICO, the Mafia and their imitators, elicited very little sympathy. RICO was seen as a way to “reach” mobsters who had demonstrated incredible expertise in eluding all other laws.

RICO provided a handful of high cards to those bringing either civil or criminal charges against “racketeers,” but the notion of encouraging “Joe Blow” to employ civil RICO to take on the Mafia in the courts remained a non-starter. As a result, criminal RICO has been used against the Mafia nine times, and civil RICO never.

Around 1982, the notion began to spread that all sorts of things could be construed as “racketeering.” Federal judges, aware of the deluge facing them, tried to sweep back the tide of RICO suits by dismissing those which did not fit the more classical concept of the term.

But the cry, “It is too, racketeering!” reached the Supreme Court and, in Sedima v. Imrex (1985), the Supreme Court felt itself forced to conclude that Congress wanted a broad, vague law. Therefore, it would remain a broad, vague law until Congress fixed it, and meanwhile, the federal courts would have to cope.

Thousands of civil RICO cases “involving securities fraud…and common-law fraud in a commercial or business setting,” began to flood the courts. And, as we have seen, the big game hunters of the Department of Justice, using criminal RICO, have been nuking Wall Street.

In the brief time since RICO burst like a starshell over the legal landscape, both law journals and the popular press have contained many accounts of the origin and history of RICO. However, the March 28 issue of the National Law Journal contained an interesting article on Notre Dame’s G. Robert Blakey, the “Dr. Frankenstein” who “tirelessly pushed his monster of a law.” Blakey spent his early years in Bobby Kennedy’s Department of Justice, and we are reminded that, “coming out of the ’60s, there was a group in public service who never lost their zeal.” Disquieting, in that the Bobby Kennedy school of law enforcement was never overly fastidious as to method, and the zealots of the ’60s have not, on the whole, proven benefactors of mankind.

Whatever Blakey’s individual qualities, we learn that he “remains the point man for a revolutionary theory of crime and prosecution which most law enforcement officials believe has worked splendidly-and which many defense attorneys see as a dread excess of governmental power.” At the same time, Blakey cries all the way to the bank, after handling “RICO and wiretap appeals for the usual unsavory clients served by big-time criminal defense attorneys.”

It’s not surprising that after nearly 20 years, certain basic definitions remain unclear. Treatises have been written on Footnote 14 of the Sedima decision, intended to clarify the term “pattern of racketeering activity.” The lay mind can do itself cerebral injury by trying to read them!

The carrion-feeders of the legal profession are always with us, in one guise or another. They have found RICO quite satisfactory for purposes of extortion, due to the inherent disadvantages with which the defense is burdened. Moreover, a RICO case-given the “revolutionary” aspects of the law and the “creative” uses thus far found for it-can cut a wide swath through corporate legal defenses.

Harry Weyher, of Olwine, Connelly, Chase, O’Donnell, and Weyher in New York, drew attention to the “strike-suitors.” He points out that they spend time picking over the annual reports and SEC filings of any fat corporate target, second-guessing management, and seeking any little flaw or weak spot.

A skill in translating some lapse or error into the inflammatory language of a “racketeering” case is required; the rest of the boilerplate is in the computer, ready to spew out filings at a keystroke. The secret to success as a strike-suitor lies in this kind of “firepower” raking the treeline in hopes of hitting something. “If they can settle for attorney’s fees in one case out of 50, they can stay in business,” Weyher notes.

From the defense point of view, it is the lure of triple damages and attorney’s fees that clog the courts with ordinary commercial cases which have been erected into federal racketeering atrocity stories. That temptation often prevents settlements from being reached. As Victor Machcinski of Olwine, Connelly so aptly remarked, “Eyes glaze over, and reason departs.”

Small wonder that the plaintiffs’ bar loves RICO. Arguing passionately that the nation is awash in white-collar crime, these lawyers are really fighting hard to prevent Congress from “de-trebling” damages in contractual disputes. They seem less wedded to the “R” for racketeering brand that RICO applies to people who were previously considered respectable, and who still consider themselves so. However, the brand, the smear, has proven a potent element in overall extortion.

The Wall Street Journal recently noted that both civil and criminal RICO cases may be blatantly political. The occasion was the imposition, last February, of Rule 11 sanctions against lawyer Daniel Sheehan and his two plaintiffs, Anthony Avirgan and Martha Honey. Rule 11 is intended to give pause to lawyers filing frivolous or unfounded suits, by holding them liable for the defendants’ attorneys’ fees and court costs.

In the case of Sheehan, Avirgan, and Honey, this came to $1.2 million. Sheehan is the lead lawyer for Christie Institute of Washington, D.C., self-described as “a center for law and public policy.” It is, of course, tax exempt, and is largely funded by similarly tax-exempt foundations and church groups, with a boost from the usual Hollywood suspects.

The Christics entered federal court in Miami in May 1986 with a bizarre but audacious, large-scale, and well-funded attempt to brand resistance to Communist expansion, a racketeering enterprise! This marked an interesting attempt to victimize military, intelligence, and (potentially) Foreign Service officers for their activities overseas, especially if covert.

In March of this year, the New York Times commented mildly upon concern “about what kind of evidentiary thread is woven through the Christics’ tapestry of allegations that a ‘secret team’ of veterans of the CIA, Cuban exiles, and soldiers of fortune spent 30 continent-hopping years dealing in drugs, death and anti-communism.”

It was Sheehan’s contention that men like retired Army General John Singlaub and retired CIA official Theodore Shackley had spent decades hoodwinking the government into paying their salaries while they were actually engaged in worldwide racketeering. That is, they were freebooters illegally causing inconvenience to the “reformist governments” of Fidel Castro, Ho Chi Minh, Daniel Ortega, and Najibullah of Afghanistan.

The “concern,” you will observe, is not for the fabricated “tapestry of allegations,” much less for the defendants, but only for the deficiency in the “evidentiary thread.”

The Christics are notable partisans of the Sandinistas, and are in thrall to a decidedly revisionist view of history. Theirs was a cause in search of a case, and a case needs a plaintiff or two. Tony Avirgan, a peripatetic journalist of leftist views, suffered an injured middle finger and lost some equipment when a bomb went off at a Contra press conference in Nicaragua. The identity and motivation of the person who placed the bomb remain unrevealed.

Such being the case, why not blame the CIA? This is the “thread” connecting the plaintiffs to Sheehan’s “sworn affidavit,” which is on sale in various editions, tracing the adventures of the aforementioned “secret team.” Interestingly, the “thread” did not so much snap under the strain, as it simply evaporated.

Sheehan kept secret the identities of his “79 witnesses” as long as possible, claiming they were in mortal peril. Thus, defense lawyers could do little, while the Christics used discovery to paw through records of former military and intelligence officers.

General John Singlaub is the most conspicuous defendant in the Christic case. Since his retirement from the Army, Singlaub has coordinated aid to anti-communist freedom-fighters in Africa, Afghanistan, and Central America. The Afghan resistance has succeeded in bringing about the withdrawal of the Soviet Army from Afghanistan. There are some people who think this is terrible. Consider this, from one of the Christic filings:

“Many of Defendant Singlaub’s check stubs indicate he has a program to aid the ‘freedom fighters’ of Afghanistan. Plaintiffs have not been allowed discovery in this matter [Judge James Lawrence King was attempting, with little success, to focus Daniel Sheehan's mind on the case of Avirgan's middle finger] and therefore, will not attempt to establish the Enterprise’s continuing effort there…[But] Defendant Singlaub and the Enterprise of which he is part continues to be involved in criminal racketeering activity.”

There is something not quite right about dozens of legal redbirds picking over Singlaub’s check stubs, credit card records, telephone records, etc. When asked what is to prevent them from passing on what they please to the KGB rezident in Washington, Thomas Spencer of Spencer & Klein in Miami, Singlaub’s attorney, has a simple one-word answer: “Nothing.”

Documents that were supposed to be considered secret material, in the Oliver North trial, already had been carried off by the Christics in their discovery dragnet. Small wonder that they sought discovery, forever. Great sport, very interesting, and the need for evidence of a quality beyond that considered acceptable before a ragtag “people’s tribunal” was becoming desperate.

Once Judge King forced Sheehan to surface his witnesses, the effect was much like turning over a rock. Some scuttled for cover, while others blinked into the unaccustomed light with a “Who, me?” expression. Some were dead, and some unidentifiable. At least half had led “double lives.” That is, source number 24 could corroborate source number 48, since they were one and the same. A “key” witness turned out to be someone named David in Costa Rica! Another witness, garrulous to a fault, was a down-and-out retired warrant officer, who provided over 1,000 pages of total hearsay “evidence.” Defense attorneys extracted from him the fact that the Christics had paid him about $20,000 in small bills.

The case foundered. Judge King decided he had finally seen enough. He awarded summary judgment to the defendants in June 1988.

Defense attorney Tom Spencer provides some raw material for numbers buffs, indicating the scale of the assault. In two years, the Christics had collected about $5 million, deployed 10 paid lawyers and eight full-time investigators, and enlisted the support of 46 enthusiasts from “Trial Lawyers for Public Justice.” There were 1,167 docket entries filling 56 volumes, and involving 115 depositions and 200 statements. Sheehan’s wish-list of trial witnesses numbered 2,176 -exactly 11.9 percent of whom happened to be dead at the time.

The Christics may have lost in the courtroom, but they are still smiling because they have won the propaganda war.

The “tapestry of allegations” engendered the films Lethal Weapon and Coverup, and numerous books, newspaper and magazine articles; it spread to an episode of Miami Vice, Public Broadcasting “documentaries,” talk-show chatter, stand-up comic routines, comic books, picture cards and even propaganda T-shirts.

Nearly all of this multi-media blitz was hostile to the defendants, and the material is still immured in the record, and out there, making the rounds. As a final twist of the knife, due to having been mentioned so often, the defendants become “public figures,” and these days a “public figure” has the chance of a popsicle in Hades of winning a libel suit.

Theodore Shackley, for instance, retired from the CIA in 1979, and now heads a firm of oil market analysts. He was considerably damaged by being dragged into the Chris-tics’ RICO suit, even though it is known that he had nothing to do with the Iran-Contra affair. But, in the ’60s and ’70s, it is likely that, as a senior CIA officer, he had danced on the toes of people who do hold grudges.

Consider the advantages to an assailant in employing RICO against retired corporate or government officials. They can be shoved into the arena alone and unarmed, without position and supporting institutions, there to face a pack of wild RICO charges. If they don’t fight back, they hand the foe a walkover victory, and come away both smeared and pauperized. If they do fight-against clever lawyers with vastly greater resources-they can be bled white through endless legal expenses.

Even though the Supreme Court recently upheld the astronomical penalties, it is unlikely the issue will rest. RICO is a very dangerous law. It is still generally conceded that the law requires repair. There are “constituencies” on either side: prosecutors and plaintiffs love it, defendants and their lawyers hate it. But “creative” use of RICO is still in its early stages, and we have seen samples of the outcome.

Among the more frequently mentioned repairs are removal of the treble-damage provision where ordinary contractual disputes are involved, and removal of the stigmatizing “racketeer” label.

Tightening requirements for “specificity” in fraud charges, curbs on the extremely free-ranging discovery permitted, and also on the extreme period during which retroactive offenses can be charged-far beyond normal statutes of limitation-relieve, somewhat, the onerous burden RICO places on the defense.

Another of these unfair burdens is the bar to recovery of costs and fees by the defendants, even if vindicated. It should not be necessary to rely upon Rule 11 alone. There are too many examples of abusive litigation under RICO already.


Dr. Susan Huck (Ph.D. in political geography) is a former university professor who writes frequently on domestic and foreign political affairs. She is a partner in Saxon Company, a Church Hill, Md. Agriculture and real estate company.

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