The Racketeer Influenced and Corrupt Organizations (RICO) Act (Part Two)

Michael Milken.

On 29 March 1989 American financier Michael Milken was indicted on 98 counts of racketeering and fraud relating to an investigation into an allegation of insider trading and other offenses. Milken was accused of using a wide-ranging network of contacts to manipulate stock and bond prices. It was one of the first occasions that a RICO indictment was brought against an individual with no ties to organized crime. Milken pleaded guilty to six lesser felonies of securities fraud and tax evasion, rather than risk spending the rest of his life in prison and ended up serving 22 months in prison. Milken was also ordered banned for life from the securities industry.

On September 7, 1988, Milken's employer, Drexel Burnham Lambert, was threatened with RICO charges under respondeat superior, the legal doctrine that corporations are responsible for their employees' crimes. Drexel avoided RICO charges by entering an Alford plea to lesser felonies of stock parking and stock manipulation. In a carefully worded plea, Drexel said it was "not in a position to dispute the allegations" made by the Government. If Drexel had been indicted under RICO statutes, it would have had to post a performance bond of up to $1 billion to avoid having its assets frozen. That would have taken precedence over all of the firm's other obligations, including the loans that provided 96 percent of its capital base. If the bond ever had to be paid, its shareholders would have been practically wiped out. Since banks will not extend credit to a firm indicted under RICO, an indictment would have likely put Drexel out of business. By at least one estimate, a RICO indictment would have destroyed the firm within a month. Years later, Drexel President and CEO Fred Joseph said that Drexel had no choice but to plead guilty because "a financial institution cannot survive a RICO indictment."

Major League Baseball.

In 2001, Major League Baseball team owners voted to eliminate two teams, presumably the Minnesota Twins and Montreal Expos. In 2002, the former minority owners of the Expos filed charges under the RICO Act against MLB commissioner Bud Selig and former Expos owner Jeffrey Loria, claiming that Selig and Loria deliberately conspired to devalue the team for personal benefit in preparation for a move. If found liable, Major League Baseball could have been responsible for up to $300 million in punitive damages. The case lasted two years, successfully stalling the Expos' move to Washington or contraction during that time. It was eventually sent to arbitration, where the arbiters ruled in favor of Major League Baseball, permitting the move to Washington to take place.

Los Angeles Police Department.

In April 2000, federal judge William J Rea in Los Angeles, ruling in one Rampart scandal case, said that the plaintiffs could pursue RICO claims against the LAPD, an unprecedented finding. In July 2001, US District Judge Gary A. Feess said that the plaintiffs did not have standing to sue the LAPD under RICO, because they were alleging personal injuries rather than economic or property damage.

Mohawk Industries.

On April 26, 2006, the Supreme Court heard Mohawk Industries, Inc. v Williams, (2006), which concerned what sort of corporations fell under the scope of RICO. Mohawk Industries had allegedly hired illegal aliens, in violation of RICO. The court was asked to decide whether Mohawk Industries, along with recruiting agencies, constituted an "enterprise" that could be prosecuted under RICO. However, in June of that year, the court dismissed the case and remanded it to the US Court of Appeals.