Civil RICO: A Manual for Federal Attorneys

1 Department of JusticeCriminal DivisionOrganized Crime and Racketeering SectionCivil RICO: AManual forFederal AttorneysOctober2007 RICO ManForFedAtt Cover 10/11/07 2:08 PM Page 1 Civil RICO: 18 1961-1968A Manual forFederal AttorneysOctober 2007 Prepared by the Staff of the Organized Crime and Racketeering Section United States Department of Justice, Washington, DC 20005 Douglas E. Crow, Principal Deputy ChiefAmy Chang Lee, Assistant Chief(202) 514-3594 Written By:Frank J. Marine, ConsultantPatrice M. MulkernThe assistance of the following is acknowledged and greatly appreciated:David M. BrinkGregory LisaJames Francis McKenzieMelissa Marquez-OliverMelvin OteyGerald TonerCatherine M. WeinstockCover Design by Linda M. BaeriiiTABLE OF CONTENTSPAGEPREFACEiTABLE OF AND APPROVAL for Bringing Civil RICO Approval by the Organized Crime and Racketeering Sectionof All Government Civil RICO Lawsuits is Authority and OF EQUITABLE RELIEF, Civil RICO, AND ITSLEGISLATIVE and General Nature of Courts Equitable of Court s Equitable Are Vested With Broad Equitable Powers To RemedyUnlawful Conduct, Including Ordering Intrusive, StructuralChanges in Wrongdoers Entities and Findings and Purposes Regarding Civil Designed 18 1964 (a)

2 To Authorize District CourtsTo Impose the Full Panoply of Equitable , Dissolution and on Future Activities and Removal from Positionsin an of Court RICO, 18 1964, is Patterned After Antitrust Laws,and Hence Vests the Attorney General of the United States With theExclusive Authority to Obtain Equitable Relief, and Vests PrivateLitigants, But Not the United States, With the Authority to Sue forTreble Relief Available Under Civil RICO is at Least As Broad AsEquitable Relief Under the Antitrust Laws, If Not OF GOVERNMENT Civil RICO LAWSUITS For Obtaining Equitable Government Must Establish a Reasonable Likelihood ofFuture Violations By a Preponderance of the Due Provision for the Rights of Innocent Issues In Proving Government Civil RICO Defendant s Liability For A Racketeering Act May Be BasedOn Aiding and Abetting of Respondeat Corporation s or Labor Union s Scienter May Be EstablishedBy The Collective Knowledge of The Corporation s or LaborUnion s Employees and Prohibition Against Intracorporate Conspiracies UnderThe Antitrust Laws Does Not Apply To Government CivilRICO Defenses Do Not Apply to Government Civil RICO ActionsFor Equitable and Statute of States Civil RICO Claims Cannot Be Implicitly Estoppel Can Not Lie Against the United States, IfEver.

3 Absent Affirmative United States Is Not Subject to the Defenses of UncleanHands or In Pari AND the Principles Governing Subject Matter and Personal Matter Processing Requirements for State Courts Exercise of InPersonam Jurisdiction Under the Fourteenth Amendment as toState Process Requirements Under the Fifth Amendment forFederal Courts Exercising In Personam Jurisdiction OverFederal Causes of RICO s Jurisdiction and Venue of Civil RICO s Jurisdiction and Venue Bases for Venue Under Section 1965(a) District In Which Such Person Resides 91b. Found 91c. Has an Agent 92d. Transacts His Affairs Service of Process Under Section 1965(b) of Venue - Forum of of the Pleading and Drafting the of the of Civil Rule 9(b) the is No Right to a Jury Trial on Claims for Equitable Governing Motions for Summary of Intent Generally are Ill-Suited for Summary Investigative Demands (CID) s CID of a of a Service of a Documents and Litigation of by the Attorney General126viib.

4 Petitions by the CID of the District in Process, Presidential Communications andInvestigatory Files Deliberative Process Presidential Communications Investigatory Files Informant Amendment , CONSENT DECREES, AND and Consent General Nature of Consent Decrees and Rules of Have Authority to Modify Judgments and ConsentDecrees Under Some Of Injunctions, Requisite Specifity, And Their ApplicationTo of Injunctions and Requisite Specifity Injunction May Apply to Non-Parties in Orders and Prohibition of Future Activities MayImplicate Property Rights Protected By Due Officers in Have Inherent Authority to Appoint Officers to AssistThem in Executing Their Officers Perform Varied Compliance and Adjudicatory III Whether Contempt is Civil or Criminal in Bagwell Following Elements and Procedures Apply to Criminal andCivil Governing Criminal Governing Civil Jury Trial for Criminal Contempt is Required When theSanction Involves A Serious Fine or Imprisonment of MoreThan Six Civil RICO CASES INVOLVING LABOR of Government Civil RICO Cases Involving Labor of Labor Designed Civil RICO to Combat the LCN s CorruptInfluence Over Labor United States Department of Justice Adopted A Strategyto Eliminate the LCN s Corrupt Influence Over Labor of Essential Relief

5 Obtained in Government Civil RICO Cases InvolvingLabor , Divestiture and Officers224(a)Officers to Administer the Affairs of a Union224(b)Adjudication Officers228(i)General Powers228(ii)Review Authority229(iii)Disciplinary of Ethical Practices Codes and Process and Article III of Persons From Union Office and Membership,and Prohibitions on Holding Union Office or Against Obtained In Contested Civil RICO Cases Involving Labor IBT Local 560 Local 30, Roofers Union ILA Local 1804-1 IBT Local 295 IBT Local 282 Mason Tenders District Council of LIUNA Private Sanitation Industry Ass n LIUNA Local 6A Officials and Entities As Nominal of Wrongdoing is Not Required to Obtain ReliefAgainst a Nominal Defendants in Government Civil RICO CasesInvolving Labor Issues in Government Civil RICO Cases Involving Action and Due Process Amendment Relief in Government Civil RICO Cases Does NotViolate, And Is Not-Pre-empted By, The NLRA.

6 The LMRDAor Other Labor NLRA Does Not Pre-empt Government CivilRICO LMRDA Does Not Pre-empt Government CivilRICO Labor Laws Do Not Pre-empt Government CivilRICO Of Union Members Rights To Free Speech and ToParticipate In Internal Union Democracy Guaranteed By The Members Rights Under the LMRDA Constitute IntangibleProperty Within The Meaning of the Hobbs Defendant Obtains or Seeks to Obtain IntangibleProperty Rights From A Victim Within The Scope of theHobbs Act When He Uses Extortionate Means In Order toExercise Those Rights For Himself or a Third Party in a WayThat Would Profit Them Civil RICO CASES NOT INVOLVING or Parallel Criminal of Court-Ordered Electronic Rule of Criminal Procedure 6(e) Government Attorney May Not Disclose A MatterOccurring Before the Grand Jury Unless It Falls Within AnException Set Forth in Rule 6(e)(3) Government Attorney Who Has Had Lawful Access to aMatter Occurring Before a Grand Jury May Use Such Matterin Handling a Civil RICO Action, But May Not Disclose SuchMatter, Without a Court-Disclosure Order, to Another Personto Assist in Handling a Civil District Court May Order Disclosure of a Grand Jury MatterPreliminary to or in Connection With a Judicial States Attorneys Manual Sections on Review and of Each Government Civil RICO Case Involving Labor UnionsiPREFACEThis Manual is intended to assist Federal Attorneys in the preparation and litigation ofcases involving the Civil provisions of the Racketeer Influenced & Corrupt Organization Act, 1961-1968.

7 Federal Attorneys are encouraged to contact the Organized Crime andRacketeering Section of the United States Department of Justice ( OCRS ) early in thepreparation of their case for advice and assistance. All Government Civil RICO complaints, RICO Civil Investigative Demands and allproposed settlements of Government Civil RICO suits must be submitted, with a supportingprosecution memorandum, to OCRS for review and approval before being issued or filed withthe court. The submission should be approved by the Government attorney s office before beingsubmitted to OCRS. Due to the volume of submissions received by OCRS, Governmentattorneys should submit the proposal three weeks prior to the date final approval is needed. Government Attorneys should contact OCRS regarding the status of pending submissions andmust refrain from finalizing any settlement agreement concerning a proposed Civil RICO lawsuitbefore final approval has been obtained from policies and procedures set forth in this Manual and elsewhere relating to 18 1961-1968 are internal Department of Justice policies and guidance only.

8 They are notintended to, do not, and may not be relied upon to, create any right, substantive or procedural,enforceable at law by any party in any matter Civil or criminal. Nor are any limitations herebyplaced on otherwise lawful litigative prerogatives of the Department of Justice. Pub. L. No. 91-452, 84 Stat. 941 (1970).11 IINTRODUCTION AND APPROVAL PROCESSA. was enacted October 15, 1970, as Title IX of the Organized Crime Control Act of1970 and is codified at 18 1961-1968. RICO provides for both criminal and civil1remedies. RICO s Civil remedies are set forth in 18 1964(a), (b) and (c), which provideas follows:(a) The district courts of the United States shall have jurisdiction toprevent and restrain violations of section 1962 of this chapter byissuing appropriate orders, including, but not limited to: orderingany person to divest himself of any interest, direct or indirect, inany enterprise; imposing reasonable restrictions on the futureactivities or investments of any person, including, but not limitedto, prohibiting any person from engaging in the same type ofendeavor as the enterprise engaged in, the activities of which affectinterstate or foreign commerce; or ordering dissolution orreorganization of any enterprise, making due provision for therights of innocent persons.

9 (b) The Attorney General may institute proceedings under thissection. Pending final determination thereof, the court may at anytime enter such restraining order or prohibitions, or take such otheractions, including the acceptance of satisfactory performancebonds, as it shall deem proper. (c) Any person injured in his business or property by reason of aviolation of Section 1962 of this chapter may sue therefor in anyappropriate United States district court and shall recover threefoldthe damages he sustains and the cost of the suit, including areasonable attorney s fee, except that no person may rely upon anyconduct that would have been actionable as fraud in the purchaseor sale of securities to establish a violation of section 1962. The To obtain relief under Section 1964(c), a plaintiff must establish that a defendant2committed a violation of the RICO statute, and that such RICO violation was the proximatecause of injury to the plaintiff s business or property.

10 See, , Anza v. Ideal Steel Supply Corp.,547 ____, _____, 126 1991, 1996 (2006); Beck v. Prupis, 529 494, 496-503(2000); Holmes v. Sec. Investor Prot. Corp., 503 258, 268 (1992).2exception contained in the preceding sentence does not apply to anaction against any person that is criminally convicted in connectionwith the fraud, in which case the statute of limitations shall start torun on the date on which the conviction becomes 1964(a) vests the Attorney General of the United States with the exclusiveauthority to sue for equitable relief, whereas Section 1964(c) vests private litigants, butnot the United States, with authority to sue for treble damages for injury to their businessor property. See Section II (D) below. Because the United States may not sue for trebledamages under Section 1964(c), this Manual does not address such suits for obtain Civil equitable relief under 18 1964(a), the United States mustprove by a preponderance of the evidence that: (1) a defendant committed or intended tocommit a RICO violation by establishing the same elements as in a criminal RICO case,except that criminal intent is not required; and (2) that there is a reasonable likelihoodthat the defendant will commit a violation in the future.