TIME: Almanac 1993/TIME Almanac 1993.iso/time/082189/08218900.005

Text File | 1992-09-23 | 5.7 KB | 109 lines

                                                                                LAW, Page 48

Showdown at Gucci Gulch


Designed as a Mob buster, RICO has become a powerful catchall


    When Congress adopted an obscure antiracketeering law in
1970, it seemed to target a particular kind of criminal: the
old-school gangster wearing a fedora and a bulging shoulder
holster. Nowadays, however, when federal prosecutors trigger the
Racketeer Influenced and Corrupt Organizations Act, their sights
are often set on a very different sort of defendant: a wealthy
professional in designer pinstripes and Gucci loafers. In the
nearly 20 years of its existence, RICO has evolved beyond its
Mob-busting origins to become a powerful legal weapon against
the upper reaches of white-collar crime. And because of its
broad civil provisions, the statute has also become a tool for
transforming common commercial and business disputes into major,
expensive racketeering lawsuits.

    Recently, few have felt the sting of RICO as much as the
denizens of Wall Street. Federal prosecutors have used the law
to go after big names like former junk-bond maestro Michael
Milken, who is expected to be tried early next year on charges
involving securities fraud. Two weeks ago, several executives
of Princeton/Newport Partners were convicted for their roles in
illegal stock-trading schemes. Two days later, the Justice
Department indicted 46 traders at the Chicago Board of Trade
and the Mercantile Exchange, 18 of them on RICO charges. And
just last week the law was used to convict E. Robert Wallach,
a longtime friend of former Attorney General Edwin Meese, of
accepting illegal payoffs to influence Government officials in
the Wedtech Corp. corruption case.

    Critics blast RICO for the seemingly catchall provisions of
both its criminal and its civil arms. "It's legislation on the
cheap," says Harvard law professor Alan Dershowitz. "It's an
attempt to use one statute to solve all the evils of society."
Others say the law is a good example of justice made blind.
Government investigators indicate that, as originally intended,
RICO has significantly dented the operations of organized
crime. But Notre Dame law professor G. Robert Blakey, one of its
main drafters, insists that Congress never intended to restrict
its application to the Mob. "We don't want one set of rules for
people whose collars are blue or whose names end in vowels, and
another set for those whose collars are white and have Ivy
League diplomas," he says.

    RICO gives law enforcers extraordinary latitude because it
focuses on patterns of criminal behavior rather than on
individual crimes. It can target anyone involved in an
"enterprise" that engages at least twice a decade in any of a
broad range of criminal activities, from murder and extortion
to mail and wire fraud. The law authorizes heavy prison
sentences and carries a powerful economic punch. Convicted
defendants must forfeit all their ill-gotten gains, including
all "proceeds" from the enterprise.

    Such punishments can sometimes be draconian. Gas-pump owner
Oscar Porcelli, for example, faces the prospect of losing his
string of New York gas stations for a RICO conviction stemming
from sales-tax evasion. "He made a mistake, but not a mistake
that should warrant shooting him with a cannon," says his
attorney, Vivian Shevitz.

    The economic penalties of the law can squeeze some
defendants into plea-bargain agreements. Threatened by a RICO
indictment and its sweeping forfeitures, the investment-banking
firm of Drexel Burnham Lambert pleaded guilty to lesser charges
last year and was hit with $650 million in penalties. Equally
troubling to RICO targets is the law's ability to seize
temporarily the assets of an accused before a trial begins --
even funds that would be used to pay a defense attorney.
"Suddenly, there are a lot of born-again civil libertarians on
Wall Street," says Michael Waldman, legislative director for
Public Citizen Congress Watch.

    Although civil RICO lawsuits total less than half of a
percent of the federal civil caseload, the statute's civil
provisions draw some of the heaviest fire. "The imaginations of
prosecutors in drafting RICO indictments are at least restrained
by the Justice Department," explains University of Texas law
professor Michael Tigar, "but the imaginations of plaintiffs'
lawyers are not similarly restrained." What encourages the
creativity, says critics, is the possibility of obtaining treble
damages and the enormous leverage of labeling an opponent a
"racketeer." The result has been a widening array of civil RICO
lawsuits, from common commercial litigation to provocative
political disputes. The law has been invoked by victims of
sexual harassment against their bosses, by tow-truck drivers
against local sheriffs and by whistle-blowers against their
employers. Earlier this year, a federal appeals court upheld the
use of RICO by a Philadelphia abortion clinic against 26
right-to-lifers who forced their way into the building,
castigated patients, knocked down workers and damaged equipment.

    This June, for the second time in four years, the U.S.
Supreme Court refused to narrow the sweep of civil RICO,
preferring to leave the matter to Congress. Not surprisingly,
that ruling recharged ongoing legislative efforts to reform
RICO's civil provisions. Among the broad coalition pressing for
changes are some of the very groups that have recently attracted
the attention of prosecutors: accountants and securities and
commodities dealers. Says Waldman: "It's a combination of The
Untouchables and Showdown at Gucci Gulch." The congressional
shoot-out to determine what happens to RICO could come this
fall.