TIME: Almanac 1990/1990 Time Magazine Compact Almanac, The (1991)(Time).iso/time/082189/08218900.005

Text File | 1990-09-19 | 6KB | 100 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.