Application of RICO to the Securities Industry

The Racketeer Influenced and Corrupt Organizations Act (RICO) was enacted as Title IX of the Organized Crime Control Act of 1970. It was designed to combat organized crime, but has broad application beyond this context since Congress mandated that RICO be liberally construed to effectuate its remedial purposes. In the case of Sedima, SPRL v. Imrex Co., the Supreme Court concluded that RICO is not limited to organized crime, but may be applied to legitimate businesses.

RICO has subsequently been used in prosecutions of white collar crime. The overarching purpose of RICO is to remove organized crime from the legitimate business community, but Congress has mandated that RICO be construed liberally and prosecutors use RICO for a wide variety of criminal contexts. Under Section 1964, the Attorney General or "any person injured in his business or property by reason of a violation of Section 1962" may bring a civil action in either state or federal court for redress. RICO provides equitable relief through divestiture of the defendant's interests in the enterprise, restrictions on future actions or investments, and dissolution or reorganization of the enterprise.

RICO has continually been expanded in business litigation as was the case when U.S. Attorney Rudolph Giuliani posed the use of RICO against the investment banking firm of Drexel Burnham Lambert in 1989. Had Giuliani used RICO, he cou

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and the firm disowned Milken, he would ask the courts to freeze the firm's assets. Under RICO, asset freezes are permitted. While many observers considered this move by Giuliani to be little more than a bluff, the attorneys for Drexel Burnham Lambert disagreed and told their clients that should the charge succeed, the firm could be irrevocably destroyed. Should Drexel and Milken prove guilty, the penalty would have been severe because they and Mr. Milken were alleged to have made millions out of stock-related offenses. Drexel agreed to settle the case out of court and Milken was separately charged and convicted of fraud. The Giuliani-Drexel case was, at the time, the latest and best publicized of a long list of "new" uses of RICO. That particular section of the 1970 Act was previously used against a nuclear-power station, another securities firm (i.e., Princeton/Newport, which went bankrupt as a result of the charges) and many other white-collar criminals. Giuliani's threat demonstrated that RICO could be a powerful tool for use against white-collar criminals in and out of court and that it was increasingly easy to use RICO to charge companies, as opposed to individuals, than other elements of the U.S. federal crimin
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Some common words found in the essay are:
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Approximate Word count = 5430
Approximate Pages = 22 (250 words per page)

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