High Court Delineates Structure of RICO Association-in-Fact Enterprise

This posting was written by Mark Engstrom, Editor of CCH RICO Business Disputes Guide.

An association-in-fact enterprise in a federal RICO claim must have an ascertainable structure beyond that inherent in a pattern of racketeering activity, the U.S. Supreme Court ruled in a 7-2 decision on June 8.

In a criminal RICO case against a loosely-organized group of individuals who had participated in numerous bank thefts over an eight-year period, the Court concluded that a trial court did not err by instructing a jury that an enterprise existed when a group of individuals, without structural hierarchy, associated solely for the purpose of carrying out a pattern of racketeering acts.

Structure

An association-in-fact enterprise must have at least three structural features: (1) purpose; (2) relationships among those associated with the enterprise; and (3) longevity that was sufficient to permit its members to pursue the enterprise’s purpose.

The term “structure,” however, did not need to appear in the jury instructions, the Court held. As long as the substance of the relevant point was adequately expressed, the language of a jury instruction was subject to the “considerable discretion” of the trial judge.

Informing the jury that it had to find an “ascertainable” structure would be “redundant and potentially misleading,” at least in a criminal context, where the jury had to determine beyond a reasonable doubt that the elements of the crime were present.

Finally, qualifying the meaning of “ascertainable structure” with the phrase “beyond that inherent in the alleged pattern of racketeering activity” was appropriate, as long as the qualifying phrase was interpreted to mean that the existence of the enterprise was a separate element that must be proved.

Enterprise Element

As the Court explained in United States v. Turkette (RICO Business Disputes Guide ¶6100), the existence of an enterprise was an element of RICO that was distinct from the pattern of racketeering element; proof of one did not necessarily establish the other.

Nevertheless, the Court cautioned that it would be a mistake to interpret the qualifying phrase to mean that the existence of an enterprise could never be inferred from evidence showing that persons associated with the enterprise had engaged in a pattern of racketeering activity. In Turkette, for example, the Court recognized that the evidence used to prove a pattern of racketeering and the evidence used to prove an enterprise “may in particular cases coalesce.”

Attributes

The petitioner—an individual who had participated in the bank thefts—unsuccessfully argued that an association-in-fact enterprise must have some additional structural attributes, such as a structural hierarchy, role differentiation, a unique modus operandi, a chain of command, professionalism and sophistication of organization, diversity and complexity of crimes, membership dues, rules and regulations, uncharged or additional crimes aside from predicate acts, an internal discipline mechanism, regular meetings regarding enterprise affairs, an enterprise name, and induction or initiation ceremonies or rituals.

These attributes, however, could not be fairly inferred from the language of RICO, according to the Court.

Nothing in the RICO statute supported the structural requirements asserted by the petitioner, the Court determined, and nothing exempted the enterprise whose associates had engaged in spurts of activity punctuated by periods of inactivity.

Jury Instructions

The jury instructions in this case were “correct and adequate,” in the Court’s view. The instructions explicitly informed the jurors that they could not convict the individual defendants under RICO unless they found that the government had proven the existence of an enterprise. The instructions also made it clear that the enterprise was a separate element from the pattern of racketeering activity.

The instructions adequately stated that the enterprise had to have the structural attributes that could be inferred from the statutory language. More specifically, the trial judge told the jury that the government was required to prove that there was an ongoing organization with some sort of framework—formal or informal—for carrying out its objectives, and that the various members and associates of the association had functioned as a continuing unit to achieve a common purpose.

Telling the jury that the existence of an association-in-fact enterprise was often more readily proven by determining what the enterprise does, rather than by performing abstract analysis of its structure, was appropriate. The instruction properly conveyed the point made in Turkette—that proof of a pattern of racketeering activity may be sufficient in a particular case to permit a jury to infer the existence of an association-in-fact enterprise.

Dissent

Dissenters Justice Stevens and Justice Breyer would have limited the term “enterprise” to “business-like entities” because nothing in the text or legislative history of the RICO statute indicated that Congress had intended to reach an “ad hoc association of thieves” whose purpose and activities were limited to sporadic acts of theft.

According to the dissenting justices, the RICO statute and the Court’s earlier decisions indicated that Congress had used the term “enterprise” in the sense of a business organization. Although the dissenters agreed with the majority that the word “structure” was not “talismanic,” they nevertheless would have stipulated that jury instructions must convey the requirement that the alleged enterprise had an existence apart from the alleged pattern of predicate acts.

The majority permitted juries to infer the existence of an enterprise “in every case involving a pattern of racketeering activity undertaken by two or more associates.” By allowing the government to prove both elements with the same evidence, the majority rendered the enterprise requirement “essentially meaningless” in associated-in-fact cases, the dissent maintained.

In the dissenters' view, proof of the separate existence of an association-in-fact enterprise would “generally require evidence of rules, routines, or processes through which the entity maintains its continuing operations and seeks to conceal its illegal acts.”

The decision, authored by Justice Alito, is Boyle v. United States, Docket No. 07-1309, issued June 8, 2009. The opinion will appear in CCH RICO Business Disputes Guide.