Thursday, June 16, 2011

Domestic  Enterprise Was Within  Ambit of RICO Law, Despite Foreign  Racketeering Acts

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

A civil RICO claim alleging a domestic enterprise was not barred by the U.S. Supreme Court’s finding in Morrison v. Nat'l Australian Bank Ltd. (RICO Business Disputes Guide ¶11,932), even though the alleged predicate acts purportedly constituted foreign conduct, the federal district court in Pittsburgh has ruled.

In Morrison, the Supreme Court concluded that “when a statute gives no clear indication of an extraterritorial application, it has none.” In this case, the defendants unsuccessfully argued that RICO could not apply to foreign conduct merely because the enterprise was domestic.

Significantly, RICO did not prohibit racketeering activity per se (its predicate acts were independently criminalized by statute); it prohibited racketeering acts that were related, in specific ways, to an enterprise. RICO thus focused, in the context of territorial analysis, on domestic rather than foreign enterprise, according to the court. As a result, a claim involving a domestic enterprise fell within the ambit of RICO.

The underlying purposes of RICO supported this conclusion, the court explained. A major purpose of the RICO statute, for example, was to protect legitimate enterprises by attacking and removing persons that had infiltrated them for unlawful purposes.

The decision is In Re: Le-Nature’s, Inc., W.D. Pa., RICO Business Disputes Guide ¶12,056.

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