Racketeering

Updated September 4, 2020

 

When most people think of racketeering, thoughts of 1930s mobsters come to mind. Gangs of this time period are often associated with organized crime and operating “rackets” to illicitly earn and move money throughout criminal networks. 

Today, racketeering takes place through complex operations which may crossover from physical to digital, while law enforcement actively pursues these illegal enterprises.

What Is Racketeering?

Racketeering describes 35 different federal crimes. When an illegal organization operates in two or more of these activities, it’s an example of a “racket”, which leads to charges of racketeering. Individuals don’t have to commit multiple crimes to be considered a suspect of criminal racketeering. Participating in one of the different crimes may be enough to be charged.  

In the most basic terms, a criminal racket is considered an act of organized crime, where one or multiple people attempt to earn recurring gains illegally through a business. Although racketeering is often associated with gambling rings or smuggling operations, any enterprise could theoretically fit the description. 

Example of Racketeering

What is an example of racketeering? if a group purchases multiple cartons of cigarettes abroad to avoid paying tobacco taxes, and then distributes them through a network of shops, it could be considered a racket. In addition to tax evasion, the organized sale of contraband tobacco is a criminal act. 

Because these enterprises engage in illegal business across state and international borders, these cases are often pursued by federal law enforcement agencies. Teams from the FBI, the Internal Revenue Service, Homeland Security Investigations, and more often work together to discover and break up rackets.

What Are the 35 Crimes of Racketeering?

In order for a crime to be prosecuted as racketeering, an organized crime ring must commit at least two of 35 defined crimes as “racketeering activity.” Defined by 18 U.S. Code § 1961, organizations that participate in or threaten “murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in a controlled substance” can be tried for operating a racket. 

But the list isn’t limited to these crimes. Overall, there are 27 federal and eight state crimes on the list, with some lesser-known crimes, including: 

Bribery and Sports Bribery 

If someone offers cash or other physical incentives to change the outcome of public policy or a sports game, it may be considered an organized crime. 

Embezzlement 

Stealing money from retirement funds, welfare, or a company’s finances can qualify an individual or group to be prosecuted as a racket.

Human Trafficking 

In addition to prostitution, bringing in foreign labor to the United States fraudulently or falsifying immigration documents (including visas and other permits) can be considered a racketeering offense. 

Media Piracy 

Selling counterfeit movies, music, and software programs as original copies is a racketeering crime if it’s part of a criminal enterprise. 

Selling Biological or Chemical Weapons 

Groups who sell illegal weapons on the black market (including nuclear weapons) could be prosecuted as a criminal organization. 

While all of these are considered individual crimes (which can be prosecuted at the state or federal level), the “racket” involves turning these situations into a regular business for profit. This requires the work of multiple investigators and prosecutors to identify patterns and develop proof of a criminal enterprise.

What Does RICO Mean?

RICO is the acronym for the Racketeer Influenced and Corrupt Organizations Act, passed by the 91st Congress and signed into law in 1970. The statue provides an avenue for law enforcement to go after criminal organizations, along with a civil component. 

As a criminal offense, RICO allows prosecution of organization leaders for not only their individual actions, but for what they instructed lower-level members to do on behalf of the racket. For instance: If a high-ranking member of a criminal group demands a subordinate commit kidnapping with the intention of extorting money, it could be tried as a violation of RICO. 

One of the advantages of using RICO charges is the ability to reduce the number of resources a criminal may have. Prosecutors who file under the act can request that a judge seize assets and force the accused person(s) to submit to a performance bond or surety bond. In addition, any pre-trial restraining order can focus on preventing witness tampering by barring the accused or associates from attacking those who may testify during the trial. 

The federal RICO law isn’t the only one of its kind in the United States. As of today, over 30 states and the territory of Puerto Rico have RICO laws on file, allowing states to take alleged criminals to trial under their own laws. This can expedite a case going to trial, especially in cases which do not involve people or money crossing state lines. 

How Is Racketeering Proven?

Racketeering cases are often very complex in nature because they involve so many moving parts. In many cases, prosecutors will file RICO charges against a suspect to encourage a plea deal and turn evidence against other members of the syndicate. The threat of seizing property and assets is sometimes enough for suspects to give away their secrets and get less jail time. 

In order to prove racketeering to a jury, a prosecution team must prove – beyond a shadow of a doubt – that the individuals on trial performed five different actions while operating their racket: 

  • The suspects managed and operated a criminal organization

  • In federal cases, the organization must have operated across state lines. In state cases, the operation can exist only within the state. 

  • Those charged and tried must have been a part of the organization. 

  • The accused must have participated in the racket. 

  • The racket must have operated at least two of the defined crimes in the RICO Act. 

If an accused individual or group of accused people are found guilty by a jury under the RICO Act in federal court, the charges can be tough. Punishment for RICO can include up to 20 years of prison time, fines of up to $25,000, and the forfeiture of all their profits and businesses while operating the racket.

Is Civil Racketeering Different from Criminal Racketeering?

The RICO Act allows for court procedures on two different types of racketeering: criminal racketeering and civil racketeering. Although they are similar, their applications in law are different. 

When a defendant is tried on federal or state RICO charges, it is a criminal action brought forward after an investigation by law enforcement officials. During the investigation, evidence is collected and presented to state attorneys, or ultimately, a grand jury. From there, charges are filed, accused persons arrested, and the trial process begins. 

Civil racketeering is different because it doesn’t require a criminal action and legal investigation. Instead,  it is a lawsuit alleging that an organization violated RICO statutes during the course of their business. The burden of proof is on the suing party (plaintiff), while the defendants are allowed to provide evidence to counter the claims. At the end of a civil racketeering lawsuit, a judge may award damages on some or all of the claims, or dismiss the lawsuit.

Famous Examples of Racketeering

Since the passing of the RICO Act, several notable criminal and civil cases have come through American courts. These are examples of some of the most famous trials: 

RICO Against the Hells Angels Motorcycle Club

In 1979, the federal government targeted the outlaw motorcycle club Hells Angels for violations of the RICO Act. They alleged the group was a criminal enterprise that ran drugs and guns across state lines to sell for profit. Despite their case, the jury could not come to a conclusion that the club president or officers directed members to participate in activities related to crime. After two years and two mistrials, charges against the club were dropped

Michael Milken and Drexel Burnham Lambert

Michael Milken may be most famous for his application of high-yield bonds and leveraged buyouts, but in 1989, he was accused of over 90 counts of racketeering for his alleged participation in insider trading. His employer, investment bank Drexel Burnham Lambert, was also indicted on RICO charges. Under the punishment for racketeering of asset forfeiture, both parties decided to plead guilty to lesser charges. 

Former Owners of the Montreal Expos v. Major League Baseball

In 2002, after the Major League Baseball owners voted to remove the Minnesota Twins and Montreal Expos from the league, 14 former partners of the Canadian team filed a RICO lawsuit against the league. The group alleged that two MLB executives conspired with the final owner of the Expos and the president of another team to devalue the Montreal franchise in order to contract the league or move the team. After two years of litigation, both parties agreed to arbitration, which ultimately went in favor of Major League Baseball.

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Are Money Laundering and Racketeering the Same? 

Although money laundering is an example of racketeering, they are not necessarily synonymous with one another. In money laundering, criminals move cash earned illegally through a legal entity (such as a bank transfer or spending money through a legal business). On its own, money laundering isn’t necessarily racketeering, but when money laundering is combined with another action on the RICO crime list, then both crimes can be charged under the RICO Act. 

What Is the Difference Between Racketeering and Extortion?

While extortion is also an example of racketeering, it isn’t necessarily racketeering by itself. Extortion, also known as “blackmail,” involves an individual or group attempting to get what they want using either force (like violence or kidnapping) or threats (such as releasing incriminating information). If extortion happens through a criminal organization or in tandem with another crime on the RICO Act list, then it may be considered racketeering. When it’s done alone for a different goal (like obtaining a one-time payment), then it may not be part of a racket and will likely be prosecuted as its own crime.