What Is Racketeering? | Overview And How It Works

What Is Racketeering
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One of the largest categories of criminal activities across the world today, racketeering has sent more men behind bars more than anything else. Even law enforcers and policymakers have found themselves in handcuffs for racketeering charges.

While it is true that policemen and politicians have fallen short under the RICO act, racketeering is equally a broad subject that needs a well-defined take in order to be able to comprehend what it entails clearly.

The list of famous people that have been charged with racketeering over the years is quite long.

The likes of R. Kelly, 6ix9ine, and John Paul Jr. have recently made the rounds in the news feed overcharges under the RICO act.

So how did these limelight stars become criminals with the world watching their every step? It’s important we start by defining what racketeering is.

What Is Racketeering?

Racketeering is a criminal activity in which money is extorted from a victim by threat or force.

One can go deeper and define racketeering as a kind of organized crime in which the evil-doer sets up a violent, fraudulent, extortion, or illegal operation to consistently collect money or other profit. This kind of activity is known as a “racket”.

A racket is when a criminal creates a problem for others for the purpose of solving that problem by some form of extortion. However, it does not necessarily mean that rackets are all about extortion, fraudulent or coercive practices. There are other forms of rackets such as; the numbers racket or the drug racket which do not involve extortion, fraudulent and coercive practices.

The existence of the black market has enabled rackets to go untaxed. The person or organization who engages in rackets is a racketeer. The traditional and most common form of the racket is the protection racket.

Here, the racketeers protect a target (business/individual) from dangerous gangs in the neighborhood, they then decide to cause damage or injury to the target until the business owner or the individual pays protection money.

At the state level, racketeering includes crimes such as murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene matters, and drug crimes.

Racketeering Explained Further

Racketeering activity includes specifically federal crimes and certain state offenses that are forbidden by the RICO Act.

These federal offenses are described in Title 18, section 1961(1)(B)(C)(E)(F) and (G) to include “any act which is chargeable under” the listed federal statutes. 

Most of these above offenses are crimes described in Title 18 and consist of a wide range of offenses including; bribery by federal government officials, identification fraud, obstruction of justice, extortion, mail and wire fraud, bank fraud, illegal gambling, trafficking in counterfeit labels, money laundering, murder for hire, and terrorism.

Federal offenses are described as “illegal acts” but are crimes under other titles include; criminal labor law violations and embezzlement of union funds (Title 29 violations), and immigration fraud (Title 8 violations).

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What Are The Forms Of Racketeering?

Racketeering can take many forms. Here are the most common forms of racketeering;

  • Cyber extortion: This is where a hacker gains access to ones computer-possibly by discovering your password-and uses that access to either damage your data or use your data in a way that is extremely harmful to you unless you pay them an amount of blackmail.
  • Kidnapping: This is considered racketeering when an individual is illegally detained and their captors agree to set the kidnapped individual free once a ransom is paid.
  • Protection rackets: The racketeer threatens to cause harm to a business or individual unless they are paid a protection fee.
  • Fencing racket: this is an operation specialising in the resale of stolen goods. Individuals buy stolen goods from thieves at low rates. They resell them for a profit to unsuspecting buyers.

Another frequent target of racketeering allegations was the labor unions.

Organized crime groups generally use one or more labor unions to extort money from a company or contractor(s).

The Italian-American mafia criminal society, La Cosa Nostra, obtained its foothold in the 1920s and 1930s when management and labor both called on to the gangsters for protection and as a counterforce to social elements.

The U.S. government introduced the Racketeer Influenced and Corrupt Organizations (RICO) Act in October 1970.

This law helped to attack Cosa Nostra by attacking its base in labour unions. The law permits enforcement agencies to charge individuals or groups involved in various acts of racketeering.

Guilty individuals are sentenced to 20 years imprisonment and other fines would also apply.

Other forms of racketeering include running an illegal gambling operation or loan sharking.

Here, often excessive debts are extracted through threats of violence including; seizure or destruction of property, injury, and sometimes murder.

Such threats back up other racketeering operations, such as human trafficking or drugs trafficking. Racketeers also compel innocent people to commit crimes like vote-rigging by threatening them.

Money laundering is also another form of racketeering where a prosperous illegal business invests in a legitimate business.

The Special Considerations In Racketeering

Corporations may also engage in racketeering. For instance, a pharmacist may bribe doctors to overprescribe medicine, thus committing fraud in order to boost their profits.

Predatory lending may also be deemed a form of racketeering. This happens when a lender tricks a borrower into taking a loan that is beyond their ability to pay.

An official personal loan is always safer than anything a loan shark may offer you even if you have bad credit.

For instance, automobile insurer State Farm was accused of illegally funding Judge Lloyd Karmeier’s 2004 election campaign by channeling money through advocacy groups that didn’t disclose donors.

The case relates to long-running litigation by State Farm customers who alleged that they were given generic, substandard car parts instead of original equipment for more than a decade.

The plaintiffs sought damages worth $1 billion, plus $1.8 billion in interest, in addition to the damages that could have been tripled under the federal RICO Act.

Total damages sought neared $8.5 billion. In September 2018, State Farm agreed to pay $250 million to settle the racketeering case just before opening statements were set to begin

What Is The Difference Between Federal And State Racketeering Offences?

Federal Offenses

Federal offenses are described in section 1961(1) (D) which identifies “any offense involving” three categories of federal offenses i.e.; fraud in the sale of securities, fraud connected with a case under title 11, and drug trafficking. 

It is significant that these offenses, like state offenses described in Section 1961(1)(A), have been interpreted broadly to include conspiracies and attempts, while the “acts indictable” are limited to violations of only the specific statutory provision.

For example, securities fraud is listed as any “offense involving” in Section 1961(1)(D) and would thus include any conspiracy or attempt to commit securities fraud, while mail or wire fraud, which are listed in Section 1961(1)(B) as “acts indictable in violation of section 1341 and 1343” would be limited to attempts, as a conspiracy is not expressly included within the terms of the listed statutory offenses.

State Offenses

State offenses are listed in Section 1961(1)(A) to include “any act or threat involving” the following crimes are; murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene matters, and narcotics trafficking, which are chargeable under State law and punishable by imprisonment for more than one year.

And since these crimes are described as “acts or threats involving,” attempts and conspiracies to commit any of these offenses can be charged.

Since Section 1961(1) (A) does not identify specific state laws that may provide the basis for a RICO predicate act, the state offenses have been interpreted to identify “generically” the kind of conduct proscribed by RICO.

Therefore, a state statutory offense may constitute a proper RICO predicate under Section 1961(1)(A) provided it substantially conforms to the essential elements under the prevailing definition of the offense when RICO was enacted in 1970.

Thus, the state statute used as a predicate need not use the same labels as the listed predicate offenses, but still may be an offense as described in Section 1961(1)(A).

For example, a state statute that is entitled something like “blackmail”  may be generically equivalent to the listed state offense of extortion if such statute proscribes an offense that contains the essential elements of what is “generically” extortion. 

Such a statute could thus be a proper state predicate crime, provided it is a felony. Another example may be a state statute that proscribes what is “generically” bribery (intent to influence, quid pro quo), but goes by a different name, such as ‘payments to officials to influence conduct.”

Thus, that state statute, or parts of it, may be a RICO predicate offense.

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What Does The Racketeer Influenced And Corrupt Organizations Act (RICO) Mean?

On October 15, 1970, the Racketeer Influenced and Corrupt Organisations Act (RICO Act) became a United States law.

The purpose of the RICO Act was to eliminate any form of racketeering operating in interstate commerce. The list of federal crimes specified in the RICO Act includes; bribery, fraud, gambling offenses, money laundering, financial and economic crimes, obstructing justice or a criminal investigation, murder for hire, and the sexual exploitation of children.

In total, there are 35 crimes that the RICO Act identifies as racketeering activities.

The Department of Justice (DOJ) provides an expansive view on RICO charges.

According to the DOJ, in order to be found guilty of violating the RICO Act, the government must prove beyond a reasonable doubt that:

  1. An enterprise existed.
  2. The enterprise affected interstate commerce.
  3. The defendant was employed by the criminal enterprise.
  4. Defendant engaged in racketeering activity.
  5. The defendant agreed to commit the substantive racketeering offence through participating in at least two racketeering acts

The RICO Act also helped law enforcement to correct a problem prosecutors had when trying to charge crime bosses. They could charge the person who committed the crime but they failed to charge the crime boss since they never committed the crime themselves.

Originally, this law was intended to take down Mafia crime bosses but prosecutors have found other ways of using it. There are criminal gangs and drug smugglers, the RICO Act can be used by prosecutors to take them down just like the crime bosses.

What Is The Prosecution For Racketeering?

Prosecutors may charge someone through RICO if they commit at least two acts of racketeering activity within a 10 year period between the two crimes. Investigation on federal crimes is done at both the federal and the state levels.  

National agencies such as the Federal Bureau of Investigation (FBI), Internal Revenue Service (IRS), Drug Enforcement Agency (DEA), Border Patrol, Tobacco and Firearms (ATF), Department of Homeland Security, Bureau of Alcohol, and the Secret Service among others are the investigating departments in the USA.

International law enforcement may also apply sometimes.

State crimes violate the laws of a particular state and are investigated by local, state, or county police. Kidnapping, robbery, and assault are considered state crimes as long as they occur within that state.

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The following are some good definitions of a successful prosecution against organized crime:

Example 1

In November 2013, Los Angeles gang leader Kevin Eleby was sentenced to 25 years in federal prison in a RICO case. The gang used violence and intimidation in an attempt to control a Pueblo del Rio Housing Projects in South Los Angeles. The RICO trial determined that the enterprise engaged in drug dealing, firearms trafficking, murder, witness intimidation, and armed robbery to control and terrorize the housing projects.

Example2

In June 2018, counties in Kansas and Missouri filed federal racketeering cases against more than a dozen manufacturers and distributors of opioids. They were accused of misleading marketing and distributing painkillers under deceptive pretenses. The prosecution alleged that the companies misrepresented addiction dangers for the benefit of their own profits.

Example 3

Officials and corporate executives from FIFA were indicted in 2015 for bribing, fraud, and money laundering to corrupt the issuing of media and marketing rights for FIFA games.

Example4

In December 2020, a federal grand jury indicted 40 people (regard as the largest federal racketeering conspiracy in South Carolina history). The indictment claims members of the “Insane Gangster Disciples ran a drug” empire from prison using contraband cell phones which they obtained illegally in prison to coordinate the rimes with those outside.

Over the years, racketeering laws have taken center stage in most federal and state arsenals in fighting crime i.e. “organized crime in particular”. The RICO Act is what holds all this together. 

The part of the RICO Act that defines criminal activity is divided into four major parts.

First clause makes it illegal to use the money gained through “racketeering activity” to acquire an interest in any enterprise involved in interstate commerce. 

The second clause makes it a violation to acquire through such “racketeering activity,” an interest in any enterprise involved in interstate commerce. 

The third clause condemns any person that is associated with any enterprise that participates in any form of “racketeering activity,” if the enterprise is engaged in business that affects interstate commerce. 

Fourth clause makes it a violation to conspire to violate any of the preceding sections.

The RICO Act goes on to provide severe criminal and civil penalties for RICO violators. Statutory criminal penalties include up to 20 years in prison for each RICO violation plus forfeiture of all property or interest in property acquired because of a RICO violation and a fine of $250,000 or twice the proceeds of the offense.

Although RICO was designed to be an aid to federal prosecutors in the fight against organized crime, the statute itself has had a much broader range of applications.

RICO has strengthened the power of federal prosecutors, allowing federal prosecutions in areas that were traditionally reserved for the states in the exercise of their general police power. 

The Supreme Court, rather than describing RICO as a congressionally created way to combat organized crime, has noted that “RICO was an aggressive initiative to supplement old remedies and develop new methods for fighting crime in general.

Frequently Asked Questions

What does RICO stand for?

Racketeer Influenced and Corrupt Organization Act

What is the minimum sentence for a RICO charge?

30 months

What is the maximum sentence for racketeering?

20 years

Is racketeering a single crime?

No, it entails several criminal acts.

Can I get bail for racketeering?

Yes

Conclusions

Laws under the RICO act are constantly being revised in the judicial system to match the ever-changing landscape.

Globalization and the internet have created a fast-paced culture that needs to be frequently reviewed and assessed to ensure racketeering crimes do not go unnoticed.

As much as a good number of criminals have gone to law, several others have managed to thrive under the radar through putting to use new technologies and systems.

The widespread criminal activity is only kept in check with a determined police force and court system.

Do share your experience or thoughts on racketeering with us in the comments.

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