The Thermonuclear Statute

By Richard Lacayo

The studio apartment in Boston's North End was an unlikely headquarters for a multimillion-dollar business. No grand entrance, no smiling receptionist. But it was in that nondescript room that leaders of the Angiulo crime family, the city's predominant underworld dynasty, met regularly to plan the fortunes of an evil empire fed by murder, gambling and loan sharking. Often their plotting turned to what they considered a vexing subject: how to avoid the reach of a unique federal law called RICO, which not only targets Mob leaders but can also dismantle their whole illegal enterprise. "Remember that word 'enterprise,' " Family Boss Gennaro Angiulo cautioned his brothers at one conclave. "And it isn't the aircraft carrier either."

The Angiulos were right to be nervous: RICO is one tough piece of legislation. With some hyperbole, the head of the Justice Department's criminal division, Stephen Trott, calls it "the thermonuclear device of criminal statutes." More than 15 years after it was adopted by Congress, the Racketeer Influenced and Corrupt Organizations Act has become the most potent Mob-busting tool in the nation, blasting underworld operations from New York to California.

RICO has been used to imprison the chief mobsters of Los Angeles, Cleveland and New Orleans and to charge leaders of major crime families in New York City. Add to that toll the Angiulos, whose fretting about RICO was recorded in 1981, along with a lot more incriminating material. Last week, after an eight- month trial, the four brothers and an associate were sentenced to varying prison terms and fines, with Gennaro Angiulo drawing 45 years and $120,000. Using the umbrella RICO statute rather than just a series of specific offenses, said Prosecutor Jeremiah O'Sullivan, meant the jury could "see that, all the more, minor crimes are part of an overall enterprise, the business of a larger crime."

Just how large the criminal business is that RICO must combat was redramatized last week by the President's Commission on Organized Crime. Wrapping up 2 1/2 years of work, the 18-member commission released a somber report warning that organized criminals have made inroads into virtually every major U.S. industry. They drain the nation's economy through tax evasion and the higher prices caused by their involvement in legitimate business, the commission concluded. The impact could be an extra .3% in consumer prices this year. Altogether, organized crime may take in as much as $106 billion in 1986 and cost a typical American at least $77.22.*

Recognizing the breadth of organized crime activity, drafters of RICO in 1970 sought to create matching law-enforcement breadth by focusing on patterns rather than instances of criminal behavior. Thus the law applies to those involved in an interstate "enterprise" that engages more than once in ten years in criminal activities ranging from mail, wire and stock fraud to extortion and murder. While many smiled over the acronym's reference to Rico, the archetypal gangster played by Edward G. Robinson in Little Caesar, federal prosecutors were slow to use the new legislation. But "since 1980 it's been used aggressively," says the delighted principal drafter, G. Robert Blakey, a Notre Dame law professor.

Now 23 states have their own little RICOs. Meanwhile, prosecutors have begun to take advantage of the elasticity of the federal statute to pursue politicians and other government figures who do not fit the typical gangster mold. Louisiana Governor Edwin Edwards, whose first trial ended in a hung jury, is back in federal court again facing RICO charges involving an influence-peddling scheme. Two weeks ago, federal prosecutors obtained

RICO indictments against two former New York City officials, Michael Lazar and Lester Shafran, in a growing municipal government scandal. Lazar, the onetime city transportation administrator, and Shafran, formerly director of the scandal-ridden parking violations bureau, were accused of bribery and, said prosecutors, operated the bureau "as a racketeering enterprise."

An increasingly prized aspect of RICO is its special forfeiture procedure, a relative rarity in American law. These provisions allow authorities to confiscate the semilegitimate business fronts, the corrupt construction companies and the phony finance operations through which much Mob wealth is funneled. In the past, even when an underworld chief was imprisoned, the illicit operations remained intact. With RICO, prosecutors can go after the crime empires themselves. In the Angiulo case, for example, the feds are pursuing $4 million in Mob assets, including two apartment buildings, a restaurant and some prime real estate near the Boston Garden.

Despite its now well-established popularity with federal prosecutors, however, RICO has its problematic side too. The statute's civil portion allows companies and individuals to bring RICO lawsuits, and because it defines racketeering so broadly, all kinds of legitimate businesses and businessmen are using the law to bash each other around in court. IBM, for example, used the law to sue Hitachi for theft of confidential technology, and reportedly pocketed a settlement of $300 million. New York Yankees Owner George Steinbrenner aimed RICO against investment partners whom he charged with selling him their interests in a joint venture without informing him of all necessary facts. Dubious charges of racketeering are especially common in takeover attempts. When Corporate Raider Carl Icahn moved in on Dan River Inc. in 1982, the company tried to fend him off with a RICO suit. A business-world hardballer Icahn may be, but a racketeer? A federal appeals court refused to allow it. "RICO has a life of its own," says Illinois Federal Judge Milton Shadur disapprovingly.

Few civil RICO cases are actually brought to trial. Says Boston Attorney David Gibbs: "Most lawyers use it as leverage to intimidate the other party into settling out of court. It's a three-barreled shotgun." RICO allows a successful plaintiff to claim triple damages, plus attorneys' fees. And it can mean unsavory publicity. What corporate executive wants to find himself accused of "racketeering"? Explains one lawyer: "They don't like this mix- up over whether they are wearing a white shirt and black tie or a black shirt and white tie."

Critics of RICO in the business community insist that Congress never intended the law to be used against legitimate enterprises. Yet a recent 15:35American Bar Association study found that only 9% of the civil RICO suits it sampled had allegations of typical Mob crimes, like arson, bribery or extortion. Most of the rest simply alleged securities or commercial frauds. Often even garden-variety contract disputes have RICO charges thrown in.

Supporters of the law, including consumer advocates and plaintiffs' attorneys, reply that even legitimate businesses can behave in illegitimate ways and that government cannot police every violation. RICO, they add, gives the victims of such practices a needed and powerful means of redress. Existing ) fraud laws or securities regulations were not enough, argues Blakey. "Under RICO, the perpetrator knows, 'If I'm caught, I don't just have to give back what I took. I give back three times what I took. It's suddenly economically unwise for me to engage in fraud.' "

To underline the law's value, civil RICO proponents point to cases like that of Barney and Donna Millsaps. Six years ago, a door-to-door salesman talked them into adding a room to their home in Norfolk, Va., assuring them loan payments would amount to no more than $50 a month. Instead, they wound up with a second mortgage and monthly payments of $148 for 15 years, a burden that strained their modest income until, less than a year later, they had lost their house. But the Millsapses along with eight other families that were hustled in the same scheme, brought a RICO suit and last July won a $115,000 collective settlement. "Congress believed that private victims of fraud are also entitled to relief," says former Federal Prosecutor Charles Wehner.

Still, the pressure for some kind of reform seems to be strong, if only because RICO keeps turning up in cases that everyone considers preposterous but that the legislative language covers. When Illinois authorities used RICO to sue a gasoline dealer for understating his state sales tax receipts, a federal appeals court ruled with "distress" that the statute was broad enough to allow the suit. In recent years a few federal courts began to balk at the more ingenious applications. But in a 5-to-4 decision last July, the U.S. Supreme Court rejected some of the methods that lower courts had tried for putting brakes on RICO. Justice Byron White concluded for the majority that while Congress may not have expected legitimate businesses to be targeted so easily by RICO, "this defect--if defect it is--is inherent in the statute as written, and its correction must lie with Congress."

Congress is considering. In recent months, a number of RICOrevision bills have surfaced on Capitol Hill, seeking to limit its application in so many civil disputes. As Edward G. Robinson asks at the end of Little Caesar, "Mother of Mercy, is this the end of Rico?" Not quite. Although the RICO- reform drive looked strong last year, it appears to have slowed down. Law- enforcement officials have been lobbying because they are fearful that attempts to rewrite the statute may neutralize it just when the war against organized crime is once more in full swing. "We need fine tuning for civil RICO, not the meat-ax," says Las Vegas Attorney Dominic Gentile, chairman of an A.B.A. committee on RICO. But some change in the law seems likely. Without it, racketeering charges threaten to become a racket in themselves.

FOOTNOTE: *Half the commissioners complained that "poor management of time, money and staff" seriously hobbled the study.

With reporting by Jonathan Beaty/Los Angeles and Anne Constable/Washington