What Is Racketeering?

What Is Racketeering?

Let me break down racketeering for you—it's a term that covers criminal acts, usually involving extortion, tied to a 'racket,' which is basically an organized scheme to pull in illegal profits. You'll often hear it in connection with the Racketeer Influenced and Corrupt Organizations Act, or RICO, a U.S. federal law that outlaws acquiring or controlling a business via certain crimes or using income from those crimes. It's also against the law to participate indirectly in these crimes by a business or to conspire to do so under this act.

The federal crimes listed in RICO include things like bribery, fraud, gambling offenses, money laundering, various financial and economic crimes, obstructing justice or investigations, and even murder for hire. On the state side, racketeering can involve crimes such as murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene materials, and drug crimes, provided they fit the generic definition from when RICO was enacted.

Key Takeaways

Here's what you need to grasp: Racketeering means acquiring a business through illegal activity, running it with illegally obtained income, or using it to commit illegal acts. The U.S. government brought in the RICO Act in October 1970 to curb this. You can face prosecution for racketeering at either the state or federal level. Federally, it covers bribery, gambling offenses, money laundering, obstructing justice, and murder for hire. At the state level, it includes murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene matters, and drug crimes.

Understanding Racketeering

Organized groups might run illegal businesses, which we call rackets, or they could siphon funds from legitimate businesses to fuel illegal operations. These rackets often thrive in clearly illicit areas like prostitution, human trafficking, drug trafficking, illegal weapons trade, or counterfeiting.

Racketeering shows up in various forms. Take cyber extortion, where a hacker infects your computer with malware, locks you out of your data, and demands payment to give you access back. Then there's protection rackets, where a criminal group threatens harm to your business or you personally unless you pay a 'protection' fee. Kidnapping counts as racketeering when someone is held illegally and released only after a ransom is paid. A fencing racket involves middlemen buying stolen goods cheap from thieves and reselling them at a profit to unaware buyers. Drug trafficking means producing, smuggling, and selling illegal drugs. Illegal gambling includes underground casinos, sports books, or card rooms where the house profits.

Labor unions have often been hit with racketeering claims. Organized crime groups use them to extort money from companies or contractors, or to control workers. The Italian-American mafia, La Cosa Nostra, was notorious for dominating labor unions, to the point where both management and the union depended on the gangsters for protection.

To fight this kind of illegal collusion and profiteering, the U.S. government passed the RICO Act in October 1970. This law lets enforcement agencies charge individuals or groups for racketeering acts. If you're found guilty of RICO crimes, you could face up to 20 years in prison or more for severe offenses, plus fines and other penalties.

Special Considerations

Corporations can get involved in racketeering too. For example, a drug company might bribe doctors to overprescribe a medication, committing fraud to increase profits. Predatory lending is another form, where a lender deceives a borrower into a loan that's designed to be impossible to repay.

Remember, an official personal loan is always a safer bet than what a loan shark offers, even if your credit is bad.

Take the case of State Farm, the automobile insurer accused of illegally funding a state supreme court justice's election campaign in 2004 by routing money through undisclosed advocacy groups. This tied into a lawsuit from customers claiming they got substandard generic car parts instead of originals for over a decade. The plaintiffs wanted $1 billion in damages plus $1.8 billion in interest, potentially tripled under RICO, totaling nearly $8.5 billion. In September 2018, State Farm settled for $250 million right before the trial started.

The Racketeer Influenced and Corrupt Organizations (RICO) Act

The Department of Justice gives a broad take on RICO charges. To convict someone under the RICO statute, the government has to prove beyond a reasonable doubt that an enterprise existed, it affected interstate commerce, the defendant was associated with or employed by this criminal enterprise, they engaged in racketeering activity, and they participated through at least two acts of such activity.

When enacted, prosecutors mainly used the Act against organized crime and criminal groups. Before RICO, they had to prosecute mob-related crimes one by one, even with many people involved. RICO lets them go after the whole racket, seize assets to stop transfers through shell companies, and charge for ongoing criminal activity. Prison terms can reach 20 years, and it allows charging leaders for crimes they ordered others to do. Prosecutors must prove the crimes and involvement beyond a reasonable doubt to apply RICO.

How Federal vs. State Racketeering Offenses Differ

Prosecutors can charge under RICO if someone commits at least two racketeering acts, with one after RICO's enactment and the last within 10 years of the prior one.

Federal crimes can lead to prosecution at both levels, involving agencies like the FBI, DEA, Border Patrol, DHS, IRS, ATF, and Secret Service, sometimes with international help. State crimes break state laws and are handled by local, state, or county police, like kidnapping, robbery, or assault within state borders. Sentences for federal crimes are usually longer and harsher than for state ones.

Examples of Racketeering

In December 2020, the DOJ indicted 40 people in South Carolina's largest federal racketeering case, involving gang members in a criminal enterprise where prison inmates used contraband cell phones to plan murders, kidnappings, gun distribution, and a global drug ring.

In June 2018, Kansas and Missouri counties filed RICO cases against over a dozen opioid makers for misleading marketing and distribution, misrepresenting addiction risks to boost profits.

FIFA officials and executives faced 2015 indictments for racketeering conspiracy and corruption over bribes and kickbacks for soccer tournament rights.

In November 2013, Los Angeles gang leader Kevin Eleby got 25 years in a RICO case for using violence to control a housing project through drug dealing, firearms trafficking, murder, witness intimidation, and armed robbery.

Seven former Baltimore police officers pleaded guilty in July 2017 to federal racketeering for stealing money, property, and narcotics via detentions, home entries, traffic stops, and false affidavits.

In June 2018, Black Souls gang leader Cornel Dawson and five others received life sentences in a RICO case for controlling a Chicago area through murders and drug deals.

Frequently Asked Questions

Is racketeering a felony? It covers a range of crimes like committing, attempting, conspiring, or aiding in felonies such as gambling, extortion, drug offenses, weapons crimes, murder, assault, prostitution, hazardous waste violations, securities violations, coercion, money laundering, arson, bribery, and forgery.

Is racketeering the same as money laundering? Money laundering is cleaning dirty money to make it look legitimate, and it can be part of racketeering if it's in an organized scheme.

For how long can you go to jail for racketeering? Convictions for RICO crimes mean 20 years or more in prison for serious offenses, plus fines and penalties.

Is the RICO Act effective? Yes, it's a strong tool against racketeering and organized crime, letting prosecutors target entire enterprises and their leaders, even if they didn't commit the crimes themselves.