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*** Court Won't Limit Use of RICO Law

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  • jail4judges
    Court Won t Limit Use of RICO Law WASHINGTON (AP) - The Supreme Court refused to bar use of a federal anti-racketeering law against outside professionals
    Message 1 of 1 , Jun 27, 2000
      Court Won't Limit Use of RICO Law

          WASHINGTON (AP) - The Supreme Court refused to bar use of a federal anti-racketeering law against outside professionals accused of conspiring with a business client to commit fraud even if they did not help manage or operate the business.
          The justices, acting without comment Monday, let stand a federal appeals court ruling that gave a broad scope to the conspiracy provisions of the Racketeer Influenced and Corrupt Organizations Act.
          The appeals court's ruling in January left a law firm and investment banking firm potentially liable to investors who were defrauded out of millions of dollars by a now-bankrupt Indianapolis company.
          Firstmark Corporation is a holding company whose subsidiaries engaged in various financial services. Beginning in the mid-1980s, the financially shaky Firstmark allegedly sought to conceal its condition by increasing the margin between the quantity of notes sold to investors and those redeemed by investors.
          As explained by the 7th U.S. Circuit Court of Appeals, those involved in the scheme ``are alleged to have deceived investors into purchasing new notes, rolling over current notes or otherwise refraining from redeeming their notes.
          ``The result was an ever-growing pyramid of debt that forced Firstmark into bankruptcy in 1988,'' the appeals court said, with investors owed $57 million.
          Many investors sued Firstmark and others - including the underwriting firm Raffensperger, Hughes & Co. and the Indianapolis law Barnes & Thornburg that had done work for Firstmark.
          A federal trial judge threw out the case against those two defendants, relying on a 
      1993 Supreme Court decision.
          In it, the nation's highest court said the RICO law cannot be used to sue outside professionals if they did not help manage or operate an allegedly fraudulent business. The law, aimed primarily at fighting mobsters, has both criminal and civil provisions. It is considered a potent legal weapon because, unlike federal securities anti-fraud laws, it offers successful plaintiffs triple damages.
          The 7th Circuit court, however, reinstated both firms as defendants and ruled that the 1993 Supreme Court decision does not govern allegations against outside professionals filed under RICO's conspiracy provisions.
          To be liable under those provisions, the appeals court said, ``one must knowingly agree to perform services of a kind which facilitate the activities of those who are operating the enterprise in an illegal manner.''
          Its decision said an illegal conspiracy ``is an agreement, not to operate or manage the enterprise, but personally to facilitate the activities of those who do.''
          In the appeal acted on Monday, lawyers for the law firm and underwriting firm said the 7th Circuit court's ruling allows all RICO plaintiffs to circumvent the liability limitation the Supreme Court imposed in 1993. ``It creates civil and criminal liability where Congress has not imposed it,'' the appeal said.
          The case is Raffensperger, Hughes & Co. v. Brouwer, 99-1637.
          For the appeals court ruling in Brouwer v. Raffensperger, Hughes & Co.: http://www.uscourts.gov/links.html and click on 7th Circuit.

          The above was sent to JAIL by Attorney Laura Burton, who says, "Ron, I'm seeing a beautiful RICO case against the State Bar of Georgia. If I put this together, do you have some legal minds to review it and advise?  Laura Burton."
          Attorney Burton is heading up our Georgia JAIL Chapter along with Kimberley Brown. I ask those attorneys following JAIL, if you are in a position to give Laura the assistance she needs in reviewing her RICO complaint against the State Bar of Georgia, she many be reached at ljburtonjd@.... Our thanks in advance.
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