How-to guide: Understanding the applicability of RICO and associated risks (USA)

Introduction

This guide will assist in-house counsel and private practice lawyers in understanding the Racketeer Influenced and Corrupt Organizations Act (RICO) and associated organizational risks. While the common perception of RICO is that it relates to the prosecution of organized crime organizations, corporations and other organizations, as well as individuals who have roles within them, may also be prosecuted or face civil penalties arising from RICO violations.

This guide provides an overview of federal and state RICO laws (including the types of organizations that might be subject to RICO), and their applicability to enterprises such as corporations. It also provides an overview of civil liability associated with RICO.

This guide covers:

1. Federal RICO Act
2. State RICO laws
3. Civil liability from RICO violations

This guide can be used in conjunction with the following How-to guides: Understanding White Collar Crime, Understanding corporate criminal liability, and Mitigating the risk of criminal activity.

Section 1 – Federal RICO Act

1.1 Introduction to federal RICO Act

The Racketeer Influenced and Corrupt Organizations Act (RICO), codified as 18 USC Ch 96, was enacted in 1970 as part of the Organized Crime Control Act. RICO was designed to combat the Mafia and other criminal organizations that had found ways to infiltrate and corrupt legitimate institutions and businesses. RICO provided prosecutors with a framework to address the ongoing criminal conduct of these organizations, and to dismantle the structures that allowed criminal organizations to thrive. 

Prior to RICO, the complex and insulated leadership structure of criminal organizations made it difficult for law enforcement to prosecute the hierarchies of criminal organizations. While lower ranking ‘soldiers’ in criminal syndicates might have faced prosecution for their offenses, these prosecutions did not affect the leadership structure of the syndicates, which were able to continue their criminal activities. RICO introduced the concept of ‘predicate acts,’ which allowed for the prosecution of the leaders of criminal groups for crimes they ordered or assisted in committing, even if they did not commit the criminal act directly. This significantly broadened the scope of prosecutorial power. 

Over time, the use and scope of RICO has spread far beyond the law’s initial purpose. While it was enacted as a tool to pursue traditional organized crime, its use now includes a variety of offenses within its purview, including non-violent white collar crimes committed by or on behalf of businesses and corporations. This evolution has made RICO an essential part of the legal landscape.

There is no single act that is prohibited by RICO. Instead, RICO penalizes organizations for engaging in a pattern or a course of criminal activity. Individual criminal acts are prosecuted under other statutes; however, if an organization operates an ongoing enterprise by means of those acts, RICO will be implicated.

1.2 RICO offenses

RICO sets forth the three substantive offenses listed below.

• Section 18 USC 1962(a) – it is a crime for any person to ‘use or invest’ any income derived from a ‘pattern of racketeering activity’ or through ‘collection of an unlawful debt’ to establish, acquire an interest in, or operate ‘any enterprise’ engaged in or affecting interstate or foreign commerce.

• Section 18 USC 1962(b) – prohibits any person from acquiring or maintaining an interest in, or control of, any enterprise that is engaged in or affects interstate or foreign commerce ‘through a pattern of racketeering activity or through collection of an unlawful debt.’

• Section 18 USC 1962(c) – makes it unlawful for any person ‘employed by or associated with any enterprise engaged in’ or affecting interstate or foreign commerce ‘to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.’

It is also a crime to conspire to commit any of the above three offenses.

A violation of any of the above provisions requires a number of common elements: proof of an enterprise’s existence, a pattern of racketeering activity involving predicate crimes, participation in the enterprise’s conduct by the defendant, and demonstrable criminal intent to further the enterprise’s illicit goals. Each of these elements is explored in further detail below.

1.2.1 Common elements of RICO offenses

Enterprise

For purposes of RICO, an ‘enterprise’ may refer to an individual, partnership, corporation, non-profit association, or other legal entity. It may also refer to any union or group of individuals associated in fact, even if that union or group of individuals is not a legal entity. This definition can encompass lawful organizations that might be used for unlawful purposes, as well as groups formed specifically for criminal purposes. A lawfully organized corporation may be an ‘enterprise’ if, for example, all or part of the business of the corporation engages in mail fraud. 

Persons

RICO applies to acts done by ‘persons.’ A ‘person’ is defined to include ‘any individual or entity capable of holding a legal or beneficial interest in property.’ See, 18 USC sec 1961(3).

A corporation or other entity is a ‘person,’ and may be held criminally liable if it is not the enterprise through which the racketeering activity is conducted.

The RICO Act also applies to informal associations that may not have any legal or formal business structure but operate as an enterprise through a pattern of racketeering activity. See United States v Turkette 452 US 576 (1981). The defendants must have worked together for a common illegal interest. Prosecuting informal associations can be challenging due to their lack of structure, but RICO provides a framework to address the criminal conduct of these groups.

Racketeering activity

RICO defines racketeering activity as the commission of a series of specific crimes set out in RICO, known as ‘predicate offenses.’ The list of these predicate offenses includes a range of state and federal crimes, and includes both violent and non-violent crimes. The various predicate offenses are defined in 18 USC 1961 and are known generally as ‘racketeering activity.’ It is important to be aware of range of these underlying crimes, which includes violent acts like murder and arson, as well as non-violent crimes such as financial fraud, bribery, or counterfeiting. It is not merely committing one of these crimes, but rather engaging in a pattern of such activities, that transforms a criminal act into a RICO violation.

Pattern of racketeering activity

To establish a pattern, at least two acts of racketeering activity, typically within a 10-year period, must be proven. The proof of the predicate acts may be a part of the RICO prosecution; they do not need to be proven in a separate action before RICO charges are brought. These acts do not need to be related to each other. A pattern focuses on ongoing illegal behaviors rather than isolated incidents, underscoring the systemic nature of the criminal activity.

Criminal intent (mens rea)

In order to be held liable for a RICO violation, the defendant must have knowledge of the illegal nature of the racketeering conduct. They must also have willfully engaged in the activities that make up the pattern of racketeering activity. A defendant’s accidental or coerced involvement in a racketeering enterprise is not grounds for a RICO charge. This level of intent aligns with the goal of punishing and deterring those who elect to participate in and perpetuate organized criminal endeavors.

In the case of Reves v. Ernst & Young, 507 U.S. 170 (1993), the Supreme Court addressed the ‘conduct or participate’ element of RICO. The Court held that in order to ‘conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs,’ a defendant must have had some part in directing the enterprise's affairs.  The ‘operation or management’ test means that merely performing services for an enterprise, even if those services aid the racketeering activity, is not enough to incur RICO liability if the individual does not have some degree of control or direction over the enterprise's affairs. ‘Willfulness’ thus focuses not only on the intent to commit the predicate acts, but on the defendant's role in the direction or management of the criminal enterprise itself. Accidental or coerced involvement, or simply being a passive recipient of benefits from a racketeering enterprise, will not meet this ‘operation or management’ standard for direct participation under RICO.

1.2.2 Section 18 USC 1962(a)

Under section 18 USC 1962(a), it is a crime for a person to ‘use or invest’ any income derived from a ‘pattern of racketeering activity’ or through ‘collection of an unlawful debt’ to establish, acquire an interest in, or operate ‘any enterprise’ engaged in or affecting interstate or foreign commerce. This section prevents the participants in a criminal enterprise from investing their proceeds in other, perhaps legitimate, enterprises.

A corporation or other business entity may be prosecuted under 18 USC 1962(a) for using or investing the proceeds from a pattern of racketeering activity.

1.2.3 Section 18 USC 1962(b)

Under section 18 USC 1962(b), it is a crime for any person to acquire or maintain an interest in, or control of, any enterprise that is engaged in or affects interstate or foreign commerce ‘through a pattern of racketeering activity or through collection of an unlawful debt.’ Prosecutions brought under this provision tend to involve defendants acquiring interests in ongoing businesses fraudulently or forcibly. Generally, section 1962(b) is used in criminal RICO prosecutions when organized groups infiltrate legitimate organizations.

1.2.4 Section 18 USC 1962(c)

Section 1962(c) is the most common RICO violation. This section makes it unlawful for any person ‘employed by or associated with any enterprise engaged in’ or affecting interstate or foreign commerce ‘to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.’

A corporation may be liable under RICO as either a ‘person’ or an ‘enterprise,’ but the corporation may not be both at the same time. There must be some separation between the person and the enterprise. See, for example, United States v Goldin Indus, Inc, 219 F3d 1268 (11th Cir 2000).

A corporation operates solely through its employees and agents. A corporation will therefore not be liable for a section 1962(c) violation if the racketeering activity is committed solely by an entity’s employees or agents: an entity cannot conspire with itself. A RICO ‘enterprise’ is not the same as a RICO ‘person.’

Participation in the conduct

‘Participation’ means that the defendant was involved in, or had some degree of control over, the enterprise’s affairs through the pattern of racketeering activity. Merely working for the enterprise or committing predicate offenses will not constitute sufficient participation to support a conviction. The prosecution must show a clear link between the defendant’s conduct and the direction or operation of the enterprise’s regular affairs. This link may be shown by evidence that the defendant made decisions for the enterprise, participated in the management of the enterprise, or carried out orders that furthered the enterprise’s racketeering activity. 

A corporation may not be liable under section 1962(c) for participating in the affairs of an enterprise that consists only of its own subdivisions, agents, or members, because an entity cannot conspire or collude with itself. See, for example, United States v Mongol Nation, 132 F Supp 3d 1207, 1218 (CD Cal 2015).

1.3 Defences and pre-trial resolution

A RICO defendant has several defenses available. There are also strategies for negotiating a pre-trial resolution of the case.

1.3.1 Statute of limitations

RICO prosecutions are governed by the federal catch-all criminal statute of limitations in 18 USC 3282. A prosecution under RICO must be brought within five years of the commission of the last act constituting a violation. If the prosecution is initiated after this period, the defense can move to dismiss the case on these grounds. In cases of RICO conspiracy, the statute of limitations may be extended to within five years from the last instance where the defendant manifested an agreement to participate in the RICO conspiracy.

1.3.2 Investigative misconduct

The evidence prosecution’s evidence may have been obtained through illegal investigative methods, such as an improper search, or eavesdropping without the proper authorization. If that is the case, the defense may move to suppress the evidence due to investigative misconduct or constitutional violations. Such a motion, if successful, could weaken or eliminate the prosecution’s case. 

1.3.3 Legitimate business purpose

A defense that an organization’s business activities were legitimate and not just a cover for an illegal enterprise may be raised. Demonstrating a lawful purpose for business transactions and relationships will seriously damage allegations of racketeering. 

1.3.4 Plea agreements

In certain cases, an organization may elect to enter into a plea agreement with the prosecution. The organization will agree to plead guilty to lesser charges and, in exchange, will be subject to reduced penalties, or may have more serious charges dismissed. 

1.3.5 Corporate cooperation

An organization may opt to cooperate fully with an investigation. While cooperation is not a defense to RICO or any other criminal charge, providing evidence and assistance in exchange for leniency, pursuant to the Department of Justice’s Corporate Leniency Policy, may sometimes lead to a resolution that is more favorable to the defendant. Fines or other penalties may be reduced, and the case will be resolved more quickly than if it were to proceed to trial. 

1.3.6 Corporate compliance programs

A robust compliance program is likewise not a defense, but it may serve to minimize liability, as provided for in the Department of Justice’s Corporate Leniency Policy. Such a compliance program may demonstrate the corporation’s commitment to preventing and detecting wrongdoing, and that demonstrated commitment can be effective when negotiating resolutions or mitigation of penalties. 

1.4 RICO penalties

An organization found guilty of RICO violations will face severe criminal penalties.

1.4.1 Fines

Criminal penalties can include fines of up to $25,000 for each RICO violation. The corporation can also be sentenced to be placed on probation. During the period of probation, the corporation’s business activities are closely monitored by the court. If fines are to be imposed, the amounts of those fines are set according to the federal sentencing guidelines. The guidelines, which are almost always followed, are scaled to the severity of the offense, including the amount of money involved and the degree of harm caused, and to the criminal history of the defendant. 

1.4.2 Forfeiture

In addition to fines, RICO violations can lead to forfeiture proceedings. Forfeiture under RICO means that any business interest, property, or asset that was acquired or maintained through the pattern of racketeering activity, or any property that constitutes or is derived from proceeds traceable to these violations, can be seized by the government.

1.4.3 Restitution

Courts may order a defendant to pay restitution to the victims of the racketeering activity. This involves compensation to the victims for the harms they suffered because of the defendant’s illegal activities. Restitution may include the return of ill-gotten gains, as well as additional compensation for damages. 

Section 2 – State RICO laws

2.1 Overview of state RICO laws

State RICO laws, also called ‘Little RICO Acts,’ are enacted by Individual states have enacted their own RICO laws. These state laws, often called ‘Little RICO Acts,’ are typically modeled on the federal law. 

The success of the federal law in prosecuting organized crime inspired states to adopt their own versions of the law to address similar problems on a local level. Initially, state RICO laws were used primarily against traditional organized crime, but over time, their application broadened to include a wide range of criminal enterprises, such as street gangs, corrupt organizations, and white collar crime syndicates. 

RICO laws have been enacted in most states, as well as in Puerto Rico and the US Virgin Islands. The specific provisions and the breadth of these laws varies from state to state, but the overall framework is consistent with the federal RICO Act.

2.2 Variations in state RICO laws

State RICO laws differ from one another in terms of scope and application. The state laws also differ in the types of crimes that are included as predicate offenses. 

Although state laws are modeled on the federal RICO law, there are a number of key differences between federal and state RICO acts. These are explored further below.

2.2.1 Jurisdiction

Federal RICO laws apply to activities that go across state lines or that have a federal nexus, such as violations of federal mail or wire fraud statutes. State RICO laws, on the other hand, apply only to activities that are carried out entirely within a single state.

2.2.2 Predicate offenses

The list of predicate offenses varies, with some state laws including crimes not covered by federal law or excluding some that are covered. The federal RICO Act identifies 35 specific offenses that qualify as racketeering. Only conduct that appears on the list can constitute racketeering activity. State RICO laws vary in their approach to defining racketeering activity. Some states, such as Delaware, adopt the federal definition of racketeering activity, with additional local laws added to the definition. See, Del Code tit 11, sec 1502. Others, such as Georgia, incorporate a broader range of activities that violate state laws. See, OCGA 16-14-3. Certain states choose to include activities that violate not only state laws but also federal and foreign laws, such as Arizona, which lists violations of the laws of other states and countries as qualifying predicate acts. See, Az Rev Stat 13-2301. Varying approaches by states have created a diverse scope of activity defined as racketeering by state laws. This activity may be broader or narrower than the activity proscribed by federal RICO. 

2.2.3 Penalties

Sentencing and penalties under state RICO laws are governed entirely by state law. The sentences imposed may be different from those set out in the federal RICO Act. 

2.2.4 Prosecutorial discretion

State law may prosecutors give prosecutors more or less discretion in pursuing RICO charges. This may influence the breadth of the application of the law. 

2.2.5 Civil remedies

Both federal and state RICO laws typically provide for civil remedies. These remedies may include treble (triple) damages. For more information on civil liability at federal level, see section 3. 

2.3 Important state RICO considerations

2.3.1 Jurisdiction

Jurisdictional issues raised by state RICO cases are pivotal. They will determine the authority and power of a state to prosecute individuals or entities for criminal activities that may have crossed state lines. The issue is delineating the extent of the state’s legal reach. In cases that pose such issues, it is crucial to seek legal counsel regarding which state has the authority to prosecute, which set of laws will apply, and how to avoid double jeopardy is critical. 

2.3.2 Concurrent investigations

Concurrent investigations take place when multiple law enforcement agencies pursue simultaneous investigations of the same individuals or organizations for related criminal activities. 

The prospect of facing both state and federal charges for the same criminal conduct poses a significant concern for a defendant. Such dual exposure is legally permissible because the states and the federal government are separate sovereigns, each with their own interests to protect. The decision to pursue state or federal charges is typically based on strategic considerations, such as the severity of penalties, the breadth of statutes, and the resources available to state and federal prosecutors. Although the double jeopardy clause of the Fifth Amendment to the US Constitution protects a defendant against being tried twice for the same offense, that clause does not preclude consecutive state and federal prosecutions for the same criminal conduct. 

Section 3 – Civil liability from RICO violations

3.1 Overview of civil RICO actions

The RICO Act allows private parties to bring civil actions for violations. The civil component of the RICO Act, found at 18 USC sec 1964, is distinct from its criminal provisions but is predicated on the demonstration of similar patterns of racketeering activity. Plaintiffs typically include businesses and individuals who have suffered financial harm from the illicit practices of an enterprise. For example, in the case of Shin Da Enterprises v Yong, No. 21-3384, a jury in Philadelphia returned a verdict of $5,130,482 for civil RICO violations and civil conspiracy to violate RICO. In that case, plaintiffs alleged they were victims of fraud, with a significant amount of the fraudulent conduct relating to a construction project. Plaintiffs had learned, through discovery in a state civil (non-RICO) court case, the defendants were committing massive fraud with respect to the construction project.  By allowing civil suits, RICO not only punishes the perpetrators but also offers a means of financial recovery for victims. 

The criteria for establishing civil liability under the federal RICO Act are largely the same as the criteria for establishing criminal liability. See, section 1.2. In addition, the plaintiff’s business or property must have been injured by reason of the racketeering activity. The plaintiff must also prove that the defendant’s misconduct was the cause of their loss. The predicate acts do not have to be proven in a separate or prior action.

A common predicate act alleged in civil RICO actions is the commission of mail or wire fraud. Mail or wire fraud are attractive for RICO plaintiffs due to their broad scope - mail fraud involves any scheme to defraud that uses the postal service, while wire fraud encompasses any fraudulent activity involving electronic communications. Deceptive practices executed through mail or wire communications provide the repeated criminal behavior necessary to establish a pattern of racketeering activity. The ubiquity of these communication methods in business operations means that mail and wire fraud can be relatively easy to prove compared to other types of racketeering activity.

3.2 Damages and remedies

In a civil RICO case at the federal level, there are several types of damages that a plaintiff may seek, including treble damages, attorneys’ fees, and costs. See further below for a consideration of the types of damages and remedies that might be sought.

3.2.1 Compensatory damages

Compensatory damages are designed to compensate the plaintiff for the actual harm or losses suffered as a result of the RICO violation. These damages will typically be awarded in a RICO case for damage to, or destruction of, property.

Medical Marijuana, Inc. v. Horn, 145 S.Ct. 931 (2025) sheds light on the scope of ‘injury to business or property’ under RICO, and implicitly on what constitutes compensatory damages. In this case, the Supreme Court addressed whether economic harms that result from a personal injury can still be considered an ‘injury to business or property’ under RICO. Douglas Horn, a truck driver, lost his job and associated wages after testing positive for THC, allegedly due to a mislabeled CBD product. The manufacturer argued that his job loss stemmed from a personal injury (ingesting THC) and thus was not compensable under RICO. The Supreme Court reversed, holding that the phrase ‘injured in his business or property’ operates with respect to the kinds of harm for which the plaintiff can recover, not the cause of that harm. The Court offered an analogy: a gas station owner beaten in a robbery does not have a RICO claim for their pain and suffering, but if their injuries force them to close their business, they can recover for their economic loss. The Horn case broadens the definition of compensable ‘business or property’ damages under RICO to include economic losses directly linked to the racketeering activity, even if a personal injury might be an antecedent event.  

3.2.2 Treble damages

Treble damages are damages that are three times the amount of actual damages awarded to the plaintiff. They are awarded in lieu of compensatory damages, but note that the RICO treble damages provision does not apply to damages for personal injury to, or the death of, a person. Treble damages are a punitive measure, intended to punish the defendants for engaging in illegal racketeering activities, and to deter them or other defendants from such activity. In order to recover treble damages, the plaintiff must prove that the defendants violated RICO laws, and that the defendant’s RICO violation directly caused the plaintiff’s injuries or losses. 

3.2.3 Attorneys’ fees and costs

Allowing recovery of a plaintiff’s attorneys’ fees and costs is meant to encourage the pursuit of RICO claims without the fear of incurring prohibitive legal costs. Recovering attorneys’ fees and costs makes it more feasible for plaintiffs to hold criminal enterprises accountable for their wrongful actions. 

3.2.4 Injunctive relief

Injunctive relief, a court order that requires the defendants to stop engaging in their illegal activities, is aimed at preventing future harm and ensuring that the defendants do not continue their unlawful behavior. 

3.2.5 Punitive damages

Punitive damages are awarded as a means to punish the defendants for their wrongful conduct, and also to deter them and other potential defendants from engaging in similar conduct in the future. These damages are separate from compensatory damages or treble damages and are awarded at the discretion of the court based on the egregiousness of the defendants’ actions.

3.3 Federal RICO civil remedies versus state civil RICO remedies

While the federal RICO statute includes a civil remedies section that grants a private right of action to any qualifying individuals to sue under the statute, this is not uniformly the case with state statutes. Some state RICO laws do not offer a private right of action, effectively barring private individuals from filing state RICO lawsuits. Other states reserve this right exclusively for the attorney general to initiate a civil suit, and there are states that only allow the recovery of civil damages following a criminal conviction related to the RICO violation. Consequently, the scope of civil remedies in some state RICO statutes is significantly limited.

The US Supreme Court has held that state courts have concurrent jurisdiction over civil RICO claims. See, Tafflin v Levitt, 493 US 455 (1990). A federal RICO claim may thus be brought in either state or federal court.

3.4 Comparison of civil and criminal RICO actions

The US Supreme Court has held that the limitation period for civil RICO cases mandates that a lawsuit must be filed within four years from the date of the injury or when the injury should have been discovered. Thus, for example, a plaintiff who did not discover an ongoing pattern of fraud because they did not review financial statements will have four years from the date the fraud first appeared in the statements, not four years after the fraud was discovered. The time period begins to run irrespective of whether the injury is later identified as part of a pattern of racketeering. While civil RICO claims have no explicit statute of limitations, the Court drew an analogy to antitrust cases, and applied the four-year limitations period for antitrust claims. See, Agency Holding Corp et al v Malley-Duff & Associates, Inc, 483 US 143 (1987).

Conversely, as discussed in section 1.3 in a criminal RICO case, the statute of limitations necessitates that the government must bring charges within five years of the date when the last racketeering act was committed or agreed upon by the defendant. See, 18 USC 3282. In cases of RICO conspiracy, the statute of limitations may be extended to within five years of the last time the defendant manifested an agreement to participate in the conspiracy. 

Civil RICO claims also must deal with a general reluctance of courts to entertain such complaints, given the potential branding of the defendant as a ‘racketeer.’ Consequently, many courts may be inclined to dismiss civil RICO complaints, particularly those grounded in wire and mail fraud, if the case appears to be a routine business dispute. A civil RICO action is more likely to succeed if it demonstrates characteristics akin to a criminal case, such as bribes, kickbacks, threats, or acts of violence.

Additional resources

RICO: A Brief Sketch (Congressional Research Service)
Primer RICO Offenses (Racketeer Influenced and Corrupt Organizations) prepared by the United States Sentencing Commission (2024)
RICO (Racketeer Influenced and Corrupt Organizations): A Theory of Investigation (DOJ, Office of Justice Programs)

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