Knowledge Center

Thursday, June 12, 2014

Evaluating a Multi-Jurisdictional RICO Claim After Second Circuit's Recent Decision

by Rick Rein

June 12, 2014

In the past, courts had decided that RICO's reach depended upon the location of the enterprise. European Community v. RJR Nabisco, Inc., 2014 U.S. App. LEXIS 7593 (2d Cir. April 23, 2014) redirected the focus to predicate acts. There, plaintiffs alleged that RJR Nabisco and related entities ("RJR") managed and controlled a global money-laundering scheme involving organized criminal factions in Russia and Colombia. Plaintiffs alleged that RJR employees travelled from the U.S. to Europe, Central America and other locations to facilitate the scheme, repatriate foreign profits from the scheme to accounts in the U.S., communicated with co-conspirators via interstate and international wires and mail and defrauded certain government agencies.

The Second Circuit held that the district court erred in finding that RICO cannot apply to a foreign enterprise or foreign conduct. It also rejected the enterprise-based approach in favor of a predicate-statute-based test, holding that RICO applies extraterritorially if "liability or guilt could attach to the extraterritorial conduct under the relevant RICO predicate"-even where the enterprise itself is outside the U.S. Id. at 14. The court found that the statutory language of two of the predicate acts, money laundering and providing material support to foreign terrorist organizations, expressly apply beyond U.S. borders in certain circumstances and thus overcome the presumption against extraterritorial application. The court also ruled that the complaint alleged sufficient domestic conduct in violation of the wire and mail fraud statutes and the Travel Act, although they don't apply extraterritorially,  to uphold their claims.

Therefore, under European, RICO claims may apply to a foreign enterprise and foreign predicate acts if the text of the predicate acts statute shows specific and direct Congressional intent to reach beyond U.S. borders. Likewise, RICO claims may proceed notwithstanding that the enterprise is foreign-based and the predicate act statute involved does not overcome the presumption against extraterritorial application, if the conduct alleged to violate the statute is sufficiently U.S.-based.

For more information about Rick's International Asset Recovery Practice, please visit his blog HERE. For more information about our Litigation Group, please visit our website.

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