By Lawrence Landskroner

American corporations have long been able to defraud their customers and competitors with virtual impunity. Traditional civil remedies for fraud rarely require a guilty corporation to do more than repay the person defrauded. Criminal remedies for fraud, especially on the corporate love, are minimal and in many cases, not applicable to the subtlest forms of fraud. The possible gains from fraudulent dealings often far outweigh the risk of civil suits or criminal charge. For many businessmen, the risks are well worth taking. We have many terms for such businessmen; unscrupulous is perhaps the kindest and most printable. Now, however, we have another term for the: racketeers.

It is difficult for many of us to picture "legitimate" businessmen as racketeer conjures up images of old gangster movies starring Jimmy Cagney of George Raft, of Al Capone and bootleggers of the '20s and '30s, of gangster manipulating union pension funds. Recent court decisions, however, have expanded the definition of what constitutes a racketeer, and in the process, forged a tremendous tool to allow ordinary citizens to sue and punish businessmen who defraud their customers.

In 1970, Congress passed and an act knows as the "Racketeer Influence and Corrupt Organization Act," or RICO. RICO made it illegal to conduct and enterprise by engaging in a pattern of certain specified criminal acts, including the use of the mail, telephone, radio or television in a scheme to defraud. The "pattern" need only be two of the specified criminal acts within ten years, and enterprise is so broadly defined as to take in any combination of two people. RICO, however, contains more than criminal penalties. It also contains a provision for civil enforcement of the law. Thus, people of businesses injured by a violation of RICO have the right to sue in federal court to recover their losses.

Two separate provisions of the civil enforcement section have made RICO and attractive avenue for civil litigation. First, RICO contains a provision mandating the award of treble damages for a violation of the act. In other words, a person who is defrauded out of $20,000 is entitled to three times that amount, or $60,000 in damages. Second, a successful RICO plaintiff is entitled to recover his attorney' fees from the RICO violator. Thus, it is possible under RICO not only to recover your damages threefold, but to force the violator, but to force the violator to pay for your attorney as well. Predictably, this has led to an increase in RICO litigation.

In a recent case, the United States Supreme Court shocked many lawyers by deciding that the broad language of RICO meant exactly what it said. Previously, many courts had thrown out RICO actions based on fraud, despite the broad language of RICO, unless the civil plaintiff could prove damages other than those from prove damages other than those from the fraud itself. These courts never explained just what those other damages were. The Supreme Court, in Sedima vs. Imrex, held that a RICO plaintiff need not have any damages other than those from the fraud.

The upshot is that RICO is now available for use to recover damages in a broad range of cases that had previously been remediable only through state courts. For instance, an ordinary case of fraud, previously a matter for recovery of damages only, may now become a matter for triple recovery and an award of attorney's fees.

To give a concrete example, suppose you are solicited over the telephone to purchase a lot at a trailer park in Florida for $10,000. After giving the company the money for the lot, you discover that the "trailer park" is a one-miles-square section of an alligator-infested swamp. That is a classic example of fraud. It is also one violation of fraud. It is also one violation of the federal wire fraud act. It is not, however, a RICO violation.

Now suppose that in the same circumstances you respond by requesting more information. The company then mails you a brochure showing a glorious color the trailer park with a gold course, pool and happy retired people strolling arm-in-amr. Your $10,00 buys you the same fetid swamp. This is still one case of fraud for which you could recover you $10,000. However, since each separate use of the phone or mail in the scheme to defraud is a separate violation of the mail fraud and wire fraud acts, there are the necessary minimum of two criminal acts. The pattern of criminal acts. The pattern of criminal acts may now be established. In this case, the single case of fraud is a RICO violation. Likewise, if you can prove that this corporation sent more than one brochure of called a second person in the same scheme, whether or not the second person was defrauded, the two criminal acts are present and the pattern may be sufficient to bring a RICO action.

Not all examples of fraud are quite so blatant, and here is where the new reading of RICO will have its greatest effect. Assume now that you are the beneficiary under and insurance policy. The insurance company denies coverage, even though they know that coverage is proper. This is an attempt to defraud you of your insurance proceeds. If the insurance company uses the mail or phone twice, they may be open to a RICO suit. A stockbroker who knowingly gives you false information causing you to purchase a stock or sell a stock may also be open to a RICO suit.

RICO may also have use in the area of product liability. Suppose a manufacturer produced an automobile with an automatic transmission that, due to a defect, could easily slip from park into reverse. Suppose also that the manufacturer knew of that defect and sold the car anyway. Normally, a lawsuit would be against that manufacturer for product liability. However, if it could be proven that the manufacturer used the telephone or mail at least twice concerning that defect, a RICO action may lie even if the use of the mail or telephone was for purely intercorporate communication. There is no requirement that the telephone or maila be the instrument of the fraud so long as it was involved in the furtherance of the fraud.

There is one caveat to using RICO in product liability cases. RICO can only be used to recover damage to business or property. Thus, RICO cannot be used to triple pain and suffering damages. It can be used to triple recovery fro property loss and possibly lost wages and medical bills as well. Coupled with a product liability case, RICO can be a very potent and dangerous weapon.

Since the Sedima case, the lawyers and lobbyists representing businesses and manufacturing and insurance companies have been pressuring congressing an attempt to get RICO changed. Opponents of RICO argue that RICO is aimed at organized crime and should not be used to allow civil recovery against "respectable" businesses. This is, of course typical of the squeals that inevitably arise whenever big businesses thins it might actually be held responsible for its illegal action. There is on reason RICO should not be available for citizens to use to strike back at giant corporations that blithely break the law. The giant corporation that defrauds its customers is no less a criminal because its fraud takes place behind a corporate charter. It's high time that ordinary citizens were allowed to take an active role in punishing our corporate criminals.

We are now in the midst of a RICO window of opportunity: It is quite likely the corporate interests will water down RICO eventually. Indeed, Ohio has passed a RICO law that does not contain the same provisions for fraud. Just what form the changes to the federal RICO act will take is anyone's guess. However, if you feel that you have a possible RICO claim, you should consult a lawyer before corporate interests destroy this valuable tool.