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be evaluated in terms of its marginal utility. You may also be able to insure against your legal costs, particularly in commercial contexts, so you can spread them out over a larger pool of similarly situated business entities and pass them on to those with whom you deal. Individual victims, however, seldom carry insurance against fraud, and they have little opportunity to pass losses on to others. Contingent fee arrangements may, of course, operate as a method by which individual victims are able to pool their attorney fee costs, but they also place a discipline on the litigation instituted. Plaintiff's attorneys do not lightly expend their own resources to litigate marginal cases. As such, contingent fee arrangements act as a valuable screening device that tends to keep those kinds of cases out of litigation.

The law, however, assumes that those who that come before it are equal; the assumption is only formally true.

It is a sad fact, but the relatively wealthy perpetrator is usually able to buy the claim of the relatively poor victim at a substantial discount of any figure that approaches justice. As the Seventh Circuit in Haroco. Inc. v American National Bank & Trust Co. of Chicago, 474 F.2d 384, 399 n.16 (7th Cir. 1984), aff'd on other grounds, 473 U.S. 606 (1985) observed:

[T]he delays, expense and uncertainties of litigation often compel
plaintiffs to settle completely valid claims for a mere fraction of
their value. By adding to the settlement value of such valid claims
in certain cases clearly involving criminal conduct, RICO may
arguably promote more complete satisfaction of plaintiffs' claims
without facilitating indefensible windfalls.

Clearly, authorizing treble damages and counsel fees changes the litigation equation. Appropriately, it raises the price of settlements. Clear winners will be quickly settled and for more than they would be otherwise. Trial time and other resources will be saved. Clear losers may be worth more than nothing now, but because they will always remain high risk ventures, they will seldom be brought. Middle area litigation, too, is more apt to be brought, and it will be worth more, but the issue, in both cases, is: is the "more" unjust? The Haroco court thought not. Studies under the antitrust statutes, which, like RICO, authorize treble damages and counsel fees, confirm the Seventh Circuit's judgment; they indicate that most treble damages anti-trust litigation that is brought is settled close to actual damages and that defendants win most litigation that goes to trial. Study of the Anti Trust Treble Damages Remedy Serial No. 8, House Comm. on The Judiciary, 98th Cong. 2nd Sess. 14 (1984). Apparently, most victims are willing to settle when they are made whole, and they do not want to litigate for the premium. No reason exists to believe that a similar pattern is not developing under RICO. Ironically, it may be necessary to authorize treble damage recovery, therefore, to assure that deserving victims of patterns of unlawful behavior under RICO receive something close to actual damages. Accordingly, Congressman Boucher is correct that RICO settlements are higher,

but his frame of reference for determining "worth" is a system that does, in fact, not do justice. As such, I reject it.

Congressman Boucher, moreover, seemingly forgets that RICO has more than a compensatory goal. The conduct that falls within its terms--systemic patterns of violence, provision of illegal goods and services, etc.--is conduct that should be unconditionally deterred. RICO is not, like some aspects of antitrust, a "regulatory offense." It also does not include strict liability, as the predicate offense are all fault-based. Society has a general stake in seeing that this sort of conduct is, therefore, sanctioned. From an economic point of view, it is a detail that is sanctioned in private civil litigation, rather than criminal prosecutions. Accordingly, private Civil RICO litigation plays an important public law function. The private enforcement that Congressman Boucher so vociferously decries is, in fact, enforcement that is in the public interest.

Finally, included as Exhibit E in this letter is a letter of June 9, 1989, of Mr. Robert J. Cindrich, the former U.S. Attorney in Pittsburgh, to Ms. Roslynn Litman, sent in connection with a study being conducted by the Court of Appeals for the Third Circuit of the utilizations of the Federal courts. It makes many of my points better than I can; it is included in this letter with Mr. Cindrich's kind permission.

V. RICO: An After Thought?

I asked you

During the course of the hearings, Mr. Jed S. Rakoff suggested that RICO's private civil enforcement mechanism was an "afterthought." to have a statement inserted in the hearing record at that point that would show that the private civil enforcement mechanism was an integral part of the RICO design from the beginning.

Enclosed as Exhibit F to this letter is the supplementary statement.

VI. RICO and LILCO

Mr. Kenneth Feinberg testified before the Subcommittee on the LILCO litigation in New York. You may find it relevant to know that the Trial Lawyers for Public Justice and the National Institute of Municipal Law Officers filed an amici brief, which I prepared, in the Second Circuit urging that Chief Judge Weinstein's opinion be reversed. The brief may be relevant, not only for the legal reasoning it contains, but also for its review of the data on White-collar crime, particularly fraud, in the United States today.

Enclosed as Exhibit G to this letter is the amici brief.

VII. State RICO Legislation

During the course of the hearings mention was made by state RICO legislation.

Enclosed as Exhibit H to this letter is a chart that summarizes that legislation.

Conclusion

It may be appropriate for me to end this letter on another philosophical note. In 1970, the Congress passed the Organized Crime Control Act, including RICO, to "strengthen [. .] the legal tools in the evidencegathering process, [to] establish [. .] new penal prohibitions, and [to] provide [. .] enhanced sanctions and new remedies 84 Stat. 923. Congress was concerned, among other things, with "fraud." Id. at 922. It found that "the sanctions and remedies available" under prior law were "unnecessarily limited in scope and import." Id. at 923. It then provided treble damage relief for "person[s] injured" in their "business or property" by violations of RICO. 18 U.S.C. § 1964(a). Congress, after full debate, consciously chose not to limit the 1970 statute to organized crime; its application was to depend on what you did, not who you were--blue-collar, White-collar, or no collar at all.

As

Law is always more than rules and procedures, statutes and decisions, or courts, legislatures, and lawyers. Ultimately, it is ideology, that is, a set of beliefs and a system of integrated values that express a nation's view of justice. Law used to rest on religion or morals, matters on which we no longer share a consensus. Today, it rests on the consent of the governed. such, its legitimacy is ever in question. Increasingly, however, large segments of our society no longer feel included. Opportunity is denied to them, as they have neither adequate education nor meaningful work. Property and power are not distributed, as they once were, more or less evenly throughout our society. Sometimes, it seems, law is all that holds us together. When power is abused in our society, the powerless have only law for recourse. The great statutes that Congress enacted in the past--the antitrust statues, the securities statutes, etc.--were, at bottom, designed to secure power for the powerless, in those cases, freedom and integrity in the market place. RICO was drafted in that tradition. No law is perfect, or beyond legitimate reform, including RICO. But I implore you to exercise care, lest you so alter it that you do not right wrong, but do wrong. Your place in history will, in part, be written by how you work to reform RICO, that is, how you seek to respond to the twin challenges of modern forms of organized and White-collar crime. How you reform RICO will, in short, write into law your view of justice. Make it one that reflects the interests, not only of the powerful, who can take care of themselves, but also of the others, who have only people like you and the law to look to.

Please include this letter with its Exhibits in your hearing record.

Thank you.

Respectfully,

3d

G. Robert Blakey

Enclosures

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Brian Ajhar

EXHIBIT B

BARRON'S

July 3, 1989

Don't Mess with RICO Congress Should Spurn Effort To Curb It

By BENJAMIN J. STEIN

THIS the end of civil

ISRICO?

A powerful coalition of lawyers and lobbyists for the securities and defense industries are beating the fateful drums. They are all over Capitol Hill, dispensing money, gifts of other kinds, promises of future favor and their wisdom about the urgent necessity of gutting the civil portions of the Racketeer Influenced and Corrupt Organizations Act of 1970. Last week's decision from the U.S. Supreme Court in H.J. Inc. v. Northwestern Bell, reaffirming the broad reach of civil RICO and rejecting judicial efforts to narrow it, have rallied the anti-RICO troops. Unless something drastic happens, they will have their way with the Congress, as the deep-pocket boys usually do, and therein could lie a major loss for investors, taxpayers and anyone who loves and believes in free markets.

RICO was Title IX of an anti-crime bill enacted during a major Nixon Administration effort to put teeth into anticrime campaign promises. The criminal part of RICO provided stiff penalties and the federalizing of prosecution of persons who gained control of enterprises through extortion, fraud, murder, robbery, blackmail and about 30 other specified of fenses.

The civil side of RICO was passed in language similar to that of the antitrust statutes' civil side. Plaintiffs who had been damaged by the loss of property because of an interconnected series of wrongful acts, a "pattern or practice" of such acts, could bring suit. These included fraud, bribery, securities-law violations and

Benjamin J. Stein is a writer, lawyer and economist.

other financial crimes. Upon a victory, they could recover treble damages, just as in antitrust. The theory of the law was that it would enlist private citizens in the war against organized crime. However, there is no limitation in the law that would confine it only to violations by the Cosa Nostra.

Little was heard from the civil side of RICO until a landmark 1985 Supreme Court decision. In Sedima, the high court ruled that to get into court under civil RICO, there did not have to be criminal conviction on the racketeering charge, nor did there have to be a distinct injury due to racketeering separate from the harm caused by any one of a number of specified wrongs. This reversed a number of lower court decisions. This holding was the one reaffirmed last week.

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