From the Bonannos to the Bin Ladens: The Reves Operation or Management Test and the Viability of Civil RICO Suits Against Financial Supporters of Terrorism
47 Pages Posted: 12 Aug 2009 Last revised: 28 Apr 2010
Date Written: August 10, 2009
Since the mid-1970s, the civil provision of the Racketeering Influenced and Corrupt Organizations Act (“RICO”) has served as a potent weapon for private plaintiffs who have suffered damage to business or property at the hands of corrupt organizations, businesses, and enterprises. Despite decades of criticism and repeated efforts by the federal courts to constrain its reach, this provision has remained largely untouched by Congress, and thus persists as a powerful remedy - one which, by virtue of its broad and expansive language, can evolve to meet the challenges presented by the changing nature of the post-9/11 world, in which terrorist organizations have come to replace the mafia as the foremost exemplar of “organized crime” in the American consciousness. This Note addresses the desirability and the viability, in light of the “operation or management” test articulated by the Supreme Court in Reves v. Ernst & Young, of civil RICO suits by private plaintiffs against those who fund international terrorist organizations.
Civil RICO is a potentially significant weapon in the war on terror, which could simultaneously serve a multitude of purposes. First and foremost, civil RICO suits can act as an additional means by which to thwart terrorist financing, by increasing the likelihood of liability for terrorist financiers, replete with the threat of treble damages. In this regard, civil RICO enables private plaintiffs, serving as private attorneys-general, to aid in the disruption of terrorist financing, while potentially achieving the restitution they deserve. These suits, however, can provide victims of terrorism with more than simple restitution; the uniquely evocative nature of RICO makes it a particularly useful method by which to powerfully associate terrorist financiers with the brutal terrorist organizations they aid, preserving the record of their transgressions in the public consciousness, while simultaneously making victims whole again - to the extent possible - through recognition, restitution, and retribution.
Part I explores the courts’ initial trepidation in interpreting the broad reach of RICO, the development of the operation or management test by the Supreme Court in Reves v. Ernst & Young, and the subsequent elucidation and expansion of that standard by the lower courts. Part II turns to the application of Reves and its progeny to attempts to utilize civil RICO against those who fund international terrorism. It begins by addressing the complexity of pleading civil RICO claims against financial supporters of terrorism, as well as the unique nature of terrorist financing and the heightened need to utilize the full spectrum of both the criminal and civil law against terrorist financiers as part of an expansive and cohesive war on terror. Part II goes on to address these claims in light of the federal courts’ precedent regarding the operation or management test, particularly the degree to which defendants who are accused of financing terrorist organizations can be conceptualized as inside the RICO enterprise or as operating within the chain of command. Finally, Part II considers the limited instances in which federal courts have been presented with such claims, and the hesitance of those courts to entertain them.
Part II concludes that such claims may be precluded under the courts’ current reading of the operation or management test, except in certain limited cases.
Next, Part III addresses the wisdom of extending the current jurisprudential regime to encompass civil RICO suits against financial supporters of terrorism, and analyzes the extent to which plaintiffs can increase the viability of their claims through more specific pleading and by stressing certain conceptual elements of their claims. Part III ultimately concludes that prohibiting such claims contravenes the legislative purpose, especially in light of Supreme Court precedent and the legislative history surrounding RICO and its amendments, and is symptomatic of the lower courts’ continued insistence on unduly constraining the reach of civil RICO. It argues against the emerging judicial response to civil RICO suits against financial supporters of terrorism, and urges that the operation or management test be read in a manner consistent with the unique circumstances and challenges of the war on terror, thereby permitting the use of civil RICO as a powerful tool not only in the battle against terrorism, but in securing vindication and restitution for domestic victims of terrorism. If the courts are unwilling to undertake such a reading and entertain similar future claims, Part III advocates that Congress amend the statute to so require. It argues that failing to extend civil RICO to suits against financial supporters of terrorism will not only remove a potentially potent and useful weapon from the arsenal in the war on terror, but will also reduce the likelihood that victims of terrorism will receive the essential redress - beyond simple restitution - that they deserve.
Keywords: RICO, Civil, Terrorism, Terrorism, Reves, Operation, Management, 9/11, September 11
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