Proving a Pattern of Racketeering: Civil RICO Explained
When your business partner lies, cheats, or steals, it often feels personal. But when that deception turns out to be part of a larger, systematic scheme to defraud you and others, it might be more than just a breach of contract or simple fraud. It could violate the Racketeer Influenced and Corrupt Organizations Act, commonly known as RICO.
While many people associate RICO with mob bosses and organized crime families, this federal statute is a powerful tool in civil court for business owners facing systematic fraud. However, bringing a successful claim requires more than just an accusation. It requires strategy, precision, and an attorney who knows how to fight.
If you suspect your business is the victim of organized commercial fraud in these regions, you need a legal representative who understands the laws and the local court systems.
At the Law Offices of David H. Schwartz, INC., protecting business interests is the primary mission. Attorney David Schwartz brings over 45 years of experience, offering a level of tenacity and strategic insight that sets the firm apart. He understands that high-stakes litigation is not a passive activity; it is a battle for the survival of your commercial interests.
Attorney David Schwartz serves clients throughout California, with a particular focus on the San Francisco Bay Area, San Jose, Santa Clara, San Mateo, Alameda County, and Oakland.
What is Civil RICO?
Congress passed RICO in 1970 primarily to stop organized criminals from infiltrating legitimate businesses. However, the law was written broadly enough to cover "enterprises" of all kinds, including legitimate corporations that go rogue.
Civil RICO allows a private citizen or business to sue if they have been injured in their business or property by a "pattern of racketeering activity." The stakes in these cases are incredibly high. If a plaintiff wins, the law mandates treble damages—meaning the defendant must pay three times the actual damages—plus attorney’s fees.
Because the penalties are so severe, courts are strict about the requirements. You cannot simply claim someone was dishonest. You must prove specific elements, and the most challenging among them is often the "pattern of racketeering."
The Core Requirement: Proving Racketeering Activity
Before you can determine a pattern of activity, you must identify the acts themselves. The statute lists specific crimes that qualify as "racketeering activity." These are often called "predicate acts." In the context of business litigation, the most common predicate acts are:
Mail fraud: Using the U.S. Postal Service or private carriers (such as UPS or FedEx) to further a fraudulent scheme.
Wire fraud: Using electronic communications (email, phone calls, wire transfers) to further a fraudulent scheme.
Bank fraud: Schemes to defraud a financial institution.
Extortion: Obtaining property or money through force, violence, or fear.
For a Civil RICO claim to move forward, the plaintiff must allege that the defendant committed at least two of these acts within a ten-year period.
Establishing the "Pattern"
This is where many cases fall apart. Simply listing two emails containing lies is rarely enough to establish a pattern under federal law. The Supreme Court has clarified that a pattern requires two main ingredients: relationship and continuity.
Relationship
The predicate acts cannot be random, isolated events. They must be related to one another. This means they have the same or similar purposes, results, participants, victims, or methods of commission. They are not spur-of-the-moment crimes; they are part of a blueprint.
Continuity
This is the harder element to prove. The courts want to see that the racketeering activity amounts to long-term criminal conduct. Continuity can be shown in two ways:
Closed-ended continuity: This involves a series of related predicate acts extending over a substantial period of time. A scheme that lasts a few weeks or even a few months usually does not qualify. The courts typically look for activity lasting more than a year.
Open-ended continuity: If the conduct hasn't been going on for a long time, the plaintiff must show a distinct threat that the activity will continue into the future. For example, if the fraud is part of the defendant's regular business practices, or a single specific goal (e.g., stealing a), it poses a future threat.
The "Single Scheme" Defense
Defendants often try to dismiss RICO cases by arguing they were involved in only a "single scheme" with a single victim. They argue that even if they sent 500 fraudulent emails, it was all for a single specific goal (e.g., stealing a specific piece of real estate), and therefore it does not constitute a "pattern" of racketeering.
Attorney David Schwartz understands how to counter these arguments. The goal is to show that the defendant’s actions were not an isolated lapse in judgment but a systematic method of operation. It is about connecting the dots to reveal the bigger picture of corruption.
The Distinct "Enterprise" Requirement
In RICO litigation, you must also be able to prove the existence of an "enterprise." You cannot simply sue a corporation for being a criminal enterprise. Under the law, the "person" (the defendant) must be distinct from the "enterprise" (the vehicle used to commit the crimes).
For example, if a corrupt CEO uses his company to launder money, the CEO is the "person, " and the company is the "enterprise." This distinction prevents plaintiffs from double-dipping and suing a company for the bad acts of its rogue employees unless specific criteria are met. This separation is vital to a successful pleading.
California Laws for Organized Fraud
While federal RICO is the heavy artillery, California state laws also provide remedies for business owners facing dishonest practices. California has its own version of RICO, known as the "Control of Profits of Organized Crime Act." However, this statute is used less frequently in civil business disputes due to stricter definitions of what constitutes "organized crime."
Instead, California litigation often involves the Unfair Competition Law (UCL), Business and Professions Code section 17200. The UCL is a broad statute that prohibits any "unlawful, unfair or fraudulent business act or practice."
While the UCL does not offer treble damages as federal RICO does, it is a powerful companion claim. It allows for restitution (getting your money back) and injunctive relief (a court order stopping the behavior). In many cases, a comprehensive complaint will include both federal RICO claims and state-level claims under the UCL or common law fraud. This multi-layered approach casts a wider net, increasing the pressure on the defendant to resolve the dispute.
Contact a Business Litigation Attorney in the San Francisco Bay Area Today
If you are involved in a Civil RICO case, you are either initiating a lawsuit or defending against one. The outcome of this battle may determine whether your business survives or fails. In these high-stakes moments, your success depends on having a business litigation attorney with deep, focused experience.
Based in San Francisco, California, the Law Offices of David H. Schwartz, INC., is experienced in handling the difficult cases that other firms might shy away from. Attorney Schwartz has guided California clients through trade secret thefts, partnership breakups, heavy commercial disputes, shareholder derivative actions, and Civil RICO claims.
For over 45 years, he has served the legal needs of businesses and individuals across the Bay Area. If you are facing a Civil RICO cases, reach out today to schedule a consultation.