What Is Racketeering?

Racketeering refers to crimes committed at a state or federal level. Racketeering may refer to the act of acquiring a business operation through illegal activity, operating a business with illegally-derived income, or using a business operation to commit illegal acts. Federal crimes of racketeering include bribery, various fraud offenses, gambling offenses, money laundering, a number of financial and economic crimes, obstructing justice or a criminal investigation, murder for hire, and sexual exploitation of children.

At the state level, racketeering includes crimes such as murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene matter, and drug crimes.

Key Takeaways

  • Racketeering may refer to the act of acquiring a business through illegal activity, operating a business with illegally-derived income, or using a business to commit illegal acts.
  • The U.S. government introduced the Racketeer Influenced and Corrupt Organizations Act聽in October 1970 (RICO) to contain racketeering.
  • Racketeering can be prosecuted at the state or federal level.
  • Federal crimes of racketeering include bribery, gambling offenses, money laundering, obstructing justice or a criminal investigation, murder for hire, and sexual exploitation of children.
  • At the state level, racketeering includes crimes such as murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene matter, and drug crimes.

Understanding Racketeering

Organized groups may operate illegal businesses, known as "rackets." An organized group may also divert funds from a legal business to use for illegal activities.

Racketeering can take many forms. Historically, rackets primarily functioned in obviously illegal industries, such as prostitution, human trafficking, drug trafficking, illegal weapons trade, or counterfeiting. More recently, cyber extortion has become a more common racketeering crime. In a case of cyber extortion, a hacker may illegally push malware onto a user鈥檚 computer, which blocks all the access to the computer and to the data stored on it. The hacker will then demand money from the user in order to restore their access.

Racketeering may also take the form of a protection racket. In a protection racket, a criminal entity may threaten to cause harm to a business or an individual's private property if the owner does not pay a fee for protection.

Kidnapping is considered racketeering when an individual is illegally detained and their captors agree to set the kidnapped individual free once a ransom is paid. Another example of racketeering is called a fencing racket, which is when individuals act as intermediaries to buy stolen goods from thieves at low rates and resell them for a profit to unsuspecting buyers.

Corporations may also engage in racketeering. For instance, a drug manufacturer may bribe doctors to overprescribe a medicine, thus committing fraud in order to boost their profits.

There's also predatory lending, wherein a lender tricks a borrower into taking a loan that deliberately ignores or actively hinders their ability to repay it. When in doubt, even if you have bad credit, an official personal loan is always safer than anything a loan shark might offer you.

Racketeer Influenced and Corrupt Organizations Act (RICO)

To contain illegal collusion and profiteering through racketeering, the U.S. government introduced the Racketeer Influenced and Corrupt Organizations (RICO) Act聽in October 1970. The law permits enforcement agencies to charge individuals or groups involved in various acts of racketeering. The U.S. Department of Justice (DOJ) provides an expansive view on RICO charges. According to the DOJ, in order to be found guilty of violating the RICO statute, the government must prove beyond a reasonable doubt that:

  1. An enterprise existed
  2. The enterprise affected interstate commerce
  3. The defendant was associated with or employed by the enterprise
  4. The defendant engaged in a pattern of racketeering activity
  5. The defendant conducted or participated in the conduct of the enterprise through that pattern of racketeering activity through the commission of at least two acts of racketeering activity as set forth in the indictment.聽

At the time that RICO was enacted, government prosecutors primarily used it to target organized crime. Before the law was in place, prosecutors had few legal methods to prosecute an entire criminal organization. Instead, prosecutors were forced to try mob-related racketeering crimes individually, even though a large number of individuals may have been involved in the commission of a crime.

RICO allows law enforcement officials to file cases against the whole racket. The law gives prosecutors an option to seize the assets of the indicted party, thereby preventing the transfer of funds and property through shell companies. Providing more tools to law enforcement agencies to combat racketeering, the law allows prosecutors to charge organizations or a group of individuals for up to 20 years of ongoing criminal activity for each count of racketeering. The law also allows prosecutors to charge the leaders of such organizations for activities that they ordered others to do.

Federal vs. State Racketeering Offenses

Through RICO, prosecutors can charge a person if they have committed at least two acts of racketeering activity, one of which occurred after RICO became law and the last of which occurred within 10 years after the prior act.

Federal crimes lead to prosecution at both the federal and the state levels. Investigation of federal crimes involves national agencies such as the Federal Bureau of Investigation (FBI), Drug Enforcement Agency (DEA), Border Patrol, Department of Homeland Security, Internal Revenue Service (IRS), Bureau of Alcohol, Tobacco and Firearms (ATF), and the Secret Service.

State crimes violate the laws of a particular state and are investigated by local, state, or county police. Kidnap, robbery and assault鈥攑rovided they occur within the boundary of a particular state鈥攁re state crimes.

Sentences for federal crimes are generally聽longer and harsher than those imposed for state crimes.

Examples of Racketeering

In June 2018, two Kansas counties and two Missouri counties filed federal racketeering cases against more than a dozen manufacturers of opioid painkillers. The defendant business entities were charged with "false, deceptive and unfair marketing and/or unlawful diversion and distribution of prescription opioids." The prosecution alleged that the defendant companies falsely represented the danger of addiction and turned "patients into drug addicts for [the companies'] own corporate profit."

Labor unions have also been a frequent target of racketeering allegations. In these instances, an organized crime group has used one or more labor union(s) to extort a company or contractor(s)鈥攐r has otherwise used a union to control workers. The Italian-American mafia criminal society, La Cosa Nostra, was famous for its control over labor unions. La Cosa Nostra gained such a strong foothold that both company management and the labor union had to rely on the gangsters for protection.

In May 2015, many FIFA (F茅d茅ration Internationale de Football Association)聽officials and corporate executives were indicted for racketeering conspiracy and corruption charges that involved bribes and kickbacks paid to secure profitable media and marketing rights to international soccer tournaments.

In November 2013, Kevin Eleby, a longtime leader of the Pueblo Bishop Bloods street gang that operated in Los Angeles,聽was sentenced to 25 years in federal prison in a RICO case. The gang used violence and intimidation in an attempt to control the Pueblo del Rio Housing Projects in South Los Angeles. Their RICO trial determined that the criminal enterprise engaged in drug dealing, firearms trafficking, murder, witness intimidation, and armed robbery as part of the gang鈥檚 efforts to control and terrorize the housing projects.

In July 2017, two former Baltimore police officers pleaded guilty to federal racketeering charges. They, along with several other members of Baltimore's Gun Trace Task Force, were accused of scheming to steal money, property, and narcotics by way of detaining individuals, entering residences, conducting traffic stops, and swearing out false search warrant affidavits.

In June 2018, Cornel Dawson, the leader of a violent street gang called Black Souls,聽was hit with multiple life sentences in a racketeering聽case. Five more gang members received similar sentences. The gang was found guilty of illegally controlling a six-block section of West Garfield Park in Chicago. The racketeering conviction included four murders committed by the gang members and involvement in drug deals.

In addition to traditional criminal enterprises, numerous instances of corporate racketeering have been found. One of the largest American automobile insurers, State Farm, was accused of illegally funding Judge Lloyd Karmeier鈥檚 2004 election campaign by channeling money through advocacy groups that didn鈥檛 disclose donors. The case relates to long-running litigation by State Farm customers who alleged that they were given generic, substandard car parts instead of original equipment for more than a decade. The plaintiffs sought damages worth $1 billion, plus $1.8 billion in interest, in addition to the damages that could have been tripled under the federal RICO Act. The total damages sought neared $8.5 billion. In September 2018, State Farm agreed to pay $250 million to settle the racketeering case just before opening statements were set to begin.