Mr Dotcom - What ‘s the racket? Mr Dotcom’s Double whammy

Mr Dotcom’s case raises many issues:   bail, extradition, “Cloud” style data storage, and internet supplied software.   The biggest is the FBI’s substantive prosecution charge for racketeering.     

The prosecution is a tsunami in itself; the lengthy Dotcom indictment , which is then based on a mega piece of legislation, the federal Racketeer Influenced and Corruption Organisations Act 1970 (USCA 18 § 1961 ff (1970)) and simply called RICO.

   The racketeering charges, an uncommon term in our law, suggests prohibition mobsters, tommy guns, and speak easies.    The meaning of racketeering in RICO goes well beyond its original 1930’s sense of the obtaining and extorting of money from illegal activities.    RICO’s purpose was to hit the crime families of the 1960 and 70’s and their extension into “corporate” activities.  

Mario Puzo’s  novel The Godfather well illustrates this.    New Zealand has nothing similar to RICO and no doubt the SFO would like something like it.

Racketeering under RICO is “a pattern of illegal activity carried out as part of an enterprise that is owned or controlled by those involved..”   The activity that falls under this is a conglomeration of all types of money crime imaginable.   If that was not enough, RICO is to be given a wide interpretation not a narrow one.    The money crimes range from illegal gambling to mail fraud to financial institution fraud to the moving of stolen cars to murder for hire to prostitution to trafficking in contraband cigarettes to drugs to FOREX crimes to fraud in the sale of securities and bribery and extortion, and there is more.      For Mr Dotcom’s case, tucked away in sections 2318 to 2320, are offences for copyright piracy of movies and recordings which he is charged with and vehemently denies.

The US Department of Justice has published a guideline manual on RICO for prosecutors to help with its complexity .      Powers under RICO include search and seizure of assets, which are deemed to be bought by the criminal “enterprise”.  This is before any evidence is heard and a conviction is entered.  How a defendant is to pay for their defence when the bank account is frozen is a good question. Some of the sentences that can be imposed have maximum 20 years per offence. 

RICO has given rise to criticisms of abuse. That RICO has gone well beyond its original purpose of dealing to the mob crime families.   Many defendants are not mobsters but individuals involved in an enterprise that commits two more of the defined racketeering offences, and can be petty criminals involved in non violent offences. 

The potential double whammy for Mr Dotcom is liability to victims (e.g. the movie companies if the allegations are proved) in civil claims for which treble damages are awarded.   RICO is a double headed monster and creating liability both in criminal and civil law.  Civil proceedings for damages is an area of abuse under RICO .     

RICO allows allow claimants to sue anyone connected with the enterprise no matter how remote.   In one case two accountants in Ernst Young who had been convicted of tax fraud in relation to a entity faced a RICO claim for damages which eventually failed.   Accountants, bankers, insurers and other professionals have been targets for RICO damage claims.   General Motors has been included in that line up.  Many have settled rather than fight because of the wide language , uncertainty and risk of treble damages.  

Vagaries have arisen when the Courts have played with RICO.   The US Supreme Court in one case lowered the barriers under RICO and allowed it to be used against legitimate businesses.   That went too far and the same Court then held in another case that RICO could not be used without evidence of extortion.  This arose in a claim by pro-abortionists over  the actions of anti abortionists.  It was claimed that the anti abortionists actions were a racketeering conspiracy to shut down abortion clinics through protest and violence. In the absence of extortion the claim could not succeed.

Mr Dotcom has had down loaded on him a mega legal mire. Extradition is not a forgone conclusion. Extradition.   Lawyers have suggested that extradition under the Act and the treaty will be difficult. The double whammy of civil damages under RICO should figure in the assessment.   If he is extradited criminal liability under RICO could then be followed not by a mega but a “peta” civil damages claim . Mr Dotcom could well be embroiled for a decade or more in Court action.

Graham HillBarrister & Solcitor

5 February 2012

Source: Graham Hill