The big issue in RICO this year is extraterritoriality. Many RICO cases have foreign elements: the defendant(s) might be foreign, the racketeering activity (or at least some of the acts in the pattern) might have been committed from a foreign country, and the RICO enterprise might be based abroad. How are courts supposed to decide when a RICO case is too far removed from the U.S. to be decided in a U.S. court? This became a problem five years ago when the Supreme Court decided that the Securities Act could not apply to the purchase of stock on the Australian stock exchange. In deciding that federal statutes do not apply “extraterritorially” unless Congress said so explicitly in the statute, the Court enunciated a broad limiting principle that could be, and gradually is, being applied as to every federal civil and criminal statute.
Federal courts have struggled to apply it to RICO which has no express statement of extraterritorial application. (Section 1962(c) of RICO prohibits the conduct or participation in an enterprise which affects “interstate or foreign commerce. The Second Circuit has decided that reference to “foreign commerce” is too thin a reed to support the argument that RICO is supposed to apply extraterritorially and I agree. It had reached the opposite conclusion in the 1970’s and should have abjured that decision however.) Some courts have decided the way to separate a domestic RICO case from a foreign one is to look at the enterprise. If it is located abroad, then the case cannot be decided in a U.S. court. Other courts focus on where the pattern of racketeering acts occurred. Neither test focuses on the citizenship of the parties, which seems odd.
I argued Hourani v. Mirtchev in the D.C. Circuit Court of Appeals last October. The case is brought by two U.S. citizens (brothers) against a U.S. citizen living in Washington, D.C. who allegedly conspired with the daughter of the President of Khazakstan to seize the Hourani’s vast oil fields and newspapers located in that country, very valuable assets. The RICO violation is extortion, the agreement of Mr. Mirtchev and the President’s daughter to tell the Houranis that they had to sign over their businesses to her or else (assumed to be torture or disappearance). They signed them over under duress. Mr. Mirtchev then acquired some of the proceeds of these businesses by wire transfers to his U.S. bank accounts (money laundering, another form of racketeering activity).
The district court believed the case was extraterritorial because the actual seizure of the Houranis’ businesses occurred in Khazkstan. The Court did not consider that the parties were U.S. citizens or that the conspiracy to extort the businesses was formed in the U.S. or that the subsequent money laundering offenses were also domestic.
Judging from the oral argument last fall, I am optimistic the D.C. Circuit will reverse. What will it decide is the dividing line between domestic and extraterritorial in RICO? The three appellate judges were clearly struggling with that, and the long delay since the argument may mean they do not agree or that the opinion is lengthy or both. But it will have a big impact on this difficult question in RICO. Because the D.C. Circuit is very influential it may be the leading decision in this area for some time- or get the attention of the Supreme Court. I will post on this as soon as it is decided.