Outsiders as RICO conspirators

Archives Securities Case Briefs: Outsiders as RICO conspirators

Brouwer vs. Raffensperger, Hughes & Co.

Brouwer v. Raffensperger, Hughes & Co., 199 F.3d 961 (7th Cir., 1/13/00): This case concerns the limitations under the federal RICO statute on liability of an underwriter and a law firm that assisted in note financings for Firstmark Corporation, a NASD member that went bankrupt in 1988. What does it take for an “outsider” to become a RICO conspirator? Seventh Circuit precedent has established that some degree of personal participation is necessary for RICO liability vis-a-vis the operation or management of the RICO “enterprise;” however, U.S. Supreme Court precedent has established that personal participation is not necessary to prove another element, the commission of the requisite two predicate acts. “[T]he issue before us is whether [Salinas v. U.S., 522 U.S. 52 (1997)] means that one does not need to personally participate in the operation or management of the enterprise in order to violate subsection [18 USC 1962(d)].” Actual participation as an operator or manager is not required, the Court decides. It is enough for liability under subsection (d) that “[o]ne must knowingly agree to perform services of a kind which facilitate the activities of those who are operating the enterprise in an illegal manner.” Summary judgment of defendants below was based on too restrictive a reading of the requisite conduct. “Therefore, we must reverse the court’s judgment and remand the case for reevaluation of the liability of these defendants consistent with this opinion.”

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Securities Attorney at Sallah Astarita & Cox | 212-509-6544 | mja@sallahlaw.com | Website | + posts

Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.