Civil RICO: The Guild’s Ultimate Weapon

April 4, 2019
I looked up Civil RICO today in anticipation of the Guild’s announced upcoming lawsuit;

“The federal Racketeering Influenced and Corrupt Organizations (RICO) law was passed in 1970 as the “ultimate hit man” in mob prosecutions. Prior to RICO, prosecutors could only try mob-related crimes individually. Since different mobsters perpetrated each crime, the government could only prosecute individual criminals instead of shutting down an entire criminal organization. Today, the government rarely uses RICO against the Mafia. Instead, because the law is so broad, both governmental and civil parties use it against all sorts of enterprises, both legal and illegal.

RICO allows for prosecution of all individuals involved in a corrupt organization. That means that the government can go after top leadership as well as the hit men and capos.

To violate RICO, a person must engage in a pattern of racketeering activity connected to an enterprise. The law defines 35 offenses as constituting racketeering, including gambling, murder, kidnapping, arson, drug dealing, bribery. Significantly, mail and wire fraud are included on the list. These crimes are known as “predicate” offenses. To charge under RICO, at least two predicate crimes within 10 years must have been committed through the enterprise.

Note that an enterprise is required. This might be a crime family, a street gang or a drug cartel. But it may also be a corporation, a political party, or a managed care company.

The RICO statute provides for severe financial penalties. The law also allows prosecutors to attach assets, so they can’t be whisked out of the country before judgment.

Civil RICO
Even though RICO threatens very long prison terms for racketeers, the law’s real power is its civil component. Anyone can bring a civil suit if they’ve been injured by a RICO violation, and if they win, receive treble damages. In the 1980s, civil lawyers attempted to fit many different claims inside of RICO, but in the 1990s the federal courts set up a number of hurdles for civil RICO claims. To succeed on a RICO claim, a plaintiff must show:

*Criminal Activity. You must show that the defendant committed one of the enumerated RICO crimes, which include the broad crimes of mail and wire fraud. If you bring a claim on a fraud basis, however, the court will apply strict scrutiny.

*Pattern of Criminal Activity. One crime is not enough. You have to show a pattern of at least two crimes. A pattern requires the crimes be related in some way — same victim, same methods, same participants — or continuous, meaning it was conducted over at least a year.

*Within the Statute of Limitations. The Supreme Court held that RICO has a four-year statute of limitations, which begins tolling from the time the victim discovers his or her damages.”
###

So a case alleging that the Studios are bribing our agents to keep our salaries low is well within the bounds of this law, it would include several of the predicate including bribery, mail fraud, wire fraud, racketeering, robbery, interference with commerce, extortion, embezzling from pension funds, witness tampering, retaliating against a witness, victim, or an informant, and any act which is indictable under title 29, United States Code, section 186 (dealing with restrictions on payments to labor organizations).

The ATA has dangerously overstepped the bounds of the law here. And given that they have ALL signed state paperwork attesting to their fiduciary duty to us as clients, they will receive zero leniency from the Federal courts, which hold Fiduciary Trust as the highest legal obligation an individual can hold to another.

I don’t think they set out to shatter the law. It was just a host of actions and new business practices which slowly accreted upon one another, reinforced by turnover at agencies and poor training, leading to the point where they are negotiating directly against our financial interest to help themselves.

But just because it’s a problem that this generation of agents inherited, that won’t matter in court. “Your honor, we were so poorly trained in fiduciary duty that we didn’t even know we were stealing from our clients” isn’t going to be looked kindly upon.

And if we are looking to torpedo WME’s upcoming IPO, I can’t think of anything more terrifying to investors than a pending RICO case alleging that WME’s entire current business model is build on felony fraud, bribery, and racketeering, with triple damages looming as a penalty.

Hell, if the evidence we put forward is strong enough, judges can attach the agencies assets so they can’t hide them. Imagine investing in an IPO where every dollar raised in the IPO is immediately confiscated by the government and held until the case works its way through the system over ten years.

Naaah.

The studios will have a choice once this lawsuit is filed; either stand with the ATA and run the risk that they are also convicted under the RICO statute, or to throw the agents under the bus and claim that they, too, are the victims of agency racketeering, being extorted into paying packaging fees against their will.

There hasn’t been a really juicy RICO case involving a labor union in a few years. If I were a clerk for a federal judge looking to send a signal to corrupt corporations, I’d be drooling right now.