Racketeering: What it is and How it Affects Society
Racketeering is a criminal activity in which a person or organization engages in a “racket.” A racket is when the criminal creates a problem for others for the purpose of solving that problem by some type of extortion. The person or organization who engages in the racket is called a racketeer. Racketeering has always been associated with the mob and organized crime, beginning back in the early days of the 1920s.
Racketeer Influenced and Corrupt Organizations Act (RICO)
RICO, also called the Organized Crime Act of 1970, was passed to try to eliminate organized crime. RICO rectified a problem that prosecutors had when trying to charge crime bosses. They could charge the person in the racket who committed the crime, but they couldn’t charge the crime boss since he did not actually commit the crime. After RICO, the crime bosses could be charged and tried for the crime. Due to RICO, the sources of revenue could be exposed and both criminal and civil penalties imposed.
Criminal penalties are 20 years to life depending on the racketeering activity and civil liabilities are triple that of a non-racketeering case.
The RICO law was originally intended to take down Mafia crime bosses.
As the years have passed since its enactment, prosecutors have found other uses for it. There are criminal gangs and drug smugglers and RICO laws can be used in their prosecution just like they were used in the prosecution of Mafioso dons.
Financial Implications of Racketeering
Racketeering has a high cost to society. The last available statistics are from 2009. All forms of organized crime together generated 1.5% of the global gross domestic product or about $870 billion. That is about 7% of the world’s export of products.
The Beginnings of Racketeering in the United States
Racketeering has long been associated with the Mafia. Lucky Luciano, who emigrated from Sicily to the United States in 1906, is widely considered the father of the American Mafia. The Mafia originated in Sicily and was originally an organization loosely composed of families charged with protecting the island from foreign invaders.
Luciano is the most powerful gangster of all time. There were criminal organizations in the United States before Lucky Luciano, but he organized young gangsters in New York City to gain power after winning bloody wars with older mob bosses. They dealt in many rackets with prostitution and bootlegging being the most lucrative. Luciano organized the gangsters into five crime families which became known as a syndicate.
Luciano was arrested in 1936 after some of the prostitutes gave evidence to prosecutors who had been investigating him. He was tried, convicted, and sentenced after it was found that he had committed sixty-two murders. During World War II, Luciano assisted the federal government, from his jail cell, with waterfront security in New York City. He had control, even from jail, of the longshoreman’s union. After that, he was released and deported to Italy where he later died.
Famous Racketeering Cases
- A famous racketeering case involving the securities industry was Michael Milken in 1989. The Milken case is an example of a racketeering case that does not involve the Mafia or a crime boss. Milken worked for the Drexel investment bank as a bond researcher. He became instrumental in developing the junk bond market. Milken became a powerful player on Wall Street and was thought to sometimes skirt the Securities and Exchange Commission (SEC) regulations. As a result, he was under scrutiny by the SEC. Milken was eventually indicted on 98 counts of racketeering and fraud with accusations of insider trading, securities fraud, and stock manipulation after being implicated by another defendant in a securities investigation. After a plea bargain, he was fined and jailed, but he is now free.
- Another recent racketeering case happened in the Atlanta school system in 2009 and tried in court in 2015. The No Child Left Behind Act was passed under the George W. Bush administration and held schools accountable for student learning. In 2009, a group of Atlanta school officials engaged in changing student answers on standardized tests that they had taken to determine what they had learned during the school year. The group of school officials was employed in a school district that was traditionally low performing and the student scores spiked up during 2009. After a long investigation, they were indicted and convicted on charges of racketeering which carries a long prison sentence.
Other Examples of Racketeering
Some of the earliest examples of racketeering, or the problems racketeers create for others, include prostitution, which is providing illegal sexual services, and the numbers racket, which is an illegal lottery that was most popular before state and national lotteries were legalized. Another popular early racket was providing protection. The protection racket involves members of the racket perpetuating crimes on, for example, a small business, and then offering “protection” from similar crimes to the small business in return for large amounts of money.
Other early examples of racketeering include drug trafficking, smuggling of weapons, kidnapping, and counterfeiting.
Modern day examples of racketeering get even more interesting. Cyber extortion occurs when the racketeer demands money or they will seize or damage electronic data, like computer data. An example would be if a hacker gains access to your computer, possibly through discovering your password, and uses that access to either damage your data or use your data in some way that is detrimental to you unless you pay them a large sum of money.
Another example of cyber extortion is credit card fraud. Criminals place credit and debit card skimmers on gasoline pumps to capture the data from them. The patrons of gasoline stations often don’t realize the skimmers are there and fall prey to the extortion. Other examples of modern-day racketeering are human trafficking, bribery, wire fraud, identity theft, illegal gambling, money laundering, and more.