Klug: Marijuana gangsters? Law designed to fight organized crime is brought to bear in Frisco case
I’m intrigued by the lawsuit that Holiday Inn and an anti-crime group recently filed under the RICO statute against a neighboring property owner who wants to open a marijuana business. This is reported to be the first civil lawsuit of its kind using the RICO statute to challenge a marijuana-related business.
RICO is the common name of the “racketeer influenced corrupt organizations act.” Congress enacted RICO in 1970 for the purpose of rooting out ostensibly legitimate businesses funded by “organized” crime syndicates. RICO is intended to prevent criminal syndicates from “laundering” their illegal profits and using “storefront operations” to conceal their criminal activities. RICO also makes the leaders of a crime syndicate accountable for crimes that they order others to do. That closed a loophole whereby a crime boss could be exempt from prosecution for ordering another to perform a crime, such as a murder, in which the boss did not personally take part. In keeping with its purpose, RICO has been used to prosecute famous criminals such as the Gambino and Luchhese crime families.
While RICO’s intended purpose is narrow, its actual terms could hardly be more open-ended and inclusive. RICO makes it unlawful for any person associated with any “enterprise” (meaning any legal entity or group of individuals) engaged in interstate commerce to conduct the affairs of the enterprise “through a pattern of racketeering activity.” Racketeering activity includes a list of certain crimes like murder, gambling, extortion and, critically, certain drug crimes.
Federal prosecutors can enforce RICO as a criminal statute, but the statute also allows any person aggrieved by racketeering activity to file a civil lawsuit. A successful plaintiff under RICO is entitled to receive judgment for three times the actual damages proven at trial plus costs and attorney fees. That makes a RICO claim no small thing.
As a result of its expansive language and friendliness to plaintiffs, RICO has been invoked, often successfully, in a variety of circumstances that were clearly not contemplated by its drafters. One early use of the statute beyond the realm of what we normally consider organized crime was against financier Michael Milken in the 1980s for insider trading. In 1994, the United State Supreme Court held that RICO could conceivably be invoked against pro-life activists who physically block access to abortion clinics in violation of the law. Less successful have been cases against Catholic bishops for their mishandling of sex abuse claims (which juries found did not amount to racketeering) and claims against major banks for their lending practices.
That brings us to the Holiday Inn suit. Practically anything to do with marijuana is illegal under federal drug laws. Marijuana activities are condoned in Colorado because of the low federal enforcement priority afforded to marijuana laws and the fact that marijuana activities are permitted to a certain extent under state law.
So, if a person operates a marijuana business in contravention of federal law, can that person be liable under RICO? It seems plausible. There are a number of federal cases in which criminal defendants were found guilty of marijuana-related RICO violations. So, the question is apparently not whether a RICO claim is potentially viable here, but rather whether the facts of the Holiday Inn case will support the claim. Is the marijuana business at issue an enterprise? Did it or its principals engage in any sort of interstate commerce relating to the marijuana business? Those and other key questions would need to be determined at trial.
Meanwhile, the potential impact of RICO lawsuits on the marijuana industry cannot be overstated. If suits like Holiday Inn’s are successful, then any aggrieved neighbor of a marijuana-related business could potentially sue for damages and attorney fees under RICO. The case will be watched closely indeed.
Noah Klug is owner of The Klug Law Firm, LLC, in Summit County, Colorado. He may be reached at 970-468-4953 or Noah@TheKlugLawFirm.com.
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