NOTES
THE FORFEITURE OF PROFITS UNDER
THE RACKETEER INFLUENCED AND
CORRUPT ORGANIZATIONS ACT:
ENABLING COURTS TO
REALIZE RICO'S POTENTIAL
INTRODUCTION
Criminal infiltration of legitimate business enterprises, particularly by
established criminal organizations, threatens the nation's economic and
social welfare.1 Many criminal organizations use their massive illegal
profits to perpetuate their unlawful activities and to invest in legitimate
businesses both as a means of acquiring additional profits and as
"fronts" for their illegal pursuits. 2 The use of legitimate and illegitimate
business enterprises to promote illegal activities drains billions of dollars
from the American economy annually and substantially enhances the
3
power of organized crime.
In 1970 Congress enacted the Racketeer Influenced and Corrupt Organizations Act (RICO)4 to eradicate organized criminal activity by depriving organized crime of its illegal gains and consequent economic
power.5 RICO's provisions, which are part of a more comprehensive series of measures known as the Organized Crime Control Act of 1970,6
prohibit persons from engaging in three kinds of activities: (1) investing
income derived from a pattern of racketeering activity in an enterprise
or portion of an enterprise that affects interstate commerce, 7 (2) acquir1. See S. REP. No. 617, 91st Cong., 1st Sess. 79 (1969) [hereinafter cited as SENATE REPORT].
2. See United States v. Martino, 681 F.2d 952, 956-58 (5th Cir. 1982) (en banc), afdsub oam.
Russello v. United States, 104 S. Ct. 296 (1983).
3. See id at 956 (quoting Congressional Statement of Findings and Purpose, Organized
Crime Control Act of 1970, Pub. L. No. 91-452, 84 Stat. 922, 922-23 (1970) (codified at 18 U.S.C.
§ 1961 note (1982))).
4. Pub. L. No. 91-452, § 901(a), 84 Stat. 941 (1970) (codified as amended at 18 U.S.C.
1961-1968 (1982)).
5. Se SENATE REPORT, supra note 1, at 79.
6. Pub. L. No. 91-452, 84 Stat. 922 (1970) (codified as amended in scattered sections of 7, 11,
12, 15, 16, 18, 19, 21, 28, 29, 33, 42, 45, 46, 47, 49, and 50 U.S.C.).
7. 18 U.S.C. § 1962(a) (1982) provides in pertinent part:
It shall be unlawful for any person who has received any income derived, directly or
indirectly, from a pattern of racketeering activity . . . to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any
interest in, or the establishment or operation of, any enterprise which is engaged in, or the
748
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 33:747
ing or maintaining a legitimate enterprise through a pattern of racketeering activity, 8 and (3) participating in an enterprise through a
pattern of racketeering activity.9 These provisions reflect Congress' intent that law enforcement agencies invoke RICO against persons who
mix their racketeering activities with the affairs of legitimate enterprises. 10 Congress also indicated that courts should construe RICO liberally to effectuate this intent. 1
12
Although courts have repeatedly affirmed RICO's constitutionality,
the statute remains the subject of much debate. 13 This debate has foactivities of which affect, interstate or foreign commerce. A purchase of securities on the
open market for purposes of investment, and without the intention of controlling or participating in the control of the issuer, or of assisting another to do so, shall not be unlawful
under this subsection if the securities of the issuer held by the purchaser, the members of
his immediate family, and his or their accomplices in any pattern of racketeering activity
or the collection of an unlawful debt after such purchase do not amount in an aggregate
to one percent of the outstanding securities of any one class, and do not confer, either in
law or in fact, the power to elect one or more directors of the issuer.
8. Id § 1962(b) provides: "It shall be unlawful for any person through a pattern of racketeering activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly,
any interest in or control of any enterprise which is engaged in, or the activities of which affect,
interstate or foreign commerce."
9. Id § 1962(c) provides in pertinent part: "It shall be unlawful for any person employed by
or associated with any enterprise engaged in, or the activities of which affect interstate or foreign
commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's af... Section 1962 also prohibits persons from
fairs through a pattern of racketeering activity.
conspiring to violate these provisions. Id § 1962(d).
The government must establish the existence of both an "enterprise" and a connected "pattern of
racketeering activity" to convict a person of a violation under RICO. United States v. Turkette,
452 U.S. 576, 583 (1981). "Enterprise" refers to the persons engaged in criminal activity, and "pattern of racketeering activity" refers to the requisite series of criminal acts for a RICO violation. Id
(construing 18 U.S.C. § 1961(1) (Supp. III 1979)). Although the government may use the same
evidence to establish both elements in a particular case, the Court in Turkelle stressed that proof of
one element does not necessarily establish the other. Id An enterprise includes "any individual,
partnership, corporation, association, or other legal entity, and any union or group of individuals
associated in fact although not a legal entity." 18 U.S.C. § 1961(4) (1982). In Turkelte the Court
held that an enterprise, moreover, includes both legitimate and illegitimate operations. Turkelth,
452 U.S. at 580-81. A pattern of racketeering activity requires "at least two acts of racketeering
activity, one of which occurred after the effective date of this chapter and the last of which occurred
within ten years (excluding any period of imprisonment) after the commission of a prior act of
racketeering activity." 18 U.S.C. § 1961(5) (1982).
10. Russello v. United States, 104 S. Ct. 296, 302-04 (1983) (discussing congressional purpose
underlying RICO).
11. See 18 U.S.C. § 1961 note (1982) (RICO "shall be liberally construed to effectuate its
remedial purpose").
12. See, e.g., United States v. Martino, 648 F.2d 367, 383 (5th Cir. 1981) (RICO upheld
against attacks based on ninth and tenth amendments, vagueness, freedom of association, and
double jeopardy clause), cert. denied, 456 U.S. 949 (on issue of validity of convictions), rev'don rehgen
ban, 678 F.2d 952 (5th Cir. 1982) (on issue of validity of forfeiture order), afdsub nom. Russello v.
United States, 104 S. Ct. 296 (1983); United States v. Huber, 603 F.2d 387, 396-97 (2d Cir. 1979)
(RICO's forfeiture provision not cruel and unusual punishment because forfeiture is keyed to magnitude of defendant's criminal enterprise); United States v. Elliott, 571 F.2d 880, 903 (5th Cir.)
(RICO does not unconstitutionally punish associational status because it proscribes conduct, not
status), cert. denied, 439 U.S. 953 (1978); United States v. Hawes, 529 F.2d 472, 479 (5th Cir. 1976)
(RICO not unconstitutionally vague).
13. Compare,e.g., Bunker Ramo Corp. v. United Business Forms, Inc., 713 F.2d 1272, 1287 n.6
(7th Cir. 1983) (RICO claim need not allege that defendant is associated with organized crime)
1984]
FORFEITURE OF PROFITS UNDER
RICO
cused in part on RICO's penalty provision, section 1963, which allows
courts both to fine and imprison persons convicted of violating the statute's substantive provisions, and to order violators to forfeit to the gov14
ernment "any interest" they have acquired or maintained as a result.
This innovative forfeiture provision is particularly important because it
allows the government to separate corrupt organizations from legitimate
channels of commerce and thus combat organized criminal activity
more effectively.1 5 In addition, the forfeiture provision represents Congress' first attempt to combat criminal activity by allowing courts to
compel forfeiture of interests through in personam proceedings, which
become operative only after a court convicts the property owner of violating one of RICO's substantive provisions.' 6 In comparison, in rem
forfeitures, formerly the sole method by which courts would allow the
17
government to confiscate property used to perpetuate illegal activity,
allow courts to proceed only against the property itself, without regard
to whether the owner of the property has been convicted of committing
a crime.'
8
with Wagner v. Bear, Stearns & Co., [1982-1983 Transfer Binder] FED. SEC. L. REP. (CCH)
99,032, at 94,913 (N.D. Ill. Sept. 17, 1982) (dismissing RICO claim for failure to allege that defendant was associated with organized crime). Comparealso United States v. Mazzei, 700 F.2d 85, 89 (2d
Cir.) (although both enterprise and pattern of racketeering are prerequisites for liability, two elements need not be separate), cert. denied, 103 S. Ct. 2124 (1983) with United States v. Bledsoe, 674
F.2d 647, 663 (8th Cir.) (existence of enterprise separate from pattern of racketeering is prerequisite
for liability under RICO), cert. denied, 103 S. Ct. 456 (1982). See generally Tarlow, RICO Revisited,
17 GA. L. RE%. 291, 311-15 (1983) (discussing interpretations of statute); id at 294-95 nn.3-6 (list of
commentaries on RICO).
14. Section 1963 provides:
(a) Whoever violates any provision of section 1962 of this chapter shall be fined not
more than $25,000 or imprisoned not more than twenty years, or both, and shall forfeit to
the United States (1) any interest he has acquired or maintained in violation of section
1962, and (2) any interest in, security of, claim against, or property or contractual right of
any kind affording a source of influence over, any enterprise which he has established
operated, controlled, conducted, or participated in the conduct of, in violation of section
1962.
18 U.S.C. § 1963(a) (1982).
15. See SENATE REPORT, supra note 1, at 79. The Senate Report emphasized the importance
of legitimate economic power to the existence of organized criminal activity, and recommended
that the Senate adopt § 1963's forfeiture provision to attack this economic base. Id; see also 116
CONG. REC. 591-92 (1970) (statement of Sen. McClellan) (new penal remedies needed to divest
criminals of illegal profits gained through infiltration of legitimate businesses); Blakey & Gettings,
RICO. Evening Up the Odds, 16 TRIAL, Oct., 1980, at 58, 58 (RICO restored the "concept of criminal
forfeiture of ill-gotten gains and economic bases of misused power").
16. An in personam proceeding is an action brought directly against a person and thus generally involves personal rights. A court's jurisdiction over an in personam action is based on its
jurisdiction over the person. See, e.g., Shaffer v. Heitner, 433 U.S. 186, 199 (1977) (in personam
jurisdiction is based on court's authority over defendant's person); Pennoyer v. Neff, 95 U.S. 714,
727 (1871) (court's jurisdiction is in personam when object of action is to determine personal rights
and obligations of defendant); BLACK's LAW DICTIONARY 711 (5th ed. 1979).
17. See infra notes 45-49 and accompanying text.
18, An in rem action is a proceeding against real or personal property. BLACK'S LAw DicTIONARY 713 (5th ed. 1979). A court's jurisdiction over an in rem action is based on its jurisdiction
over the property. See Huntington v. Attrill, 146 U.S. 657, 669 (1892) (in rem proceedings must be
750
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 33:747
The RICO forfeiture provision greatly increases the government's
ability to attack a criminal organization's economic base.19 The novelty
of using the in personam rather than the traditional in rem forfeiture
proceeding to reach criminal activity,20 however, has prompted critics to
argue that courts should interpret the term "interest" conservatively, in
particular to exclude profits derived from activities that violate RICO's
substantive provisions. 2 1 Until recently, federal courts had employed
varying definitions of the term interest. 22 The United States Court of
Appeals for the Fifth Circuit held that interest included profits that defendants had derived from prohibited activities. 23 Other courts of appeals have defined interest more narrowly to exclude profits from
forfeiture under RICO. 24 The United States Supreme Court recently
settled the issue in Russello v. United States.25 The Court agreed with the
Fifth Circuit, holding that courts may require individuals convicted of
violating RICO's substantive provisions to forfeit their illegally acquired
brought in state in which property is situated); Clinton Foods, Inc. v. United States, 188 F.2d 289,
292 (4th Cir.), cert. denied, 342 U.S. 825 (1951) (in rem proceedings are local in character and must
be brought in jurisdiction that has power to seize property). The court's decision in an in rem
proceeding determines rights in the specific property that are valid against all other persons. Flesch
v. Circle City Excavating & Rental Corp., 137 Ind. App. 695, 700, 210 N.E.2d 865, 868 (1965).
19. See 116 CONG..REc. 18,955 (1970) (statement of Sen. McClellan) (new forfeiture provision
incapacitates and removes organized crime's corrupting influence from channels of commerce by
requiring criminals to divest themselves of interests they have acquired in legitimate business)
20. See infra notes 45-53 and accompanying text (discussing historic absence of in personam
forfeiture actions). Until the enactment of RICO, Congress used in rem forfeiture statutes to allow
seizure of property and thereby to punish persons who engaged in objectionable activities. See infia
notes 58-78 and accompanying text (discussing development of punitive in rem forfeiture actions).
Congress thus often characterized as in rem forfeiture statutes those that actually operated in personam to punish the property owner but were invoked upon conviction or some other proof of
criminal activity. See infta notes 58-78 and accompanying text (discussing development of in rem
forfeitures as punitive measure).
21. See, e.g., United States v. Martino, 681 F.2d 957, 962 (5th Cir. 1982) (en bane) (Politz, J.,
dissenting) (courts should "charily" assess in personam forfeiture provision to exclude profits), af]d-sub nom. Russello v. United States, 104 S. Ct. 296 (1983); Taylor, Forfeiture Under 18 US.C § 1963:
RICO's Most Powerful Weapon, 17 AM. CRIM. L. REV. 379, 381 (1980) (courts should limit forfeiture
provision to avoid results unintended by Congress and Court in prior case law); see also Tarlow,
RICO: The Darling of the Prosecutor's Nurseqv, 49 FORDHAM L. REV. 165, 277-78 (1980) (forfeiture
provision is radical innovation in forfeiture law).
22. Compare United States v. McManigal, 708 F.2d 276, 287 (7th Cir. 1983) (interest does not
include income, proceeds, or profit from racketeering activity) and United States v. Marubeni Am.
Corp., 611 F.2d 763, 769 (9th Cir. 1980) (interest does not include profits from RICO violation)
with United States v. Cauble, 706 F.2d 1322, 1349 (5th Cir. 1983) (forfeiture encompasses all assets
defendant used to maintain interest in RICO enterprise); United States v. Jacobson, 691 F.2d 110,
113 (2d Cir. 1982) (interest encompasses all property rights in business enterprise); United States v.
Martino, 681 F.2d 952, 961 (5th Cir. 1982) (en bane) (interest encompasses income or proceeds
from racketeering activity), ae'dsub noma.Russello v. United States, 104 S. Ct. 296 (1983) and United
States v. Godoy, 678 F.2d 84, 86 (9th Cir. 1982) (interest includes real estate purchased with RICO
profits).
23. United States v. Martino, 681 F.2d 952, 961 (5th Cir. 1982) (en banc), afd sub nom. Russello v. United States, 104 S. Ct. 296 (1983).
24. See United States v. McManigal, 708 F.2d 276, 287 (7th Cir. 1983); United States v. Marubeni Am. Corp., 611 F.2d 763, 769 (9th Cir. 1980).
25. 104 S. Ct. 296 (1983).
1984]
FORFEITURE OF PROFITS UNDER
RICO
profits to the government. 26
This Note maintains that the Supreme Court in Russello properly included profits acquired during a RICO violation among the interests
forfeitable upon conviction under RICO. Part I reviews the history of
forfeiture in England and the United States and establishes that RICO's
in personam forfeiture provision is theoretically consistent with courts'
historical use of in rem rather than in personam forfeiture proceedings
to punish persons for engaging in particular activities. Part II discusses
the differences of opinion among the courts of appeals over whether
profits are a forfeitable interest under RICO's forfeiture provision. In
addition, Part II establishes a basis for understanding how the Court's
decision in Russello reflects a proper rejection of the historically based
argument that courts should construe criminal in personam forfeiture
provisions narrowly. Part III examines the Supreme Court's decision to
include profits in the term interest. It demonstrates that although the
Court's decision will allow law enforcement agencies to implement more
effectively Congress' intent in passing RICO, the decision still allows
lower courts a significant amount of discretion in requiring forfeitures
under RICO. The Note concludes by suggesting ways courts should exercise this discretion to effectuate congressional intent.
I.
FORFEITURES IN HISTORICAL PERSPECTIVE
A.
Earl'y Englih Proceedings
Early English law recognized three forms of forfeiture: forfeiture con27
sequent to attainder, deodand, and forfeiture pursuant to statute.
Under forfeiture consequent to attainder, the oldest and most widely
used form of forfeiture, the government could divest convicted felons or
traitors of all their real and personal property. 28 These individuals forfeited their chattels to the Crown and their lands either to the Crown or
to their lords. 29 The children of these individuals, moreover, could not
inherit their parents' forfeited property because the commission of a felony corrupted or voided the original grant of chattel or real property
from the King or lord to his subject.3 0 American colonists generally re26. Id at 304.
27. See Note, Bane of American ForfeitureLaw--Banirhedat Last?, 62 CORNELL L. REV. 768, 770
(1977).
28. See Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 682 (1974); United States
v. Grande, 620 F.2d 1026, 1038 (4th Cir.), cert denied, 449 U.S. 830 (1980); 2 W. BLACKSTONE,
COMMENTARIES *421; 2 J. KENT, COMMENTARIES ON AMERICAN LAw 386 (5th ed. New York
1844) (1st ed. New York 1827); T. PLUNKETT, A CONCISE HISTORY OF THE COMMON L~w 430-31
(1956).
29. See 2 W. BLACKSTONE, supra note 28, at *252; E. JENKS, A SHORT HISTORY OF ENGLISH
LAW 35-36 (1913).
30. See 2 W.
BLACKSTONE,
supra note 28, at *253. In thirteenth century England lords and
752
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 33:747
jected forfeiture consequent to attainder because of the permanent and
31
needless injury it inflicted on innocent descendants.
The King employed the second form of forfeiture, deodand, to confiscate animate and inanimate objects that had directly or indirectly
caused the death of one of his subjects. 32 Deodand was premised on the
legal fiction that an object that had killed one of the King's subjects was
capable of future harm and thus should be destroyed. 33 Because the
harm was attributable to the object, the culpability of the object's owner
was irrelevant. 34 If livestock, for example, killed a person, the animal's
35
owner, regardless of his innocence, would have to forfeit the livestock.
Deodand's superstitious and religious foundation led early Americans to
reject it, like attainder, as repugnant to their developing concepts of
36
justice.
the King could enforce a felon's conviction by confiscating the felon's land. See 1J. BISHOP, CRIMINAL LAW § 615(2) (9th ed. 1923) (felony includes punishment of forfeiture); 2 F. POLLOCK & F.
MAITLAND, THE HISTORY OF ENGLISH LAW 466-67 (2d ed. 1923) (discussing kinds of felonies).
The King in particular liked forfeiture because application of the penalty increased his wealth and
provided an easy means of collecting taxes. See Note, supra note 27, at 773. The crown thus freely
expanded the severity of the penalty, including, for example, goods held by the felon's bailee that
were within the class of goods subject to forfeiture. Id
31. The U.S. Constitution provides that "no Attainder of Treason shall work corruption of
Blood or Forfeiture except during the Life of the person attained." U.S. CONST. art. III, § 3, cl. 2.
See 1J. BIsHOP, supra note 30, § 970; 2 J. KENT, upra note 28, at 286; see also infra note 50 (discussing 1790 congressional enactment that prohibited certain kinds of forfeitures).
32. See Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 682 (1974); Parker-Harris
Co. v. Tate, 135 Tenn. 509, 510, 188 S.W. 54, 55 (1916); 0. HOLMES, THE COMMON LAw 24
(1881). See generally 1 W. BLACKSTONE, supra note 28, at *300-02 (discussing theory of deodand); 2
F. POLLOCK & F. MAITLAND, supra note 30, at 473 (discussing history of deodand). Deodand was
partially based on the Judeo-Christian belief that it was necessary to forfeit the object as expiation
for the injury it had caused to the decedent's soul. Calero-Toledo, 416 U.S. at 680-82. The King
therefore confiscated and sold the object, and distributed the proceeds of the sale to the poor to
appease the wrath of God. Parker-HarrisCo., 135 Tenn. at 510, 188 S.W. at 55.
33. Sollenberger v. Kansas City Pub. Serv. Co., 356 Mo. 454, 459-60, 202 S.W.2d 25, 27
(1947) (under English common law, personal chattels that had caused death of human forfeited to
King); Parker-Harris Co. v. Tate, 135 Tenn. 509, 510, 188 S.W. 54, 55 (1916) (under English common law, personal chattel that was immediate instrument of death of human forfeited to King);
Note, Due Process in Automobile Forfeiture Proceedings, 3 U. BALT. L. REV. 270, 271 (1974).
34. See 1 W. BLACKSTONE, supra note 28, at *301-02; 0. HOLMES, supra note 32, at 25.
35. See 2 F. POLLOCK & F. MAITLAND, supra note 30, at 473; 0. HOLMES,supra note 32, at 25.
But see 2 W. BLACKSTONE, supra note 28, at *301 (forfeiture of animal based in part on owner's
negligence). The classic example of deodand dates back to the Mosaic Code: "Where an ox gore a
man or woman and they die, he shall be stoned and his flesh shall not be eaten, but the owner of the
ox shall be quit." Exodus 21:28.
36. See Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 682-83 (1974) (deodand
not part of United States common law tradition); Sollenberger v. Kansas City Pub. Serv. Co., 356
Mo. 454, 456, 202 S.W.2d 25, 27 (1947) (deodand was never part of American legal system because
of its scandalous nature); Parker-Harris Co. v. Tate, 135 Tenn. 509, 510, 188 S.W. 54, 55 (1916)
(American jurisprudence has firmly and properly denounced superstititious principle of deodand).
Forfeiture consequent to attainder and deodand illustrate a fundamental theoretical dichotomy
that resulted in a procedural distinction in forfeiture law. Courts employed forfeiture consequent
to attainder as an in personam punitive sanction to punish individuals convicted of particular felonies. See 2 F. POLLOCK & F. MAITLAND, supra note 30, at 466-67. They generally could not impose
this in personam criminal sanction, however, absent conviction of the property owner for committing a felony. See Dobbin's Distillery v. United States, 96 U.S. 395, 399 (1878) (forfeitures in many
1984)
FORFEITURE OF PROFITS UNDER
RICO
Statutes that authorized the government and private individuals to
confiscate properties persons had used to commit particular crimes constituted the third kind of English forfeiture. 3 7 The Exchequer became
the primary forfeiture court under the broadest of these statutes, the
Navigation Acts, which required persons to transport commodities in
English-built and -manned ships. 38 Persons convicted of violations of the
carried
Navigation Acts were compelled to forfeit both the illegally
39
cargo and the ship they had used to transport the goods.
Parties could bring proceedings under the Navigation Acts either in
40
rem against the cargo itself or in personam against the cargo's owner.
Government prosecutors generally favored the in rem action because the
claimant-owner then bore the burden of refuting the alleged violation or
acquiescing to the forfeiture.4 1 Actions in rem also offered a procedural
advantage as commerce grew more complex; obtaining jurisdiction over
the cargo facilitated convictions of elusive claimant-owners. 42 Private individuals, moreover, often used the in rem proceeding to satisfy personal
wrongs. 43 In addition, they sometimes seized and disposed of illegally
transported cargo in return for a percentage of the proceeds from the
public sale of the goods. 44
common law felony cases did not attach until offender was convicted). In contrast, courts could
employ civil in rem forfeiture actions, like deodand, against property directly; such actions did not
require criminal conviction of the owner as a condition precedent to the forfeiture. See Various
Items v. United States, 282 U.S. 577, 581 (1931) (in rem forfeiture proceeding not punishment for
criminal offense); Note, supra note 27, at 768 (forfeiture is civil sanction imposed in in rem proceeding against "guilty" property).
37. I W. BLACKSTONE, supra note 28, at *299. Statutory forfeiture authorized English courts,
after each conviction for an atrocious offense, to confiscate permanently all of the offender's movables or personal estate, and to confiscate either permanently or temporarily the offender's immovables or landed property. These forfeitures were premised on the theory that people enjoy the use
of property through a contract with society; if a member of the community participated in criminal
activity, he necessarily violated his societal contract. It was appropriate, therefore, for the state to
resume ownership of his property. Id
38.
See Navigation Act, 1660, 12 Car. 2, ch. 18, § 1(2); L. HARPER, THE ENGLISH NAVIGA-
TION LAWS: A SEVENTEENTH CENTURY EXPERIMENT IN SOCIAL ENGINEERING 387-414 (1964)
(digest of Acts). Although persons could bring Navigation Acts claims before the King's Bench, the
vice-admiralty court, or the Exchequer, claimants favored exchequer courts for several reasons: 1)
the Exchequer's long experience as the King's revenue court allowed it to develop swift and severe
processes; 2) it enjoyed far-reaching authority; and 3) it could mitigate the law's severity if extenuating circumstances were present. Id at 109-10.
39. Id at 109.
40. Id at I11.
41. See Note, supra note 27, at 776.
42. Id
43. See 3 W. BLACKSTONE, supra note 28, at *261-62. An individual could file an exchequer
information on behalf of the Crown to recover money or other chattels or to obtain damages for a
personal wrong. Individuals most commonly used informations to recover forfeitures from persons
who had transgressed revenue laws and who thereby had caused them personal injury. The proceeds of these forfeitures usually were given to the informer who filed the action and confiscated the
property. Sometimes part of the proceeds, however, was given to the King, the poor, or some public
use, and the other part to the informer or prosecutor. Id
44. See L. HARPER, supra note 38, at 97.
754
THE AMERICAN UNIVERSITY LAw REVIEW
[Vol. 33:747
Use of in rem proceedings in the courts of exchequer to enforce the
Navigation Acts significantly affected American forfeiture law by legiti-
mating the use of in rem forfeiture proceedings. 45 The English government's imposition of admiralty courts on the colonies in the late
seventeenth century, moreover, strengthened colonial America's appreciation of the exchequer courts and their in rem proceedings. 46 The colonists soon became critical of the admiralty courts, which, unlike the
courts of exchequer, proceeded without juries,4 7 often favored the government, and were more expensive than the exchequer courts to oper-
ate. 48 The early American courts thus proceeded in rem according to
exchequer proceedings in all nonadmiralty forfeiture cases, and established a precedent for using in rem rather than in personam forfeiture
actions.
49
B.
HistoricalMisreadizgs of Forfeiture Law
RICO's passage as the first in personam criminal forfeiture statute to
be enacted since 1790 reflects American courts' historical preference for
in rem forfeiture proceedings.5 0 Critics have contended that Congress'
45. See Note, supra note 27, at 780 (federal courts usually employed in rem forfeiture proceeding that resembled English Navigation Acts).
46. See Wroth, The Massachusetts Vice Admiralty Court and the FederalAdmiraltyJurudctton, 6 AM.
J. LEGAL HisT. 250, 257-58 (1962). In 1696 the English Board of Trade created royal courts of
admiralty, which operated without juries, to circumvent sympathetic colonial juries who often refused to order forfeitures. The creation of those courts was a radical departure from the English
practice of bringing all offenses under the Navigation Acts before the Exchequer, which sat with a
jury. Id
47. Id; see supra note 46.
48. See L. HARPER, supra note 38, at 186 n.21. An English official of the time claimed that
because they were not paid salaries, the colonial admiralty judges often prostituted the dignity of
the courts for their own gain. Id
49. See, e.g., C.J. Hendry Co. v. Moore, 318 U.S. 133, 153 (1943) (Court has repeatedly declared that district courts should proceed as courts of common law in nonadmiralty forfeiture actions); The Sarah, 21 U.S. (8 Wheat.) 456, 457 (1823) (seizure made on land should be tried in
court of common law with jury); United States v. La Vengeance, 3 U.S. (3 DalI.) 230, 232 (1790) (in
civil in rem proceedings, courts may impose forfeitures similar to those imposed in exchequer proceedings). Observations of illustrious commentators regarding the state of the law also influenced
American courts to proceed according to the practices of the exchequer courts. Both Blackstone
and Kent, for example, who were widely read in colonial America, had referred to the English
practice of conducting forfeiture proceedings for violations of Acts of Parliament in rem in the court
of exchequer. 3 W. BLACKSTONE, supra note 28, at *262; 1 J. KENT, supra note 28, at 386.
50. In 1790 Congress enacted a statute that prevented the government from imposing certain
forfeiture penalties. The Act of Apr. 30, 1790, ch. 9, § 24, 1 Stat. 117 (codified at 18 U.S.C. § 3563
(1982)), provides that "no conviction or judgment shall work corruption of blood or any forfeiture
of estate." Congress' reference to "corruption of blood" suggests that it passed this act primarily, if
not solely, to eliminate the harsh effect that forfeiture consequent to attainder had on innocent
descendants who were prevented from tracing lines of inheritance through their attained ancestors.
See United States v. Martino, 681 F.2d 957, 959 n.23 (5th Cir. 1982) (en banc), afd sub nom. Russello v. United States, 104 S. Ct. 296 (1983).
The phrase "forfeiture of estate" suggests an intent to compel forfeiture of one's entire estate
because courts had employed English attainder law to prevent descendants from inheriting entire
estates and not just specific portions of an estate. See supra notes 27-31 and accompanying text.
Although one author has asserted that the 1790 statute prohibits all use of criminal forfeitures, and
1984]
FORFEITURE OF PROFITS UNDER
RICO
failure to enact an in personam forfeiture provision prior to RICO demonstrates a traditional rejection of in personam criminal forfeitures. 5 '
These critics assert that courts accordingly should interpret RICO's forfeiture provision narrowly. 52 The petitioner in Russello argued that this
historical bias required courts, specifically, to exclude illegally acquired
53
profits from RICO's forfeiture provision.
These observations and conclusions, however, disregard American
courts' fusion of civil and criminal forfeiture proceedings subsequent to
the early distinction, 54 and, in particular, their use of civil in rem forfeiture proceedings as a form of punishment. American courts drew on
colonial America's preference for in rem forfeiture proceedings and recognized the "quasi-criminal" 55 forfeiture action; the government could
that Congress' enactment of RICO's forfeiture provision consequently repealed the statute, see Tarlow, supra note 21, at 278, it is more likely, in light of the "corruption of blood" language, that the
statute and its analogous constitutional provision, see U.S. CONST. art. III, § 3, cl. 2; supra note 31,
refer only to an individual's life estate in real property. Anglo-Americans' natural attachment to
real property reinforces this interpretation of these provisions; they would want decendants to inherit real property. See 2 J. KENT, supra note 28, at 318-19 (property ownership is essential to
human spirit and provides for social improvement, agricultural development, governmental stability, and commercial activity).
Neither the Constitution nor the 1790 statute prevents Congress from enacting less severe criminal in personam forfeiture provisions. RICO's forfeiture provision, therefore, legitimately encompasses only interests acquired through or maintained in illegal enterprises and does not allow for
forfeiture of estates. 18 U.S.C. § 1963 (1982). See United States v. Thevis, 474 F. Supp. 134, 141
(ND. Ga. 1979) (RICO forfeitures are not forfeitures of estate), cert. denied, 456 U.S. 1008 (1982).
51. See Tarlow, supra note 21, at 277-78; Taylor, supra note 21, at 382.
52. See Tarlow, supra note 21, at 277-78; Taylor, supra note 21, at 382.
53. See Brief for Petitioner at 5-6, Russello v. United States, 104 S. Ct. 296 (1983). Although
the Court acknowledged this argument, it failed to address RICO's forfeiture provision in a historical context and left the petitioner's assertion unanswered. Set Russello v. United States, 104 S. Ct.
296, 299 (1983).
54. See infra notes 58-78 and accompanying text (explaining how American courts effectuated
purposes of criminal in personam forfeitures through civil in rem proceedings). The English exchequer and admiralty courts had specific jurisdictional limitations: only exchequer courts exercised in
rem jurisdiction over property other than realty. Argument for Plaintiff in error. United States v.
La Vengeance, 3 U.S. (3 Dall.) 230, 231-32 (1796). One author has suggested that whether a particular forfeiture required a civil or criminal proceeding was not an issue in England: the only issue
was whether the case fell within the Exchequer's subject rhatterjurisdiction. Note, supra note 27, at
783-84. In the American system, in contrast, courts possessed broad subject matter jurisdiction with
no comparable delineation between courts that could hear in rem and in personam cases. Ma The
Supreme Court's holding in La Vengeance that courts could impose exchequer forfeitures in civil in
rem proceedings, La 1,engeance, 3 U.S. (3 Dall.) at 233, therefore, created the potential for courts to
use forfeiture proceedings to punish absentee owners, which would violate the absentee owner's
constitutional guarantee to freedom from deprivation of property without due process of law. See
U.S. CONST. amend. V. Courts accordingly had to distinguish the primarily civil exchequer proceeding from the punitive criminal proceeding. To solve the constitutional dilemma, courts created
the personification fiction, which viewed the property itself as being a danger to society. See Miller
v. United States, 78 U.S. (11 Wall.) 268, 321-22 (1871) (Field, J., dissenting). This fiction allowed
courts to apply in rem forfeiture provisions in cases in which the property was so inherently dangerous that its possession was illegal, or in cases in which ordinarily harmless property endangered the
public. See Fisher v. McGirr, 67 Mass. (1 Gray) 1, 28 (1854). The personification fiction, moreover,
allowed courts to conceptualize all forfeitures as in rem proceedings that did not punish the owner,
and therefore could be conducted in the owner's absence. See Miller, 78 U.S. (I 1 Wall.), at 321-22
(Field, J., dissenting).
55. See Boyd v. United States, 116 U.S. 616, 633-34 (1885).
756
a
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 33:747
confiscate property and thus punish the property's owner without obtaining a criminal conviction against the owner.56 This action injected
the punitive characteristics of in personam criminal forfeiture actions
57
into civil in rem forfeiture proceedings.
I.
The development of punitive in rem forfeitures
Throughout the early 1800's, courts attempted to distinguish civil in
rem forfeiture actions against personal and real property from criminal
in personam actions against the objects' owners. 58 This distinction began to dissolve, however, in 1862, when Congress passed the first of the
Civil War Confiscation Acts. 59 These Acts authorized the government
to punish rebels who had fled behind Confederate lines at the start of
the Civil War by confiscating the property they had abandoned in the
north. 60 The penalty's advocates, however, faced a procedural impasse:
the Constitution prohibited the government from prosecuting the insur6t
rectionists in their absence.
Congress circumvented this constitutional impediment by invoking
the personification fiction to assert that the Confiscation Acts' applicability depended on the nature of the seized property rather than on the
culpability of the property's owner: the property, instead of the owner,
became the wrongdoer. 62 The Acts' proponents also argued that the
56. See One 1958 Plymouth Sedan v. Pennsylvania, 380 U.S. 693, 700-02 (1965).
57. See infra notes 58-78 and accompanying text (discussing punitive nature of in rem
forfeitures).
58. See, e.g., United States v. Brig Malek Adhel, 43 U.S. (2 How.) 209, 233-34 (1844) (vessel
subject to forfeiture without regard to owner's conduct); The Palmyra, 25 U.S. (12 Wheat.) 1, 15
(1827) (in rem proceeding under Piracy Acts of 1819 independent of and unaffected by in personam
criminal proceeding); United States v. 1960 Bags of Coffee, 12 U.S. (8 Cranch) 398, 405 (1814)
(upholding forfeiture of coffee transferred to bona fide purchaser); United States v. The Little
Charles, 26 F. Cas. 979, 982 (C.C.D. Va. 1818) (No. 15,612) (forfeiture of vessel for acts others
committed against will of owner).
59. Act of Mar. 3, 1863, ch. 120, 12 Stat. 820; Act of July 17, 1862, ch. 195, 12 Stat. 589; Act
of Aug. 6, 1861, ch. 60, 12 Stat. 319 (current version at 50 U.S.C. §§ 212-213 (1976)).
60. See Act of Mar. 3, 1863, ch. 120, 12 Stat. 820 (providing for collection of abandoned
property); Act ofJuly 17, 1862, ch. 195, 12 Stat. 589 (providing for collection of estate and property
of those who acted in insurrection against United States); Act of Aug. 6, 1861, ch. 60, 12 Stat. 319
(current version at 50 U.S.C. §§ 212-213 (1976)) (providing for seizure and condemnation of property of those who acted in insurrection against United States).
61. See Note, supra note 27, at 786. The constitutional guarantees of the right to confront
one's accusers and of trial in the district of the offense prevent the government from prosecuting an
absent defendant. U.S. CONsT. amend. VI.
62. See CONG. GLOBE, 37th Cong., 2d Sess. 2235 (1862) (remarks of Rep. Eliot regarding Civil
War Confiscation bill) (property that is instrument of crime is subject to in rem forfeiture proceedings, which are independent of any criminal in personam proceeding) (quoting The Palmyra, 25
U.S. (12 Wheat.) 1, 14 (1827)); id at 2239 (remarks of Rep. Noell) (recognizing that Congressmen
justified bill by fiction of law that property was guilty of offense and not property owner); see also
Note, supra note 27, at 786 (discussing arguments regarding whether in rem forfeitures satisfied
requirements of due process of law). The Supreme Court relied on the personification fiction to
uphold the constitutionality of the Act. See Tyler v. Defrees, 78 U.S. (11 Wall.) 331, 345 (1870)
FORFEITURE OF PROFITS UNDER
RICO
Acts were designed to suppress rebellion, not to punish traitors, 63 and
that "great public necessity" justified the in rem seizures. 64 Opponents
of the Acts criticized the personification fiction and the proponents'
other arguments, claiming that Congress clearly intended that the executive branch use the Acts to punish absent rebel citizens. 6 5 Congress'
use of in rem forfeitures in these Acts, moreover, expanded the personification fiction by allowing the government to confiscate property regard66
less of whether the property had been used to commit an illegal act.
The Supreme Court's decisions upholding the Confiscation Acts, and
thus the expansion of the personification fiction, conveyed the Court's
67
tacit approval of the use of in rem forfeitures to punish persons.
After the Confiscation Acts decisions the Court adopted inconsistent
positions regarding the theoretical bases and procedural requirements of
forfeiture actions. 68 In upholding the forfeiture of property that persons
other than the defendant had used in an illegal distilling operation, the
Court in Dobbin's Distillryv. UnitedStates 69 stressed the civil in rem qualities of forfeiture proceedings. 70 The Court stated that the owner's ignorance regarding the illegal use of his property was irrelevant; the
government could confiscate the property through an in rem proceeding
without first obtaining a criminal conviction against the owner.7 1 Legis(Act designed to introduce principles applied to seizures of property on water to confiscations of
property seized on land belonging to limited class of enemies).
63. CONG. GLOBE, 37th Cong., 2d Sess. 2294 (1862) (remarks of Rep. Wallace).
64. Id at 2239 (remarks of Rep. Noell).
65. Id at 1574 (remarks of Sen. Henderson); Norris v. Doniphan, 61 Ky. (4 Met.) 385, 426
(1863) (in rem proceedings may be used to punish rebels); see L. DAY, THE CONSTITUTIONALITY
AND LEGALITY OF CONFISCATIONS IN FEE, UNDER AcT OF JULY 17, 1862, at 5 1-55 (1870) (in rem
forfeiture proceedings intended as punishment for violation of law).
66. See Miller v. United States, 78 U.S. (11 Wall.) 268, 321-22 (1871) (Field, J., dissenting)
(comparing confiscation statute to in rem proceedings in which property itself had been used to
commit offense).
67. See, e.g., MeVeigh v. United States, 78 U.S. (11 Wall.) 259, 266 (1870) (property of individual guilty of offenses charged subject to forfeiture); Miller v. United States, 78 U.S. (I1 Wall.)
268, 312-13 (1870) (acts authorizing seizure of lands belonging to public enemies are constitutional); Tyler v. Defrees, 78 U.S. (11 Wall.) 331, 345 (1870) (Congress has power to enact legislation
to fight domestic insurgence and civil war). Although the Court upheld the Acts' constitutionality
as a legitimate exercise of the nation's war power, and therefore did not analyze their due process
implications, the effect of its decisions was clear. In a dissenting opinion in Miller, Justice Field
stated that the Acts revolutionized American criminal jurisprudence by allowing the government to
punish persons by taking actions solely against their property. Miller, 78 U.S. (11 Wall.) at 323
(Field, J., dissenting). Justice Field also observed that the Acts allowed the government to impose a
double punishment by acting against both the defendant and the property. Id.
68. Compare Boyd v. United States, 116 U.S. 616 (1886) (fourth amendment guarantees are
applicable to in rem forfeiture proceedings because of their similarity to criminal proceedings) with
Dobbin's Distillery v. United States, 96 U.S. 395 (1878) (forfeiture upheld despite owner's ignorance of property's illegal use because in rem proceedings are civil proceedings against property).
69. 96 U.S. 395 (1878).
70. Id at 399-400.
71. Id. at 400. Although the Court recognized that many in rem forfeiture provisions required a prior felony conviction, in rem forfeiture proceedings created by revenue statutes and
brought before the Exchequer did not have this requirement because the property itself was consid-
758
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 33:747
lators, the Court reasoned, in the exercise of their police power, could
determine that certain uses of property were undesirable without regard
72
to the culpability of the property owner.
In Bo yd v. United States,73 however, the Court held that the government's warrantless seizure of documents in an in rem proceeding would
violate the fourth and fifth amendment rights of the accused, 74 reasoning that forfeiture proceedings, "though they may be civil in form, are in
their nature criminal. ' 75 The Court thus shifted its view of when in rem
forfeiture actions required proof of criminal intent, and failed to establish a steadfast rule governing the procedural safeguards required in
such actions. In United States v. Stowell, 76 for example, the Court construed a revenue statute's forfeiture provision 77 to allow the government
to confiscate personal property used in an illegal distilling operation, but
not to allow it to confiscate real property used in the operation unless
the property's owner actually knew of the illegal operation. 78 The
Court's shift in focus from the property itself to the actions or mental
state of the property's owner accentuated the punitive element of in rem
forfeitures.
2. Providingconstitutionalsafeguards furtherjudicialrecognition ofpunitive in
rem forfeitures
By the middle of the twentieth century, it was clear that the government was using civil in rem forfeiture proceedings to punish criminal
activity. The Court observed in one case that in rem forfeiture proceedings were "firmly fixed" in the punitive jurisprudence of the United
States,79 and in another case that the object of forfeiture proceedings,
ered to be the offender. Id at 399-400. See General Motors Acceptance Corp. v. United States, 286
U.S. 49, 56-59 (1932) (forfeiture valid despite owner's ignorance regarding illegal use of vehicle);
United States v. One Ford Coupe Auto., 272 U.S. 321, 332-33 (1926) (car forfeited despite owner's
innocent intention); Van Oster v. Kansas, 272 U.S. 465, 467-68 (1926) (forfeiture of car entrusted
by innocent owner to wrongdoer upheld); Goldsmith-Grant Co. v. United States, 254 U.S. 505,
509-13 (1921) (forfeiture of car used to transport illegal whiskey upheld despite owner's innocence).
72. See Van Oster v. Kansas, 272 U.S. 465, 467-69 (1926) (upholding confiscation of vehicles
used unlawfully to transport liquor) (citing Kidd v. Pearson, 128 U.S. 1, 26 (1888)).
73. 116 U.S. 616 (1886).
74. Id at 634-35.
75. Id The Court stated that penalty and forfeiture suits were quasi-criminal suits in which
the defendants were entitled to all the constitutional protections given to defendants in criminal
proceedings. Id
76. 133 U.S. 1 (1890).
77. See Act of Feb. 8, 1875, ch. 36, § 16, 18 Stat. 307, 310. The revenue act allowed the
government to confiscate any still or distilling apparatus that the owner had failed to register with
the tax collector, along with any personal property of the owner found in areas near the still. Id
78. United States v. Stowell, 133 U.S. 1, 13-16 (1890). The Court concluded that although the
statute allowed the government to confiscate any personal property involved in the distilling operation, the government could only confiscate real estate that belonged to the owner of the distillery or
to persons who participated in or consented to the the distillery's operation. Id.
79. Goldsmith v. United States, 254 U.S. 505, 511 (1921).
1984]
FORFEITURE OF PROFITS UNDER
RICO
like the object of criminal actions, was to punish persons who had broken the law.8 0 Although it continued to require a lower standard of
proof,8 1 the in rem forfeiture action was no longer a purely civil
proceeding.
Consistent with this merging of civil in rem forfeiture proceedings and
criminal punishment, the Court applied to in rem forfeiture proceedings
certain constitutional provisions that it previously had invoked only in
criminal actions. In applying the exclusionary rule to in rem forfeiture
proceedings in One 1958 Pymouth Sedan v. Pennsylvania,82 for example, the
Court stated that it would be anomalous for it to exclude illegally obtained evidence in criminal proceedings while admitting the same evidence in forfeiture proceedings, because a court had to find that a
criminal law had been violated to allow the forfeiture.8 3 The Court's
application of constitutional safeguards to in rem forfeiture proceedings
further obscured the distinction between civil in rem and criminal in
personam forfeiture proceedings.
C
CongressionalUse of CriminalForfeitures
In attempting to battle various criminal activities, Congress has recently recognized the effectiveness of forfeiture provisions and has enacted several statutes that authorize courts to order persons to forfeit
monies related to illegal activities. 84 Courts, for example, may order individuals convicted of violating the gambling provisions of the Racketeering Act 8 5 to forfeit "any property, including money" used in the
commission of the offense.8 6 They also can order persons convicted of
engaging in a continuing criminal enterprise to distribute narcotics to
forfeit their profits and interests in the enterprise. 8 7 Those convicted of
violating the Communications Act also may be forced to forfeit substan88
tial amounts of money.
80. One 1958 Plymouth Sedan v. Pennsylvania, 380 U.S. 693, 700 (1965).
81. As in all civil proceedings, in an in rem action the government need establish the truth of
its allegations by only a preponderance of the evidence. Lilienthal's Tobacco v. United States, 97
UoS. 237, 271 (1877); Compton v. United States, 377 F.2d 408, 411 (8th Cir. 1967); Martin v.
United States, 277 F.2d 785, 786 (5th Cir. 1960).
82.
380 U.S. 693 (1965).
83. Id at 701. The Court also has applied the right against compelled self-incrimination to in
rem forfeiture proceedings. United States v. United States Coin & Currency, 401 U.S. 715 (1971).
84. See, e.g., Racketeering Act § 803(a), 18 U.S.C. § 1955(d) (1982) (illegal gambling business); Controlled Substances Act § 408(a)(2), 21 U.S.C. § 848(a)(2) (1982) (continuing criminal
enterprise); id § 511(b), 21 U.S.C. § 881(b) (controlled substances violation).
85. 18 U.S.C. §§ 1951-1955 (1982).
86. Id § 1955(a).
87. Controlled Substances Act, § 408, 21 U.S.C. § 848(a)(2) (1982).
88. 47 U.S.C. § 503(b) (1976 & Supp. V 1981) provides that any person who willfully or
repeatedly fails to comply substantially with the terms and conditions of any license, permit, or
certificate shall forfeit $2000 for each violation.
760
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 33:747
In arguing that American jurisprudence has disfavored criminal forfeitures, and that courts, consequently, should strictly construe RICO's
forfeiture provision to exclude illegally acquired profits, the petitioner in
Russello8 9 and other critics9° of RICO's forfeiture provision have overlooked American courts' developing use of civil in rem forfeiture proceedings to punish criminal activity. American courts have not
hesitated to use forfeitures in a criminal context; 91 they simply have
masked their support by imposing these punishments through civil in
rem rather than criminal in personam proceedings.
Prior to the Court's decision in Russello, however, not all courts enthusiastically implemented RICO's in personam forfeiture provision. The
lower courts disagreed on whether they could enter orders under section
1963's in personam forfeiture provision to require persons to forfeit illegally acquired profits. The Ninth Circuit had held in United States v.
MarubeniAmerica Corp., 92 for example, that courts could not enter orders
under section 1963 requiring persons to forfeit income derived from
RICO violations. 93 The Fifth Circuit, however, reasoning that profits
were included within the plain meaning of the term interest, had held in
United States v. Martino94 that courts could require individuals to forfeit
income derived from illegal activities. 9 5 An analysis of these decisions
provides a necessary basis for understanding the Court's decision in
Russello.
II. MARUBENI AND MARTINO: A SPLIT IN THE CIRCUITS
A.
The FactualSettings
Marubeni and Martino both involved defendants who had reaped substantial profits from illegal activities. The defendants in Marubenz; Marubeni America Corporation and Hitachi Cable, Ltd., had secured
telephone equipment supply contracts worth $8.8 million from the
Anchorage Telephone Utility by bribing a utility official to give them
confidential bidding information.9 6 A grand jury subsequently indicted
the defendants in part for violating RICO by conducting the affairs of
89. See supra note 53 and accompanying text.
90. See supra note 21 and accompanying text.
91. See supra notes 58-83 and accompanying text (discussing history of forfeitures).
92. 611 F.2d 763 (9th Cir. 1980).
93. Id at 767. Since the Ninth Circuit's decision in Manrbeni, only the Seventh Circuit has
excluded proceeds from a conviction under RICO's forfeiture provision. See United States v.
McManigal, 708 F.2d 276, 290 (7th Cir. 1983) (reversing decision ordering attorney to forfeit
$99,700 in legal fees illegally acquired through property tax assessment scheme).
94. 681 F.2d 952 (5th Cir. 1982) (en banc), ajf'dsub noma.Russello v. United States, 104 S. Ct.
296 (1983).
95. Id at 961.
96. United States v. Marubeni Am. Corp., 611 F.2d 763, 764 (9th Cir. 1980).
1984]
FORFEITURE OF PROFITS UNDER
RICO
their enterprise through a pattern of racketeering activity. 97 In Martino
a group of persons, including Russello, had defrauded several insurance
companies by burning residential and commercial properties and then
filing inflated proof of loss statements. 98 Russello himself had arranged
for arsonists in the group to burn a building he owned, and had colluded with an insurance broker who also belonged to the group to file a
fraudulent insurance claim. 99 Russello received $340,043.09 under the
policy.'00 A jury subsequently convicted Russello and his codefendants
under RICO for conducting the affairs of an enterprise through a pattern of racketeering activity.101
In both cases the government requested the trial court to order the
defendants to forfeit their illegally acquired proceeds, which consisted in
Marubeni of profits from the supply contracts, 10 2 and in Martbno of,
among other properties, Russello's insurance proceeds. 03 The government argued that these proceeds were forfeitable interests under section
1963(a). In Marubeni the court disagreed with the government and dismissed the count in the complaint that requested the court to order the
defendants to forfeit the profits from their supply contracts.' 0 4 In Martino, however, the trial court agreed with the government's contentions
and upheld a special jury verdict that ordered the defendants, including
Russello, to forfeit their illegally acquired insurance proceeds.' 0 5
The courts of appeals in both cases evidenced a similar difference of
opinion on the forfeitability of profits. The Ninth Circuit in Marubeni
affirmed the trial court's ruling which dismissed the government's re97. Id
98. United States v. Martino, 681 F.2d 952, 953 (5th Cir. 1982) (en banc), af'd sub oa. Russello v. United States, 104 S. Ct. 296 (1983). The defendants in Martno had organized an association-in-fact enterprise that consisted of insurance adjusters, homeowners, promoters, investors, and
arsonists. The enterprise destroyed at least 18 residential and commercial properties in Florida
between July 1973 and April 1976. Id
99. Russello v. United States, 104 S. Ct. 296, 298 (1983).
100. Id at 299.
101. Id Thejury also convicted Russello and some of his codefendants of mail fraud under 18
U.S.C. § 1341 (1982). United States v. Martino, 648 F.2d 367, 379 (5th Cir. 1981), cert. denied, 456
U.S. 949 (on issue of validity of convictions), rev'd on rehg en bane, 678 F.2d 952 (5th Cir. 1982) (on
issue of validity of forfeiture order), affdsub nom. Russello v. United States, 104 S. Ct. 296 (1983).
The district court handed down a total of 80 convictions to various members of the arson ring. Id
at 379 n.l (listing counts in indictment). The defendants advanced several arguments in support of
a reversal of their convictions. They argued, for example, that RICO was unconstitutional, that the
district court had misapplied RICO's provisions, that the court had prejudicially joined the defendants' trials, and that some of the defendants had been incompetent to testify. Id at 380-89. The
court rejected all of these arguments. Id
102. United States v. Marubeni Am. Corp., 611 F.2d 763, 764 (9th Cir. 1980).
103. United States v. Martino, 681 F.2d 952, 953 (5th Cir. 1982) (en banc), a'dsub nom. Russello v. United States, 104 S. Ct. 296 (1983).
104. United States v. Marubeni Am. Corp., 611 F.2d 763, 764 (9th Cir. 1980).
105. United States v. Martino, 681 F.2d 952, 953 (5th Cir. 1982) (en banc), afd sub nom. Russello v. United States, 104 S. Ct. 296 (1983).
762
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 33:747
quested forfeiture order. 0 6 The Fifth Circuit in Martino, however, in an
07
en banc decision that reversed a decision by a three-judge panel,
agreed with the trial court that ordering Russello to forfeit his insurance
proceeds was a proper penalty under RICO. 10 8 Both courts reasoned
that the language of the statute and RICO's legislative history supported their respective positions.
B.
The Legal Analyses
In Marubeni the Ninth Circuit gave four reasons for rejecting the government's assertion that interest included the defendants' profits from
their supply contracts. 10 9 The court first observed that RICO does not,
by its terms, prohibit persons from using illegally acquired income to
purchase limited amounts of securities on the open market, although it
does prohibit persons from otherwise investing such income in establishments or operations that affect interstate commerce." 10 The court reasoned that Congress would not have allowed limited stock investments
financed with illegally acquired profits if it had also intended to allow
the government to seize those profits because a complete forfeiture order
would leave the defendants with no money to make such investments. I'
The court then observed that the statute's legislative history demonstrated that Congress intended that courts use RICO's forfeiture provision to separate racketeers from enterprises they had illegally acquired
or maintained."12 It reasoned, therefore, that the forfeiture provision ap106. United States v. Marubeni Am. Corp., 611 F.2d 763, 764 (9th Cir. 1980).
107. See United States v. Martino, 648 F.2d 952 (5th Cir. 1981), cert. dented, 456 U.S. 949 (an
issue on validity of convictions), rev'd on reh'g en banc, 678 F.2d 952 (5th Cir. 1982) (on issue of
validity of forfeiture order), afl'd sub norn. Russello v. United States, 104 S. Ct. 296 (1983).
108. United States v. Martino, 681 F.2d 952 (5th Cir. 1982) (en banc), a'dsub nor. Russello v.
United States, 104 S. Ct. 296 (1983).
109. United States v. Marubeni Am. Corp., 611 F.2d 763, 766 (9th Cir. 1980).
110. Id at 767 (discussing 18 U.S.C. § 1962(a) (1982)); see supra note 7 (text of§ 1962(a)).
11. United States v. Marubeni Am. Corp., 611 F.2d 763, 767 (9th Cir. 1980). One difficulty
with the court's reliance on § 1962(a) of RICO to interpret § 1963(a)(1) is that the two sections
serve different functions. Section 1962(a) identifies the kinds of activities that violate the Act and
thus implicate the Act's punitive section. Subsection 1963(a)(1) establishes one penalty that courts
can apply to individuals subsequent to conviction for violating one of RICO's prohibitory sections.
Each provision involves different guidelines. The limited stock investment exception, for example, allows an individual to purchase an insignificant portion of a legitimate enterprise with illegally acquired proceeds without being forced to forfeit the interest in the enterprise or profits
acquired from the investment. See 18 U.S.C. § 1962(a) (1982) (persons who have acquired no more
than one percent of class of securities entitled to exemption from RICO provisions). This exception, however, cannot be used to limit courts' ability to seize profits from investments and other
enterprises that do violate § 1962's provisions. See United States v. Martino, 681 F.2d 952, 960 (9th
Cir. 1982), aff'd sub norn. Russello v. United States, 104 S. Ct. 296 (1983).
112. United States v. Marubeni Am. Corp., 611 F.2d 763, 769 (9th Cir. 1980); Jee SENATrE
REPORT, supra note 1, at 79. The Senate Report asserted that RICO adopts the most direct method
of separating racketeers from their illegally acquired enterprises by allowing courts to fine, imprison, or enter forfeiture orders against persons who acquire or run organizations by defined racketeering methods. Id
1984]
FORFEITURE OF PROFITS UNDER
RICO
plied only to racketeers' interests in such enterprises and not to profits
from the enterprises that had been distributed to the members of the
enterprise; the latter were not interests in the enterprise within the
meaning of the statute. 1 3 In narrowing the scope of the forfeitable interest the Ninth Circuit compared RICO to the Controlled Substances
Act,"I4 which it passed in the same month as RICO. The court reasoned that because Congress has specifically provided for the forfeiture
of profits obtained from a criminal enterprise in that Act, it would have
included a similar provision in RICO if it had intended to allow courts
to order defendants to forfeit illegally acquired profits under RICO."15
Finally, the Ninth Circuit concluded that RICO's legislative history, 1 6 in particular a 1969 letter from former Deputy Attorney General Kleindienst to the Senate Subcommittee in charge of the Organized
Crime Control Act," t 7 reflected Congress' intent to allow RICO violators to retain profits derived from their illegal activities." 8 The court
stated that in passing RICO Congress clearly intended to reach interests
that racketeers held in legitimate business operations and not to attack
the entire spectrum of racketeering activities." 9
The Fifth Circuit in Martino disagreed with the Ninth Circuit's inter113. United States v. Marubeni Am. Corp., 611 F.2d 763, 767 (9th Cir. 1980).
114. 21 U.S.C. § 848(a)(2)(A) (1982) provides that any person convicted of engaging in a continuing criminal enterprise shall forfeit to the United States "the profits obtained by him in such
enterprise ...
"
115. See United States v. Marubeni Am. Corp., 611 F.2d 763, 766 & n.7 (9th Cir. 1980).
116. See SENATE REPORT, supra note 1, at 76-83; 116 CONG. REC. 819 (1970); id at 601; id. at
590, 592, 115 CONG. REC. 5872-75, 5884-86 (1969).
117. See United States v. Marubeni Am. Corp., 611 F.2d 763, 768 (9th Cir. 1980) (citing Measures Relating to Crime, Heanng on S 30, S 1861 and RelatedProposalsBefore the Subcomm. on CriminalLaws
and Proceduresof the Sen. Comm. on theJudiciay, 91st Cong., 1st Sess. 407 (1969)). The Deputy Attorney General wrote that "this revival of the concept of forfeiture as a criminal penalty, limited as it
is... to one's interest in the enterprise. . . involved. . . and not extending to any other property
of the convicted offender is a matter of Congressional wisdom rather than Constitutional power."
,leasures Relating to Crime, Hearingon S 30, . 1861 and Related ProposalsBefore the Subcomm. on Criminal
Laws and Proceduresof the Sen. Comm on theJudiciag, 91st Cong., 1st Sess. 407 (1969), quoted in United
States v. Marubeni Am. Corp., 611 F.2d 763, 768 (9th Cir. 1980). Reliance on Deputy Attorney
General Kleindienst's letter as an indication of congressional intent regarding § 1963 is arguably
inappropriate because the letter comments on an early formulation of RICO, S. 30, that Congress
did not adopt. See ,farubeni Am. Corp., 611 F.2d at 768 n.9; see also Russello v. United States, 104 S.
Ct. 296, 303 (1983) (Kleindienst letter does not refer to § 1963 as finally enacted and consequently
does not evidence congressional intent to preclude forfeiture of profits); Note, RICO: Are the Courts
Construing the Legislativ'e History Rather than the Statute Itse/?, 55 NOTRE DAME LAW. 777, 787-88
(1980) (court's use of Kleindienst quote emphasizes subjectivity inherent in attempt to interpret
ambiguous legislative history).
118. See United States v. Marubeni Am. Corp., 611 F.2d 763, 768-69 (9th Cir. 1980).
119. Id The court failed to discuss two cases in which district courts had interpreted the term
interest under § 1963. See United States v. Thevis, 474 F. Supp. 134 (N.D. Ga. 1979); United States
v. Meyers, 432 F. Supp. 456 (W.D. Pa. 1977). Although neither district court cited compelling
authority for its definition of interest, each held that an interest under RICO was similar to a
continuing proprietary right, such as ownership of stock, rather than interest in the form of dividends or profits. Thetis, 474 F. Supp. at 142 (citing United States v. Meyers, 432 F. Supp. 456, 461
(W.D. Pa. 1977)). The court's failure to cite Thevis or Mqyers in Aarubeni suggests its inability to
764
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol.
33:747
pretation of the statute, relying on the plain meaning of the statute and
other expressions of congressional intent to uphold the jury's forfeiture
order.120 Absent a "clearly expressed legislative [intent] to the contrary," the court initially observed, courts should interpret only the
plain language of a statute. 12 1 The court assumed that because RICO
does not define interest, Congress intended the term to have its ordinary
meaning. 122 The court observed that interest ordinarily was defined
broadly enough to include profits and income 12 3 -an interpretation that
incomported with the House Report's definition of interest, which
I24
violations."'
the
to
related
.
.
.
interests
and
cluded "all property
state definitively what constitutes a forfeitable interest, particularly because both decisions supported its opinion.
The Ninth Circuit did attempt to clarify and refine its holding in Marubeni in a subsequent
opinion. See United States v. Godoy, 678 F.2d 84 (9th Cir. 1982). In UnitedStatesv. G'doy the court
examined whether the district court had properly ordered the defendant to forfeit two tracts of
property he had purchased with proceeds he had derived from an illegal enterprise that distributed
methaqualone. Id at 85-86. The defendant argued that, under the court's holding in Marubent, his
properties did not constitute a forfeitable interest under § 1963 because he had used nonforfeitable
proceeds from his illegal enterprise to purchase the properties. See id at 87. The court rejected the
defendant's argument and, in holding that the properties purchased with enterprise profits were
indeed forfeitable, moved significantly beyond Marubeni's restrictive interpretation of interest. d
The Ninth Circuit distinguished Marubeni on the ground that the defendant in Marubmen, unlike the
defendant in Godoy, had not invested proceeds in an enterprise. The proceeds in Marubent, therefore,
were not forfeitable under § 1963. Id
It is unclear, however, whether the court's characterization of Godoy's properties as interests in
an enterprise was proper. Referring to § 1963(a)(2), the court stated that courts were entitled to
require defendants to forfeit "any interest in . . . any enterprise" they had acquired through the
investment of income derived from racketeering activity. d at 86. It then reasoned that Godoy's
properties constituted an enterprise in real estate engaged in interstate commerce, and therefore
were forfeitable under § 1963, because he had leased them to businesses that were engaged in interstate commerce. Id at 86 & n.3. The court also noted that Congress had been aware of organized
crime's extensive investments in real estate and concluded that Congress would have provided a
statutory exception similar to the limited stock investment exception in § 1962(a) if it had intended
to exempt ownership of commercial real estate from RICO's forfeiture provision. Id at 86-87. The
court's extension of the definition of what constitutes a forfeitable interest to encompass what arguably was an intrastate real estate transaction represents a significant expansion of the court's
restrictive interpretation of interest in Marubenz which excluded all proceeds derived from criminal
activity.
120. United States v. Martino, 681 F.2d 952, 954-55, 956-61 (5th Cir. 1982), afdasb nod Russello v. United States, 104 S. Ct. 296 (1983).
121. Id. at 954 (quoting Consumer Prod. Safety Comm'n v. GTE Sylvania, 447 U.S. 102, 108
(1980)); see Bread Political Action Comm. v. Federal Election Comm'n, 455 U.S. 577, 580 (1982)
(analysis of statute must begin with language of statute itself).
122. United States v. Martino, 681 F.2d 952, 954 (5th Cir. 1982) (citing Richards v. United
States, 369 U.S. 1, 9 (1962)), a fdsub nam Russello v. United States, 104 S. Ct. 296 (1983).
123. Id The court noted that the dictionary defines interest to include a "right, title or legal
share in something; participation in advantage, profit and responsibility." Id (quoting WEBSTER'S
THIRD NEW INTERNATIONAL DICTIONARY 1178 (1971)). The court also stated that Black's Law
Dictionag,defines interest as "the most general term that can be employed to denote a right, claim,
title or legal share in something." Id (quoting BLAcK's LAw DICTIONARY 729 (5th ed. 1979)).
Interest includes "profit," "welfare," or "benefit" in RANDOM HOUSE DICTIONARY OF THE ENGISH LANGUAGE UNABRIDGED 741 (1981).
124. United States v. Martino, 681 F.2d 952, 954 (5th Cir. 1982) (en banc) (discussing H.R.
REP. No. 1549, 91st Cong., 2d Sess. 57, 57, reprintedin 1970 U.S. CODE CONG. & AD. NEws 4007,
4033), a.fdsub noma.Russello v. United States, 104 S. Ct. 296 (1983).
1984]
FORFEITURE OF PROFITS UNDER
RICO
The Fifth Circuit also rejected the Ninth Circuit's argument that
Congress intended courts to use RICO's forfeiture provision solely to
divest defendants of interests in, and thus to separate the defendants
from, enterprises they had acquired or maintained in violation of section
1962.125 It observed that although section 1963's forfeiture clause is limited to interests defendants have acquired or maintained in violation of
section 1962,126 this limitation merely identifies the activities for which
courts can impose a penalty of forfeiture; it does not limit forfeiture to
defendants' interests in enterprises through or in which they have ille127
gally acquired or maintained an interest.
The court in Martino next observed that the different formulations of
forfeitable interests in subsections 1963(a)(1) and 1963(a)(2)'12 8 demonstrated that Congress intended to reach illegally acquired profits under
subsection 1963(a)(1) to complement the interest in an enterprise forfeiture provision of subsection 1963(a)(2).1 29 Subsection 1963(a)(2) authorizes courts to compel forfeiture of interests persons possess in enterprises
they have invested in or operated in violation of RICO. 13° Application
of the provision depends on the existence of identifiable assets in the
enterprise in which a defendant can possess an interest. 13 ' Under subsection 1963(a) (1), however, courts can reach any interests persons derive from RICO violations regardless of whether those interests are in an
enterprise that has identifiable assets. 132 Courts thus may apply subsection 1963(a)(1) to punish persons who operate enterprises that do not
125.
S- id at 955.
126.
St id
127,
Id
128. Se 18 U.S.C. § 1963(a)(1), (2) (1982); supra note 14 (text of provision).
129. United States v. Martino, 681 F.2d 952, 955-56 (5th Cir. 1982) (en bane), af'd sub nom.
Russello v. United States, 104 S. Ct. 296 (1983); cf. United States v. Wooten, 688 F.2d 941, 950 (4th
Cir. 1982) (inclusion of provision in one section of act and omission in another section indicates
Congress did not intend to include provision in latter section); Russell v. Law Enforcement Assist-
ance Admin., 637 F.2d 354, 356 (5th Cir. 1981) (appropriate to presume that legislature intended
different meaning and effect for different language used in parts of statute); United States v. Wong
Kim Bo, 472 F.2d 720, 722 (5th Cir. 1972) (presumption is that congressional inclusion of language
in one section of statute and omission in another section indicates intentional inclusion or omission).
The Ninth Circuit failed to provide an adequate explanation why Congress used different language
in two subsections of the same provision if it intended the subsections to convey the same meaning.
130. 18 U.S.C. § 1963(a)(2) (1982); see supra note 14 (text of provision).
131. See United States v. Martino, 681 F.2d 952, 957 n.18 (5th Cir. 1982) (en banc) (interest in
enterprise takes varying forms that encompass ownership interests such as stock or real property
interests and interests that provide source of control of enterprise), aJ'dsub fon. Russello v. United
States, 104 S. Ct. 296 (1983). In United States v. Rubin, 559 F.2d 975 (5th Cir. 1977), the Fifth
Circuit interpreted § 1963(a)(2) as requiring the defendant to forfeit his positions in various unions
and employee welfare plans. Id. at 990. The court found that the scope of the subsection is broad
enough to include elective or appointive management positions as well as financial interests. Id. at
992; see United States v. Martino, 681 F.2d at 956-58 (§ 1963(a)(2)'s attack on sources of economic
power that perpetuate activities of organized crime requires divestiture of defendant's power over
enterprises).
132. 18 U.S.C. § 1963(a)(1) (1982); see supra note 14 (text of provision).
766
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 33:747
have identifiable assets and, therefore, are beyond the reach of subsection 1963(a) (2). Enterprises such as narcotics operations and arson rings,
for example, rarely have identifiable assets: their illegally acquired proceeds are the only property available for forfeiture.1 33 A refusal to allow
courts to require forfeiture of these proceeds under subsection
1963(a) (1), the court reasoned, would frustrate Congress' intent to eradi134
cate these enterprises.
The Fifth Circuit decided that RICO's legislative history confirmed
its view that subsection 1963(a)(1) reaches illegally acquired profits.
The court observed that Congress had asserted in its Statement of Findings and Purpose of the Organized Crime Control Act' 35 that organized
crime removes billions of dollars annually from legitimate circulation in
the American economy and therefore threatens to undermine the nation's economic system. 136 The legislative history suggested that Congress was aware that organized criminal operations depend on both
illegally acquired profits and the ability to use those profits to infiltrate
legitimate enterprises to sustain their illegal activities.' 3 7 These operations, for example, often infiltrate legitimate businesses, acquire their
assets through fraud or theft, and eventually force the business into
38
bankruptcy.
Congress had passed the RICO provision of the Organized Crime
Control Act to deprive these organizations of their financial support and
to stop their infiltration of legitimate businesses.' 39 Indeed, the court
stated, Congress had enacted RICO's forfeiture provision to achieve precisely this result;1 40 Congress intended that the executive branch and the
judiciary invoke these provisions to divest criminals of both their power
over legitimate businesses and the income they derive from illegal activi133. See United States v. Martino, 681 F.2d 952, 958 (5th Cir. 1982) (en banc), a'd sub noam.
Russello v. United States, 104 S. Ct. 296 (1983); see also Russello v. United States, 104 S. Ct. 296,
301 (1983) (profits of illegitimate associations-in-fact usually distributed immediately).
134. United States v. Martino, 681 F.2d 952, 958 (5th Cir. 1982) (en banc),aj'dsubnom. Russello v. United States, 104 S. Ct. 296 (1983); see infra notes 135-46 and accompanying text (explaining legislative purpose of RICO).
135. Pub. L. No. 91-452, 84 Stat. 922, 922-23 (1970) (codified at 18 U.S.C. § 1961 note (1982)).
136. See United States v. Martino, 681 F.2d 952, 956 (5th Cir. 1982), afdsb noa. Russello v.
United States, 104 S. Ct. 296 (1983) (quoting congressional Statement of Findings and Purpose,
Organized Crime Control Act of 1970, Pub. L. No. 91-452, 84 Stat. 922, 922-23 (1970) (codified at
18 U.S.C. § 1961 note (1982)).
137. Id at 957 & n.17.
138. Id at 957.
139. See id at 957 n.17 (legislative history is replete with "hit them where they hurt" philosophy); see a/so 116 CONG. REC. 607 (1970) (remarks of Sen. Byrd) (need for monetary penalties for
criminals' predatory business practices); id at 591 (remarks of Sen. McClellan) (removal of organized crime from legitimate organizations has same effect as direct forfeiture of ill-gotten gains); 115
CONG. REC. 9951 (1969) (remarks of Rep. Pofi) (forfeiture sanction is both poetic justice and strong
deterrent).
d sub or.
140. See United States v. Martino, 681 F.2d 952, 957 (5th Cir. 1982) (en banc), afd
Russello v. United States, 104 S. Ct. 296 (1983).
1984]
FORFEITURE OF PROFITS UNDER
RICO
ties.141 The court stated, moreover, that Congress was aware that in
142
passing RICO, it was entering a new domain of law enforcement.
Several legislators had stressed the need for and Congress' desire to use
drastic methods and extraordinary provisions to combat the nationwide
problem of organized crime." 43 In addition, Congress had specifically
directed courts to construe RICO liberally to effectuate the statute's remedial purpose." 44
The Fifth Circuit concluded that excluding illegally acquired proceeds from forfeiture would be contrary to Congress' stated intent to
attack organized crime's economic power on all fronts. 4 5 Exclusion of
profits from RICO's forfeiture provision, moreover, would increase
criminal activities by encouraging illegal endeavors that yield primarily
46
cash revenues."
III. RUSSELLO V. UNITED STATES
In a unanimous decision founded primarily on the Fifth Circuit's reasoning, the Supreme Court in Russello v. United States"17 affirmed the
Fifth Circuit's decision in Martino and held that subsection 1963(a)(1) of
RICO authorized courts to compel forfeiture of illegally acquired profits
and proceeds."18 Although by deciding to adopt the Fifth Circuit's analysis the Court contributed little insight into the problem of what constitutes a forfeitable interest under RICO, its opinion has the effect of
strengthening the government's ability to use RICO to eradicate organized crime's economic basis because it makes the Fifth Circuit's holding
applicable nationwide."' 9 The Court did not, however, establish more
precise guidelines for courts to follow in deciding when and to what
extent they should order persons to forfeit illegally acquired proceeds.
141. Id
142, Id at 961 (Congress enacted far-reaching measures to resolve problem of organized
crime),
143. See 116 CONG. REc. 819 (1970) (remarks of Sen. Scott) (only nationwide campaign can
contain organized crime); id at 35,199 (remarks of Rep. Rodino) (drastic methods and efficient law
enforcement measures essential to combat organized crime); id. at 602 (remarks of Sen. Hruska)
(RICO is extraordinary weapon).
144 United States v. Martino, 681 F.2d 952, 956 n.16 (5th Cir. 1982) (en banc), a 'd ub nor.
Russello v. United States, 104 S. Ct. 296 (1983); see supra note 11 (text of clause).
145. United States v. Martino, 681 F.2d 952, 958 (5th Cir. 1982) (en bane) (commenting on S.
REP. No. 617, 91st Cong., 1st Sess. 79 (1969)),afdsub nom. Russello v. United States, 104 S. Ct. 296
(1983).
146. Id.
147 104 S. Ct. 296 (1983).
148. Id at 304. The Court, however, did not determine what specifically constitutes profits
and proceeds. Id at 304 n.3. The Court's failure to establish guidelines for determining what constitutes profits and proceeds leaves to the lower courts the discretion to decide which illegally acquired profits and proceeds they should order a defendant to forfeit. See infra notes 173-90 and
accompanying text (discussing use of judicial discretion in ordering forfeiture of profits and
proceeds).
149. &e U.S. CONsT. art. VI, cl. 2 (supremacy clause).
768
THE AMERICAN UNIVERSITY LAW REVIEW
A.
[Vol. 33:747
The Court-s Anaysis
The Court first observed that the ordinary meaning of the term interest encompassed profits and proceeds.150 The Court stated that Congress' use of the term interest in RICO's forfeiture provision was in
accord with its use of other broad terminology in RICO, such as the
terms enterprise, racketeering activity, and participation.' 5 1 An expansive interpretation of interest, moreover, was consistent with the Court's
definitions of what constitutes property interests under the fourteenth
52
amendment's due process clause.1
In examining the statute's language and what it suggested about Congress' intent in enacting RICO, the Court observed that it would be
improper to use subsection 1963(a)(2) to limit the reach of subsection
1963(a)(1) because the use of different language in the two subsections
reflected congressional intent to convey different meanings and uses for
each section.153 The Court found that many illegal enterprises rarely
have identifiable assets,' 54 and that limiting RICO's forfeiture provision
to interests in an enterprise, therefore, would inappropriately place
whole areas of organized crime outside the scope of the provision.' 55
The Court also rejected the petitioner's assertion that Congress' failure to grant courts explicit authority to order forfeiture of profits in
RICO, as it had in the Controlled Substances Act,' 56 demonstrated that
Congress intended to exclude profits from the reach of RICO's forfeiture
provision.15 7 The Court stated that it could not appropriately interpret
150. Russello v. United States, 104 S. Ct. 296, 299 (1983).
151. Id at 300. The Court also noted that inclusion of profits in the forfeitable interest provision was consistent with the broad tenor of its earlier decision interpreting RICO, United States v.
Turkette, 452 U.S. 576 (1981), in which it had held that the term enterprise under RICO encompasses legitimate as well as illegitimate operations. See id at 580; Russello v. United States, 104 S.
Ct. 296, 301 (1983); supra note 9 (discussing Turkette).
152. Russello v. United States, 104 S. Ct. 296, 299 (1983); see, e.g., Logan v. Zimmerman Brush
Co., 455 U.S. 422, 430 (1982) (interests protected as property are varied and may be intangible)
(quoting National Mut. Ins. Co. v. Tidewater Transfer Co., 337 U.S. 582, 646 (1949) (Frankfurter,
J., dissenting)); Perry v. Sindermann, 408 U.S. 593, 601 (1972) (term property encompasses broad
range of interests); Board of Regents v. Roth, 408 U.S. 564, 569, 571-72 (1972) (property interests
protected by procedural due process extend beyond actual ownership of real estate, chattels, and
money).
153. See Russello v. United States, 104 S. Ct. 296, 301 (1983) (presence of forfeiture provision in
§ 1963(a)(2) does not preclude broad construction of term interest in § 1963(a)(1)).
154. Id
155. Id (quoting United States v. Turkette, 452 U.S. 576, 589 (1981)). In Turkette the Court
had noted that limiting the definition of enterprise under RICO to legitimate enterprises would
leave associations of persons engaged solely in illegal activities such as loansharking, the fencing of
property, and the importation and distribution of narcotics, beyond the reach of RICO. United
States v. Turkette, 452 U.S. 576, 589-90 (1981). The Court in Russello reasoned that construing
§ 1963(a)(1) to attack only interests in enterprises would blunt the statute's effectiveness in combating the illegitimate enterprises that it had addressed in Turkette. Russello v. United States, 104 S.
Ct. 296, 299-300 (1983).
156. 21 U.S.C. § 881(a)(6) (1982).
157. Russello v. United States, 104 S. Ct. 296, 301 (1983); see Brief for Petitioner at 29-34,
1984]
FORFEITURE OF PROFITS UNDER
RICO
Congress' use of a term in one statute as a limitation on a provision of
another statute; the two statutes, the Court pointed out, have different
uses, and thus naturally employ different language. 5 8 Congress' use of
the broad term interest in RICO, moreover, was consistent with its goal
of eliminating organized crime's general economic power base.' 5 9 Congress' specific authorization of forfeiture of profits in the Controlled Substances Act, in contrast, was consistent with the specific goal in that
statute of attacking narcotics activities, which typically generate only
60
monetary profits and therefore rarely have identifiable assets.'
Finally, the Court adopted the Fifth Circuit's interpretation of
RICO's legislative history. It emphasized that Congress recognized that
organized crime derived much of its economic power from its illegal
profits, which it used to infiltrate legitimate enterprises.' 6' Congress'
goal in passing RICO, therefore, was both to remove organized crime's
profit margin by compelling criminals to disgorge their illegal gains, and
to prevent infiltration of legitimate businesses.' 62 If the Court decided
to exclude profits from RICO's forfeiture provision it would defeat this
congressional goal by encouraging criminals to generate nonforfeitable
163
profits from their illegal activities.
B.
The Difficulties Averted by Russello
In holding that section 1963 encompasses illegally acquired profits
and proceeds, the Supreme Court in Russello resolved the anomaly that
the Ninth Circuit had created in Marubeni: To conclude, as the Ninth
Circuit had, that courts could order defendants to forfeit illegally acquired profits only if they had invested those profits in violation of section 1962(a) would have perpetuated an obvious loophole in RICO's
forfeiture provision.' 64 Criminals could protect illegally acquired proceeds by investing them in legitimate nonenterprises such as gold certificates, real estate, and government bonds, which, by definition, are
outside the scope of RICO. 165 The Ninth Circuit's interpretation of section 1963 was inconsistent with Congress' intent to prohibit criminal
infiltration in legitimate businesses because it inadvertently encouraged
Russello v. United States, 104 S. Ct. 296 (1983) (Congress should determine propriety of seeking
forfeiture of profits and proceeds).
158. Russello v. United States, 104 S. Ct. 296, 301 (1983).
d
159.
160. Ida at 301-02.
161. Id at 302-03 (Congress could not have hoped to attack organized crime's economic base
without authorizing forfeiture of profits).
162. Id at 303 (interpreting Congress' broader goals).
163. Id
164. United States v. Romano, 523 F. Supp. 1209, 1212 (S.D. Fla. 1981) (citing United States
v. Marubeni Am. Corp., 611 F.2d 763, 767 (9th Cir. 1980)).
165. Id
770
THE AMERICAN UNIVERSITY LAW REVIEW [Vol. 33:747
166
investment activity in legitimate streams of commerce.
The Ninth Circuit had attempted to close this loophole in a subsequent decision by interpreting subsection 1963(a)(1) to encompass interests in any enterprise acquired with RICO proceeds, rather than
interests in enterprises used merely to perpetuate violations of RICO's
substantive provisions.' 6 7 The court's interpretation of subsection
1963(a)(1) in that decision, however, continued to limit forfeiture to
noncash assets or property traceable to the illegally acquired income.168
The court's interpretation, therefore, deterred only the investment of
RICO proceeds in enterprises and left criminals' uninvested cash profits
untouched. 169 The Supreme Court's conclusion in Martino that subsection 1963(a)(1) encompasses illegally acquired profits cured the
problems the Ninth Circuit's decisions had created. More important,
however, the decision represents a rejection of attempts to limit the
scope of RICO's forfeiture provision, and thereby gives effect to Congress' intent to attack the economic power of organized crime directly.
C
Profis Forfeited with Discretion
Contrary to the petitioner's argument in Russello that RICO's in personam forfeiture provision was inconsistent with American courts' historical aversion to forfeitures, American jurists have long used forfeiture
proceedings, primarily civil in rem proceedings, to punish wrongdoers. 70° Congress' enactment of RICO's forfeiture provision, therefore,
did not constitute a significant departure from past American legal
practice. The language and legislative history of RICO's forfeiture provision simply represented congressional recognition that criminal organizations often use their cash profits to perpetuate their illegal activities
and to infiltrate legitimate businesses.' 7' To attack these aspects of or166. See supra note 139 and accompanying text (congressional intent underlying RICO's forfeiture provision).
167. See United States v. Godoy, 678 F.2d 84, 87 (9th Cir. 1982). For a discussion of the Ninth
Circuit's decision in Godoy, see supra note 119.
168. See United States v. Godoy, 678 F.2d 84, 89 (9th Cir. 1982) (Poole, J., concurring in part
and dissenting in part) (effect of majority's opinion would be to require forfeiture of all income
except that "kept in a mattress").
169. Id at 89 (Poole, J., concurring in part and dissenting in part).
170. See supra notes 54-83 and accompanying text (discussing historical development of punitive element in proceedings in rem).
171. See, e.g., Congressional Statement of Findings and Purpose, Organized Crime Control Act
of 1970, Pub. L. No. 91-452, 84 Stat. 922, 922-23 (codified at 18 U.S.C. § 1961 note (1982)) (organized crime uses money obtained from illegal endeavors to infiltrate and corrupt legitimate business
and labor unions, subverts and corrupts democratic processes and thereby weakens stability of nation's economy); Measures Relating To OrganizedCrime: HearingsBefore the Subcomm. on CriminalLaws and
Procedures of the Senate Comm. on theJudicia, 91st Cong., 1st Sess. 448-49 (1969) (statement of John
Mitchell, Attorney General, United States) (organized crime will survive until its principal sources
of revenue are removed); 116 CONG. REc. 602 (1970) (remarks of Sen. Hruska) (central aim of
organized crime is amassing huge profits); id at 586, 592 (remarks of Sen. McClellan) (organized
1984]
FORFEITURE OF PROFITS UNDER
RICO
ganized criminal activity effectively, the Court concluded that the term
interest must encompass profits or proceeds derived from activities that
72
violate RICO.
Despite the Court's resolution of the forfeitability of profits, the scope
of judges' discretion in ordering persons to forfeit illegally acquired interests under RICO has remained unsettled. Although judges traditionally have exercised broad discretion in imposing criminal penalties,1 73 in
United States v. L 'Hoste 174 the Fifth Circuit held that courts lack discretion under RICO to refuse to impose or to mitigate forfeiture orders
from juries, regardless of the nature of the RICO violation. 175 The
Fifth Circuit stated in L'f-oste that section 1963 authorizes only the Attorney General to mitigate RICO forfeiture orders. 176 The Second Circuit, however, in holding that RICO's forfeiture provision does not
violate the eighth amendment's prohibition of cruel and unusual punishment, stated that section 1963 allows courts to exercise limited discre177
tion to avoid unusually harsh applications of forfeiture orders.
crime's illegal enterprises produce annual income of billions of dollars); 115 CONG. REc. 827 (1969)
(remarks of Sen. McClellan) (organized crime uses illegal gains to infiltrate and secure control of
legitimate business and labor unions); id at 605 (remarks of Sen. Yarborough) (RICO designed to
root out organized crime's influence over legitimate businesses); see also supra notes 135-46 and accompanying text (discussing RICO's legislative history).
172. Set Russello v. United States, 104 S. Ct. 296, 300 (1983).
173. Odom v. United States, 403 F.2d 45 (5th Cir. 1968) (sentencing within limits of statutory
discretion of trial courts), cert. dsmissed, 400 U.S. 23 (1970); Weissman v. United States, 387 F.2d
271 (10th Cir. 1967) (appellate court will not interfere if sentence within statutory limits); Wagstaff
v. United States, 370 F.2d 444 (10th Cir. 1966) (within sole discretion of trial court to determine
sentence); see Williams v. New York, 337 U.S. 241, 246-48 (1949) (discussing courts' broad discretion to choose information to use in formulating penalty); FED. R. CRIM. P. 32 (sentencing and
judgment rule for federal courts).
174. 609 F.2d 796 (5th Cir.), cert. dented, 449 U.S. 833 (1980).
175. Id. at 810-11 (basing conclusion that courts have no discretion not to compel forfeiture, in
part, on portion of § 1963 that stipulates that "whoever violates. . . [the statute] ... shall forfeit
to the United States ....
" (emphasis added)).
176. Id Section 1963(b) authorizes a district court to enter "restraining orders or prohibitions,
or to take other actions, including, but not limited to, the acceptance of satisfactory performance
bonds, in connection with any property or other interest subject to forfeiture under this section, as it
shall deem proper." 18 U.S.C. § 1963(b) (1982). Section 1963(c) authorizes the "Attorney General
to seize all property or other interest declared forfeited under this section upon such terms and
conditions as the court shall deem proper." Id § 1963(c). The court in L'Z-Ioste concluded that
Congress intended to limit courts' discretion in entering forfeiture orders to administrative details
such as the time and place that the Attorney General should seize the forfeited property. United
States v. L'Hoste, 609 F.2d 796, 811 (5th Cir.), cert. denied, 449 U.S. 833 (1980).
177. United States v. Huber, 603 F.2d 387, 397 (2d Cir. 1979), cert. denied, 445 U.S. 927 (1980).
The Second Circuit employed a significantly broader interpretation of the terms and conditions of
the forfeiture referred to in § 1963(c) than the Fifth Circuit used in L'Hoste to uphold a district
court's decision to include the following condition in a forfeiture order: "(1) that defendant may
redeem and repossess himself of said entities at any time within six months of the date of this
judgment upon payment or delivery to the Attorney General of cash or other property satisfactory
to the Attorney General having a value of $100,000." Id The Second Circuit's interpretation of
§ 1963(c) grants district courts a greater degree of power in shaping the scope and conditions of the
seizure than the Fifth Circuit's interpretation. It is unclear, however, whether courts have the discretionary authority not only to authorize a defendant to repurchase but also to exclude profits
from the forfeiture order. See supra notes 173-77 and accompanying text.
772
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 33:747
Mambeni and Martizo illustrate the desirability of allowing courts to
exercise at least limited discretion in implementing RICO's forfeiture
provision, particularly with respect to illegally acquired profits. In Marubeni the Ninth Circuit upheld the district court's refusal to allow the
jury to consider whether it should order the defendant to forfeit the $8.8
million worth of supply contracts that it had acquired illegally.178 Although the Ninth Circuit affirmed the district court's decision solely on
other grounds, 179 an $8.8 million forfeiture order would have been a
severe penalty for the crime committed-bribing a telephone company
official.'8 0 More significant though, it is questionable whether requiring
Marubeni to forfeit the contract price would necessarily have eradicated
the kind of organized criminal activity that Congress intended to eliminate by passing RICO. Although Marubeni America Corporation had
used unscrupulous means to obtain contracts, a requirement that it forfeit profits from those contracts would not have effectuated congressional intent unless Marubeni had sought to use the profits to support
illegal activities or to infiltrate other businesses.' 8 '
In Martino, however, congressional intent and the reprehensible nature of the defendant's criminal activity persuaded the Fifth Circuit to
affirm the lower court's order requiring the defendants to forfeit their
illegally acquired insurance proceeds. The defendants in Martino, unlike
those in Maruben had used their illegally acquired proceeds to perpetuate their criminal operations, 8 2 precisely the kind of activity Congress
sought to prevent by passing RICO. 8 3 Requiring defendants to forfeit
proceeds in cases such as Martino effectuates Congress' intent to eliminate organized crime's economic base by draining its funds, because activities such as the arson-for-profit scheme present in Martino are
criminal activities that sustain themselves on their illegally acquired
84
proceeds.1
178. See United States v. Marubeni Am. Corp., 611 F.2d 763, 764 (9th Cir. 1980).
179. The court concluded that all profits were exempt from forfeiture under § 1963. Ida at 766.
180. See id at 764.
181. Only a strained interpretation of the facts in Maruberi could link the $8.8 million that
Marubeni acquired through the supply contracts to the bribes it paid to the telephone official.
Although the profit motive may have encouraged Marubeni's criminal activity, the profits themselves did not facilitate or perpetuate Marubeni's illegal activities. Cf id at 769 (congressional
intent was to remove from racketeers their interests in legitimate enterprises and not to attack
racketeering by requiring forfeiture of all profits and proceeds).
182. See United States v. Martino, 681 F.2d 952, 953 (5th Cir. 1982) (en banc) (examining
district court's findings on defendant's use of arson profits to purchase additional properties for
future illegal endeavors), afdsub noma.Russello v. United States, 104 S. Ct. 296 (1983).
183. See supra notes 15, 139 & 143 and accompanying text (discussing legislative intent to eliminate profits organized crime uses to perpetuate criminal activity).
184. See United States v. Martino, 681 F.2d 952, 958 (5th Cir. 1982) (en banc) (listing criminal
activities that produce primarily cash proceeds), afd sub noma.Russello v. United States, 104 S. Ct.
296 (1983); SENATE COMM. ON THE JUDICIARY, 96th Cong., Ist Sess., REPORT ON S. 1722, CRIMINAL CODE REFORM ACT OF 1979, 798 (Comm. Print 1980) (listing arson as criminal activity
targeted by RICO) [hereinafter cited as COMM. PRINT]; supra note 15 and accompanying text
1984]
FORFErrURE OF PROFITS UNDER
RICO
Allowing courts to exercise discretion in implementing RICO forfeiture orders will enable them to distinguish between criminal enterprises
that use illegally acquired income to perpetuate their criminal activities
and criminal enterprises that do not use their illegally acquired proceeds
to support further criminal activities. This discretion, moreover, will allow courts to deter zealous government prosecutions of small-time
criminals and generally legitimate businesses, which Congress did not
intend to reach under RICO, 18 5 by refusing to order the forfeiture of
profits that do not threaten society.' 8 6 The Supreme Court's failure to
limit the kinds of associations that the government can prosecute under
RICO 8 7 increases the desirability of granting courts this discretionary
power.
In Russelo the Supreme Court declined to resolve the issue of judicial
discretion in ordering RICO forfeitures. The court specifically stated
that lower courts should not rely on its use of the terms profits and proceeds in interpreting what constitutes forfeitable interests under RICO,
or in deciding the precise amount that defendants should forfeit in a
particular case.' 8a The Court's decision, moreover, does not compel
courts to order defendants to forfeit illegally acquired profits and proceeds; the Court simply decided against limiting forfeitable interests to
interests in enterprises.' 8 9 RICO's forfeiture provision, however, states
that courts shall order individuals convicted of violating RICO's substantive provisions to forfeit any interest acquired or maintained in the
violation. 90 The statute's express language, together with the Court's
(noting that RICO combats crime by eliminating criminal organization's economic base); infra note
186 (sources listing criminal activities that require large amounts of cash).
185. See United States v. Huber, 603 F.2d 387, 396 (2d Cir. 1979) (cautioning against "undue
prosecutorial zeal" in invoking RICO), cert. denied, 445 U.S. 927 (1980); Bradley, Racketeers, Congress,
andthe Courts:.4nAnaijsts ofRICO, 65 IowA L. REv. 837, 892-93 (1980) (suggesting that courts limit
use of RICO to racketeering that significantly affects commerce); Tarlow, supra note 2 1, at 305-06
(discussing prosecutor's zeal in using RICO); Tarlow, supra note 13, at 298-99 (discussing
prosecutorial overuse of RICO).
186. RICO's legislative history demonstrates that Cofigress was primarily concerned with cash
profits derived from organized criminal activities such as narcotics trafficking, kidnapping, arson,
extortion, blackmailing, loan sharking, bankruptcy fraud, smuggling, dissemination of obscene material, and criminal infringement of copyrights. See COMM. PRINT, supra note 184; see also United
States v. Martino, 681 F.2d 952, 958 (5th Cir. 1982) (en banc) (narcotics trafficking, loan sharking,
extortion, gambling, and prostitution were primary objects of congressional concern), affdsub nom.
Russello v. United States, 104 S. Ct. 296 (1983); Congressional Statement of Findings and Purpose,
Organized Crime Control Act of 1970, Pub. L. No. 91-452, 84 Stat. 922, 922-23 (codified at 18
U.S.C. § 1961 note (1982)) (organized crime obtains money from "such illegal endeavors as syndicated gambling, loan sharking, the theft and fencing of property, the importation and distribution
of narcotics and other dangerous drugs, and other forms of social exploitation"); SENATE REPORT,
supra note 1, at 77 (citing schemes to liquidate defaulted loan shark debts by burning debtors'
property and collecting insurance proceeds).
187. See United States v. Turkette, 452 U.S. 576, 589 (1981) (RICO encompasses all forms of
legitimate and illegitimate enterprises).
188. Russello v. United States, 104 S. Ct. 296, 304 n.3 (1983).
189. See id (concluding that interests subject to forfeiture are not limited to interests in
enterprises).
190. 18 U.S.C. § 1963 (1982); see supra note 14 (text of § 1963).
774
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 33:747
refusal in Russello to compel forfeiture of profits, therefore, properly supports the conclusion that the lower courts do indeed have the discretion
to decide whether forfeitable interests encompass a defendant's illegally
acquired profits and proceeds.
CONCLUSION
The Supreme Court in Russello correctly interpreted RICO's forfeiture provision to include profits and proceeds acquired through a violation of that statute. Although courts traditionally have employed in
rem rather than in personam forfeiture proceedings, they have not hesitated to use forfeitures to punish criminal activity. Consequently, there
is no historical justification for conservatively construing RICO's in personam forfeiture provision to exclude illegally acquired profits and proceeds on the premise that their inclusion would constitute punishment.
The plain meaning of the term interest and Congress' desire to eradicate
the economic bases of organized criminal operations, moreover, support
a broad interpretation of section 1963.
Congress enacted RICO to fortify and improve the remedies that law
enforcement agencies and courts can employ to curb organized criminal
activity. The Court's decision to allow courts to require the forfeiture of
profits has significantly strengthened these remedies. Courts, however,
may and should exercise discretion in fashioning their forfeiture orders
to distinguish among the variety of potential RICO violations and allow
seizure of illegally acquired profits only in cases in which defendants use
their illegally acquired profits to sustain illegal enterprises or to perpetuate criminal activity. Effective exercise of judicial discretion will allow
courts to ameliorate the harshness of RICO's forfeiture provision in
cases that present circumstances that militate against forfeiture. It will
also assist courts to implement more effectively Congress' intent to eliminate organized crime's economic bases by authorizing forfeiture of profits in cases involving operations that depend on illegal income for their
survival.
STUART DAVID KAPLAN