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