From: Black Unicorn <unicorn@schloss.li>
Date: Fri, 15 Mar 1996 14:04:24 +0800
To: Cypherpunks <cypherpunks@toad.com>
Subject: RICO and remailers (brief treatment, if long)
Message-ID: <Pine.SUN.3.91.960313191209.8242F-100000@polaris.mindport.net>
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Several people expressed interest in a small treatment of seizure law 
jurisprudence, and the Bennis case (seizure of an automobile used for 
soliciting prostitution was upheld even where one of the owners knew 
nothing about its use for a crime and which Mr. Bell has relied on 
fairly heavily in pointing out that the Supreme Court has its "head 
up its ass.")

I want to point out that I'm not being paid for this.  As a result 
anyone who takes this like legal advice, rather than what it is, i.e. 
an academic examination, does so at their own peril.

-A-

RICO

I cover RICO because it's a popular prosecution tool, because it is 
the predominate vehicle for seizure and forfeiture in federal cases 
(of which remailer and encryption issues are likely to arouse) and 
because it represents a codification of the approach most courts take 
when dealing with seizure cases.  In a very real way, RICO represents 
the outer extremes of seizure cases in the United States, and is 
probably, given the complexity of many state laws, the simplest way 
to "grab" something.  It also has civil provisions which make 
"private prosecutors" out of you and me.

Generally speaking, after its passage (1970) RICO was ignored.  
(Interested readers might look to Bradley, Racketeers, Congress and 
the Courts: An Analysis of RICO, 65 Iowa Law Review, 837 (1980). for 
a detailed review of its early development).  It was "rediscovered" 
some years later, and grew in popularity because of the civil 
provisions for divestiture, dissolution, reorganization, and 
restrictions on future activites as well as treble damages under 18 
U.S.C. 1964.

Generally speaking, in order to secure a conviction with RICO, one 
must prove the existance of an "enterprise" and a connected "pattern 
of racketeering activity."  RICO prosecutions are generally triggered 
by predicate acts, listed specifically in the statute.  The statute 
lists these in the definitions section.  (Section 1961)  I reproduce 
some below to give the reader a feel for what is anticipated:

As used in this chapter--
(1) "racketeering activity" means (A) any act or threat involving 
murder, kidnaping, gambling, arson, robbery, bribery, extortion, 
dealing in obscene matter, or dealing in a controlled substance or 
listed chemical (as defined in section 102 of the Controlled 
Substance Act), which is chargeable under State law and punishable by 
imprisonment for more than one year; (B) any act which is indictable 
under any of the following provisions of title 18, United States 
Code: [bribery, sports bribery, counterfeiting, theft from interstate 
shipment, embezzlement from pension or welfare funds, extortionate 
credit transactions, mail fraud, transmission of gambling 
information, wire fraud, financial institution fraud, obscene 
matters, obstruction of justice, tampering with witnesses, informants 
or victims, money laundering, monetary transactions with respect to 
property derived from unlawful activity, sexual exploitation of 
children, white slavery, (some deleted)]  (18 U.S.C. 1961)

The activities specifically prohibited by RICO are also statuatorily 
defined.  Specifically:

(a) It shall be unlawful for any person who has received any income 
derived, directly or indirectly, from a pattern of racketeering 
activity... in which such person has participated as a principal 
within the meaning of section 2, title 18, United States Code, 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 
estlablishment or operation of, any enterprise which is engaged in, 
or the activities of which affect, interstate or foreign commerce....
(b) 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.
(c) 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 affairs through a 
pattern of racketeering activity or collection of an unlawful debt.  
(Section 1962)
(d) [or to conspire to do any of the above]

The seizure provisions are contained in 18 U.S.C., Section 1963:

(a) Whoever violates any provision of section 1962 of this chapter 
shall be [fined and imprisoned or both] and shall forfeit to the 
United States, irrespective of any provision of State Law--
(1) any interest the person has acquired or maintained in violation 
of section 1962;
(2) any --
(A) interest in;
(B) security of;
(C) claim against; or
(D) property or contractual right of any kind affording a source of 
influence over;
[the enterprise violating section 1962]; and
(3) any property constituting, or derived from, any proceeds which 
the person obtained, directly or indirectly, from racketeering 
activity or unlawful debt collection in violation of section 1962.
[...]
(b) Property subject to criminal forfeiture under this sections 
includes--
(1) real property, including things growing to, affixed to, and found 
in land; and
(2) tangible and intangible personal property, including rights, 
privileges, interests, claims and securities.

The lead case generally used to outline the overall principals of 
RICO is United States v. Turkette, 452 U.S. 576 (1981).

Most of the defining litigation surrounding RICO involved refining 
the definitions of "enterprise" and "pattern" of racketeering.  
Turkette indicates in part that:

Section 1962(c) makes it 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 affairs 
through a pattern of racketeering activity or collection of unlawful 
debt."  The term "enterprise" is defined as including "any 
individual, partnership, corporation, association, or other legal 
entity, and any union or group of individuals associated in fact 
although not a legal entity."  (Turkette)

Of primary importance, and the key issue in Turkette, is the fact 
that "There is no restriction upon the associations embraced by the 
definition: an enterprise includes any union or group of individuals 
associated in fact." Id.

Both legitimate and illegitimate enterprises qualify.  United States 
v. Hartley, 678 F.2d 961 (11th Cir. 1982) applied RICO to an 
otherwise legitimate corporate defendant.  On the subject of passive 
involvement of a defendant in criminal activity the court in Haroco 
Inc. v. American Nat'l Bank & Trust Co. 747 F.2d 284 (7th Cir. 1984) 
offers:

...the defendants are surely correct in saying that the corporation 
enterprise should not be liable when the corporation is itself the 
victim or target or merely the passive instrument for the wrongdoing 
of others... The liable person may be a corporation using the 
proceeds of a pattern of racketeering activity in its operations.  
This approach... makes the corporation enterprise liable under RICO 
when the corporation is actually the direct or indirect beneficiary 
of the pattern of racketeering activity, but not when it is merely 
the victim, prize, or passive instrument of racketeering.  This 
result is in accord with the primary purpose of RICO, which, after 
all, is to reach those who ultimately profit from racketeering, not 
those who are victimized by it. (This preference for enterprise 
liability has been followed by other courts. See e.g., Schreiber 
Distributing Co. v. Serv-Well Furniture Co., 806 F.2d 1393 (9th Cir. 
1986); Commonwealth of Pa. v. Derry Construction Co., 617 F.Supp 940 
(W.D.PA 1985).  See generally, First, Business Crime, 1990)

And Ravens v. Ernst and Young, 113 S.Ct. 1163, refines the definition 
of "conduct or participate" thusly:

Once we understand the word "conduct" to require some degree of 
direction, and the word "participate" to require some part in that 
direction, the meaning of section 1962(c) comes into focus.  In order 
to "participate, directly or indirectly in the conduct of such 
enterprise's affairs," one must have some part in directing those 
affairs.  Of course, the word "participate" makes clear that RICO 
liability is not limited to those with primary responsibility for the 
enterprise's affairs, just as the phrase "directly or indirectly" 
makes clear that RICO liability is not limited to those with a formal 
position in the enterprise, [note 4] but some part in directing the 
enterprise's affairs is required.  The "operation or management" test 
expresses this requirement in a formulation that is easy to apply... 
In sum, we hold that "to conduct or participate, directly or 
indirectly, in the conduct of such enterprise's affairs," one must 
participate in the operation or management of the enterprise itself.

Let us assume for a moment then that the worst conspiracy one can 
imagine, involving all of the horsemen of the infopocalypse, uses a 
remailer to conduct its activities.  Absent a showing that the 
conspiracy is involved, participating, or directing the operation of 
the remailer, or that the conspiracy used proceeds to support the 
remailer, it is pretty clear that the remailer, and the operator are 
a "passive instrument" of the conspiracy.

One might also look to the Justice Department Guidelines for the use 
of RICO as a prosecutoral tool:

"...it is not the policy of the criminal Division to approve 
"imaginative" prosecutions under RICO which are far afield from the 
Congressional purpose of the RICO statute.... Further, it should be 
noted that only in exceptional circumstances will approval be granted 
when RICO is sought merely to serve some evidentiary purpose, rather 
than to attack the activity which Congress most directly addressed- 
the infiltration of organized crime into the nation's economy."  (9-
110.200, RICO guidelines preface).

One might also look at the second circuit in Huber:

"We further note that where the forfeiture [under RICO] threatens 
disproportionately to reach untainted property of the defendant... 
section 1963 permits the [court] a certain amount of discretion in 
avoiding draconian (and perhaps unconstitutional) applications of the 
forfeiture provision."

In sum, provided no statute exists expressly felonizing the operation 
of e-mail forwarding or encryption, I wouldn't much worry about RICO.  
It is possible, I suppose, to construct a creative (very creative) 
argument that mere operation of a remailer is wire fraud, and thus 
triggers RICO and allows seizure, but I find this fairly unlikely. I might 
add that future legislation prohibiting "furtherance of a felony via 
encryption" or some such is almost certain to have a scienter 
requirement making innocent forwarders of such information  who did not 
know they were furthering a felony immune from the statute, and thus RICO.

-B-

The Michigan Case, and why it has absolutely nothing to do with 
remailers.

Mr. Bell has made a great to-do about the Bennis case (seizure of 
automobile absent showing that co-owner knew of criminal use of 
same).  His connection of the case to remailers is surrounded by 
a good deal of imagination, myth, and outright fabrication.  I 
thought I would take a closer look and see what was to be found.  That 
done, let me then dispel some of the myths.


Myth #1:  This holding means that any property can be seized for any 
crime and the owner placed at the mercy of the state at a whim.

Totally false.  The Michigan law is specifically written to allow 
property seizure in the specific instance of prostitution or 
gambling.  Many states have forfeiture laws, but they are an extreme 
resort, and typically bear only on very narrow activities.  Michigan, 
further, is at the draconian side of the spectrum.  Michigan also has 
some of the toughest state drug laws in the country (Automatic life 
sentence without parole for mere possession without intent to 
distribute, of more than 650 grams of cocaine)  Consider the Michigan 
law used in Bennis, reproduced below.

Section 600.3801 of Michigan's Compiled Laws. states in pertinent 
part: "Any building, vehicle, boat, aircraft, or place used for the 
purpose of lewdness, assignation or prostitution or gambling, or used 
by, or kept for the use of prostitutes or other disorderly persons... 
is declared a nuisance... and all... nuisances shall be enjoined 
and abated as provided in this act and as provided in the court 
rules.  Any person or his or her servant, agent, or employee who 
owns, leases, conducts, or maintains any building, vehicle, or place 
used for any of the purposes or acts set forth in this section is 
guilty of a nuisance."
Section 600.3825 states in pertinent part:
   "(1) Order of abatement. If the existence of the nuisance is 
established in an action as provided in this chapter, an order of 
abatement shall be entered as a part of the judgment in the case, 
which order shall direct the removal from the building or place of 
all furniture, fixtures and contents therein and shall direct the 
sale thereof in the manner provided for the sale of chattels under 
execution . . . .
"(2) Vehicles, sale. Any vehicle, boat, or aircraft found by the 
court to be a nuisance within the meaning of this chapter, is subject 
to the same order and judgment as any furniture, fixtures and 
contents as herein provided."  Mich. Comp. Laws Ann. @ 600.3825 
(1987).


Myth #2: This means that if your property is seized, you can never 
make an innocent owner defense to the seizure.

Again, false.  Many statutes allow innocent owner defenses and some 
courts will assume the availability of such a defense in absence of 
express intent by the legislature to the contrary.  In this case 
there was such an expression.  Namely:

"Proof of knowledge of the existence of the nuisance on the part of 
the defendants or any of them, is not required." Mich. Comp. Laws 
Ann. @ 600.3815(2) (1987).


Myth #3: If your car is stolen, and it is used in the sales of drugs, 
its gone baby.

False.  Most states recognize that use of property without the 
owner's consent insulates the property from seizure.  Michigan is no 
exception.  Note the Supreme Court's Comment in the Bennis Case:

The Michigan Supreme Court specifically noted that, in its view, an 
owner's interest may not be abated when "a vehicle is used without 
the owner's consent." Id., at 742, n. 36, 527 N.W.2d at 495, n. 36.


Myth #4:  This is a new and outlandish holding by the Supreme Court.  
Nothing like this has ever been seen before.  It represents a turn to 
fascism.  The current Supreme Court has its head up its ass.

False.  The history of allowing seizure of property not taken without 
the owners consent, even if the specific use of the property was 
indeed without the owners knowledge, goes back more than 150 years and 
can be traced to Britain's own practice (maintained to this day).  
Take the Supreme Court's comment again in the Bennis Case:

Our earliest opinion to this effect is Justice Story's opinion for 
the Court in The Palmyra, 25 U.S. 1, 12 Wheat. 1, 6 L. Ed. 531 
(1827). The Palmyra, which had been commissioned as a privateer by 
the King of Spain and had attacked a United States vessel, was 
captured  [*10]   by a United States war ship and brought into 
Charleston, South Carolina, for adjudication. Id., at 8. On the 
Government's appeal from the Circuit Court's acquittal of the vessel, 
it was contended by the owner that the vessel could not be forfeited 
until he was convicted for the privateering. The Court rejected this 
contention, explaining:
"The thing is here primarily considered as the offender, or rather 
the offense is attached primarily to the thing." Id., at 14.


Myth #5:  This means that if someone drives my car to the city, and 
then blows up a building and flees via subway, my car is history.

False.  In order to allow seizure, the property seized must typically 
be an "instrumentality" of the crime.  Granted this is a bit of a 
obscure distinction at times, even to supreme court justices:

The limits on what property can be forfeited as a result of what 
wrongdoing--for example, what it means to "use" property in crime for 
purposes of forfeiture law--are not clear to me. See United States v. 
James Daniel Good Real Property, 510 U.S., ___ (1993) (slip op., at 
2-5) (THOMAS, J., concurring in part and dissenting in part). 
(Bennis)

But it's fairly clear that this is a significant defense to seizure, 
and one which was never raised by the defense in Bennis:

It thus seems appropriate, where a [challenge] by an innocent owner 
is concerned, to apply [the instrumentality] limits rather strictly, 
adhering to historical standards for determining whether specific 
property is an "instrumentality" of crime. Cf. J. W. Goldsmith, 
Jr.-Grant Co., supra, at 512 (describing more extreme hypothetical 
applications of a forfeiture law and reserving decision on the 
permissibility of such applications).The facts here, however, do not 
seem to me to be obviously distinguishable from those involved in Van 
Oster; and in any event, Mrs. Bennis has not asserted that the car was 
not an instrumentality of her husband's crime. (Bennis)

After getting the government's brief by fax this afternoon, it became 
fairly clear why the non-instrumentality defense was not made:

After John Bennis was seen stopping and allowing Ms. Polarchio to 
enter his car, the Police followed him to a residential area, midway 
in the block, where his car stopped and the lights were turned off. 
(TR-63-65) After the police stopped behind the Bennis' auto, two 
heads were seen: a female on the right, a male on the left. Seconds 
later, the female head went down, disappearing toward the drivers 
side. (TR 65-66)
When the officer observed John Bennis and Kathy Polarchio engaged in 
fellatio in the Bennis' car, John Bennis had his pants pulled down. 
(TR-67)  (Bennis: Brief for the Government)

It's pretty hard to argue that the automobile was not an 
instrumentality of the crime when it was used to pick up, transport 
and conceal, indeed make possible the very illicit sexual practices of the 
defendant which are at issue.  (i.e. public solicitation of prostitution 
and lewd conduct on a public street within the car itself, conduct 
probably not possible in this form without the automobile).


Myth #6: The court just doesn't care about property rights.

False.  The court spends a great deal of time thinking about the 
parties rights, and even suggests a different ruling had the car not 
be co-owned by the perpetrator of the crime.

First, it bears emphasis that the car in question belonged to John 
Bennis as much as it did to Tina Bennis. At all times he had her 
consent to use the car, just as she had his. (Bennis)

It also considered what Mrs. Bennis would actually gain from a ruling 
in her favor from a practical standpoint:

Th[e] court declined to order a division of sale proceeds, as the 
trial judge took pains to explain, for two practical reasons: the 
Bennises have "another automobile," App. 25; and the age and value of 
the forfeited car (an 11-year-old Pontiac purchased by John and Tina 
Bennis for $ 600) left "practically nothing" to divide after 
subtraction of costs. See ante, at 3 (majority opinion) (citing App. 
25).(Bennis)

While it is tempting to damn the decision after listening to the 
sound bytes, there is much more going on here than a mere seizure.

Remailer operators shouldn't be concerned (at least with regard to 
these cases) overmuch until a local state statute addressing 
remailers specifically is passed in a jurisdiction where the innocent 
owner defense is not permitted, or in any jurisdiction where such 
statute forbids resort to the innocent owner defense.  I will, 
however, note that this is only about 3 hours work, and I wouldn't go 
betting the farm on it.

---
My prefered and soon to be permanent e-mail address: unicorn@schloss.li
"In fact, had Bancroft not existed,       potestas scientiae in usu est
Franklin might have had to invent him."    in nihilum nil posse reverti
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