What is 'Racketeering'

Racketeering, often associated with organized crime, is the act of offering of a dishonest service (a "racket") to solve a problem that wouldn't otherwise exist without the enterprise offering the service. Racketeering as defined by the RICO Act includes a list of 35 crimes. If convicted of racketeering, a person could serve up to 20 years and be fined up to $25,000.

BREAKING DOWN 'Racketeering'

A common example of a racket would be if a group of people cut the tires of cars on a specific street, and then that same group, or one in concert with the one cutting tires offered "protection" to the owners of the cars for a price. This fits the definition of a racket because without the organization’s slashing of tires in the first place, the demand for "protection" would be low or non-existent. Other examples of racketeering activity include extortion, money laundering, loan sharking, obstruction of justice and bribery. 

The Racketeer Influenced and Corrupt Organizations (RICO) Act became U.S. law in 1970, permitting law enforcement to charge individuals or groups with racketeering. This law made it so that organizations or individuals could be charged for up to ten years of ongoing criminal activity, that leaders of those organizations could be charged for activities that they ordered others to do (for instance, murder and extortion) and gave law enforcement more tools to combat racketeering. 

Process for Prosecuting Racketeering

The part of the RICO act that gives it teeth is the prosecutor’s option to seize the indicted party’s assets, preventing transfer of funds and property. This provision makes it so that in the case of a guilty verdict the government would have something to seize from criminal enterprises. Otherwise, it would be possible for organizations to move assets around in shell companies, making it harder to seize ill-gotten goods. In addition, this provision made it so it was hard for those indicted to pay for high-powered attorneys. Due to this, many cases are settled in plea deals.

The origin of the term "racketeering" comes from the Employers Association of Chicago. The EA was a group meant to represent the interests of employers, and generally to oppose the unionization of the city of Chicago, although less so as time went on. Founded by the VP of Marshall Field & Company, John Shed, the EA was formed initially to fight a telephone equipment strike in the years 1902 and 1903. In the 1920s and 1930s, the EA focused its energy on leveling charges of mob-ties, vandalism, domestic terrorism, and crimes they called "racketeering." A few years after the first use of the term by the EA, Employers’ Association President James W. Breen was linked to racketeering charges – specifically, the formation of a battery makers cartel.

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