The World in U.S. Courts: Spring 2014 - Racketeer Influenced and Corrupt Organizations Act (RICO)/Hobbs Act
Plaintiff Perkumpulan represents Indonesian investors who claimed they were defrauded out of hundreds of millions of dollars through a Ponzi scheme operated by the defendants. It sued the defendants in U.S. District Court in Washington alleging RICO violations.
The RICO statute was amended in 1995 to remove from the list of acts that can give rise to a RICO claim ones that were actionable as "fraud in connection with the purchase and sale of securities." The U.S. District Court in Washington State found that the defendants’ claims did, on their face, allege fraud in connection with the purchase or sale of securities. Perkumpulan argued, however, that the acts were not actionable because they were extraterritorial and therefore outside the reach of the U.S. securities laws. Thus, Perkumpulan maintained that the defendants’ actions were not exempted from the RICO statute. The court rejected this argument, concluding that the 1995 RICO amendment precluded claims based on types of "conduct" in the nature of securities fraud, whether or not the plaintiff could successfully pursue a securities claim.