The World in U.S. Courts: Fall 2014 - Racketeer Influenced and Corrupt Organizations Act (RICO)
The Mexican State oil company, Pemex, and a subsidiary sued a South Korean engineering company and a unit of Siemens in Germany alleging RICO violations stemming from the defendants' bribing of Pemex officials to approve overrun and expense payments in the course of an oil refinery rehabilitation project. While the planning and bribery were alleged to have occurred in outside the U.S., Pemex alleged that the financing for the project was obtained in the U.S. and that invoices were sent to, and payment made from, a U.S. bank, and so jurisdiction under RICO existed. The question on appeal was whether the RICO statute could reach the alleged conduct given its geographic distribution.
The U.S. Court of Appeals in New York began by noting that a different panel of Second Circuit judges had recently decided in European Community v. RJR Nabisco, Inc. [discussed in the Summer 2014 edition of The World in U.S. Courts] that the extraterritorial scope of the RICO statute should be deemed to follow the reach of the "predicate offenses" alleged as a basis for the claim. That prior decision had also determined that the U.S. Wire Fraud statute should not be given extraterritorial application, and the Court of Appeals in this case thus ruled that only U.S. contacts could be considered in determining whether jurisdiction under RICO would lie. Those contacts were determined to be inadequate, and dismissal of the complaint was affirmed.