RICO: A New Tool For Immigration Law Enforcement
by Micah King
Olivia Mendoza is an agricultural worker in Washington state’s fruit industry, and, while the fruit business in Washington is a billion-dollar-per-year industry, she and many of her co-workers live in poverty. Part of their poverty is due to the fact that some employers, like Ms. Mendoza’s, lower industry wages by illegally hiring low-skill foreign nationals without proper work authorization.
Not only do these illegal aliens work for less than US citizens and legal workers, like Ms. Mendoza, they also accept inferior and even unsafe working conditions. Aside from perpetuating poverty among illegal aliens themselves, the hiring of illegal aliens also suppresses wages and worsens working conditions for legal employees like Olivia Mendoza. Fortunately for her and thousands of Americans in similar circumstances, there is recourse.
In 1996, Congress expanded the Racketeer Influenced and Corrupt Organizations Act (RICO) to include violations of federal immigration law.1 While this expansion may not have received much publicity, it could potentially change the face of U.S. immigration law enforcement. Under the new RICO provisions, a violation of certain provisions of the Immigration and Nationality Act (INA) meets the definition of racketeering activity, also known as a "predicate offense,"2 and an entity that engages in a pattern of racketeering activity for financial gain can be held both criminally and civilly liable.3 Among other things, the INA makes it unlawful to encourage illegal immigration or employ illegal aliens,4 which violations were included as predicate offenses under RICO.
RICO Claims and Private Lawsuits
Legal scholars recognize the significance of this decision. G. Robert Blakey, a professor at Notre Dame Law School, told the National Law Journal that the court, in its decision, has "now told people who are competitively injured by the abuse of the immigration system that they have a remedy under RICO. Before, they didn’t have a remedy at all, which is why Congress put it in there." According to the article, "the 2nd Circuit decision could end up supplementing the government’s efforts to catch employers who hire undocumented workers by permitting civil litigators to press their claims" As Mr. Foster put it, "We will be acting as private prosecutors in the way RICO was intended and I think that is a desirable thing."7
After the decision in Commercial Cleaning, Mr. Foster filed two additional class actions, Trollinger v. Tyson Foods8 and Mendoza v. Zirkle Fruit,9 against companies alleged to have employed illegal aliens. Both of these cases were brought by groups of employees who claimed that due to their employers’ practice of hiring illegal aliens, their wages were depressed. While the U.S. District Court for the Eastern District of Washington initially dismissed the case against Zirkle Fruit, the Ninth Circuit Court of Appeals reinstated it. The case against Tyson Foods was also dismissed, this time by the U.S. District Court for the Eastern District of Tennessee, but is currently before the Fifth Circuit Court of Appeals.
According to Foster, there are many similarities between these cases. Both Tyson Foods and Zirkle Fruit are large employers that have a major impact on local wage levels, and in both cases the plaintiff employees are hourly workers employed in jobs typically available to illegal aliens. Also, in both cases, employers and employees are aware that the defendants are employing illegal aliens. Foster believes that others in similar circumstances around the country may also have standing to bring suit.
The Washington D.C.-based Friends of Immigration Law Enforcement (FILE) is currently involved in a potential RICO lawsuit in New Jersey in which an employee plans to sue his former employer for hiring illegal aliens. Wilfredo Torres, an American citizen, is an owner-operator truck driver who contracted with his former employer to deliver food to grocery stores. Over his ten years of employment, Torres says his employer hired an ever-increasing number of illegal aliens. Torres estimates that 50 percent of the workers hired by his employer are illegal aliens, and alleges that his employer, knowing that the illegal aliens would work under inferior conditions and for longer hours, began demanding that the drivers make "double deliveries," even though such a requirement violates the policies of the Department of Transportation. When Mr. Torres refused to accept these unlawful requirements, he was fired. Mr. Torres stated that he and other American workers were driven out of their jobs because his employer was willing to exploit illegal alien workers who would do anything, including making "double deliveries," in order to keep their jobs. According to the new uses of the RICO Act, the employer may be liable under RICO for the financial damages caused to Mr. Torres and his American-citizen and legal-resident co-workers.
The 1996 changes in the INA made hiring illegal aliens a predicate act of racketeering activity under RICO, but illegal hiring wasn’t the only violation of the INA made a predicate act. Other INA prohibitions made RICO predicate acts were encouraging or inducing illegal immigration, smuggling, and harboring illegal aliens.10 Together, these additions make the RICO Act potentially a very strong new tool in the hands of private parties against persons and companies that profit by violating U.S. immigration law.
Three Components of a RICO Claim
Predicate Offenses. RICO allows private plaintiffs to seek compensation from any citizen or entity that causes injury to his business or property by engaging in a pattern of specific criminal acts, called predicate offenses.12 As mentioned, certain violations of the INA serve as predicate offenses, and are defined by the RICO statute as racketeering activity.13 A violation of Section 1962 of RICO exists when a defendant engages in a "pattern of racketeering activity," which is defined generally as "at least two acts of racketeering activity."
The INA clearly prohibits the hiring of illegal aliens, stating "[a]ny person who, during any 12-month period, knowingly hires for employment at least 10 individuals with actual knowledge that the individuals are aliens described in subparagraph (B) shall be fined…or imprisoned for not more than 5 years, or both."14 Thus, any company or person that knowingly hires, within any 12-month period, at least ten illegal aliens, commits a criminal violation of the INA, and is liable under RICO. This is the provision that is applicable in the recent class actions brought by Howard Foster, as well as in FILE’s developing case.
The primary hurdle to establishing illegal hiring as a predicate act is the knowledge requirement. That is, the defendant must have knowledge that the persons hired are illegal aliens. Mr. Foster is attempting to overcome this hurdle by subpoenaing employment records to determine whether the new employees used valid Social Security numbers. If the Social Security numbers were invalid and unverified by the employer, then a jury may conclude that the employer had knowledge that it was hiring illegally — satisfying the knowledge requirement necessary to establish illegal hiring as a predicate act under RICO.
In Mendoza v. Zirkle Fruit, Olivia Mendoza, the Washington fruit worker, and her fellow employees alleged that their employers "knowingly hired at least 50 undocumented workers per year as part of a scheme to depress employee wages."15 If proven, this allegation would satisfy the predicate offense requirements.
Another predicate act that would make an employer liable under RICO is encouraging or inducing "an alien to come to, enter, or reside in the United States, knowing or in reckless disregard of the fact that such coming to, entry, or residence is or will be in violation of law."16 The Fourth Circuit Court of Appeals has specifically interpreted this provision to apply to actions that encourage illegal aliens already in the United States to remain or that induce further illegal immigration.17 The Fourth Circuit held that "‘encouraging’ is not limited to bringing in, transporting or concealing illegal aliens. Rather, ‘encouraging’ relates to actions taken to convince the illegal alien to come to this country or to stay in this country."18 The Court held that a range of activities would meet this definition — fertile ground for a good plaintiff attorney.
One way to encourage illegal immigration is to accept foreign-issued identification documents, such as the "matricula consular" card issued by the Mexican government, that are only needed by illegal aliens. Mexican consulate offices in the United States issue the cards to Mexican nationals living here, without regard to the immigration status of the recipients. Since all legal immigrants and foreign visitors have access to legitimate U.S.-issued identification, such as a passport with a visa stamp or a green card, only illegal aliens have need to rely on the matricula card to establish identity. Acceptance of such a card as valid U.S. identification would certainly facilitate the entry of illegal aliens into American society, and any bank, municipality, or other entity that accepts the card, knowingly provides benefits — such as the ability to open bank accounts or access public services — to illegal aliens usually reserved solely for US citizens or legal residents. Though there is no court opinion yet that speaks directly to this new issue, it is not unreasonable to argue that such a practice could be found to encourage illegal aliens already in the United States to remain.
Acceptance of the matricula card also induces further immigration because those contemplating illegal entry will be more likely to do so given the added benefits they can hope to obtain with a matricula card once inside the United States. Thus, acceptance of the matricula for financial gain may serve as a predicate act under RICO. If an entity, for financial gain, accepts the matricula on more than one occasion, it engages in a pattern of racketeering activity in violation of §1962 of the RICO Act.
Other violations of the INA may also serve as predicate acts. While the previously mentioned acts — employing illegal aliens ands encouraging illegal immigration — are the only ones discussed in this article, this should not be construed as providing an exhaustive list of possible predicate acts. The INA also makes it unlawful to smuggle, transport, or harbor illegal aliens. If an entity gained financially from these unlawful actions and another person or business was injured as a result, that person or business may also be able to bring suit under RICO. Only time will tell just how comprehensive the RICO Act will prove to be in punishing those who violate U.S. immigration law.
Injury Suffered by the Plaintiff. In addition to establishing that the defendant has committed a predicate offense, the plaintiff must also show proof of injury. "Under RICO, ‘any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefore in any appropriate United States district court’ for civil damages. 18 U.S.C. §1964(c)."19
In Mendoza, the group of employees that brought the suit claimed that they suffered injury to their property in the form of lost wages. The Ninth Circuit Court of Appeals held that this allegation was sufficient to establish the injury element of the RICO claim.20
In Commercial Cleaning, the group of competitor cleaning companies that brought the suit alleged that they lost lucrative cleaning contracts that were awarded to the defendant. In fact, Commercial Cleaning lost a contract to the defendant that it had successfully performed for over a year. The Second Circuit Court of Appeals held that the alleged injury was sufficient to meet this element.21
Another plaintiff that may be able to show injury is the competitor of a financial corporation that accepts the matricula consular or other foreign-issued identification card to open a bank account or engage in other financial services activity. By accepting the card in violation of the INA, the bank or other entity gains a competitive advantage similar to the defendant in Commercial Cleaning. The bank, for example, would unlawfully gain additional account holders, strengthening its competitive position by providing it with additional resources to invest in loans. This unlawful activity would injure competitor banks in a similar way that the plaintiff companies were injured in Commercial Cleaning. The law-abiding competitor banks would potentially lose loan customers because the bank acting unlawfully may be able to provide better loan terms or otherwise gain a competitive advantage due to its strengthened financial position.
Again, this would clearly injure the business capabilities of the competitors and give potential plaintiffs a valid claim under RICO against the offending entities. Knowing that they could be held criminally and civilly liable for such a practice, many businesses might reconsider the practice of accepting matricula consular cards in the future.
Causation. The third element of a RICO claim — causation — has been the most challenging for plaintiffs looking for redress for injuries suffered due to violations of immigration law. In fact, the district courts that dismissed the previously mentioned cases did so based on lack of causation. This element requires that the predicate act committed by the defendant must have caused the injury to the plaintiff.
The test used to assess causation was established by the U.S. Supreme Court in Holmes v. Securities Investor Protection Corp.22 "Holmes described this proximate cause requirement as requiring a 'direct relation between the injury asserted and the injurious conduct alleged.'"23 This "direct relation" test requires the court to assess three factors: "(1) whether there are more direct victims of the alleged violation who can be counted on to vindicate the law; (2) whether it will be difficult to ascertain the amount of damages attributable to the violation; and (3) whether allowing recovery for indirect injuries would force the court to adopt complicated rules apportioning damages among plaintiffs removed at different levels of injury to obviate the risk of multiple recoveries."24
The U.S. District Court for the District of Connecticut applied this "direct relation" test in Commercial Cleaning v. Colin Service Systems. As mentioned, Commercial Cleaning sued on behalf of a group of office cleaning companies that competed with the defendant. Commercial Cleaning alleged that it lost cleaning contracts because Colin could provide lower bids as a result of Colin’s employment of illegal aliens. By hiring illegal aliens, the plaintiff alleged, Colin was able to cut labor costs since it did not have to pay federal taxes for those employees and since it could pay the illegal aliens less than that which legal workers were entitled to, and would demand.
After applying the "direct relation" test, the court held that causation was not established.25 The court held the plaintiff lacked standing to sue under RICO, and dismissed the case,26 reasoning that multiple factors besides the alleged illegal hiring scheme could have caused the injury to the plaintiffs, that damages would be difficult to determine, and that the Immigration and Naturalization Service (INS), not the plaintiffs, had the responsibility to punish the defendant.27
On appeal, however, the Second Circuit Court of Appeals refuted these conclusions. While the Second Circuit agreed that multiple factors could have contributed to Commercial Cleaning’s loss of contracts, it found that the plaintiff may be able to prove that the loss was due to Colin’s illegal hiring scheme, and so should be given an opportunity to do so.28 The Court stated that "[w]here, as here, the parties have bid against each other, the difference between the lowest and second lowest bid is readily discoverable. If Commercial can prove that but for Colin’s lower wage costs attributable to its illegal hiring scheme, Commercial would have won the contract and would have earned a profit on it, it will have shown a proximately caused injury, compensable under RICO."29
The Second Circuit also disagreed with the district court’s conclusion that damages would be difficult to apportion. The Court clarified that this factor relates only to the risk of multiple liability where compensation is paid both to those directly injured by the defendant’s illegal activity, called first-tier plaintiffs, and those derivatively injured, called second-tier plaintiffs. The concern of the Supreme Court in Holmes, the Second Circuit explained, "was that, if damages are paid both to first tier plaintiffs…and to second tier plaintiffs…then the payment of damages to the first tier plaintiffs would cure the harm to the second tier plaintiffs, and the payment of damages to the latter category would involve double compensation."30 However, there is no risk of double compensation in this case. "Commercial and its fellow class members are not alleging an injury that was derivative of injury to others. Commercial does not seek to recover based on ‘the misfortunes visited upon a third person by the defendant’s acts.’"31 Thus, the concern of the district court that damages would be difficult to apportion was unfounded.
The Second Circuit further disagreed with the district court, stating that Commercial Cleaning and its fellow class members were the proper entities to bring suit. Colin Systems had argued, and the district court had agreed, that the INS was the proper entity to bring suit against Colin Systems. The appellate court found this argument illogical. As the Second Circuit explained, if the fact that a government entity has a right to bring a suit means that private entities are precluded from suing, then there would be no private right of action under RICO because all predicate offenses under RICO expose the violator to government prosecution. Since there is a recognized private right of action under RICO, the district court’s conclusion cannot be maintained.32
A similar sequence of events occurred in the case of Mendoza v. Zirkle Fruit. Mendoza sued her employer, alleging that her wages were suppressed as a result of her employer’s hiring of illegal aliens. The U.S. District Court for the Eastern District of Washington dismissed the case, holding that Mendoza and her fellow class members lacked standing under RICO to bring suit.33 As in Commercial Cleaning, the district court in Mendoza applied the "direct relation" test and determined that the hiring of illegal aliens was not the proximate cause of the plaintiff’s injury.34
While the district court did agree with Mendoza that she was the proper victim to bring suit because she did suffer a direct injury, the court disagreed with Mendoza as to the other two factors. The court held that the plaintiff would not be able to "concretely establish the degree to which their wages have been affected by the defendants’ alleged violations" due to the multitude of factors that could contribute to the lower wages.35 The court stated that it would be "a daunting task" to sift through all these factors and determine the damages attributable to the employer’s hiring of illegal aliens. The court thus held that Mendoza lacked standing under RICO, and dismissed her claim.
However, the Ninth Circuit Court of Appeals, like its counterpart in the Second Circuit, reversed the dismissal of the RICO claim.36 The Ninth Circuit did agree with the district court’s conclusion that Mendoza and her fellow class members were the proper victims to bring suit. "[T]aking the allegations in the complaint as true, we are unable to discern a more direct victim of the illegal conduct. The documented employees here do not complain of a passed-on harm. They allege that the scheme had the purpose and direct result of depressing the wages paid to them by the growers."37 However, the Ninth Circuit disagreed with the other findings of the district court.
First, the Ninth Circuit stated that the district court improperly dismissed based on the mere fact that factors other than the alleged illegal hiring scheme could have caused the depression of wages. "[I]t is inappropriate at this stage to substitute speculation for the complaint’s allegations of causation…the workers must be allowed to make their case through presentation of evidence, including experts who will testify about the labor market, the geographic market, and the effects of the illegal scheme… For now, it is sufficient that the employees have alleged market power — they must not be put to the test to prove this allegation at the pleading stage."38
The court noted specific portions of the complaint that strengthened the plaintiff’s case — the allegation that "the growers singularly have the ability to define wages in this labor market" and allegations that spelled out "a broad conspiracy causing direct harm to the workers." With these allegations included in the complaint, the court held that the plaintiff class had stated a valid claim, and that the plaintiffs should have the opportunity to prove their allegations at trial.
The Ninth Circuit also disagreed that damages would be difficult to calculate. "That wages would be lower if, as alleged, the growers relied on a workforce consisting largely of undocumented workers, is a claim at least plausible enough to survive a motion to dismiss, whatever difficulty might arise in establishing how much lower the wages would be."39 Thus, the Ninth Circuit was not persuaded that the possible difficulty of calculating damages was enough of a reason to dismiss an otherwise valid claim.
As a result of these conclusions, the Ninth Circuit reinstated the RICO claim and remanded the case.40
A third RICO case currently in the courts is Trollinger v. Tyson Foods. The facts of Trollinger are very similar to those in Mendoza — a class of employees sued their employer for conspiring to depress their wages by hiring illegal aliens. The U.S. District Court for the Eastern District of Tennessee dismissed the case for failure to state a claim.41
In reaching its conclusion, the district court relied on arguments similar to those made by the district courts in Commercial Cleaning and Mendoza. In fact, the district court used the opinion from Mendoza, which of course was later reversed, to support its holding. The court applied the "direct relation" test and stated that even though the plaintiffs alleged a direct injury, "the conclusion that Tyson’s hiring of alleged illegal aliens depressed the plaintiffs’ wages would require sheer speculation."42 However, this is the exact argument that the Ninth Circuit in Mendoza stated was improper — "it is inappropriate at this stage to substitute speculation for the complaint’s allegations of causation."43
An additional factor noted by the district court that is unique to Trollinger is that a union that negotiated a collective bargaining agreement, which set the wage rate, represented the plaintiffs. The court reasoned, "As the wage rates were the product of collective bargaining, plaintiffs cannot demonstrate that those rates were ultimately depressed by the presence of alleged illegal aliens in the work force."44 However, the presence of this collective bargaining agreement will likely be seen as merely another factor which could affect wage rates, rather than the sole factor, and so the plaintiffs will likely be given the opportunity to prove that the agreement itself was affected by the employer’s hiring of illegal aliens. It is reasonable to believe that the employer, knowing that it could and would hire illegal aliens at a lower wage rate, offered less to its legal employees during the negotiations surrounding the collective bargaining agreement. Thus, the hiring of illegal aliens would still be a cause of depressed wages.
The Future of RICO & Immigration Law
One likely result that would follow if the plaintiffs in the discussed suits succeed on their claims is that the hiring of illegal aliens will be seriously curtailed. The RICO Act sets severe penalties for defendants found guilty of violating its provisions. A successful plaintiff is entitled to treble damages, which means threefold the actual injury suffered, plus costs and reasonable attorney’s fees.45 Additionally, the court can order the defendant to divest itself of any interest in any enterprise and to refrain from engaging in any commercial activity or making commercial investment. The court can also order the "dissolution or reorganization of any enterprise."46 In short, the losing defendant in a RICO case can lose his or her business, be forced to provide high levels of compensation to the plaintiff, and even be prohibited from engaging in future business activities.
Once businesses realize just how devastating these RICO penalties can be, they will find it prudent to resist the urge to hire illegal aliens. Thus, the first successful RICO claim against an employer for hiring illegal aliens will likely send a strong signal to corporate America that immigration laws must be respected — precisely what Congress intended when it included INA violations in the RICO Act.
Additionally, the RICO provision regarding the unlawful encouragement of illegal immigration could justify a suit against a private entity, such as a bank, that accepts foreign-issued identification cards that are only needed by illegal aliens. One example of this, of course, is the matricula consular issued by the Mexican consulates in the United States. Since both the supporters of the matricula and those who oppose its acceptance agree that only illegal aliens have need to rely on the card, acceptance of the card knowingly encourages illegal immigration.
Some large U.S. financial corporations currently accept the matricula as primary or secondary ID for the purpose of opening bank accounts in the United States for illegal aliens. An illegal alien with a U.S. bank account, in which he or she may deposit illegally acquired funds, and out of which he or she may pay local rent, local utility bills, and send money abroad, is more likely to remain illegally in the United States. In other words, he or she is encouraged to remain illegally in the United States — such encouragement being a violation of Federal law.
When such a violation is done for the purpose of financial gain, as in the case of the financial corporations engaged in the practice, it is more than simply a violation of immigration law — it is racketeering. Also, those contemplating entering the United States illegally will be further encouraged to do so because of the added benefits they can obtain once they enter. Thus, it is reasonable to say that acceptance of the matricula is a violation of the INA and a predicate offense under RICO.
With this predicate offense established, a bank that competes with the one accepting the card would only have to plead the other elements of a RICO claim — injury and causation — in order to survive a motion to dismiss and bring the case to trial. The plaintiff bank will likely be able to plead these elements. As mentioned in the discussion of the injury element above, the injury to the plaintiff bank would be lost market share and competitive disadvantage, leaving causation as the only remaining obstacle to receiving compensation for damages.
Under the "direct relation" test, the plaintiff will be able to prove causation. First, the plaintiff bank would be the direct victim of the defendant bank’s illegal activity, similar to the direct injury suffered by Commercial Cleaning at the hands of Colin Service Systems. Second, it will not be difficult to ascertain the damages attributable to the unlawful acceptance of the matricula. Regulations issued by the U.S. Treasury Department require banks to record the type of document used by an account applicant. Thus, the defendant would have records indicating how many accounts were issued on the basis of the matricula alone. Calculations, relatively simple for financial professionals, could then be made to determine the level of business the defendant obtained by its unlawful activity and the impact that that unlawfully gained business had on the market. Third, there is no risk of multiple liabilities due to the presence of second-tier plaintiffs. The plaintiff bank, a first-tier plaintiff, will likely be the only plaintiff with standing to sue since it is the only entity injured by the defendant. Though multiple banks may sue the defendant, all of these banks will be first-tier plaintiffs, so this last factor is not of any concern. Thus, banks accepting the matricula face the real possibility of RICO liability.
Beyond illegal hiring and acceptance of foreign-issued identification cards, only time will tell just how much of an impact the inclusion of INA violations in the RICO statute will have on immigration law, corporate practice, and public policy. What is clear is that Howard Foster and others following his lead are blazing a new legal path armed with a powerful tool — RICO — that is sure to have a profound effect on the way immigration laws are enforced in this country.
Part of the legislative intent of the RICO laws in general was to afford private citizens a remedy for lawbreaking when authorities normally charged with such enforcement became derelict in their duties. For example, in a town in which political corruption and racketeering activity have combined to the detriment of law-abiding citizens and the rule of law, the RICO Act was intended to provide private citizens the ability to initiate court action to compel enforcement and respect for the law.
The inclusion of INA violations as RICO predicate acts in the 1996 immigration reform act was an attempt by Congress to provide private citizens with recourse in the face of widespread disregard for immigration laws. Now, citizens and businesses are beginning to avail themselves of this powerful new tool, and, if the intent of Congress bears fruit, the results could represent a drastic change in immigration law enforcement in the United States, based on private interest as opposed to government enforcement. By providing a strong incentive for employers and businesses to stop engaging in illegal hiring and the encouragement of illegal immigration for financial gain, there is hope to significantly reduce illegal immigration in the United States simply by working through the U.S. courts.
7 Elizabeth Amon, New RICO Target:
Hiring Illegal Aliens,
National Law Journal, Dec. 3, 2001 issue (posted onlineNov.26),
Micah King is with Friends of Immigration Law Enforcement, a Washington-based association of attorneys, law enforcement professionals, and others concerned with immigration law enforcement. This article originally appeared as a backgrounder for the Center of Immigration Studies.
The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.