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A Law of Unintended Consequences

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Rico
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Novia Turkette Jr. was not your average thug.

He was the ringleader of a gang of criminals that evidently had no limits. In western Massachusetts during the 1970s, Turkette and his cohorts started off burglarizing drugstores and selling the stolen goods on the black market.

They eventually evolved into a thriving arson and insurance-fraud operation, where Turkette and his gang were hired out to burn down property and file fraudulent insurance claims.

Then, in order to protect their business from the Feds, the crew paid off police officers and other witnesses, before one of them eventually turned Turkette over to the F.B.I.

By most accounts, Turkette was more John Gotti than Steve Ballmer. But Microsoft chief executive Ballmer recently found his lawyers arguing before the Supreme Court over the same word in the same legal statute as the convicted gangster did in 1981.

Turkette lost his argument. And, in a huge blow to the corporate lobby, Microsoft learned earlier this month that the Supreme Court refused to even hear its case.

The word is enterprise. And the law is the Racketeer Influenced and Corrupt Organizations Act. RICO, as it's commonly known among corporate executives and mafia dons alike, was enacted under the Organized Crime Control Act of 1970.

The law was created to give the government more power to keep organized mobsters from infiltrating businesses. But today, U.S. attorneys file only a handful of criminal RICO cases each year. Instead, it's evolved into a powerful and controversial tool for plaintiffs suing corporations in civil class-action suits.

"Nobody anticipated RICO would be used in this way," says Jeff Grell, a lawyer and a professor of civil RICO law at the University of Minnesota Law School.

A lot is at stake in RICO cases. They are costly to litigate, and defendants found guilty of RICO claims must pay triple the damages. It's one of the few statutes that allows plaintiffs to recoup attorney fees and costs.

Because they are difficult to defend and potentially very costly to lose, most civil RICO cases end up being settled by companies that are also eager to avoid the stigma of losing a racketeering case. That is why Microsoft and other corporate interests want to remove the law from the plaintiffs' reach.

In the 1981 Supreme Court case, Turkette's argument centered on the fact that his rough-and-tumble organization was not an "enterprise" because it wasn't legitimate. In denying his appeal, the justices broadened the scope of the term, which is how Microsoft ended up defending itself against the very same claim.

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