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Copyright (c) 1990 Notre Dame Law Review
University of Notre Dame

SYMPOSIUM LAW AND THE CONTINUING ENTERPRISE: PERSPECTIVES ON RICO: ARTICLE: How the RICO Monster Mauled Wall Street

1990

65 Notre Dame L. Rev. 1050

Author

L. Gordon Crovitz *

Excerpt

I. Introduction

On Wall Street, the 1980s will be remembered for an investment banker and a U.S. Attorney armed by the Justice Department with broad use of a killer statute. The banker, instead of sticking to the usual activities of underwriting and brokerage made an epoch discovery about the true measure of high-yield bonds, now called junk bonds. Partly as a result, hundreds of small firms found access to capital they never had before, more jobs were created in the U.S. than in Europe and Japan combined, the economy boomed. There was also the ready capital to fund the market for corporate control--takeovers, leveraged buy-outs, restructurings--that serves as the ultimate solution to the problem of the separation of ownership and control of firms.

This caused great dislocations and in some quarters great anger. Competitors resented the success of the upstart firm Drexel Burnham Lambert. The Securities and Exchange Commission and the U.S. Attorneys' Office in Manhattan decided that Michael Milken had to be brought down. There was nothing illegal in junk bonds or hostile takeovers, but RICO was the way out of this irrelevancy. His hundreds of thousands of trades were analyzed. Despite the fact that the best prosecutors could find were alleged regulatory offenses, almost none of which had ever before been treated criminally, and where any victims remain very hard to find, RICO was the perfect club. Call him a racketeer, guilty of "frauds" and call him greedy, a sleaze, and see if a jury will ...
 
 
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