New Bill Protects Dirty U.S. Companies, Say Critics

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July 24, 2006 9:46 AM

Critics of a new bill say it fails to hold American companies accountable for knowingly participating in illegal activities, such as cigarette smuggling, which could eventually fund terrorist activities.
               
The 'Prevention of Civil RICO Abuse Act of 2006,' prohibits foreign governments from suing an American company in U.S. courts under the Racketeer-Influenced and Corrupt Organizations (RICO) law.
The U.S. House Judiciary Committee passed the bill last week.

The legislation has sparked a good deal of controversy.

"It's basically shutting down RICO as a way for foreign countries to get any relief against a U.S.-based entity, whether it's a criminal organization, a corporation or a person," said Eric Lindblom, Assistant General Counsel at the Campaign for Tobacco-Free Kids.

Lindblom added that the bill not only protects American companies, but indirectly promotes terrorism by abetting cigarette smuggling.

"The worst way that cigarette smuggling affects all our lives is that it is being used as a significant funding source for terrorist organizations," said Lindblom.  "If you finance terrorist organizations, that makes them better able to perform terrorist acts that could harm people in the U.S. and people overseas."

Previously, foreign governments were able to challenge American companies in U.S. courts, seeking damages for monies lost to illegal trafficking and smuggling of goods.  And that they did.  Since 2000, 30 foreign governments have filed civil RICO suits seeking compensation for revenue lost on account of smuggled goods.   

Proponents of the bill say the original RICO statue allowed foreign governments to file frivolous lawsuits against American companies, seeking billions in lost revenue.

Some questioned whether those settlements were really going back to the various countries' governments, particularly when a country has a reputation for corruption.

"If not addressed, these lawsuits may allow drug cartels and paramilitary groups to reap the benefits of an unintended ambiguity in the law and turn RICO into a funding source," said Rep. Sensenbrenner (R-WI) in a hearing last week.      

The bill, which passed in the Judiciary Committee by a vote of 17 to eight, is now up for consideration by the full House of Representatives.