Document: 507 U.S. 170 113 S.Ct. 1163 122 L.Ed.2d 525 Bob REVES, et al., Petitionersv.ERNST & YOUNG. No. 91-886. Argued Oct. 13, 1992. Decided March 3, 1993. Syllabus * A provision of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962(c), makes it unlawful "for any person employed by or associated with [an interstate] enterprise . to conduct participate, directly indirectly, in such enterprise's affairs through a pattern racketeering activity. ." After respondent's predecessor, accounting firm Arthur Young Company, engaged certain activities relating valuation gasohol plant on yearly audits financial statements farming cooperative, cooperative filed for bankruptcy, bankruptcy trustee brought suit, alleging, inter alia, that question rendered civilly liable under 1962(c) petitioner holders cooperative's notes. Among other things, District Court applied Circuit precedent requiring, order liability attach, "some participation operation management itself"; ruled Young's failed satisfy this test; granted summary judgment its favor RICO claim. Agreeing lower court's analysis, Appeals affirmed regard. Held: One must participate itself be subject liability. Pp. 6-16. (a) Examination statutory language light pertinent dictionary definitions context brings section's meaning unambiguously into focus. Once is understood word "conduct" requires some degree direction, "participate" part clear one have directing an "participate, affairs." The "operation management" test expresses requirement formulation easy apply. ____. (b) finds further support 1962's legislative history. (c) RICO's "liberal construction" clause—which specifies "provisions title shall liberally construed effectuate remedial purposes"—does not require rejection test. clause obviously seeks ensure Congress' intent frustrated overly narrow reading statute, but invitation apply new purposes Congress never intended. It from statute's history did intend extend beyond those who (d) consistent proposition limited upper management. "Outsiders" having no official position may if they are "associated with" enterprise. (e) This will overturn courts' findings respondent was entitled upon application facts case. failure tell board should been valued particular way insufficient basis concluding participated itself. 937 F.2d 1310, affirmed. BLACKMUN, J., delivered opinion Court, which REHNQUIST, C.J., STEVENS, O'CONNOR, KENNEDY, JJ., joined, all Part IV-A SCALIA THOMAS, joined. SOUTER, dissenting opinion, WHITE, Gary M. Elden, Chicago, IL, petitioners. Michael R. Dreeben, Washington, DC, as amicus curiae Kathryn A. Oberly, respondent. Justice BLACKMUN Court.1 1 case us once again interpret provisions (RICO) chapter Organized Crime Control 1970, Pub.L. 91-452, Title IX, 84 Stat. 941, amended, §§ 1961-1968 (1988 ed. Supp.II). Section in, affect, interstate foreign commerce, presented whether provision. 2 Farmer's Cooperative Arkansas Oklahoma, Inc. (the Co-op), began operating western eastern Oklahoma 1946. To raise money expenses, Co-op sold promissory notes payable holder demand. Each year, members were elected serve board. met monthly delegated actual general manager. In 1952, appointed Jack White 3 January 1980, taking loans finance construction his company, Flame Fuels, By end White's debts totalled approximately $4 million. September Gene Kuykendall, served accountant both Flame, indicted federal tax fraud. At meeting November 12, proposed purchase Flame. agreed. month later, however, declaratory action against state court alleging actually had February 1980. complaint drafted attorneys led consent decree relieving providing owned since 15, 4 Kuykendall convicted fraud 1981. See United States v. White, 671 1126 (CA8 1982) (affirming their convictions). Harry Erwin, managing partner Russell Brown firm, testified shortly thereafter retained perform 1981 audit. Joe Drozal, put charge audit Cabaniss selected assist him. On 2, 1982, Company merged later became Ernst Young.2 5 Drozal's first tasks determine Flame's fixed-asset value. consulting reviewing books (which prepared), Drozal concluded plant's value at 1980 $4,393,242.66, figure employed. Using base, factored costs capitalized expenses $4.5 then how treated purposes. If beginning 1979, would If, purchased given fair market time purchase, somewhere between $444,000 $1.5 less than million, insolvent. start million books. 6 April 22, report Co-op's audit's Note 9, expressed doubt investment could ever recovered. 9 also observed sustaining losses averaging $100,000 per month. Co. Reves, 1318 1991). conclusion always without 7 May 27, held 1982 annual meeting. meeting, Co-op, C. Young, distributed condensed statements. These included asset among total assets omitted information contained 9. F.2d, 1318-1319. present. Erwin saw statement when he arrived 5-minute presentation, told audience copies full available office. response questions, explained incurred $1.2 revealed relevant true health. 8 hired report, 7, 1983, similar restated (this 8) recoverable. 1320. responsible showing positive net worth. 24, 8. time, reviewed advance act remove name statement. Cabaniss, 3-minute presentation gave report. He informed office them about difficulty written down Ibid. 1984, experienced slight run demand 23, unable secure financing, bankruptcy. As result, frozen estate longer redeemable noteholders. II 10 14, 1985, suit 40 individuals entities, including behalf certified class noteholders, petitioners here, consisting persons 1984. Petitioners settled defendants except Young. determined before trial securities law. Robertson 635 F.Supp. 851, 865 (WD Ark.1986). Nos. 85-2044, 85-2096, 85-2155, 85-2259 Ark. 1986), App. 198-200. established Eighth Bennett Berg, 710 1361, 1364 (en banc), cert. denied, sub nom. Prudential Ins. America Bennett, 464 1008, 104 527, 78 (1983), itself." 198. ruled: "Plaintiffs show anything more accountants series completed transactions, records fairly portraying status date three four months preceding meetings directors shareholders reports. We do hesitate declare fail required Berg." Id., 199-200. 11 went claims. jury found committed awarded $6.1 damages. reversed, 856 52, 55 (1988). writ certiorari, within 3(a)(10) Securities Exchange 1934, 48 882, 15 78c(a)(10). Reves 494 56, 70, 110 945, 953, 108 47 (1990). 12 remand, major respects damages award, reversed remanded trial. 1339-1340. only Appeals' decision issue here affirmance Like articulated Berg "rise level Co-op." 1324. Columbia has adopted Yellow Bus Lines, Drivers, Chauffeurs Helpers Local Union 639, 286 U.S.App.D.C. 182, 188, 913 948, 954 (1990) 501 ----, 111 2839, 115 1007 (1991). 502 112 1165, 117 411 (1992), resolve conflict these cases Bank National Trust Savings Assn. Touche Ross Co., 782 966, 970 (CA11 1986) (rejecting defendant enterprise). III 13 "In determining scope we look language. unambiguous, absence 'a clearly contrary, ordinarily regarded conclusive.' " Turkette, 452 576, 580, 101 2524, 2527, 69 246 (1981), quoting Consumer Product Safety Comm'n GTE Sylvania, Inc., 447 102, 108, 100 2051, 2056, 64 766 (1980). Russello States, 16, 20, 296, 299, 17 (1983). 14 phrase "to used twice, seems reasonable give each use construction. Sorenson Secretary Treasury, 475 860, 106 1600, 1606-1607, 89 855 (1986). verb, means lead, run, manage, direct. Webster's Third New International Dictionary 474 (1976). urge read "carry on," Brief so almost involvement "conduct participate" requirement. But important, [an] affairs," indicates direction.3 dissent agrees that, "it plausible find suggestion control." Post, prefers focus noun, unless reads include element direction noun phrase, becomes superfluous. easily chose repeat "conduct." conclude, therefore, verb subsection direction. 16 difficult what make "participate." previously characterized "ter[m] breadth." Russello, U.S., 21-22, S.Ct., 299-300. argue synonym "aid abet." 26. That term breadth indeed, abet" "comprehends assistance words, acts, encouragement, support, presence." Black's Law 68 (6th 1990). appears narrower meaning. mark limits might mean looking say. hand, affairs" broader already noted, repetition purpose. middle ground, common understanding "participate"—"to take in." 1646 understand comes affairs. Of course, primary responsibility affairs, just "directly indirectly" formal enterprise,4 required. IV 1962. basic structure 1962 took shape spring 1969. 20 Senator Hruska introduced S. 1623, 91st Cong., 1st Sess., combined previous proposals. Lynch, RICO: Being Criminal, Parts I II, 87 Colum.L.Rev. 661, 676 (1987); Blakey Gettings, (RICO): Basic Concepts—Criminal Civil Remedies, 53 Temp.L.Q. 1009, 1017 1623 titled "Criminal Activities Profits Act" directed solely proceeds derived criminal activity.5 2(a) bill ultimately 1962(a). 19 18, Senators McClellan 1861, recast added 1962(b) (c).6 Blakey, Fraud Action Context: Reflections 58 Notre Dame L.Rev. 237, 264, n. 76 (1982). line 1861 reflected expanded purpose: prohibit infiltration legitimate organizations activity activity" (emphasis added). June Assistant Attorney General Will Wilson views Department number bills organized crime, Subcommittee Criminal Laws Procedures Senate Committee Judiciary. criticized ground too merely prohibits prohibited funds business, fails control business activities." Measures Related Crime: Hearings Judiciary, 387 (1969) praised because "criminal broad enough cover most methods ownership, concerns acquired" supra, 258, 59. 21 With alterations IX 30. House Reports accompanied 30 described three-part 1962: 22 "(1) making receipt income 'racketeering activity' principal commission acquire interest establish commerce; (2) prohibiting acquisition commerce 'pattern' activity;' (3) proscribing activity.' H.R.Rep. 91-1549, p. 35 (1970); S.Rep. 91-617, 34 U.S.Code Cong. Admin.News pp. 4007, 4010. 23 comments floor, consistently referred subsections enterprise.7 Representative Cellar, Chairman Judiciary voted out acting managerial capacity, activity." 116 Cong.Rec. 35196 (1970) 24 fact does necessarily Cf. 591, 2533 (references "requir[e] negative inference [RICO] reach enterprises existing purposes"). remarks, While being considered, critics raised defined broadly many crimes typical crime. 18912-18914, 18939-18940 (remarks Sen. McClellan). reassured bill's critical limitation 1961(1)'s list predicate requirements, 25 "The danger offenses proceedings even smaller 1968 [Safe Streets] [A]ct, crime listed provides IX's prohibitions. Unless individual commits engages violations, uses obtain operate made IX." Cong.Rec., 18940. 26 Thus, confirms deduced 1962(c)—that B 27 directed, 904(a) 947, see note following 1961, 438, purposes." Nor help mind. Those gleaned statute normal interpretation. 'only serves aid resolving ambiguity; beget one.' Sedima, S.P.R.L. Imrex 473 479, 492, 10, 105 3275, 3282, 346 (1985), Callanan 364 587, 596, 81 321, 327, 312 (1961). activity.8 V 28 flawed "any [the] enterprise." 37-40. agree management, disagree inconsistent proposition. An "operated" lower-rung participants management.9 "managed" others exert over as, example, bribery. 29 argues "outsiders" Amicus Curiae 15. correctly points purpose attack "infiltration organizations," 76, argument several counts. First, ignores subsections. Infiltration addressed (b), applies "outsiders."10 Second, "employed enterprise, suggesting contain restriction. Third, cannot interpreted complete depends conducted "enterprise's own is, itself—but neither nor urge. sum, hold VI 31 Both standard adopt today case, judgment. Neither argued courts misapplied creating 'financial management's responsibility.' 5, CCH AICPA Professional Standards, SAS 1, 110.02 Although professional standards profession relevant, define constitutes 1962(c). 32 undisputed relied preparing AICPA's auditor draft whole based system. reports calculated plant. 87-1726 (CA8), 250-251, 272-273. conclude constituted participation. think respect sufficient rise 33 ordered. whom WHITE joins, dissenting. 36 "conduct," congressional mandate limit Ante, What strikes clear, looks very least hazy me, accordingly irrelevant, dispositive. assume, majority, imports say majority misapplies here. therefore respectfully dissent. 37 occurs twice noun. 38 "It collection debt." surely correct cognates receive readings, ante, ____, "context important" coming sense terms intended Congress, ibid., goes astray form divining fit usage well. reaches pivotal "in 'to affairs,' direction." (footnote omitted). sure, setting abbreviated consideration control, orchestra." (Even so, emphatic, "[t]he notion leadership often obscured lost; e.g. investigation it." Oxford English 691 (2d 1989) original).) 39 event, limited, features inclusive term, majority's chosen "carrying forward" out," (1976), phrases implication control. diminished covers by" it, And associates (like employees) conducting racketeering, participating conduct, indirect manner. prohibition renders rather awkward, hard imagine leave capacity someone think, then, contextual examination shows long arm, unlimited prove includes least, defeat conviction restrictive interpretation intended.1 What, call tie analysis? answer faced uncertain tie-breaker clause, directs 904(a), 1961. "express admonition" broadly, 497-498, 3285-3286, instance, plays part, recognize definition free restricting control.2 Because reading, reverse. 41 Even view still join judgment, me unsupportable announces. confined role traditionally performed outside auditor, Co-op. record viewed favorably Reves,3 created hired, purported, Most importantly, adduced evidence responsibilities deciding, assign important fixed asset, plant, conceded below alleged traditional auditing. find, erroneously (again) 42 For our purposes, auditing clear. describing "respective auditor," Code Conduct developed American Institute Certified Public Accountants (AICPA). Respondent 31. auditors' code up ultimate content statements: 43 responsibility. auditor's express Management adopting sound policies establishing maintaining internal will, record, process, summarize, data assertions embodied independent suggestions them, system." 44 short, chooses appear statements; "simply client's statements." can independently substance himself. re Thomas P. Reynolds Securities, Ltd., Release 29689, 1991 SEC Lexis 1855, *6-*7 (Sept. 1991) ("A company may, rely prepare account However, performs functions, become identified audit"). 45 indeed step shoes solvency predicated. (although advanced $4.1 during 291, 295), there indication occurred anywhere else time. When accepted job 1981, matter obvious moment. Instead declaring responsibility, instead turning reliable value, basically set questions come doing repeatedly choices calling exercise belonged instance. 46 realized statement, prepared felon (who happened former accountant),4 1316-1317 1991), memo serious cost figures 1189-1191. Nonetheless, "essentially invented" matched, penny, phoney accountant, created. 138-140. "invented" proceeded decide, acquired indicated local decree, 295, 1212-1214, "adopted blatant fiction—that [had] entire inception May, 1979—in justify carrying [the Co-op's] cost, built scratch." 137. Apparently, idea 1979 nowhere books, treat transaction manner.5 Relying fiction, unreality shared Board Directors,6 let alone membership, 238. 1982. 261. actions, responsibilities, thereby derived, provided analysis. after evidence, "created 199. supporting petitioners' allegation "participated creation statements" handed year Before Appeals, although disputed claim functioning de facto chief officer, Supplemental Reply Remand Appellant dispute Court's 20. Instead, "[e]ven if, auditing, integral dominant, active ownership role." 49 ignoring crucial concessions, prompted describe "limited audits, Directors explain presentations meetings." "as law, violation," (quoting 1361 1983)) requiring (internal quotes 50 concessions going ignored declared irrelevant. explains today, 'outsiders' 'associated with' affairs—that ____ original). "participated" context, (citing 299-300, (1983)), "indirect" suffice. 3285-3286 ("Congress' self-consciously expansive language" supports "RICO broadly"). 51 opposing motion demonstrated "participation" sense. assuming authority key decisions stating crossed separating "outside" auditors "inside" managers. like affirms grant spite believe test, syllabus Reporter Decisions convenience reader. Detroit Lumber THOMAS opinion. terminology earlier judicial writings hereinafter refer "Arthur Young." calls attention 1955(a), penalizes anyone "conducts, finances, manages, supervises, directs, owns illegal gambling business." 11; Tr. Oral Arg. 24-25. noted Courts proscribe mere bettor." Sanabria 437 54, 70-71, 26, 98 2170, 2182, 57 (1978). "conducts" distinguish "manages, [or] directs." reasons, "significant banc) added), part: "Sec. 2. Whoever, received indirectly section legal beneficial assets, liabilities, capital guilty felony fined $10,000, imprisoned ten years, both." "§ Prohibited "(a) knowingly [sic] invest, income, establishment of, commerce. "(b) maintain, debt. "(c) See, e.g., 607 Byrd West Virginia) ("to businesses ., methods"); id., 36294 McClellan) acquiring 36296 Dole) ("using 35227 Rep. Steiger) ("the specified commercial organizations"). history, occasion consider rule lenity. note, lenity adopt. oral argument, discussion low-level employees considered 25-27. need decide far extends ladder officers Subsection conspire violate attempts shore materials. demonstrates needed shorthand method referring spoke "the operation" out, "operation" essentially interchangeable "conduct"; definable on" out." 22. There meant attend nuance concedes, "[T]he claims Given redundant tend two appearances ruling nonmovant believed, justifiable inferences drawn favor." Anderson Liberty Lobby, 477 242, 255, 2505, 2514, 91 202 My description facts, primarily conforms standard. "independent involved keeping addition "auditing" 1991); 1982); 633 relying services. decided otherwise, sale—three dollars less. "blatant fiction" maintained appearance "look better." 137-138. motives desire keep accountants' themselves [their] trial." 136. asserts, "undisputed" fact, "that reports." (after examining Kuykendall). Since nearly $4.4 1317. inception, despite overwhelming contrary records. 137-138; 1317 ("In [Arthur Young] great deal exactly opposite"). creative accounting, reliance owner (a necessary cost). Not procured friendly lawsuit engineered lawyers building owning 1318. continued indicat e "acquired ownership" 250.

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