WASHINGTON -- In a case involving Continental Bank Corp., the Supreme Court declined Monday to review a lower-court ruling that corporations may not be held responsible for employees' actions in civil suits filed under the Racketeer Influenced and Corrupt Organizations Act.

Chicago-based Continental, along with the defunct Penn Square Bank of Oklahoma City, were accused by investors of promoting the fraudulent sale of shares in flimsy oil and gas partnerships between 1979 and 1981.

Penn Square was closed by banking regulators in 1982. Its collapse precipitated a federal bailout for Continental in 1984.

Banks' Role Challenged

The investors claimed the banks made loans that gave partnership organizers the credentials and backing they needed to persuade people to buy shares, even though the ventures lacked sufficient reserves to succeed.

One Continental executive who oversaw the disputed transactions received favorable insider loans from Penn Square and was convicted on related charges.

A federal jury in Nebraska found Continental liable under the federal racketeering law, known as RICO.

Lower Courts Agreed

The law requires proof that a defendant participated in an "enterprise" engaged in "a pattern of rackeering."

But the trial judge threw out the RICO conviction, and a federal appeals court in St. Louis affirmed that decision.

The trial and appeals courts said that the illegal activities in question must be proved to represent official corporate policy for a finding of RICO liability.

The investors, stressing that this standard is in conflict with rulings of other lower courts, appealed to the Supreme Court, which on Monday declined to consider the case.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.