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United States v. Russo

decided: April 8, 1971.


Moore, Kaufman and Hays, Circuit Judges.

Author: Moore


Defendants Leonard Russo (Russo) and David Wenger (Wenger) were convicted for violating 18 U.S.C. §§ 371 and 1954 in that Russo conspired with various persons to pay illegal kickbacks to Wenger, an agent and counsel of the Central States Southeast and Southwest Area Pension Fund of the International Brotherhood of Teamsters (the Fund),*fn1 which violation was charged in Count One of the indictment in this case. Wenger was also convicted on a second count, for receiving $5,000 with intent to be influenced in respect to his official duties with respect to the Fund, also in violation of 18 U.S.C. § 1954. Wenger was sentenced on June 5, 1970 to two years, three months in prison and a $5,000 fine on each count, to run concurrently. Russo was sentenced to two years in prison and a $5,000 fine.

Although the substantive statute which was violated (18 U.S.C. § 1954) took effect on June 19, 1962, the Government's presentation included facts which antedated the effective date of the statute. The events material to the conspiracy charges commenced in 1961.

In the late Spring of 1961, James Plumeri (Plumeri), a defendant named in the indictment but who before trial was severed from the cases below, asked Herbert Itkin (Itkin), a co-conspirator not named as a defendant and who was the Government's chief witness at trial, to supply him with the names of persons who would be willing to make payoffs in order to obtain mortgages from the Fund. Plumeri would then use his "contact" with the Fund to obtain such mortgages. Plumeri's "contact" was Wenger, who since 1955 had been the auditor and financial adviser to the Fund.

Plumeri asked Jack McCarthy (McCarthy), a defendant (convicted but who did not appeal) to introduce Itkin to Wenger. McCarthy complied and asked Wenger to cooperate with the scheme. Wenger agreed and demanded a fee of 5% of any mortgage loan requested. Russo then asked Itkin to obtain a mortgage for Sam Giamonco (Giamonco), who was building a hospital in Fairlawn, New Jersey. Itkin stated that a 12% fee would be required, 10% in "green" (cash) and 2% by check. Giamonco agreed, but stated that he needed a temporary loan of $400,000 pending approval of the mortgage. During a meeting held in September, 1961, which included Giamonco, Russo, Itkin and John Greco, Giamonco's attorney, Itkin offered to arrange for this temporary loan for a fee of $15,000. Thereafter, at Russo's instance Giamonco made an initial payment of $7,500 and submitted certain papers concerning the project. Itkin testified that on the basis of Wenger's representations that the mortgage would be granted, he (Itkin) was able to obtain for Giamonco the temporary $400,000 loan from the General Commercial Acceptance Corporation.*fn2 After the closing of this loan, Giamonco paid Itkin an additional $7,500 of which Russo got $5,000.

In December, 1961, with the meeting of the Board of Trustees of the Fund approaching, Wenger demanded that he be paid $25,000 cash prior to the meeting. He made it clear that if the cash was not produced, the deal was off. Itkin and Russo received $35,000 from Giamonco and flew to Chicago where the Board was about to meet. They paid Wenger the $25,000 and kept $5,000 each. Immediately thereafter, the Trustees approved the loan, although no formal application had been submitted and although a moratorium on the granting of mortgages by the Fund was in effect.

The Fund was willing to commit itself only to the extent of a loan equal to two-thirds the value of the property. This was not enough to meet Giamonco's requirements. After an appraisal which put that value at $1 million, Itkin had Wenger write to the Fund in January, 1962, asking that a loan of $875,000 be approved based on Giamonco's personal guaranty of the full amount of the mortgage and an "investigation" conducted by Wenger of Giamonco's personal financial situation. Wenger then asked Itkin for an additional $20,000. Giamonco, in turn, was required to pay $30,000 of which Itkin, Russo and McCarthy each received $5,000 and Wenger $15,000 rather than the $20,000 he had demanded. The Fund then mailed a letter of commitment to Giamonco's attorney, Greco, on January 30, 1962. Giamonco was still not satisfied and requested that he be required to guaranty the loan only to the extent of $350,000, which request was approved. He also requested an accelerated payout date which was also approved. Whereupon Russo and Itkin collected another $10,000 from Giamonco which they split.

All the foregoing occurred prior to the effective date of the statute which appellants are accused of violating. However, thereafter Wenger had demanded 5% of the total original amount requested (5% of $900,000 or $45,000) and was still "owed" $5,000, which amount he repeatedly asked to be paid to him. During 1962 and 1963, Wenger obtained for Giamonco periodic extensions of the loan payout date but he ultimately refused to cooperate further until the $5,000 was paid. Russo, Plumeri and McCarthy all were asked by Itkin to contribute part of the needed $5,000. Russo suggested instead that Itkin get an additional $15,000 from Giamonco and pay Wenger from the money so obtained. Other than that, all three refused to help Itkin raise the money. Finally, on June 20, 1963, Itkin paid Wenger from his own funds, although by that date Itkin was cooperating with the Government. The requested further extension of the loan payout date, which Wenger had refused to act upon pending receipt of the $5,000, was then granted by the Fund. Thereafter, Giamonco paid Itkin $15,000; Itkin in turn paid Plumeri and McCarthy $3,500 each and Russo $1,500. On January 10, 1964, the mortgage loan was made by the Fund to the Fairlawn Hospital.

Both appellants contend that prejudicial error was committed by the Trial Court's admission into evidence of acts prior to June 19, 1962. Their argument, in summary, is that there was no statute prohibiting kickbacks prior to that date -- hence, no crime. Ergo, there could not have been a conspiracy to commit a crime until the crime was statutorily created, and all evidence before June 19, 1962, should have been excluded. They point to dates in late January and early February 1962 when they claim that the formal mortgage commitment was issued and argue that, the object of the conspiracy having been fulfilled, the conspiracy had ended. In fact, appellants assert that prior to the statute a conspiracy could not even have existed and cite Article 1, Section 9, Clause 3 of the Constitution that no "ex post facto Law shall be passed." The ex post facto question need not be resolved in this case because the proof clearly established that the conspiracy, and overt acts therein, continued long after June 19, 1962.

Merely because appellants' actions prior to June 19, 1962 did not violate § 1954 does not mean that acts committed after that date, done in violation thereof, are in any way excused or that the conspiracy had ended. Here, a number of overt acts occurred after the effective date of the statute. Wenger refused to transmit a request for a delay in the payout date of the loan until Itkin paid him the $5,000 he demanded. Russo was paid $1,500 from the final payoff by Giamonco following the approval of the loan in final form. In addition he had suggested that the final $5,000 demanded by Wenger be raised by asking for the final payment from Giamonco ahead of time. These acts demonstrate that the conspiracy continued after the statute became effective and constitute a sufficient basis for concluding that the appellants violated the statute after its effective date.

Evidence relating to the period antedating the effective date of the statute was admissible in that it showed the intent and purpose of the conspirators' later acts. Christianson v. United States, 226 F.2d 646, 652-53 (8th Cir. 1955), cert. denied, 350 U.S. 994, 100 L. Ed. 859, 76 S. Ct. 543 (1956); Butler v. United States, 138 F.2d 977, 979-81 (7th Cir. 1943). The acts subsequent to June 19, 1962 were a definite part of the same conspiracy. Testimony of prior acts was necessary to enable the jury fully to appreciate the relationship between the payments which were made after the effective date of the statute and Wenger's "services" to Giamonco in connection with the mortgage.*fn3

Wenger asserts, supported by Russo, that he was an independent C.P.A. and was not employed by, nor was he an agent of, the Fund. However, Wenger's status was a jury question which was resolved against him. More than ample evidence supports his relationship to the Fund as "counsel, agent." In rendering advice to the Fund on a regular basis, including giving the Fund advice regarding the financial status of potential borrowers, Wenger established an agency relationship with the Fund and, therefore, became a member of the class to which the statute is addressed, whether or not he could also properly be described as a "counsel" to the Fund.*fn4

Both appellants concentrate heavily upon the Government's chief ("star") witness, Itkin, as a "pathological liar" and "a liar, thief, cheat and perjurer." Reversible error is asserted because of the Trial Court's refusal to order a psychiatric examination. Itkin may well have possessed all of these characteristics and the Government may have been, and probably was, following the precept "Set a thief to catch a thief" but in cases involving crime, the Government's witnesses are rarely pillars of the Church. As long as the jury from its observation has the opportunity to appraise ...

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