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United States v. Sclafani

decided: June 27, 1973.


Smith, Mulligan and Timbers, Circuit Judges.

Author: Timbers

TIMBERS, Circuit Judge:

Appellants Gus Sclafani and Ben Ross appeal from judgments of conviction entered upon jury verdicts returned October 6, 1972 after a nineteen day trial before Edmund L. Palmieri, District Judge, in the Southern District of New York.

Sclafani was convicted on three counts of loansharking, in violation of the Extortionate Credit Transaction Act of 1968, 18 U.S.C. §§ 893 and 894 (1970); on one count of conspiring to finance an extortionate credit transaction, in violation of 18 U.S.C. § 371 (1970); on two counts of income tax evasion, in violation of 26 U.S.C. § 7201 (1970); and on one count of making a false statement, in violation of 18 U.S.C. § 1001 (1970). On December 4, 1972, an effective sentence of ten years imprisonment and a $30,000 fine was imposed on Sclafani.

Ross was convicted on two counts of loansharking, in violation of the Extortionate Credit Transaction Act; on one count of conspiring to finance an extortionate credit transaction; and on three counts of filing false and fraudulent income tax returns, the latter in violation of 26 U.S.C. § 7206(1) (1970). On December 11, 1972, an effective sentence of fifteen years imprisonment and a $90,000 fine was imposed on Ross.*fn1

The chief claim of error raised on appeal by both appellants is that they were precluded from calling a co-defendant as a witness at their trial because of certain remarks made by the trial judge in accepting the co-defendant's change of plea and in sentencing him several months before the trial began. Other subordinate claims of error are raised by both appellants.

We affirm.


Events Leading to Indictment

In view of the issues raised on appeal, a summary description of the loansharking scheme of considerable dimensions which constituted the core of this case, and the conduct for which appellants were convicted, will suffice.

The scheme in substance was that appellants loaned ever increasing sums of money to two borrowers at enormous rates of interest. They proceeded to collect the interest and other payments by threats of death, maiming and other violence. The exorbitant interest rates and other terms of extortion, rather than alleviating the borrowers' financial difficulties, forced them to borrow additional amounts. This continued to compound the plight of the victims. Eventually, faced with still further threats of physical injury and death, the victims turned to the FBI.

The sequence of events that led to the instant indictment began with the financial problems of Morton Kanof and Herbert Hurwitz, two contractors specializing in ghetto building construction. In July 1968, Kanof and Hurwitz, who were then in need of $25,000, were put in touch with defendant Joseph Randazzo. He agreed to lend them the sum on these terms: interest at 3% per week; principal repayment in amount of $100 per week; two bogus payroll checks, each in amount of $125 per week, one of which was to go to defendant Joseph Maida; and a $2,000 bonus to Randazzo.

By October 7, Randazzo had delivered $10,000 of the $25,000 promised. Nevertheless, Kanof and Hurwitz were required to make payments pursuant to the original agreement. Subsequent deliveries of money and revisions of the loan resulted in the borrowers making payments in amount of $930 per week by the end of 1968.

Beginning February 1969, the borrowers' payment checks started to bounce. They encountered increasing difficulty in making the required payments. Randazzo began threatening them at gunpoint, purportedly on orders from higher up.

In June 1969, Randazzo introduced Hurwitz to appellant Sclafani as the person who was to receive all further payments. Hurwitz was informed by Sclafani that he "breaks legs, arms and heads" when necessary.

By late July 1969, Kanof and Hurwitz were in need of an additional $50,000. They had a meeting with Randazzo and Maida, at which it was agreed that this further sum would be loaned on these terms: the total principal would be computed as $100,000; interest at 3% per week would be paid on that principal amount; and four bogus payroll checks per week, each in amount of $175, would be required. The additional $50,000 was delivered to the borrowers by Sclafani and Maida in three installments by October 24, 1969. At that point the required weekly interest payments were in amount of $3,000.

In December 1969, Kanof and Hurwitz again encountered difficulty in making payments. Maida informed them that he was in trouble with his people. He introduced Kanof and Hurwitz to defendant Vincent Lore who made some direct threats and ordered prompt payment of the arrearage.

At a subsequent meeting between Maida, Lore and the two borrowers, the latter requested a further $10,000 loan with which to make their back-payments. The loan was arranged at $4,000 interest to be paid over a four week period.

In March 1970, payments by Kanof and Hurwitz again became sporadic. This led to further threats from Lore. At Lore's direction, a subcontract was entered into between the borrowers' company and C & P Painting. The latter was controlled by defendant Angelo Tuminaro and appellant Ross' son-in-law, among others. The company was identified by Lore as "my friends". The subcontract turned out to be a no-profit contract for the borrowers. After one week, the subcontract was breached by C & P. Lore arranged several meetings between the principals at C & P's offices; and at each meeting Lore left the borrowers to converse with Ross.

From that point on, there were frequent defaults in payments on the part of Kanof and Hurwitz. On May 4, Lore instructed the borrowers to deliver the payment for that week at a specified site or they would be killed. That payment was made as directed.

Shortly thereafter, Kanof and Hurwitz obtained some stock upon which they hoped to be able to obtain a loan. They informed Lore. He directed them to go to a particular bank branch and to inform a specified officer that they had been sent by Ross. The instructions were followed, but the bank refused to make a loan on the stock.

In June, in addition to the weekly payments, Lore demanded and received from the borrowers some $500 worth of plumbing fixtures. Also during June, Lore directed Kanof to determine the feasibility of converting a certain Brooklyn building into a drug rehabilitation or day care center in satisfaction of the back-payments due. It was later learned that the building was owned by a corporation of which Ross and Tuminaro were the principals. When the proposed conversion proved unfeasible, Lore told the borrowers to forget they had ever seen the building.

The demands upon the borrowers continued. At one point Lore actually bit Kanof's hand and threatened to gouge out Hurwitz's eyes. Gunpoint confrontations followed. At another time, Lore stabbed Kanof's hand with a table fork and bit Kanof's face.

On August 11, following some further inquiries into the value of a Brooklyn building owned by the borrowers, Lore directed that the mortgage on that building be transferred to Ross' daughter. Sometime around that date the borrowers met Tuminaro for the first time. At this meeting, Tuminaro told them that Lore had been too easy on them and that if they were really having trouble raising money they should rob a bank. Tuminaro said that he and Lore would supply a gun.

Lore subsequently suggested to Kanof that he take out an insurance policy on Hurwitz's life in the amount owed and that Lore and his people would arrange for Hurwitz's death.

On October 15, Lore directed the borrowers to execute the mortgage assignment on their Brooklyn building to appellant Ross, not to his daughter. The assignment was executed accordingly and was recorded.

On November 3, Kanof and Hurwitz were given an ultimatum by Lore that unless they came up with $10,000 they would both be killed. Kanof and Hurwitz went to the FBI. On November 4, a conversation was taped in which Lore repeated his threats of the day before. On the following day, the borrowers met Maida ...

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