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Sindona v. Grant

decided: March 21, 1980.


Appeals by Michele Sindona and by the United States from two orders of the District Court for the Southern District of New York, Henry F. Werker, Judge . Sindona appeals from an order, 461 F. Supp. 199 (S.D.N.Y. 1978), denying a petition for habeas corpus from a ruling of Judge Thomas P. Griesa of the same court, acting as a committing judicial officer, which held Sindona to be extraditable to Italy, 450 F. Supp. 672 (S.D.N.Y. 1978). The United States appeals from a second order, based on later factual developments, granting the petition. Affirmed on Sindona's appeal, reversed on the Government's appeal.

Before Moore, Friendly and Meskill, Circuit Judges.

Author: Friendly

This extradition case has had a tangled history. On September 7, 1976, the United States, acting on behalf of the Republic of Italy, commenced an extradition proceeding in the District Court for the Southern District of New York against Michele Sindona, an Italian citizen, who was charged with the Italian crime of "fraudulent bankruptcy." Thomas P. Griesa, Judge, acting as committing judicial officer, held Sindona extraditable. Matter of Sindona, 450 F. Supp. 672 (S.D.N.Y.1978). Lacking a direct avenue of appeal, Sindona sought a writ of habeas corpus on grounds that will appear hereafter. See Shapiro v. Ferrandina, 478 F.2d 894, 901 (2 Cir.), cert. dismissed, 414 U.S. 884, 94 S. Ct. 204, 38 L. Ed. 2d 133 (1973). His petition was denied by Judge Werker, Sindona v. Grant, 461 F. Supp. 199 (S.D.N.Y.1978) and Sindona appealed to this court. Before argument of the appeal, however, a federal grand jury indicted Sindona on charges mainly relating to the collapse of the former Franklin National Bank. The indictment prompted a second habeas corpus petition claiming that Sindona now fell within the ambit of Article VI(1) of the Treaty on Extradition between the United States of America and Italy, 26 U.S.T. 493, T.I.A.S. 8052, which bars extradition

(w)hen the person whose surrender is sought is being proceeded against or had been tried and discharged or punished in the territory of the requested party for the offense for which his extradition is requested.

Judge Werker granted this petition and ordered the termination of extradition proceedings on July 6, 1979. The United States appealed from that decision and moved to consolidate with Sindona's earlier appeal. We granted the motion, and both appeals are now before us. Meanwhile, Judge Werker's second order has been stayed.

The Charges

Michele Sindona is an Italian businessman who is alleged to have controlled an international "financial group" of banks and other corporations during the early 1970's. In mid-1974, his fortunes soured abruptly with the simultaneous collapse of major banks on both sides of the Atlantic. In Milan, Italy, the Banca Privata Italiana (BPI) was ordered into forced liquidation by the Italian Ministry of the Treasury on September 27, 1974 and adjudged insolvent by a Milan court on October 15, 1974. Only two months before, on August 1, 1974, BPI had been formed from the merger of two Sindona-controlled banks, the Banca Unione (BU) and the Banca Privata Finanziaria (BPF). In the United States, the Franklin National Bank was declared insolvent on October 8, 1974, and its holding company, the Franklin National Corporation of New York (Franklin) filed a bankruptcy shortly thereafter. Sindona held 21.6% of Franklin's shares through Fasco International, a Luxembourg holding company.

The Italian charges underlying the request for Sindona's extradition stem from the collapse of BPI. This debacle and the attendant investigations prompted several warrants for Sindona's arrest; the third, filed on July 2, 1975, accompanied the extradition request and ordered the apprehension of Sindona and one Carlo Bordoni, the former Managing Director of BU, on four charges alleging violations of Articles 216, 217, 219 and 223 of the Italian Bankruptcy Law (Royal Decree of March 26, 1942, No. 267). Of these, one charge of "simple bankruptcy" under Article 217 was dropped during the proceedings below. The remaining charges and associated provisions of Italian law relate to the crime of "fraudulent bankruptcy."*fn1 The first asserts that Sindona, and Bordoni, in their official capacities as officers and directors of BU and BPF,

It further alleges that the principals routinely financed the business ventures of a group of foreign and Italian corporations by placing BU and BPF funds, totalling some 150 billion lira, on time deposits with foreign banks, while secretly instructing the depository banks to convey these funds through "fiduciary accounts" to various corporations in the Sindona "group", see discussion infra. The second charge accuses Sindona and Bordoni of falsifying BU and BPF accounting records with the intent of procuring an unjust profit; it further details ten methods of illegally altering corporate books which the principals are said to have employed with the effect of rendering BU and BPF official records meaningless. The third charge complains that by falsifying balance sheets and books, Sindona and Bordoni fraudulently misrepresented the true economic conditions of BU and BPF from 1970 through 1973.

Although the Italian warrant is notably lacking in specifics, it refers to three supporting documents for factual amplification: the bank examiners' report for BU prepared by investigators from the Bank of Italy (a similar report for BPF was withheld), the liquidator's report prepared by the appointee of the Ministry of the Treasury, and the declaration of insolvency issued by the Milan court. These submissions are also supplemented by corroborating materials including, inter alia, the depositions of three former BPF employees who possessed personal knowledge of that bank's foreign transactions.

The Italian liquidator's and bank examiners' reports describe in detail for the period beginning in mid-1973 the so-called "fiduciary transactions" complained of in the warrant. Their findings have been summarized by Judge Griesa:

Funds of BU and BPF would be deposited with certain foreign banks, principally Amincor Bank of Zurich. These banks would be instructed to credit the funds to beneficiaries which were foreign companies controlled by Sindona. Although in theory these transactions might have been considered as loans by BU and BPF to the Sindona companies, the reports state that there was no valid documentation in the books and records of BU and BPF, and that all trace of the true beneficiaries of the deposits was removed from the banks' documentation . . . . (T)he import of both the examiners' and the liquidator's report is that Sindona never intended to repay the funds transferred by fiduciary deposits, or at least soon decided that there would be no repayment.

450 F. Supp. at 681. Beginning in early 1974, the reports allege, Sindona and Bordoni substituted assetless "bridge corporations" as the beneficiaries of the fiduciary deposits on the records of the depository banks, purportedly in order to frustrate any recoupment of the disbursed funds in the event of a BU-BPF bankruptcy.*fn2 The reports also charge numerous improper foreign exchange transactions resulting in large losses to BU, BPF, and the merged entity, BPI losses that in some instances allegedly served as covert transfers of funds from the Italian banks to other Sindona interests. In addition, both the reports and the depositions describe elaborate accounting fictions and other techniques employed to conceal the massive drain on BU-BPF assets. The bank examiners' report concludes that the losses suffered by BU alone from unauthorized foreign exchange transactions and fiduciary deposits totals about 118 billion lira; the Italian warrant charges Sindona with improperly diverting 166 billion lira from a total BPI deficit of 180 billion lira. Using the 650-lira-to-the-dollar foreign exchange rate adopted by Judge Griesa, the equivalent dollar values are roughly, $182,000,000, $255,000,000 and $277,000,000 respectively.*fn3

The American indictment alleges many of the same generic forms of fraudulent conduct described in the Italian reports, albeit in connection with the Franklin National Bank and Talcott National Corporation. Unlike the Italian warrant, however, the federal indictment is richly detailed. It charges a number of underlying criminal acts, most of which are pleaded on three levels: as the objects or overt acts of a single overall conspiracy between Sindona and Bordoni to defraud American investors and various United States governmental agencies, as individual substantive offenses or the basis for such offenses, and as the elements of securities fraud, i. e., as deceptive devices used in connection with the purchase of Franklin stock from individual investors.

In rough chronological order, the criminal conduct underlying the American indictment is alleged to have begun with the failure of Sindona and Bordoni to disclose to American authorities and investors that the funds used to acquire interests in Franklin during July of 1972, and in a second American company, the Talcott National Corporation (Talcott) in early spring of 1973, were fraudulently abstracted from BU and BPF through the fiduciary account device.*fn4 The indictment alleges that after Sindona and Bordoni secured control of Franklin they reversed the flow of funds through the fiduciary account conduit during October, 1972, by fraudulently transferring $15,000,000 from Franklin back to BU. In this regard they are also said to have bribed the general manager of Interbanca, a Milan bank, to perform an intermediary role in the transaction.*fn5 Next, Sindona and Bordoni are accused of causing the Franklin Bank to enter numerous fictitious foreign exchange transactions during 1973 and early 1974, including wash transactions designed to inflate Franklin's profits prior to the preparation of financial statements, and, in one instance, a paper deal intended solely to disguise the transfer of $2,001,000 from BU to Franklin via the fiduciary deposit device.*fn6 Sindona is also charged with one count of perjury for denying knowledge of these transactions during a later Security and Exchange Commission investigation (Count 84). Finally, Sindona and Bordoni are charged with engaging Franklin in actual but unauthorized foreign exchange trading at a total cost to the bank of $30,000,000. This loss they allegedly concealed by falsifying Franklin's books and records and by procuring the complicity of a senior Franklin officer through bribery.*fn7

Issues on Appeal

Well before the filing of the American indictment on March 19, 1979, Judge Griesa, sitting as a committing judicial officer, rendered a decision granting extradition, 450 F. Supp. 672 (1978). He held that the Italian evidence of unlawful fiduciary deposits, improper foreign exchange trading, and the "transfer" of debts sufficed to establish probable cause of separate violations of Article 216(1) of the Italian Bankruptcy Code, see note 1 supra ; that the proofs of accounting falsification constituted probable cause of violations of Article 216(2); and that the evidence gave probable cause to believe that Sindona's multiple delicts had "caused" the bankruptcy of BPI within the meaning of Article 223. See 450 F. Supp. at 688. After rejecting Sindona's plea for a hearing on certain evidentiary matters and determining that neither the Treaty nor federal law otherwise barred extradition, the court issued a warrant of commitment.*fn8 Sindona's first petition for habeas corpus attacked this order on numerous grounds, all of which were rejected by Judge Werker.

Following the denial of his first petition for habeas corpus and the intervention of the American indictment, Sindona filed a second habeas petition, urging that the Treaty precludes dual prosecution of the Italian and American charges. Believing that the situation had been fundamentally changed, Judge Werker found in Sindona's favor and directed that the writ should issue and the extradition proceedings should be terminated. The United States appeals on two grounds: first that the district court erroneously failed to apply the federal double jeopardy test, alleged to be found in Blockburger v. United States, 284 U.S. 299, 304, 52 S. Ct. 180, 182, 76 L. Ed. 306 (1932), and second, that even if the treaty mandates a standard broader than the Blockburger rule in construing the "double jeopardy" provision, Sindona remains ...

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