Appeal from an Order of the United States District Court for the Southern District of New York, Knapp, J., Granting Defendant's Motion to Dismiss those Counts of an Indictment Charging Violations of the Extortionate Credit Transactions Statute, 18 U.S.C. § 891 et seq. (1982). Affirmed.
Lumbard, Newman and Pratt, Circuit Judges.
The issue raised on this appeal is whether a creditor who seeks to enforce a usurious loan be recording a conveyance of real property that recites a false consideration can be prosecuted under the federal "loan sharking" statute, 18 U.S.C. § 891 et seq. (1982). Holding that the creditor could not be so prosecuted, the United States District Court for the Southern District of New York, Whitman Knapp, Judge, dismissed five counts of a fifteen-count indictment against defendant Albert Pacione, Jr. The government contends on appeal that the district court's interpretation of the statute was too narrow. We disagree, and accordingly affirm.
The facts claimed by the government are taken as true for purposes of this appeal, United States v. Von Barta, 635 F.2d 999, 1002 (2d Cir. 1980), cert. denied, 450 U.S. 998, 68 L. Ed. 2d 199, 101 S. Ct. 1703 (1981). In 1979 Robert Verrelli and Daniel Maher wanted to exhibit an airplane that had belonged to the late Elvis Presley. Unable to obtain financing from other sources, Verrelli sought a loan from Vincent Aprile, who together with his attorney, defendant Albert Paccione, Jr., agreed to lend Verrelli and Maher $25,000 in return for their promise to repay $37,500 after the exhibition. As security for repayment, Verrelli's mother-in-law, Rose Dorner, executed a mortgage on her home in favor of Pacione's law firm for $37,500.
Pacione prepared the mortgage, which falsely recited that the amount oweed was $37,500, and that it was to be repaid by October 26, 1979, "at no rate of interest".Pacione and Aprile told Dorner that if Verrelli and Maher did not repay the loan, the mortgage would be recorded and would create a lien against her property. Although the exhibition on October 20, 1979, was a financial failure, Dorner promptly repaid $37,500 to Pacione and Aprile and received back the unrecorded mortgage marked "Paid in full".
Notwithstanding their first failure, Verrelli and Maher planned a second exhibition of the Presley airplane and again sought financing from Aprile and Pacione, who this time agreed to lend them $20,000 in return for a promise to repay $30,000 by December 3, 1979. As security for the second loan, Maher and his wife executed a trust deed to their home in favor of Pacione's law firm as trustees. The deed falsely recited that the Mahers had received $30,000 as consideration for the conveyance; in fact they had received only the $20,000 loan.
The second exhibition also flopped, and when the Mahers were unable to repay the loan, Pacione, on January 9, 1980, submitted the deed to the county clerk of Orange County, New York, for recording. Pacione's law firm later conveyed the property to Aprile, who sold it to a third party.
Even though the Mahers had lost their home, Aprile allegedly continued to press them for repayment, and at one point sought to recruit a third person to beat up Maher. However, these alleged steps towards violence are not relevant to this appeal, because the government conceded before Judge Knapp its inability to prove that Pacione was associated with, or even aware of, any of the threats allegedly made by his client and co-lender, Aprile.
The indictment charged Pacione and Aprile with violations of the extortionate credit transactions statute, as well as other offenses. Insofar as relevant here, it charged that Pacione and Aprile conspired to make extortionate extensions of credit, in violation of 18 U.S.C. § 892(a) (count 1), committed substantive violations of the same section (counts 2 and 3); conspired to collect an extension of credit through the use of extortionate means, in violation of 18 U.S.C. § 894(a) (count 4); and used extortionate means to collect an extension of credit, in violation of 18 U.S.C. § 894(a) (count 6).
Pacione moved to dismiss these counts of the indictment, claiming that his conduct was not what congress meant to prohibit in the extortionate credit statute. Rather, Pacione argued, congress intended the statute to embrace only such violent conduct as "the classic loan shark scenario of 'I'll burn your house down if you don't pay me my 1000% interest'".
The district court granted Pacione's motion. Judge Knapp agreed with Pacione's contention "that the totality of facts asserted by the government to be provable against [Pacione] do not establish a violation of the statute." Noting that Pacione made "no threats of any sort to anyone", he concluded that "filing a usurious mortgage may be illegal, but it is not ...