New York Law Review

Tag: Criminal Usury

  • People v. Kennedy, 68 N.Y.2d 569 (1986): Business Records Exception Requires Proof of Systematic Record-Keeping

    People v. Kennedy, 68 N.Y.2d 569 (1986)

    To admit records under the business records exception to the hearsay rule, a party must establish that the record was made in the regular course of business, it was the regular course of business to make such records, and the record was made at or near the time of the event being recorded.

    Summary

    Kennedy, a police officer, was convicted of conspiracy and criminal usury based on evidence suggesting he was a silent partner in a loansharking operation. The prosecution introduced pocket diaries as business records of the usurer, supported by expert testimony interpreting the entries. The New York Court of Appeals reversed the conviction, holding that the prosecution failed to establish a proper foundation for admitting the diaries under the business records exception to the hearsay rule because there was insufficient evidence that the records were systematically maintained or created as part of a regular business practice. The court emphasized that the statute requires proof of a routine, habitual, and systematic record-making process to ensure trustworthiness.

    Facts

    Frank DiMare borrowed money from Thomas Manuli, also a police officer, at usurious interest rates. The People alleged that Kennedy, another police officer, was Manuli’s silent partner, providing the cash for the loans and receiving a percentage of the usurious payments. The prosecution’s evidence included DiMare’s testimony, admissions from Kennedy, bank records, recorded conversations, and two pocket diaries seized from Manuli’s apartment. These diaries contained cryptic entries of names, initials, and numbers. The People’s expert witness interpreted the entries as records of loans, payments, and expenses related to the usurious lending operation, linking Kennedy to the transactions.

    Procedural History

    Kennedy was convicted of conspiracy in the fourth degree and criminal usury in the second degree. The Appellate Division reversed the conviction and ordered a new trial, finding that the People failed to lay a sufficient foundation for the admission of the diaries. The People appealed to the New York Court of Appeals.

    Issue(s)

    Whether the prosecution established a sufficient foundation to admit the pocket diaries as business records under CPLR 4518(a), thereby satisfying an exception to the hearsay rule.

    Holding

    No, because the prosecution failed to demonstrate that the diaries were made in the regular course of business, that it was the regular course of business to make such records, and that the records were made at or near the time of the event being recorded.

    Court’s Reasoning

    The Court of Appeals acknowledged that the business records exception, codified in CPLR 4518(a), could theoretically apply to records of a criminal enterprise if proper foundation is established. The court emphasized that the statute requires proof that the record was made in the regular course of business, that it was the regular course of such business to make the record, and that the record was made at or about the time of the event. The Court found that the expert testimony, while opining that the diaries were the type of records kept in a usury business, failed to establish the regularity and systematic nature of the record-keeping. Specifically, the expert’s cross-examination revealed that each usurer maintains records in their own style, and the entries were sometimes predated, undermining the reliability and trustworthiness required for the business records exception. The Court stated, “More, however, is required by way of foundation than an expert’s view that, because usurers personally and cryptically maintain records of what is collected, paid and owed, two pocket diaries identified as a usurer’s record are ‘business records’ admissible in evidence against a third person for the truth of their contents.” The court underscored the importance of ensuring fairness to the accused, particularly in criminal cases, where the right to confrontation is constitutionally protected. Absent proof of systematic record-keeping, the diaries were inadmissible hearsay.

  • People v. Winograd, 68 N.Y.2d 383 (1986): Strict Compliance with Eavesdropping Warrant Requirements

    People v. Winograd, 68 N.Y.2d 383 (1986)

    New York’s eavesdropping statute (CPL Article 700) demands strict compliance; failure to seek prompt amendment of a warrant after intercepting evidence of an unauthorized crime or to immediately seal tapes after a warrant’s expiration results in suppression of the evidence.

    Summary

    The Winograds, suspected of running a fencing operation and loansharking business, were subject to extensive police surveillance, including video surveillance and wiretaps. An initial wiretap authorized interception of conversations related to stolen property, but officers soon intercepted conversations regarding criminal usury. The prosecution’s delay in seeking an amendment to include usury, and subsequent delays in sealing the tapes after the warrants expired, led to the suppression of the evidence. The Court of Appeals emphasized the need for strict compliance with the eavesdropping statute to prevent abuse and protect privacy, reversing the conviction.

    Facts

    The Winograds operated a furrier business and were suspected of fencing stolen goods. Police used an informant and video surveillance to gather evidence. The initial wiretap warrant authorized interception of conversations about stolen property. Almost immediately, conversations concerning criminal usury were intercepted. The People obtained warrants authorizing wiretaps on the Winograds’ business, targeting stolen property and later, criminal usury. There were delays in seeking amendments to the warrant to include usury and in sealing the tapes after the warrants expired.

    Procedural History

    The Winograds were arrested and indicted. The defendant’s motion to suppress evidence was denied. She was convicted on multiple counts of criminal usury and possession of stolen property. The Appellate Division affirmed the conviction. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    1. Whether the crime of criminal usury is a crime “dangerous to life, limb, or property” within the meaning of the Federal Omnibus Crime Control and Safe Streets Act of 1968, thereby authorizing state eavesdropping warrants for such a crime?
    2. Whether the People sought an amendment to the eavesdropping warrant “as soon as practicable” after intercepting conversations relating to criminal usury, as required by CPL 700.65(4)?
    3. Whether the People complied with the sealing requirements of CPL 700.50(2) by immediately sealing the tapes after the expiration of the eavesdropping warrants?

    Holding

    1. Yes, because the term “crime” in the federal statute is to be construed generically and the organized criminal enterprise here is dangerous to life, limb or property.

    2. No, because the People delayed 18 days in seeking the amendment, which was not “as soon as practicable.”
    3. No, because the People failed to offer satisfactory explanations for the delays in sealing the tapes after the expiration of the warrants.

    Court’s Reasoning

    The Court emphasized that New York law requires strict compliance with eavesdropping statutes. On the first issue, the Court found that criminal usury fell within the ambit of crimes “dangerous to life, limb, or property” permitting wiretapping, as it was part of a larger criminal enterprise. Regarding the warrant amendment, the Court stated that CPL 700.65(4) requires that an amendment be sought “as soon as practicable” after probable cause exists for an unlisted crime. Here, the police had probable cause to believe that the Winograds were committing criminal usury as early as July 14, yet they did not seek to amend the warrant until August 1, a delay of 18 days. The court found this delay violated the statute, especially given the continuous interception of conversations related to usury. Regarding the sealing requirement, CPL 700.50(2) mandates immediate sealing upon expiration of the warrant. The Court found the People’s explanation for the delay in sealing wiretap No. 2 (supervising Justice’s unavailability) inadequate, as they could have transferred authority to another Justice. Similarly, the delay in sealing wiretap No. 3 (expiration on a Saturday, sealing on Monday) was deemed insufficient, as law enforcement does not cease on weekends. The Court suppressed the evidence and any evidence derived from it, remanding for a determination of what evidence was derived from the suppressed evidence. The Court quoted People v. Sher, ” ‘[I]n the absence of compliance, the State officials lack authority to wiretap, and any interceptions they make are unlawful, and any evidence derived from the wiretap is inadmissible’ “.

  • People v. Barash, 41 N.Y.2d 20 (1976): Defining ‘Scheme or Business’ for Criminal Usury

    People v. Barash, 41 N.Y.2d 20 (1976)

    The terms “scheme or business of making or collecting usurious loans” in New York Penal Law § 190.42 are not unconstitutionally vague, and the statute applies to a series of interrelated usurious loan transactions by the same person constituting an integrated operation.

    Summary

    Barash was convicted of criminal usury for a series of loans he made to George Morgan. The New York Court of Appeals upheld the conviction, finding that the terms “scheme or business” in the criminal usury statute were not unconstitutionally vague. The Court determined that the evidence supported the jury’s finding that Barash engaged in a “scheme or business” of making usurious loans, due to the multiple, interrelated loans made to Morgan to benefit a club in which Barash had a financial interest. The Court also addressed a potential conflict of interest with Barash’s attorney, ultimately determining it did not warrant reversal.

    Facts

    Barash made four usurious loans to George Morgan over eight months. These loans were connected to the Italian-American Club’s operations, in which Barash had a financial interest. The loans carried extremely high interest rates (104% to 182% per annum). Morgan cooperated with law enforcement and testified against Barash.

    Procedural History

    Barash was indicted for first and second-degree criminal usury. The prosecution moved to disqualify Barash’s counsel due to a conflict of interest, which was denied. Barash was convicted on all counts. The Appellate Division affirmed the conviction, and the New York Court of Appeals granted leave to appeal.

    Issue(s)

    1. Whether the terms “scheme or business of making or collecting usurious loans” in Penal Law § 190.42 are unconstitutionally vague.
    2. Whether the evidence was sufficient to sustain Barash’s conviction for criminal usury in the first degree.
    3. Whether the trial court erred by not inquiring into a potential conflict of interest with Barash’s defense counsel.
    4. Whether the trial court erred in denying a motion for a mistrial after receiving a note from a juror indicating an inability to render a fair verdict.

    Holding

    1. No, because the terms have a readily understandable meaning derived from common usage and legal dictionaries.
    2. Yes, because the evidence showed a series of interrelated usurious loan transactions that constituted an integrated operation.
    3. Yes, but this error did not warrant reversal.
    4. No, because the note alone did not mandate a mistrial, and the defense did not request further inquiry.

    Court’s Reasoning

    The Court reasoned that “scheme” and “business” are commonly understood terms and not impermissibly vague. A “scheme” is “a design or plan formed to accomplish some purpose,” and “business” is “commercial activity engaged in for gain.” The Court emphasized the importance of context, stating that the statute applies to “a series of transactions, multiple as to loans if not borrowers, which are usurious and are made by the same person under such circumstances that they can factually be found to be interrelated and to constitute parts of an integrated single operation.”

    The Court found sufficient evidence to support the conviction, citing the four loans made to Morgan over a short period at usurious rates, all connected to the Italian-American Club’s financial stability. The jury was justified in concluding this constituted a “scheme or business.”

    Regarding the conflict of interest, the Court acknowledged that the trial court erred by not inquiring of Barash about the potential risks of his attorney’s prior representation of Morgan, the key prosecution witness. However, the Court held that Barash was not entitled to reversal because he failed to demonstrate that an actual conflict of interest, or even a significant possibility thereof, existed. The Court noted that Barash’s attorney reasonably believed he was no longer bound by confidentiality to Morgan due to Morgan’s cooperation with the prosecution, and his cross-examination of Morgan was diligent.

    Finally, the Court found no error in denying the mistrial. Defense counsel did not request further inquiry of the juror and only moved for a mistrial. The juror continued to deliberate and ultimately joined in the unanimous verdict.

  • People v. Ersan, 47 N.Y.2d 781 (1979): Defendant’s Right to Particulars Regarding “Scheme or Business” Allegation in Usury Case

    People v. Ersan, 47 N.Y.2d 781 (1979)

    In a criminal usury case where the indictment alleges a “scheme or business” of making usurious loans, the defendant is entitled to particulars regarding that allegation to adequately prepare a defense.

    Summary

    Defendant was indicted for first-degree criminal usury, which requires proof that the usurious conduct was part of a “scheme or business.” The defendant requested particulars regarding the “scheme or business” allegation, but his motion was denied. At trial, the prosecution failed to prove the first-degree charge, and the jury was instructed on the lesser included offense of second-degree criminal usury. The New York Court of Appeals reversed the conviction, holding that the defendant was entitled to particulars regarding the “scheme or business” allegation to adequately prepare his defense, particularly given the significant difference between defending against a single usurious transaction and a broader charge of loansharking.

    Facts

    The defendant was indicted on one count of criminal usury in the first degree. The indictment stemmed from a loan made to Frank Starace. First-degree criminal usury requires proof that the actor’s conduct was part of a scheme or business of making or collecting usurious loans. The defendant moved for particulars of the “scheme or business” allegation in the indictment.

    Procedural History

    The trial court denied the defendant’s motion for particulars. The jury was instructed on the lesser included offense of second-degree criminal usury after the prosecution failed to prove the first-degree charge. The Appellate Division affirmed the conviction. The New York Court of Appeals reversed the order of the Appellate Division and dismissed the indictment, without prejudice to the People seeking leave to resubmit a charge of criminal usury in the second degree.

    Issue(s)

    Whether a defendant charged with first-degree criminal usury, based on an alleged “scheme or business” of making usurious loans, is entitled to particulars regarding the “scheme or business” allegation to adequately prepare a defense.

    Holding

    Yes, because the defendant needs to know what he would be called upon to defend against. The court reasoned that defending against a single usurious transaction is significantly different from defending against the broader charge of loansharking, making particulars necessary for a fair trial.

    Court’s Reasoning

    The Court of Appeals held that the defendant was entitled to particulars regarding the “scheme or business” allegation in the indictment. The court reasoned that even if the indictment sufficiently particularized the one loan made to Frank Starace, the defendant was entitled to particulars as to the “scheme or business” allegation to know what he would be called upon to defend against. The court emphasized the significant difference between defending a single usurious transaction and defending against the broader charge of loansharking. The court noted the prosecutor’s references to the broader charge, even though it could not be proved, further prejudiced the defendant. The court found the People’s argument that the defendant was not prejudiced because only the second-degree offense was charged to the jury unavailing, stating, “The argument answers itself.” The court also dismissed the People’s argument that the defendant was not entitled to particulars because his motion did not allege that he could not adequately prepare his defense without such information, as this argument was not raised in opposing the application, nor did the motion judge deny the request for particulars on that ground. The court cited People v. Iannone, 45 N.Y.2d 589, in support of the defendant’s right to particulars in such a case. The court stated that, in a case such as this, the defendant needs to know what the government is claiming regarding the larger scheme, not just the specific instance for which he is charged. Without this information, the defendant cannot properly prepare a defense.

  • Reilly v. Foursome Inn Corp., 64 N.Y.2d 580 (1985): Estoppel Certificates and Criminal Usury

    Reilly v. Foursome Inn Corp., 64 N.Y.2d 580 (1985)

    A mortgagor who provides an estoppel certificate may be barred from asserting a criminal usury defense against an assignee unless the certificate was executed under duress, the assignee knew of the usury, or invalidating circumstances existed.

    Summary

    This case addresses whether an estoppel certificate prevents a mortgagor from raising a defense of criminal usury against an assignee of the mortgage. Foursome Inn Corp. executed a mortgage with a high interest rate and then provided an estoppel certificate to an assignee, Reilly. When Foursome defaulted, Reilly sought foreclosure. Foursome then attempted to amend its answer to assert criminal usury. The court held that an estoppel certificate could waive criminal usury, but this waiver is invalid if the certificate was obtained through duress, the assignee had prior knowledge of the usurious nature of the transaction, or other invalidating circumstances existed. The court modified the lower court’s order, remitting the case for further proceedings because issues of fact remained.

    Facts

    In 1974, Foursome Inn Corp. borrowed $35,000 from Broadhollow Funding Corporation, secured by a mortgage on its inn. The mortgage had a 24% annual interest rate. Foursome only received $32,900, with $2,100 paid to Ira S. Schwartz, Broadhollow’s secretary-treasurer. In October 1975, Beatrice Reilly, Foursome’s president, signed an estoppel certificate stating there were no defenses or offsets to the mortgage. Negotiations for the certificate involved both Ira Schwartz and his father, Abraham. In July 1976, Foursome defaulted, and the plaintiffs, assignees of the mortgage, initiated a foreclosure action. Mrs. Reilly’s affidavit alleged the certificate was signed as a result of threats or being misled.

    Procedural History

    The plaintiffs brought a foreclosure action after Foursome defaulted. Foursome sought to amend its answer to include the defense of criminal usury. Special Term denied the motion to amend and granted summary judgment to the plaintiffs based on the estoppel certificate. Foursome then moved to vacate the judgment, which was also denied. The Appellate Division reversed, granting Foursome summary judgment and declaring the mortgage void. The Court of Appeals reversed the Appellate Division’s grant of summary judgment to Foursome and remitted the case for further proceedings.

    Issue(s)

    Whether an estoppel certificate can waive the defense of criminal usury.

    Holding

    No, because an estoppel certificate may be invalidated by duress, other invalidating circumstances, or the assignee’s knowledge of the criminal nature of the transaction before taking the assignment.

    Court’s Reasoning

    The court reasoned that while assignees of nonnegotiable mortgages typically take them subject to any defenses against the assignor, an estoppel certificate changes this rule. The certificate represents the validity of the mortgage, preventing the mortgagor from later asserting defenses. However, this is premised on the assignee being an innocent party. If the assignee knows of the usurious nature of the transaction, they cannot enforce the mortgage. The court also acknowledged that the policy against usury exists to protect vulnerable borrowers. The court noted that while the Legislature made criminal usury a defense for corporations, they did not explicitly address estoppel certificates in this context. The court balanced the public policy against usury with the principle that “where one of two innocent persons must suffer by the acts of a third, he who has enabled such third person to occasion the loss, must sustain it” (National Safe Deposit Co. v Hibbs, 229 US 391, 394). The court determined that the estoppel certificate could be invalidated if obtained through duress or if the assignee had knowledge of the usurious nature of the transaction. The court found that questions of fact remained regarding the legitimacy of a commission paid and whether duress existed. The court stated, “the intention to change a long-established rule or principle is not to be imputed to the legislature in the absence of a clear manifestation”. The court ultimately held that a valid estoppel certificate, relied upon in good faith, could preclude a criminal usury defense unless duress or assignee knowledge existed.

  • People v. Iannone, 45 N.Y.2d 589 (1978): Sufficiency of Indictment and Waiver of Objections

    People v. Iannone, 45 N.Y.2d 589 (1978)

    A defendant waives the right to challenge the factual sufficiency of an indictment if the objection is not timely raised, provided the indictment effectively charges a crime and the defendant isn’t deprived of the right to be informed of the charges.

    Summary

    Defendants Iannone and Corozzo appealed their convictions for criminal usury, arguing the indictments against them were insufficient for failing to state facts constituting a crime. The Court of Appeals affirmed the convictions, holding that the defendants waived their right to challenge the indictments’ factual sufficiency because they failed to raise timely objections. The court clarified that while indictment by a grand jury is a fundamental right, defects in factual allegations, unlike the failure to charge all elements of a crime, can be waived if not promptly challenged.

    Facts

    Iannone was indicted for conspiracy and criminal usury, pleading guilty to one count of criminal usury. Corozzo was indicted for conspiracy, criminal usury, and grand larceny, and was convicted of criminal usury after a jury trial. Both indictments charged that the defendants knowingly charged, took, and received money as interest on a loan at a rate exceeding 25% per annum, without legal authorization. Iannone challenged the indictment’s sufficiency for the first time at sentencing, and Corozzo raised the issue for the first time on appeal to the Court of Appeals.

    Procedural History

    Iannone pleaded guilty to one count of criminal usury; his motion to dismiss the indictment at sentencing was denied, and the Appellate Division affirmed his conviction. Corozzo was convicted of criminal usury after a jury trial, and the Appellate Division affirmed his conviction. Both defendants appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether a defendant waives the right to challenge the factual sufficiency of an indictment by failing to raise a timely objection in the trial court.
    2. Whether an insufficiency in the factual allegations of an indictment constitutes a jurisdictional defect that cannot be waived.

    Holding

    1. Yes, because a defendant must timely object to preserve the issue for appellate review.
    2. No, because an indictment is only jurisdictionally defective if it fails to charge every material element of the crime, not merely because of insufficient factual allegations.

    Court’s Reasoning

    The court emphasized the evolution of indictment requirements, noting a shift from strict formalism to a more practical approach focused on providing defendants with adequate notice of the charges. While indictment by a Grand Jury is a fundamental right, the specific contents of the indictment are subject to waiver. The court stated that “the basic essential function of an indictment qua document is simply to notify the defendant of the crime of which he stands indicted.” The court noted that CPL 200.50 requires an indictment to contain a “plain and concise factual statement… with sufficient precision as to clearly apprise the defendant… of the conduct which is the subject of the accusation”.

    The Court distinguished between defects that are jurisdictional and those that are not. “In essence, an indictment is jurisdictionally defective only if it does not effectively charge the defendant with the commission of a particular crime…or if it fails to allege that a defendant committed acts constituting every material element of the crime charged.” It held that “[i]nsufficiency in the factual allegations alone, as opposed to a failure to allege every material element of the crime, does not constitute a nonwaivable jurisdictional defect”.

    The court cautioned that an overzealous prosecutor shouldn’t deprive a defendant of the right to be informed of the charges, especially where the indictment provides little information. In such cases, the court must ensure the defendant’s rights to a bill of particulars and effective discovery are protected. Here, the defendants didn’t claim they were unaware of the charges or prejudiced, only that the indictments were insufficient. Because the indictments properly charged criminal usury and the defendants failed to timely object, they waived their right to challenge the factual sufficiency on appeal.