Sindona v. Grant, 78 Civ. 2472 (HFW).

• Decision Date: 15 November 1978
• Docket Number: No. 78 Civ. 2472 (HFW).,78 Civ. 2472 (HFW).
• Citation: 461 F. Supp. 199
• Parties: Michele SINDONA, Petitioner, v. George V. GRANT, United States Marshal for the Southern District of New York, Acting Under a Warrant Issued at the Request of the Republic of Italy, Respondent.
• Court: U.S. District Court — Southern District of New York

461 F. Supp. 199

Michele SINDONA, Petitioner, v. George V. GRANT, United States Marshal for the Southern District of New York, Acting Under a Warrant Issued at the Request of the Republic of Italy, Respondent.

No. 78 Civ. 2472 (HFW).

United States District Court, S. D. New York.

November 15, 1978.

Mudge Rose Guthrie & Alexander, Schulte & McGoldrick, Clark Wulf & Levine, New York City, for petitioner, by John J. Kirby, Jr., Lawrence V. Senn, Jr., Todd L. Klipp, Laurence A. Urgenson, Roberta R. Brackman, Robert Kasanof, Dynda L. Andrews, Ramsey Clark, Melvin L. Wulf, New York City, of counsel.

Robert B. Fiske, Jr., U. S. Atty., S. D. N. Y., New York City, for respondent, by John J. Kenney, Executive Asst. U. S. Atty., New York City, of counsel.

OPINION

WERKER, District Judge.

The petitioner in this habeas corpus proceeding has been found extraditable to Italy in an extradition proceeding brought by the Republic of Italy. The Honorable Thomas P. Griesa, District Judge of this Court sitting as a committing magistrate under the provisions of 18 U.S.C. § 3184, decided in accordance with the Treaty of Extradition between the United States of America and the Republic of Italy¹ that probable cause had been established to believe the petitioner had committed the extraditable crime of fraudulent bankruptcy.² A comprehensive opinion dated May 18, 1978 is reported in In re Sindona, 450 F.Supp. 672 (S.D.N.Y.1978).

Since there is no direct appeal from the order of the committing magistrate, the only review available is by petition for writ of habeas corpus. Jhirad v. Ferrandina, 536 F.2d 478, 482 (2d Cir.), cert. denied, 429 U.S. 833, 97 S.Ct. 97, 50 L.Ed.2d 98 (1976); Shapiro v. Ferrandina, 478 F.2d 894, 901 (2d Cir.), cert. dismissed, 414 U.S. 884, 94 S.Ct. 204, 38 L.Ed.2d 133 (1973); Jimenez v. Aristeguieta, 290 F.2d 106 (5th Cir. 1961). We thus have the anomalous situation of a review by one district judge of the decision of another district judge.

That review however is limited, for "habeas corpus is available only to inquire whether the magistrate had jurisdiction, whether the offence charged is within the treaty and, by a somewhat liberal extension, whether there was any evidence warranting the finding that there was reasonable ground to believe the accused guilty." Fernandez v. Phillips, 268 U.S. 311, 312, 45 S.Ct. 541, 542, 69 L.Ed. 970 (1925).

These principles of review do not provide for a rehearing by the court deciding the habeas corpus petition. The habeas corpus petition is not a writ of error. The entire record of the extradition proceeding is now before the Court and has been examined by it. No issue of the magistrate's jurisdiction has been raised.

FACTS

Petitioner is a 58-year old Italian businessman who owned or controlled two Italian banks located in Milan, Banca Privata Finanziaria ("BPF") and Banca Unione ("BU"). In 1960 he was elected to the board of directors and appointed vice president of BPF, and in 1973 he was appointed president of that bank. He became vice president and a director of BU in December 1968. He resigned as vice president of BU as of April 1978 but remained a director. Sindona owned or controlled 100% of the BPF and 51% of the BU shares.

On August 1, 1974, BU and BPF merged into a new entity, Banca Privata Italiana ("BPI"). Sindona was neither a director nor an officer of BPI. The record is unclear as to his continued roles in BU and BPF but Judge Griesa inferred that he remained a director of both until the merger.

On September 27, 1974 the Italian Ministry of the Treasury ordered BPI into liquidation and a liquidator was appointed.

BPI was declared insolvent by the Court of Milan on October 15, 1974. This judgment was affirmed by the Court of Appeal of Milan in July 1977 and by the Supreme Court of Italy on March 31, 1978.

An inspection of the records of BU was commenced by bank examiners of the Bank of Italy on July 1, 1974 to determine in part its position as of June 28, 1974. The examination was completed on October 1, 1974. This report and that of the liquidator of BPI concluded that approximately 180 billion lire (about $225 million)³ deposited at BPI and its predecessors (BU and BPF) had been improperly and illegally diverted at Sindona's direction for his benefit and the benefit of companies which he controlled. These reports also disclose that the books and records of the banks had been falsified to conceal the actual beneficiaries of these transfers through a variety of complex devices. These devices included the recording of fictitious foreign exchange transactions, the nonrecording of other foreign exchange transactions, the fragmenting of transactions within the bank to conceal from officials the true nature of the transactions, the establishment of fictitious security to support credits granted to Sindona companies, and the creation of interbank time "deposits" with foreign banks which were not deposits but actually fiduciary accounts not callable within 48 hours as was indicated on the bank's books. In addition, BU's official balance sheet for December 31, 1973 was inaccurate because many large transactions were reflected only in "secret accountings" and not in the balance sheet.

A large number of the "fiduciary deposits" were made during the last half of 1973. These deposits were carried on the books of BU and BPF as interbank time deposits, many of them recallable on 48 hours notice. The books and records of the banks did not reflect in any way the fact that money had been loaned to Sindona companies nor did they indicate whether the beneficiaries were creditworthy. In early 1974 the transactions were altered so that "bridge companies" with no assets were substituted as the beneficiaries on the accounts with the foreign banks. Thus if the banks called these loans they were faced with companies which had not received the money and which were without assets to repay the loans.

The funds deposited were deposited principally with Amincor Bank of Zurich. After a deposit the foreign banks would be instructed to credit the funds to beneficiaries which were actually foreign companies controlled by Sindona.

Both reports concluded that the device of substituting the bridge companies was used because Sindona never intended to repay the funds transferred to fiduciary accounts. The liquidator's report stated that this device was designed to prevent bankruptcy authorities from discovering the true beneficiaries of the funds. It should be noted that only certain employees of the foreign departments of BU and BPF could identify through the use of coded cards the true beneficiaries of the fiduciary accounts.

Improper foreign exchange transactions also caused large losses. These transactions included devices that concealed losses and made them appear as assets in time deposits with foreign banks. Simulated foreign exchange transactions and contracts at prices not current at the time were also utilized, as well as some transactions which appear to have been engaged in for the purpose of causing loss to the banks in favor of the other party.

The report of the bank examiners concluded that the corporate bodies of BU were controlled by Sindona and Carlo Bordoni, BU's managing director, and that Sindona controlled Bordoni.

As of June 28, 1974 BU's losses totalled 111 billion lire ($171 million), of which 88.6 billion lire ($136 million) was the result of fiduciary deposits in favor of Sindona's companies. Over 30 billion lire ($46 million) in losses had been caused by certain foreign exchange transactions. The total losses caused by fiduciary deposits and foreign exchange transactions amounted to 118 billion lire ($182 million).

As of September 27, 1974 BU's deficit balance was 200 billion lire ($307 million). According to the liquidator's report the principal reason for the deficit was the fiduciary deposits and improper foreign exchange transactions.

The conclusions of the liquidator and the bank examiners were largely confirmed by Nicola Biase, a newly employed manager of BPF, as a result of an independent investigation made by him in July 1974. In addition, a report by one Silvano Pontello, an employee of BPF to whom a balance sheet showing the "global assets and liabilities of the Sindona group" was dictated by Sindona in early July 1974, listed total liabilities of 133.7 billion lire ($205.7 million) to the bank.

The bank examiners inspection in July caused rumors about BU to appear in the press and generated withdrawals of 40 billion lire ($61 million) between July 1 and July 15. Between September 13 and 27 after the merger into BPI an additional 219 billion lire ($337 million) was withdrawn and the liquidation of BPI was ordered.

These are essentially the facts found by Judge Griesa and upon which he based his probable cause conclusion. 450 F.Supp. at 674-75, 680-84.

THE PETITION FOR HABEAS CORPUS

Petitioner alleges as grounds for this application the following:

4. Petitioner is unlawfully restrained of his liberty and in unlawful custody of respondent in that the magistrate denied petitioner the public hearing prescribed by 18 U.S.C. § 3189 and arbitrarily and improperly limited the evidence and the subjects upon which he was willing to receive evidence.

5. The restraint is further unlawful in that the evidence introduced during the proceeding for petitioner's extradition was not sufficient "to justify committal for trial," as required by Article V of the Treaty on Extradition between the United States and Italy (the "Treaty").

6. The restraint is further unlawful in that no competent and admissible evidence was introduced during the proceeding for petitioner's extradition to sustain the charges upon which the extradition was sought, within the meaning of 18 U.S.C. § 3184 and the Treaty.

7. The restraint is further unlawful in that the magistrate conducting the extradition proceeding denied petitioner an opportunity to present evidence by way

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