People v. Luongo

• Decision Date: 14 June 1979
• Citation: 418 N.Y.S.2d 365,47 N.Y.2d 418,391 N.E.2d 1341
• Parties: , 391 N.E.2d 1341 The PEOPLE of the State of New York, Respondent, v. Robert A. LUONGO, Jr., Appellant. (two cases).
• Court: New York Court of Appeals Court of Appeals

Page 365

418 N.Y.S.2d 365

47 N.Y.2d 418, 391 N.E.2d 1341

The PEOPLE of the State of New York, Respondent, v. Robert A. LUONGO, Jr., Appellant. (two cases).

Court of Appeals of New York.

June 14, 1979.

Stanley L. Shapiro, Commack, for appellant in the first above-entitled action

Patrick Henry, Dist. Atty. (Frederick Eisenbud, Fort Salonga, of counsel), for respondent in the first above-entitled action.

Stanley L. Shapiro, Commack, for appellant in the second above-entitled action.

Denis Dillon, Dist. Atty. (Mark S. Adler and William C. Donnino, Mineola, of counsel), for respondent in the second above-entitled action.

OPINION OF THE COURT

COOKE, Chief Judge.

Defendant was convicted, after a jury trial in Suffolk County Court, of 13 counts of grand larceny in the second degree (Penal Law, § 155.35) and 2 counts of grand larceny in the third degree (Penal Law, § 155.30). Subsequently, he was convicted of 36 counts of grand larceny in the second degree and 4 counts of grand larceny in the third degree in a nonjury trial in County Court, Nassau County. In both cases, the Appellate Division modified the sentences imposed. The convictions were affirmed with the exception that in the Nassau County prosecution one count of second degree grand larceny was reduced to grand larceny in the third degree. Leave to appeal was granted by a Judge of this court in each matter.

On these appeals, defendant contends that the People failed to prove his guilt of the crime of larceny by false promise (Penal Law, § 155.05, subd. 2, par. (d)), beyond a reasonable doubt. Specifically, he maintains that the People's proof failed to exclude to a moral certainty every hypothesis but that at the time defendant or his authorized agents induced people to invest money with him by promising them an inordinately high rate of return in a short period, he had no intention of fulfilling his promises. The orders of the Appellate Division, 58 A.D.2d 895, 397 N.Y.S.2d 97; 58 A.D.2d 896, 397 N.Y.S.2d 98, should be affirmed. Viewed in a light most favorable to the People, the evidence at the trials established that at the time defendant made each and every promise, he knew as a certainty that each and every investor was in jeopardy, subject to the built-in danger that he would not be repaid, since defendant was engaged in a Ponzi scheme which could subject him to immediate prosecution and was bound at sometime in the future to collapse of its own weight. From inception, each promise was infected with that inevitability, not a mere possibility of collapse an infection contrary to the promise and to that extent conceived in falsity. Promises, successively made, were certain to result in eventual unfulfillment. At the point when incoming investments would not be sufficient to meet the obligations owed to each investor, the promise could not be performed. Even when the threat of collapse was precipitated by the arrest of one of his agents in Nassau County, defendant nevertheless continued to take in new investments with the future intention that he would soon terminate the plan and flee.

At both trials, the testimony of all of the investors in defendant's plan was essentially the same. Each of them testified that he or she was induced to invest a minimum of $1,000 with Robert Luongo Associates (hereinafter referred to as Associates) for either a 1-, 3- or 12-week period. At the end of the period, the principal would become due together with interest in the amount of 10, 20 or 30 to 40% Of the principal sum invested. Patrons of the plan were given sketchy details as to where their funds were invested. They were informed, however, that none of the funds were being used to finance any illicit enterprises but rather were being invested in Associates and its affiliated enterprises. Associates, they were told, had interests in aircraft, racing cars, real estate, construction performance bonds, an insurance company, a restaurant, a consulting firm, business promotion and a host of other concerns. As it later developed, however, these representations proved to be false or grossly exaggerated. Nevertheless, undoubtedly spurred by the allure of such enormous profits, investors eagerly placed their money with defendant with little investigation into the legitimacy of his operations.

The true manner in which defendant obtained possession of the money and the uses to which those funds were applied was revealed through the testimony of his agents, as well as the statements and actions of the defendant himself. Joseph Merlo, defendant's chief associate and supervisor of his sales force, testified that when he met the defendant in late 1971 he was immediately impressed with his aura of prosperity. Offered a position as a solicitor of investor funds, Merlo was informed that although Associates and its subsidiaries stood behind the investments, the key to the continued success of the scheme was the constant accretion of new investment funds into the plan. Merlo initially attracted a number of new investors, trading on the appearance of prosperity surrounding Associates and the defendant together with the promise of a large rate of return on a short-term investment.

The mechanics of investment in the plan were essentially constant. In return for their money, depositors were given a promissory note signed by the defendant specifying the date payment was due and the gross amount to be paid. Merlo would collect the money for the new investments on Thursday and bring it to defendant. The following day, defendant would give Merlo the funds needed to distribute to clients withdrawing funds from the program. Merlo was told by defendant that he drove to Philadelphia to invest the money on Thursday evenings where he picked up the funds necessary for distribution the following day. However, aside from his statements, there was no evidence that these trips were made. Thus, in the initial stages of the plan, those investors who wished to withdraw their investments were promptly paid. The effect of such prompt payment, of course, was to convert every investor into a missionary spreading the word of the enormous profits which could be speedily attained with no discernible risk of loss.

Accordingly, over a two-year period, the project expanded with amazing rapidity. In keeping with the production-oriented nature of the plan, new agents were enlisted to collect and distribute investor funds. Defendant instructed the agents to inform investors that for a 12-week investment, 30% Interest would be returned by Associates. The agents were told to inform investors that Associates would invest their money in short-term real estate and performance bonds as well as various real or imagined subsidiaries. The agents were to give depositors a promissory note, now in the name of Associates, incorporating the essential terms of the transaction. As the notes matured, the agents were instructed to try and persuade depositors to reinvest but, if they chose not to do so, disbursements on the matured notes were to be paid from the proceeds of incoming investments. Each week, either defendant, Merlo, or Ciro Campos, another key aide, would pick up the excess funds taken in or give the agent enough money to cover the difference.

The plan operated to the apparent satisfaction of all concerned until February 11, 1974 when the Nassau County Police, armed with a warrant, arrested Leonard Shefts, an agent of defendant, searched his home and seized records relating to the operation of the plan. Visibly upset, defendant told Merlo to destroy any records relating to the scheme in his possession and to instruct the other agents to do the same. The following morning, defendant fled to Campos' home in New Jersey after first burning his own records. At a meeting with Campos and Merlo in that State, defendant informed them that if all depositors who had invested with Shefts were paid when their notes became due, their problems with the law would be obviated. To accomplish this objective, over $90,000 would have to be raised by March 1, 1974. Merlo and Campos were told that all notes coming due during the ensuing 12 weeks would be paid after which the program would be closed.

There then ensued what can best be described as a mad scramble to secure the funds necessary to pay Shefts' investors. During that period, defendant assured his agents that all investors would be paid and to continue to take in new funds. On February 28, 1974, defendant, Campos and Merlo met at Campos' home in New Jersey to arrange for the payment of Shefts' investors. After showing Merlo an article about the life of Charles Ponzi, a notorious swindler, defendant remarked: "If this thing collapses, it will be known as a Luongo scheme and not a Ponzi scheme."

Shefts' investors were paid on March 1, 1974. However, the other agents were instructed to "hold off" their investors whose notes were due on that date. Defendant told Campos and Merlo that payment would be a few days late and arranged to meet them on March 5. On that date, while Merlo and Campos were waiting for defendant who was to give them the funds to distribute to their agents and investors, defendant was somewhere over the Atlantic on his way to Sweden.

After his arrest by Interpol on June 29, 1974, defendant was returned to the United States that October in the custody of detectives from Nassau and Suffolk Counties. On the flight back, he remarked that he was familiar with the life of Charles Ponzi and that when he first started his plan he realized it would grow, but "he never dreamed it would ever catch on and grow like wildfire the way it did". Luongo also stated that although approximately $12 million flowed...