United States v. Fiore

• Decision Date: 04 December 1970
• Docket Number: No. 7646.,7646.
• Citation: 434 F.2d 966
• Parties: UNITED STATES of America, Appellee, v. Samuel FIORE, Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

434 F.2d 966 (1970)

UNITED STATES of America, Appellee, v. Samuel FIORE, Defendant, Appellant.

No. 7646.

United States Court of Appeals, First Circuit.

December 4, 1970.

Kevin M. Keating, with whom Joseph S. Oteri, Crane, Inker & Oteri, and Martin K. Leppo, Boston, Mass., were on the brief, for appellant.

Gerald McDowell, Sp. Atty., Department of Justice, with whom Will Wilson, Asst. Atty. Gen., Criminal Division, and Walter T. Barnes, Sp. Atty., Department of Justice, were on the brief, for appellee.

Before ALDRICH, Chief Judge, McENTEE and COFFIN, Circuit Judges.

McENTEE, Circuit Judge.

Defendant was convicted on two counts of an indictment charging him with violations of the federal anti-loan sharking law. Each count charged that on a specific occasion in November 1969 in North Reading, Massachusetts, the defendant expressly and implicitly threatened the use of violence to cause harm to the person of one Hubert J. Sweeney, the debtor, to collect and attempt to collect extensions of credit from said Sweeney in violation of 18 U.S.C. § 894 (Supp. V, 1970).¹

The relevant facts are as follows. In 1963 or early 1964 Sweeney, an insurance broker, after attempting unsuccessfully to borrow money elsewhere, obtained a loan of $3,000 from the defendant. No writings of any kind were signed but the defendant told him that the interest would be 2% a week (104% a year). This required payments of $60 a week in interest alone which Sweeney made every month or so for some two and a half years. In 1967 the defendant told Sweeney that he still owed $1,000 on this loan. In the latter part of that year Sweeney borrowed $2,000 more from the defendant. As in the first instance no papers were signed but this time the interest was raised to 3% a week or 156% a year. Sweeney kept up the interest payments on these loans until the latter part of September 1969 and stopped. Shortly thereafter the defendant began hounding him for payment. Sweeney testified that on November 22 the defendant telephoned him at home, cursed him for not paying, said "the big boss" was there and wanted all the money or else. He also testified that on November 29 defendant telephoned him again and, among other things, threatened that if he didn't pay he was liable "to get a bomb" in his car. Sweeney's wife, who listened in on both conversations, corroborated her husband's testimony with reference to these threats. Sweeney testified that because of the threats he was "very, very much afraid."

In addition to the foregoing, the following significant testimony was adduced at trial. In October 1969 Sweeney misappropriated an insurance client's check for $500, cashed it at defendant's restaurant and gave the defendant $300 out of the proceeds towards payment of interest on the loans. Sweeney's boss testified that he fired him when he learned of this misappropriation. He also testified to two conversations he had with the defendant which have an important bearing on the issues involved in this case.²

The defendant admitted loaning money to Sweeney knowing that he had no credit but disputed the amounts of the loans and denied making the threats. He also denied that he was in the loan business or that he was a loan shark.

On appeal, defendant's major contention is that Congress had no power or authority to enact the statute in question. In passing this legislation, however, Congress relied on its constitutional power to "regulate commerce * * * among the several states" and "to establish * * * uniform laws on the subject of bankruptcies. * * *"³ The act contains pertinent congressional findings regarding the relationship between organized crime and extortionate credit transactions and their effect on interstate commerce and the federal bankruptcy laws. It also contains a forceful declaration of congressional purpose to remedy the evils mentioned in these findings through the exercise of its aforesaid powers.⁴ These findings were based on evidence before Congress. Clearly they have a rational basis and therefore are not open to question here. United States v. Gainey, 380 U.S. 63, 85 S.Ct. 754, 13 L.Ed.2d 658 (1965).

The defendant contends that the statute may not be sustained under either of said clauses of the Constitution. Although we recently stated in United States v. Tomasetta, 429 F.2d 978 (1st Cir. 1970), that the constitutionality of this statute was "a subject of serious controversy," we are impressed by the fact that every court that has considered this statute has sustained it under the Commerce Clause. See United States v. Perez, 426 F.2d 1073 (2d Cir. 1970), cert. granted, 400 U.S. 915, 91 S.Ct. 175, 27 L.Ed.2d 154 (U.S. Nov. 16, 1970); United States v. Biancofiori, 422 F.2d 584 (7th Cir.), cert. denied, 398 U.S. 942, 90 S.Ct. 1857, 26 L.Ed.2d 277 (1970); United States v. Curcio, 310 F.Supp. 351 (D.Conn.1970), and United States v. Calegro De Lutro, 309 F.Supp. 462 (S.D. N.Y.1970). We are further impressed by the fact that, although the court in Perez did not reach the question, the court in each of the other three cases also sustained § 894 under the Bankruptcy Clause. Most of the contentions made in the instant case were considered and rejected in these four cases and we need consider them only briefly here.

In Heart of Atlanta Motel v. United States, 379 U.S. 241, 258, 85 S.Ct. 348, 358, 13 L.Ed.2d 258 (1964), the Court stated "The power of Congress to promote interstate commerce also includes the power to regulate the local incidents thereof * * * which might have a substantial and harmful effect upon that commerce." In attacking the power of Congress to enact § 894 under the Commerce Clause, defendant contends that in prosecutions under this statute the Constitution requires a determination, on a case to case basis, that interstate commerce is involved and that this determination must be made in a judicial proceeding. Suffice it to say that in upholding the validity of the Drug Abuse Control Amendments of 1965 this court, as well as other circuit courts, have held that such a showing is not constitutionally required. White v. United States, 395 F.2d 5 (1st Cir.), cert. denied, 393 U.S. 928, 89 S.Ct. 260, 21 L.Ed.2d 266 (1968); accord, United States v. Cerrito, 413 F.2d 1270 (7th Cir. 1969), cert. denied, 396 U.S. 1004, 90 S.Ct. 554, 24 L.Ed.2d 495 (1970); White v. United States, 399 F.2d 813 (8th Cir. 1968); Deyo v. United States, 396 F.2d 595 (9th Cir. 1968).⁵

Also, defendant relies heavily on United States v. Five Gambing Devices, 346 U.S. 441, 74 S.Ct. 190, 98 L.Ed. 179 (1953), especially on the dictum of Mr. Justice Jackson that "No precedent of this Court sustains the power of Congress to enact legislation penalizing failure to report information not shown to be in, or mingled with, or found to affect commerce." Id. at 446, 74 S.Ct. at 193. But as we noted in White v. United States, supra,

"there seems little doubt that Heart of Atlanta goes beyond the dictum in Gambling Devices in its willingness in a proper case to approve legislation declaring that certain activities affect interstate commerce per se without requiring proof in each case." 395 F. 2d 5, 8 n. 3.

Accord, Perez, supra, 426 F.2d at 1078.⁶

Thus we conclude that § 894 is sustainable as a valid exercise of congressional power under the Commerce Clause.

This statute may also be sustained as a "necessary and proper" extension of the congressional power to make uniform laws concerning bankruptcies. United States v. Biancofiori, supra. In enacting the statute Congress expressly found that "Extortionate credit transactions directly impair the effectiveness and frustrate the purposes of the laws enacted by the Congress on the subject of bankruptcies."⁷ Congress also stated,

"Article I, Section 8, of the Constitution expressly empowers Congress to make `uniform laws on the subject of bankruptcies.\' In the exercise of this power, Congress has enacted the Bankruptcy Act, which confers on any debtor the statutory right, with certain qualifications, to be discharged of his debts by applying substantially all of his property toward their repayment. It is obvious, however, that obligations as to which there is an understanding that they may be collected by extortionate means, or which are actually so collected, are not susceptible of being `discharged\' in bankruptcy in any meaningful sense. Such transactions thus deprive the debtor of a Federal statutory right, and at the same time defeat one of the principal purposes of the Bankruptcy Act, which is to afford insolvent persons the opportunity to make a fresh start. Thus, it seems clearly within the power of the Congress to protect the Federal statutory right, and to assure that the bankruptcy laws will be carried into execution, by enacting legislation to prohibit extortionate credit transactions."⁸

These findings also have a rational basis and are not open to question here.

The instant case is a typical example of the direct connection between loan-sharking and bankruptcy. As here, loan-sharks lend money to persons who are usually in financial trouble but are unable to borrow from other sources. These victims are the ones most likely to use the bankruptcy laws. The loanshark uses extortionate means to make sure that the interest on the loans is collected first. In a situation of this kind the debtor cannot freely exercise his rights under the Bankruptcy Act without running the risk, as in the instant case, of sustaining bodily harm. As was so aptly pointed out in the government's brief, loansharking works a substantial inhibiting effect on the exercise of federal rights under the bankruptcy laws.

In our view Congress could reasonably assume that the very finding of threats of violence means that the debtor is near enough to insolvency to need his bankruptcy rights protected. But proof of the debtor's financial condition must be generally predicated on his willingness to testify to it. In threat cases, testimony is likely...