USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 96-2286
UNITED STATES,
Appellee,
v.
STANTON D. SHIFMAN,
Defendant, Appellant.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Robert E. Keeton, U.S. District Judge]
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Before
Torruella, Chief Judge,
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Campbell, Senior Circuit Judge,
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and Boudin, Circuit Judge.
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Paul G. Holian for appellant.
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Donald C. Lockhart, Trial Attorney, with whom Donald K. Stern,
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United States Attorney, were on brief for appellee.
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August 19, 1997
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CAMPBELL, Senior Circuit Judge. Stanton Shifman
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challenges his convictions on charges arising out of an
illegal loan-sharking operation run by Joseph A Yerardi, Jr.
He argues, inter alia, that there was insufficient evidence
to support the convictions.
I.
Stanton Shifman and nine others were indicted on
October 14, 1993 for multiple offenses based on their
involvement in an illegal gambling and loan-sharking
operation. Shifman, whose activities pertained only to the
loan-sharking side of the operation, was charged with
violation of, and conspiracy to violate, the Racketeer
Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C.
1962(c) & (d). He was also charged with four counts of
aiding and abetting the making of extortionate extensions of
credit, 18 U.S.C 892(a), and a single count of aiding and
abetting the collection of an extension of credit by
extortionate means, 18 U.S.C 894(a).
Shifman was tried separately from the others. The
government's evidence consisted primarily of the testimony of
the alleged victims of the loan-sharking activities, seized
records of loans, and admissions made by Shifman to law
enforcement officials. We recite the facts in the light most
favorable to the verdicts being appealed. United States v.
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Valerio, 48 F.3d 58, 63 (1st Cir. 1995).
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Joseph Yerardi operated a large-scale gambling and
loan-sharking enterprise that made loans to borrowers at
weekly interest rates of from 3 percent to 5 percent. These
rates translate into annual interest rates of from 153
percent to 260 percent. The maximum legal annual rate
allowed in Massachusetts is 20 percent. Mass. Gen. Laws. ch.
271, 49.
Shifman first came into contact with Yerardi when
he needed the loan shark's services because of his own
mounting debts. Shifman subsequently borrowed from Yerardi
numerous times and on each occasion made interest payments of
3 percent or 4 percent a week. At times, Shifman fell behind
in his weekly payments and was threatened with physical
injury by a Yerardi employee, Jack Murphy, also known as Jack
Kelley. At some point, Yerardi encouraged Shifman to refer
anyone he knew in need of money to Yerardi. In return for
these referrals, which totaled approximately ten over a
twelve to sixteen month period, Shifman received either fees
from the borrowers or "points" a reduction in the interest
rate on his loan from Yerardi. Lieutenant-Detective
William McDermott testified that Shifman admitted to him that
Yerardi would reduce his debt after he referred a customer
who proceeded to take out a loan from Yerardi.
Much of the testimony came from the borrowers, Mark
LaChance, Gerald Moore, Craig Inge, Randall Gasbarro, and
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Paul Mahoney, whose loans were all documented by entries in
the records seized from Yerardi.
LaChance testified that he approached Shifman, who
he knew to be in the mortgage business, for legitimate
financing on his construction equipment. Shifman told him
the financing would come through without a problem. After
weeks of waiting, LaChance, desperately in need of money,
approached Shifman for help in obtaining a short-term loan.
Shifman referred LaChance to Yerardi, clearly conveying that
Yerardi was a loan shark. The legitimate financing Shifman
was allegedly procuring for LaChance never materialized.
Gerald Moore testified that he too was introduced
to Yerardi by Shifman. He also testified that he was paying
4 percent interest a week on the money he borrowed from
Yerardi, and that he knew that he could be physically hurt if
he didn't repay the money. Moore gave a portion of the
proceeds of his loan from Yerardi to Shifman. At one point,
when Moore was behind in his payments, Jack Murphy and two
other men visited Moore on Yerardi's behalf and attempted to
break Moore's hand.
Craig Inge testified that he went to Shifman with
the hope of obtaining legitimate financing for his video
business. When the financing failed to materialize, Shifman
referred Inge to Yerardi. Shifman represented that the loan
with Yerardi would serve only to meet Inge's needs until the
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legitimate financing came through. Again, the legitimate
financing never materialized. Inge paid Shifman $1,000 from
the money he borrowed from Yerardi for what Shifman described
as a fee for his services.
Randall Gasbarro and Paul Mahoney both testified
that Shifman referred them to Yerardi. They both understood,
from Shifman's description, that Yerardi was a loan shark.
Both men testified that they were paying 3 percent interest a
week on the money they borrowed from Yerardi. Mahoney
testified that he gave a portion of the money he borrowed
from Yerardi to Shifman.
Another witness, Paul Terranova, testified that he
approached Shifman for a second mortgage on his home. When
the mortgage didn't come through, Shifman referred Terranova
to Yerardi suggesting that the loan would be a short-term
loan to tide him over until the mortgage came through. He
also testified that he paid Shifman approximately $2,500, and
that the mortgage never came through, causing him to remain
indebted to Yerardi.
Shifman himself testified that he gave numerous
people Yerardi's telephone number, and that these people
would not have known about Yerardi, nor would they have taken
out extortionate loans from Yerardi, had he not referred
them. Shifman testified to knowing Yerardi to be a loan
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shark, and that people could be physically injured if they
did not repay the loans from Yerardi.
The jury found Shifman guilty of both violating
RICO and conspiring to violate RICO. The jury also found
Shifman guilty on all four counts of aiding and abetting the
making of extortionate extensions of credit. The jury
acquitted Shifman on the charge that he had aided and abetted
the collection of an extension of credit by extortionate
means. Shifman was sentenced to 51 months imprisonment.
This appeal followed.
II.
A. Sufficiency of the Evidence
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Shifman contends that the evidence was insufficient
as a matter of law to support his convictions. "In reviewing
sufficiency claims, we consider the evidence 'in the light
most favorable to the prosecution' and then ask whether the
evidence 'would allow a rational jury to determine beyond a
reasonable doubt that the defendant[] w[as] guilty as
charged.'" United States v. Hurley, 63 F.3d 1, 11 (1st Cir.
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1995)(quoting United States v. Mena Robles, 4 F.3d 1026, 1031
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(1st Cir. 1993)), cert. denied, __ U.S. __, 116 S. Ct. 1322
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(1996).
1. The RICO Counts
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For a defendant to be found guilty of a substantive
RICO violation, the government must prove beyond a reasonable
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doubt that (1) the "enterprise affect[ed] interstate or
foreign commerce, (2) that the defendant under consideration
associated with the enterprise, (3) that [the] defendant
participated in the conduct of the enterprise's affairs, and
(4) that [the] defendant's participation was through a
pattern of racketeering activity." Aetna Cas. Sur. Co. v. P
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& B Autobody, 43 F.3d 1546, 1558 (1st Cir. 1994).1
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For a defendant to be found guilty of conspiring to
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violate RICO, the government must prove "(1) the existence of
an enterprise affecting interstate commerce, (2) that the
defendant knowingly joined the conspiracy to participate in
the conduct of the affairs of the enterprise, (3) that the
defendant participated in the conduct of the affairs of the
enterprise, and (4) that the defendant did so through a
pattern of racketeering activity by agreeing to commit, or in
fact committing, two or more predicate offenses." Id. at
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1561.
Hence liability for a substantive RICO violation
under 1962(c) and liability for a RICO conspiracy violation
under 1062(d) rest on very similar elements. There are,
however, two notable differences. As stated in Aetna:
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1. Aetna dealt with a civil RICO claim, but it is
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appropriate to rely on civil RICO precedent when analyzing
criminal RICO liability. The standard is the same for both
criminal and civil RICO violations. See 18 U.S.C. 1962.
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The RICO Act differentiates between criminal and civil
liability by providing for criminal penalties in 18 U.S.C.
1963, and civil remedies in 18 U.S.C. 1964.
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The major difference between a violation
of 1962(c) itself . . . and a violation
of 1962(d) based on 1962(c) . . . is
the additional required element that the
defendant knowingly joined a conspiracy
to violate 1962(c). Another difference
is that, to prove that a defendant
violated 1962(c), it is necessary for
the plaintiff to prove two predicate
offenses; under 1962(d), in contrast,
this is not an element required to be
proved. To prove a violation of
1962(d), it is enough to prove that a
defendant agreed with one or more others
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that two predicate offenses be committed.
Id. at 1562.
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a. The Substantive RICO Violation
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i. Affecting Interstate Commerce
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Shifman does not challenge the adequacy of the
proof that Yerardi's loan-sharking enterprise affected
interstate commerce.
ii. Association with the Enterprise
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The second element of the substantive RICO violation
is "that the defendant under consideration associated with the
enterprise." Id. at 1558. The jury could reasonably have found
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from the evidence presented that Shifman deliberately associated
himself with Yerardi's enterprise. Not only did Shifman himself
borrow from Yerardi, he referred borrowers to Yerardi with the
goal of obtaining either a reduction in the interest rate on his
own debt to Yerardi, or a cash fee from the borrower. Infra.
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iii. Participation in the Conduct
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The third element of the substantive RICO violation
under 1962(c) requires that the defendant have participated in
the conduct of the enterprise's affairs. The Supreme Court has
interpreted the phrase "to participate in the conduct of the
enterprise's affairs" to mean participation in the operation or
management of the criminal enterprise. See Reves v. Ernst &
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Young, 507 U.S. 170, 185 (1993). Appellant argues that there was
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insufficient evidence for the jury to find that his conduct met
the "operation or management" test. We disagree.
Reves differs from the present case in that it
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addressed the civil RICO liability of an independent adviser
outside of the RICO enterprise's chain of command. The Supreme
Court held in Reves that an accounting firm employed by the
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enterprise could not be held civilly liable under RICO for
preparing an inaccurate accounting statement as it had not
"participate[d] in the operation or management of the enterprise
itself." Id. Respecting Reves, we have said:
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Special care is required in translating
Reves' concern with "horizontal"
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connections--focusing on the liability of
an outside adviser--into the "vertical"
question of how far RICO liability may
extend within the enterprise but down the
organizational ladder. In our view, the
reason the accountants were not liable in
Reves is that, while they were undeniably
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involved in the enterprise's decisions,
they neither made those decisions nor
carried them out; in other words, the
accountants were outside the chain of
command through which the enterprise's
affairs were conducted.
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United States v. Oreto, 37 F.3d 739, 750 (1st Cir. 1994).
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We have held, post-Reves, however, that a defendant
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who is "plainly integral to carrying out" the enterprise's
activities may be held criminally liable under RICO." See id.
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In the present case, Shifman was "plainly integral to
carrying out" Yerardi's loan-sharking plans. There was evidence
that Yerardi encouraged Shifman to refer persons in need of money
to the enterprise and that Shifman did so on a number of
occasions. The evidence was plain that Shifman knew Yerardi to
be engaged in illegal loan-sharking operations, that Shifman gave
Yerardi's number to many people, and that the victims would not
have known of Yerardi had Shifman not referred them. Shifman,
moreover, could be found to have "set up" certain victims so as
to make it more likely they would borrow from Yerardi. He did
this by first promising legitimate financing, and when this was
not forthcoming, and they were desperate, offering them Yerardi's
services. The evidence also supported a finding that Shifman
benefitted financially from the transactions by either receiving
points on his debt to Yerardi, or else obtaining fees from the
borrowers.
The jury could infer that, but for Shifman's
referrals, the extortionate loans to LaChance, Moore, Inge,
Gasbarro, and Mahoney would not have taken place, and that these
referrals were calculated and regular efforts taken by Shifman on
behalf of the Yerardi enterprise. We are satisfied there was
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sufficient proof of Shifman's participation in the conduct of the
enterprise's affairs, albeit at a relatively low level, to
support the verdict.
iv. Pattern of Racketeering Activity
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The final element for substantive RICO liability is
that the defendant's participation was through a "pattern of
racketeering activity."
In order to have engaged in a "pattern" of
racketeering activity, a defendant must have committed at least
two racketeering acts within ten years of one another. See 18
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U.S.C. 1961(5). These acts must be related and "amount to or
pose a threat of continued criminal activity." H.J. Inc. v.
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Northwestern Bell Telephone Co., 492 U.S. 229, 239 (1989).
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The definition of "racketeering activity" includes
making or conspiring to make an extortionate extension of credit.
See 18 U.S.C. 1961(1) (defining "racketeering activity" in part
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as including an offense indictable under 18 U.S.C. 892, which
bans the making of extortionate extensions of credit). Aiding
and abetting one of the activities listed in 1961(1) as
racketeering activities makes one punishable as a principal and
amounts to engaging in that racketeering activity. See 18 U.S.C.
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2.2
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2. (a) Whoever commits an offense against the United States
or aids, abets, counsels, commands, induces or procures its
commission, is punishable as a principal.
(b) Whoever willfully causes an act to be done which if
directly performed by him or another would be an offense
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In this case, the racketeering acts that formed the
basis of Shifman's RICO conviction were the four extortionate
credit transactions he was convicted of aiding and abetting.
Shifman contends there was insufficient evidence from which to
find that he committed these racketeering acts.
In order to convict Shifman of aiding and abetting
the making of extortionate extensions of credit, the government
had to prove Shifman aided and abetted "[a]ny extension of credit
with respect to which it is the understanding of the creditor and
the debtor at the time it is made that delay in making repayment
or failure to make repayment could result in the use of violence
or other criminal means to cause harm to the person, reputation,
or property of any person." 18 U.S.C. 891(6).
A basic element of aiding and abetting is proof "that
the defendant consciously shared the principal's knowledge of the
underlying criminal act, and intended to help the principal."
United States v. Taylor, 54 F.3d 967, 975 (1st Cir. 1995).
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The present record provided sufficient evidence for
the jury to find that Shifman aided and abetted the making of the
four extortionate extensions of credit.
There was ample evidence that Yerardi's loans to
LaChance, Moore, Gasbarro, and Mahoney were extortionate. The
jury could infer an understanding between Yerardi and the
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against the United States, is punishable as a principal.
18 U.S.C. 2.
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borrowers that if a borrower delayed in repaying, violence would
be used to force repayment. The rate of interest on the loans
far exceeded the legal rate; legal collection means were
unavailable. LaChance, Moore, Gasbarro, and Mahoney all
testified to knowing that Yerardi was a loan shark. LaChance and
Gasbarro were each told by Shifman that Yerardi was a hard money
lender, and that they should be aware of what type of person they
were dealing with. Both understood this to mean that Yerardi was
a loan shark. Moore was warned by Yerardi himself that violence
would ensue if he did not make his payments on time. Mahoney
testified that he understood Yerardi's business, as Shifman
explained it, to be loan-sharking. Mahoney also understood that
loan sharks would use force to collect payment. From this
evidence the jury was entitled to find that there was an
understanding between Yerardi and the borrowers that violence
would be used if they failed to make their loan repayments.
There was also sufficient evidence at trial for the
jury to find beyond a reasonable doubt that Shifman aided and
abetted the making of these extortionate loans. Shifman knew
that the loans Yerardi would make to the borrowers Shifman
referred to him would be extortionate, having himself borrowed
from Yerardi at an illegal rate of interest and, when he fell
behind, having been threatened with violence by Yerardi's
henchmen. Shifman informed the borrowers of the realities of
doing business with Yerardi, with its potential for violence. It
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could be inferred that Shifman referred the borrowers to Yerardi
fully expecting them to take out loans from him. There was also
evidence, as explained above, that Shifman was actively helping
Yerardi find new borrowers in order to gain fees from the
borrowers or a reduction in the interest rate on his outstanding
debt to Yerardi. Accordingly, the jury was warranted in
concluding that Shifman knowingly rendered tangible aid to
Yerardi's loan-sharking activities and was desirous, in the case
of the four borrowers, that those illegal activities succeed.
The jury's finding that Shifman was guilty of aiding and abetting
the extortionate extensions of credit involving these four men
was amply supported.
b. The RICO Conspiracy
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i. Affecting Interstate Commerce
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As noted, Shifman does not challenge the sufficiency
of the evidence offered to prove that Yerardi's enterprise
affected interstate commerce.
ii. Knowingly Joining the Conspiracy
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The second element of the conspiracy charge requires
that the defendant "knowingly joined the conspiracy to
participate in the conduct of the affairs of the enterprise."
Aetna, 43 F.3d at 1561. "All that is necessary to prove this
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element of the RICO conspiracy . . . is to prove that [the
defendant] agreed with one or more co-conspirators to participate
in the conspiracy." Id. at 1562. The evidence showed an
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agreement between Yerardi and Shifman for the latter to refer
borrowers to Yerardi. The evidence also supported a finding of
an understanding between Yerardi and Shifman that, at least in
some cases, if Shifman referred a borrower to Yerardi who
proceeded to take out a loan his own debt would be reduced.
There was clearly sufficient proof of an agreement between
Shifman and a co-conspirator for the former to have joined in the
conspiracy.
iii. Participation in the Conduct
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This element is identical to the third element of the
substantive RICO violation. As indicated in our discussion of
that element, supra, there is sufficient evidence to prove this
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element of the RICO conspiracy count.
iv. Pattern of Racketeering Activity
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The fourth element of the RICO conspiracy violation
is met if the defendant agrees to commit or actually commits two
or more acts of racketeering activity. As discussed under the
substantive RICO violation section, there was sufficient evidence
for the jury to find that Shifman committed four of the charged
racketeering acts. Accordingly, the fourth element is met.
2. Aiding and Abetting Extortionate Extensions of Credit
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Appellant contends that there was insufficient
evidence to convict him of the four substantive counts of aiding
and abetting the extortionate extensions of credit. We have
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already considered and rejected this argument in the course of
discussing the substantive RICO violations, supra.
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B. Miscellaneous Trial Issues
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1. The Cooperation Evidence
Appellant argues that the court erroneously excluded
certain evidence showing his cooperation with government
authorities; that the court unduly limited his counsel's opening
statement; and that the pretrial stipulation that the government
would not attempt to show that Shifman participated in Yerardi's
enterprise after he began cooperating with law enforcement
officials in June of 1991 should have been read to the jury. All
these matters, Shifman argues, tended to show a "consciousness of
innocence" that he should have been able to place before the
jury. We find no reversible error.
Turning first to the cooperation evidence, the jury
was ultimately allowed to hear and to consider extensive evidence
of Shifman's cooperation with law enforcement officials. It is
not clear to us that the court excluded any significant amount of
this evidence. We see no abuse of discretion in the court's
handling of the cooperation evidence.
As for the alleged restriction on defense counsel's
opening statement, we found no such restriction in the record.
The court merely stated:
I'm not going to preclude [appellant's
attorney] from saying what he wishes in
light of what I have said previously,
that of course I have instructed and will
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instruct the jury again that what counsel
says in opening statement is not
evidence, and if he makes any promises to
offer in evidence something that I have
not ruled on, he's doing it at his peril.
We see nothing improper in these remarks.
Regarding the stipulation, appellant argues that it
should have been read to the jury after the government said in
its opening statement that Shifman told authorities "half the
story." The government plausibly argues, however, that the "half
the story" remark had to do with Shifman's pre-June conduct,
unrelated to the stipulation. Shifman, however, did not then
request that the stipulation be read at trial, so we review for
plain error. Fed. R. Crim. P. 52(b). Under the plain error
standard of review, appellant bears "the burden of persuasion" to
establish that there was an error, that the error was "clear" or
"obvious," and that the error "affect[ed] substantial rights."
United States v. Olano, 507 U.S. 725, 734 (1993).
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We do not see how the district court's failure, on
its own initiative, and without request, to read the pretrial
stipulation to the jury amounted to an error of any kind. Nor
has appellant met the burden of showing prejudice under Rule
52(b).3 In accordance with the stipulation, he was not
prosecuted for any offenses after his cooperation with law
enforcement officials began in June of 1991. The government
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3. Normally, "the defendant must make a specific showing of
prejudice to satisfy the 'affecting substantial rights' prong
of Rule 52(b). Olano, 507 U.S. at 735.
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presented evidence pertaining to Shifman's conversations with
police after June, but only to rebut Shifman's direct testimony
concerning these conversations and his state of mind during the
alleged offenses. We find no prejudice to Shifman from the
district judge's failure to advise the jury of the stipulation.
2. The Response to the Jury Question
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Appellant contends that the court erred when, with
his counsel's approval, it referred the jury to the written jury
instructions in response to a question about conducting or
participating in an enterprise's affairs. The government
responds that Shifman waived any objection to the answer when his
attorney explicitly agreed to the district judge's response to
the jury question. See United States v. Rojo-Alvarez, 944 F.2d
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959, 971 (1st Cir. 1991) (holding that there was waiver when
defense counsel stated he was satisfied with the reworded
instruction); see also United States v. Lakich, 23 F.3d 1203 (7th
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Cir. 1994) (holding that there was waiver when counsel explicitly
agreed to the court's instruction). But see United States v.
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Marder, 48 F.3d 564, 571 (1st Cir. 1995) (waiver in these
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circumstances is an open question), cert. denied, 514 U.S. 1056
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(1995). Regardless whether an actual waiver took place, we see
nothing even remotely close to an error meeting the plain error
standard.
Affirmed.
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