United States v. Shifman

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 96-2286

UNITED STATES,

Appellee,

v.

STANTON D. SHIFMAN,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Robert E. Keeton, U.S. District Judge]

Before

Torruella, Chief Judge,

Campbell, Senior Circuit Judge,

and Boudin, Circuit Judge.

Paul G. Holian for appellant.

Donald C. Lockhart, Trial Attorney, with whom Donald K. Stern,

United States Attorney, were on brief for appellee.

August 19, 1997

CAMPBELL, Senior Circuit Judge. Stanton Shifman

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.

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

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.

1995)(quoting United States v. Mena Robles, 4 F.3d 1026, 1031

(1st Cir. 1993)), cert. denied, U.S. , 116 S. Ct. 1322

(1996).

1. The RICO Counts

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

& B Autobody, 43 F.3d 1546, 1558 (1st Cir. 1994).1

For a defendant to be found guilty of conspiring to

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

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:

1. Aetna dealt with a civil RICO claim, but it is

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.

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

that two predicate offenses be committed.

Id. at 1562.

a. The Substantive RICO Violation

i. Affecting Interstate Commerce

Shifman does not challenge the adequacy of the

proof that Yerardi's loan-sharking enterprise affected

interstate commerce.

ii. Association with the Enterprise

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

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.

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 &

Young, 507 U.S. 170, 185 (1993). Appellant argues that there was

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

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

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:

Special care is required in translating
Reves' concern with "horizontal"

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

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).

We have held, post-Reves, however, that a defendant

who is "plainly integral to carrying out" the enterprise's

activities may be held criminally liable under RICO." See id.

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

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

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.

Northwestern Bell Telephone Co., 492 U.S. 229, 239 (1989).

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

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.

2.2

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).

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

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

i. Affecting Interstate Commerce

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

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

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

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

element of the RICO conspiracy count.

iv. Pattern of Racketeering Activity

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

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.

B. Miscellaneous Trial Issues

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).

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

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

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

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

Cir. 1994) (holding that there was waiver when counsel explicitly

agreed to the court's instruction). But see United States v.

Marder, 48 F.3d 564, 571 (1st Cir. 1995) (waiver in these

circumstances is an open question), cert. denied, 514 U.S. 1056

(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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