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United States v. Jacobson

decided: October 12, 1982.

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
RALPH JACOBSON, DEFENDANT-APPELLANT



Appeal from a judgment of conviction entered by the United States District Court for the Eastern District of New York (Mishler, Judge), after a jury trial for acquiring or maintaining an interest in, or control of, an enterprise engaged in interstate commerce through the collection of an unlawful debt in violation of 18 U.S.C. § 1962(b) (1976) and raising as grounds for relief (i) insufficiency of the evidence, (ii) improper presentation of evidence to the indicting grand jury, and (iii) error in the District Court's denial of a motion for production of grand jury transcripts. Affirmed in part but remanded for a hearing on the validity of the indictment and for disclosure of all relevant grand jury transcripts.

Cardamone and Winter, Circuit Judges, and Herbert N. Maletz, Judge.*fn*

Author: Per Curiam

Defendant-appellant Ralph Jacobson appeals from a judgment of conviction of the United States District Court for the Eastern District of New York (Mishler, Judge) entered on March 12, 1982 after a four-day jury trial. Jacobson was convicted of one count of acquiring or maintaining an interest in or control of an enterprise engaged in interstate commerce through the collection of an unlawful debt in violation of 18 U.S.C. § 1962(b)(1976) (Racketeer Influenced and Corrupt Organizations Act or "RICO"). He was acquitted of one count of collecting and attempting to collect an extension of credit through the use of extortionate means in violation of 18 U.S.C. § 894(a)(1) (1976). Judge Mishler sentenced Jacobson to five years imprisonment, of which the last 54 months were suspended and to be served on probation. On appeal, Jacobson presents three issues for review by this Court: (i) whether the evidence presented at trial was sufficient to sustain his conviction under 18 U.S.C. § 1962(b); (ii) whether the manner in which testimony was presented to the indicting grand jury was proper; and (iii) whether the District Court's denial of his motion to disclose transcripts of the indicting grand jury was error. Although we find the evidence was more than sufficient to sustain Jacobson's conviction, oral argument before this Court disclosed serious inaccuracies in the government's brief as to what occurred before the indicting grand jury. We therefore remand with instructions to order disclosure of all relevant grand jury transcripts and to hold a hearing on the validity of the indictment.

I

In 1967, Gary Chartoff, his father Abraham, and his younger brother, Howard, opened the "Triple C" bagel bakery in a shopping center in Plainview, New York. The bakery premises were leased for a 15-year term from Morton Realty. In 1969, the Triple C encountered financial difficulties. Abraham Chartoff left the business after a disagreement with his son Gary and Gary, who had a long history of gambling trouble and money mismanagement, was unable to obtain bank financing to shore up the bakery's affairs. Faced with these reverses, Chartoff testified that he "went to a friend of mine and I asked him if [he] knew of any loansharks where I could borrow money." This friend, a local delicatessen owner named Philip Fox, introduced Chartoff to appellant Jacobson in November, 1969.

The initial agreement between Chartoff and Jacobson involved an advance of $2,500 by Jacobson which Chartoff agreed to repay in 10 weekly installments of $300, for a total of $3,000. For the next 10 weeks, someone named "Burt" came by Chartoff's bakery and collected $300. Upon repayment of the first loan, Jacobson advanced Chartoff $2,500 in January, 1970, and another $2,500 in March, 1970, on identical terms. Despite these loans, the Triple C continued to founder. Howard Chartoff also left the business after a dispute with Gary, and the bakery's debts, including one to the Internal Revenue Service, continued to mount.

In June, Chartoff approached Jacobson and asked for a $15,000 loan. According to Jacobson, the resulting transaction involved an agreement on his part to invest $15,000 in the Triple C. In return, Chartoff agreed to assign Triple C's lease to him as security. The government, however, characterized the deal as a $15,000 loan for which Jacobson required as security a second mortgage on Chartoff's home and assignment of the lease. In any event, Chartoff agreed to pay Jacobson $150 per week for the remaining 13-year term of the lease. Shortly afterward, the payment was raised to $175, an arrangement which continued until 1973.

In 1973, Chartoff and his brother-in-law, Robert Krupin, decided to open a second bagel bakery in another shopping mall. They entered an agreement with Jacobson on essentially the same terms as the June, 1970, deal. However, the second bakery failed within a year, and Chartoff then agreed to pay Jacobson $225 per week from the receipts of the Triple C in order to cover both loans. From 1974 to 1975, Chartoff made these payments. Then, in the winter of 1975, "as a last ditch survival chance," Chartoff borrowed an additional $10,000 from Jacobson and agreed to pay the money back in 13 weekly installments of $1,000. After several weeks, Chartoff stopped paying Jacobson on any of the loans. In June, 1976, Chartoff began cooperating with the F.B.I.

Jacobson, as assignee of the Triple C lease, brought a state court action leading to Chartoff's eviction. Two weeks later, on July 30, the Internal Revenue Service conducted an auction sale of Triple C's fixtures to recoup back taxes and Jacobson's wife, Joan, purchased the fixtures. Jacobson then transferred the lease to his wife. In 1977, the fixtures, equipment, and lease were all sold to another bagel bakery.

On appeal, Jacobson presents a novel but not difficult issue. 18 U.S.C. § 1962(b) provides in pertinent part:

It shall be unlawful for any person . . . through collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.

Jacobson contends that, in becoming Triple C's landlord, he did not acquire an "interest" in the enterprise. He argues that the RICO statute distinguishes between "property rights" and "interests" and that Section 1962(b) covers only the latter. Since a lease is clearly a property right, Jacobson asserts that his conduct falls outside the ambit of the statute.

We reject his contention. By its terms, the statute permits conviction upon a showing that the defendant acquired either an "interest in" or "control of" an enterprise through an unlawful debt. Following the standard of Glasser v. United States, 315 U.S. 60, 80, 86 L. Ed. 680, 62 S. Ct. 457 (1942), all permissible factual inferences must be resolved in the government's favor. The jury here might easily have inferred that Jacobson used the lease as a means to control the bakery enterprise and concluded that, when Jacobson evicted Chartoff and purchased the fixtures and equipment through his wife, he acquired control of the bakery. Indeed, there was testimony that even prior to the formal eviction, Jacobson changed the bakery's locks and took money directly from the store's cash register to cover the debts owed him, actions a jury might reasonably believe constituted the exercise of control.

We also reject Jacobson's contention that Section 1962(b) excludes "property rights" such as leaseholds from the term "interests." As the ...


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