UNITED STATES Bankruptcy Court

For Eastern District of Texas

Plano Division
____________________________________________.
DENALORE LEE CANNON &
ROSE ANN HOOPER CANNON, PLAINTIFFS
VS.
TEXAS INDEPENDENT BANK, Defendants
Case No. 96-41-347-DRS
Adversary Proceeding No. A-96-4 147-DRS
____________________________________________.
Plaintiff’s Memorandum of Law
ON CREDIT LOANS AND VOID CONTRACTS

To the Honorable Judge of Said Court:

This Memorandum with authorities, law and cases in support, will establish the following
facts: 1) Defendant and privately owned banks are making loans of credit with the
intended purpose of “creating” credit as “money;” 2) other financial institutions and
individuals may “launder” bank credit that they receive directly or indirectly from privately
owned banks; 3) this collective activity is unconstitutional, unlawful, in violation of
common law, U. S. Code and the principles of equity; 4) such activity and underlying
contracts have long been held void by State Courts, Federal Courts and the U. S. Supreme
Court.

This Memorandum will show through authorities and established common law that credit
“money creation” by privately owned bank corporations is not really “money creation” at
all, but the trade specialty and artful illusion of law merchants who use old-time trade
secrets of the Goldsmiths to entrap the borrower and unjustly enrich the lender through
usury and other unlawful techniques. Issues based on law and the principles of equity,
which are within the jurisdiction of this Court, will be addressed.

HISTORY OF MONEY AND BANKING

THE GOLDSMITHS

In his book, Money and Banking (8th Edition, 1984), Professor David R. Kamerschen
writes on pages 56-63: “The first bankers in the modern sense were the goldsmiths, who
frequently accepted bullion and coins for storage . . . One result was that the goldsmiths
temporarily could lend part of the gold left with them . . . These loans of their customers’
gold were soon replaced by a revolutionary technique . . . When people brought in gold,
the goldsmith gave them notes promising to pay that amount of gold on demand. The

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notes, first made payable to the order of the individual, were later changed to bearer
obligations. In the previous form, a note payable to the order of Perry Reeves would be
paid to no one else unless Reeves had first endorsed the note . . . But notes were soon
being used in an unforeseen way. The note holders found that, when they wanted to buy
something, they could use the note itself in payment more conveniently and let the other
person go after the gold, which the person rarely did . . . The specie, then tendered to
remain in the goldsmiths’ vaults . . . The goldsmiths began to realize that they might profit
handsomely by issuing somewhat more notes than the amount of specie they held.

“These additional notes would cost the goldsmiths nothing except the negligible cost of
printing them, yet the notes provided the goldsmiths with funds to lend at interest . . . And
they were to find that the profitability of their lending operations would exceed the profit
from their original trade. The goldsmiths became bankers as their interest in manufacture
of gold items to sell was replaced by their concern with credit policies and lending
activities.

“They discovered early that, although an unlimited note issue would be unwise, they could
issue notes up to several times the amount of specie they held. The key to the whole
operation lay in the public’s willingness to leave gold and silver in the bank’s vaults and
use the bank’s notes. This discovery is the basis of modern banking.”

On page 74, Professor Kamerschen further explains the evolution of the credit system:
“Later the goldsmiths learned a more efficient way to put their credit money into
circulation. They lent by issuing additional notes rather than by paying out in gold, in
exchange for the interest bearing note received from their customer (in effect, the loan
contract), they gave their own non-interest bearing note. Each was actually borrowing
from the other . . . The advantage of the later procedure of lending notes rather than gold
was that . . . more notes could be issued if the gold remained in the vaults . . . Thus,
through the principle of bank note issuance banks learned to create money in the form of
their own liability.”

Another publication that explains modern banking as learned from the Goldsmiths is
Modern Money Mechanics (5th edition 1992), published by the Federal Reserve Bank of
Chicago, that states beginning on page 3: “It started with the goldsmiths . . .” At one time,
bankers were merely middlemen. They made a profit by accepting gold and coins brought
to them for safekeeping and lending the gold and coins to borrowers. But the goldsmiths
soon found that the receipts they issued to depositors were being used as a means of
payment. “Then bankers discovered that they could make loans merely by giving
borrowers their promises to pay, or bank notes . . . In this way, banks began to create
money . . . Demand deposits are the modern counterpart of bank notes. . . It was a small
step from printing notes to making book entries to the credit of borrowers that the
borrowers, in turn, could ‘spend’ by writing checks, thereby printing their own money.”

MODERN MONEY AND BANKING

HOW BANKS CREATE MONEY

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In the modern sense, banks create money by creating “demand deposits.” Demand
deposits are merely “book entries” that reflect how much lawful money the bank owes its
customers. Thus, all deposits are called demand deposits and are the bank’s liabilities.
The bank’s assets are the vault cash plus all the “IOUs” or promissory notes that borrowers
sign when they borrow either money or credit. When a bank lends its cash (legal money),
it loans its assets, but when a bank lends credit, it lends its liabilities. The lending of credit
is, therefore, the exact opposite of the lending of cash (legal money).

At this point, we need to define the meaning of certain words like “lawful money,” “legal
tender,” “other money” and “dollars.”

The terms “Money” and “Tender” had their origins in Article I, Sec. 8 and Article I, Sec.
10 of the Constitution of the United States. Title 12 U.S.C. 152 refers to “gold and silver
coin as lawful money of the united States” and was repealed in 1994. The term “legal
tender” was originally cited in 31 U.S.C.A. 392 and is now re-codified in 31 U.S.C.A.
5103 that states: “united States coins and currency . . . are legal tender for all debts, public
charges, taxes, and dues.” The common denominator in both “lawful money” and “legal
tender money” is that both are issued by the United States Government.

With Bankers, however, we find that there are two forms of money – one is government-
issued and the other is issued by privately owned banks such as Defendant, Texas
Independent Bank. As we have already discussed government-issued forms of money, we
need to look at privately-issued forms of money.

All privately issued forms of money today are based upon the liabilities of the issuer.
There are three common terms used to describe this privately created money. They are
“credit,” “demand deposits” and “checkbook money.” In the Fifth edition of Black’s Law
Dictionary, p.331, under the term “Credit,” the term “Bank credit” is described as:
“Money bank owes or will lend individual or person.” It is clear from this definition that
“Bank credit” which is the “money bank owes” is the bank’s liability. The term
“checkbook money” is described in the book I Bet You Thought, published by the privately
owned Federal Reserve Bank of New York, as follows: “Commercial banks create
checkbook money whenever they grant a loan, simply by adding deposit dollars to
accounts on their books to exchange for the borrower’s IOU . . .”

The word “deposit” and “demand deposit” both mean the same thing in bank terminology
and refer to the bank’s liabilities. For example, the Chicago Federal Reserve’s book,
Modern Money Mechanics says: “Deposits are merely book entries . . . Banks can build
up deposits by increasing loans . . . Demand deposits are the modern counterpart of bank
notes. It was a small step from printing notes to making book entries to the credit of
borrowers which the borrowers, in turn, could ‘spend’ by writing checks.” Thus, it is
demonstrated in Modern Money Mechanics how, under the practice of fractional reserve
banking, a deposit of $5,000 in cash could result in a loan of credit/checkbook
money/demand deposits of $100,000 if reserve ratios set by the Federal Reserve are 5%
(instead of 10%).
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In a practical application, here is how it works. If a bank has ten people who each deposit
$5,000 (totaling $50,000) in cash (legal money) and the bank’s reserve ratio is 5%, then
the bank will lend twenty times this amount, or $1,000,000 in “credit” money. What the
bank has actually done, however, is to write a check or loan its credit with the intended
purpose of circulating credit as “money.” Banks know that if all the people, who receive a
check or credit loan, were to come to the bank and demand cash, the bank would have to
close its doors because it doesn’t have the cash to bank up its check or loan. The bank’s
check or loan will, however, pass as money as long as people have confidence in the
illusion and don’t demand cash. Panics are created when people line up at the bank and
demand cash (legal money), causing banks to fold as history records in several time
periods.

The process of passing checks or credit as money is done quite simply. A deposit of
$5,000 in cash by one person results in a loan of $100,000 to another person at 5%
reserves. The person receiving the check or loan of credit for $100,000 usually deposits it
in the same bank or another bank in the Federal Reserve system. The check or loan is sent
to the bookkeeping department of the lending bank where a book entry of $100,000 is
credited to the borrower’s account. The lending bank’s check that created the borrower’s
loan is then stamped “Paid” when the account of the borrower is credited a “dollar”
amount. The borrower may then “spend” these book entries (demand deposits) by writing
checks to others, who in turn deposit their checks and have book entries transferred to their
account from the borrower’s checking account.

However, two highly questionable and unlawful acts have now occurred. The first was
when the bank wrote the check or made the loan with insufficient funds to back them up.
The second is when the bank stamps its own NSF check “paid” or posts a loan by merely
crediting the borrower’s account with book entries the bank calls “dollars.” Ironically, the
check or loan seems good and passes as money – unless an emergency occurs via demands
for cash – or a Court challenge – and the artful illusion bubble bursts.

DIFFERENT KINDS OF MONEY

The book I Bet You Thought, published by the Federal Reserve Bank of New York says:

“Money is any generally accepted medium of exchange, not simply coin and currency.
Money doesn’t have to be intrinsically valuable, be issued by a government or be in
any special form.” [Emphasis added.] Thus, we see that privately issued forms of money
only require public confidence in order to pass as money. Counterfeit money also passes
as money as long as nobody discovers it is counterfeit. Likewise, “bad” checks and
“credit” loans pass as money as long as no one finds out they are unlawful. Yet, once the
fraud is discovered, the value of such “bank money,” like bad checks, ceases to exist.
There are, therefore, two kinds of money – government-issued legal money and privately-
issued unlawful money.

DIFFERENT KINDS OF DOLLARS

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The dollar once represented something intrinsically valuable made from gold or silver. For
example, in 1792 Congress defined the silver dollar as a silver coin containing 371.25
grains of pure silver. The legal dollar is now known as “United States coins and
currency.” However, the Banker’s dollar has become a unit of measure of a different kind
of money. Therefore, with Bankers there is a “dollar” of coins and a “dollar” of cash (legal
money), a “dollar” of debt, a “dollar” of credit, a “dollar” of checkbook money or a
“dollar” of checks. When one refers to a dollar spent or a dollar loaned, he should now
indicate what kind of “dollar” he is talking about, since Bankers have created so many
different kinds.

A dollar of bank “credit money” is the exact opposite of a dollar of “legal money.” The
former is a liability while the latter is an asset. Thus, it can be seen from the earlier
statement quoted from I Bet You Thought, that money can be privately issued as: “Money
doesn’t have to . . . be issued by a government or be in any special form.” It should be
carefully noted that banks that issue and lend privately created money, demand to be paid
with government issued money. However, payment in like kind under natural equity
would seem to indicate that a debt created by a loan of privately created money can be paid
with other privately created money, without regard for “any special form” as there are no
statutory laws to dictate how either private citizens or banks may create money.

BY WHAT AUTHORITY??

By what authority do state and national banks, as privately owned corporations, create
money by lending their credit – or more simply put, by writing and passing “bad” checks
and “credit” loans as “money”? Nowhere can a law be found that gives banks the authority
to create money by lending their liabilities.

Therefore, the next question is: If banks are creating money by passing bad checks and
lending their credit, where is their authority to do so? From their literature, banks claim
these techniques were learned from the trade secrets of the Goldsmiths. It is evident,
however, that money creation by private banks is not the result of powers conferred upon
them by government, but rather the artful use of long held “trade secrets.” Thus, unlawful
money creation is not being done by banks as corporations, but unlawfully by bankers.

Article I, Section 10, para. 1 of the Constitution of the United States specifically states that
no state shall . . . coin money, emit bills of credit, make any Thing but gold and silver
coin a Tender in Payment of Debts, pass any Bill of Attainder, ex post facto Law, or Law
impairing the Obligations of Contracts . . .” [Emphasis added.] The states that grant the
Charters of state banks also prohibit the emitting of bills of credit by not granting such
authority in bank charters.

It is obvious that “We the people” never delegated to Congress, state government, or
agencies of the state, the power to create and issue money in the form of checks, credit, or
other “bills of credits.” The Federal Government today does not authorize banks to emit,
write, create, issue and pass checks and credit as money, but banks do, and get away with
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it. Banks assign their privately created money more misleading names, like “credit,”
“demand deposits,” or “checkbook money.” However, the true nature of “credit money”
and “checks” does not change regardless of the deceptive terminology used to describe
them. Such money in common use by privately owned banks is illegal under Article I,
Sec. 10, para. 1 of the Constitution of the United States as well as unlawful under the laws
of the United States.

VOID “ULTRA VIRES” CONTRACTS

Black’s Law Dictionary defines the Latin term “extra vires” to mean beyond powers.
Black’s Law Dictionary explains the term “ultra vires” embraces “[a]n act performed
without any authority to act on subject. Haslund v. City of Seattle, 86 Wash.2d 607, 547
P.2d 1221, 1230. Acts beyond the scope of the powers of a corporation, as defined by its
charter or laws of state of incorporation. State ex rel. v. Holston Trust Col, 168 Tenn. 546,
79 S.W.2d 1012, 1016. The term has a broad application and includes not only acts
prohibited by the charter, but acts which are in excess of powers granted and not
prohibited, and generally applied either when a corporation has no power whatever to do
an act, or when the corporation has the power, but exercises it irregularly. People ex rel.
Barrett v. Bank of Peoria, 295 Ill.App. 543, 15 N.E.2d 333, 335. Act is ultra vires when
corporation is without authority to perform it under any circumstances or for any purpose.
By doctrine of ultra vires a contract made by a corporation beyond the scope of its
corporate powers is unlawful. Community Federal Sav. & Loan Ass’n of Independence,
Mo. v. Fields, C.C.A., Mo., 128 F.2d 705, 708.” Black’s 6th Edition, p. 1522.

The courts have long held that when a corporation executes a contract beyond the scope of
its charter or granted corporate powers, the contract is void or “ultra vires”. See infra,
Pullman v. Central Transp. Co., 139 U.S. 62, 11 S.Ct. 478, 35 L.Ed. 55.

THE QUESTION OF LAWFUL CONSIDERATION

The issue of whether the lender, who writes and passes a “bad” check or makes a “credit”
loan, has a claim for relief against the borrower is easy to answer, providing the lender can
prove that he gave a lawful consideration based upon lawful acts, but did the lender give a
lawful consideration? To give a lawful consideration, the lender must prove that he gave
the borrower lawful money such as coins or currency. Failing that, he can have no claim
for relief in a court at law against the borrower as the lender’s actions were Ultra vires or
void from the beginning of the transaction.

It can be argued that “bad” checks or “credit” loans, that pass as money, are valuable, but
so are counterfeit coins and currency that pass as money. It seems unconscionable that a
bank would ask homeowners to put up a homestead as collateral for a “credit loan” that the
bank created out of thin air. Would a court of law or equity allow a counterfeiter to
foreclose against a person’s home because the borrower was late in payments on an
unlawful loan? If the court were to do so, it would be contrary to all principles of law.

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The question of valuable consideration does not depend on any value imparted by the
lender, but by false confidence instilled in the “bad” check or “credit” loan by the lender.
In a court at law or equity, the lender has no claim for relief. The argument that the lender
has a claim for relief because the borrower received property for the lender’s “bad” check
or “credit” loan, is not valid unless the lender can prove that he gave lawful value. The
claim for relief lies with the seller, who may be holding the “bad” check or “credit” loan,
against the lender or the borrower, or both.

BORROWER RELIEF

Since we have established that the lender of unlawful or counterfeit money has no claim
for relief under a void contract, the last question is, does the borrower have a claim for
relief against the lender?

First, if it is established that the borrower has made no payments to the lender, then the
borrower has no claim for relief against the lender for money damages, but the borrower
has a claim for relief to void the debt he owes the lender for notes or obligations
unlawfully created by an Ultra vires contract for lending “credit” money.

The borrower, the Courts have long held, has a claim for relief against the lender to have
the note, security agreement, or mortgage note the borrower signed, declared null and void.
The borrower may also have claims for relief for breach of contract by the lender for not
lending “lawful money” and for usury for charging an interest rate several times greater
than the amount agreed to in the contract for any lawful money actually risked by the
lender. For example, if on a $100,000 loan it can be established that the lender actually
risked only $5,000 (5% Federal Reserve ratio) with a current interest rate of 10%, the
lender has then loaned $95,000 of “credit” and $5,000 of “lawful money” while charging
10% interest ($10,000) on the entire $100,000. The true interest rate on the $5,000 of
“lawful money” actually risked by the lender is 200%, which violates Usury laws. If no
“lawful money” was loaned, then the interest rate is an infinite percentage. Such
techniques, the bankers say, were learned from the trade secrets of the Goldsmiths.

The Courts say that such contracts with borrowers are wholly void from the beginning of
the transaction because banks are not granted powers to enter into such contracts by either
state or national charters.

ADDITIONAL BORROWER RELIEF

In District Court, the borrower may have additional claims for relief under “Civil RICO”
Federal Racketeering laws (Title 18 U.S.C. 1964) as the lender may have established a
“pattern of racketeering activity” by using the U.S. Mail more than twice to collect an
unlawful debt and the lender may be in violation of Title 18 U.S.C. 1341, 1343, 1961 and
1962. The borrower may have other claims for relief if he can prove there was or is a
conspiracy to deprive him of property without due process of law under Title 42 U.S.C.
1983 (Constitutional injury), 1985 (Conspiracy) and 1986 (“Knowledge” and “Neglect to
Prevent” a U.S. Constitutional Wrong). Under Title 18 U.S.C.A. 241 (Conspiracy),
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violators “shall be fined not more than $10,000 or imprisoned not more than ten (10) years
or both.”

CASE CITES IN SUPPORT

ULTRA VIRES CONTRACTS

1. “A contract is ultra vires being unlawful and void, not because it is in itself immoral,
but because the corporation, by the law of its creation, is incapable of making it. The
courts, while refusing to maintain any action upon the unlawful contract, have always
striven to do justice between the parties, so far as could be done consistently with
adherence to law, by permitting property or money, parted with on the faith of the unlawful
contract, to be recovered back, or compensation to be made for it. In such case, however,
the action is not maintained upon the unlawful contract, nor according to its terms; but on
an implied contract of the defendant to return, or failing to do that, to make compensation
for, property or money which it has no right to retain. To maintain such an action is not to
affirm, but to disaffirm the unlawful contract.” Pullman v. Central Transp. Co., 139 U.S.
62, 11 S.Ct. 478, 35 L.Ed. 55

2. “When a contract is once declared ultra vires, the fact that it is executed does not
validate it, nor can it be ratified, so as to make it the basis of suit or action, nor does the
doctrine of estoppel apply.” F&PR v. Richmond, 133 SE 898; 151 Va. 195.

3. “A national bank . . . cannot lend its credit to another by becoming surety, indorser or
guarantor for him, such an act is ultra vires . . .” Merchants Bank v. Baird, 160 F 642.

LOAN OF CREDIT

4. “In the federal courts, it is well established that a national bank has not power to lend its
credit to another by becoming surety, endorser, or guarantor for him.” Farmers and
Miners Bank v. Bluefield Nat’l Bank, 11 F.2d 83, 271 U.S. 669.
5. “A national bank has no power to lend its credit to any person or corporation.” Bowen
v. Needles Nat. Bank, 94 F. 925; 36 CCA 553, certiorari denied In 20 S.Ct. 1024, 176 US
682, 44 L.Ed 637.

6. “Mr. Justice Marshall said: ‘The doctrine of ultra vires is a most powerful weapon to
keep private corporations within their legitimate spheres and to punish them for violations
of their corporate charters, and it probably is not invoked too often . . .’” Zinc Carbonate
Co. v. First National Bank, 103 Wis. 125, 79 NW 229, American Express Co. v. Citizens
State Bank, 194 NW 430.

7. “A bank may not lend its credit to another, even though such a transaction turns out to
have been of benefit to the bank, and in support of this a list of cases might be cited, which
would look like a catalog of ships.” Norton Grocery Co. v. Peoples Nat. Bank, 144 SE
505, 151 Va 195.

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8. “It has been settled beyond controversy that a national bank, under federal law being
limited in its powers and capacity, cannot lend its credit by guaranteeing the debts of
another. All such contracts entered into by its officers are ultra vires. . .” Howard &
Foster Co. v. Citizens Nat’l Bank of Union, 133 SC 202, 130 SE 759 (1926).

9. “. . . checks, drafts, money orders and bank notes are not lawful money of the United
States . . .” State v. Neilon, 73 Pac. 324, 43 Ore. 168.

10. “Neither, as included in its powers, nor incidental to them, is it a part of a bank’s
business to lend its credit. If a bank could lend its credit as well as its money, it might, if it
received compensation and was careful to put its name only to solid paper, make a great
deal more than any lawful interest on its money would amount to. If not careful, the power
would be the mother of panics . . . Indeed, lending credit is the exact opposite of lending
money which is the real business of a bank, for while the latter creates a liability in favor
of the bank, the former gives rise to a liability of the bank to another.” 1 Morse, Banks and
Banking, 5th Ed. Sec. 65; Magee, Banks and Banking, 3rd Ed. Sec. 248.” American Express
Co. v. Citizens State Bank, 194 NW 429.

11. “It is not within those statutory powers for a national bank, even though solvent, to
lend its credit to another in any of the various ways in which that might be done.” Federal
Intermediate Credit Bank v. L. Herrison, 33 F.2d 841, 842 (1929).

12. “There is no doubt but what the law is that a national bank cannot lend its credit or
become an accommodation endorser.” National Bank of Commerce v. Atkinson, 56 F. 471.

13. “A bank can lend its money, but not its credit.” First Nat’l Bank of Tallapoosa v.
Monroe, 135 Ga 614, 69 F. 1124, 32 LRA (NS) 550.

14. “. . . the bank is allowed to lend money upon personal security, but it must be money
that it loans, not its credit.” Sellgman v. Charlottesville Nat. Bank, 3 Hughes 647, Fed.
Case No. 12, 642, 1039.

LOANS OF MONEY

15. “A loan may be defined as the delivery by one party to, and the receipt by another
party of, a sum of money upon an agreement express or implied, to repay the sum with or
without interest.” Parsons v. Fox,179 Ga 605, 176 SE 644. Also see Kirkland v. Bailey,
155 SE 2d 701, and United States v. Neifert White Co., 247 Fed.Supp. 878, 879.

“The word ‘money’ in its usual and ordinary acceptation means gold, silver, or paper
money used as a circulating medium of exchange. . .” e.v. Railey 280 Ky 319, 133 SW2d
75.

PROMISE TO PAY NOT EQUIVALENT TO PAYMENT

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16. “A promise to pay cannot, by argument, however ingenious, be made the equivalent of
actual payment . . .” Christensen v. Beebe, 91 P 133, 32 Utah 406.

17. “A check is merely an order on a bank to pay money.” Young v. Hembree, 73 P2d
393.

HOLDER IN DUE COURSE

18. “A bank is not the holder in due course upon merely crediting the depositor’s
account.” Bankers Trust v. Nagler, 229 NYS2d 142, 143.

FRAUD AND MISREPRESENTATION

19. “Any false representation of material facts made with knowledge of falsity and with
intent that it shall be acted on by another in entering into contract, and which is so acted
upon, constitutes ‘fraud,’ and entitles party deceived to avoid contract or recover
damages.” Barnsdall Refining Corp. v. Bimarn Wood Oil Co., 92 F.2d S17.

20. “Any conduct capable of being turned into a statement of fact is representation. There
is no distinction between misrepresentations effected by words and misrepresentations
effected by other acts.” Leonard v. Springer, 197 Ill 532, 64 NE 301.

21. “It is not necessary for recision of a contract that the party making the
misrepresentation should have known that it was false, but recovery is allowed even
though misrepresentation is innocently made, because it would be unjust to allow one who
made false representations even innocently to retain the fruits of a bargain induced by such
representations.” Whipp v. Iverson, 43 Wis.2d 166.

CONSIDERATION

22. “If any part of the consideration for a promise be illegal, or if there are several
considerations for an unseverable promise, one of which is illegal, the promise, whether
written or oral, is wholly void, as it is impossible to say what part or which one of the
considerations induced the promise.” Menominee River Co. v. Augustus Spies L&C Co.,
147 Wis 559, 572; 132 NW 1122.

“The contract is void if it is only in part connected with the illegal transaction and the
promise single or entire.” Guardian Agency v. Guardian Mut. Savings Bank, 227 Wis.
550, 279 NW 83.

RICO

23. In a Debtor’s RICO action against its creditor, alleging that the creditor had collected
an unlawful debt, an interest rate (where all loan charges were added together) that
exceeded, in the language of the RICO Statute, “twice the enforceable rate,” the Court
found no reason to impose a requirement that the Plaintiff show that the Defendant had
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been convicted of collecting an unlawful debt, running a “loan sharking” operation. The
debt included the fact that exaction of a usurious interest rate rendered the debt unlawful
and that is all that is necessary to support the Civil RICO action. Durante Bros. & Sons,
Inc. v. Flushing Nat. Bank, 755 F.2d 239, cert. denied, 473 US 906 (1985).

24. The Supreme Court found that the Plaintiff in a civil RICO action need establish only
a criminal “violation” and not a criminal conviction. Further, the Court held that the
Defendant need only have caused harm to the Plaintiff by the commission of a predicate
offense in such a way as to constitute a “pattern of Racketeering activity.” That is, the
Plaintiff need not demonstrate that the Defendant is an organized crime figure, a mobster
in the popular sense, or that the Plaintiff has suffered some type of special Racketeering
injury; all that the Plaintiff must show is what the Statute specifically requires. The RICO
Statute and the civil remedies for its violation are to be liberally construed to effect the
Congressional purpose as broadly formulated in the statute. Sedima, SPRL v. Imrex Co.,
473 US 479 (1985)

FEDERAL RESERVE BANK

25. “Each Federal Reserve bank is a separate corporation owned by commercial banks in
its region . . .” Lewis v. United States, 680 F.2d 1239 (1982).

Respectfully submitted,

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