Lastly, defendant contends that the agreement pr

Lastly, defendant contends that the agreement provided for a late penalty fee charge in the form of 18,000 shares of preferred stock, convertible to 600,000 shares of common stock valued at $30,000 which amounted to 120% of the loan.

The current maximum annual interest rate under New York's civil usury statute is 16% (General Obligations Law § 5-501 [1]; Banking Law § 14-a; Borowski v Falleder, 296 AD2d 301 [2002]), and 25% under New York's criminal usury statute (Penal Law § 190.40; Nikezic v Balaz, 184 AD2d 684 [1992]). The laws defining and prohibiting usury are intended to protect against a lender's overreaching (Norman Goldstein Assoc. v Bank of N.Y., 204 AD2d 288 [1994]). While pursuant to General Obligations Law § 5-521 (1) corporations, generally the antithesis of "desperately poor people," are ordinarily barred from asserting a usury defense (Schneider v Phelps, 41 NY2d 238, 243 [1977]), the prohibition is inapplicable in an action in which a corporation, such as defendant, interposes the defense of criminal usury as described in section 190.40 of the Penal Law (see General Obligations Law § 5-521 [3]). Penal Law § 190.40 penalizes as a felony the knowing unauthorized loaning of any amount at an{**19 Misc 3d at 488} interest rate greater than 25% per annum. General Obligations Law § 5-521 (3) permits corporations to interpose a defense of criminal usury as described in Penal Law § 190.40. A defendant raising the defense of criminal usury must allege and prove that the lender (1) knowingly charged, took or received (2) annual interest exceeding 25% (3) on a loan or forbearance (Penal Law § 190.40). The first element requires proof of the general intent to charge a rate in excess of the legal rate rather than the specific intent to violate the usury statute (Angelo v Brenner, 90 AD2d 131 [1982]). Where the usurious interest is plain from the face of the instrument, usurious intent will be implied (see Fareri v Rain's Intl., 187 AD2d 481 [1992]).

Defendant has met its burden of proof simply by submitting the letter agreement evidencing the usurious transaction. Here, an interest rate of 10% per month (120% per annum) plus an incentive fee of $7,500 (243% of the loan) amount to combined interest payments at an annual interest rate of 363%. That amount exceeds the maximum rate allowed by the civil usury law (General Obligations Law §§ 5-501, 5-511 [1]), as well as the criminal usury law (Penal Law § 190.40). In addition, the late charge provision of the letter agreement, which awarded a 120% per annum penalty, "while not technically interest, is unreasonable and confiscatory in nature and therefore unenforceable when examined in the light of the public policy expressed in Penal Law § 190.40, which makes an interest charge of more than 25% per annum a criminal offense" (Sandra's Jewel Box v 401 Hotel, 273 AD2d 1, 3 [2000]; see also BDO Seidman v Hirshberg, 93 [*5]NY2d 382 [1999]; Quaker Oats Co. v Reilly, 274 AD2d 565 [2000]). "The showing, as here, that the [letter agreement] reserves to the lender an illegal rate of interest satisfies [defendant's] burden of proving a usurious loan" (Matter of Dane, 55 AD2d 224, 226 [1976]; see also Hammond v Marrano, 88 AD2d 758 [1982]). This evidence shifts the burden to plaintiff, requiring it to produce evidence negating the application of the usury defense.