U.S. v. Palmeri

• Decision Date: 03 September 1980
• Docket Number: No. 79-2148,No. 79-2149,No. 79-2147,No. 79-2150,No. 79-2424,Nos. 79-2147,79-2147,79-2148,79-2149,79-2150,79-2424,s. 79-2147
• Citation: 630 F.2d 192
• Parties: 106 L.R.R.M. (BNA) 2611 UNITED STATES of America v. PALMERI, Ernest P., Sr., Appellant inUNITED STATES of America v. CAMPISANO, Joseph, Appellant inUNITED STATES of America v. CARIELLO, Vito, Appellant inUNITED STATES of America v. SMITH, Frank, Appellant inUNITED STATES of America v. CHESTNUT, Flen, Appellant into 79-2150 and 79-2424.
• Court: U.S. Court of Appeals — Third Circuit

Page 192

630 F.2d 192

106 L.R.R.M. (BNA) 2611

UNITED STATES of America v. PALMERI, Ernest P., Sr., Appellant in No. 79-2147.

UNITED STATES of America v. CAMPISANO, Joseph, Appellant in No. 79-2148.

UNITED STATES of America v. CARIELLO, Vito, Appellant in No. 79-2149.

UNITED STATES of America v. SMITH, Frank, Appellant in No. 79-2150.

UNITED STATES of America v. CHESTNUT, Flen, Appellant in No. 79-2424.

Nos. 79-2147 to 79-2150 and 79-2424.

United States Court of Appeals, Third Circuit.

Argued Aug. 5, 1980.

Decided Sept. 3, 1980.

Kenneth Michael Robinson, Washington, D. C., for appellants Palmeri and smith.

Dennis M. Hart, Washington, D. C., for appellant Chestnut.

Steven H. Gifis, Princeton, N. J., for appellant Campisano.

Frederic J. Gross, Haddonfield, N. J., for appellant Cariello.

Robert J. Del Tufo, U. S. Atty., Kenneth N. Laptook, Asst. U. S. Atty., Newark, N. J., for appellee.

Before ALDISERT and SLOVITER, Circuit Judges, and HANNUM, District Judge. ^*

OPINION OF THE COURT

ALDISERT, Circuit Judge.

These consolidated appeals from a jury verdict of conviction present a number of questions for consideration. The first issue concerns the proper scope of 18 U.S.C. § 1954, which proscribes the receipt of kickbacks and other illegitimate benefits by persons associated with employee benefit plans. The second issue is whether the district court failed to distinguish transactions involving money covered by § 1954 from transactions involving money not covered by that section. Third, we must determine whether the court erred in submitting special interrogatories to the jury. Finally, we must decide whether the government produced insufficient evidence to support each conviction under 18 U.S.C. §§ 1962(c) and (d), which proscribe transactions and conspiracies related to racketeering enterprises. We hold that the government produced insufficient evidence to support the conviction of appellant Flen Chestnut, and we will therefore reverse his conviction. We resolve all other issues against appellants, however, and the other convictions will therefore be affirmed.

Local 945 of the International Brotherhood of Teamsters, with offices at West Paterson, New Jersey, was an employee organization within the meaning of 18 U.S.C. § 1954, and maintained three collective bargaining funds: a Pension Fund; a Welfare Fund, which provided hospitalization and related benefits to the members; and a Severance Fund, which made payments to retired or laid-off workers from individual accounts. The local also maintained a treasury consisting of unearmarked union monies. Both the Welfare Fund and the Severance Fund were "employee welfare benefit plans" within the meaning of § 1954 and were covered by the Welfare Pension Plan Disclosure Act, 29 U.S.C. §§ 301-09, repealed by Employee Retirement Income Security Act, Pub.L. No. 93-406, § 111, 88 Stat. 851, codified at 29 U.S.C. § 1031, and the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001-1381. Each fund was managed by a board of trustees comprised of three management trustees and three union trustees. Joseph Campisano was the president and Vito Cariello the secretary-treasurer of Local 945, and both were union trustees of each fund. Ernest P. Palmeri, Sr., Flen Chestnut, and Frank Smith were business representatives and employees of Local 945.

The government introduced evidence tending to show that in July, 1973, the board of trustees adopted a program of concentrating the assets of the funds into fewer and larger certificates of deposit, thereby maximizing their investment performance. The board vested authority to implement the program in Cariello. During the ensuing three years, nine area banks received more than $1,200,000 from the union in savings deposits and investments in certificates of deposit, while at the same time extending nearly three quarters of a million dollars in loans to participants in the scheme or their nominees. The banks made little or no effort to collect the loans that they had extended for fear of jeopardizing future deposits or renewals of current deposits by the local.

Under the scheme, Palmeri would contact officers of banks and indicate to them that Local 945 was interested in obtaining certificates of deposit in large face amounts from certain banks. During these conversations and with varying degrees of bluntness, Palmeri would suggest that he or persons close to him were in need of loans. The bank officers, operating on the basis of the implied quid pro quo, would grant the loan with little or no meaningful evaluation of the loan application. Soon thereafter, Cariello would contact the officer to inquire about interest rates, and a deposit check on one of the union's funds would promptly arrive bearing Cariello's signature. As the scheme progressed, recipients of the loans began to default, and several of the banks victimized by the scheme experienced severe financial difficulties. In addition, the facade of extending and receiving credit began to give way to the reality of percentage kickbacks.

I.

Many transactions were alleged in the twenty-three count indictment and supported by the government at trial. Although we will not detail each transaction, we will summarize them.

In November, 1973, Alexander Smith, President of the State Bank of Chatham, was introduced to Palmeri. They discussed Palmeri's desire for a loan and Smith's interest in obtaining deposits from Local 945. Palmeri offered to speak to Cariello and said that union funds would probably be deposited in the bank. He also indicated that from time to time he would be sending friends into the bank for loans. Palmeri, who was not a customer of the bank, requested and received a $10,000 unsecured loan on the spot. A week later Smith received a telephone call from Cariello who had talked with Palmeri and was ready to deposit $20,000. Smith received the check in December and issued a certificate of deposit to Local 945.

In January, 1974, Palmeri obtained an additional $7,500 unsecured loan from the bank after he promised to speak to Cariello about increasing Local 945's deposits. A few days later, Cariello called requesting interest rate quotations. Smith continued to press Palmeri for additional deposits and in March, 1974, Cariello called again to say that more money would soon be available.

On March 14, Palmeri obtained a $20,000 loan for his son's business, Elton Fashions. On the next day, the bank received an additional $80,000 check from Local 945. The same month, Smith agreed to lend Palmeri $20,000 for the construction of a restaurant, but only if he came up with four qualified borrowers, each of whom would receive $5,000. The loans were consummated using Campisano, two restaurant employees, and Palmeri's son as the four borrowers. Campisano's application stated that "education" was the purpose of his loan. Campisano and Palmeri later paid off the loan in cash because of Palmeri's uneasiness about Campisano having a loan outstanding from the same bank at which the union kept its funds. Campisano later denied to the FBI and to the grand jury ever having taken out a personal loan at the State Bank of Chatham or having been asked by anyone to do so.

In April, 1974, Palmeri and two officials from other unions threatened to withdraw their union deposits from the State Bank of Chatham unless Smith adopted a one hundred percent loans-for-deposits ratio. At that point Cariello and Campisano entered the room and Cariello announced that the union could keep its money in any bank with a competitive interest rate. On the promise of still more union deposits, and with the approval of the bank's board of directors, Smith ultimately agreed to a sixty percent ratio.

Several more loan for deposit transactions followed. The bank extended another loan to Elton Fashions for $15,000, and another to a sister corporation for $15,000. At Palmeri's request, appellant Chestnut received unsecured loans for $7,000 and $4,500, Emily Bonniello received one for $20,000, and appellant Frank Smith a car loan for $3,100. Palmeri also obtained a $5,000 unsecured loan for his brother. Throughout this time, Local 945's original $100,000 CD was continuously renewed, and an additional $100,000 CD was purchased with a check drawn on the Welfare Fund.

In August, 1974, Palmeri and the same two officials from other unions met with Alexander Smith to demand a two percent kickback on their deposits. Smith acquiesced in this demand. At the next meeting, which Campisano also attended, Frank Rando, one of the other officials, threatened to cooperate with the FBI's investigation of the kickback scheme. Palmeri responded: "(I)f you like breathing you won't even think such things, let alone say them." Campisano echoed the warning: "Frank, he's not kidding. Al (Smith) doesn't know anything. You know too much." Rec. at 2.171.

Alexander Smith testified that these loans were granted because of the loans for deposits arrangement with the union. Shortly after Smith left the State Bank of Chatham in May, 1975, Local 945 and its Welfare Fund redeemed their $100,000 CDs, and withdrew their deposits from the bank.

In the spring of 1974, Rando introduced Palmeri to Robert Prodan, vice-president and chief operating officer of the Bank of Bloomfield. Rando described his own loans-for-deposits relationship with the bank and Palmeri said that he would attempt to duplicate it. Palmeri went to the bank, stated his intention to obtain deposits from the local, and applied for a $15,000 unsecured loan. Prodan granted this loan on May 31, 1974. On June 21, 1974, the bank received a $100,000 check from the Welfare Fund for the purchase of a six month CD. Although Cariello signed this check, as he did all the Welfare Fund and Severance Fund checks, he never spoke to Prodan about the deposit or its terms. A few weeks later Prodan wrote to Palmeri acknowledging receipt of the money and thanking him. Palmeri called Prodan and...