U.S. v. Bonanno

• Decision Date: 08 August 1988
• Docket Number: No. 86-1352,86-1352
• Citation: 852 F.2d 434
• Parties: 26 Fed. R. Evid. Serv. 297 UNITED STATES of America, Plaintiff-Appellee, v. Joseph Charles BONANNO, Jr., Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 434

852 F.2d 434

26 Fed. R. Evid. Serv. 297

UNITED STATES of America, Plaintiff-Appellee, v. Joseph Charles BONANNO, Jr., Defendant-Appellant.

No. 86-1352.

United States Court of Appeals Ninth Circuit.

Argued April 12, 1988.

Submitted April 26, 1988.

Decided July 15, 1988.

As Amended Aug. 8, 1988.

Charles R. Garry and Peter A. Leeming, San Francisco, Cal., for defendant-appellant.

Nancy Simpson, Asst. U.S. Atty., Sacramento, Cal., for plaintiff-appellee.

Appeal from the United States District Court for the Eastern District of California.

Before FERGUSON and LEAVY, Circuit Judges, and REDDEN, ^* District Judge.

REDDEN, District Judge:

Joseph Charles Bonanno, Jr. appeals his conviction, following a jury trial, for mail fraud, wire fraud and conspiracy. Bonanno urges five grounds for reversal: (1) outrageous governmental conduct; (2) entrapment; (3) the district court's failure to instruct the jury on the good faith defense; (4) the district court's abuse of its discretion in limiting cross-examination of a governmental witness; and (5) insufficient evidence to support the conviction. We affirm.

Joseph Charles Bonanno, Jr. was indicted with four codefendants: Salvatore ("Bill") Vincent Bonanno, Jerome Gatto, Virgil Redmond, and Lyle Green. The indictment alleged 47 counts including charges for violations of 18 U.S.C. Sec. 1341 (mail fraud), 18 U.S.C. Sec. 1343 (wire fraud), and 18 U.S.C. Sec. 371 (conspiracy). The indictment alleged that the defendants engaged in a scheme to defraud investors through the operation of their corporation, Sunburst Industries. The scheme involved devising fraudulent purchase orders for a "United States historical poster" to be produced and marketed by the defendants. Defendants sought to obtain funds on the strength of the fraudulent purchase orders.

Redmond died prior to trial and Green and Gatto entered guilty pleas. Salvatore Bonanno was found not guilty and all further references to Bonanno are to appellant Joseph Bonanno.

FACTS

In 1981, Gatto and Redmond formed Sunburst Industries and purchased the copyright to the poster from Green. Green had already sold "well more than 100%" of his interest in the poster to other investors. During late 1981 and 1982, Sunburst obtained several purchase orders, none of which were sound. We summarize:

The Unicap order was solicited by Gatto and was sent by Peter Pravettoni, president of Unicap and friend of both Gatto and Bonanno. Pravettoni knew he could not afford the posters and cancelled the December 1981 order in February of 1982.

The Calco order was placed by Robert Price for his company, which was in chapter 11 bankruptcy. Calco could not afford its January 1982 order, and cancelled in February 1982. Price cancelled after Mike Hines, an investigator for the Utah Attorney General's office, advised Price that Sunburst was under investigation for its various poster transactions.

The Cal West purchase order was from a company owned by Joe Livingston, but managed by Gatto. It, too, was financially strapped and soon cancelled its order.

Asset Funding, a factoring company, loaned $200,000 to Sunburst based upon the Unicap and Cal West purchase orders. The repayment check was rejected for insufficient funds. Asset Funding then seized the inventory collateral.

The Federal Bureau of Investigation then recruited informant Lou Terra to pose as a potential investor in Sunburst. Terra himself faced criminal charges for his activities in real estate development and factoring money. Terra recorded a series of telephone conversations as well as face to face meetings with Bonanno, Gatto and the other defendants. These conversations involved the possibility of Terra factoring loans for posters.

On February 8, 1982, Gatto told Terra that Sunburst had a buyer for $350,000 worth of posters, requested $810,000 in funding from him, and sent Terra the Calco purchase order. Gatto then told Terra that Sunburst was shipping on the Unicap and Cal West purchase orders. Later, Gatto admitted that the Calco purchase order had been cancelled but said it was to be replaced. Several days later, Sunburst sent Terra information on another potential purchaser whom Bonanno identified as a "huge" marketer with connections to the Southland Corporation and its 7-11 store chain (the Bear Body/7-11 order). Bonanno told Terra that Sunburst would be selling posters in 7-11 stores nationwide. Gatto also told Terra that the posters were about to be shipped and asked for a loan. He offered to guarantee repayment by assignment of the poster copyright and inventory, and told Terra that Sunburst was not "strong" enough to provide a bank guarantee. Terra later learned that no Bear Body/7-11 purchase order existed. The Bowers order, another purchase order, was discussed by Terra, Gatto and Bonanno. During the course of the taped conversations regarding Bowers, Bonanno admitted that Bowers was "not in a position to buy the paperwork," but assured Terra that Bowers' authorized representative, Louis Ivie, would tell Terra's "investors" "whatever you [Terra] want him to say."

Bonanno was convicted on one count of mail fraud, seven counts of wire fraud and one count of conspiracy.

I OUTRAGEOUS GOVERNMENTAL CONDUCT

Bonanno challenges the trial court's denial of his several motions to dismiss based on outrageous governmental conduct. A motion to dismiss an indictment based on this ground is a question of law reviewed de novo, with factual findings reviewed under the clearly erroneous standard. United States v. Bogart, 783 F.2d 1428, 1434 (9th Cir.), vacated on other grounds sub nom. United States v. Wingender, 790 F.2d 802 (1986). This defense will not succeed unless the governmental conduct challenged is so grossly shocking as to violate the universal sense of justice. United States v. Simpson, 813 F.2d 1462, 1464 (9th Cir.), cert. denied, --- U.S. ----, 108 S.Ct. 233, 98 L.Ed.2d 192 (1987).

Unacceptable governmental conduct occurs when the government agents act brutally by using physical or psychological coercion against the defendant, or the agents engineer and direct the criminal enterprise from start to finish. Bogart, 783 F.2d at 1435-36. The government's conduct is permissible when: (1) the defendant was already involved in a continuing series of similar crimes, or the charged criminal enterprise was already in progress at the time the government agent became involved; (2) the agent's participation was not necessary to enable the defendants to continue the criminal activity; (3) the agent Bonanno points to three aspects of the government's conduct in its investigation of Sunburst as violative of his due process rights. First, Agent Hines of the Utah Attorney General's office stated to Robert Price of Calco that Sunburst was under investigation and had no right to sell the posters. Bonanno claims this discouraged Price from becoming a legitimate investor and created financial pressure on Sunburst. Second, Bonanno claims that Terra's activities forced Sunburst to rely on Terra as a source of funding. Finally, Bonanno claims that Terra intentionally delayed delivering money to Sunburst until the Bear Body/7-11 order was no longer available, thereby "driving the participants to desperation and guaranteeing the failure of the company."

                used artifice and stratagem to ferret out criminal activity;  (4) the agent infiltrated a criminal organization;  and (5) the agent approached persons already contemplating or engaged in criminal activity.   See Bogart, 783 F.2d at 1437-38
                

None of these alleged governmental actions constituted outrageous governmental conduct. Agent Hines' statements were accurate. He testified that he contacted Price to determine whether the order was bona fide after being assured by Redmond that it was. Hines told Price there was going to be an investigation and that there had been numerous complaints about Green. There is no evidence that Terra's conduct forced Bonanno to rely on him as a funding source. Terra neither provided money nor prevented Sunburst from pursuing other funding sources. Bonanno's claim that Terra intentionally delayed payment until the Bear Body/7-11 order was unavailable is not supported by the evidence. There was no evidence of such an order or evidence that Gatto took steps to act upon it.

There is no evidence that the government "engineer[ed] and direct[ed] the criminal enterprise from start to finish," as required to establish this defense. See Bogart, 783 F.2d at 1436. Terra did not devise the plan for factoring fraudulent purchase orders. See United States v. Williams, 791 F.2d 1383, 1386 (9th Cir.), cert. denied, 479 U.S. 869, 107 S.Ct. 233, 93 L.Ed.2d 159 (1986); see also United States v. Citro, 842 F.2d 1149, 1153 (9th Cir.1988). The defendants here were already involved in the purchase order scheme when Terra approached them. See Bogart, 783 F.2d at 1438.

II ENTRAPMENT

Bonanno also argues that the evidence was insufficient to support his conviction because the defense of entrapment was demonstrated. When the sufficiency of the evidence is challenged, this court must view the evidence in the light most favorable to the government, and decide if any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979); United States v. Stewart, 770 F.2d 825, 831 (9th Cir.1985), cert. denied, 474 U.S. 1103, 106 S.Ct. 888, 88 L.Ed.2d 922 (1986).

This defense focuses upon the defendant's predisposition to commit the crime, rather than on the actions of government agents. United States v. So, 755 F.2d 1350, 1353 (9th Cir.1985); United States v. Diggs, 649 F.2d 731, 738 (9th Cir.), cert. denied, 454 U.S. 970, 102 S.Ct. 516, 70 L.Ed.2d 387 (1981). This court has developed five factors to consider when determining whether a defendant was entrapped: (1) the defendant's character or reputation; (2) whether...