U.S. v. Capozzi

Citation883 F.2d 608
Decision Date06 October 1989
Docket NumberNo. 88-1567,88-1567
Parties28 Fed. R. Evid. Serv. 898 UNITED STATES of America, Appellee, v. John V. CAPOZZI, Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

Nearl R. Sonnett, Miami, Fla., for appellant.

Rosemary C. Meyers, St. Louis, Mo., for appellee.

Before ARNOLD and JOHN R. GIBSON, Circuit Judges, and ROSENBAUM, * District Judge.

ROSENBAUM, District Judge.

John V. Capozzi (Capozzi) appeals his conviction, after trial by jury, on charges of conspiracy, fraud, and insider dealing. 1 The charges arise out of his scheme to defraud the United States and Bohemian Savings and Loan Association (Bohemian), an ailing St. Louis, Missouri, financial institution. On appeal, Capozzi raises several alleged errors at trial, including the district court's 2 1) failure to grant judicial immunity to defense witnesses, 2) limitation of bias or motive evidence, 3) failure to dismiss the conspiracy and fraud charges, and 4) failure to require a courtroom identification of appellant. For the reasons set forth below, we find no reversible error and affirm the judgment of conviction in all respects.

I. BACKGROUND

"Because the jury found appellant guilty on all counts, we recount the evidence presented at trial in the light most favorable to the prosecution." United States v. Padilla, 869 F.2d 372, 375 (8th Cir.1989). In October, 1982, Capozzi, a Florida real estate developer, secured a $945,000 construction loan from Bohemian for the completion of Cedar Villas, a large south Florida development. While negotiating that loan, Capozzi expressed to Dan Wood (Wood), Bohemian's president, his desire to purchase a bank. Capozzi and Wood discussed whether he, Capozzi, would be interested in joining a group which was attempting to acquire Bohemian. 3 Capozzi was interested, and in November, 1982, he met with a group headed by Al Keller (Keller). Shortly thereafter, Keller submitted a formal offer to the Federal Savings and Loan Insurance Corporation (FSLIC) listing himself, Capozzi, and Jerome Nagelbush (Nagelbush), a Capozzi associate, as purchasers. In late 1982, however, the FSLIC rejected Keller's proposal.

Capozzi immediately commenced discussions with Wood and Nagelbush concerning an alternate plan for acquiring Bohemian. Ultimately, Nagelbush opted out, but in January, 1983, Capozzi submitted to the FSLIC his own purchase plan, using a combination of real estate and second mortgages as his primary investment vehicles. Capozzi's acquisition plan 1) guaranteed that the net worth of the institution would be maintained at a predetermined level, 2) required the FSLIC to contribute $2.5 million to Bohemian outright, in addition to a $5.7 million subordinated debenture, to be repaid beginning five years after acquisition, and 3) called for Wood to remain as president of Bohemian. After much discussion, the FSLIC accepted Capozzi's proposal, and on December 1, 1983, the sale closed, making Capozzi the sole shareholder and chairman of the board of directors for Bohemian.

Immediately before taking control of Bohemian, and soon thereafter, Capozzi caused the institution to enter into transactions which ran afoul of banking laws. This resulted in, first, his removal from the bank and, ultimately, the present fifteen count federal indictment charging him with conspiracy, fraud, and insider dealing.

During a two week trial, 4 the government's evidence established that Capozzi orchestrated transactions which profited him or his associates at the expense of Bohemian in violation of federal banking laws. The jury considered evidence concerning three principal transactions.

A. The Cedar Ridge Escrow

In October, 1983, Bohemian, at Capozzi's direction, disbursed $140,000 to Capozzi associate Jerome Nagelbush, supposedly as a real estate escrow deposit on a property known as Cedar Ridge. Bohemian never purchased Cedar Ridge, however, and the $140,000 was never returned to the bank. When Bohemian's chief financial officer, Gary Schlette, requested documentation concerning the purported escrow payment for bank examiners, Wood, after consulting with Capozzi, described the payment as merely an interest free loan.

B. The Emerald Hills Transaction

In early 1984, Bohemian, under Capozzi's direction, purchased Emerald Hills Country Club (Emerald Hills), a one thousand unit apartment, golf course, and country club complex located in Hollywood, Florida, for the sum of $10 million. Under the guise of a sales commission, Capozzi directed the additional payment of $200,000 by Bohemian to Brinwo Development Corporation (Brinwo), a company owned by Capozzi associate James Inklebarger (Inklebarger). Neither Brinwo nor Inklebarger, however, played any role in the Emerald Hills transaction. Moreover, Inklebarger immediately transferred $198,000 back to Capozzi. Capozzi used $123,000 of that money to make the first quarterly payment required under the terms of his purchase of Bohemian.

C. The Camelot Transaction

In 1983, prior to acquiring Bohemian, Capozzi, through his corporation, Camelot at University Park, Inc. (Camelot), purchased a piece of undeveloped land in Miramar, Florida, for approximately $510,000. In early 1984, shortly after acquiring Bohemian, Capozzi, without disclosing his ownership of Camelot, directed Bohemian to contract to purchase the undeveloped Camelot property for the sum of $2.66 million. Capozzi's scheme depended on a fraudulent appraisal. Capozzi instructed his appraiser, Marvin Meacham, to value the undeveloped land as if it were a developed property. In sum, Capozzi presented Bohemian an appraisal based on development work which had not been performed. Capozzi used a portion of the proceeds he received from that transaction to make the second and third quarterly payments for Bohemian.

II. ISSUES ON APPEAL

Capozzi raises the following questions: 1) whether the district court properly refused appellant's request to judicially immunize three potential defense witnesses; 2) whether the district court properly limited bias or motive evidence, pursuant to Rule 608(b) of the Federal Rules of Evidence; 3) whether the district court properly denied appellant's motion to dismiss the conspiracy and fraud counts in light of McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987); and 4) whether a courtroom identification of Capozzi was essential in this case.

III. DISCUSSION
A. Defense Witness Immunity

Four days before trial, the government filed a bill of particulars naming five unindicted co-conspirators. Three such named individuals were Capozzi associates Nagelbush, Inklebarger, and Jacob Fishman (Fishman). 5 During the trial, after the government had concluded its case, the defense called the three individuals to the witness stand out of the presence of the jury. Each man asserted that, if called, he would invoke his fifth amendment privilege and decline to testify. The district court determined that each of the individuals had asserted his right to remain silent and, therefore, concluded it would be improper for the court to call these witnesses before the jury and compel them to claim their constitutional privilege. Accordingly, these potential defense witnesses were excused from testifying.

Capozzi's trial counsel advised the district court that the anticipated testimony of these individuals was crucial to Capozzi's defense. The government declined to apply for use immunity pursuant to 18 U.S.C. Sec. 6001, et seq., and the district court took the position it had no authority to compel the government to offer statutory immunity. Capozzi then requested that the district court a) continue the matter, 6 b) dismiss the indictment with prejudice, or c) judicially immunize the witnesses and compel their testimony.

Capozzi did not seek an order from the district court compelling the government to immunize these witnesses. 7 Instead, he invited the district court to fashion an extraordinary remedy: judicial immunity, "the power of a court, unaided by statute, to order that a witness' testimony cannot be used against him." United States v. Turkish, 623 F.2d 769, 773 (2d Cir.1980), cert. denied, 449 U.S. 1077, 101 S.Ct. 856, 66 L.Ed.2d 800 (1981). The district court declined Capozzi's invitation, instead, granting him leave to present to the jury relevant portions of earlier sworn deposition testimony offered by all three men during civil proceedings before attorneys for the Federal Home Loan Bank Board and FSLIC in connection with Capozzi's actions at Bohemian.

On appeal, Capozzi claims 1) his defense depended on the testimony of these individuals; 2) the government knew this and, for seven months, lulled him into relying on the anticipated testimony of these witnesses; 3) the timing of the government's bill was designed to intimidate and discourage Nagelbush, Inklebarger, and Fishman from testifying; and d) the government's denial of statutory immunity to these individuals forced them to assert their fifth amendment privilege thereby withholding exculpatory testimony which would otherwise have been available to him. 8

In sum, Capozzi argues that government misconduct--the alleged purposeful eleventh hour notification that these individuals were unindicted co-conspirators coupled with the prosecutor's refusal to offer statutory immunity--prevented him from presenting exculpatory evidence guaranteed by the sixth amendment's Compulsory Process Clause and denied him his right to due process protected by the fifth amendment.

Traditionally, defendants have used two theories in presenting due process arguments for immunization of defense witnesses. The first suggests setting the conviction aside to permit the balanced immunization of witnesses; the second would authorize judicial immunity.

Considering the first possibility, some Courts of Appeals have suggested or held that if the...

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