968 F.2d 782 (9th Cir. 1991), 90-10058, United States v. Musacchio

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Citation968 F.2d 782
Date30 July 1991
PartiesUNITED STATES of America, Plaintiff-Appellee, v. Ted A. MUSACCHIO, Defendant-Appellant.
Docket Number90-10058.

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968 F.2d 782 (9th Cir. 1991)

UNITED STATES of America, Plaintiff-Appellee,

v.

Ted A. MUSACCHIO, Defendant-Appellant.

No. 90-10058.

United States Court of Appeals, Ninth Circuit

July 30, 1991

Argued and Submitted Feb. 13, 1991.

As Amended on Denial of Rehearing and Rehearing En Banc July 1, 1992.

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Christopher J. Cannon, Sugarman & Cannon, San Francisco, Cal., for defendant-appellant.

Robert Dondero, Asst. U.S. Atty., San Francisco, Cal., for plaintiff-appellee.

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

Before SCHROEDER, CANBY and NOONAN, Circuit Judges.

CANBY, Circuit Judge:

Ted Musacchio was found guilty of misapplication of funds in the care of Columbus Savings and Loan, and of causing a false statement to be made to the Federal Home Loan Bank Board. Musacchio appeals his convictions. He contends that the indictment charging him with misapplication was insufficiently specific to protect various rights guaranteed by the Fifth and Sixth Amendments. He further claims that due to the insufficiency of the indictment his conviction for misapplication may have been based on acts that occurred outside the statute of limitations. Musacchio also asserts that a civil stipulation made by a codefendant in a related civil action was erroneously admitted against him on the false statement charge.

We disagree and affirm.

FACTS

Columbus Savings and Loan Association, one of the many casualties of the savings and loan crisis, was a federally insured financial institution. Ted Musacchio was president and chief executive officer of Columbus Savings from 1979 until 1985. The Board of Directors governed the financial operations of Columbus Savings and the President was obligated under the by-laws to follow the directives of his Board. As President, Musacchio also served as a member of the Board.

In 1983, Columbus Savings entered into a joint venture agreement with Frumenti Development Company to develop Serramonte Highlands, a residential housing development. This case is based on the negotiations for, and the operation, of the Serramonte Highlands project.

In 1979, prior to formation of the Columbus-Frumenti joint venture, Frumenti Development and Citation Homes had formed a joint venture to develop Serramonte Highlands. That joint venture was also called Serramonte Highlands. In 1982, Citation Homes decided to sell its interest in the joint venture for $8 million.

Peter Frumenti, a long-time friend of Musacchio, owned Frumenti Development Company, a closely-held corporation. In addition, Peter Frumenti was a leading shareholder in Columbus Savings, having purchased $100,000 in stock at Musacchio's request. In 1983, Frumenti suggested to

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Musacchio that Columbus Savings buy out Citation's interest in the Serramonte Highlands project at a cost of $9.28 million.

After negotiating with Frumenti for several months, Musacchio presented the Serramonte Highlands joint venture to the Columbus Savings Board of Directors. 1 The Board adopted a "Resolution Authorizing Serramonte Highlands Project" but required as conditions to that resolution that Frumenti not receive any money "up front" and that Frumenti personally guarantee all agreements with Frumenti Development Company. Although Frumenti had informed Musacchio that he would be taking money up front and that he would not furnish a personal guarantee, Musacchio advised Columbus Savings that all conditions to the Resolution had been met.

Musacchio and Frumenti then executed a joint-venture agreement which provided that Frumenti was not to receive any money up front, but which made no mention of a personal guarantee by Frumenti. Contrary to the terms of this joint-venture agreement, upon closing Frumenti did personally receive $1.28 million. Because the transaction was a double escrow, the escrow documents available to Columbus Savings did not disclose that Frumenti had received this money. 2

Development on the Serramonte Highlands project began after the joint-venture agreement was signed. By the summer of 1985, Columbus Savings became concerned about losses from the Serramonte venture. An accounting firm was retained to conduct an audit for Columbus Savings and the Federal Home Loan Bank Board (FHLBB). The accounting firm expressed concern that Frumenti would not be able to cover his 50% share of the Serramonte losses, which were projected to be approximately $5 million. To alleviate this concern, Columbus Savings requested that Frumenti secure his obligation with three pieces of real estate. Columbus Savings, however, soon discovered that Frumenti had over-valued the three properties and that the properties were already encumbered as security for a $2.1 million loan Frumenti owed to Centennial Savings. As a result, the three properties offered as security on the Serramonte Highlands joint venture actually had a negative value.

Frumenti, however, also held stock in Delta Pacific bank. Frumenti had purchased the stock with the $2.1 million loan from Centennial. Musacchio proposed that Columbus Savings purchase the Centennial $2.1 million loan to free the stock so that it could be used as security for Frumenti's share of the Serramonte Highlands losses. As a result, Frumenti would owe Columbus Savings rather than Centennial $2.1 million, the Delta Pacific stock would be unencumbered, and Frumenti could post the stock to cover the Serramonte losses. The Columbus Board passed a resolution to purchase Frumenti's Centennial loans, but conditioned approval upon Frumenti's pledge of the Delta Pacific stock to cover Serramonte losses. Columbus Savings drafted an Addendum to reflect these terms.

Frumenti's attorneys, however, drafted their own version of the Addendum, which omitted the requirement of Delta Pacific stock as security. Similarly, Musacchio directed that the pledge of stock be deleted

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from Columbus Savings' version of the Addendum. After this version of the Addendum was signed by Frumenti and Columbus Savings' representatives, Columbus Savings' attorney noticed that the Delta Pacific stock was not pledged and that there was no security agreement for the stock. The attorney advised Musacchio of these omissions.

At this same time, Columbus Savings' annual audit and a Form 8-K report were due to be filed with the FHLBB. The federal regulator in charge was particularly concerned that Columbus Savings was approaching insolvency and would need to sign a Consent Agreement. Columbus Savings' accounting firm, however, filed a report with the FHLBB indicating that Columbus Savings would still be solvent, with a positive regulatory capital of $1.6 million, after covering its share of the Serramonte losses. In preparing this report, the accounting firm relied on Musacchio's representation that Frumenti's half of the projected $5 million losses was secured by the Delta Pacific stock. As a result of the report, the FHLBB decided not to require Columbus Savings to sign the Consent Agreement at that time.

In October of 1985, the FHLBB examiner determined that Columbus Savings had to sign a Consent Resolution. At that time, Musacchio resigned as President of Columbus Savings.

On June 17, 1988, the grand jury returned a four count indictment against Musacchio and Frumenti. 3 The indictment charged Musacchio in Count One with the misapplication of $9.3 million from Columbus Savings on or about June 28, 1983, in violation of 18 U.S.C. § 657; 4 in Count Three with a false entry in Columbus Savings' records, in violation of 18 U.S.C. § 1006; and in Count Five with falsely stating to the FHLBB in a Form 8-K that stock was pledged as collateral for a reserve against project losses, in violation of 18 U.S.C. § 1001. 5

The trial court granted a motion to sever the defendants' trials. After a three week trial, the jury returned a guilty verdict against Musacchio on Counts One and Five.

On appeal, Musacchio contends that the indictment as to Count One was insufficiently specific and thus failed to provide adequate notice of the scope of the charges, failed to protect against the possibility of a conviction at variance with the indictment, failed to ensure a unanimous verdict, and allowed a conviction based upon acts outside of the statute of limitations. As to Count Five, Musacchio contends that the district court erred in admitting a stipulation, made by Frumenti in an earlier civil action, that the Delta Pacific stock was never pledged.

DISCUSSION

Count One: Misapplication

I. Sufficiency of the Indictment

We review the sufficiency of an indictment de novo. United States v. Bohonus, 628 F.2d 1167, 1173 (9th Cir.), cert. denied, 447 U.S. 928, 100 S.Ct. 3026, 65

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L.Ed.2d 1122 (1980). In judging the sufficiency of the indictment, we must determine whether it adequately alleges the elements of the crime and whether Musacchio was fairly informed of the charge against him, so that he can defend himself against the charge and plead double jeopardy against a subsequent prosecution. See United States v. Jenkins, 785 F.2d 1387, 1392 (9th Cir.), cert. denied, 479 U.S. 855, 107 S.Ct. 192, 93 L.Ed.2d 125 (1986); United States v. Buckley, 689 F.2d 893, 897 (9th Cir.1982), cert. denied, 460 U.S. 1086, 103 S.Ct. 1778, 76 L.Ed.2d 349 (1983). The government was required to state only the essential facts necessary to apprise Musacchio of the crime charged, see United States v. Markee, 425 F.2d 1043, 1047-48 (9th Cir.), cert. denied, 400 U.S. 847, 91 S.Ct. 93, 27 L.Ed.2d 84 (1970); the government was not required to allege its theory of the case or list supporting evidence to prove the crime alleged. Buckley, 689 F.2d at 897. In fact, an indictment that sets forth the charged offense in the words of the statute itself is generally sufficient. United States v. Johnson, 804 F.2d 1078, 1084 (9th Cir.1986).

Count One of the...

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