U.S. v. Badaracco

• Decision Date: 19 February 1992
• Docket Number: No. 91-5484,91-5484
• Citation: 954 F.2d 928
• Parties: UNITED STATES of America v. Ernest J. BADARACCO, Jr., Appellant.
• Court: U.S. Court of Appeals — Third Circuit

Page 928

954 F.2d 928

60 USLW 2558

UNITED STATES of America v. Ernest J. BADARACCO, Jr., Appellant.

No. 91-5484.

United States Court of Appeals, Third Circuit.

Argued Oct. 15, 1991.

Decided Jan. 24, 1992.

As Amended Feb. 5, Feb. 24, and March 3, 1992.

Rehearing and Rehearing En Banc Denied Feb. 19, 1992.

Gerald D. Miller (argued), Miller, Meyerson, Schwartz & Corbo, Jersey City, N.J., for appellant.

Michael Chertoff, U.S. Atty., Leslie Faye Schwartz (argued), Asst. U.S. Atty., Office of U.S. Atty., Newark, N.J., for appellee.

Before SLOVITER, Chief Judge, and COWEN and WEIS, Circuit Judges.

OPINION OF THE COURT

SLOVITER, Chief Judge.

Appellant Ernest J. Badaracco, Jr. pleaded guilty to four counts of bank fraud in violation of 18 U.S.C.A. § 1006 (West Supp.1991) and 18 U.S.C. § 2 (1988). He appeals from the judgment of sentence imposing a 21 month term of imprisonment and an order that he make restitution to the Elysian Savings Bank of Hoboken in the amount of $293,000.00.

We are asked to review the district court's application of the United States Sentencing Guidelines (U.S.S.G.) in (1) concluding that Badaracco was an "organizer" or "leader" for purposes of upward adjustment under U.S.S.G. § 3B1.1(c), (2) calculating Badaracco's base offense level under U.S.S.G. § 2F1.1(b), and (3) adjusting Badaracco's sentence upward under U.S.S.G. § 2F1.1(b)(2) based on the conclusion that the offense involved more than minimal planning. We are also asked to determine whether the government violated its promise under the plea agreement to stipulate that Badaracco's offense did not involve more than minimal planning, and whether the district court erred in ordering Badaracco to make restitution to the Elysian Savings Bank in the amount of $293,000.00. Finally, we consider Badaracco's claim that the district court threatened to retaliate against him at resentencing for taking an appeal to this court. Because Badaracco is currently serving his sentence we expedited the appeal to avoid mootness of any of the issues raised.

I. Facts

Between 1979 and 1987, Badaracco served as President and Chief Executive Officer of the Elysian Federal Savings Bank in Hoboken, New Jersey. During the same period, either Badaracco or a member of his family had an interest in three electrical companies: Badaracco Brothers Inc.; Bad-Mar, Inc.; and 1067 Electric. Presentence Report p 11. ¹ In his capacity as President and CEO of Elysian, Badaracco approved loans to several Hoboken developers on the condition that they distribute the electrical work required on their construction projects to one or more of the three Badaracco family companies. Badaracco knew that his actions were against bank policy and misled the bank with the assurance that he had severed ties to the family electrical firms. The ten-count indictment against Badaracco was based on four of these transactions.

Counts 1-4 of the indictment were based on the development by Patricia Tuohy of "Crystal Condos" in Hoboken. Tuohy contacted Badaracco in the spring of 1984 to discuss financing for the acquisition and construction of the site. Badaracco promised that Elysian would finance the project provided that Tuohy enter into a partnership with Elysian's subsidiary, Elysian Financial Services Corporation (EFS). In May 1984, Tuohy and EFS entered into a partnership known as CJT Realty. Each partner held a fifty percent interest in the project, with Tuohy acting as manager of the construction project, and EFS taking a purely passive role. Badaracco was to perform inspections on the progress of the construction and to approve all draw downs from the construction loan. Presentence Report pp 13-14.

Elysian approved the construction loan for Crystal Condos in August 1984. The Presentence Report does not state the amount of the loan. After CJT Realty had purchased the property, Badaracco demanded that Tuohy hire Badaracco Brothers to do the electrical work on the project, even though another company had made the lowest bid. Tuohy objected to this demand because work performed by Badaracco Brothers for Tuohy on an earlier occasion had been unsatisfactory. When Badaracco threatened to withdraw Elysian's financing from all of Tuohy's construction projects, including Crystal Condos, if she did not meet his demand, Tuohy agreed to hire Badaracco Brothers. Presentence Report p 15. The electrical contract was worth approximately $78,300 to Badaracco Brothers. Superseding Indictment, Count 1 p 5; App. at 45.

For the next three years, Badaracco repeatedly interfered with the Crystal Condos project, which progressed slowly. Badaracco was abusive and threatening to Tuohy, warning her that: "I'm waiting for you to make one wrong move so I can foreclose on you." Presentence Report p 16. In March 1985, Badaracco replaced Tuohy's construction foreman with his own man, Joseph Gorga. When Tuohy objected, Badaracco threatened again to withdraw Elysian's financing from all of her construction projects. After Gorga took over, Tuohy noticed that very little work was being done on Crystal Condos, despite the fact that significant draw downs were being made from the Crystal Condos construction loan. Tuohy believed that the money was being used to finance the Abbey, a construction project jointly owned by Gorga and EFS. Presentence Report p 17.

In January 1986, Badaracco demanded that Tuohy sign a second construction loan in the amount of $600,000 to finish off the Crystal Condos project. Tuohy balked until Badaracco again threatened to foreclose or rescind the financing on all of her construction projects. In June 1987, after Gorga had been replaced by two successive construction foremen, Badaracco asked Tuohy to take over management of the project. Because Badaracco Brothers had not yet completed the electrical work, Tuohy sought a replacement contract to finish the work. App. at 32. She obtained an estimate from Pegasus Electric of $12,000. Badaracco suggested that Tuohy instead use Bad-Mar Electric for $19,000. In response to Tuohy's objection, Badaracco lowered the estimate to $16,000 and hired Bad-Mar to do the job without Tuohy's consent. Once again, Tuohy objected and Badaracco threatened to foreclose on the project if she did not accept Bad-Mar. Presentence Report p 19.

Counts 5 and 6 of the indictment were based on a second Badaracco scheme, involving the development of the "Adams Street Project" in Hoboken. Some time in 1984, Badaracco asked developer Peter Belfiore and his partner Alan Richards to enter into a joint venture with EFS to develop a real estate project, in which EFS would be one partner and Belfiore and Richards the other. Richards proposed the Adams Street property for development and Badaracco agreed. Badaracco decided that EFS should get a 60% interest in the project and Belfiore and Richards a 20% interest each. The property cost $540,000. Belfiore provided $40,000 of his own money and EFS provided $250,000. Belfiore and Richards were responsible for the remaining $250,000 of the mortgage amount. Presentence Report pp 20-21.

Belfiore and Richards were unable to obtain financing at any other local bank, apparently because of Badaracco's involvement in the project. ² Thus, Elysian became the sole source of financing for the project in the amount of $3,405,000. Badaracco conditioned approval of the loan on the use of Badaracco Brothers for all of the project's electrical work, and refused to consider any competitive bidding. Belfiore reluctantly agreed to this demand because he did not want to jeopardize his financing. Shortly after construction began, Badaracco unilaterally hired 1067 Electric to do part of the electrical work on the project. Presentence Report at p 22. Badaracco Brothers and 1067 Electric received approximately $175,000 worth of contracts from this project. App. at 47.

Like the Crystal Condos project, the Adams Street Project progressed slowly. Badaracco, the sole inspection and draw down authority on the construction loans, consistently underfunded the project. Presentence Report p 22. In June 1985, after accusing Belfiore, who was acting as construction manager, of stealing construction materials, Badaracco replaced Belfiore with Gorga. When Belfiore objected, Badaracco threatened to rescind Elysian's financing of the project. Presentence Report p 23. Gorga's first act as construction manager was to shut down the project. When construction was resumed, the number of workers had been dramatically cut, the rate of work was slow and its quality poor. Gorga also altered the construction plans. Belfiore believes that Gorga was attempting to make the Abbey project, which he owned jointly with EFS, more attractive than the Adams Street Project. Presentence Report p 24.

Finally, in the fall of 1986, when the Adams Street Project was nearly complete, an EFS officer informed Belfiore that more money was needed to complete the project. She told him to sign a blank loan commitment with the dollar amount to be filled in later. When Belfiore refused, Badaracco threatened to foreclose on the project. Belfiore then signed a loan commitment for an additional $975,000. Presentence Report p 25. ³

Counts 9 and 10 of the indictment are based on loans made by Elysian "to a property located at 205-207 Fourteenth Street, Hoboken, New Jersey." Superseding Indictment, Count 9 p 2. Badaracco Brothers received a $40,000 electrical contract from this deal. App. at 47-48. Although the Presentence Report states that counts 9 and 10 arose from the Crystal Condos scheme, this does not appear to be the case, judging from the dollar amount and address identified in the superseding indictment. There are no other facts before us about this scheme.

On August 2, 1990, Badaracco was charged by a grand jury with five counts of bribery, in violation of 18 U.S.C.A. § 215 (West Supp.1991) and 18 U.S.C. § 2 (1988), and five counts of bank fraud, in violation of 18 U.S.C.A. § 1006 (West...