U.S. v. Cardascia

• Citation: 951 F.2d 474
• Decision Date: 05 December 1991
• Docket Number: Nos. 108-112,D,s. 108-112
• Parties: 34 Fed. R. Evid. Serv. 1224 UNITED STATES of America, Appellee, v. Carl CARDASCIA; Ronald Martorelli; Gabriel Peluso; Anthony DelVecchio; Jilly Rizzo; Donald Sheppard; Marc Bateman; Donald Laauwe; Frank Nigrelle; Stephen Metz; Grace Celentano; Vincent Ciarlone, Defendants, Carl Cardascia; Marc Bateman; Ronald Martorelli; Donald Sheppard and Jilly Rizzo, Defendants-Appellants. ockets 90-1541, 90-1721, 91-1037, 91-1039 and 91-1040.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 474

951 F.2d 474

34 Fed. R. Evid. Serv. 1224

UNITED STATES of America, Appellee, v. Carl CARDASCIA; Ronald Martorelli; Gabriel Peluso Anthony DelVecchio; Jilly Rizzo; Donald Sheppard; Marc Bateman; Donald Laauwe; Frank Nigrelle; Stephen Metz Grace Celentano; Vincent Ciarlone, Defendants Carl Cardascia; Marc Bateman; Ronald Martorelli; Donald Sheppard and Jilly Rizzo, Defendants-Appellants.

Nos. 108-112, Dockets 90-1541, 90-1721, 91-1037, 91-1039 and

91-1040.

United States Court of Appeals Second Circuit.

Argued Aug. 26, 1991.

Decided Dec. 5, 1991.

John Apicella, Brooklyn, N.Y., for defendant-appellant Carl Cardascia.

John H. Doyle, New York City (Jordan W. Siev, Carol Schlitt, Anderson Kill Olick & Oshinsky, P.C., of counsel), for defendant-appellant Marc Bateman.

Dominic F. Amorosa, New York City, for defendant-appellant Jilly Rizzo.

Paul Brenner, New York City, for defendant-appellant Ronald Martorelli.

Susan Corkery, Asst. U.S. Atty. E.D. New York, Brooklyn, N.Y. (Andrew J. Maloney, U.S. Atty., Emily Berger and Virginia Evans, Asst. U.S. Attys., Steven M. Gold, Sp. Asst. U.S. Atty., of counsel), for appellee U.S.

Before OAKES, Chief Judge, FEINBERG and CARDAMONE, Circuit Judges.

CARDAMONE, Circuit Judge:

This appeal reveals delineated plans in which different individuals in their haste to get rich committed numerous frauds and misapplied bank funds. Appellants are swindlers who created sham schemes and the bank officers who received commissions under-the-table for loaning the bank's money to them. In doing so they proved the truth of Samuel Johnson's dictum: "Avarice is a uniform vice ... to the favour of the covetous there is a ready way, bring money and nothing is denied." S. Johnson, The History of Rasselas, XXXIX (Oxford Univ. Press). Appellants' greed blinded them to the fact that their grandiose designs were so transparent it was obvious they would be easily seen through. We turn to examine in some detail the two conspiracies upon which appellants were convicted and the roles they and others who participated played.

BACKGROUND

Carl Cardascia, Marc Bateman, Ronald Martorelli, Jilly Rizzo, and Donald Sheppard (appellants) were all convicted in the United States District Court for the Eastern District of New York (Weinstein, J.), after a lengthy and complicated jury trial, for conspiracy, fraud, and false statements in connection with loans made by a Queens, New York savings and loan institution. A 64-count indictment charged 12 defendants variously with conspiring to commit offenses in violation of 18 U.S.C. § 371 (1988) (conspiracy), § 1341 (mail fraud), § 1343 (wire fraud), §§ 1006 and 1014 (false statements), and 18 U.S.C. § 657 (1988) (misapplication of bank funds).

The five appellants were found guilty by the jury on April 4, 1990 as follows: (1) Cardascia of two conspiracy counts, five mail fraud counts, 22 misapplication of bank fund counts, four false statement counts, and one count of illegal participation of a bank officer in a false statement; (2) Bateman of one conspiracy count Cardascia was sentenced to concurrent two year terms on all counts, fined $669,000, with all but $100,000 suspended, and ordered to make restitution in the amount of $7.9 million, also suspended. Martorelli was sentenced to concurrent five year terms, which were suspended, given two years probation, six months of which are to be served in a community treatment facility, and fined a $350 special assessment. Sheppard's and Bateman's two and five year sentences were suspended, and each received a probationary term requiring 300 hours of community service. Sheppard was assessed $50; Bateman was fined $40,000 and $5,000 on the two counts for which he was convicted. Rizzo's sentence was similar to Martorelli's, except that his fine was $285,000, plus a $150 assessment. Cardascia is presently serving his sentence. The sentences of the other four appellants have been stayed pending this appeal.

                and one false statement count;  (3) Martorelli of two conspiracy counts, four wire fraud counts, four misapplication counts, one mail fraud count, and one false statement count;  (4) Rizzo of one conspiracy count, five misapplication counts, and two false statement counts;  and (5) Sheppard of one conspiracy count, one false statement count, and one mail fraud count.   Judgments of conviction were entered against each appellant on August 24, June 20, December 5, June 20, and November 15, 1990, respectively
                

In addition to these five appellants, a sixth defendant, Anthony DelVecchio, was convicted but has not appealed. Three of the six remaining defendants--Gabriel Peluso, Stephen Metz, and Frank Nigrelle--pled guilty before trial; the prosecution of the other three defendants--Donald Laauwe, Vincent Ciarlone, and Grace Celentano--was deferred (these seven defendants are hereafter referred to as defendants to distinguish them from appellants). Three other primary players in the two conspiracies--Lawrence Formato, George Livieratos and Michael Rapp--cooperated with the prosecution, were not indicted, and appeared as the government's chief witnesses (referred to hereafter as witnesses).

The charges involved two different conspiracies sharing many of the same defendants and involving the same bank, the Flushing Federal Savings and Loan Association of Queens, New York (bank or Flushing Federal), where appellant Cardascia was president and appellant Martorelli assistant vice-president. In prosecuting this matter, the government called 35 witnesses and introduced hundreds of documents during the 40-day trial.

A. The Joint Venture

In the first or joint venture conspiracy a group of business partners obtained multi-million dollar loans fraudulently from Flushing Federal, ostensibly to develop property in Pennsylvania. The business venture was a sham. The seven partners in this venture were appellants Bateman, Sheppard and Rizzo, witnesses Formato and Livieratos, and defendants DelVecchio and Peluso (hereafter partners). The conspiracy developed as follows: In late 1982 or early 1983 appellant Bateman, an attorney, contacted witness Formato and proposed that Formato and Livieratos, as officers of World Wide Ventures, Inc. (World Wide), a holding company of various enterprises for which appellant Sheppard served as corporate secretary, enter a joint venture with Bateman, appellant Rizzo, and defendant Anthony DelVecchio, the latter two being the owners of Jilly's Enterprise. The sole asset of Jilly's Enterprise was a piece of undeveloped land in the Poconos region of Pennsylvania (the Poconos property). Rizzo and DelVecchio needed financing in order to convert the property to a profitable use. Shares of stock in World Wide were exchanged for an interest in the Poconos property, which was estimated to be worth $300,000 at the time. With a projected $300,000-$700,000 in seed money, and needing an estimated $30-50 million dollars to complete the project, the partners purportedly planned to develop the Poconos property into a hotel, casino, and sporting resort complex.

The group first sold one million shares of World Wide stock while holding promotional media events in an effort to inflate its price. They also obtained two small loans After approving the loan, appellant Cardascia instructed the partners to get an appraisal of the Poconos property at as high a figure as possible, to serve as "window dressing" in the event the loan files were examined by government auditors. The appraisal and other documents were to be delivered to appellant Ronald Martorelli, assistant vice-president of the bank. Cardascia, knowing the property was worth only $300,000, intended that the Poconos property would serve as the collateral for the $5 million loan. Appellant Sheppard, as the corporate secretary of World Wide, produced some loan documents for Martorelli, but he and the other partners were unable to obtain the inflated appraisal until attorney Bateman managed to get from defendant Donald Laauwe, a licensed real estate broker, an appraisal valuing the property at $6.5 million, for which Laauwe was paid a $1,000 fee. This value was ascribed to the Poconos property despite the lack of any zoning permits or construction approvals for the huge development ostensibly planned. Further, the so-called appraisal did not contain a legal description of the property, tax value information, sales figures for comparable property, or its highest or best use value. Defendant Laauwe's appraisal failed to conform to professional standards in so blatant a manner that no bank could consider the document acceptable for loan purposes. The appraisal eventually was forwarded by witness Formato to appellant Martorelli--who asked no questions--and said it was needed purely as a formality to complete the file.

                from the Pilgrim National Bank, but these funds were not used to develop the property and were spent instead on the partners' personal expenses.   In their search for additional capital, the partners were introduced to defendant Gabriel Peluso and, in turn, his friend appellant Carl Cardascia, president of Flushing Federal.   Hoping ultimately to procure $50 million in financing, the partners arranged for a $5 million loan from the bank, but received only $500,000 due to limits on the amount Cardascia could personally approve.   Although defendant Peluso originally demanded a 20 percent commission, or $1 million, to split with Cardascia, the partners eventually agreed to transfer 1 million shares of World Wide stock instead
                

The $5 million line of credit was conditionally approved on March 7, 1984 and the partners closed the transaction at Flushing Federal on March 23, 1984. The bulk of the proceeds from the initial $500,000 payment had been dispersed among the partners for their personal use. On May 16, 1984 witness Livieratos initiated the transfer of 500,000 shares of World Wide, then worth $2.50 per share, to appellant Cardascia and defendan...