U.S. v. Castaldi

• Decision Date: 27 October 2008
• Docket Number: No. 07-3452.,07-3452.
• Citation: 547 F.3d 699
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Kenneth CASTALDI, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

547 F.3d 699

UNITED STATES of America, Plaintiff-Appellee, v. Kenneth CASTALDI, Defendant-Appellant.

No. 07-3452.

United States Court of Appeals, Seventh Circuit.

Argued September 5, 2008.

Decided October 27, 2008.

Daniel L. Bella, Joshua P. Kolar (argued), Office of the United States Attorney, Hammond, IN, for Plaintiff-Appellee.

Clark W. Holesinger (argued), Valparaiso, IN, for Defendant-Appellant.

Before FLAUM, ROVNER, and WILLIAMS, Circuit Judges.

FLAUM, Circuit Judge.

Kenneth Castaldi appeals his conviction on thirteen counts of mail fraud and embezzlement from an employee benefits plan. The convictions stemmed from a grant that the Northwest Indiana District Council of Carpenters (the Union) obtained for the purpose of having the Northwest Indiana Joint Apprenticeship Committee (the JAC) teach certain classes to Union members. Castaldi, the director of the Joint Apprenticeship Committee, was convicted of stealing some of this grant money. Castaldi now raises a number of challenges to his conviction on appeal. He claims that (1) his indictment was legally insufficient; (2) the prosecution improperly presented a mug shot to the jury; (3) the district court improperly excluded testimony as hearsay; (4) the government's evidence on the mail fraud charge was insufficient to support a conviction; (5) the district court failed to properly consider the sentencing factors contained in 18 U.S.C. § 3553(a); and (6) the government did not present sufficient evidence of his intent to embezzle. For the reasons explained below, we affirm the judgment of the district court.

I. Background

The government's case against Castaldi was essentially that he, along with his co-defendant Paul Hernandez, controlled the account where grant funds were deposited, and then paid themselves (or their credit card companies) sums totaling more than $100,000 from the account.

The State of Indiana awarded the grant to the Union so that it could provide various vocational education programs for Union members; the Union enlisted the JAC to teach classes in the proper use of scaffolding equipment. The terms of the state's grant covered thirty-one percent of the costs of the educational program, up to a maximum of $200,000; the Union would thus need to spend about $645,000 in order to receive the full amount of the grant. The state also required that the Union incur all program-related expenses by March 3, 2000 in order to qualify for reimbursement.

The defendant, in his briefs to this court, emphasized that Hernandez took much of the initiative in obtaining the grant. Hernandez was, at the time the state awarded the grant, in charge of special projects for the Union. He sought out the grant, served as the liaison to state officials, and worked out the logistics of the grant. Hernandez received the grant funds from the state and deposited them in the Northwest Indiana Carpenters District Grant Fund, a checking account opened at the Indiana Carpenters Federal Credit Union. Hernandez, Castaldi, and Gary Nannenga, the head of the Union, were the signatories on this account.

The JAC's role was to provide scaffolding training for Union members, and the state grant funds would be used, in part, to pay for that training. The JAC listed the grant fund checking account on its books and provided the state with W-9 paperwork, signed by Castaldi, as part of the grant. Castaldi, as the head of the JAC, was thus connected to the administration of the grant funds.

The government alleges that the illegal conduct in this case stems from what Hernandez and Castaldi chose to do with the grant funds. Castaldi and Hernandez were signatories to the account in which the grant funds were kept. Drawing on the grant account, Castaldi and Hernandez made out checks to themselves, to a credit card company with which Hernandez had an account, and to a secretary and bookkeeper for the JAC, paying out over half of the grant's proceeds, with most of the payments occurring after the March 3, 2000 deadline for reimbursement.

Castaldi and Hernandez both claimed that the payments were wages that the two were entitled to because of their work on the scaffolding training. The government pointed out that both are salaried employees, and that the terms of their employment do not include overtime wages. Indeed, Ronald Simko, who replaced Castaldi as director of the JAC in 2001, was offered money from the grant fund in addition to his salary but apparently refused to take it.

Castaldi and Hernandez's payments to themselves violated a number of other JAC by-laws, including the requirement that all checks be signed by a Union trustee and an employer trustee, and a prohibition on Union officials writing their own payroll checks or opening up accounts. Hernandez and Castaldi, both trustees of the JAC, were aware of these requirements and, as far as anyone can tell, never suggested that the JAC modify them.

On May 19, 2005, a federal grand jury indicted Hernandez and Castaldi on twenty-one separate counts. Castaldi was named in count one, charging him with mail fraud, and counts three through fourteen, charging him with theft or embezzlement of an employee benefit plan's assets. A federal jury convicted Castaldi on all counts on November 21, 2006. The district court then rejected Castaldi's motions for an acquittal and a new trial, and ultimately sentenced him to thirty months in prison. This appeal followed.

II. Discussion

A. The legal sufficiency of the indictment.

Castaldi first challenges the legal sufficiency of the indictment. When a defendant challenges an indictment before the district court, the district court's decision is usually reviewed de novo. United States v. Smith, 230 F.3d 300, 305 (7th Cir.2000). However, because in this case Castaldi did not object to the indictment before the district court, we review under a more deferential standard. The indictment "must be upheld unless it is so defective that it does not, by any reasonable construction, charge any offense for which the defendant is convicted." Id. at 305-06 n. 3.

In order for an indictment to be sufficient, it must accomplish three things. First, it must state each element of the crimes charged; second, it must provide the defendant with adequate notice of the nature of the charges so that the accused may prepare a defense; and third, it must allow the defendant to raise the judgment as a bar to future prosecutions for the same offense. United States v. Fassnacht, 332 F.3d 440, 444-45 (7th Cir.2003). We have emphasized that we read indictments practically and as a whole, rather than in a "hypertechnical manner." Id. Moreover, the defendant must demonstrate prejudice from the alleged deficiency in the indictment. United States v. Webster, 125 F.3d 1024, 1029 (7th Cir.1997).

Castaldi focuses on counts three through fourteen of his indictment, which stated that defendants "did embezzle, steal, and unlawfully and willfully abstract and convert to their own use ... the moneys .. . and other assets of the Northwest Indiana Joint Apprenticeship Committee [JAC]" (emphasis added). According to Castaldi, the record is clear that it was the Union, not the JAC, that was issued the grant and that the Union held the grant proceeds. Castaldi further claims that he was prejudiced by this error because the indictment did not provide him with adequate notice of the charges against him, and because he could be prosecuted for the same conduct again, with the Union rather than the JAC as the purported victim.

The reference to the JAC rather than the Union is insignificant, however. As the government correctly points out, even if the Union initially received the grant money, the money was meant to compensate the JAC for scaffolding classes and, thus, the JAC was the entity that would ultimately benefit from the grant funds. Those grant funds were also in an account that was listed on the books of the JAC and to which Castaldi, the head of the JAC, was one of only three signatories. Thus, there is ample basis to believe that the JAC was entitled to the funds during the time of the embezzlement, or at least that the funds were intended for the JAC, and thus it was properly listed as the victim of the scheme.

Additionally, defense counsel in this case agreed to Jury Instruction 37, which provided that a defendant could "be convicted of illegally taking money intended for the benefit of an employee plan even if the money is taken before it is turned over to the plan." Given that defense counsel agreed at trial that Castaldi could be convicted of taking money from an employee benefit plan even if the funds he took had not yet reached that plan, it is very odd for him to argue on appeal that he could not even be charged under the same theory of the case.

Accordingly, the record below reveals that Castaldi had adequate notice of the charges against him and that it was proper for the indictment to list the JAC, rather than the Union, as the victim in the indictment.

B. The presentation of Castaldi's mug shot to the jury.

Castaldi's second claim is that the district court improperly permitted the government to present a mug shot of him to the jury during the government's opening statement and closing argument. The mug shot was part of a demonstrative aid presenting the flow of funds between the grant, Hernandez, and Castaldi, with the picture accompanying Castaldi's name and place on the flow chart.

Mug shots are generally not admissible at trial because they are indicative of past criminal conduct and thus barred by concerns about presenting evidence of a defendant's past criminal conduct to a jury. United States ex rel. Bleimehl v. Cannon, 525 F.2d 414, 416 (7th Cir.1975). A mug shot may be introduced as evidence, however, when the following conditions have been satisfied. "(1) The prosecution must have a demonstrable need to introduce the photographs; (2) the photos themselves, if shown to the jury, must not...