U.S. v. Gustafson

• Decision Date: 29 February 1984
• Docket Number: 83-1653,Nos. 83-1631,s. 83-1631
• Citation: 728 F.2d 1078
• Parties: 15 Fed. R. Evid. Serv. 351 UNITED STATES of America, Appellee, v. Deil Otto GUSTAFSON, Appellant. UNITED STATES of America, Appellee, v. Ralph Edwin BRUINS, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1078

728 F.2d 1078

15 Fed. R. Evid. Serv. 351

UNITED STATES of America, Appellee, v. Deil Otto GUSTAFSON, Appellant.

UNITED STATES of America, Appellee, v. Ralph Edwin BRUINS, Appellant.

Nos. 83-1631, 83-1653.

United States Court of Appeals,

Eighth Circuit.

Submitted Dec. 12, 1983.

Decided Feb. 29, 1984.

Rehearing Denied March 30, 1984.

James M. Rosenbaum, U.S. Atty., Douglas A. Kelley, Asst. U.S. Atty., Dist. of Minn., Minneapolis, Minn., James L. Forman, Legal Intern, for appellee.

Terence P. Durkin, Dudley & Smith, St. Paul, Minn., Albert J. Krieger, Susan W. Van Dusen, Albert J. Krieger, P.A., Miami, Fla., for appellant Deil Otto Gustafson.

Before HEANEY, ROSS and FAGG, Circuit Judges.

ROSS, Circuit Judge.

On November 5, 1981, defendants Agosto, Gustafson, Newstrum, Bruins, Bacigalupo and Norris were named in a 31 count indictment that charged violations of 18 U.S.C. Secs. 1005 (false entry on bank records), 1341 (mail fraud), 1343 (wire fraud), and 371 (conspiracy). Newstrum agreed, pursuant to a plea bargain, to plead to one count of mail fraud and testify on behalf of the government. A jury trial began in United States District Court for the District of Minnesota ¹ on January 3, 1981. On January 14, the court granted judgments of acquittal to defendants Bacigalupo and Norris. On January 23, the jury returned its verdict: Agosto was convicted on all counts; Gustafson was convicted on all counts; and Bruins was convicted of 11 counts. On May 3, the district court imposed the following sentences: Agosto received 20 years and a $63,000 fine; Gustafson received 10 years and an $81,000 fine; and Bruins received 3 years and a $20,000 fine. Costs were imposed against Agosto and Gustafson. On August 29, 1983, defendant Agosto died of a heart attack.

On appeal, defendants Bruins and Gustafson raise the following issues: 1) whether government exhibit 500 was improperly admitted under rule 404(b); 2) whether the trial court erred in denying Bruins' motion for a new trial; and 3) whether the trial court erred in refusing to rule on Gustafson's motion in limine to restrict the government's cross-examination of Bacigalupo. ² For the reasons discussed herein, we affirm.

I. General Background

Defendant Gustafson, during the relevant time period, owned 20 percent of the Tropicana Hotel and Casino. Gustafson also owned the Summit National Bank of Saint Paul, Summit State Bank of Richfield, Summit State Bank of Phalen Park, Summit State Bank of South Saint Paul, and Summit State Bank of Bloomington. Defendant Newstrum was Gustafson's "right-hand man" in the operation of the various corporations. Defendant Agosto was the owner of Production and Leasing (P & L), a Nevada corporation, which provided the Folies Bergere floor show to the Tropicana for the sum of $60,000 per week. Defendant Norris was employed by Agosto at P & L as an administrative secretary. Defendant Bruins was the president of the Summit Bank of Richfield and acted as a consultant to the Summit National Bank. Defendant Bacigalupo was the vice president and cashier at the Summit National Bank and personally handled the Tropicana and P & L accounts at that bank.

The subject of this criminal prosecution was a check floating scheme which was conducted to fraudulently assist the Tropicana and P & L's financial position by providing interest-free loans to both enterprises by the Summit Banks of Saint Paul and Richfield during the years of 1977 and 1978. The Tropicana obtained an improper loan from the Summit Bank of Saint Paul by using the bank as its depository bank for Tropicana employees' federal withholding taxes. P & L obtained its loans by using two Summit banks as its depository for federal withholding taxes and by opening commercial checking accounts at both banks. The Tropicana and P & L made deposits to these accounts in the form of nonsufficient fund (NSF) checks. The banks treated these as cash (collected) items and used bank funds to pay Tropicana and P & L obligations. When the checks were returned as dishonored, the banks would accept new NSF checks to replace them. This process would continue until the defendants decided to pay with "good" checks. In order to conceal this "float" scheme, officers of both banks had to make false entries on the books to avoid arousing the suspicions of bank examiners. This scheme allowed the Tropicana and P & L to continue day-to-day operations in spite of severe cash flow shortages.

During the trial, the government produced evidence that Marlee, Inc., a Nevada corporation that owned the Gamblers Hall of Fame casino, opened a checking account at Summit Richfield in July of 1975. Gustafson owned Marlee, Inc. The opening deposit was a $300,000 personal check of Ed Legg drawn on a Las Vegas bank. Prior to collection, the bank had paid $169,000 of checks written on the account. The Legg check was not collected as payment was stopped, thus, a $169,000 overdraft was created in the account. Two days later, Gustafson deposited a check drawn on an Ethiopian bank which was valued at approximately $300,000. The item was sent to a Minneapolis bank for collection. However, on the same day, Summit Richfield gave the Marlee account a $300,000 credit which covered the overdraft. On September 16, 1975, the foreign check was still uncollected and Gustafson assured the board of directors that he would personally pay the overdraft by September 30 if the check did not clear. The overdraft was paid by Gustafson on that date.

After the bank was examined in 1975, Chief Examiner Joseph Vogel wrote a letter to the board of directors at Summit Richfield dated December 1, 1975. The letter characterized the Marlee transaction as a "direct misapplication of bank funds" with attendant "fictitious entries" on the bank's books. It named Gustafson, Newstrum, and Bruins as the persons responsible and stated that reports had been submitted to the United States attorney and the FBI. Bruins responded to the letter and indicated that he and Gustafson were concerned but felt that they handled the situation properly. No charges were filed. The Vogel letter, government exhibit 500, was introduced at trial as evidence which tended to show the defendants had knowledge and notice that suspicious "floating" activity had occurred at the bank and was deemed a misapplication of funds by the bank examiners.

The testimony of trial witnesses established that by the spring of 1978, there were so many checks and replacement checks in the clearing process that the handling of such checks became almost impossible. Agosto ordered his people to consolidate 17 Tropicana checks into two checks, payable to P & L, in the amounts of $660,000 and $360,000, respectively. These checks were deposited into the P & L account at Summit Richfield. When these checks were dishonored by the Valley Bank of Nevada, the Marquette National Bank of Minneapolis, Summit Richfield's correspondent bank, became quite alarmed. By May 16, 1978, the Marquette Bank had refused to extend provisional credit to Summit until those deposits had been collected.

This precipitated a crisis for the Summit Banks and led to what was labeled the "Jane Lannin Affair" at trial. Bruins telephoned Gustafson to inform him of the problem created by the Marquette Bank. Gustafson summoned Newstrum and put Bruins' call on a speaker phone. Bruins suggested that the Tropicana open new accounts at other Summit Banks which did not clear through the Marquette Bank. Newstrum was ordered to call Las Vegas and have blank Tropicana checks sent to Minnesota and delivered to Bruins. Newstrum called Jane Lannin and told her to drive to the Minneapolis Airport, pick up a speed pack from the Tropicana, deliver it to Bruins and await further instructions. When Lannin arrived at the bank, Bruins instructed her to open new accounts at two other Summit Banks in the name of Hotel Conquistador, Inc. When Lannin opened the new accounts, she drew checks payable to Summit National as directed by Bruins. The plan never achieved its desired effect because the bank examiners entered the bank before the checks could be presented for collection. Newstrum testified that Gustafson told him to lie to the FBI about the "Jane Lannin Affair" and to shift the responsibility from Minnesota to the people in Las Vegas.

On Monday, May 22, 1978, the federal bank examiners entered Summit National and Summit Richfield and discovered that $2,400,000 worth of checks were in float. Since this exceeded the capital of the bank, there was concern that the bank would fail. Gustafson borrowed $1,500,000 from a local bank to pay off floating checks. Agosto, through wire transfers, was able to pay off all but $220,000 at Summit National and $141,000 at Summit Richfield.

It appears that after the above payments were made, Gustafson and Bacigalupo set about to try to cover the remaining deficiency. On June 21, 1978, two miscellaneous credit slips to the P & L account were filed showing cash deposits of $110,000 and $109,000, respectively. These slips bore the initials of Bacigalupo as the responsible bank official. No currency transaction reports were filed. Furthermore, suspicious loans had been made earlier in the same day. These transactions are the subject of a second indictment in which Bacigalupo and Gustafson were charged with failure to file currency reports and for false entries on bank books. That case had not been tried prior to the trial of the instant case.

II. Evidence of Other Crimes, Wrongs or Acts

Government exhibit 500, the letter of Chief Bank Examiner Vogel, was admitted into evidence and went to the jury. Appellants assert that the admission of such evidence was an abuse of Rule 404(b) of the Federal Rules of Evidence. ³ Appellants contend that the government introduced this evidence to show that they had a propensity towards criminal behavior. Under Rule 404(b), such evidence is not admissible to prove the bad character of ...