Source: https://law.justia.com/cases/federal/appellate-courts/F2/932/973/288861/
Timestamp: 2019-05-19 08:34:53
Document Index: 548747282

Matched Legal Cases: ['§ 1291', '§ 657', '§ 1014', '§ 7206', '§ 7201', '§ 1014', '§ 1014', '§ 1014', '§ 3623', '§ 1014']

Unpublished Disposition, 932 F.2d 973 (9th Cir. 1987) :: Justia
Unpublished Disposition, 932 F.2d 973 (9th Cir. 1987)
US Court of Appeals for the Ninth Circuit - 932 F.2d 973 (9th Cir. 1987)
UNITED STATES of America, Plaintiff-Appellee,v.Peter FRUMENTI, Defendant-Appellant.
No. 89-10517.
Argued and Submitted April 10, 1991.Decided May 3, 1991.
Peter Frumenti appeals his convictions for submitting false statements to a savings and loan association, tax evasion, and subscribing to a false tax return. Frumenti contends (1) the district court committed prejudicial error by altering a jury instruction on the defense of good faith reliance on counsel's advice after the jury began deliberating, (2) the government failed to establish beyond a reasonable doubt that Marin Savings & Loan ("Marin") was insured by the Federal Savings & Loan Insurance Corporation ("FSLIC") at the time of the offense, (3) the district court erred in admitting subsequent bad act evidence under Federal Rules of Evidence 404 and 403, (4) the evidence of the existence of a tax deficiency and willfulness was insufficient to support the jury's verdict on either of the tax counts and (5) the fine of $250,000 was in excess of the statutory maximum of $5,000. We have jurisdiction under 28 U.S.C. § 1291 and affirm the conviction on each of the counts, but vacate the $250,000 fine and remand for a redetermination of the fine.
Frumenti was president of Frumenti Development Corporation ("FDC"), a closely-held corporation. FDC had been a partner with Citation Homes in a residential development named Serramonte Highlands. In 1983, Citation agreed to sell its interest in the project for $8 million if a buyer could be found. Frumenti, a shareholder in Marin Savings and Loan ("Marin"), approached Ted Mussachio, Marin's chief executive office, about buying out Citation. Frumenti raised the selling price to $9.2 million, and told Citation's general manager not to discuss the finances with Marin.
At several Marin board meetings the directors discussed the proposal. Apparently concerned about the transaction, they asked Frumenti whether FDC owned the land and whether Frumenti would receive any money from the transaction with Citation. Both Mussachio and Frumenti told the board FDC had no interest in the transaction between Citation and Marin.
Frumenti subsequently signed a joint venture agreement with Marin for the Serramonte project on June 28, 1983. According to the agreement, Frumenti had no ownership interest in the property, and would receive no money from the sale of Citation's interest to Marin. Frumenti later received $1.28 million from the sale of the Citation interest to Marin. Frumenti claims he made a full disclosure to Mussachio, and acted on the advice of his attorney.
Frumenti's bookkeeper recorded the $1.28 million as a loan to FDC from the Serramonte Joint Venture. Frumenti later filed a tax return without listing the $1.28 million as income.
In 1985, the FSLIC took over Marin through receivership. As a result of an ensuing investigation into Marin's affairs, Frumenti was charged with aiding and abetting the misapplication of bank funds in violation of 18 U.S.C. § 657, making a false statement to a savings and loan association in violation of 18 U.S.C. § 1014, filing a false tax return in violation of 26 U.S.C. § 7206(1), and tax evasion in violation of 26 U.S.C. § 7201. At trial, the jury returned guilty verdicts on the last three counts. Frumenti received a five-year suspended sentence, three years of probation, and a fine of $250,000.
" [A]lthough a criminal defendant is entitled to an instruction regarding his theory of the case, challenges which merely pertain to the trial judge's language or formulation of the charge are reversible only for an abuse of discretion." United States v. Cruz, 783 F.2d 1470, 1472 (9th Cir. 1986) (quoting United States v. Marabelles, 724 F.2d 1374, 1382-83 (9th Cir. 1984)). The trial judge is given substantial latitude in tailoring the instructions so long as they fairly and adequately cover the issues presented. Id. Also, when reviewing a claim of error relating to jury instructions, the instructions must be viewed as a whole. Id.
Frumenti contends the trial court abused its discretion by deleting one sentence from the instruction on good faith reliance on counsel after the instruction had been read to the jury. Frumenti argues that the deletion materially altered the instruction's meaning, and was prejudicial to him.
We disagree. The district court judge sought to correct the instruction to comply with existing Ninth Circuit law. The deleted sentence misstated the law. It indicated that reliance on advice of counsel was a complete defense to the charge. It also contradicted the remainder of the instruction which correctly stated the law.
Advice of counsel is not regarded as a separate and distinct defense, but rather as a circumstance indicating good faith, which the trier of fact is entitled to consider on the issue of fraudulent intent. United States v. Ibarra-Alcarez, 830 F.2d 968, 973 (9th Cir. 1987) (quoting Bisno v. United States, 299 F.2d 711, 719 (9th Cir. 1961), cert. denied, 370 U.S. 952 (1962)).
We conclude that the district court did not abuse its discretion by correcting the instruction. The effect of the correction was that the jurors received written instructions which accurately stated Ninth Circuit law regarding reliance on advice of counsel as a defense. Frumenti's counsel's closing argument was unaffected by the change.
Proof that the financial institution is insured is an essential element of the offense of making a false statement under 18 U.S.C. § 1014. United States v. Phillips, 606 F.2d 884, 887 (9th Cir. 1979), cert. denied, 444 U.S. 1024 (1980); 18 U.S.C. § 1014. Frumenti contends the government failed to establish beyond a reasonable doubt that the accounts of Marin were insured by the FSLIC at the time of the offense.
When reviewing the sufficiency of the evidence to support a criminal conviction, the standard of review is whether, viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime charged beyond a reasonable doubt. United States v. Harris, 792 F.2d 866, 868 (9th Cir. 1986).
Frumenti argues there was no direct testimony by any witness that Marin's accounts were insured by the FSLIC, although he concedes there were at least five occasions during trial when the jury heard evidence suggesting the FSLIC insured Marin's accounts. All of this evidence was uncontradicted. It was sufficient to prove the element of insurance beyond a reasonable doubt.
Frumenti next contends that the district court judge erred in admitting evidence of subsequent bad acts under Federal Rules of Evidence 404 and 403. The admission of "bad act" evidence is reviewed for abuse of discretion. United States v. Faust, 850 F.2d 575, 584 (9th Cir. 1988).
The conduct in issue involved alleged (uncharged) forgeries of checks from Marin made out jointly to both Frumenti and a subcontractor. The subcontractor's signature was forged and the cashed checks were deposited into an FDC account. Frumenti and his son were the sole signatories on the account. The court also received into evidence testimony that Frumenti submitted false invoices to Marin for work the subcontractor did not do.
Frumenti contends the sole relevance of this evidence was to demonstrate that he had a criminal disposition, and to show that he acted in conformity with that character trait when he signed the joint venture agreement. We disagree. The district court did not abuse its discretion in admitting the evidence under Rule 404(b). The judge determined that these acts were similar to the charged counts in that they were committed against the same entity, and in the course of the same joint venture. The evidence was relevant to Frumenti's intent and good faith in his dealings with Marin in the course of the joint venture agreement. Frumenti's defense was that he acted in good faith reliance on counsel's advice. This evidence went directly to that issue.
Frumenti contends the jury's verdict on the two tax counts was not supported by the evidence. In Count 7, he was charged with tax evasion. In Count 6, he was charged with subscribing to a false statement on a tax return. In reviewing the evidence, this court must review the evidence in the light most favorable to the government, and determine whether any rational trier of fact could have found the essential elements of the crimes charged beyond a reasonable doubt. Jackson v. Virginia, 443 U.S. 307, 319 (1979).
The elements necessary to convict for tax evasion are the existence of a tax deficiency, willfulness in attempt at evasion of taxes, and an affirmative act constituting evasion or attempted evasion. United States v. Marabelles, 724 F.2d 1374, 1377 (9th Cir. 1984). Frumenti contends the government failed to establish beyond a reasonable doubt that a tax deficiency existed, or that he acted willfully to evade payment of taxes.
Once the government establishes a nondisclosure and at least the prima facie existence of a deficiency, the burden then shifts to the defendant to negate the deficiency by showing that it was wrongly computed or cancelled out by another deduction. Elwert v. United States, 231 F.2d 928, 933 (9th Cir. 1956). Frumenti argues that he satisfied his burden because the testimony of his accountant, Stewart Shikoff, established that no tax deficiency existed. Frumenti's argument is without merit. The jury also heard the testimony of expert witness Internal Revenue Service agent Tom Borgo, who testified that losses Shikoff said existed could only be correctly taken in 1984. Borgo also testified that the $1.28 million was taxable income to FDC in 1983, but was not reported in that year's return. Based on this testimony, a rational trier of fact could have found the existence of a tax deficiency beyond a reasonable doubt. Marabelles, 724 F.2d at 1377.
Frumenti also contends there was insufficient evidence of willfulness required to convict on Counts 6 and 7. For Count 7, tax evasion, willfulness requires a showing of specific wrongful intent to avoid a known legal duty. Marabelles, 724 F.2d at 1379 (citing United States v. Pomponio, 429 U.S. 10, 12 (1976)). Willfulness may be inferred by the trier of fact from all the facts and circumstances of the attempted understatement of tax. Id. (citing United States v. Conforte, 624 F.2d 869, 875 (9th Cir.), cert. denied, 449 U.S. 1012 (1980). For Count 6, the analysis is the same.
Frumenti contends he rebutted the government's proof of willfulness by establishing good faith reliance on a qualified accountant after full disclosure of tax-related information, in accordance with United States v. Claiborne, 765 F.2d 784, 798 (9th Cir. 1985), cert. denied, 478 U.S. 1120 (1986).
The government offered evidence in the form of testimony by bookkeeper Stewart Shikoff and supporting documents that the $1.28 million received from Marin was entered as a loan in FDC's general ledgers. Shikoff identified Frumenti as the ultimate source of all information regarding the nature of all the transactions. Shikoff also testified he never saw any loan documentation for the transaction. Based on the evidence, a reasonable juror could have found that Frumenti did not make full disclosure of all facts, and that he willfully misrepresented the transaction to Shikoff.
Finally, Frumenti contends the district court erred in imposing a fine of $250,000 for a violation of 18 U.S.C. § 1014 (false statement to a savings and loan), under the Criminal Fine Enforcement Act of 1984, 18 U.S.C. § 3623.
Frumenti's offense was committed on or about June 28, 1983. At that time, 18 U.S.C. § 1014 provided for a maximum fine of $5,000. The Criminal Fine Enforcement Act of 1984 applies only to offenses committed after December 31, 1984 and before November 11, 1987. United States v. Henson, 828 F.2d 1374, 1385 (6th Cir. 1988), cert. denied, 109 S. Ct. 784 (1989); United States v. Elkins, 885 F.2d 775, 790 (11th Cir. 1989). Thus, there is no basis for Frumenti's fine in excess of $5,000. We therefore vacate that portion of the district court's sentence imposing a $250,000 fine on Frumenti and remand for the district court to redetermine the amount of the fine.
Frumenti's lawyer was Gilbert Berkeley, a partner in McCutchen, Doyle, Brown and Enerson. On May 20, 1983 Frumenti disclosed the details of the deal to him, including the fact that Frumenti would be receiving $1.28 million. As discussions went on between Frumenti, Berkeley and representatives of Marin Savings, Berkeley came to the conclusion that Musacchio and the Board of Marin Savings had a disagreement because the board believed that Frumenti would receive nothing from the transaction. It was so warranted on page 27 of the draft agreement for the purchase. Berkeley told Frumenti that he had a fiduciary obligation to disclose what he was receiving to Marin Savings and that the firm would not represent him if he did not make the disclosure. Frumenti did tell Musacchio. A letter drafted by Berkeley on June 14 states that Frumenti told him that he had made a full disclosure to Musacchio. Despite the representation to Musacchio that Frumenti would be receiving the money, Berkeley did not advise Frumenti to change the agreement which warranted that he was receiving nothing.