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United States v. Musacchio

filed: July 30, 1991.


Appeal from the United States District Court for the Northern District of California. D.C. No. CR-88-0365-CAL. Charles A. Legge, District Judge, Presiding.

Mary M. Schroeder, William C. Canby, Jr. and John T. Noonan, Jr., Circuit Judges. Opinion by Judge Canby.

Author: Canby

CANBY, JR., Circuit Judge

Ted Musacchio was found guilty of misapplication of funds in the care of Columbus Savings and Loan, and of causing a false statement to be made to the Federal Home Loan Bank Board. Musacchio appeals his convictions. He contends that the indictment charging him with misapplication was insufficiently specific to protect various rights guaranteed by the Fifth and Sixth Amendments. He further claims that due to the insufficiency of the indictment his conviction for misapplication may have been based on acts that occurred outside the statute of limitations. Musacchio also asserts that a civil stipulation made by a codefendant in a related civil action was erroneously admitted against him on the false statement charge.

We disagree and affirm.


Columbus Savings and Loan Association, one of the many casualties of the savings and loan crisis, was a federally insured financial institution. Ted Musacchio was president and chief executive officer of Columbus Savings from 1979 until 1985. The Board of Directors governed the financial operations of Columbus Savings and the President was obligated under the by-laws to follow the directives of his Board. As President, Musacchio also served as a member of the Board.

In 1983, Columbus Savings entered into a joint venture agreement with Frumenti Development Company to develop Serramonte Highlands, a residential housing development. This case is based on the negotiations for, and the operation, of the Serramonte Highlands project.

In 1979, prior to formation of the Columbus-Frumenti joint venture, Frumenti Development and Citation Homes had formed a joint venture to develop Serramonte Highlands. That joint venture was also called Serramonte Highlands. In 1982, Citation Homes decided to sell its interest in the joint venture for $8 million.

Peter Frumenti, a long-time friend of Musacchio, owned Frumenti Development Company, a closely-held corporation. In addition, Peter Frumenti was a leading shareholder in Columbus Savings, having purchased $100,000 in stock at Musacchio's request. In 1983, Frumenti suggested to Musacchio that Columbus Savings buy out Citation's interest in the Serramonte Highlands project at a cost of $9.28 million.

After negotiating with Frumenti for several months, Musacchio presented the Serramonte Highlands joint venture to the Columbus Savings Board of Directors.*fn1 The Board adopted a "Resolution Authorizing Serramonte Highlands Project" but required as conditions to that resolution that Frumenti not receive any money "up front" and that Frumenti personally guarantee all agreements with Frumenti Development Company. Although Frumenti had informed Musacchio that he would be taking money up front and that he would not furnish a personal guarantee, Musacchio advised Columbus Savings that all conditions to the Resolution had been met.

Musacchio and Frumenti then executed a joint-venture agreement which provided that Frumenti was not to receive any money up front, but which made no mention of a personal guarantee by Frumenti. Contrary to the terms of this joint-venture agreement, upon closing Frumenti did personally receive $1.28 million. Because the transaction was a double escrow, the escrow documents available to Columbus Savings did not disclose that Frumenti had received this money.*fn2

Development on the Serramonte Highlands project began after the joint-venture agreement was signed. By the summer of 1985, Columbus Savings became concerned about losses from the Serramonte venture. An accounting firm was retained to conduct an audit for Columbus Savings and the Federal Home Loan Bank Board (FHLBB). The accounting firm expressed concern that Frumenti would not be able to cover his 50% share of the Serramonte losses, which were projected to be approximately $5 million. To alleviate this concern, Columbus Savings requested that Frumenti secure his obligation with three pieces of real estate. Columbus Savings, however, soon discovered that Frumenti had over-valued the three properties and that the properties were already encumbered as security for a $2.1 million loan Frumenti owed to Centennial Savings. As a result, the three properties offered as security on the Serramonte Highlands joint venture actually had a negative value.

Frumenti, however, also held stock in Delta Pacific Bank. Frumenti had purchased the stock with the $2.1 million loan from Centennial. Musacchio proposed that Columbus Savings purchase the Centennial $2.1 million loan to free the stock so that it could be used as security for Frumenti's share of the Serramonte Highlands losses. As a result, Frumenti would owe Columbus Savings rather than Centennial $2.1 million, the Delta Pacific stock would be unencumbered, and Frumenti could post the stock to cover the Serramonte losses. The Columbus Board passed a resolution to purchase Frumenti's Centennial loans, but conditioned approval upon Frumenti's pledge of the Delta Pacific stock to cover Serramonte losses. Columbus Savings drafted an Addendum to reflect these terms.

Frumenti's attorneys, however, drafted their own version of the Addendum, which omitted the requirement of Delta Pacific stock as security. Similarly, Musacchio directed that the pledge of stock be deleted from Columbus Savings' version of the Addendum. After this version of the Addendum was signed by Frumenti and Columbus Savings' representatives, Columbus Savings' attorney noticed that the Delta Pacific stock was not ...

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