United States v. Castaldi, Kenneth ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 07-3452
U NITED S TATES OF A MERICA,
Plaintiff-Appellee,
v.
K ENNETH C ASTALDI,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Indiana, Hammond Division.
No. 2:05 CR 77—Rudy Lozano, Judge.
A RGUED S EPTEMBER 5, 2008—D ECIDED O CTOBER 27, 2008
Before F LAUM, R OVNER, and W ILLIAMS, Circuit Judges.
F LAUM, Circuit Judge. Kenneth Castaldi appeals his
conviction on thirteen counts of mail fraud and embezzle-
ment 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 Ap-
prenticeship Committee (the JAC) teach certain classes to
Union members. Castaldi, the director of the Joint Ap-
prenticeship Committee, was convicted of stealing some
2 No. 07-3452
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 prosecu-
tion 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 embez-
zle. For the reasons explained below, we affirm the judg-
ment 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.
No. 07-3452 3
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.
4 No. 07-3452
Castaldi and Hernandez both claimed that the pay-
ments were wages that the two were entitled to because
of their work on the scaffolding training. The govern-
ment 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.
No. 07-3452 5
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 stan-
dard. The indictment “must be upheld unless it is so
defective that it does not, by any reasonable construc-
tion, charge any offense for which the defendant is con-
victed.” 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 defen-
dant 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
6 No. 07-3452
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 insig-
nificant, 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 scaf-
folding 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
No. 07-3452 7
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 improp-
erly permitted the government to present a mug shot of
him to the jury during the government’s opening state-
ment 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 defen-
dant’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 imply that the defendant had a crim-
inal record; and (3) the manner of their introduction at
trial must be such that it does not draw particular atten-
tion to the source or implications of the photographs.” Id.8 No. 07-3452
The decision to allow the use of demonstrative exhibits
is an evidentiary decision which we review for abuse of
discretion. United States v. Warner, 498 F.3d 666, 691 (7th
Cir. 2007).
Castaldi’s argument on this issue is limited to the
absence of any demonstrable need to introduce the photo-
graph into evidence, coupled with the prejudice from
the introduction of a mug shot. The government
included the mug shot of Castaldi on a chart used to
illustrate how money flowed among different organiza-
tions and individuals. The district court determined that
the mug shot did not indicate that Castaldi was incarcer-
ated, and that it lacked the prejudicial features of a mug
shot, such as a prisoner wearing prison garb or holding
up prison slates. Indeed, the photo shows Castaldi
wearing street clothes, standing in front of a blank back-
ground.
In a case where the government simply uses the photo as
part of a demonstrative exhibit, prosecutors are well
advised not to present mug shots or other detention-
related photos to a jury, particularly when a prosecutor
could obtain a similar photo from another government
bureau, such as the Department of Motor Vehicles. Were
the government to consider such an approach again, we
trust they would reflect on the challenges such demon-
strative exhibits present. Nevertheless, the record below
indicates that the photo was not admitted into evidence
and was presented in such a way that the jury would not
have been aware of its origins. Although we have reserva-
tions regarding the need to introduce the mug shots
No. 07-3452 9
when the government could simply have used the defen-
dants’ names on the chart, we will not find an abuse
of discretion on the basis that we might have acted differ-
ently from the district court. Accordingly, the district
court did not abuse its discretion in allowing the use
of the photo in the demonstrative exhibit.
C. Exclusion of testimony as cumulative error.
Castaldi’s third challenge is to the district court’s refusal
to admit various testimony that it determined to be
hearsay. Castaldi claims that the various denials collec-
tively amount to cumulative error. Evidentiary rulings
are, again, reviewed for an abuse of discretion. United
States v. Aldaco, 201 F.3d 979, 985 (7th Cir. 2000). In order
for evidentiary rulings to amount to cumulative error, a
defendant must show that multiple errors ultimately
denied him a fundamentally fair trial. Alvarez v. Boyd, 225
F.3d 820, 824 (7th Cir. 2000). This requires showing that
“but for the errors, the outcome of the trial probably
would have been different.” United States v. Allen, 269
F.3d 842, 847 (7th Cir. 2001).
Castaldi points to the district court’s decision to
sustain a hearsay objection at some point during the
testimony of six different witnesses. Castaldi claims that
in each instance, the testimony was not offered for the
truth of the matter asserted and thus was not hearsay. The
government responds that the district court took this
distinction into account when examining the government’s
hearsay objections. Indeed, it claims that in at least two
instances the government’s objections were sustained
10 No. 07-3452
because defense counsel had not identified a relevant
purpose for the statement aside from the truth of the
matter asserted.
Even assuming arguendo that the district court improp-
erly excluded portions of the testimony on hearsay
grounds, Castaldi does not present to this court any
indication that the excluded testimony was so material to
the case that, were that testimony admitted, the jury
would have returned a different verdict. The testimony
in question related to statements that Castaldi and other
account signatories made to various witnesses about the
existence of the trust account or payments from the
account; ostensibly, this testimony would have estab-
lished that various Union officials were aware of the
grant funds. However, Castaldi does not point to any
testimony of relevance to the charges in this case; none
of the testimony indicates that Union or JAC officials
knew that Castaldi was paying himself with grant funds,
nor that they approved of those payments. The district
court thus did not abuse its discretion by excluding the
testimony in question; nor can Castaldi demonstrate that,
had the testimony been admitted, the outcome of the
trial would have been different. We find no cumulative
error here.
D. Sufficiency of the evidence on Castaldi’s intent to
defraud.
Castaldi’s fourth challenge is that the government did
not present sufficient evidence of his intent to defraud with
respect to the mail fraud count. A challenge to the suffi-
No. 07-3452 11
ciency of the evidence is a formidable barrier for a defen-
dant to overcome. This court will review the evidence
at trial in the light most favorable to the government and
reverse the conviction only if no rational finder of fact
could have found the defendant guilty beyond a reason-
able doubt. United States v. Wallace, 212 F.3d 1000, 1003
(7th Cir. 2000).
The government, to prove a mail fraud charge, must
prove that a defendant: (1) devised a scheme to defraud;
(2) did so knowingly and with an intent to defraud; and
(3) used the mail as part of carrying out the scheme. 18
U.S.C. § 1341. Castaldi argues that the indictment charged
him with a scheme to defraud during the grant period,
while the proof at trial related only to the period after
the grant had expired. He also argues that Hernandez
pulled the strings on the grant, and thus that the gov-
ernment cannot prove he was a willful participant in
the scheme.
The evidence in the record indicates that Castaldi was a
long-serving member of both the Union and the JAC,
and accordingly that he was familiar with the by-laws of
both organizations, including their prohibitions on
writing himself checks from JAC or Union accounts.
The record also indicates that during and after the grant
period Castaldi wrote himself checks from the grant
fund account, including checks payable to himself. This
court cannot conclude that no rational finder of fact could
find that Castaldi entered into a scheme to defraud
during the grant period, given that he took money he
was not rightfully owed from the account with grant
12 No. 07-3452
funds, and that, given his knowledge of the proper proce-
dures to follow with such funds, he did so knowing it did
not belong to him. The evidence in the record is thus
sufficient to support a conviction.
E. Whether the district court considered the § 3553(a)
factors at sentencing.
Castaldi’s fifth claim is that the district court failed to
properly explain its sentence of thirty months (which was
within guidelines) in light of the sentencing factors in
18 U.S.C. § 3553(a). We review the district court’s sentenc-
ing procedures de novo. United States v. Mendoza, 510 F.3d
749, 754 (7th Cir. 2007). We review a district court’s
ultimate sentencing decision for reasonableness. United
States v. Booker, 543 U.S. 220, 261 (2005). A within-guide-
lines, properly calculated sentence is presumptively
reasonable. Rita v. United States, 127 S.Ct. 2456, 2462 (2007).
With respect to the district court’s discussion of the
§ 3553(a) factors, a “comprehensive essay” is not necessary,
nor does the district court have to proceed in a checklist
fashion through the factors. United States v. Dean, 414 F.3d
725, 729 (7th Cir. 2005). Instead, the district court must
provide the reasoning behind its sentencing decision,
while addressing arguments that are “not so weak as not
to merit discussion.” United States v. Cunningham, 429
F.3d 673, 679 (7th Cir. 2005).
Castaldi argues that he presented evidence to the
district court that he had no prior criminal history and is a
hardworking and industrious person. He also claims
strong support from his family, friends, and community,
No. 07-3452 13
and that as a non-violent offender he presents no danger
to his community. These factors, Castaldi argues now,
supported a sentence of probation or home detention,
rather than the prison term that the district court imposed.
The record from the sentencing hearing indicates that
the district court considered the factors that Castaldi cites
on appeal. Addressing Castaldi and Hernandez, the
district court noted that “both of you have talked about
your past history, your history of being law abiding
and the good you have done. I have no doubt that many
of the things that you have done in your life have been
good.” Sentencing Hearing Tr. vol. 2, p. 82. But the
district court then cited the gravity of Castaldi’s crime,
and the need for deterrence and rehabilitation in
imposing a within-guidelines sentence of thirty months.
The district court’s consideration of the § 3553(a) factors
may not have resulted in the court giving Castaldi the
sentence that he wanted, but the record reflects that the
district court did consider those factors and imposed a
sentence that is within the sentencing guidelines and
reasonable given the circumstances of this case.
F. The sufficiency of the evidence with respect to
Castaldi’s criminal intent.
Castaldi’s final argument to this court is that the gov-
ernment did not present sufficient evidence of his intent
to embezzle funds. This argument largely repeats the
claim that Castaldi made in his challenge to the suf-
ficiency of the evidence on the mail fraud charge: That
Castaldi simply took directions from Hernandez about
14 No. 07-3452
the disbursement of the grant funds. Again, however,
the record reflects that the government presented testi-
mony that both Castaldi and Hernandez wrote themselves
checks out of the grant account, and that both were long-
serving Union employees who knew the Union
prohibited this practice. There is thus sufficient evidence
in the record that Castaldi, in concert with Hernandez,
knowingly embezzled funds intended for the JAC.
III. Conclusion
The judgment of the district court is A FFIRMED.
10-27-08