People v. Spaccia ( 2017 )

Filed 6/23/17
CERTIFIED FOR PARTIAL PUBLICATION*
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
THE PEOPLE, B256046
Plaintiff and Respondent, Los Angeles County
Super. Ct. Nos. BA382701
v. & BA376026
PIER’ANGELA SPACCIA,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Kathleen A. Kennedy, Judge. Affirmed in
part, reversed in part, with directions.
Dwyer + Kim and John P. Dwyer, under appointment by
the Court of Appeal, for Defendant and Appellant.
Kamala D. Harris, Attorney General, Gerald A. Engler,
Chief Assistant Attorney General, Lance E. Winters, Senior
Assistant Attorney General, Victoria B. Wilson, Supervising
Deputy Attorney General, and Idan Ivri, Deputy Attorney
General, for Plaintiff and Respondent.
_______________________________________
* Pursuant to California Rules of Court, rules 8.1100, 8.1105(b),
and 8.1110, this opinion is certified for publication with the exception
of parts 1 and 3 of the Discussion.
INTRODUCTION
This case arises out of the highly publicized corruption
scandal in the City of Bell (Bell). The scandal erupted in 2010,
after it was discovered that the city manager, assistant city
manager, and five city council members were receiving
astronomical salaries and fringe benefits, which they had taken
care to conceal from their constituents. The subsequent
investigation focused in large part on the actions of the longtime
city manager, Robert Rizzo, and the assistant city manager,
defendant and appellant Pier’Angela Spaccia.
As pertinent here, a jury convicted Spaccia of 11 counts
relating to the corruption scandal, including five counts of
misappropriation of public funds (Pen. Code, § 424), one count of
conspiracy to misappropriate public funds (Pen. Code, § 182,
subd. (a)(1)), four counts of conflict of interest by a public official
(Gov. Code, §§ 1090, 1097) and one count of secreting an official
record (Gov. Code, § 6200). Spaccia challenges the judgment of
conviction on several grounds.
With respect to the five counts of misappropriation of
public funds, Spaccia asserts we must reverse the two convictions
related to unauthorized loans she received from Bell due to
insufficient evidence. We reject this contention because the jury
could reasonably have concluded she was criminally negligent by
failing to take steps to determine whether those loans were
authorized. Spaccia also asserts that the instructions given here
for all of the misappropriation counts incorrectly allowed the jury
to convict her based upon her status as a city officer alone,
without also requiring the jury to find that she exercised some
material degree of control over public funds. We agree the
instructions were erroneous in light of People v. Hubbard (2016)
2
63 Cal.4th 378 (Hubbard), a decision issued after Spaccia’s trial,
clarifying the scope of Penal Code section 424. Furthermore, we
cannot say the error was harmless beyond a reasonable doubt.
Accordingly, we reverse the five convictions for misappropriation
of public funds in counts 3, 4, 10, 12 and 13.
Further, Spaccia contends the conflict of interest conviction
based on her involvement in changing Bell’s pension plan must
be reversed because the plan is not a contract within the meaning
of Government Code section 1090. Instead, she argues the
pension plan is a form of deferred compensation incident to her
employment with Bell, and because she was convicted of conflicts
of interest in relation to her employment contracts in counts 4, 5,
and 6, she cannot be convicted in count 2 for making the same
employment contracts. We affirm the conviction on count 2
because amendments to the pension plan effectively modified the
terms of Spaccia’s employment with Bell, and therefore
constituted the making of a contract within the meaning of
Government Code section 1090.
Finally, with respect to sentencing, Spaccia contends the
abstract of judgment erroneously states she is required to serve
her sentence in state prison due to a current or prior conviction
for a serious or violent felony (Pen. Code, § 1170, subd. (h)(3)).
The People concede the point, and we direct the court to correct
the abstract of judgment.
3
PROCEDURAL BACKGROUND
By information dated October 3, 2013,1 the People charged
Spaccia with 13 counts related to the Bell public corruption
scandal: one count of conspiracy to misappropriate public funds,
in violation of Penal Code section 182, subdivision (a)(1)2
(count 1); four counts of conflict of interest, in violation of
Government Code sections 1090 and 1097 (counts 2, 5, 6 and 7);
six counts of misappropriation of public funds in violation of
section 424, subdivision (a) (counts 3, 4, 10, 11, 12 and 13); and
two counts of unlawful secretion of an official record in violation
of Government Code section 6200 (counts 8 and 9). The
information alleged that the losses for counts 3 through 7, and 11
through 13, exceeded $1,300,000 (§ 12022.6, subd. (a)(3)), and
involved theft of more than $100,000 (§ 1203.045, subd. (a)).
A jury acquitted Spaccia on count 8 and the court declared
a mistrial as to count 11, after finding the jury was hopelessly
deadlocked on that count; the court later dismissed count 11. The
jury found Spaccia guilty of the remaining counts and found all
allegations true.
1 The People originally filed two cases in 2011, one by information
and the other by indictment, naming Spaccia and Rizzo as
co-defendants. The court dismissed two counts of the indictment
against Spaccia for lack of probable cause under Penal Code
section 995, subdivision (a). The cases were later consolidated.
Because Spaccia and Rizzo were not tried together, the People filed an
amended information containing only the counts naming Spaccia as a
defendant, solely for use during Spaccia’s trial. We refer throughout
our opinion to the renumbered counts contained in the amended
information dated October 3, 2013.
2 All undesignated statutory references are to the Penal Code.
4
The court sentenced Spaccia to an aggregate determinate
term of 11 years and eight months. The court selected count 4 as
the base term and imposed the upper term of four years. (§ 424,
subd. (a).) For counts 3, 10, 12, and 13, the court imposed a total
of four years—one-third the midterm of three years for each
count—to run consecutive. (§ 424, subd. (a).) The court imposed
eight months for count 2—one-third the midterm of two years—to
run consecutive. (Gov. Code, §§ 1090, 1097.) For counts 5, 6, and
7, the court imposed the midterm of two years, to run concurrent.
(Gov. Code, §§ 1090, 1097.) For counts 1 and 9, the court imposed
the midterm of three years, to run concurrent. (§ 182, subd.
(a)(1); Gov. Code, § 6200.) Finally, the court imposed an
additional three years for the high-value property enhancement,
to run consecutive. (§ 12022.6, subd. (a).) Spaccia was ordered to
serve her sentence in state prison pursuant to section 1170,
subdivision (h)(3), due to a current or prior serious or violent
felony.3
In addition to a restitution fine ($2,200), a court
assessment ($440), and a conviction assessment ($330), the court
imposed a victim restitution order under section 1202.4,
subdivision (f), in the amount of $8,254,776.
FACTUAL BACKGROUND
1. Background
The City of Bell is a small city in Los Angeles County. In
2006, Bell became a charter city; prior to that time, it was a
general law city. Robert Rizzo was Bell’s Chief Administrative
Officer during the entire period relevant here.
3 As the People concede, this finding was erroneous.
5
In 2002, Spaccia began working for Bell as a consultant. In
2003, Rizzo invited her to take a full-time employee position as
Assistant to the Chief Administrative Officer. Initially, Spaccia
was Bell’s fiscal officer. Rizzo assigned Spaccia to mentor
Lourdes Garcia so that she would eventually take over that
position. Garcia had a long history with Bell; she started as an
account clerk and worked her way up to director of
administrative services.4 Due to a personality clash between
Garcia and Spaccia, Rizzo reassigned Spaccia in 2005 to handle
special projects, including budgeting, audits, and Bell’s annual
financial reports. In 2007, Spaccia’s title changed from Assistant
to the Chief Administrative Officer to Assistant Chief
Administrative Officer, but her job responsibilities did not
change. In 2010, Rizzo removed Spaccia from Bell entirely and
assigned her to work in the City of Maywood.5 The city council
terminated Spaccia’s employment in July 2010.
During her employment at Bell, Spaccia took several
extended leaves of absence to care for family members and to
recover from surgeries she underwent for back problems. Spaccia
was fully paid during her absences, and was not required to take
sick or vacation leave.
4 Garcia testified under an immunity agreement.
5 Rizzo agreed to lend Bell staff to the City of Maywood to assist
with that city’s financial problems.
6
2. Pension plan6
One of Spaccia’s first assignments at Bell was to create a
new, supplemental pension plan. Spaccia worked with Alan
Pennington, an actuary and pension fund specialist at a
subsidiary of Wells Fargo. Although he dealt almost exclusively
with Spaccia, Pennington understood Rizzo was the decision
maker, and Spaccia was the messenger, regarding the new
pension plan.
At the time, non-safety employees of Bell were eligible for a
pension benefit through CalPERS, which provided 2 percent of
salary per year of service, starting at age 55. Rizzo wanted the
new plan to provide an additional 1 percent benefit, for a total
retirement benefit of 3 percent of salary per year of service.7
At trial, Pennington explained that certain pension plans
are subject to an income cap pursuant to ERISA.8 The amount of
the income cap is set by the Internal Revenue Service (IRS) on an
annual basis, and employers must observe the cap so that their
contributions to the plan qualify for favorable tax treatment. The
income cap is changed annually, and ranged between $200,000
and $260,000 during the time Pennington worked with Bell. The
effect of the income cap is to limit the amount of benefit an
employee can receive to a maximum, calculated with reference to
the income cap. In other words, an employee would receive a
6 In count 2, the jury convicted Spaccia of violating Government
Code sections 1090 and 1097 in relation to the City of Bell
Supplemental and Replacement Pension Plan.
7 Safety employees already received a 3 percent pension benefit.
8 Employee Retirement Income Security Act of 1974 (29 U.S.C.
§ 1001 et seq.).
7
retirement benefit equal to 2 percent of his or her salary per year
of service, based either upon a percentage of the employee’s
actual salary at the time of retirement or a percentage of the
income cap amount, whichever is lower. As a result of the income
cap, the pension benefit received by high income employees could
be less than the targeted percentage of their salary.9
In 2003, when Spaccia and Pennington were creating the
new pension plan, the only person impacted by the income cap
was Rizzo. However, Rizzo was adamant that he receive a full
1 percent pension benefit from the new pension plan. In order to
provide that benefit, Pennington proposed the creation of two
sub-plans within Bell’s new pension plan. The first, to be called
the supplemental plan, was a qualified plan subject to the income
cap, which provided a 1 percent benefit. Employees whose
income did not exceed the cap would receive the targeted benefit
of an additional 1 percent of their salary. The second plan, to be
called the replacement plan, was a non-qualified plan, designed
to provide only high income employees with an additional benefit
that would bring their total additional pension benefit to
1 percent—i.e., it would replace that portion of the 1 percent
benefit eliminated by the supplemental plan’s income cap. The
city council adopted the supplemental and replacement pension
plans on June 30, 2003.
9 For example, if no income cap applied, an employee who earned
$300,000 at retirement would receive a 2 percent benefit ($6,000) per
year of service from CalPERS, and an additional 1 percent ($3,000)
from Bell’s supplemental pension plan. However, if an income cap of
$200,000 applied, the employee would only receive a benefit of
2 percent of $200,000 ($4,000) per year from CalPERS, and 1 percent
of $200,000 ($2,000) per year from the supplemental plan.
8
Because both the income cap and Rizzo’s salary changed
annually, it was necessary to adjust the formula used to calculate
the replacement benefit periodically to guarantee Rizzo a total
benefit equal to 1 percent of his salary. Over the years, Spaccia
and Pennington communicated regularly about these
calculations. Changes to the pension plan were presented to and
adopted by the city council by resolution.
Eventually, Spaccia’s salary also exceeded the IRS income
cap, and she too was eligible for the replacement plan. Her 2008
employment contract explicitly noted her eligibility for the
replacement pension plan. Spaccia’s communications with
Pennington show she was well aware she would receive the
replacement pension plan benefit.
In 2004, Spaccia told Pennington that Rizzo wanted to limit
the number of participants potentially eligible for benefits under
the replacement plan. She instructed Pennington to develop
some limitations to the plan so that only she and Rizzo could
receive the benefit. The proposed amendments closing the
replacement plan to new participants and requiring participants
to have certain dates and years of service were later approved
and adopted by the city council by resolution.
Pennington estimated that Bell would need to contribute
more than $15 million to fund the replacement plan.
9
3. Employment contracts for Rizzo and Spaccia10
3.1. Compensation
When Spaccia first began working at Bell, employment
contracts were prepared by Bell’s outside counsel, Edward Lee.
In 2005, however, Rizzo directed Spaccia to prepare employment
agreements for all executive and administrative management
employees. She understood that Rizzo planned to submit the
2005 agreements to the city council for approval, together with
the five-year budget she was preparing for their review. Rizzo
told Spaccia, as well as Garcia, that the 2005 agreements had
been approved by the city council.
The employment contracts and subsequent amendments
Spaccia prepared provided her, as well as Rizzo, with substantial
compensation.
When Spaccia was initially hired as a full-time employee on
July 1, 2003, her contract provided a base salary of $3,935 per
two week pay period, or $102,310 annually. Pursuant to the
agreements and amendments she prepared, Spaccia’s salary rose
steadily each year. At the time her employment was terminated
in 2010, Spaccia earned a base salary of $13,192 per two week
pay period—more than $340,000 annually. At trial, Spaccia
acknowledged her salary and benefits were excessive.
10 In counts 3 and 4, the jury convicted Spaccia of violating
section 424, subdivision (a), regarding Rizzo’s compensation and
benefits, and Spaccia’s compensation and benefits (respectively) during
the period 2005 to 2010. In counts 5, 6 and 7, the jury convicted her of
conflicts of interest under Government Code section 1090, regarding
her 2005 employment contract amendment, 2006 contract amendment,
and 2008 contract, respectively.
10
Rizzo’s salary also increased substantially during this
period, rising from $9,615 per two week period in 2002
(approximately $250,000 annually) to $27,048 per two week
period in 2010—more than $700,000 annually.
Pennington said Rizzo and Spaccia had the highest
government salaries he had ever seen.
3.2. Fringe benefits
By virtue of their employment contracts and amendments,
as well as resolutions adopted by the city council, Spaccia and
Rizzo also received significant fringe benefits which, like their
salaries, increased substantially over time.
For example, in 2006, the third amendment to Spaccia’s
employment contract provided that Bell would fund Spaccia’s
retirement savings plan in the maximum allowable amount. The
City paid between $33,000 and $44,000 per year to provide this
benefit to Spaccia. Rizzo received the same benefit.
With respect to leave accruals, Bell also provided a
substantial benefit. When Spaccia was originally hired, she
accrued vacation and sick leave commensurate with her years of
employment at Bell, i.e., as a new employee. In 2005, however,
the second amendment to her contract provided she would accrue
vacation leave commensurate with her years of PERS service
credit. As a result, she accrued vacation based upon 15 years of
service rather than two years of service—a significant increase.
Over time, the city council also approved resolutions that
substantially increased vacation and sick leave accruals for
Spaccia and Rizzo. At times, Rizzo and Spaccia each received two
paychecks—one for their base salary and the other for the cash
value of accrued vacation and sick leave. By 2008, Spaccia and
Rizzo were earning 33 hours of vacation leave every two weeks.
11
The City also provided increased benefits by purchasing
five year PERS service credits for Spaccia, Rizzo, and other senior
Bell managers. The purchase of an additional five years of
service credit provided employees with increased retirement and
leave benefits, to the extent those benefits were calculated using
years of service.
Spaccia’s 2008 contract also provided that Bell would pay
her portion of FICA and Medicare withholding. Eventually, Bell
also paid Spaccia’s share of the required CalPERS contributions.
Rizzo received similar increases and benefits.
4. Loans from Bell11
In 2002, the city council authorized an $80,000 loan from
Bell to Rizzo. As discussed in greater detail post, Rizzo took
several additional loans from Bell (without approval from the city
council), which he opted to repay using the cash value of his
accrued sick and vacation leave. He later expanded this “loan
program” to include other employees as well as city council
members. Spaccia received six purported loans from Bell,
including $77,500 in 2003, $100,000 in 2009, and $130,000 in
2010.
11 In counts 12 and 13, the jury convicted Spaccia of violating
section 424, subdivision (a), by accepting unauthorized loans in 2009
($100,000) and 2010 ($130,000).
12
5. Employment contract for Randy Adams12
In 2009, Rizzo decided to hire a new police chief to improve
Bell’s police department. Spaccia knew Randy Adams because
they worked together for approximately 10 years in the City of
Ventura. Adams had a long career in law enforcement and was
both well established and well regarded. He had been the Chief
of Police in Simi Valley and Glendale. Rizzo asked Spaccia to
contact Adams to see if he would be interested in moving to Bell.
Adams met with Rizzo and several council members to discuss
the possibility, and he eventually agreed to work for Bell.
Over the course of several months, Spaccia met and
corresponded with Adams about his salary and benefits package.
Adams demanded a high salary because he had planned to retire;
to make it worthwhile to work instead of retiring, he asked Bell
to pay him the amount of the pension he would have received if
he retired in addition to a salary commensurate with his
experience. The City ultimately agreed to a salary of
approximately $450,000, an amount Spaccia agreed was
exceedingly high.
6. Scandal erupts; Spaccia is fired, then arrested.
The city council terminated Spaccia’s employment with Bell
at a council meeting in late July 2010. Spaccia was arrested on
September 21, 2010.
12 In count 10, the jury convicted Spaccia of violating section 424,
subdivision (a), in relation to the employment contract for Randy
Adams.
13
DISCUSSION
1. Substantial evidence supports Spaccia’s convictions
under Penal Code section 424 regarding unauthorized
loans.
Spaccia contends we must reverse the convictions on counts
12 and 13 (§ 424, subd. (a)(2)) because the evidence was
insufficient to establish she knew, or was criminally negligent in
not knowing, the loans she received from Bell were unauthorized.
We disagree.
1.1. Standard of review
In assessing the sufficiency of the evidence, we review the
entire record to determine whether any rational trier of fact could
have found the defendant guilty beyond a reasonable doubt.
(People v. Zamudio (2008) 43 Cal.4th 327, 357.) “The record must
disclose substantial evidence to support the verdict—i.e.,
evidence that is reasonable, credible, and of solid value—such
that a reasonable trier of fact could find the defendant guilty
beyond a reasonable doubt.” (Ibid.) In applying this test, we
review the evidence in the light most favorable to the verdict and
presume in support of the judgment the existence of every fact
the jury could reasonably deduce from the evidence. (People v.
Kraft (2000) 23 Cal.4th 978, 1053.) The same standard applies
where the conviction rests primarily on circumstantial evidence.
(People v. Thompson (2010) 49 Cal.4th 79, 113.) We may not
reweigh the evidence or resolve evidentiary conflicts. (People v.
Young (2005) 34 Cal.4th 1149, 1181.) The testimony of a single
witness can be sufficient to uphold a conviction—even when there
is significant countervailing evidence, or the testimony is subject
to justifiable suspicion. (People v. Barnwell (2007) 41 Cal.4th
141038, 1052.) Accordingly, we may not reverse for insufficient
evidence unless it appears “ ‘that upon no hypothesis whatever is
there sufficient substantial evidence to support [the conviction].’ ”
(People v. Bolin (1998) 18 Cal.4th 297, 331.)
1.2. Penal Code section 424 requires proof the
defendant knew, or was criminally negligent in
not knowing, her conduct was unauthorized.
As pertinent here, section 424, subdivision (a), provides:
“Each officer of this state, or of any county, city, town, or district
of this state, and every other person charged with the receipt,
safekeeping, transfer, or disbursement of public moneys,
who . . . :
2. Loans the same or any portion thereof; makes any profit
out of, or uses the same for any purpose not authorized by law;
[¶] . . . [¶]
Is punishable by imprisonment in the state prison for two,
three, or four years, and is disqualified from holding any office in
this state.”
The “presence or absence of legal authorization is an
essential element” of the offense of misappropriation of public
funds. (Stark v. Superior Court (2011) 52 Cal.4th 368, 397
(Stark).) “It also a ‘fact’ about which the defendant must have
knowledge in order to act with wrongful intent.” (Id. at
pp. 397-398.) Accordingly, the People must establish “either
actual knowledge or criminal negligence in failing to know the
legal requirements underlying the section 424 charges. ‘Criminal
negligence refers to “ ‘a higher degree of negligence than is
required to establish negligent default on a mere civil issue. The
negligence must be aggravated, culpable, gross, or reckless.’ ”
[Citations.]’ ” (Id. at p. 399.)
15
The Supreme Court has long held that “[t]he safekeeping of
public moneys has, from the first, been safeguarded and hedged
in by legislation most strict and severe in its exactitudes. It has
continuously been the policy of the law that the custodians of
public moneys or funds should hold and keep them inviolate and
use or disburse them only in strict compliance with the law.”
(People v. Dillon (1926) 199 Cal. 1, 12; Stark, supra, 52 Cal.4th at
p. 399.) Accordingly, public officials and others are obligated “to
take reasonably necessary steps to determine the
appropriateness of their conduct.” (Stark, p. 402.) Criminal
negligence must “necessarily be measured by what is objectively
reasonable for the particular person in the defendant’s position.”
(Id. at p. 401.)
1.3. There is substantial evidence Spaccia was, at a
minimum, criminally negligent in not knowing
the loans at issue were unauthorized.
Although Spaccia received six loans during the time she
worked for Bell, the People only charged her under section 424
with respect to three: a $77,500 loan received in October 2003
(count 11); a $100,000 loan received in February 2009 (count 12);
and a $130,000 loan received in March 2010 (count 13). As noted,
ante, the jury convicted Spaccia on counts 12 and 13, but
deadlocked on count 11, resulting in a mistrial on that count.
The most prominent distinction between the 2003 loan and
the 2009 and 2010 loans is, of course, that Bell became a charter
law city in 2006. A copy of Bell’s charter was admitted into
evidence, and the jury heard testimony from a former attorney
for the city, Edward Lee, regarding the impact of Bell’s adoption
of the charter. Specifically, Lee explained that the charter vested
all power in the city council, unless the charter provided
16
otherwise. In other words, in the absence of an express provision
in the charter authorizing a particular action, all proposed city
actions needed to be formally approved by the city council
through the adoption of an ordinance or resolution, as provided
by the charter. The charter does not authorize an employee loan
program. Furthermore, the council did not ever pass a resolution
or ordinance authorizing such a program.
Although Spaccia repeatedly testified she was unaware the
loan program was unauthorized, her subjective view does not
preclude conviction under section 424. Spaccia was aware Bell
adopted a charter in 2006, and testified she was familiar with
certain provisions of the charter, and likely read the charter in its
entirety at some point. Moreover, she had worked at municipal
and other governmental entities for her entire career—more than
20 years. Given these facts, the jury could reasonably have
concluded Spaccia was criminally negligent by failing to take
steps to determine whether her 2009 and 2010 loans were
authorized either under the Bell charter or by the city council.
Accordingly, the convictions on counts 12 and 13 are supported by
substantial evidence.13
13 As explained post, however, we reverse the convictions for those
counts due to instructional error.
17
2. Spaccia’s convictions for misappropriation of public
funds under Penal Code section 424 must be reversed
due to instructional error.
2.1. The court’s instructions regarding the elements
of the offense of misappropriation of public funds
were erroneous.
Spaccia contends her convictions for misappropriation of
public funds (counts 3, 4, 10, 12, and 13) must be reversed
because the court’s instructions regarding the elements of the
offense were incorrect as a matter of law. In light of the Supreme
Court’s recent authority on point, Hubbard, supra, 63 Cal.4th
378, we agree the instructions were erroneous.
A criminal defendant has a right to accurate instructions
on the elements of a charged crime. (People v. Mil (2012)
53 Cal.4th 400, 409.) “We determine whether a jury instruction
correctly states the law under the independent or de novo
standard of review. (People v. Posey (2004) 32 Cal.4th 193, 218.)
Review of the adequacy of instructions is based on whether the
trial court ‘fully and fairly instructed on the applicable law.’
(People v. Partlow (1978) 84 Cal.App.3d 540, 558.) ‘ “In
determining whether error has been committed in giving or not
giving jury instructions, we must consider the instructions as a
whole . . . [and] assume that the jurors are intelligent persons
and capable of understanding and correlating all jury
instructions which are given.” [Citation.]’ (People v. Yoder (1979)
100 Cal.App.3d 333, 338.) ‘Instructions should be interpreted, if
possible, so as to support the judgment rather than defeat it if
they are reasonably susceptible to such interpretation.’ (People v.
Laskiewicz (1986) 176 Cal.App.3d 1254, 1258.)” (People v. Ramos
(2008) 163 Cal.App.4th 1082, 1088.)
18
Section 424 criminalizes conduct by persons charged with
receipt, safekeeping, transfer or disbursement of public moneys.
Here, the jury was instructed on, and found Spaccia guilty of, five
counts of misappropriation of public funds under section 424.14
Subdivision (a) of that section provides, in pertinent part:
“Each officer of this state, or of any county, city, town, or
district of this state, and every other person charged with the
receipt, safekeeping, transfer, or disbursement of public moneys,
who either:
1. Without authority of law, appropriates the same, or any
portion thereof, to his or her own use, or to the use of another; or,
2. Loans the same or any portion thereof; makes any profit
out of, or uses the same for any purpose not authorized by law;
[¶] . . . [¶]
Is punishable by imprisonment in the state prison for two,
three, or four years, and is disqualified from holding any office in
this state.”
Spaccia asserts that the court’s instructions to the jury—a
modified version of CALJIC No. 7.26.1—improperly advised the
jury that it could convict her by finding, on the first element of
the offense, either that she was an officer of Bell, or that she was
an employee charged with receipt, safekeeping, transfer, or
14 On counts 3 and 4, the jury found Spaccia violated section 424,
subdivision (a)(1), through payment of unauthorized compensation and
benefits to Rizzo (count 3) and herself (count 4) during the period
July 1, 2005 to June 30, 2010. On count 10, the jury found Spaccia
violated section 424, subdivision (a)(1), by facilitating unauthorized
payments to Bell Chief of Police Randy Adams between July 28, 2009
and July 2010. On counts 12 and 13, the jury found Spaccia violated
section 424, subdivision (a)(2), by accepting unauthorized loans of
$100,000 (2009) and $130,000 (2010) from Bell.
19
disbursement of public moneys.15 According to Spaccia, section
424 only applies to those officers who are also entrusted with the
receipt, safekeeping, transfer, or disbursement of public funds.
Spaccia relies primarily upon Hubbard, supra, a decision
issued after her trial which clarifies the scope of liability under
section 424. The Supreme Court granted review in Hubbard to
consider two questions, the first of which is squarely at issue
here: whether section 424, subdivision (a) “applies only to those
public officers ‘charged with the receipt, safekeeping, transfer, or
disbursement of public moneys.’ ” (Hubbard, supra, 63 Cal.4th at
p. 386.)
Preliminarily, the court recognized that section 424,
subdivision (a), is ambiguous. The court noted that the first
sentence of subdivision (a), “could be read, in short, as applying to
(1) all state, county, city, town or district officers, and (2) any
person ‘charged with the receipt, safekeeping, transfer, or
disbursement of public moneys.’ Or it could apply instead to
(1) state, county, city, town, or district officers ‘charged with the
receipt, safekeeping, transfer, or disbursement of public moneys,’
and (2) every other person so charged.” (Hubbard, supra,
63 Cal.4th at p. 386.) The defendant argued the Legislature’s use
of the word “other” in section 424, subdivision (a),
(“officer . . . and every other person charged”) implied the
Legislature meant only to target officers who are also charged
with the receipt, safekeeping, transfer, or disbursement of public
moneys. (Hubbard, supra, at p. 387.) The People argued for a
15 Hubbard was issued after the parties filed their appellate briefs.
Pursuant to Government Code section 68081, we requested and
received supplemental letter briefs addressing the significance of that
decision in this case.
20
more expansive interpretation of the statute, in which any
government officer could be prosecuted, but only non-officers
charged with the receipt, safekeeping, transfer, or disbursement
of public moneys would be subject to prosecution. (Id. at pp. 386-
387.)
The court acknowledged that both proffered interpretations
of the statute were plausible. However, the court emphasized
that in adopting the statute, the Legislature intended to
“protect[ ] the public fisc and hold[ ] accountable those in a
position to place public funds at risk.” (Hubbard, supra,
63 Cal.4th at p. 387.) After reviewing the statute’s text and
purpose, as well as its own relevant precedent, the court held
“that for a public officer to be convicted under [section 424,
subdivision (a)], he or she must be ‘charged with the receipt,
safekeeping, transfer, or disbursement of public moneys.’ ” (Id. at
p. 391.) The court went on to conclude that the jury had been
properly instructed, and the defendant’s conviction was
supported by substantial evidence. (Id. at p. 398.)
In light of the court’s clarification of the scope of
section 424, subdivision (a), in Hubbard, we review the
instructions given in this case to determine whether they
accurately state the elements of the offense of misappropriation
of public funds. The court delivered lengthy instructions based
upon CALJIC No. 7.26.1. As modified, the instruction for counts
3, 4, and 10 read, in pertinent part: “Defendant is accused in
Counts Three, Four and Ten of violating section 424, subdivision
(a)(1) of the Penal Code, a crime. [¶] Every officer of this state,
or of any county, city, town, or district of this state, and every
other person charged with the receipt, safekeeping, transfer, or
disbursement of public moneys, who without authority of law,
21
appropriates the same or any portion thereof, to his or her own
use, or to the use of another, is guilty of a violation of Penal Code
section 424, subdivision (a)(1), a crime. [¶] . . .[¶] The term
‘officer’ includes Chief Administrative Officer and Assistant Chief
Administrative Officer for the City of Bell. [¶] . . . [¶] In order to
prove this crime, each of the following elements must be proved:
1. The defendant was an officer of the City of Bell, or a
person charged with the receipt, safekeeping, transfer, or
disbursement of public moneys;
2. The defendant without authority of law, appropriated
public moneys to his or her own use or to the use of another; and
3. The defendant either knew that the law prohibited her
appropriation of public moneys to his or her own use, or to the
use of another, or was criminally negligent in failing to discover
whether she had the legal authority to make the appropriation.”
The court’s instruction on counts 11, 12 and 13 was
substantially similar, though modified to state a violation of
section 424, subdivision (a)(2), rather than subdivision (a)(1).
Our chief concern is that, with respect to the first element
of the offense, the instructions state the People needed to prove
that Spaccia “was an officer of the City of Bell, or a person
charged with the receipt, safekeeping, transfer, or disbursement
of public moneys.” Spaccia asserts the use of the word “or,”
particularly when combined with the comma after “Bell,” creates
two alternative classifications, either of which would be sufficient
to sustain a conviction: (1) officers of Bell; and (2) persons
charged with the receipt, safekeeping, transfer or disbursement
of public moneys.
The People flatly reject the possibility that the instructions
may have led the jury to believe it could convict Spaccia without
22
finding she was charged with the receipt, safekeeping, transfer or
disbursement of public moneys. The People contend “[a]s a
matter of plain English, the jury would have understood that the
‘charged with’ clause modifies both the words ‘person’ and
‘officer.’ ” The “plain English” rule the People focus their
argument upon is the last antecedent rule—a rule of statutory
interpretation which “provides that ‘qualifying words, phrases
and clauses are to be applied to the words or phrases
immediately preceding and are not to be construed as extending
to or including others more remote.’ ” (White v. County of
Sacramento (1982) 31 Cal.3d 676, 680 (White).)
Here, applying the last antecedent rule produces the
construction urged by Spaccia: the phrase “charged with”
modifies only the immediately preceding word, “person,” and does
not modify “an officer of the City of Bell.” However, the People
argue an exception to the last antecedent rule applies: “ ‘ “[w]hen
several words are followed by a clause which is applicable as
much to the first and other words as to the last, the natural
construction of the language demands that the clause be read as
applicable to all.” ’ ” (White, supra, 31 Cal.3d at pp. 680-681.) By
applying this exception, the People propose, the first element of
the instructions should be read as if it stated “ ‘[t]he defendant
was an officer of the City of Bell [charged with the receipt,
safekeeping, transfer, or disbursement of public moneys,] or a
person charged with the receipt, safekeeping, transfer or
disbursement of public moneys.” This interpretation would cure
the defect in the instructions alleged by Spaccia.
Even if we were to assume that it is useful to apply a rule
of statutory construction in the analysis of a jury instruction—a
matter open to debate—we are not persuaded by the People’s
23
position. Instead, we focus our analysis on the common and
accepted use of “or” as a disjunctive. (See Chicago Manual of
Style (16th ed. 2010) p. 255, § 5.198 [“[d]isjunctive or separative
coordinating conjunctions denote separation or alternatives.
Only one of the statements joined by the conjunction may be true;
both may be false. The conjunctions include . . . or”].) Thus, in
the instruction given here (“the defendant was an officer of the
City of Bell, or a person charged with the receipt, safekeeping,
transfer or disbursement of public moneys”), the conjunction “or”
separates two distinct alternatives: officers, on one hand, and
persons charged with financial responsibility, on the other hand.
The placement of the comma before “or” further emphasizes the
distinction. We believe this straightforward application of basic
grammar principles yields the construction most likely
understood by the jurors.16
Accordingly, and consistent with the reasoning of Hubbard,
we hold the instructions given in this case—and the CALJIC
pattern instruction upon which they were based—improperly
state the first element of the offense of misappropriation of public
funds under section 424, subdivision (a), because they allowed
the jury to convict Spaccia based upon a finding that she was a
16 Our grammatical analysis is consistent with long standing as
well as contemporary usage of the word “or.” (See, e.g., Yellin, The
Elements of Constitutional Style: A Comprehensive Analysis of
Punctuation in the Constitution (2012) 79 Tenn. L. Rev. 687, 727,
fn. 192 [examining use of conjunctions and commas in the
Constitution, and observing contemporary usage accurately explained
by Schoolhouse Rock! Conjunction Junction (ABC television broadcast
Nov. 17, 1973), which instructs that “or” is a conjunction used to
connect words and phrases “when you have a choice”].)
24
city officer, without also finding she was charged with the receipt,
safekeeping, transfer or disbursement of public moneys.
2.2. The error was prejudicial.
As the People point out, the court properly instructed the
jury it could convict Spaccia either because she committed the
crimes charged, or because she aided and abetted the perpetrator
of those crimes.17 Thus, the jury was presented with three
theories upon which it could convict Spaccia of misappropriation
of public funds: (1) she was an officer of Bell who made
unauthorized use of public funds; (2) she was a person charged
with the receipt, safekeeping, transfer or disbursement of public
moneys who made unauthorized use of public funds; and (3) she
aided and abetted someone else (in this case, Rizzo) in the
commission of the crime. The first of these theories is, as just
explained, invalid as a matter of law.
The People urge us to affirm Spaccia’s convictions under
section 424, notwithstanding the instructional error, because
“there was a mountain of evidence that [Spaccia] was responsible
for supervising the safekeeping, transfer, and disbursement of
public moneys throughout her tenure” at Bell. In the alternative,
the People argue the court’s instructional error was not
17 The court gave CALCRIM 400: “A person may be guilty of a
crime in two ways. One, he or she may have directly committed the
crime. I will call that person the perpetrator. Two, he or she may have
aided and abetted a perpetrator, who directly committed the crime. [¶]
A person is guilty of a crime whether he or she committed it personally
or aided and abetted the perpetrator. [¶] Under some specific
circumstances, if the evidence establishes aiding and abetting of one
crime, a person may also be found guilty of other crimes that occurred
during the commission of the first crime.”
25
prejudicial because the jury could have convicted Spaccia on the
aiding and abetting theory, which theory the People assert is
supported by “strong evidence.” Evidently, the People
misunderstand the analysis of prejudice where, as here, the jury
is instructed on multiple theories of a defendant’s guilt, and one
of those theories is legally inadequate to sustain the conviction.
“The nature of this harmless error analysis depends on
whether a jury has been presented with a legally invalid or a
factually invalid theory. When one of the theories presented to a
jury is legally inadequate, such as a theory which ‘ “fails to come
within the statutory definition of the crime” ’ [citation], the jury
cannot reasonably be expected to divine its legal inadequacy. The
jury may render a verdict on the basis of the legally invalid
theory without realizing that, as a matter of law, its factual
findings are insufficient to constitute the charged crime. In such
circumstances, reversal generally is required unless ‘it is possible
to determine from other portions of the verdict that the jury
necessarily found the defendant guilty on a proper theory.’
[Citation.]
“In contrast, when one of the theories presented to a jury is
factually inadequate, such as a theory that, while legally correct,
has no application to the facts of the case, we apply a different
standard. [Citation.] In that instance, we must assess the entire
record, ‘including the facts and the instructions, the arguments of
counsel, any communications from the jury during deliberations,
and the entire verdict.’ [Citation.] We will affirm ‘unless a
review of the entire record affirmatively demonstrates a
reasonable probability that the jury in fact found the defendant
guilty solely on the unsupported theory.’ [Citation.]” (People v.
26
Perez (2005) 35 Cal.4th 1219, 1233 [quoting People v. Guiton
(1993) 4 Cal.4th 1116, 1128-1130].)
Here, we must reverse the convictions on counts 3, 4, 10, 12
and 13, unless we conclude, beyond a reasonable doubt, the jury
based those convictions on a finding that Spaccia had the
requisite control over public funds, or found she aided and
abetted Rizzo in the commission of the charged crimes, or that
the instructional error was harmless. (See Neder v. United States
(1999) 527 U.S. 1, 19 [holding if defendant presented evidence
sufficient to support a contrary finding on an omitted element,
error is not harmless beyond a reasonable doubt]; People v. Chun
(2009) 45 Cal.4th 1172, 1203 [noting if other aspects of the jury’s
verdict or the evidence leave no reasonable doubt that the jury
made the findings necessary for the legally valid theory, the error
is harmless]; see also People v. Chiu (2014) 59 Cal.4th 155, 167
[holding defendant could not be convicted of first degree murder
on natural and probable consequences theory, and then noting
“[d]efendant’s first degree murder conviction must be reversed
unless we conclude beyond a reasonable doubt that the jury
based its verdict on the legally valid theory that defendant
directly aided and abetted the premeditated murder”].) We find
no evidence on this record which would allow us to draw any of
those conclusions.
First, the jury’s verdicts on the misappropriation counts
were general verdicts, and thus the jury was not required to state
the theory underlying the verdicts. Further, with the exception
of the verdict on count 1 (conspiracy to misappropriate public
funds), nothing about the verdicts on the remaining counts
indicates, one way or the other, which theory formed the basis of
the jury’s verdicts. And as to count 1, the People set forth 23
27
overt acts related to the conspiracy; some relate to the conduct
underlying counts 3, 4, 10, 12 and 13, but others do not. The
jury’s verdict stated only that it found Spaccia “committed at
least one” of those 23 acts, and the verdict form did not require
the jury to specify which act(s) formed the basis of the conviction
for count 1. Moreover, the jury was instructed that it did not
need to agree on which overt act formed the basis of the
conspiracy conviction, so long as each juror concluded that at
least one of the 23 alleged overt acts was committed.
We note the jury found true the special allegation that the
crimes charged in counts 3, 4, 12, and 13, involved the theft of
over $100,000 within the meaning of section 12023.045,
subdivision (a). The jury was instructed, in pertinent part, “[t]o
prove this allegation, the People must prove that: 1. The City of
Bell entrusted public money to the defendant; 2. The City of Bell
or its agents did so because it or they trusted the defendant[;]
3. The defendant fraudulently used the property for her own
benefit; 4. When the defendant used the public money, she
intended to deprive the City of Bell of its use; and 5. The public
money was over $100,000.” In accordance with long standing
precedent, we presume that the jury understood and followed the
court’s instructions. (See, e.g., People v. Edwards (2013)
57 Cal.4th 658, 746.)
Spaccia contends the finding of entrustment embraced by
the special allegation is not synonymous with a finding under
section 424 that she was “ ‘charged with the receipt, safekeeping,
transfer, or disbursement of public moneys.’ ” In support of her
argument, Spaccia notes that the jury instructions regarding
misappropriation of public funds (the modified CALJIC pattern
instruction discussed ante) contain the following language: “An
28
officer or a person is charged with the receipt, safe keeping, or
disbursement of public moneys when he or she is entrusted with
responsibilities or duties relating to, and has some degree of
control over, the receipt, safe keeping, or disbursement of public
moneys.” Spaccia argues this portion of the section 424
instructions requires the jury to make two findings: entrustment
of public moneys, and a degree of control over those public
moneys, only the first of which is encompassed within the jury’s
finding on the special allegation. We agree, particularly in light
of the fact that the heart of Spaccia’s defense on these counts was
that although she was entrusted with public funds—the finding
the jury made in the special allegation—she was not in a position
to exercise control over those funds.
Second, some courts have been able to determine the basis
of the jury’s verdict by examining questions posed by the jury
during its deliberations. (See, e.g., People v. Chiu, supra,
59 Cal.4th at pp. 167-168 [discussing note from jurors indicating
they could not agree whether to convict on first- or second-degree
murder].) Here, the jury did ask several questions during the
course of its deliberations. Those questions, however, do not shed
any light on the basis of the jury’s convictions on the counts at
issue. We therefore conclude the jury’s verdicts and questions do
not indicate which theory the jury relied upon to convict Spaccia
under section 424.
We see no other indication from the conduct of the trial
which suggests, one way or the other, which theory of guilt the
jury adopted. During closing argument, the People focused upon
the invalid theory of guilt more than the other two theories. (See,
e.g., People v. Valentine (2001) 93 Cal.App.4th 1241, 1246,
disapproved on another point by People v. Leal (2004) 33 Cal.4th
29999 [observing the potential prejudice from an instructional error
is increased where the prosecutor’s argument focuses on the
erroneous theory].) Indeed, the People emphasized to the jury
that it could convict Spaccia if she was an officer of Bell. At one
point during his closing, for example, the prosecutor addressed
the misappropriation counts, saying: “Misappropriation. You
have to either be an officer or a person charged with
disbursement of public funds. An officer. Right. The way she
becomes an officer is if she is the assistant chief administrative
officer. You saw that listed in the city charter.” He highlighted
the distinction between officers and employees as well: “Now even
if you are not a public officer, the second thing you are still liable
for is 424. Employees are too, if they are entrusted with
responsibilities or duties relating to and have some degree of
control over the receipt, safekeeping or disbursement of public
funds.”
Moreover, the aiding and abetting theory went virtually
unmentioned during the People’s initial closing and rebuttal
arguments. During his initial argument, the prosecutor barely
alluded to the theory. After summarizing evidence relating to
Adams’s hiring, the prosecutor suggested the evidence showed
Spaccia and Rizzo conspired to conceal his salary and other
benefits. He then stated, “And you got instructed on the law of
conspiring and aiding and abetting. And that’s what covers it,”
and moved on to other matters. During rebuttal, the prosecutor
mentioned aiding and abetting directly, but only with respect to
count 3, relating to Rizzo’s salary and benefits. “We have
charged her with aiding and abetting and assisting Mr. Rizzo in
stealing his own salary. Mr. Rizzo obviously couldn’t do it all by
himself; he needed people to help him. Miss Spaccia is one of the
30
people that helped him.” Aside from these two remarks, the
People focused on Spaccia acting in her own self-interest, either
on her own or in concert with Rizzo.
In sum, the People did not establish that the jury
necessarily convicted Spaccia because it found she had a material
degree of control over public funds, or because she aided and
abetted Rizzo in the commission of the charged crimes.
Nor can we determine, through examination of the
evidence, that the jury relied on one of the legally correct theories
in rendering its verdicts. If no reasonable jury could have found
in Spaccia’s favor on the invalid theory due to a lack of
substantial evidence, the error would be harmless. But that is
not the case here. Instead, there was evidence from which the
jury could have found Spaccia guilty on the legally invalid theory
and rejected the valid theories. As we discuss in detail post,
Spaccia presented evidence to support a finding that she did not
have a material degree of control over the public funds at issue in
counts 3, 4, 10, 12 and 13. Spaccia’s testimony (which was
corroborated to some extent by other witnesses), if credited by the
jury, provides a sufficient basis for a finding in her favor on all of
the misappropriation counts.
Counts 3 and 4
In counts 3 and 4,18 the jury convicted Spaccia of
misappropriating public funds through employment contracts for
Rizzo and herself throughout the period July 1, 2005 through
June 30, 2010.
18 Because we conclude the conviction on count 4 must be reversed
due to instructional error, it is unnecessary for us to address Spaccia’s
31
Spaccia testified she acted only in a secretarial capacity
with respect to employment contracts for herself, Rizzo, and other
members of Bell’s executive management. All pertinent
information regarding the contract terms came from Rizzo, and
she had no authority to make any decisions about or changes to
the employment agreements.
In 2005, Spaccia prepared 12 employment contracts for
management level employees at Bell. She used her own contract
as a template and created new contracts by filling in the detailed
information contained in a spreadsheet she received from Rizzo.
Rizzo told her he would, and did, present the contracts to the city
council for approval. She had no contact with the council
members, per Rizzo’s direction. In 2006, Rizzo directed her to
revise those contracts by adding a severance clause and making a
change to the medical reimbursement provision. Although
Spaccia would sometimes sign personnel action reports advising
the payroll department of a change in compensation for an
employee, she did so only after talking with Rizzo and then
signed on his behalf, not her own.
Spaccia’s testimony was confirmed to some extent by
Garcia, who testified Rizzo (not Spaccia) would inform her of
changes to his or Spaccia’s employment contracts. In addition,
Garcia confirmed Rizzo (not Spaccia) instructed her to prepare
the 2007 and 2008 city council resolutions which implemented
increased accrual rates for sick and vacation leave designed to
benefit himself and Spaccia.
contention that the court should have stayed sentencing on counts 5, 6
and 7 under section 654.
32
Count 10
In count 10, the jury convicted Spaccia of misappropriating
public moneys from July 2009 to July 2010 through “payment
made to Randy Adams pursuant to a contract for $457,000 per
year as Chief of Police unlawfully executed in violation of Bell
City Charter sections 519 and 604(a) and Resolution 2006-42.” In
the People’s view, Spaccia exercised control over public monies by
virtue of her role in the negotiation and finalization of the
inflated employment contract for Adams.
According to Spaccia, however, Rizzo made all the decisions
regarding Adams’s contract. Adams also understood Spaccia was
delivering messages from Rizzo and was acting at his direction.
Spaccia testified at trial that when Rizzo was considering
police chief candidates, he asked her to reach out to Adams, who
was then the Chief of Police in Glendale. Spaccia knew Adams
because she worked with him in the City of Ventura from 1980 to
1990. Spaccia considered Adams to be a “professional friend.”
When Spaccia contacted Adams, she told him Rizzo asked her to
reach out to him about the police chief job in Bell.
According to Spaccia, Rizzo arranged a series of meetings
for Adams to meet the council members, managers, and the
president of the police officer’s association. She attended some,
but not all, of those meetings. Rizzo eventually told Adams that
he could “write [his] own ticket.” Negotiations began after
Adams sent Rizzo his request for salary and benefits. Rizzo
reviewed Adams’s requests with Spaccia, told her which benefits
Bell would provide, and then asked her to relay that information
to Adams. Rizzo explicitly instructed Spaccia not to discuss
salary with Adams; Rizzo said he would handle that with Adams
directly.
33
Although Spaccia drafted the employment agreement for
Adams, she maintained she had no control over its content. Rizzo
decided which benefits Adams would receive and told her the
salary to put into the contract. When the Adams employment
contract was finalized, Spaccia took the agreement to Glendale so
Adams could sign it. Rizzo, not Spaccia, signed the contract on
behalf of Bell. Spaccia did not sign the personnel form
authorizing Adams’s pay.
Counts 12 and 13
In counts 12 and 13, the jury convicted Spaccia of
misappropriating public funds by accepting unauthorized loans
from Bell in the amount of $100,000 (February 2009) and
$130,000 (March 2010), respectively. Although Spaccia does not
deny she received the money from Bell, she contends these loans
were part of an “administrative loan” program devised by Rizzo
and administered by Garcia, as to which she exercised no
authority or control. Her testimony at trial supports her position,
as does the testimony of Garcia.
According to Garcia, the 2002 amendment to Rizzo’s
employment agreement provided that Rizzo could borrow $80,000
from Bell. After Rizzo received, and repaid, the $80,000 loan, he
told Garcia he could take another loan in the same amount. Over
the next several years, he took at least six loans from Bell in
varying amounts. Rather than repay the loans with deductions
from his salary, Rizzo repaid them with the cash value of his
accrued sick and vacation leave.
Rizzo subsequently authorized similar loans for other Bell
employees. In 2003, Spaccia received a loan of $77,500, to be
repaid with the cash value of sick and vacation leave. Rizzo told
Garcia he authorized the loan for Spaccia. Although the evidence
34
was conflicting about who drafted the agreements relating to the
loans, the jury could have credited Spaccia’s testimony that she
had no involvement in the preparation of those agreements.
Garcia also testified that Rizzo encouraged her to take a loan
from Bell, which she did.
With respect to the loans at issue in this appeal, Garcia
instructed Bell’s accounting department to wire $100,000 to
Spaccia in February 2009. Rizzo approved the wire transfer
request. It is unclear whether any written agreement was ever
prepared for this loan. Spaccia also received a loan of $130,000 in
March 2010. Rizzo authorized the wire transfer. Spaccia denied
preparing or authorizing any aspect of these two loans and
consistently stated Rizzo was the only person authorized to
approve loans to Bell employees.
In light of the state of the evidence, as well as the other
factors we have discussed, we cannot conclude that the jury
necessarily convicted Spaccia on one of the two legally valid
theories, as opposed to the legally invalid one, or that the jury’s
verdicts on counts 3, 4, 10, 12 and 13 would have been the same
notwithstanding the instructional error. We therefore must
reverse the five convictions under section 424.
3. The conviction under Government Code section 1090
based upon changes to Bell’s pension plan must be
affirmed.
Spaccia contends her conviction on count 2 must be
reversed because the People failed to prove that the alleged
conflict of interest (which involved the formation or modification
of Bell’s supplemental and replacement pension plan program)
concerned a contract. In the alternative, Spaccia contends she
cannot be convicted in count 2 for having made the same
35
contracts (her employment agreements and addenda) underlying
her convictions in counts 5, 6, and 7. Because the changes to the
pension plan effectively amended Spaccia’s employment contract,
and her participation in the modification of the pension plan
involves different conduct than is at issue in counts 5, 6, and 7,
we affirm the conviction on count 2.
3.1. The existence of a contract is a required element
of the crime of conflict of interest under
Government Code section 1090.
In count 2, Spaccia was convicted of a conflict of interest
under Government Code section 1090, which provides in relevant
part: “Members of the Legislature, state, county, district, judicial
district, and city officers or employees shall not be financially
interested in any contract made by them in their official capacity,
or by any body or board of which they are members.” (Gov. Code,
§ 1090, subd. (a).) Under Government Code section 1097, “[e]very
officer or person prohibited by the laws of this state from making
or being interested in contracts . . . , who willfully violates any of
the provisions of those laws, is punishable by a fine of not more
than one thousand dollars ($1,000), or by imprisonment in the
state prison, and is forever disqualified from holding any office in
this state.” (Gov. Code, § 1097.)
As the Supreme Court recently observed, Government Code
section 1090 “codifies the long-standing common law rule that
barred public officials from being personally financially
interested in the contracts they formed in their official
capacities.” (Lexin v. Superior Court (2010) 47 Cal.4th 1050,
1072 (Lexin).) “The common law rule and section 1090 recognize
‘[t]he truism that a person cannot serve two masters
simultaneously . . . .’ [Citations.]” (Id. at p. 1073.)
36
“To determine whether section 1090 has been violated, a
court must identify (1) whether the defendant government
officials or employees participated in the making of a contract in
their official capacities, (2) whether the defendants had a
cognizable financial interest in that contract, and (3) (if raised as
an affirmative defense) whether the cognizable interest falls
within any one of section 1091’s or section 1091.5’s exceptions for
remote or minimal interests. [fn. omitted] [Citations.] Proof of a
violation of section 1097, the provision criminalizing violations of
section 1090, requires a further showing that the section 1090
violation was knowing and willful. [Citations.]” (Lexin, supra,
47 Cal.4th at p. 1074.)
Of particular relevance here, the Supreme Court has
emphasized that “[w]hat differentiates section 1090 from other
conflict of interest statutes such as the Political Reform Act of
1974 . . . is its focus on the making of a contract in which one has
an impermissible interest.” (Lexin, supra, 47 Cal.4th at p. 1074
[original italics], citing People v. Honig (1996) 48 Cal.App.4th
289, 333 (Honig).) Thus, Government Code “[s]ections 1090 and
1097 are more specific than the conflict-of-interest provisions of
the [Political Reform Act of 1974, Government Code § 8100 et seq.
(PRA)]. The former specifically apply to the making of
governmental contracts while the latter apply to making,
participation in making, or in any way attempting to use an
official position to influence, any governmental decision.
(§ 87100.) While the definition of making a contract is defined
broadly under section 1090, it is not nearly as broad as the
behavior at which the conflict-of-interest provisions of the PRA
are aimed. [Citation.]” (Honig, supra, 48 Cal.App.4th at p. 329.)
37
3.2. The modification of Bell’s pension plan
effectively amended Spaccia’s employment
contract.
The jury convicted Spaccia of four conflicts of interest
under Government Code section 1090: count 2 (Bell supplemental
and replacement pension benefit program), count 5 (2005 second
addendum to her employment agreement), count 6 (2006 third
addendum to her employment agreement), and count 7 (2008
employment agreement). Spaccia challenges only the conviction
on count 2.
Spaccia contends her conviction on count 2 is impermissibly
based upon the same conduct at issue in counts 5, 6, and 7, which
alleged conflicts of interest based upon her employment contracts
and addenda in 2005, 2006 and 2008. Fundamental to her
argument is her assertion that the Bell supplemental and
replacement plan program (identified as the basis of count 2 by
the People) is not, in and of itself, a contract. Rather, she
suggests, the right to pension benefits is part of the consideration
provided by Bell to its employees as part of the employment
relationship and, therefore, her pension benefit is encompassed
within her employment contracts. Although Spaccia’s position is,
to some extent, consistent with well-established law, it does not
lead to the conclusion she urges.
We agree that Spaccia’s right to pension benefits
constituted compensation incident to her employment with Bell.
“[I]t has long been settled that under California law [pension]
benefits ‘do not derive from the beneficence of the employer, but
are properly part of the consideration earned by the employee.’
[Citation.] Since pension benefits represent a form of deferred
compensation for services rendered [citation], the employee’s
38
right to such benefits is a contractual right, derived from the
terms of the employment contract. Since a contractual right is
not an expectancy but a chose in action, a form of property
[citations], we held in Dryden v. Board of Pension Commrs. [1945]
6 Cal.2d 575, 579, that an employee acquires a property right to
pension benefits when he enters upon the performance of his
employment contract.” (In re Marriage of Brown (1976) 15 Cal.3d
838, 845; see also In re Marriage of Peterson (2016)
243 Cal.App.4th 923, 929-930.)
Moreover, for a public employee like Spaccia, the right to
pension benefits is a vested, contractual right. “A public
employee’s pension constitutes an element of compensation, and
a vested contractual right to pension benefits accrues upon
acceptance of employment. Such a pension right may not be
destroyed, once vested, without impairing a contractual
obligation of the employing public entity. [Citation.]” (Betts v.
Board of Administration (1978) 21 Cal.3d 859, 863.) Here,
however, we depart from Spaccia’s logic. Because the right to
pension benefits vests “upon acceptance of employment,” it
necessarily follows that any modification of a pension benefit
during employment constitutes an amendment to the employee’s
terms of employment. In other words, a change in pension
benefits effectively amends the employee’s contract of
employment by changing the amount of the employee’s
compensation, and the employee ratifies the amendment by
continuing the employment relationship. An amendment to or
renegotiation of a contract, like the formation of a contract, falls
within the scope of Government Code section 1090. (See, e.g.,
Sonoma County Organization of Public Employees v. County of
Sonoma (1979) 23 Cal.3d 296, 304 [collective bargaining
39
agreements are binding contracts]; City of Imperial Beach v.
Bailey (1980) 103 Cal.App.3d 191, 196-197 [renewal of
concessionaire contract constitutes “making” of a contract for
purposes of section 1090].)19
Further, in assessing the extent to which Spaccia benefited
from amendments to Bell’s pension plan, we are not limited to an
examination of written employment contracts. “[P]rohibited
financial interests are not limited to express agreements for
benefit and need not be proven by direct evidence. Rather,
forbidden interests extend to expectations of benefit by express or
implied agreement and may be inferred from the circumstances.”
(People v. Honig (1996) 48 Cal.App.4th 289, 315.) “ ‘[W]e must
disregard the technical relationship of the parties and look
19 The Attorney General has also repeatedly found that the
modification of a contract falls within the scope of actions prohibited by
Government Code section 1090. (See, e.g., 89 Ops.Cal.Atty.Gen. 217,
218-219 (2006) [renegotiation of collective bargaining agreement
constitutes “making” of a contract within the meaning of section 1090];
81 Ops.Cal.Atty.Gen. 134, 136-137 (1998) [renegotiation of rental
agreement and water fee constitutes “making” of a contract];
73 Ops.Cal.Atty.Gen. 191, 193-194 (1990) [“obvious” conflict arises for
school board member who is also a teacher within the district when
board makes decisions regarding teacher salaries];
65 Ops.Cal.Atty.Gen. 305, 307 (1982) [modification of collective
bargaining agreement by school district’s governing board constitutes
the making of a contract within the meaning of section 1090].)
Although not binding, “Attorney General opinions are entitled to
considerable weight. [Citation.] This is particularly true when
construing section 1090 and its related provisions because ‘the
Attorney General regularly advises local agencies about conflicts of
interest and publishes a manual designated to assist local
governmental agencies in complying with the conflict of interest
statutes.’ ” (Lexin, supra, 47 Cal.4th at p. 1087, fn. 17.)
40
behind the veil which enshrouds their activities in order to
discern the vital facts. [Citation.] However devious and winding
the trail may be which connects the officer with the forbidden
contract, if it can be followed and the connection made, a conflict
of interest is established.’ [Citation.]” (Ibid.) Accordingly, we
examine the circumstances surrounding the modification of the
pension plan to determine whether Spaccia’s conduct falls within
the scope of Government Code section 1090.
Here, the timing of the pension plan modifications as
related to the negotiation of Spaccia’s employment contracts and
subsequent amendments is critical. Bell created the
supplemental and replacement pension plans effective July 1,
2003. On the same date, Spaccia became an employee of Bell.
However, at that time Spaccia’s salary ($102,310 annually) was
below the ERISA income cap and therefore she did not benefit
from any aspect of the replacement plan. In 2004, by resolution
2004-48, the city council approved an amendment to the
replacement plan, increasing the multiplier to 5 percent (which
had the effect of increasing the retirement benefit for participants
in the replacement plan), effective July 1, 2005. The second
amendment to Spaccia’s employment contract, also effective
July 1, 2005, increased her salary to $185,000 annually, an
amount above the ERISA income cap. Thus, by that time,
Spaccia plainly had a financial interest in the replacement plan.
In late 2007, Pennington advised Spaccia that the ERISA
income cap amount would be increased from $150,000 to
$230,000 in 2008. Accordingly, the formula used to calculate the
benefit for the replacement plan needed to be modified in order to
ensure that Rizzo would receive the targeted benefit amount
(1 percent of his salary per year of service, from the supplemental
41
and replacement plans combined). Spaccia and Pennington
exchanged multiple email messages concerning the details and
financial projections, and they eventually arrived at a solution.
By resolution 2007-63, the city council approved an amendment
to the replacement plan increasing the multiplier to
5.175 percent, effective January 1, 2008. As of January 1, 2008,
Spaccia’s employment contract provided that she earned more
than the ERISA income cap. Thus, when the pension plan
modification became effective on January 1, 2008, Spaccia’s
employment contract was effectively amended because, as of that
date, she gained a vested right to increased pension benefits.
Viewing the transaction as a whole, it is plain that Spaccia acted
on Bell’s behalf to determine the extent to which the pension
benefit needed to be increased in order to fulfill Bell’s
commitment to Rizzo. At the same time, as an employee, she
benefitted directly from that increase because she was a
participant in the replacement plan. This conduct is sufficient to
support Spaccia’s conviction for conflict of interest on count 2.
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DISPOSITION
The convictions on counts 3, 4, 10, 12 and 13 are reversed.
The judgment of conviction is affirmed in all other respects. The
matter is remanded for further proceedings consistent with this
opinion, including correction of the abstract of judgment to delete
references to Spaccia’s current or prior serious or violent felony
convictions.
CERTIFIED FOR PARTIAL PUBLICATION
LAVIN, J.
WE CONCUR:
EDMON, P. J.
ALDRICH, J.
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