People v. Selivanov , 210 Cal. Rptr. 3d 117 ( 2016 )

Filed 11/17/16
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
THE PEOPLE, B252894 consolidated with
B255166
Plaintiff and Respondent,
(Los Angeles County
v. Super. Ct. No. BA372244)
YEVGENY SELIVANOV et al.,
Defendants and Appellants.
THE PEOPLE, B255166
Plaintiff and Appellant,
v.
YEVGENY SELIVANOV et al.,
Defendants and Respondents.
APPEALS from judgments of the Superior Court of Los Angeles County, Stephen
A. Marcus, Judge. Affirmed as modified, with directions.
Kaplan Marino, Nina Marino and Allen G. Weinberg for Defendant, Appellant
and Respondent Tatyana Berkovich.
Crowell & Moring, Jeffrey H. Rutherford and Nimrod Haim Aviad for Defendant,
Appellant and Respondent Yevgeny Selivanov.
Young, Minney & Corr, Paul C. Minney, William J. Trinke and Kevin M. Troy;
California Charter Schools Association, Ricardo J. Soto, Julie Ashby Umansky and
Phillipa L. Altman as Amicus Curiae on behalf of California Charter Schools Association
in support of Defendants, Appellants and Respondents.
Jackie Lacey, District Attorney, Roberta Schwartz, Serena R. Murillo and
Matthew Brown, Deputy District Attorneys for Plaintiff and Appellant The People of the
State of California.
Kamala D. Harris, Attorney General, Gerald A. Engler, Chief Assistant Attorney
General, Lance E. Winters, Assistant Attorney General, Michael C. Keller and Eric J.
Kohm, Deputy Attorneys General, for Plaintiff and Respondent The People of the State
of California.
________________________________
Spouses Yevgeny “Eugene” Selivanov and Tatyana Berkovich founded a charter
school, Ivy Academia, in 2003. In 2006, the Los Angeles Unified School District
(LAUSD), which issued Ivy Academia’s charter, conducted a random audit of the
school’s finances. The audit revealed several irregularities, prompting a further
investigation that ultimately resulted in the filing of a 33-count information charging
Selivanov and Berkovich with numerous financial crimes. After a five-week trial, a jury
convicted Selivanov and Berkovich of felony embezzlement (Pen. Code, § 504)1 and
felony misappropriation of public moneys (§ 424, subd. (a)). The jury further convicted
Selivanov of felony false accounting of public moneys (§ 424, subd. (a), money
laundering (§ 186.10) and filing false tax returns (Rev. & Tax. Code, § 19705, subd. (a)).
In addition, as to Selivanov, the jury found true the allegation that the total losses
associated with six of the embezzlement counts exceeded $65,000. (§ 12022.6, subd.
(a)(1).)
Selivanov and Berkovich each moved for a new trial. The trial court granted the
motions as to all of their convictions for misappropriation and false accounting of public
moneys under section 424, subdivision (a), on the ground that it improperly had
instructed the jury that the funds involved were public moneys. The court sentenced
1
All further statutory references are to the Penal Code unless otherwise indicated.
2
Selivanov to a total of four years, eight months in state prison, and sentenced Berkovich
to formal probation on the condition that she serve 45 days in county jail. Both
defendants were ordered to pay fines, fees, and restitution.
Selivanov and Berkovich appeal. They jointly challenge one of their
embezzlement convictions on several grounds, including sufficiency of the evidence and
the trial court’s failure to give a unanimity instruction. They also seek reversal based on
the court’s failure to instruct the jury to determine whether the amount embezzled
exceeded $950, and whether the embezzled funds were public funds within the meaning
of section 514. Both defendants also contend the court erred by failing to consider
proffered juror declarations when setting their restitution. Selivanov separately
challenges the sufficiency of the evidence underlying his other convictions. He also
challenges the court’s failure to instruct the jury on the claim-of-right defense, the
admission of certain accounting documents, and several aspects of the restitution order.
As we explain more fully below, we conclude the trial court erred in making the
public funds finding but affirm defendants’ convictions because the error was harmless.
We do, however, direct the trial court to strike from Selivanov’s restitution order the joint
and several obligation to pay $22,396.60 in restitution to Ivy Academia in connection
with his embezzlement conviction in count 2, and strike from Berkovich’s restitution
order any language making Selivanov jointly and severally liable for it. As modified, the
judgments of the trial court are otherwise affirmed in full.
The Los Angeles County District Attorney (“the People”) filed a cross-appeal
challenging the trial court’s grant of defendants’ motions for new trial of the section 424
counts. In their opening brief, the People contend the trial court relied on outdated case
law to conclude that the jury was required to determine whether a charter school is a
district; they do not challenge the validity of the actual basis for the court’s ruling, its jury
instruction on “public moneys.” In their reply, however, the People argue that the trial
court’s actual basis for granting the motion was erroneous. They urge us to excuse their
oversight, reverse the trial court’s rulings on the motions for new trial, and reinstate the
guilty verdicts on all of the section 424, subdivision (a) counts affected by the motions.
3
We decline their invitation to do so and affirm the trial court’s order granting defendants’
new trial motions.
PROCEDURAL HISTORY
On May 4, 2011, the People filed a 33-count information charging defendants with
various financial crimes.2 Counts 1, 3, 5, 7, and 39 charged both defendants with
misappropriating public moneys. (§ 424, subd. (a).) Each of those misappropriation
counts was paired with a charge of embezzlement in excess of $950. (§ 504, counts 2, 4,
6, 8, and 40, respectively.) The information also charged both defendants with filing
false personal income tax returns in violation of Revenue and Taxation Code section
19705, subdivision (a) (counts 27-31).
Selivanov alone was charged with five additional counts of misappropriating and
falsely accounting for public moneys. (§ 424, subd. (a), counts 9, 11, 18, 21, and 24.)
Four of those counts (9, 18, 21, and 24) were paired with a count of embezzlement in
excess of $950 stemming from the same conduct. (§ 504, counts 10, 19, 22, and 25,
respectively.) Three of those misappropriation-embezzlement count pairs—18-19, 21-22,
and 24-25— were further supplemented with a related count of money laundering (§
186.10, subd. (a), counts 20, 23, and 26.) The information also alleged that Selivanov
alone filed false business income tax returns. (Rev. & Tax. Code, § 19705, subd. (a),
counts 32-36.) Berkovich alone was charged with one count of conflict of interest. (Gov.
Code, §§ 87100 and 91000, count 38).
The information further alleged, with respect to the misappropriation,
embezzlement, and money laundering charges in counts 1-8, 18-26, and 39-40, that
defendants took, damaged, and destroyed property of a value exceeding $65,000 within
the meaning of section 12022.6, subdivision (a)(1). With respect to most of the
embezzlement counts, including all of those sounding against Berkovich, namely counts
2
Following the parties’ practice, we refer to the counts by the numbers used in the
information and not the renumbered counts used at trial. The original criminal complaint
against defendants had 40 counts, which is why some of the counts discussed herein have
a number higher than 33.
4
2, 4, 6, 8, 10, 19, and 40, the information alleged that the funds embezzled were “public
funds” within the meaning of section 514.
Embezzlement and misappropriation counts 3-6 and 9-10 were dismissed pursuant
to defendants’ section 995 motions following the preliminary hearing. The court later
dismissed the conflict of interest charge against Berkovich (count 38) pursuant to the
People’s motion under section 1385. Defendants pleaded not guilty to the remaining
charges and denied all of the special allegations.
Defendants were tried jointly before a jury in February and March 2013. On April
5, 2013, the jury found Selivanov guilty of seven counts of misappropriating or falsely
accounting for public moneys (counts 1, 7, 11, 18, 21, 24, and 39), six counts of
embezzling in excess of $950 (counts 2, 8, 19, 22, 25, and 40), two counts of money
laundering (counts 23 and 26), and 10 counts of filing false tax returns (counts 27-36).
The jury acquitted Selivanov of a third money laundering charge (count 20) but found
true the special allegation that, as to counts 2, 8, 19, 22, 25, and 40, Selivanov in the
aggregate took money exceeding $65,000 within the meaning of section 12022.6,
subdivision (a)(1).
The jury found Berkovich guilty of two counts of misappropriating public moneys
(counts 1 and 39), one count of embezzling in excess of $950 (count 2), and five
misdemeanor tax counts that were lesser included offenses of the charged felony tax
violations (counts 27-31). The jury acquitted Berkovich of one additional count of
misappropriation (count 7) and two additional counts of embezzlement in excess of $950
(counts 8 and 40). It also found not true the special allegation that she embezzled in
excess of $65,000 within the meaning of section 12022.6, subdivision (a)(1). The court
later dismissed Berkovich’s misdemeanor tax convictions at the People’s request,
pursuant to section 1382.
Selivanov and Berkovich each moved for a new trial. The court granted the
motions as to the misappropriation and false accounting counts charged under section
424, subdivision (a) (counts 1, 7, 11, 18, 21, 24, and 39) and denied the motions in all
other respects.
5
At sentencing, at the People’s request and over defendants’ objections, the court
found that “this case involved public funds” within the meaning of section 514, the
statute setting out the punishment scheme for embezzlement offenses. The court later
denied defendants’ motions to strike the finding.
The court sentenced Selivanov to a total of four years, eight months in state prison,
calculated as the high term of three years on one of the embezzlement counts (§ 504,
count 8); an additional year for the enhancement on that count (§ 12022.6, subd. (a)); and
eight months, one-third the midterm, on one of the money laundering counts (§ 186.10,
subd. (a), count 26). The court imposed concurrent terms on all other counts of
conviction. After a contested restitution hearing, the court ordered Selivanov to pay a
total of $271,795.11 in restitution. Of that amount, $227,896.11 was payable to Ivy
Academia: $126,654.73 was assessed in connection with count 40; $66,795.96 was
assessed in connection with counts 8, 19, 22, and 25; and a total of $34,445.42 was
assessed in connection with count 2. The remaining $43,899 of Selivanov’s restitution
was payable to the Franchise Tax Board in connection with the tax convictions in counts
27-36. The court also ordered Selivanov to pay a restitution fine of $5,000 and imposed
and suspended a $5,000 parole revocation restitution fine.
The court sentenced Berkovich to five years’ formal probation, on the condition
that she serve the first 45 days in county jail. The court also ordered her to perform 320
hours of community service. The court found Berkovich jointly and severally liable with
Selivanov for $22,396.60 in restitution in connection with her sole conviction for
embezzlement (count 2). The court ordered Berkovich to pay a $1,000 restitution fine.
Both defendants timely appealed. The People also timely appealed the court’s
grant of defendants’ new trial motions. The appeals were consolidated for oral argument
and decision.
FACTUAL BACKGROUND
This case concerns obfuscatory and complex financial transactions and accounting
procedures. In the interest of clarity and brevity, we recite immediately below the facts
underlying the charged conduct, organized topically. Additional facts pertinent to the
6
legal issues raised on appeal will be discussed as necessary in connection with those
issues.
I. Ivy Academia
This case centers on defendants’ conduct in their capacities as the founders and
operators of a charter school, Ivy Academia. Charter schools are “public schools funded
with public money but run by private individuals or entities rather than traditional public
school districts.” (Today’s Fresh Start, Inc. v. Los Angeles County Office of Education
(2013) 57 Cal. 4th 197, 205.) Though operated independently, charter schools are subject
to public oversight. (Id. at p. 206.)
Selivanov was the executive director of Ivy Academia. Berkovich initially served
as the school’s principal and later became its president. Both defendants continuously
served on Ivy Academia’s governing board of directors.
A. Founding and Corporate Organization
In October 2003, defendants filed a petition to establish Ivy Academia with the
Charter School Division of the Los Angeles Unified School District (LAUSD), which
oversees charter schools. LAUSD approved the petition, authorizing Ivy Academia to
begin operations the next fiscal year, July 1, 2004 through June 30, 2005. After the
charter was approved, Selivanov incorporated Alternative Schools, Inc., a nonprofit
public benefit corporation, to operate and do business as Ivy Academia. Selivanov also
filed a fictitious business name statement identifying Ivy Academia as a fictitious name
of Alternative Schools, Inc.
Defendants also owned another business entity, Academy Just for Kids, LLC
(“AJFK”). Selivanov changed the name of that business to EGeneration, LLC in April
2005.
B. Funding and Finances
1. Charter School Funding Generally
According to prosecution witness Aaron Eairleywine, the central business advisor
for LAUSD’s Charter School Division, Ivy Academia was considered a public school
entitled to receive state funds and federal funds that flow through the state. Eairleywine
7
and Patricia Smith, a representative of the Los Angeles County Office of Education’s
finance department, testified that the allocations from the state are “designed to fund the
educational activities,” “instructional program,” and general operation of charter schools.
Funding is based on charter schools’ average daily attendance and is distributed primarily
in the form of categorical and general purpose block grants. According to Eairleywine
and Smith, categorical and general purpose block grants are considered unrestricted funds
that may be spent “for the overall operation of the agency and its purpose” – i.e., for
school or educational purposes. Eairleywine and Smith further testified that charter
schools also receive restricted grants and other funds that must be spent for particular
purposes, such as purchasing supplies, reducing class sizes, or paying for standardized
testing. They both noted that LAUSD does not train charter school operators on the
proper use of categorical or general purpose block grant funds.
According to Eairleywine, money usually does not begin flowing from the state to
a new charter school until after the school begins operating. But new charter schools
need funds at their inception to secure facilities, pay staff, and prepare the school for
students. For that reason, Eairleywine explained, LAUSD requires charter schools to
demonstrate access to funding in their initial petitions. Some charter schools obtain these
initial funds through grants or philanthropic gifts. Others, like Ivy Academia, use loans.
2. The Start-Up Loan
Ivy Academia obtained a $250,000 loan from the California Department of
Education. Ivy Academia also obtained a loan from Selivanov and Berkovich, referred to
at trial as the “start-up loan.” Ivy Academia’s governing board approved the start-up loan
in August 2004. It documented receipt of the start-up loan by issuing a three-year,
unsecured promissory note payable to Selivanov in the amount of $250,000, plus nine
percent interest.
Despite the personal nature of the loan and language in the promissory note
making it payable to Selivanov personally, the start-up loan was booked in the “Due to
Academy” account in Ivy Academia’s QuickBooks accounting software. “Academy”
referred to defendants’ business entity AJFK, Academy Just for Kids. The Due to
8
Academy account was one of three QuickBooks accounts recording amounts owed to
Selivanov, Berkovich, and their business entities. The other two, Due to Management
and Due to EGeneration, will be addressed below.
The amount initially entered in the Due to Academy account on September 30,
2004 was approximately $397,000, though both the promissory note approved by the
board and the audited financial statements Ivy Academia submitted to LAUSD reflected a
loan of only $250,000. A few weeks later, on October 19, 2004, Ivy Academia made a
$300,000 payment to AJFK, reducing the amount owed in the Due to Academy account
to approximately $97,000. However, this payment appeared on Ivy Academia’s audited
financial statements as a payment of only approximately $74,000. The only people with
access to Ivy Academia’s QuickBooks accounting software were Selivanov and the
school’s bookkeeper, Marina Pilyavskaya. Pilyavskaya, who testified under a grant of
immunity, testified that she did not do the books for defendants’ other business entities.
The People charged Selivanov with falsifying the accounting of public moneys in
connection with the discrepancies in the documentation of the start-up loan and its
repayment (§ 424, subd. (a); count 11)).
3. Deferred Salaries
During the first year of Ivy Academia’s operation, the school did not have funds
available to pay salaries to Selivanov and Berkovich. Ivy Academia’s governing board
voted to defer payment of the salaries, plus nine percent interest, until the school’s
finances improved. Pilyavskaya entered the deferred salaries owed—$100,000 to
Selivanov and $80,000 to Berkovich—into another QuickBooks account, “Due to
Management.” The amount owing in the Due to Management account increased to
$230,000 after the board approved bonuses for both Selivanov and Berkovich. Ivy
Academia regularly made payments to defendants to offset the interest accruing on the
Due to Management account, but did not make formal salary payments against this
account until April 2008, when it issued Selivanov a check for $18,000. The Due to
Management account reflected two additional salary payments to defendants in 2008
(another $18,000 to Selivanov and $10,000 to Berkovich) and two to each defendant in
9
2009. Each defendant received a check for $11,000 in April 2009, and the Due to
Management account reflected that. The other salary payment each defendant received in
2009—a check for $7,000—was documented in the Due to Management account as a
payment of only $1,727.80. No further salary payments were documented in the Due to
Management account until early 2011, after the board voted to pay down the salary still
owed to defendants in regular increments. The balance of the Due to Management
account reached zero in July 2011.
4. Financial Oversight
Like other charter schools authorized by LAUSD, Ivy Academia was subject to
examination and audits by the LAUSD Charter School Division. Eairleywine testified
that charter schools are required to submit preliminary budgets, interim reports, and
annual audits to the Charter School Division in addition to undergoing on-site reviews.
Charter schools also are required to hire independent auditors, selected from a list
approved by the state controller’s office, to prepare annual audited financial statements.
Although it complied with these requirements, Ivy Academia was the subject of a random
audit in 2006. That audit led to a lengthy investigation that resulted in the criminal
charges at issue here. While the investigation was ongoing, in 2008, LAUSD approved
Ivy Academia’s petition to renew its charter.
II. American Express Charges and Expenditure of Public Funds
Selivanov and Berkovich each had an Ivy Academia American Express credit
card. The People alleged that defendants’ use of their American Express cards
constituted misappropriation of public moneys (§ 424, subd. (a); count 1) and
embezzlement of public funds (§§ 504, 514; count 2).
Pilyavskaya testified that she was responsible for processing the defendants’
charges. When she received the monthly American Express bill, she would prepare
expense reports and request receipts supporting defendants’ purchases. Pilyavskaya
attached the receipts to the expense reports and gave them to board member Arthur
10
Sarkisian for approval.3 Sarkisian approved the expense reports and then returned the
reports and accompanying receipts to Pilyavskaya, who kept them in her office.
During LAUSD’s investigation of Ivy Academia, LAUSD financial analyst and
forensic accountant Connie Delos Santos4 reviewed Pilyavskaya’s American Express
records. Delos Santos prepared a spreadsheet showing all charges made to the Ivy
Academia American Express account from January 2005 through January 2010. She
highlighted each charge she deemed “questionable” or “disallowed” based on her online
research into public school spending, her general understanding of the types of purchases
that have school purposes versus those that are “personal in nature,” and a LAUSD meal
policy. The charges Delos Santos deemed “questionable” totaled $34,445.42.
According to Delos Santos, the “questionable” charges made on Selivanov’s
American Express card totaled $12,048.82. These charges included $48.71 for flowers
purchased on Valentine’s Day and booked into the “Office Supply” account in Ivy
Academia’s QuickBooks; $59.94 for a business meeting at Crazy Tokyo on a Friday
night at 9:48 p.m., booked as utilities and housekeeping; and $135.89 at Cheesecake
Factory on a Saturday afternoon for a business meeting. The “questionable” charges on
Berkovich’s American Express card totaled $22,396.60. They included $67.38 for two
“Welcome Baby” floral arrangements, booked as other office supplies; two $42.45 floral
arrangements for councilman Jack Weiss, booked as teacher appreciation; $631.38 at
Things Remembered, booked as maintenance supplies; $100 for a Crate and Barrel gift
card, also booked as maintenance supplies; $995 for a “Tax secrets seminar by Patrick
James,” booked as other professional development; and various items purchased at
Costco, including a Speedo bathing suit, shrimp scampi, and Pull-Ups training pants.
Both defendants also repeatedly charged hundreds of dollars at bowling alleys and
3
At trial, Sarkisian and two other members of the board, Alex Kauffman and
Marci Adams, each invoked the Fifth Amendment right against self-incrimination.
Kauffman previously had testified at the preliminary hearing, however, and that
testimony was read into the record at trial.
4
The Deputy District Attorney confirmed this spelling of Delos Santos’s name at
oral argument.
11
restaurants for “teacher appreciation” events, at least one of which included the purchase
of alcohol.
Defendants did not reimburse Ivy Academia for any of these charges, though
Pilyavskaya testified that Berkovich sometimes wrote “no” or “mine” on receipts to
indicate items that were not purchased for the school. Defendants did not reduce the
amount owed to them in the Due to Management account by documenting their
“questionable” purchases there, and they did not report the purchases as income on their
personal income taxes. According to former Ivy Academia principal Christina Desiderio,
however, Berkovich boasted that her Ivy Academia credit card was “unlimited” and
stated that she wanted to open more charter schools because “it could make you a
millionaire.”
The independent auditors who prepared financial statements for Ivy Academia
included a note in their 2006 report that “there was a problem with the credit card use,”
including inadequate explanations for charges, and expenditures that “appeared to be
personal in nature.” Prosecution witness Michael Atkinson, a senior investigator with
LAUSD’s Office of the Inspector General, testified that the audit paperwork included a
notation that “Selivanov had fought with them about having that information removed
from the audit report” and another reminding the auditors to “closely review their use of
credit cards to see if these deficiencies have been corrected.”
Both the prosecution and the defense presented witnesses who testified about the
standards governing spending by charter schools. All of the witnesses generally agreed
that public moneys or funds received by charter schools must be spent on educational or
school purposes. The witnesses differed, however, on whether or under what conditions
certain expenditures met that standard. Prosecution witnesses Eairleywine and Smith
testified that gifts for teachers and staff, “activities for the pleasure of faculty and
teachers and staff such as bowling,” and “after hours dinners off campus” would not be
permissible under any circumstances. Defense witnesses Caprice Young, founder of the
12
California Charter Schools Association5; Eric Premack, executive director of the Charter
Schools Development Center; and Roger Lowenstein, the founder and director of a
charter school; all testified that such expenditures could be appropriate. Premack added
that a charter school would need to have “reason to believe that it helps the school
achieve its instructional goals,” and Lowenstein agreed that charter schools have a duty to
guard public funds.
III. Rent Increase
In June 2004, defendants’ other business entity, AJFK, entered into a 10-year
sublease agreement with J & N Amoroso Family Investments, LLC for a property to use
as Ivy Academia’s campus. Under the sublease, which Selivanov and Berkovich
personally guaranteed, AJFK agreed to pay rent of $18,390 per month for a 24,520-
square-foot building on De Soto Avenue in Woodland Hills. The rent was adjustable, but
increases were pegged to the Consumer Price Index and capped at five percent per year.
Without the knowledge of landlord J & N Amoroso Family Investments, AJFK
assigned the sublease to Alternative Schools, Inc. (Ivy Academia) on September 1, 2004,
for a period of two years. Ivy Academia moved into the De Soto Avenue building shortly
thereafter. Under the terms of the sublease assignment, Ivy Academia became jointly and
severally liable for AJFK’s obligations under the sublease, including the monthly rent of
$18,390 per month.
On October 2, 2008, more than two years after the original sublease assignment
expired, Selivanov presented the Ivy Academia board with a proposal to approve another
assignment and assumption of the sublease. The new “Assignment Assumption of
Lease” would be “made as of July 1st, 2007 by and between Academy Just For Kids
(EGeneration LLC) . . . and Alternative Schools Inc. . . for a period of seven years.”
Under the terms of Selivanov’s proposed Assignment Assumption of Lease, Alternative
Schools, Inc. (Ivy Academia) would agree “to make a monthly payment to
[AJFK/EGeneration], or its designee, in the amount of $43,870.05 for the use of the
5
The California Charter Schools Association filed an amicus curiae brief
supporting defendants on appeal.
13
facility and lease guarantees.”6 The monthly rent was scheduled to increase five percent
each year on July 1. Selivanov presented to the board a “Broker Opinion of Value”
prepared by real estate brokerage firm Lee & Associates. That opinion stated that the
reasonable fair market value of monthly rent for the approximately 27,000-square-foot
building “in its current condition and existing use” as of October 28, 2007 was
approximately $1.75 per square foot, triple net, or $47,250.
Defendants recused themselves from voting on the Assignment Assumption of
Lease. The remaining two board members who were present decided the substantial rent
increase it contained “was an appropriate risk that the school was taking” and approved
the Assignment Assumption of Lease. However, one of them, Alex Kauffman, testified
at the preliminary hearing that he never reviewed the original sublease. Selivanov signed
the undated Assignment Assumption of Lease on behalf of AJFK/EGeneration, and board
treasurer Arthur Sarkisian—who had been absent from the meeting at which the proposal
was presented and approved—signed on behalf of Ivy Academia.
According to Kauffman’s preliminary hearing testimony as read at trial, the board
discussed “the fact that Ivy’s monthly payment is only 90% of the fair market value of
the facilities as determined by Lee & Associates and the school has just rented [a] new
high school facility at $1.75 per square foot in tremendous competition with another
6
The full text of the pertinent paragraph provided: “Assigner
[AJFK/EGeneration] was the original Sublessee under the Sublease. Assigner assigned
the Sublease to Assignee [Alternative Schools, Inc.] for period [sic] of seven years.
Assignee desires to accept the assignment of the Sublease. Both Assigner and Assignee
agree as follows: (a) each of them hereby ratifies all the terms and conditions of the
Sublease, (b) each of them is, and shall hereafter forever remain, jointly and severally
liable for all Sublessee’s obligations under the Sublease, (c) to the extent necessary
Assigner approves the assignment of the Sublease to Assignee, and Assignee accepts
such assignment for period [sic] of seven years, (d) Assignee agrees to sell Assigner
$520,000 of tenant improvements, in return Assignor [sic] agrees to assume $520,000 of
Assignee’s bank loan from Western Commercial bank [sic], and (e) Assignee agrees to
make a monthly payment to the Assigner, or its designee, in the amount of $43,870.05 for
the use of the facility and lease guarantees; this payment will increase 5% every July
1st[.]”
14
charter school.”7 Kauffman further testified that the board also viewed the rent increase
as the fair market value of the “constant risk” defendants assumed when they obtained a
loan from Western Commercial Bank to improve the premises. (See IV. Western
Commercial Bank Loan, post at pp. 16-18.)
LAUSD investigator Michael Atkinson testified that the effect of the board’s
approval of the Assignment and Assumption of Lease was an increase in the monthly
“rent that Ivy Academia has to pay from [$]18,390 per month to $43,870.05 per month,”
an increase of approximately $25,480 per month, or nearly 139 percent. The total net
amount of increased rent owed from the agreement’s effective date of July 1, 2007
through June 2, 2008 was approximately $237,000. This amount—$237,000— was
entered into Ivy Academia’s Due to EGeneration QuickBooks account as a liability to
EGeneration on June 30, 2008, roughly three months before the board was apprised of
and approved the Assignment and Assumption of Lease on October 2, 2008.
Jason Amoroso, a real estate attorney involved with the original sublease between
J & N Amoroso Family Investments and AJFK, testified that the fair market value of the
De Soto Avenue property was that originally agreed upon: $18,390 per month,
increasing each year in step with inflation. He also testified that he was not aware that
AJFK ever assigned the lease to Ivy Academia. QuickBooks printouts introduced by
defendants showed that Ivy Academia continued to pay J & N Amoroso Family
Investments the originally agreed upon rent even after the increase was approved by the
board and booked into Ivy Academia’s QuickBooks. Amoroso, however, testified that
“we received checks from Ivy Academia[,] EGeneration, various entities . . . and they
stated they were involved with the school.”
Prosecution witness James Balbin, a certified public accountant, opined that the
rent increase was a “sham transaction” that was “just absurd.” He further testified that
there was “no business purpose to increase the lease payment due on this rent.” Defense
7
The increased monthly rent of $43,870.05 approved by the board was
approximately 93 percent of the fair market value stated in the Lee & Associates opinion.
15
expert Jan Goren, a certified public accountant, countered that the rent increase reflected
various business risks: the risk that defendants would need to satisfy their guarantee on
the original sublease, the risk that they would have to remove various leasehold
improvements from the premises, and the risk that Ivy Academia could lose its charter.
Selivanov presented testimony from Robert Gutzman, a real estate appraiser.
Gutzman conducted a historical appraisal of the property, which he determined to be
27,854 square feet. Gutzman testified that the property was worth $1.66 per square foot,
or $46,125 per month, as of July 1, 2007 and $1.70 per square foot, or $47,250 per month
as of October 1, 2008.
The People alleged that certain payments made to EGeneration after the rent
increase constituted both misappropriation of public funds (§ 424, subd. (a); count 7) and
embezzlement of public funds (§§ 504, 514; count 8).
IV. Western Commercial Bank Loan
In June 2006, Alternative Schools, Inc. (Ivy Academia) obtained a five-year,
$500,000 loan from Western Commercial Bank to finance “phase two remodeling” of the
De Soto Avenue premises from a warehouse into a school. In August 2006, the loan
amount was increased to $600,000.
In March 2009, when the outstanding balance of the loan stood at $390,000,
Selivanov asked Western Commercial Bank to change the borrowing entity on the loan
from Alternative Schools, Inc. to EGeneration, LLC. According to former Western
Commercial Bank underwriter Jennifer Irrizary, Selivanov made the request because he
needed some additional write-offs. The bank effectuated the change on March 20, 2009.
Both defendants signed in their capacity as managers of EGeneration, and Selivanov
personally guaranteed the loan.
Just as the rent increase was documented in the Ivy Academia’s QuickBooks
months before it was presented to and approved by the board, changes to the loan were
entered into Ivy Academia’s QuickBooks long before Western Commercial Bank
formally transferred the loan to EGeneration. According to prosecution witnesses
Atkinson, Delos Santos, and Balbin, Ivy Academia’s QuickBooks documented an “asset
16
sale” on July 1, 2007, when the loan had an outstanding balance of $520,000. According
to those witnesses, the asset sale consisted of EGeneration’s assumption of responsibility
for the $520,000 loan balance in exchange for Ivy Academia’s transfer of $520,000 worth
of improvements on the De Soto Avenue property to EGeneration. The property
improvements were not physically transferred to EGeneration, because Ivy Academia
was using them on its campus. However, the property improvement assets were removed
from Ivy Academia’s balance sheet and transferred to EGeneration’s along with the loan
liability. Delos Santos and Franchise Tax Board special agent Rigoberto Salazar both
testified that EGeneration claimed a depreciation deduction for the assets on its 2007
Limited Liability Company Return of Income taxation form.
The asset sale transaction was presented to and approved by the Ivy Academia
board on October 2, 2008, concurrently with the rent increase. The board minutes, which
the parties stipulated were admissible as business records, state that the board “noticed
that the sale of assets is beneficial to Ivy as it allows the school to strengthen its balance
sheet, while EGeneration LLC will only be able to recognize about 30c on $1 benefit
from this purchase through the depreciation of assets.” The board accordingly approved
the transaction, which was documented in the same Assignment Assumption of Lease
that effectuated the rent increase. As noted above (ante, fn. 6), a single sentence in the
one-page Assignment Assumption of Lease contained both provisions. That sentence
stated that Ivy Academia “agrees to sell to [EGeneration] $520,000 of tenant
improvements, in return [EGeneration] agrees to assume $520,000 of [Ivy Academia’s]
bank loan from Western Commercial bank, and . . . [Ivy Academia] agrees to make a
monthly payment to [EGeneration], or its designee, in the amount of $43,870.05 for the
use of the facility and lease guarantees; this payment will increase 5% every July 1st.”
After liability for the loan was transferred from Ivy Academia to EGeneration, Ivy
Academia continued to make loan payments directly to Western Commercial Bank.
According to Delos Santos and Pilyavskaya, these payments—totaling $126,654.73—
were recorded in Ivy Academia’s QuickBooks as rent payments. Pilyavskaya agreed on
cross-examination that payments on the loan were recorded as rent payments “as of at
17
least August 16th of 2008,” predating both board approval of the asset sale transaction
(October 2, 2008) and the formal transfer of the loan to EGeneration (March 2, 2009), but
post-dating the putative effective date of the asset sale transaction (July 1, 2007).
After the rent increase, Ivy Academia owed $43,870.05 in rent per month. That
amount, less that month’s payment to J & N Amoroso Family Investments and loan
payment to Western Commercial Bank, was documented in the Due to EGeneration
account each month as a liability Ivy Academia owed to EGeneration. According to
defense expert Goren, this arrangement was a consequence of the “or its designee” clause
in the Assignment Assumption of Lease the board approved on October 2, 2008: “[Ivy
Academia] agrees to make a monthly payment to [EGeneration], or its designee, in the
amount of $43,870.05 for the use of the facility and lease guarantees . . . .” Goren
explained that, after the rent increase, Ivy Academia owed $43,870.05 in rent to
EGeneration each month. However, EGeneration named J & N Amoroso Family
Investments and Western Commercial Bank as its designees to which Ivy Academia
should make monthly payments in partial satisfaction of the total increased rent. In other
words, Ivy Academia would pay some portion of the $43,870.05 rent to J & N Amoroso
Family Investments, and another portion to Western Commercial Bank, at EGeneration’s
behest. Any remaining amount owed beyond those two payments each month was
booked as a liability in the Due to EGeneration account. There is no documentary
evidence formalizing these designations.
The People alleged that the loan payments Ivy Academia made after transferring
the loan to EGeneration constituted both misappropriation of public moneys (§ 424, subd.
(a); count 39) and embezzlement of public funds (§§ 504, 514; count 40).
V. Transfers of Funds to EGeneration
As noted above, Ivy Academia had three QuickBooks accounts recording amounts
owed to Selivanov, Berkovich, and their business entities: Due to Management, Due to
Academy, and Due to EGeneration. The latter two accounts, which documented debts to
both the former (AJFK) and current (EGeneration) names of defendants’ other business
18
entity, were consolidated in Ivy Academia’s QuickBooks in June 2008. After that point,
the Due to Academy account was zeroed out.
Because the Due to Academy and Due to EGeneration accounts were eventually
consolidated, and because AJFK and EGeneration were the same entity, prosecution
witnesses treated these two accounts as one for purposes of determining the balance Ivy
Academia owed to AJFK/EGeneration and, ultimately, Selivanov and Berkovich, the
owners of that entity. Even though the Due to Management account also reflected money
owed to defendants (their deferred salaries), neither the Ivy Academia QuickBooks nor
the prosecution combined the Due to Management account with the Due to Academy or
Due to EGeneration accounts. Defense expert Jan Goren opined that all three accounts
should have been considered together because the amounts owed to defendants’ business
entities ultimately were owed to defendants personally.
Prosecution witnesses Atkinson and Delos Santos testified that the combined
balance of the Due to Academy and Due to EGeneration accounts reached zero on
August 1, 2007, meaning that, at that point, Ivy Academia no longer owed money to
AJFK and/or EGeneration. Ivy Academia subsequently made three large monetary
transfers to EGeneration, however: $25,000 on August 1, 2007, $20,000 on November
19, 2007, and $20,000 on December 1, 2007. Shortly after the $25,000 transfer,
EGeneration issued a $24,000 check to Selivanov, leaving EGeneration with a total of
$1,540.65 in its bank account. Before the first $20,000 transfer in November 2007,
EGeneration’s bank account balance dipped to $46.80. Following that transfer,
EGeneration wrote a $7,000 check to Selivanov. Atkinson testified that absent the
$20,000 transfer from Ivy Academia, EGeneration would not have had enough money to
make the $7,000 payment. EGeneration’s bank account balance slipped to $3,386.53
before the final $20,000 transfer in December 2007; shortly after that payment was
deposited into its bank account, EGeneration issued two checks totaling $15,300.
On April 1, 2008, the balance in the Due to EGeneration account was negative,
meaning that EGeneration owed money to Ivy Academia. Ivy Academia nevertheless
issued a $5,000 check to EGeneration that day.
19
The Due to EGeneration account balance was still negative on June 30, 2008. On
that date, however, a liability of $237,000 was added to the account, turning its balance
positive; now, the account showed that Ivy Academia owed $208,623 to EGeneration.
The $237,000 liability was the total net amount of increased rent Ivy Academia owed
from the effective date of the rent increase, July 1, 2007, through June 30, 2008. This
additional liability was added to Ivy Academia’s QuickBooks three months before the
rent increase was presented to and approved by the board.
After the balance of the Due to EGeneration account was bolstered by the addition
of the retroactive rent liability, Ivy issued a series of small checks to EGeneration. On
September 24, 2008, Ivy Academia issued a $5,000 check to EGeneration. It
subsequently issued three additional checks to EGeneration: a $5,000 check on October
1, 2008, a $3,000 check on December 20, 2008, and a $5,000 check on March 16, 2009.
While all of the aforementioned transfers to EGeneration were being made, the
amount owed to defendants as reflected in the Due to Management account remained
unchanged at approximately $230,000. Prosecution witnesses Atkinson, Delos Santos,
and Balbin and defense witness Goren all agreed that the amount due to defendants as
documented in the Due to Management account exceeded the total amounts Ivy
Academia transferred to EGeneration in 2007 and 2008. The balance of the Due to
Management account was not reduced when any of the transfers to EGeneration were
made, however, or at any time prior to 2008 and 2009, when Ivy Academia made several
deferred salary payments directly to both defendants. Defendants ultimately directly
received the full $230,000 in deferred salaries that the Due to Management account
indicated they were owed.
The People alleged that Selivanov embezzled public funds by making the series of
$5,000 and $3,000 transfers to EGeneration after the rent increase was added to the Due
to EGeneration account (§§ 504, 514; count 8). They further alleged that each of the
three larger transfers in 2007 constituted misappropriation of public moneys (§424, subd.
(a); counts 18, 21, 24), embezzlement of public funds (§§ 504, 514; counts 19, 22, 25),
and money laundering (§ 186.10, subd. (a); counts 20, 23, 26).
20
VI. Taxes
Defendants were charged with filing false personal and corporate income tax
returns for the years 2004 through 2008. Prosecution witnesses Salazar and Delos Santos
testified that defendants failed to report on their personal income tax returns the personal
expenses they charged to their American Express cards from 2005 to 2008. Salazar and
defense witness Goren both testified that any American Express charges constituting
embezzlement or personal expenses should have been reported as taxable income, but
proper school expenditures were not required to be reported. Delos Santos testified that
defendants would have to report as personal income even those charges that did not
benefit them personally, such as teacher appreciation dinners, because “they are in
control of the credit card.” Salazar testified that defendants improperly reported $46,000
they received as payment of their deferred salaries on their 2008 EGeneration tax return
rather than on their personal income tax return. Salazar further testified that defendants’
personal tax returns would be affected by improprieties on the corporate tax returns filed
by AJFK/EGeneration, because “any income or losses would flow in to the individual
return” since defendants were AJFK/EGeneration’s only members.
Salazar testified that AJFK/EGeneration’s tax returns for the years 2004 through
2008 contained numerous improprieties. In 2004, he testified, expenses shown in
AJFK’s accounting books were both deducted on the AJFK tax return and recorded as
amounts owing to AJFK in Ivy Academia’s Due to Academy account. Salazar opined the
deductions taken by AJFK were improper because the expenses were double-booked. He
also testified that the 2004 AJFK return contained $30,697.35 of deductions for “rent
expenses,” even though the AJFK QuickBooks showed the amount claimed was spent on
other items such as “Office Depot expense, Dominoes [sic] Pizza, car insurance, Coffee
Bean items, [El] Pollo Loco.” According to Salazar, the 2004 AJFK tax return also
overreported AJFK’s income because it included the October 19, 2004 $300,000 loan
repayment from Ivy Academia as income, even though loan repayments are not income.
According to Salazar, the 2005 EGeneration return deducted $11,930 worth of
“supplies expenses,” which Salazar testified consisted of “items like cheesecake, the car
21
insurance, Victoria [sic] Secret, you know, the pretzel charges, pediatric care, and
restaurant.” Salazar testified that the 2006, 2007, and 2008 returns contained similarly
improper deductions for supplies. According to Salazar, the improperly deducted
amounts in those years were, respectively, $11,461, $9,125, and $9,367. Salazar also
testified that the 2007 EGeneration tax return failed to report as income $43,795.96 that
Ivy Academia paid in excess of the amount it owed to EGeneration that year.
The People alleged that both Selivanov and Berkovich filed personal income tax
returns that they did not believe to be true and correct as to every material matter in tax
years 2004, 2005, 2006, 2007, and 2008 (Rev. & Tax. Code, § 19705, subd. (a); counts
27-31). They further alleged that Selivanov filed tax returns for AJFK/EGeneration that
he did not believe to be true and correct as to every material matter in tax years 2004,
2005, 2006, 2007, and 2008 (Rev. & Tax. Code, § 19705, subd. (a); counts 32-36).
DISCUSSION
I. American Express Charges Embezzlement Conviction (Count 2)
Both defendants challenge the section 504 embezzlement convictions stemming
from their use of Ivy Academia American Express cards (count 2). Jointly, they contend
there was insufficient evidence to establish that their use of the cards was fraudulent.
They further contend that the court erred by failing to give a unanimity instruction and by
failing to require the jury to find the amount taken exceeded $950. They argue that the
cumulative effect of these two instructional errors deprived them of a fair trial.
Defendants finally contend the court erred by finding at sentencing that the case involved
“public funds” within the meaning of section 514. We address these contentions in turn.
A. Sufficiency of the Evidence
“When a defendant challenges the sufficiency of the evidence, ‘“[t]he court must
review the whole record in the light most favorable to the judgment below to determine
whether it discloses substantial evidence—that is, evidence which is reasonable, credible,
and of solid value—such that a reasonable trier of fact could find the defendant guilty
beyond a reasonable doubt.” [Citation.]’ [Citations.] ‘Substantial evidence includes
circumstantial evidence and any reasonable inferences drawn from that evidence.
22
[Citation.]’ [Citation.] We ‘“‘presume in support of the judgment the existence of every
fact the trier could reasonably deduce from the evidence.’” [Citation.]’ [Citation.]”
(People v. Clark (2011) 52 Cal. 4th 856, 943.)
The jury found defendants’ use of the Ivy Academia American Express cards
constituted embezzlement within the meaning of section 504. That statute provides:
“Every officer of this state, or of any county, city, city and county, or other municipal
corporation or subdivision thereof, and every deputy, clerk, or servant of that officer, and
every officer, director, trustee, clerk, servant, or agent of any association, society, or
corporation (public or private), who fraudulently appropriates to any use or purpose not
in the due and lawful execution of that person’s trust, any property in his or her
possession or under his or her control by virtue of that trust, or secretes it with a
fraudulent intent to appropriate it to that use or purpose, is guilty of embezzlement.”
(§ 504.) As the language of the statute makes plain, “[t]he offense of embezzlement
contemplates a principal’s entrustment of property to an agent for certain purposes and
the agent’s breach of that trust by acting outside his authority in his use of the property.”
(People v. Sisuphan (2010) 181 Cal. App. 4th 800, 813-814.) It further contemplates a
relationship of trust and confidence between the perpetrator and the victim (People v.
Wooten (1996) 44 Cal. App. 4th 1834, 1845) and a breach of that trust and confidence by
“conversion of trusted funds coupled with the intent to defraud” (In re Basinger (1988)
45 Cal. 3d 1348, 1363).
Defendants contend there was insufficient evidence from which the jury could
conclude they acted with fraudulent intent or acted outside of their authority when using
the American Express cards. We disagree.
“‘The intent essential to embezzlement is the intent to fraudulently appropriate the
property to a use and purpose other than that for which it was entrusted, in other words,
the intent to deprive the owner of his property . . . .’” (People v. McClain (1956) 140
Cal. App. 2d 899, 900.) “It is well established that intent to defraud may be inferred from
the circumstances surrounding the transaction in question.” (People v. Eddington (1962)
201 Cal. App. 2d 574, 579; 2 Witkin & Epstein, Cal. Crim. Law 4th (2012) Crimes
23
Against Property, § 35, pp. 59-60.) The circumstances surrounding the credit card
transactions identified as “questionable” provided a sufficient basis from which the jury
could infer defendants acted with fraudulent intent. The People presented evidence that
defendants used their Ivy Academia credit cards at restaurants to purchase meals for
“business meetings” that occurred late at night and on weekend afternoons, and that these
purchases were recorded in Ivy Academia’s accounting books in categories including
“utilities and housekeeping,” “school supplies,” and “dues and subscriptions.” They also
presented evidence that defendants charged large sums at bowling alleys and restaurants
for “teacher appreciation” events, and that such events were not proper “educational
purposes” for which a charter school permissibly could spend money. Even though
Pilyavskaya, not defendants, prepared the expense reports and QuickBooks entries
documenting these charges, she reported to Selivanov, who also had access to the
QuickBooks, and the reports she prepared bear defendants’ signatures. Additionally, the
People presented evidence that Berkovich boasted about her “unlimited” credit card and
her aspirations of becoming a millionaire by opening more charter schools, and that
Selivanov sought to have Ivy Academia’s independent auditors remove negative
comments about defendants’ credit card usage from their 2006 report. The jury readily
could conclude from all of this evidence that defendants acted with fraudulent intent
when using the American Express cards.
The jury likewise reasonably could conclude defendants acted outside the scope of
their authority as Ivy Academia’s operators when making the challenged charges.
Defendants assert (without citation to authority) that board member Sarkisian’s review
and approval of the expense reports constituted express authority for the challenged
charges. Defendants further suggest that LAUSD’s failure to inform them of its concerns
about the credit card charges, and the People’s failure to call Ivy Academia’s auditors as
witnesses at trial demonstrate defendants’ authority to make the charges. We are not
persuaded. The People adduced evidence that charter schools operate under the authority
not only of their own charters and governing boards but also the broader umbrella of the
LAUSD Charter School Division. According to prosecution witnesses Eairleywine and
24
Smith, LAUSD and the Los Angeles County Office of Education did not classify
“activities for the pleasure of faculty and teachers and staff such as bowling,” and “after
hours dinners off campus” as expenses that charter schools and their operators were
authorized to make. The jury was entitled to credit this substantial evidence and infer
from it that defendants lacked the authority to use the credit cards as they did, whether
the board signed off on the expenditures or not. The jury was not, as defendants suggest,
required to draw the opposite inference from LAUSD’s silence about its concerns or the
People’s failure to call Ivy Academia’s auditors as witnesses.
B. Unanimity Instruction
Defendants contend the trial court’s failure to give a unanimity instruction on
count 2 constituted prejudicial error. We review assertions of instructional error de novo.
(People v. Shaw (2002) 97 Cal. App. 4th 833, 838.) Whether the trial court should have
given a “particular instruction in any particular case entails the resolution of a mixed
question of law and fact,” which is “predominantly legal.” (People v. Waidla (2000) 22
Cal. 4th 690, 733.) Accordingly, we examine the issue without deference. (Ibid.)
In a criminal case, a jury verdict must be unanimous. (People v. Collins (1976) 17
Cal. 3d 687, 693; Cal. Const., art. I, § 16.) This means that each individual juror must
agree the defendant committed a specific offense. (People v. Russo (2001) 25 Cal. 4th
1124, 1132.) Thus, “when the evidence suggests more than one discrete crime, either the
prosecution must elect among the crimes or the court must require the jury to agree on the
same criminal act.” (Ibid.) The court generally has a sua sponte duty to give a unanimity
instruction where, as here, the prosecution did not elect among the criminal acts alleged.
(People v. Melhado (1998) 60 Cal. App. 4th 1529, 1534; People v. Jennings (2010) 50
Cal. 4th 616, 679.) There are several exceptions to this rule, however. “For example, no
unanimity instruction is required if the case falls within the continuous-course-of-conduct
exception, which arises ‘when the acts are so closely connected in time as to form part of
one transaction’ [citation], or ‘when . . . the statute contemplates a continuous course of
conduct or a series of acts over a period of time.’ [Citation.] There also is no need for a
unanimity instruction if the defendant offers the same defense or defenses to the various
25
acts constituting the charged crime. [Citation.]” (People v. Jennings, supra, 50 Cal.4th
at p. 679.)
Defendants contend “the way the case was presented to the jury showed [a
unanimity] instruction was appropriate and required.” They further assert, without
citation to the record, that they “never defended the case as if the transactions were part
of a single course of conduct.” We disagree.
From the outset of the trial, all parties characterized the American Express charges
as a single, continuing course of conduct. The People told the jury in their opening
statement that the credit card charges constituted “basically one series of incidents, one
course of conduct,” and that they would ask the jury to make “the determination” that the
expenditures were for “personal purchases that did not benefit the school and were not for
school purpose.” Defendants similarly characterized the numerous charges
monolithically in their opening statements. Thus, Selivanov told the jury the evidence
would show “that he acted in good faith, in the best interest of the school,” and that no
one—not the board, the independent auditors, or LAUSD—ever informed him “those
types of purchases were prohibited.” Berkovich took a different tack, but it too was a
unified one. She asserted that “Everything was a school purpose, and if mistakes were
made, . . . [t]he evidence is going to show that, but that is not criminal.”
Opening statements are not argument. But they do ‘“prepare the minds of the jury
to follow the evidence and to more readily discern its materiality, force, and effect.”’
(People v. Harris (1989) 47 Cal. 3d 1047, 1080.) And here, defendants continued to urge
the jury to find all of the credit card charges permissible under a single theory.
Berkovich told the court at sidebar that her sole defense was “that everything Miss
Berkovich bought had a school purpose. And if it didn’t have a school purpose, it was a
recognized mistake that was reimbursed and that is the defense.” She told the jury the
same thing during her closing argument, arguing that “all these expenses, teacher
appreciation that the prosecution thinks should not happen, meals, community outreach,
networking, they are all expenses that are common in the industry.”
26
Selivanov likewise presented a single defense to all of the credit card charges
during his closing. He argued that the sole issue was “whether or not Mr. Selivanov
intended to defraud Ivy Academia with respect to purchasing things on the American
Express card,” and that “there is no evidence of an intent to defraud.” Both defendants
emphasized that all of the charges, not merely some subset of them, were reviewed and
approved by other individuals and entities. In short, they offered essentially the same
defense to all of the acts. (See People v. Jennings, supra, 50 Cal.4th at p. 679; People v.
Thompson (1995) 36 Cal. App. 4th 843, 851.)
Defendants claim that the People deviated from the single course-of-conduct
theory during rebuttal argument, thereby rendering a unanimity instruction necessary. In
support, they point to four comments, three of which suggested that defense witnesses
with ties to the charter school movement were biased. We are not persuaded. An
attorney is permitted “to remind the jurors that a paid witness may accordingly be biased
and is also allowed to argue, from the evidence, that a witness’s testimony is
unbelievable, unsound, or even a patent ‘lie.’” (People v. Arias (1996) 13 Cal. 4th 92,
162.) In attempting to characterize defense witnesses as biased, the People were asking
the jurors to reject their testimony, not presenting multiple arguments as to why the credit
card charges constituted embezzlement.
Defendants similarly take out of context the fourth comment, a remark by the
prosecutor that the $995 Tax Secrets seminar Berkovich purchased with the credit card
was “an embezzlement in itself.” The People made this statement as part of an apparent
effort to distinguish between the section 424 misappropriation and section 504
embezzlement counts stemming from defendants’ usage of the credit cards. The People
informed the jury that “the embezzlement charge does carry a minimum of $950. So, as
such, one would have to find that the theft was $950 or more. Which, in this case, we the
People would submit it is heavily substantiated just in terms of the charges. Now, in
terms of a misappropriation of funds, there is no minimum limit on that. There is no
$950 minimum, but we would submit, ladies and gentlemen, in terms of this case here
that even the Tax Secret, even the Tax Secret item that was bought for $950 [sic], that is
27
an embezzlement in itself.” These comments do not undermine the People’s general
approach to the charges, nor do they persuade us a unanimity instruction was necessary.8
C. Value of Embezzled Property
Defendants contend their convictions for felony embezzlement in count 2 must be
reversed or reduced to misdemeanors because the jury failed to specify a loss greater than
$950 on the verdict forms. Defendants argue that because the verdict form simply stated
that the embezzlement was a felony, it “created a de facto directed verdict on an element
of the offense in violation of [their] equal protection and due process rights.” This error,
they contend, lessened the People’s burden of proof and therefore requires reversal. In
the alternative, they contend that the jury’s failure to find that the embezzlement in count
2 was grand or petty theft, or to determine that the value of the property embezzled
exceeded $950, requires that their convictions be deemed to be for petty theft and
reduced to misdemeanors. For this argument they rely on section 1157, which states:
“Whenever a defendant is convicted of a crime . . . which is distinguished into degrees,
the jury . . . must find the degree of the crime or attempted crime of which he is guilty.
Upon the failure of the jury . . . to so determine, the degree of the crime . . . of which the
defendant is guilty, shall be deemed to be of the lesser degree.” (§ 1157) We do not find
either argument persuasive.
Section 490a provides that the term embezzlement “shall hereafter be read and
interpreted as if the word ‘theft’ were substituted therefor.” (§ 490a.) “Theft is divided
into two degrees, the first of which is termed grand theft; the second, petty theft.”
(§ 486.) Since embezzlement is theft and theft is divided into two degrees, it follows that
embezzlement likewise is divided into two degrees. As the court explained in People v.
8
We also find unpersuasive Berkovich’s suggestion that “[t]he fact that appellant
was acquitted of the vast majority of the charges against her speaks volumes as to
whether the prosecution’s arguments were given full credit by this jury.” The jury found
Berkovich guilty of misappropriating public moneys in connection with the same
conduct, strongly suggesting it found her use of the American Express card improper.
The numerous counts on which she was acquitted pertained to other instances of
misappropriation and embezzlement that were factually distinct from her use of the
American Express card.
28
Stanfill (1999) 76 Cal. App. 4th 1137, 1143, “Embezzlement is a form of ‘theft’ (§ 490a)
and, with exceptions not pertinent here, is made punishable with state prison time only if
the use value of the subject property exceeds [$ 950].”9
Count 2 of the information alleged that defendants committed felony
embezzlement in violation of section 504 and that the property embezzled had a “value
exceeding Nine Hundred Fifty Dollars ($950) to wit: credit card charges made to Ivy
Academia’s American Express account.” In keeping with the felony allegation, the court
instructed the jury with a modified version of CALCRIM No. 1806 that effectively
equated “felony” embezzlement with “grand theft by embezzlement.” That instruction
read in pertinent part: “The defendant is charged in Counts [sic] with grand theft by
embezzlement in violation of Penal Code section 504.”10 The court also defined grand
theft both orally and in writing with CALCRIM No. 1801, which provided in pertinent
part: “If you conclude that the defendant committed a theft, you must decide whether the
crime was grand theft or petty theft. The defendant committed grand theft if he or she
stole property worth more than $950. [¶] . . . [¶] All other theft is petty theft. The
People have the burden of proving beyond a reasonable doubt that the theft was grand
theft rather than a lesser crime. If the People have not met this burden, you must find the
defendant not guilty of grand theft.”
For each defendant, the court provided two verdict forms for count 2: a guilty
verdict form and a not guilty verdict form. None of the forms mentioned “grand theft,”
“petty theft,” or the dollar value $950, or asked the jury to make findings regarding those
9
When Stanfill was decided, the value threshold separating petty theft and grand
theft was $400. (See former § 487, subd. (a) (1997).) In 2011, the threshold was raised
to its current level, $950. (See § 487, subd. (a).) One of the “exceptions” not pertinent in
Stanfill but pertinent here is when the embezzlement is of public funds. (See discussion,
at pp. 31-34, post.)
10
The written version of CALCRIM No. 1806 did not include count numbers
despite the court’s statement to counsel that it had handwritten them in. However, while
orally instructing the jury, the court said, “I should have written in everybody’s thing, let
me see, 2 [8, 19, 22, 25, and 40] with grand theft by embezzlement violation of Penal
Code section 504, does everybody have the numbers written in 2, [8, 19, 22, 25, and 40]
good cause I personally did that [sic].”
29
terms. Instead, the verdict forms read “We, the jury in the above-entitled action, find the
defendant . . ., guilty [or not guilty] of the crime of EMBEZZLEMENT BY PUBLIC
OR PRIVATE OFFICER, in violation of Penal Code Section 504, a felony, as charged
in Count 2 of the Information.” The jury returned verdicts of guilty as to both
defendants.
This combination of instructions and verdict forms did not relieve the prosecution
of its burden of proof. The People alleged and sought to prove only that defendants
committed felony embezzlement. The court instructed the jury accordingly, stating that
defendants were charged in count 2 with “grand theft by embezzlement,” defining grand
theft as theft of property exceeding $950 in value, and explaining that the jury “must find
the defendant not guilty of grand theft” if the People failed to prove beyond a reasonable
doubt that a grand theft occurred. We presume the jury understood and correlated these
instructions (People v. Martin (2000) 78 Cal. App. 4th 1107, 1111), which appeared on a
single page of the instructions packet and squarely placed on the People the burden of
proving the charged crime. The verdict forms’ use of the word “felony” did not reduce
this burden. The verdict forms expressly referred to the information, which also
described the charged conduct only as a felony. The information also alleged that that the
property at issue was “credit card charges made to Ivy Academia’s American Express
account” and that those charges were “of a value exceeding Nine Hundred Fifty Dollars
($950).”11 These documents did not give the jury an option to convict defendants of
anything less than grand theft by embezzlement. If the jury determined the People failed
11
The prosecutor also argued to the jury that “the embezzlement charge does carry
a minimum of $950. So, as such, one would have to find that the theft was $950 or
more.” These comments underscored the People’s burden and the importance of the
$950 threshold to a conviction on count 2. Defendants point out that this statement was
imprecise, for a grand theft conviction requires the value of the property to exceed (rather
than merely equal) $950. However, the court instructed the jury to follow the court’s
instructions rather than “anything concerning the law said by the attorneys in their
arguments.” The court’s instructions correctly articulated the distinction between grand
and petty theft.
30
to prove the amount embezzled exceeded $950, the instructions and verdict form properly
required the jury to find the defendants not guilty on count 2.
Moreover, the instructions and verdict form did not violate section 1157 such that
reduction of the convictions to a misdemeanor is required. The purpose of section 1157
is to ensure that the jury’s determination of degree is clear when a verdict of varying
degrees is permissible (People v. Mendoza (2000) 23 Cal. 4th 896, 910), so that the
defendant is protected from the risk that the degree of the crime could be increased after
the judgment (People v. Goodwin (1988) 202 Cal. App. 3d 940, 947). Just as applying
section 1157 “where jury verdicts correctly permit only a first-degree felony murder
conviction would do nothing to further this statutory purpose” (People v. Mendoza,
supra, 23 Cal.4th at p. 910), applying section 1157 here, where the information,
instructions, and verdict form permitted a conviction only for felony embezzlement,
would not serve this purpose. “[W]here the trial court properly instructs the jury to find a
defendant either not guilty or guilty” of felony embezzlement by grand theft, “there is
simply no degree determination for the jury to make.” (Id. at p. 911.) For that reason,
requiring application of section 1157 here “would be both absurd and unreasonable, for it
would require courts to deem a conviction to be of a degree that was never at issue and
that the jury was neither asked nor permitted to consider.” (Ibid.) Had the information
alleged, or the verdict form stated, simply “embezzlement,” with no indication of value or
felony designation, the result might be different. Here, however, the jury’s verdict
specifically found defendants guilty of embezzlement “as charged in Count 2 of the
Information,” which required the jury to find that the property exceeded $950 in value to
return a conviction. The jury implicitly—and necessarily—made the required factual
findings to support the defendants’ convictions for felony embezzlement.
D. Cumulative Instructional Error
Because we have rejected defendants’ claims of instructional error on count 2,
there can be no cumulative error stemming from the same claims. (People v. Tully
(2012) 54 Cal. 4th 952, 1020.)
31
E. The Court’s Public Funds Finding
1. Background
The information alleged in count 2 that the charged felonious “embezzlement and
defalcation was of the public funds within the meaning of Penal Code Section 514.” It
similarly alleged that public funds were defalcated in embezzlement counts 4, 6, 8, 10,
19, and 40, but not in embezzlement counts 22 and 25. It is unclear why the allegation
was not made as to counts 22 and 25, as both were paired with charges of
misappropriation of public moneys stemming from the same conduct. 12
“Section 514 defines the punishment for one convicted of embezzlement.”
(Redondo, supra, 19 Cal.App.4th at p. 1434.) It provides in relevant part: ‘“Every
person guilty of embezzlement is punishable in the manner prescribed for theft of
property of the value or kind embezzled; . . . if the embezzlement or defalcation is of the
public funds of the United States, or of this state, or of any county or municipality within
this state, the offense is a felony, and is punishable by imprisonment in the state prison;
and the person so convicted is ineligible thereafter to any office of honor, trust, or profit
in this state.”’
The first clause of section 514 clarifies that embezzlement generally is to be
punished like its analogues, petty and grand theft. Thus, embezzlement of money or
12
“The term ‘public funds’ is not defined in section 514” or anywhere else in the
Penal Code. (People v. Redondo (1993) 19 Cal. App. 4th 1428, 1434 (Redondo).)
However, section 426 defines “public moneys” for the purposes of section 424, which
criminalizes the misappropriation and false accounting of public moneys, as “all bonds
and evidence of indebtedness, and all moneys belonging to the state, or any city, county,
town, district, or public agency therein, and all moneys, bonds, and evidences of
indebtedness received or held by state, county, district, city, town, or public agency
officers in their official capacity.” Whether the terms “public funds” and “public
moneys” were intended to have the same or similar meanings is not entirely clear.
(Redondo, supra, 19 Cal.App.4th at p. 1435.) The Redondo court appeared to equate
“funds” with “money,” however, holding that a “defendant is not culpable for a felony
based on embezzlement of public funds under section 504 if what was stolen was not an
available pecuniary resource of the public.” (Id. at p. 1437.) The parties in this case
likewise have treated the terms “public moneys” and “public funds” as synonyms and
used them interchangeably.
32
property valued at $950 or less is punished like misdemeanor petty theft, “by fine not
exceeding one thousand dollars ($1,000), or by imprisonment in the county jail not
exceeding six months, or both.” (§ 490.) Embezzlement of money or property valued at
more than $950, is, like its grand theft counterpart, a “wobbler”—a crime that “in the trial
court’s discretion, may be sentenced alternately as [a] felon[y] or misdemeanor[].”
(People v. Superior Court (Alvarez) (1997) 14 Cal. 4th 968, 974; see also People v.
Stanfill, supra, 76 Cal.App.4th at pp. 1144-1145 [embezzlement of property valued
beyond threshold for grand theft is a “true wobbler for which the court had discretion to
choose between misdemeanor and felony punishment”].) Section 489, subdivision (c) is
the source of this discretion. It provides that grand theft, with narrow exceptions not
applicable here, is punishable “by imprisonment in a county jail not exceeding one year
or pursuant to subdivision (h) of Section 1170.” (See also 2 Witkin & Epstein, Cal. Crim.
Law 4th (2012) Crimes Against Property, § 8, p. 30 [“Grand theft is generally a felony-
misdemeanor punishable by imprisonment in a county jail for not more than 1 year
(misdemeanor), or under P.C. 1170(h) . . . .”].)
The second portion of section 514 significantly curtails the trial court’s sentencing
discretion where the property embezzled is “public funds.” Under section 514, the
embezzlement of public funds “is a felony, and is punishable by imprisonment in the
state prison” (§ 514), “regardless of the value of the property embezzled” (Redondo,
supra, 19 Cal.App.4th at p. 1434). The felony-misdemeanor distinction based on value is
thus eliminated, as is the trial court’s ability to choose misdemeanor punishment
regardless of the amount embezzled. Additionally, section 514 bars those convicted of
embezzling public funds from holding certain offices in the future.
The jury was not given an opportunity to find that the property embezzled in count
2 (or any of the other embezzlement counts) was public funds. Neither the instructions
nor verdict forms pertaining to count 2 (or the other embezzlement counts) mentioned
public funds. At the sentencing hearing, the People asked the court to make “a Penal
Code section 514 finding . . . in light of them being public officials” and noted that such a
finding “would have an impact in terms of the sentencing.” The People reiterated their
33
request later in the hearing, when the court had almost concluded sentencing Selivanov,
explaining that such a finding “would render the defendants ineligible to hold public
office.” Over defendants’ “strenuous objection,” the court found “that these were public
funds and that he embezzled public funds, and the public funds being from the school,
Ivy Academia, which is a public school.”
Defendants now contend that the court’s finding violated Apprendi v. New Jersey
(2000) 530 U.S. 466 (Apprendi) and Alleyne v. United States (2013) 133 S. Ct. 2151
(Alleyne), which require any fact that increases the statutory maximum (Apprendi) or
mandatory minimum (Alleyne) punishment to be found by a jury beyond a reasonable
doubt. They argue that by making the contested finding, the court impermissibly
increased their penalties “in four distinct ways . . . (1) removal of Penal Code § 504 from
‘wobbler’ status; (2) mandatory state prison incarceration where probation is denied; (3)
post-state prison parole; and (4) imposition of a parole revocation restitution fine.”13 We
need reach only the first of defendants’ alternative arguments as it is correct. The public
funds finding had the effect of eliminating the court’s discretion to sentence them to a
misdemeanor sentence to be served in county jail. The finding accordingly should have
been made by the jury. The error was harmless in this case, however, because the record
reveals beyond a reasonable doubt that the jury would have made the same finding had it
been asked to do so.
2. Applicable Legal Principles
In Apprendi, the United States Supreme Court held that “[o]ther than the fact of a
prior conviction, any fact that increases the penalty for a crime beyond the prescribed
statutory maximum must be submitted to a jury, and proved beyond a reasonable doubt.”
(Apprendi, supra, 530 U.S. at p. 490.) The Court explained in a footnote that “facts that
expose a defendant to a punishment greater than the one otherwise legally prescribed
13
Defendants do not argue in their opening brief and only make a cursory
suggestion in reply that the court’s finding increased their penalties by making them
ineligible to hold public office. They accordingly have forfeited this contention, and we
do not consider it here. (People v. Bryant (2014) 60 Cal. 4th 335, 408.)
34
were by definition ‘elements’ of a separate legal offense.” (Id. at p. 483, fn. 10.) A few
years later, in Blakely v. Washington (2004) 542 U.S. 296, the Court further clarified that
“the ‘statutory maximum’ for Apprendi purposes is the maximum sentence a judge may
impose solely on the basis of the facts reflected in the jury verdict or admitted by the
defendant. [Citations.] In other words, the relevant ‘statutory maximum is not the
maximum sentence a judge may impose after finding additional facts, but the maximum
he may impose without any additional findings.” (Blakely, supra, 542 U.S. at p. 303
[emphases omitted].)
The Supreme Court initially treated statutory minimums differently. In Harris v.
United States (2002) 536 U.S. 545 (Harris) the Court held that judicial factfinding that
increased the mandatory minimum sentence was permissible under the Sixth
Amendment. However, the Supreme Court extended the reasoning of Apprendi in
Alleyne, supra, 133 S. Ct. 2151, which overruled Harris and held that any fact that
increases a defendant’s mandatory minimum sentence must be found by a jury beyond a
reasonable doubt. (Alleyne, supra, 133 S.Ct. at pp. 2155, 2162-2163.)
In Alleyne, the defendant was convicted of robbery affecting interstate commerce
(18 U.S.C. § 1951(a)), a crime that carried a penalty of five years to life. A defendant
who brandished a firearm during that crime was subject to a heightened penalty of seven
years to life. (Alleyne, supra, 133 S.Ct. at pp. 2155-2156.) Although the jury did not find
that defendant brandished a firearm, the probation report recommended a sentence of
seven years based on brandishing. The trial court found brandishing based on a
preponderance of the evidence and sentenced defendant to seven years in prison. (Id. at
p. 2156.) The Court of Appeal affirmed based on Harris. (Ibid.) The Supreme Court
reversed and overruled Harris. It held that “Apprendi’s definition of ‘elements’
necessarily includes not only facts that increase the ceiling [of available punishment], but
also those that increase the floor. Both kinds of facts alter the prescribed range of
sentences to which a defendant is exposed and do so in a manner that aggravates the
punishment.” (Id. at p. 2158.) Under Alleyne, “[f]acts that increase the mandatory
minimum sentence are therefore elements and must be submitted to the jury and found
35
beyond a reasonable doubt.” (Ibid.) “It is no answer to say that the defendant could have
received the same sentence with or without that fact.” (Id. at p. 2162.) If a fact increases
either the punishment floor or ceiling, it must be found by a jury beyond a reasonable
doubt.
Alleyne also made clear, however, that “broad sentencing discretion, informed by
judicial factfinding, does not violate the Sixth Amendment.” (Alleyne, supra, 133 S.Ct.
at p. 2163.) “‘[E]stablishing what punishment is available by law and setting a specific
punishment within the bounds that the law has prescribed are two different things.’
[Citation.]” (Ibid.) Accordingly, a judge may make factual findings that influence his or
her sentencing discretion, but may not make factual findings that aggravate the legally
prescribed punishment. (See id. at pp. 2162-2163.) For instance, “[t]rial judges often
find facts about the nature of the offense or the character of the defendant in determining,
for example, the length of supervised release following service of a prison sentence;
required attendance at drug rehabilitation programs or terms of community service; and
the imposition of statutorily prescribed fines and orders of restitution. [Citation.]
Intruding Apprendi’s rule into these decisions on sentencing choices or accoutrements
surely would cut the rule loose from its moorings.” (Oregon v. Ice (2009) 555 U.S. 160,
171-172.)
3. Analysis
Defendants contend that the court’s public funds finding violated Alleyne by
mandating that the embezzlement be treated as a felony rather than a wobbler. We agree.
However, we conclude that the error was harmless beyond a reasonable doubt.
The information charged defendants in count 2 with felony embezzlement. This
wobbler offense, like all others, properly was regarded as a felony throughout trial “for
all purposes until imposition of sentence or judgment.” (People v. McElroy (2005) 126
Cal. App. 4th 874, 880 [emphasis added].) From the outset of the case, then, defendants
were subject to punishment for a felony—a custodial term of 16 months, two years, or
three years—by virtue of the People’s allegation that they embezzled “property being of a
value exceeding Nine Hundred Fifty Dollars ($950) to wit: credit card charges made to
36
Ivy Academia’s American Express account.” However, the felony sentencing triad
represented only the punishment ceiling defendants faced. Because embezzlement is a
wobbler, the felony designation was applicable only “until imposition of sentence or
judgment.” At that point, the trial court had the discretion to choose whether defendants
should be subject to felony or misdemeanor punishment. Thus, the punishment floor
defendants faced was that provided in section 489, subdivision (c), “imprisonment in a
county jail not exceeding one year.” Even if it was unlikely that the trial court would
exercise its discretion to sentence defendants as if they were convicted for misdemeanor
embezzlement, it had that option.
After the public funds finding was made, however, the trial court lost its discretion
to sentence defendants to a misdemeanor punishment. Under section 514, the
embezzlement of public funds “is a felony, and is punishable by imprisonment in the
state prison.” (§ 514.) The minimum punishment to which defendants were subject
accordingly rose to the low term of the felony triad, 16 months, based on the trial court’s
finding. The finding increased the mandatory minimum punishment and therefore under
Alleyne must be considered an element of the crime required to be submitted to the jury
and found beyond a reasonable doubt.14
The People argue that “[b]ecause nothing about the section 514 finding exposes a
defendant to a longer sentence than the one available absent the finding, there is nothing
14
We note that the crime of “embezzlement of public money” has a different
statute of limitations than embezzlement of non-public money, which lends support to the
conclusion that a “public funds” finding is an element of a separate crime. (Compare §
799 [“Prosecution for an offense punishable by death or by imprisonment in the state
prison for life or without the possibility of parole, or for the embezzlement of public
money, may be commenced at any time.”] with § 801 [“Except as provided in Sections
799 and 800, prosecution for an offense punishable by imprisonment in the state prison or
pursuant to subdivision (h) of Section 1170 shall be commenced within three years after
commission of the offense.”] and § 801.5 [“Notwithstanding Section 801 or any other
provision of law, prosecution for any offense described in subdivision (c) of Section 803
[including grand theft] shall be commenced within four years after discovery of the
commission of the offense, or within four years after the completion of the offense,
whichever is later.”].)
37
inconsistent about the trial court’s rejection of this very argument and the principles
stated in Alleyne.” This argument ignores express language in Alleyne, which states that
“It is no answer to say that the defendant could have received the same sentence with or
without that fact.” (Alleyne, supra, 133 S.Ct. at p. 2162.) It is true that defendants were
subject to felony punishment with or without the finding. With the finding, however,
defendants were subject only to felony punishment. “The essential point is that the
aggravating fact produced a higher range, which, in turn, conclusively indicates that the
fact is an element of a distinct and aggravated crime. It must, therefore, be submitted to
the jury and found beyond a reasonable doubt.” (Id. at pp. 2162-2163.)
The People’s analogy to People v. Benitez (2005) 127 Cal. App. 4th 1274 also is not
persuasive. In Benitez, a jury found the defendant guilty of 30 lewd and lascivious acts
upon victims under the age of 14 and further found that the offenses involved more than
one victim. Through a series of statutory cross-references, these findings made the
defendant ineligible for probation. The jury did not separately find the defendant
ineligible for probation, however, and defendant argued the absence of such a finding
violated Blakely. (See Benitez, supra, 127 Cal.App.4th at p. 1277-1278.) The Court of
Appeal rejected defendant’s argument. It held that the proviso in former section 667.61,
subdivision (c)(7) disqualifying certain sex offenders from probation “is not an element
of the enhancement to be negated upon proof to a jury.” (Id. at p. 1278.) It reasoned that
eligibility for probation was not subject to Blakely because “[f]inding a defendant
ineligible for probation is not a form of punishment, because probation itself is an act of
clemency on the part of the trial court,” and “a defendant’s eligibility for probation
results in a reduction rather than an increase in the sentence prescribed for his offenses.”
(Ibid. [emphasis in original])
Here, the public funds finding increased rather than deceased the range of
punishments to which defendants were subject. Although the potential for misdemeanor
sentencing was, like probation, within the trial court’s discretion, it was still a form of
punishment. The elimination of that possibility raised the sentence prescribed for
defendants’ offenses. And even if the situations were analogous, the jury in Benitez made
38
factual findings that eliminated the possibility of probation. Those findings were made
by the court here.
Defendants and the People both correctly recognize that Apprendi error is subject
to harmless error review under Chapman v. California (1967) 386 U.S. 18, 24. (People
v. Davis (2005) 36 Cal. 4th 510, 564.) Thus, “if a reviewing court concludes, beyond a
reasonable doubt, that the jury, applying the beyond-a-reasonable-doubt standard,
unquestionably would have found true” the finding in question, “the Sixth Amendment
error properly may be found harmless.” (People v. Sandoval (2007) 41 Cal. 4th 825,
839.) That standard is met here.
Regardless of whether all funds Ivy Academia possessed were public funds as a
matter of law there is no question that, had it been presented with the question, the jury
would have found the money defendants embezzled in count 2 to be public funds as a
matter of fact. Throughout trial, everyone, including defense counsel and defense
witnesses, spoke almost exclusively in terms of “public moneys” and “public funds.”
The only disputes relevant to the American Express charges at issue in count 2 concerned
whether they were made to advance an educational purpose, a requirement for the
expenditure of public funds. Defendants did not contest the threshold issue of the
provenance of the funds used to pay for the American Express charges. As Selivanov
argued in closing, “[w]e know from the evidence that the funds that were coming to Ivy
Academia were from two sources primarily, categorical block grant funding and general
purpose funding, and the evidence was that money that was categorical block grant
money or general purpose money essentially needed to be spent for school related
purposes in connection with the operation of the school.” Berkovich put it even more
explicitly: “[t]his is a private entity receiving public funds.” We are convinced beyond a
reasonable doubt the jury would have agreed and made the public funds finding had it
been given the opportunity to do so. Accordingly, any Apprendi error the court may have
introduced by making the public funds finding was harmless.
39
II. Other Embezzlement Convictions (counts 8, 19, 22, 25 & 40)
Selivanov challenges his other embezzlement convictions—those stemming from
the series of $5,000 and $3,000 transfers made to EGeneration in 2008 after the $237,000
rent liability was booked into the Due to EGeneration account (count 8), the three
transfers of $25,000, $20,000, and $20,000 made to EGeneration in 2007 (counts 19, 22,
and 25, respectively), and the approximately $126,000 in loan payments Ivy Academia
made to Western Commercial Bank after transferring liability for the Western
Commercial Bank loan to EGeneration (count 40).15 First, he argues that none of the
embezzlement convictions was supported by substantial evidence because “all of the
funds transferred to his account were his own” and he had authority to transfer them. As
to count 40 specifically, Selivanov argues that the loan payments were made pursuant to
a legitimate contract and funds never were entrusted to him. Second, he contends that the
trial court erred by failing to provide the jury with an instruction on the claim-of-right
defense, thereby precluding him from presenting a defense and violating his right to a fair
trial. We do not find these contentions persuasive.
A. Sufficiency of the Evidence
Selivanov contends that none of his embezzlement convictions was supported by
substantial evidence. After reviewing the entire record in the light most favorable to the
verdict (People v. Clark, supra, 52 Cal.4th at p. 943), we conclude that ample evidence
supports the convictions.
“‘Embezzlement is the fraudulent appropriation of property by a person to whom
it has been [e]ntrusted.’ (§ 503.) The elements of embezzlement are: ‘1. An owner
entrusted his/her property to the defendant; 2. The owner did so because he/she trusted
the defendant; 3. The defendant fraudulently converted that property for his/her own
15
Selivanov also contends that his money laundering convictions on counts 23 and
26 (§ 186.10, subd. (a)) are predicated upon the same conduct as the embezzlement
convictions in counts 22 and 25 and therefore cannot stand if those convictions are
reversed. Because we affirm the embezzlement convictions, we affirm the money
laundering convictions as well.
40
benefit; [and] 4. When the defendant converted the property, he/she intended to deprive
the owner of its use.’ (CALCRIM No. 1806.)” (People v. Fenderson (2010) 188
Cal. App. 4th 625, 636-637.)
Selivanov contends that counts 8, 19, 22, and 25—the counts involving Ivy
Academia’s monetary transfers to EGeneration—fail at the first element because one
cannot be guilty of embezzling his or her own property. According to Selivanov, the Due
to Management account demonstrated at all relevant times that Ivy Academia owed him
more than he transferred to his business entity EGeneration, and “[f]or this reason alone,”
his embezzlement convictions cannot stand. We do not agree. Even if Ivy Academia had
a legitimate debt to Selivanov as reflected in the Due to Management account, the money
that Selivanov caused Ivy Academia to transfer to EGeneration did not become his
property simply by virtue of that indebtedness. It remained the property of Ivy
Academia, which entrusted Selivanov to allocate the money for the benefit of the school
rather than for his own personal benefit. The jury readily could have concluded from
Selivanov’s failure to document these withdrawals as reductions in the amount owing in
the Due to Management account, his failure to document them as income for tax
purposes, and his failure to transfer his purported salary to his personal account that
Selivanov was not in fact recouping the deferred salary he was owed. The People also
presented evidence that several of the contested transfers were made only after the rent
increase (which Balbin described as a “sham transaction”) inflated the amounts Ivy
Academia purportedly owed to EGeneration, and that EGeneration in other instances
used the transferred funds almost immediately to make payments it otherwise would not
have been able to afford. The jury could have concluded from this evidence that
Selivanov was not owed the money he took, and that he took the money with fraudulent
intent.
Selivanov also contends there can be no embezzlement because he was authorized
to repay himself from the funds with which he was entrusted. While it is true that
Selivanov’s position as the executive director of Ivy Academia vested him with authority
to handle financial matters, the People presented evidence that the board approved the
41
final series of salary payments to Selivanov and Berkovich in 2010. The jury could
conclude from this evidence that board approval was required for such payments, and
further could conclude from the absence of evidence of any such approval that the board
did not authorize Selivanov’s previous withdrawals. The People also introduced
evidence that the board-approved salary payments Ivy Academia made to defendants in
2008 were documented on 1099 tax forms. The jury could infer from the absence of tax
forms for the transfers alleged in counts 8, 19, 22, and 25 that these earlier transactions
were not made via authorized channels.
As to count 40, Selivanov contends that any funds he “supposedly took from Ivy
Academia” to pay the Western Commercial Bank loan “were taken under a valid
contract,” and “one cannot be guilty of embezzling money when he has acquired title to it
by contract or sale. (People v. Parker (1965) 235 Cal. App. 2d 100, 109.)” This is too
broad a read of People v. Parker, which affirmed the embezzlement conviction of a
building contractor who used down payments given to him for his own purposes rather
than depositing them into accounts at a title company as he had promised. (People v.
Parker, supra, 235 Cal.App.2d at p. 109.) The proposition for which Selivanov cites
Parker comes from People v. Holder (1921) 53 Cal.App.45, in which the Court of
Appeal reversed the embezzlement conviction of a building contractor. The contractor in
Holder used the money his customers paid him for his own purposes rather than to buy
materials for the homes he was building. The Court of Appeal concluded that the
contracts governing the contractor’s relationship with his customers were such that the
money the customers gave to the contractor became his upon receipt. Therefore, the
money could not be embezzled because it was the defendant’s own property, not the
property of another that had been entrusted to him. (See People v. Holder, supra, 53
Cal.App.45 at p. 48.)
This case is different. The Assignment Assumption of Lease was an agreement
between Ivy Academia and EGeneration, not between Ivy Academia and Selivanov, or
between Ivy Academia and Western Commercial Bank. Under the Assignment
Assumption of Lease, the money in Ivy Academia’s accounts remained the property of
42
Ivy Academia, which entrusted Selivanov to oversee it. Neither Selivanov nor
EGeneration nor Western Commercial Bank acquired title to Ivy Academia’s money
under the contract. Moreover, the People presented substantial evidence that the rent
increase that purportedly prompted the payments to Western Commercial Bank was a
sham transaction despite the board’s approval. The jury reasonably could have
concluded that Ivy Academia had no obligation to continue to make the loan payments it
was making to EGeneration’s purported “designees,” J & N Amoroso Family
Investments and Western Commercial Bank, particularly since Amoroso knew nothing of
the rent arrangement, the board was not informed of the loan transfer until more than a
year after its effective date, and Western Commercial Bank was not informed about the
loan transfer for at least five months after the board approved it.
B. Claim-of-Right Defense Instruction
1. Background
Selivanov’s theory at trial was that the payments Ivy Academia made to
EGeneration at his direction could not constitute embezzlement as alleged in counts 8,
19, 22, and 25, because Ivy Academia owed him deferred salary, as reflected in the Due
to Management account.16 That is, the “transfer of that money was justified because that
belonged to us.” The court told him it had “no problem with [him] making that
argument,” but denied his request to instruct the jury on the claim-of-right defense, which
“provides that a defendant’s good faith belief, even if mistakenly held, that he has a right
or claim to property he takes from another negates the felonious intent necessary for
conviction of theft or robbery.” (People v. Tufunga (1999) 21 Cal. 4th 935, 938
16
Selivanov quotes liberally in his briefing the trial court’s discussion of the
claim-of-right defense as it applied to count 2, the embezzlement count involving the
American Express charges. However, Selivanov explicitly stated, both in his briefs and
at oral argument, that he “did not associate the claim-of-right defense with his AMEX
Card charges” and is not claiming this particular instructional error on that count.
Although Berkovich requested a claim-of-right instruction as to count 2, she does not
now argue that she was entitled to a claim-of-right instruction on count 2 or any other
embezzlement count, nor does she join Selivanov’s argument to the extent it may be
applicable to count 2, the only embezzlement count on which she was convicted.
43
(Tufunga).) Citing People v. Barnett (1998) 17 Cal. 4th 1044, the court explained that it
understood the claim-of-right defense to be applicable only where a defendant claimed
ownership of specific, identifiable money or property. In the court’s view, “claim of
right requires you to be able to identify and say this money exactly is my money,” and
“all this money was flown all over the place, and there is no identifiable money that you
can point to and say that was the money that I was owed for my salary Due to
Management account that was the money that I was owed for my loan.”
Selivanov also asked the court to provide a claim-of-right instruction on count 40,
the embezzlement count stemming from Ivy Academia’s continued payments on the
Western Commercial Bank loan. He contended that claim-of-right should be a “slam
dunk” on that count because “it’s the most open and transparent thing we did,” going
through the board and the bank and making the payments “openly and validly under a
claim of right.” The court disagreed, stating, “if you do it openly and validly you usually
do it before you actually do the transaction.”
The court gave the jury an instruction regarding good faith. Using the CALCRIM
instruction for embezzlement, CALCRIM No. 1806, the court told jurors that “A good
faith belief in acting with authorization to use the property is a defense. [¶] In deciding
whether the defendant believed that he or she had a right to the property and whether he
or she held that belief in good faith, consider all the facts known to him or her at the time
he or she obtained the property, along with all the other evidence in the case. The
defendant may hold a belief in good faith even if the belief is mistaken or unreasonable.
But if the defendant was aware of facts that made that belief completely unreasonable,
you may conclude that the belief was not held in good faith.” The court separately
instructed the jury on mistake of fact: “An act committed or an omission made in
ignorance or by reason of a mistake of fact which disproves any criminal intent is not a
crime. [¶] Thus a person is not guilty of a specific intent crime which includes the
crimes charging Theft by Embezzlement and Money laundering if he or she commits an
act or omits to act under an actual belief in the existence of certain facts and
44
circumstances which, if true, would make the act or omission lawful.” (CALJIC No.
4.35.)
During his closing argument, Selivanov told the jury that although “much of the
conduct at issue here is not in dispute,” “there will be a question about what was Mr.
Selivanov thinking when he entered into certain transactions.” He emphasized that the
board approved both the rent increase and lease transactions, and that the transactions
were reviewed by Ivy Academia’s outside auditors. With respect to the transfers of
money to EGeneration, Selivanov argued that “a debt to EGeneration and AJFK is a debt
to Mr. Selivanov and Miss Berkovich,” and that because the Due to Management account
at all relevant times had a balance “easily in excess of the transfers at issue here,” “he
could take the money back as repayment.”
The jury found Selivanov guilty on all of the embezzlement counts. It further
found that Selivanov, “with the intent to do so, took money exceeding $65,000.00, within
the meaning of Penal Code section 12022.6(a)(1).”
2. Analysis
The claim-of-right defense originated in the common law as a defense to larceny
or robbery (Tufunga, supra, 21 Cal.4th at p. 945), which, like embezzlement, require the
specific intent to permanently deprive another of property. “‘It has long been the rule in
this state and generally throughout the country that a bona fide belief, even though
mistakenly held, that one has a right or claim to the property negates felonious intent.
[Citations.] A belief that the property taken belongs to the taker [citation], or that he had
a right to retake goods sold [citation] is sufficient to preclude felonious intent. Felonious
intent exists only if the actor intends to take the property of another without believing in
good faith that he has a right or claim to it. [Citation.]’ [Citation.]” (People v. Barnett,
supra, 17 Cal.4th at p. 1143.)
The Legislature codified the claim-of-right defense in 1872. Unchanged since,
section 511 provides: “Upon any indictment for embezzlement, it is a sufficient defense
that the property was appropriated openly and avowedly, and under a claim of title
preferred in good faith, even though such claim is untenable. But this provision does not
45
excuse the unlawful retention of the property of another to offset or pay demands held
against him.” (§ 511.) The good-faith nature of a defendant’s belief in his or her right to
the property taken is a crucial element; the claim-of-right defense is not available if a
defendant was aware of contrary facts that rendered his or her belief wholly
unreasonable. (People v. Stewart (1976) 16 Cal. 3d 133, 140.) The claim-of-right defense
also is inapplicable where a defendant attempts to conceal the taking (id. at p. 141),
where the claim of right to the property arises from “notoriously illegal” activity (People
v. Hendricks (1988) 44 Cal. 3d 635, 642), or “where an employee unilaterally determines
that he or she is entitled to certain wages and thereafter, without authorization,
appropriates the property of the employer in purported payment of such wages” (People
v. Creath (1995) 31 Cal. App. 4th 312, 318).
“‘[A] trial court is not required to instruct on a claim of-right defense unless there
is evidence to support an inference that [the defendant] acted with a subjective belief he
or she had a lawful claim on the property.’ [Citations.]” (Tufunga, supra, 21 Cal.4th at
p. 944.) “‘“In evaluating the evidence to determine whether a requested instruction
should be given, the trial court should not measure its substantiality by weighing the
credibility [of the witnesses]. . . . Doubts as to the sufficiency of the evidence to warrant
instructions should be resolved in favor of the accused. [Citations.]”’ [Citation.]” (Ibid.)
Selivanov contends the evidence was sufficient to support the requisite inference here.
We agree.
Selivanov presented testimony supporting his theory that he had a good faith claim
of right to the funds at issue. Defense expert Jan Goren testified that the Due to
Management account could be bundled together with the Due to Academy and Due to
EGeneration accounts, and the evidence showed that the Due to Management account
reflected a large amount owed to defendants at all relevant times. Of course, other
evidence showed that Selivanov made the payments to his business rather than to himself,
did not document the transfers in the Due to Management account (though he did
document them elsewhere in Ivy Academia’s QuickBooks), and did not prepare tax forms
indicating he received salary payments. However, these conflicts in the evidence were
46
for the jury to resolve; we cannot, as the People suggest, dismiss Selivanov’s evidence as
“entirely implausible.” We likewise cannot disregard Selivanov’s evidence that the loan
payments were made in good faith, pursuant to a legitimate contract, despite the ample
evidence in the record suggesting otherwise. Nor can we embrace the trial court’s
rationale that the defense was inapplicable because the money secreted was not
identifiable as Selivanov’s or Western Commercial Bank’s. The cases it relied upon for
that principle addressed the defense’s application in the robbery context, where strong
policy concerns disfavoring self-help through force or violence necessitate a narrow
construction of the defense. (See Tufunga, supra, 21 Cal.4th at pp. 938, 948-950; People
v. Barnett, supra, 17 Cal.4th at pp. 1143-1146.)
We disagree with Selivanov, however, to the extent he contends that “the jury was
left unequipped to consider the ample evidence at trial pointing to [his] lack of guilt”
under a claim-of-right theory. “[A] failure to instruct where there is a duty to do so can
be cured if it is shown that ‘the factual question posed by the omitted instruction was
necessarily resolved adversely to the defendant under other, properly given instructions.’
[Citation.]” (People v. Stewart, supra, 16 Cal.3d at p. 141.)17 That showing was made
here. The court instructed the jury on good faith, a necessary element of the claim-of-
right defense, and the jury nonetheless returned guilty verdicts on all of the
embezzlement counts. By making these findings, the jury demonstrated that it
necessarily rejected one of the key elements of the claim-of-right defense.
Selivanov asserts that the court’s instruction on good faith was too narrow,
because it “only told the jury that acting with authorization could serve as a defense,”
rather than informing the jury that claim of title was at issue. He relies on People v.
17
“It is not clear what standard applies to cases involving error in instructing on
the claim-of-right defense. In cases involving other kinds of defenses, courts have
applied the [People v.]Watson [(1956) 46 Cal. 2d 818, 836] standard.” (People v. Russell
(2006) 144 Cal. App. 4th 1415, 1431, overruled in part by People v. Covarrubias (2016) 1
Cal.5th 838, 874; see also People v. Sojka (2011) 196 Cal. App. 4th 733, 738.) We find
the error harmless even under the more stringent standard set forth in Chapman v.
California, supra, 386 U.S. at p. 24.)
47
Threestar (1985) 167 Cal. App. 3d 747 (Threestar). There, the defendant was accused of
embezzlement in connection with his retention and sale of audio speaker stands after the
business for which he worked disbanded. The prosecution theorized that the defendant
and the owner of the business agreed that defendant would sell the business’s current
inventory of stands on a commission basis. Contrary to this arrangement, defendant
ordered additional stands and sold them without informing the business owner or
distributing her full share of the profits to her. Defendant claimed that no agreement
existed. According to his theory, he owned the patent rights to the stands and made
voluntary payments to the business owner “to help her recoup her losses in the
corporation.” (See Threestar, supra, 167 Cal.App.3d at pp. 751-752.) He claimed he had
a good faith belief that he could lawfully sell the speaker stands, and that the trial court
had a sua sponte duty to instruct the jury on the claim-of-right defense. (Id. at p. 753.)
We agreed. (Ibid.) We further concluded that the instruction the court delivered could
have misled the jury. We held that the pertinent part of the instruction, “if one takes
business proceeds in the good faith belief he has permission to keep such proceeds he is
not guilty of theft,” did not “address the defense theory of the evidence that no such sales
agreement existed.” (Id. at p. 756.) We found the error prejudicial because, under the
instructions given, “the jury did not necessarily find that appellant lacked a good faith
belief that he was acting pursuant to a lawful ‘claim of title’ based on his patent rights.”
(Id. at pp. 756-757.) We also noted that the instructions given omitted mention of the
“open and avowed” element of the claim-of-right defense. (Id. at p. 756.)
Threestar is distinguishable. There, the instruction the court gave did not “address
the defense theory of the evidence that no such sales agreement existed.” (Threestar,
supra, at p. 756.) That is, it “did not advise the jury that [defendant’s] good faith belief
based on his patent rights could constitute a defense to embezzlement.” (Ibid.) Even if
the jury credited defendant’s evidence to that effect, the jury instructions did not inform
the jurors that they could find defendant not guilty. Here, the jury instructions the court
gave reflected defendant’s theory of the case. The good faith instruction the court
delivered here, part of the CALCRIM instruction on embezzlement (to which Selivanov
48
did not object), informed the jury not only that “A good faith belief in acting with
authorization to use the property is a defense,” but also that a defendant’s belief “that he
or she had a right to the property” is a defense. Thus, it accurately informed the jury that
a defendant could negate his or her felonious intent by demonstrating a good faith belief
that he or she was authorized to use or legally possess the property. Unlike Threestar,
where the jury instruction was misleading because it did not comport with the
defendant’s alleged justification for selling the goods and keeping the profits, the good
faith instruction here aligned with Selivanov’s theory of the case, namely that he had a
right to the money he transferred to EGeneration because he was owed deferred salary
payments.
Selivanov also points to our observation in Threestar that the trial court in that
case failed to instruct on the “openly and avowedly” element of the claim-of-right
defense. (See Threestar, supra, 167 Cal.App.3d at p. 756.) This dicta does not compel
the conclusion that Selivanov was prejudiced here. Even if the omission of the openly
and avowedly element was the deciding factor in Threestar, which it plainly was not, the
omission of such an instruction here was not prejudicial to Selivanov. The jury’s
findings that Selivanov acted with the intent to deprive Ivy Academia of the funds it had
entrusted to him demonstrate that the jury necessarily would have rejected the claim-of-
right defense even if it had concluded Selivanov took the property openly and avowedly.
III. Corporate Tax Convictions (counts 32-36)
The jury found Selivanov guilty of filing false corporate tax returns for AJFK and
EGeneration for the years 2004-2008. (Rev. & Tax. Code, § 19705, subd. (a).)
Selivanov contends those convictions must be reversed because the trial court admitted
QuickBooks records for AJFK and EGeneration absent a proper foundation or exception
to the hearsay rule. He further argues that the People failed to prove an essential element
of the crime, namely that he did not believe the statements in the returns were true and
correct as to every material matter. We do not find either of these contentions persuasive.
49
A. Admission of AJFK/EGeneration QuickBooks Printouts (Exhibit 105)
1. Background
While LAUSD forensic accountant Delos Santos was on the stand, the People
identified as Exhibit 105 a collection of AJFK/EGeneration QuickBooks printouts.
Selivanov objected to the People’s attempt to discuss the printouts with Delos Santos on
the grounds of “foundation on the business records.” The court overruled the objection,
stating that expert witnesses “can rely on hearsay in order to reach their opinion.” The
court explained to the jury that, “at this moment,” Exhibit 105 was “not necessarily
coming in for the truth of the matter, but it is coming in to help explain what her opinion
is and you may consider it as such.” Delos Santos proceeded to testify that she was
familiar with the QuickBook documents, which had been obtained “[f]rom the search
warrant” of Ivy Academia. Delos Santos also testified that Selivanov told her in 2007
that there were no accounting books or electronic records for EGeneration. Prosecution
witness Michael Atkinson previously had testified to the same thing.
Selivanov objected again when the prosecutor asked Delos Santos if the
QuickBooks documents appeared to have been produced in the ordinary course of
business. At sidebar, Selivanov acknowledged that an electronic copy of the QuickBooks
had been found on an Ivy Academia server but argued that there had been no testimony
about who prepared them or whether they were kept in the ordinary course of business.18
The People told the court “we want it to come in for the truth” and explicitly invoked the
business records exception to the hearsay rule as a basis to achieve that aim. The
prosecutor argued that someone like Delos Santos, who was “eminently qualified on
QuickBooks,” could “testify that all QuickBooks are kept according to the way the
software directs them to be kept.” The court ruled, “I am allowing them at this moment
for the expert relied on them and reached their opinions, and it is coming in [for] the truth
of the matter.” The court deferred ruling on the admissibility of the QuickBook printouts
18
Ivy Academia bookkeeper Pilyavskaya testified that she did not do accounting
for defendants’ other business entities.
50
under the business records exception to the hearsay rule and asked the parties to research
the issue further.
During the lunch recess, the court and counsel discussed two cases the court
located that addressed the business records exception, People v. Dean (2009) 174
Cal. App. 4th 186 and People v. Hovarter (2008) 44 Cal. 4th 983. The court opined that
both cases “seem to speak that you have to have people that can lay a foundation that
they have some familiarity with the records, not just some person who is an auditor
looking at records and then laying a foundation based on that.” The court accordingly
expressed “grave doubts” as to whether the QuickBooks printouts were admissible for
their truth pursuant to the business records exception. It noted, however, that “one of the
ways to get around that” might be by arguing that “those are admissions or you know or
adoptive [admissions] or something like that.”
Two days later, outside the presence of the jury, the parties again addressed the
admissibility of the QuickBooks printouts for their truth as business records. Neither side
presented the court with any case authority, and the People did not accept the court’s
invitation to argue that the printouts were admissions. Instead, the People suggested that
the printouts were not in accordance with AJFK/EGeneration’s actual expenditures, as
reflected by a collection of checks and credit card statements identified as Exhibit 106.
The People contended, without citing any authority, that “the fact that these books are
going to be shown to be false, meaning they don’t match up to what was filed in the
return shows they are not being offered for their truth. They are being offered as
circumstantial evidence that the defendant [Selivanov] knew he was lying on his tax
returns. It will be tied circumstantially.” The court agreed with “this last argument,”
ruling, “[i]t comes in for non-hearsay to show there is another set of books and whether
they are true or not. I will allow them in.”
51
The People subsequently used the QuickBooks printouts,19 Exhibit 106, and
various AJFK/EGeneration tax returns with Franchise Tax Board witness Rigoberto
Salazar. He testified that numerous items booked as rent or supplies expenses in the
QuickBooks and deducted as such on AJFK/EGeneration’s tax returns were not in fact
rent or supplies expenses but rather payments on a credit card used to purchase items
from businesses including Domino’s, El Pollo Loco, Albertsons, and Victoria’s Secret.
According to Salazar, the information on the tax returns “was based on the QuickBooks.”
The admissibility of the QuickBooks printouts arose for a third time at the close of
the People’s case-in-chief. Again, the court ruled the documents were admissible. It
explained: “I am allowing the records in. I am treating this just like you would receive a
letter or another item. I had a series of cases on a piece of paper, but basically it is
coming in for a non-hearsay purpose to show not only that the fact that the records [sic]
but these kind of records were found in a location and the school run by these people and
their indicia they knew about these records and had some familiarity or some connection
with these records cause of the location they were found just like if you found a telephone
bill or a letter addressed to someone you could then jump from that to the fact that that
person exercised dominion and control over that location, and I think that the fact that
they were found on a server at the school, that these people were running, he was the
executive director, the wife was the president, I will allow it for that reason. . . .” The
court further stated that it was admitting Exhibit 105 “basically for all purposes because I
think there is some indicia that this is connected to the defendants,” and explained that if
it had come in only to support an expert’s opinion, “I might not admit it for the jury to
look at, and you would just have to rely and argue from the testimony of the witness.”
19
They actually used Exhibit 94, a spreadsheet Franchise Tax Board special agent
Rigoberto Salazar prepared using data from Exhibit 105. Selivanov objected to Exhibit
94 “on the basis of the discussion that we had at side-bar earlier,” and the court overruled
the objection.
52
2. Analysis
Hearsay is “evidence of a statement that was made other than by a witness while
testifying at the hearing and that is offered to prove the truth of the matter stated.” (Evid.
Code, § 1200, subd. (a).) Hearsay is not admissible unless it meets the requirements of
one of the exceptions set forth in Evidence Code sections 1220-1390. (Evid. Code, §
1200, subd. (b); see also People v. DeHoyos (2013) 57 Cal. 4th 79, 132.) A trial court’s
ultimate ruling on admissibility “implies whatever finding of fact is prerequisite thereto; a
separate or formal finding is unnecessary unless required by statute.” (Evid. Code, § 402,
subd. (c).) We review the trial court’s conclusions regarding foundational facts for
substantial evidence and its decision to admit or exclude a hearsay statement for abuse of
discretion. (People v. DeHoyos, supra, 57 Cal.4th at p. 132.) We review the ruling, not
the rationale; “[t]he ruling must be upheld if the evidence was admissible under any
hearsay exception.” (People v. Karis (1988) 46 Cal. 3d 612, 635.)
Our review is complicated by the People’s shifting explanations as to the purpose
for which the QuickBooks printouts were being offered. Initially, they told the trial court,
“we want it to come in for the truth” and invoked the business records exception to the
hearsay rule as the vehicle to accomplish that end. After the court expressed “grave
doubts” about the applicability of that particular hearsay exception, the People changed
course and claimed that the QuickBooks printouts “are not being offered for their truth”
but instead were being offered for their falsity, “as circumstantial evidence that the
defendant [Selivanov] knew he was lying on his tax returns.” For the sake of
completeness, we consider both possibilities.
To the extent the QuickBooks documents were offered to prove their falsity, we
agree with the People that they were not hearsay. “A statement is not hearsay when
offered to show the statement is false.” (People v. Ogg (2013) 219 Cal. App. 4th 173, 184,
citing People v. Mendoza (1987) 192 Cal. App. 3d 667, 672-673; see also People v.
Sanchez (2016) 63 Cal. 4th 665, 674 [“a hearsay statement is one in which a person makes
a factual assertion out of court and the proponent seeks to rely on the statement to prove
that assertion is true”].) The QuickBooks printouts accordingly were admissible for this
53
purpose so long as they were relevant and not unduly prejudicial (see Evid. Code, §§
350-352), points defendants never contested.
To the extent the QuickBooks documents were being offered for their truth, we
agree with Selivanov that they were inadmissible hearsay unless they satisfied the
requirements of one of the exceptions to the hearsay rule. At trial (and now on appeal),
the People argued that the business records exception was applicable. That exception is
codified in Evidence Code section 1271, which provides: “Evidence of a writing made as
a record of an act, condition, or event is not made inadmissible by the hearsay rule when
offered to prove the act, condition, or event if: [¶] (a) The writing was made in the
regular course of a business; [¶] (b) The writing was made at or near the time of the act,
condition, or event; [¶] (c) The custodian or other qualified witness testifies to its identity
and the mode of its preparation; and [¶] (d) The sources of information and method and
time of preparation were such as to indicate its trustworthiness.” The business records
exception is based on the premise that records made and relied upon in the regular course
of business may be regarded as trustworthy without the verification of all persons who
contributed to them. (See People v. Crosslin (1967) 251 Cal. App. 2d 968, 975 (discussing
predecessor to current Evidence Code section 1271).) It eliminates the need to call each
witness by simply substituting the record of the transaction instead. (Ibid.)
“The key to establishing the admissibility of a document made in the regular
course of business is proof that the person who wrote the information or provided it had
knowledge of the facts from personal observation.” (Jazayeri v. Mao (2009) 174
Cal. App. 4th 301, 322.) The witness called to present this proof “need not have been
present at every transaction to establish the business records exception; he or she need
only be familiar with the procedures followed.” (Ibid.) Here, neither of the two
witnesses with whom the People discussed Exhibit 105—Delos Santos and Salazar—had
the requisite knowledge of AJFK’s or EGeneration’s accounting or recordkeeping
procedures. Though these witnesses may have been knowledgeable about QuickBooks
and accounting generally, they could not offer the jury any information about the
“identity and the mode of . . . preparation” (Evid. Code, § 1271, subd. (c)) of the
54
particular QuickBooks documents offered as Exhibit 105. The closely analogous case of
Sierra Managed Asset Plan, LLC v. Hale (2015) 240 Cal.App.4th Supp. 1 is instructive.
There, a debt collector acquired the rights to a delinquent credit card account and sued the
card holder in a limited civil collection case. (Id. at pp. 3-4.) The debt collector
submitted as evidence a declaration by one of its employees, Mr. Roberts, which included
as attachments copies of the card holder’s credit card statements. (Id. at p. 4.) The card
holder challenged the admissibility of the statements on appeal, and the Court of Appeal
concluded that the trial court abused its discretion in admitting the statements under the
business records exception. (See id. at pp. 7-9.) The court noted that Mr. Roberts had
never worked at the credit card company that created the documents, was not a custodian
of the documents, and lacked personal knowledge about the account and charges in
question beyond what he learned upon acquiring the documents from the credit card
company. (Id. at p. 8.) The court ruled that “Mr. Roberts’s declaration and testimony at
trial simply do not meet the necessary foundation” for the business records exception,
because “[a]t best” all they established was that the debt collector, “as assignee from the
creditor, received records originating from Citibank concerning the account in question.”
(Id. at p. 9.) Delos Santos and Salazar are no different from Mr. Roberts, the
QuickBooks printouts are analogous to the credit card statements, and the business
records exception is equally inapplicable in this case.
However, the AJFK/EGeneration QuickBooks printouts fit within the “authorized
statements” hearsay exception codified in Evidence Code section 1222. That section
provides that “Evidence of a statement offered against a party is not made inadmissible
by the hearsay rule if: [¶] (a) The statement was made by a person authorized by the
party to make the statement or statements for him concerning the subject matter of the
statement; and [¶] (b) The evidence is offered either after admission of evidence
sufficient to sustain a finding of such authority or, in the court’s discretion, as to the order
of proof, subject to the admission of such evidence.” The People presented evidence that
AJFK/EGeneration was a business owned and operated by Selivanov and Berkovich, and
that Selivanov was personally involved in the day-to-day financial affairs of
55
AJFK/EGeneration. They also presented evidence that Selivanov, with assistance from
Pilyavskaya, was exclusively responsible for preparing and maintaining similar
QuickBooks accounts at Ivy Academia; that Pilyavskaya had nothing to do with the
AJFK/EGeneration QuickBooks; that the AJFK/EGeneration QuickBooks were found on
an Ivy Academia server after Selivanov denied their existence to both Atkinson and
Delos Santos; that an accountant prepared EGeneration’s taxes in accordance with the
QuickBooks; and that the accountant had no contact with Berkovich. Collectively, this
evidence was sufficient to satisfy the authorized statements exception: the jury readily
could infer that Selivanov either prepared the AJFK/EGeneration QuickBooks himself or
directed someone else affiliated with AJFK/EGeneration to do so. (See O’Mary v.
Mitsubishi Electronics America, Inc. (1997) 59 Cal. App. 4th 563, 570.)
Although the People did not invoke this hearsay exception below, the trial court
appears to have considered it. In its ultimate ruling, the court emphasized that it was
admitting the QuickBooks printouts because they bore indicia that Selivanov had a
connection with the QuickBooks: he served as executive director of Ivy Academia, and
the records were recovered from the school’s server after Selivanov denied their
existence. Whether the QuickBooks printouts were offered for their truth or falsity, we
are satisfied that the trial court did not abuse its discretion in admitting them for all
purposes.
B. Sufficiency of the Evidence
Selivanov argues that the corporate tax convictions must be reversed for an
additional reason: the evidence failed to establish that he “did not believe the statements
made in the relevant corporate tax returns were true and correct.” We disagree.
The People charged Selivanov with violating Revenue and Taxation Code section
19705, subdivision (a)(1), which criminalizes as a felony the willful making and
subscribing of “any return, statement, or other document, that contains or is verified by a
written declaration that it is made under penalty of perjury” that the defendant “does not
believe to be true and correct as to every material matter.” (Rev. & Tax. Code, § 19705,
subd. (a)(1).) Selivanov contends the record contains no direct evidence that he knew or
56
believed the AJFK/EGeneration tax returns included false information, and no
circumstantial evidence that he knowingly misclassified AJFK/EGeneration’s expenses.
He points out that his accountant and tax preparer was not called to testify, and argues
that “no attempt was made to show whether Mr. Selivanov provided accurate information
to his certified public accountant.” He also reiterates that evidence was lacking as to the
preparation and maintenance of the AJFK/EGeneration QuickBooks.
These arguments miss the mark in light of the whole record, which we view in the
light most favorable to the verdict. (People v. Clark, supra, 52 Cal.4th at p. 943.) The
People presented a 194-page exhibit containing checks and credit card statements that
illustrated the nature of AJFK/EGeneration’s expenditures and cash flow, and testimony
from Salazar interpreting those documents. All of the checks were signed by Selivanov,
and all of the credit card statements were addressed to him. The jury could conclude
from this evidence that Selivanov was either directly involved in day-to-day financial
matters at AJFK/EGeneration or had knowledge of them. The People also introduced the
QuickBooks accounting records for AJFK/EGeneration, along with testimony that the
entries in those books diverged from the expenditures documented in AJFK
EGeneration’s checks and credit card statements. As discussed above, the jury could
infer from all of the circumstances that Selivanov prepared or authorized the preparation
of the QuickBooks accounts, and therefore was aware that they falsely represented the
nature of numerous AJFK/EGeneration transactions. Finally, the People introduced the
tax returns at issue, which Selivanov signed under penalty of perjury and which aligned
with the QuickBooks rather than the documentary evidence of AJFK/EGeneration’s
finances. The jury also learned, via stipulation, that the accountant who prepared the
taxes for EGeneration, a business owned by both Selivanov and Berkovich, never had
any contact with Berkovich. This evidence is substantial and supports the jury’s
conclusion that Selivanov knew that AJFK/EGeneration’s tax returns, which tracked the
AJFK/EGeneration QuickBooks stored on Ivy Academia’s server, contained information
that was not true and correct.
57
IV. Personal Tax Convictions (counts 27-31)
The jury convicted Selivanov of violating Revenue and Taxation Code section
19705, subdivision (a)(1) with respect to his personal income taxes for the years 2004-
2008. Selivanov contends these convictions cannot stand because they were “follow-on
charges that were wholly dependent on liability for” other substantive charges, the
embezzlement convictions in counts 2, 19, 22, and 25. That is, the People alleged that
Selivanov failed to report as income the money he embezzled in counts 2, 19, 22, and 25.
(See People v. Hagen (1998) 19 Cal. 4th 652, 671 [“it has long been settled law that
embezzled funds are taxable income”].) Selivanov argues that reversal of the
embezzlement convictions also must result in reversal of the convictions for willfully
filing false or fraudulent personal tax returns. This argument cannot succeed in light of
our rulings above sustaining the embezzlement counts.
Selivanov makes an additional argument pertaining to count 27 only. That count
alleged that Selivanov filed a false personal income tax return in 2004. There is no
dispute, however, that all of the embezzlement conduct alleged and proven in counts 2,
19, 22, and 25 post-dates 2004: the American Express charges began in 2005, and the
other pertinent embezzlements occurred in 2007. Selivanov accordingly contends that
there is no evidence supporting his conviction for filing a false personal income tax return
in 2004. In his reply brief and a footnote in his opening brief, Selivanov claims that the
People failed to present evidence that he underreported income on either his personal or
corporate income tax returns in 2004. Therefore, he contends, the People failed to prove
any violation of Revenue and Taxation Code section 19705, subdivision (a)(1) by virtue
of false statements on the 2004 EGeneration tax return “flowing through” to his personal
tax return.
This argument is not persuasive. Our Supreme Court has explained that a false
statement is “material” for purposes of section 19705 when it has “some objective
potential for interference with the calculation or monitoring of income or tax liability.”
(People v. Hagen, supra, 19 Cal.4th at pp. 667-668 (emphasis omitted); see also Stark v.
Superior Court (2011) 52 Cal. 4th 368, 401.) Whether it results in the over- or
58
underreporting of a taxpayer’s income or liabilities, a purposeful false statement on a tax
return plainly carries the objective potential to interfere with the Franchise Tax Board’s
ability to calculate and monitor income and tax liability.
Although Selivanov is correct that the People did not present evidence that he
failed to report embezzled funds as income in 2004, he overlooks their evidence that
falsehoods in the form of overstated deductions on the 2004 EGeneration tax return
flowed through to his personal tax return. Salazar testified that losses or gains reported
on EGeneration’s tax returns “passed through” or “flow[ed] over into” the personal tax
returns of its members, Selivanov and Berkovich. Salazar further testified that
EGeneration falsely reported $59,707 in deductions in 2004, thereby affecting its income
and that of Selivanov. As discussed above, the record contained substantial evidence
from which the jury could conclude that Selivanov knowingly subscribed to false
information on the corporate tax returns; therefore, the jury could conclude he equally
had knowledge that the same information remained false when carried through to his
personal returns.
V. Restitution
The trial court found Berkovich and Selivanov jointly and severally liable for
$22,396.60 in restitution to Ivy Academia in connection with the fraudulent American
Express charges, and further ordered Selivanov alone to pay an additional $205,499.48 to
Ivy Academia and $43,899 to the Franchise Tax Board. Both defendants contest these
orders. Berkovich contends the court abused its discretion at the restitution hearing by
declining to accept and consider juror statements and declarations she submitted.
Selivanov joins this argument. He also argues that he should not be jointly and severally
liable for the $22,396.60 because he had nothing to do with the charges on Berkovich’s
American Express card, and there was no evidence that the expenses he charged could be
considered an economic loss to Ivy Academia.
Selivanov raises several additional challenges to his restitution order. First, he
contends that the court erred in ordering him to pay any restitution to Ivy Academia
because Ivy Academia never made a claim of actual economic loss. Second, he contends
59
that the court erred in ordering him to pay $126,654.73 in connection with count 40 (Ivy
Academia’s continued loan payments to Western Commercial Bank). He argues that the
loan payments Ivy Academia made did not cause it economic loss because they were
deducted from the increased rent it owed to EGeneration. Finally, Selivanov contends
there was no factual or rational basis underlying the court’s order that he pay $43,899 in
restitution to the Franchise Tax Board. We find persuasive only Selivanov’s argument
regarding his joint and several liability.
A. Standard of Review
“Generally speaking, restitution awards are vested in the trial court’s discretion
and will be disturbed on appeal only when the appellant has shown an abuse of
discretion. [Citation.] ‘“[E]ven though the trial court has broad discretion in making a
restitution award, that discretion is not unlimited. While it is not required to make an
order in keeping with the exact amount of loss, the trial court must use a rational method
that could reasonably be said to make the victim whole, and may not make an order
which is arbitrary or capricious.”’ [Citation.] ‘“When there is a factual and rational basis
for the amount of restitution ordered by the trial court, no abuse of discretion will be
found by the reviewing court.”’ [Citation.]” (People v. Holmberg (2011) 195
Cal. App. 4th 1310, 1320.) “To facilitate appellate review of the trial court’s restitution
order, the trial court must take care to make a record of the restitution hearing, analyze
the evidence presented, and make a clear statement of the calculation method used and
how that method justifies the amount ordered.” (People v. Giordano (2007) 42 Cal. 4th
644, 664.)
B. Juror Statements and Declarations
1. Background
In connection with her sentencing memorandum, Berkovich’s counsel submitted a
declaration in which she relayed the contents of post-trial conversations she had with
three jurors. According to counsel’s declaration, one juror reported that the jury as a
whole made its own evaluation of which charges on the American Express cards were
impermissible. The juror further stated that he personally found permissible the various
60
meals and teacher appreciation events and concluded that less than $1500 of the charges
were disallowable. Another juror told Berkovich’s counsel that the jury as a whole
concluded the meals and teacher appreciation events were not criminal and that he
personally thought the disallowable charges did not exceed $1500-$2000. A third juror
told Berkovich’s counsel that the jury as a whole agreed the restaurants and teacher
appreciation events were not takings. This juror also stated that she personally concluded
that clothing, diapers, and bowling were personal expenses.
Berkovich’s counsel spoke with three additional jurors and attached their sworn
declarations for the court. Two of those jurors stated that the jury “ultimately accepted
all meals, teacher appreciation events, and gifts to teachers and students, and did not
consider those items “takings” for counts one and two,” while the third stated that the
jury only accepted “all meals” and “most teacher appreciation events.” All three of these
jurors elaborated on what they personally considered to be improper personal expenses.
Berkovich’s counsel referred to the juror statements and declarations at the
sentencing hearing, prompting the court to state that “None of that is considered by the
court. Under [Evidence Code section] 1150, you’re not to consider anything that jurors
say about their deliberations, so I don’t know why you did that.” Berkovich’s counsel
explained that she did not read Evidence Code section 1150 to preclude the consideration
of such statements at sentencing. The court reiterated, “I don’t view that as something
the court should consider, their thinking and thoughts about jury deliberations; otherwise,
we would have everybody doing that in every case, and they have a specific statute that
says you are not supposed to do that, so I would prefer that you not address that.”
Berkovich’s counsel raised the issue of the juror statements and declarations at the
restitution hearing several weeks later. She again urged the court to consider the
statements and declarations, which she argued supported her view that Berkovich did not
61
personally benefit from many of the items charged to the American Express card and
therefore should owe a lesser amount of restitution.20
The court declined. It explained: “First of all, I would not be inclined to accept
any various affidavits filed by jurors and separate amounts of what they decided the
restitution was. If courts were to go that route, I would have 12 different amounts of
restitution, depending upon what the juror thought was the amount. In addition, I don’t
have a situation where the jurors have testified in court, they’ve been examined and
cross-examined. I have no idea why they reached whatever conclusions they reached.
And, finally, I’m absolutely convinced that 1150 prevents any consideration - - even
though the court has wide latitude when it comes to restitution, I am certain that we are
not supposed to take a poll of the jury and find out what they thought the amount of
restitution should be. I have never seen that done. I’ve never heard of it being done, and
it just does not seem to me to be a reasonable thing to do. I am, rather, more influenced -
- and I did see and hear the evidence in this case, and I’m more influenced by the fact of
the testimony of the auditors in this case who did conduct an audit and who did prepare
these records, which have been submitted by the People, but which were also submitted
as evidence in the case. I think this is an example of having some very strong
recordations of AmEx charges and other things that were spent that were not for
educational purposes; they were for the benefit of the defendants.”
2. Analysis
Both defendants contend the court erred as a matter of law and therefore abused its
discretion by citing Evidence Code section 1150 as a basis for excluding the juror
statements and declarations. They argue that Evidence Code section 1150 was not
applicable at their restitution hearing because they were not seeking to invalidate or
attack the verdict but rather were submitting the statements and declarations “to give the
20
Selivanov likewise argued that the juror statements and declarations established
that he should be liable only for $367.27 in restitution on count 2, the total of the charges
on his credit card for “non-business meals, non-teacher appreciation events and non-
teacher gifts.”
62
trial court relevant and useful information as to the jurors’ perceptions of amount of loss
in question.” They further contend that the court’s refusal to consider the juror
statements and declarations deprived them of a full and fair opportunity to test the basis
for the restitution order. The People recognize that “it is doubtful that the provisions of
Evidence Code section 1150, prohibiting the use of juror declarations concerning their
mental processes, were triggered.” They argue that the court’s ruling was supported by
legitimate policy reasons and therefore did not constitute an abuse of discretion.
Evidence Code section 1150 provides “(a) Upon an inquiry as to the validity of
any verdict, any otherwise admissible evidence may be received as to statements made,
or conduct, conditions, or events occurring, either within or without the jury room, of
such a character as is likely to have influenced the verdict improperly. No evidence is
admissible to show the effect of such statement, conduct, condition, or event upon a juror
either in influencing him to assent to or dissent from the verdict or concerning the mental
processes by which it was determined. [¶] (b) Nothing in this code affects the law
relating to the competence of a juror to give evidence to impeach or support a verdict.”
As the parties all recognize, this statute by its terms “applies only to postverdict inquiries
into how error or misconduct had affected the juror in reaching the verdict.” (People v.
Cooper (1991) 53 Cal. 3d 771, 838.) Because defendants were not challenging the
verdict, and were not alleging juror misconduct, Evidence Code section 1150 did not
prevent the court from considering the proffered juror statements and declarations.
That does not mean the court was required to consider this evidence, however.
“[T]rial courts have discretion regarding the formalities they follow and the evidence they
consider at such hearings.” (People v. Millard (2009) 175 Cal. App. 4th 7, 42.)
Defendants fail to recognize that such discretion cuts both ways. Just because a court is
permitted to consider certain evidence does not mean it is required to do so. Here, the
court offered at least one valid reason for its refusal to consider the juror statements and
declarations: it did not want to open the door to the bombardment of sentencing courts
with up to 12 potentially conflicting juror declarations in every case involving restitution.
(Cf. People v. Arbuckle (1978) 22 Cal. 3d 749, 755 [“We cannot be oblivious to the drain
63
on time and public resources the demands of defendant would impose.”].) This was a
reasonable, rational basis on which to exclude the declarations, which in this case
provided varying accounts of the expenditures the jury as whole viewed as criminal.
Moreover, the divergent nature of the declarations and the inability of the court and the
People to question the jurors further could have led to the consideration of unreliable or
even inaccurate information, which itself would have rendered the proceedings
fundamentally unfair. (People v. Goulart (1990) 224 Cal. App. 3d 71, 83.)
We find unpersuasive defendants’ suggestion that the court’s exclusion of the
juror statements and declarations deprived them of “the full and fair opportunity to test
the basis for the restitution order as mandated by law.” “The scope of a criminal
defendant’s due process rights at a hearing to determine the amount of restitution is very
limited: ““‘A defendant’s due process rights are protected when the probation report
gives notice of the amount of restitution claimed . . ., and the defendant has an
opportunity to challenge the figures in the probation report at the sentencing hearing.’”
[Citations.]” (People v. Cain (2000) 82 Cal. App. 4th 81, 86.) A trial court violates these
rights if the hearing procedures are fundamentally unfair. (Id. at p. 87.)
The procedures the court used in this case were not fundamentally unfair. The
People submitted a sentencing memorandum requesting certain amounts of restitution,
which they supported with trial exhibits. The court afforded defendants the opportunity
to submit their own sentencing and restitution memoranda and to contest the People’s
restitution figures in open court. The court’s reasonable refusal to consider the juror
statements and declarations did not render this process unfair, particularly where the trial
court presided over the five-week trial and “did see and hear the evidence in this case.”
Defendants were not precluded from obtaining or submitting alternative evidence in
support of their positions at the restitution hearing after they learned at the sentencing
hearing that the court was disinclined to consider the juror declarations and statements.
In short, they received the process to which they were entitled.
64
C. Lack of Victim Request for Restitution
Selivanov contends that his entire restitution order as to Ivy Academia must be
reversed because “Ivy Academia, the purported victim of Mr. Selivanov’s conduct[,] has
made no claim for victim restitution.” In his view, a victim is entitled to restitution only
if he or she initiates and participates in the restitution process by identifying the type of
loss sustained and its monetary value.21 This view is not in accordance with the law.
Article I, section 28, subdivision (b)(13)(A) of the California Constitution vests in
“all persons who suffer losses as a result of criminal activity . . . the right to seek and
secure restitution from the persons convicted of the crimes causing the losses they
suffer.” By its very terms, this provision expresses the “unequivocal intention of the
People of the State of California” (Cal. Const., art. I, § 28, subd. (b)(13)(A)) that “every
victim who suffers a loss shall have the right to restitution from those convicted of the
crime giving rise to that loss” (People v. Phelps (1996) 41 Cal. App. 4th 946, 950
(emphasis added)). “The only qualification is that the loss must be ‘the result of criminal
activity.’ [Citation.]” (Ibid.)
The broad constitutional right to restitution is implemented in section 1202.4,
which provides in subdivision (a)(1) that “It is the intent of the Legislature that a victim
21
Selivanov asserts that “[r]epresentatives of Ivy Academia were summoned to
testify in court,” regarding a settlement between the board of directors and defendants,
“but the trial court refused to hear them.” The court’s refusal to consider such evidence
was not improper. “[T]he settlement of a civil action and release of the defendant by the
crime victim does not discharge the defendant’s responsibility to satisfy the restitution
order: ‘Even when a victim obtains a settlement from a company that insured the
defendant for civil liability, the court in a criminal action may order the defendant to pay
victim restitution. This is so because the victim “might rationally chose to accept an
insurance settlement for substantially less than his or her losses rather than risk the
uncertain . . . possibility that the defendant will pay the entire restitution amount”
[citation], and the “victim’s willingness to accept the [insurance settlement] in full
satisfaction for all civil liability, . . . does not reflect the willingness of the People to
accept that sum in satisfaction of the defendant’s rehabilitative and deterrent debt to
society.”’ [Citation.]” (People v. Vasquez (2010) 190 Cal. App. 4th 1126, 1133.) “[A]
release by the victim cannot act to release a defendant from his financial debt to the state
any more than it could terminate his prison sentence.” (People v. Bernal (2002) 101
Cal. App. 4th 155, 162.)
65
of crime who incurs an economic loss as a result of the commission of a crime shall
receive restitution directly from a defendant convicted of that crime.” Subdivision
(a)(3)(B) of section 1202.4 requires the trial court to order restitution to the victim(s) of a
defendant’s crime “in accordance with subdivision (f),” which in turn states in pertinent
part that “in every case in which a victim has suffered economic loss as a result of the
defendant’s conduct, the court shall require that the defendant make restitution to the
victim or victims in an amount established by court order, based on the amount of loss
claimed by the victim or victims or any other showing to the court.” (§ 1202.4, subd. (f)
(emphasis added).) Like the constitutional provision, these statutory provisions are
devoid of any language limiting the class of compensable victims to those who
affirmatively request restitution and must be broadly and liberally construed. (People v.
Mearns (2002) 97 Cal. App. 4th 493, 500-501.) Moreover, section 1202.4, subdivision (f)
uses disjunctive language to indicate that the amount of restitution may be based either on
the “amount of loss claimed by the victim or victims” or “any other showing to the
court,” suggesting that a claim by the victim is not, as Selivanov argues, a “primary
predicate condition” for the issuance of a restitution order.
Selivanov looks primarily to People v. Fulton (2003) 109 Cal. App. 4th 876, 885-
886 to support his position. In that case, which addressed whether and to what extent
attorneys’ fees incurred by crime victims are recoverable as restitution, the Court of
Appeal stated: “At the core of the victim restitution statutory scheme is the mandate that
a victim who suffers economic loss is entitled to restitution and that the restitution is to be
‘based on the amount of loss claimed by the victim.’ Thus, a victim seeking restitution
(or someone on his or her behalf) initiates the process by identifying the type of loss
[citation] he or she has sustained and its monetary value.” Selivanov reads this language
to require victims to make a claim for restitution before they are entitled to receive it. We
do not. The excerpt from People v. Fulton quotes only the first portion of the disjunctive
language in section 1202.4, subdivision (f), and omits the second portion that permits the
amount of restitution to be based on “any other showing to the court.” We further note
that the parenthetical language in the People v. Fulton excerpt—“or someone on his or
66
her behalf”—clarifies that a crime victim need not personally act on his or her own
behalf. Instead, “someone,” such as the People, may initiate the restitution process on
behalf of a victim.
Selivanov also cites People v. Lai (2006) 138 Cal. App. 4th 1227, 1246-1249 and
People v. Woods (2008) 161 Cal. App. 4th 1045, 1049-1053. Those cases are not on point.
In People v. Lai, we held that “when a defendant is sentenced to state prison, section
1202.4 limits restitution to losses caused by the criminal conduct for which the defendant
was convicted.” (People v. Lai, supra, 138 Cal.App.4th at p. 1246.) In doing so, we
discussed the constitutional and statutory rights to restitution in a manner similar to that
above (see id. at pp. 1246-1247) and addressed the distinction between restitution orders
made when a defendant is sentenced to probation and those made when a defendant is
sentenced to prison (see id. at pp. 1247-1249). Nowhere did we state or suggest that a
court may order restitution only upon receiving a claim from a victim. The same can be
said for People v. Woods. There, the Court of Appeal considered whether a defendant
convicted of being an accessory after the fact to murder lawfully could be ordered to pay
victim restitution for economic losses stemming from the murder. (See People v. Woods,
supra, 161 Cal.App.4th at pp. 1049-1053.) Relying heavily on People v. Lai, the court
concluded that such a restitution order would be improper. (Ibid.) The court did not
discuss or consider the form of the request for restitution; the case accordingly is
inapposite to Selivanov’s argument here.
D. Joint and Several Liability
1. Background
The trial court ordered defendants to pay a total of $34,445.42 in restitution in
connection with count 2, embezzlement via improper use of Ivy Academia’s American
Express cards. The court ordered Selivanov solely responsible for the $12,048.82 in
improper charges made on his card, and jointly and severally responsible for the
$22,396.60 in improper charges made on Berkovich’s card. In doing so, the court
accepted the People’s argument that Selivanov bore some responsibility for charges
incurred on Berkovich’s card because he exerted control over Ivy Academia’s finances
67
and implicitly approved her expenditures by initiating payments on the American Express
bills.
2. Analysis
Selivanov contends that the court erred in finding him jointly and severally liable
for the charges Berkovich made because he “did not participate in the crime causing the
victim’s economic loss.” In his view, “nothing in the record suggests that Mr.
Selivanov’s criminal conduct caused Ivy Academia the loss attributed to Ms. Berkovich’s
AMEX Card expenditures.” We agree and order the judgment modified to strike the
$22,396.60 joint and several obligation assessed to Selivanov.
Section 1202.4, subdivision (f) requires courts to order restitution in most cases
“in which a victim has suffered economic loss as a result of the defendant’s conduct.”
This provision contains a causality requirement: a defendant sentenced to state prison
may be obligated to pay restitution only for losses stemming from the criminal conduct of
which he or she was convicted. (People v. Lai, supra, 138 Cal.App.4th at pp. 1246,
1249.) A defendant may be held jointly and severally liable for losses for which a
codefendant bears more culpability (People v. Madrana (1997) 55 Cal. App. 4th 1044,
1051), but the criminal conduct of which the defendant was convicted must be at least a
substantial factor in causing victim’s loss (People v. Holmberg, supra, 195 Cal.App.4th
at pp. 1321-1322).
The only case Selivanov cites, People v. Leon (2004) 124 Cal. App. 4th 620,
illustrates these principles. In Leon, two defendants wrote and cashed a total of four
fraudulent checks on a victim’s account while he was hospitalized. (Leon, supra, 124
Cal.App.4th at p. 622.) Defendant Leon cashed one check for $2,450, while his
codefendant, Garza, cashed three checks totaling $11,000. (Ibid.) The trial court ordered
Leon to pay $13,450 in restitution jointly and severally with Garza, and the Court of
Appeal reversed. (Ibid.) The Court of Appeal held that the trial court lacked authority
under section 1202.4 to order Leon to pay restitution for a crime he did not commit. It
reasoned that because “$11,000 of [the victim’s] loss resulted from the crimes of Garza,
not Leon, and nothing in the record suggests that Leon aided and abetted commission of
68
Garza’s crimes,” Leon could be liable only for the $2,450 of losses attributable to the
check he cashed. (Ibid.)
The same is true of the losses attributable to the credit card charges in this case.
The People presented evidence that $22,396.60 of the $34,445.42 in fraudulent charges
were made to a card issued to Berkovich, and that $12,048.82 of the charges were made
to a card issued to Selivanov. The criminal conduct at issue was defendants’ use of the
cards to make charges unrelated to the educational purpose of Ivy Academia, or, as the
information put it, “credit card charges made to Ivy Academia’s American Express
account.” The People distinguished between defendants’ usage of the cards and did not
present any evidence that Selivanov made the charges on Berkovich’s card or that he
assisted her in doing so. Like the defendants in Leon who separately wrote and cashed
fraudulent checks on the same account, Selivanov and Berkovich independently used
their Ivy Academia credit cards for nefarious purposes.
The People contend that “Selivanov had control of the finances and instituted
payment for the improper charges,” and “tried to hide the charges.” That conduct was
not the basis of Selivanov’s conviction on count 2, however, which rested upon the actual
“credit card charges made to Ivy Academia’s American Express account.” The People do
not point to any evidence that Selivanov directed, aided, or endorsed Berkovich’s
fraudulent use of her card, or that Selivanov was even aware of many of the improper
charges Berkovich made, such as those for personal items. Nor have they pointed to any
evidence from which the trial court could have concluded that the charges on Selivanov’s
card were a substantial factor that contributed to the charges on Berkovich’s card. We
accordingly conclude the court abused its discretion by holding Selivanov jointly and
severally liable for the charges made to Berkovich’s card. The trial court is directed to
modify both defendants’ restitution orders to reflect that Berkovich alone is liable for the
$22,396.60 in restitution to Ivy Academia associated with count 2.
E. Economic Loss to Ivy Academia
Selivanov contends that the portions of the restitution order directing him to pay
Ivy Academia $126,654.73 on count 40 (embezzlement in connection with Ivy
69
Academia’s continued payment of the Western Commercial Bank loan) and $12,048.82
on count 2 (embezzlement with the American Express card) are unsupported by evidence
that Ivy Academia sustained economic loss. He argues that the loan payments were
“fully deducted from Ivy Academia’s lease payment for its use of the De Soto facility”
and therefore caused no loss to the school, and that the teacher appreciation events and
business meals he charged on the American Express card “were a benefit” to Ivy
Academia. We find these contentions unpersuasive.
At a restitution hearing, the People carry the initial burden of demonstrating the
amount of the victim’s economic loss. (People v. Sy (2014) 223 Cal. App. 4th 44, 63;
People v. Fulton, supra, 109 Cal.App.4th at p. 886.) Their showing establishes the
amount of restitution the victim is entitled to receive, and the burden shifts to the
defendant to prove by a preponderance of the evidence that the loss is other than that
claimed. (People v. Sy, supra, 223 Cal.App.4th at p. 63; People v. Tabb (2009) 170
Cal. App. 4th 1142, 1153.) The People carried their initial burden as to both the loan
payments and the credit card charges by presenting the court with evidence of Ivy
Academia’s outlays.
Selivanov did not present evidence (aside from Berkovich’s juror statements and
declarations) to refute this showing. Instead, he argued that the continued loan payments
at worst constituted a “phantom loss” or “paper loss” because Ivy Academia “continued
to pay on a loan from which it was benefiting, because what the loan paid for were
building improvements the school was still enjoying,” and that the credit card losses
should be limited to $367.27, the amount Selivanov charged on “non-business meals,
non-teacher appreciation events and non-teacher gifts.” The trial court did not abuse its
discretion in rejecting these arguments, which it noted the jury also rejected. With
respect to the loan, the trial court stated “it was clear, at least it was clear to me, that what
Mr. Selivanov did in a very sophisticated manner is he had Ivy Academia pay off loans
that they were not required to pay off, and as a result of paying off those loans, he
benefited. So that is the amount on that.” And with respect to the challenged credit card
charges, the court concluded that none of them was made for a proper educational
70
purpose. Rather, all were for defendants’ benefit. The court’s conclusions rest upon
strong factual and rational bases, and we do not disturb them.
F. Restitution to Franchise Tax Board
1. Background
The court ordered Selivanov to pay a total of $43,899 in restitution to the
Franchise Tax Board. That total was the sum of three distinct figures: (1) $28,251, the
Franchise Tax Board’s costs of investigation and prosecution; (2) $14,226, the total of the
additional personal income taxes owed ($5,450 for 2004, $656 for 2005, $2,122 for 2006,
$4,392 for 2007, and $1,605 for 2008)22; and (3) $1,422, representing 10 percent interest
on the back taxes. Selivanov argued at the restitution hearing that, at most, he should be
liable for the agency’s investigative and prosecution costs, the amount of which he did
not dispute. He also argued that there was no evidence in the record to support the
amount of back taxes and interest due, because the Franchise Tax Board did not conduct
a civil tax audit, and the numbers it presented accordingly were “inherently unreliable.”
The court rejected these arguments on the grounds that evidence to support the tax
liabilities “came out in the trial.”
2. Analysis
Selivanov contends the “trial court simply accepted the Franchise Tax Board’s
assertion that such was the tax liability without question or concern,” despite his
demonstration of “significant deficiencies” in the numbers. The “deficiencies” he points
out are: (1) the tax liability was calculated based on the purported unreported income of
both defendants; (2) during trial, Franchise Tax Board agent Salazar “admitted that
$28,698 out of the claimed unreported income for 2007 was, in fact, reported”; and (3)
the People simply accepted Salazar’s disallowance of all EGeneration deductions that
were misclassified or inflated rather than performing an analysis “to ascertain whether the
misclassified expenses could have been deducted under a different category, or what was
22
These numbers add up to $14,225. Selivanov has not challenged this arithmetic
error.
71
the overall tax impact of the misclassifications.” We are not persuaded that these
putative deficiencies render the numbers found by the court lacking in factual basis.
All of the personal tax returns in this case were filed jointly and signed by
Selivanov. We see no basis from which to conclude that Berkovich’s lack of convictions
on the tax counts reduces the amount of taxes for which Selivanov is liable on the parties’
joint returns. Moreover, although Selivanov asserts that “Ms. Berkovich’s supposedly
unreported income should be removed from the calculation,” he fails to provide even an
estimate of what that income was, or what its impact on the tax liability would have been.
Mere suggestion of error is insufficient to undermine the People’s prima facie showing of
the restitution amount, or to demonstrate that the trial court’s order lacked a factual basis.
The same is true of Selivanov’s other contentions. If Selivanov disagreed with
Salazar’s testimony regarding reported income in 2007 or believed the calculations the
People proffered at the restitution hearing did not reflect deductions that properly could
have been taken, he could have undertaken the analysis himself to provide a basis for the
court to find a lower number. He did not do so in the trial court and has not done so on
appeal. The restitution amounts ordered by the court were supported by the record, and
we will not overturn them on the showing here.
VI. Grant of Motions for New Trial
A. Background
Count 1 of the information alleged that Selivanov and Berkovich misappropriated
public funds by making improper charges to their Ivy Academia American Express cards.
(§ 424, subd. (a)(1).)23 Count 39 alleged that both defendants misappropriated public
funds by using Ivy Academia funds to make payments on the Western Commercial Bank
23
In pertinent part, section 424, subdivision (a) prohibits “[e]ach officer of this
state, or of any county, city, town, or district in this state, and every other person charged
with the receipt, safekeeping, transfer, or disbursement of public moneys” from
misappropriating, misusing, improperly accounting for, or improperly disposing of public
moneys. (§ 424, subd. (a); see also 2 Witkin & Epstein, Cal. Crim. Law 4th (2012)
Crimes Against Property, § 44, p. 69.) Counts 1, 7, 11, 18, 21, 24, and 39 alleged
violations of section 424, subdivision (a).
72
loan after EGeneration assumed liability for it. (§ 424, subd. (a)(1).) Count 7 also
pertained to both defendants and alleged that they improperly profited from public
moneys by virtue of the rent increase. (§ 424, subd. (a)(2).) The remaining counts (11,
18, 21, and 24) applied only to Selivanov and alleged that he falsely accounted for public
moneys in the Ivy Academia financial records (§ 424, subd. (a)(3), count 11) and
misappropriated public moneys by transferring funds from Ivy Academia to EGeneration
when the latter was not owed money (§ 424, subd. (a)(1), counts 18, 21, 24).
1. Section 424 Jury Instructions
The court instructed the jury on the section 424 counts using modified versions of
CALJIC Nos. 7.26.1, 7.26.2, and 7.26.3. The court’s modified CALJIC No. 7.26.1 stated
in pertinent part: “Defendant Selivanov is accused in Counts [1, 18, 21, 24, and 39] and
Defendant Berkovich is accused in Counts 1 and [39] of misappropriation of Public
Funds by a Public Official in violation of 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, 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 phrase, “public moneys”
as used in this instruction, includes all monies and evidences of indebtedness received or
held by Ivy Academia Charter public school or its officers in their official capacity. [¶]
The term “Officer” as used in this instruction includes a charter school operator,
administrator, executive director and President. [¶] The term “district” as used in this
instruction includes a charter school.”
The modified version of CALJIC No. 7.26.2, which pertained to count 7, stated
that “The phrase, “public moneys” as used in this instruction, includes all moneys and
evidence of indebtedness received or held by Ivy Academia Charter public school or its
officers in their official capacity.” The modified version of CALJIC No. 7.26.3, which
pertained to count 11 and defendant Selivanov only, stated, “The phrase, “public
73
moneys” as used in this instruction has previously been defined in these instructions.”
There is no indication in the record that defendants objected to these instructions.
The jury found defendant Selivanov guilty of all seven of the section 424,
subdivision (a) counts with which he was charged. The jury found Berkovich guilty of
misappropriating public funds as alleged in counts 1 and 39 but acquitted her of profiting
from the rent increase as alleged in count 7.
2. Motions For New Trial
In Selivanov’s motion for new trial, which Berkovich joined, he contended these
instructions were improper for two reasons. First, he argued that “by defining the
statutory terms “public moneys,” “district,” and “officer” in the manner it did, the Court
relieved the prosecution of the burden of proving, beyond a reasonable doubt, that Mr.
Selivanov was indeed a public officer, or that he was in charge of public moneys.”
Second, Selivanov contended that the definitions the court provided for “public moneys,”
“district,” and “officer” were incorrect because independent charter schools operated by
nonprofit organizations are not “counties, cities, towns, or districts in the state of
California” and their funds are not “moneys belonging to a county, city, town, district or
public agency therein, or held by an officer of those governmental entities, and therefore
are not “public moneys” under Penal Code § 426.”24
The court held a lengthy hearing on the new trial motions at which it told the
parties that the issue it was “most interested in listening to, is the issue on the 424 and the
issue about misinstruction and that line of cases that say, in essence, that you can’t take
away from the jury one of the elements of the crime. There’s a whole line of cases that
have been cited for that. There are others. That is one of my biggest issues that I want to
hear argument on.” The court further clarified the issue: “Didn’t I instruct or tell the
jury, basically, that the monies received by the Ivy Academia school were, in fact, public
24
Section 426 states: “The phrase ‘public moneys,’ as used in Sections 424 and
425, includes all bonds and evidence of indebtedness, and all moneys belonging to the
state, or any city, county, town, district, or public agency therein and all moneys, bonds,
and evidences of indebtedness received or held by state, county, district, city, town, or
public agency officers in their official capacity.”
74
monies? And doesn’t the instruction in that area lay out that they are supposed to decide
whether those are public monies or not? Didn’t I direct them that any money received,
any indebtedness for this school is public money?” After some argument by the parties,
the court again clarified its thinking: “I’m less troubled by “officer.” I’m more troubled,
frankly, by public monies, because there is an actual instruction under 726.1 [sic]. I didn’t
use that instruction. I think one of the reasons I didn’t use it is I’m, in some ways,
agreeing with the People that I thought, as a matter of law, this was public monies. I
believe that was my mindset, that it’s not really that big of an issue for the jury. It’s
public monies. It came from the state; it went to this charter public school: it’s public
monies. So I didn’t really foreshadow this issue. But now that the issue has been
brought to my attention, I certainly see it as an issue, whether the definition that should
have been given to the jury should have been more something that they could choose
from rather than simply saying that monies received by a charter school are public
monies.”
The court ultimately “decided, after thinking about it for endless hours,” that a
new trial was required on all of the section 424 counts. The court explained: “The
Constitution gives a criminal defendant the right to have a jury determine beyond a
reasonable doubt his guilt of every element of the crime with which he is charged. The
trial court may not direct a verdict of guilt no matter how conclusive the evidence, and I
don’t believe I can take judicial - - not judicial notice, but find as a matter of law - - I
believe that the issue of public monies is an element of the crime; you have to prove it.
And I guess what I ultimately believe is that by instructing the way I did, that I took that
element away from the jury. . . . If this had just been tweaked a little bit and we had
thrown in charter school, or charter school is considered a public agency, or something
like that, I believe there would be no problem. But in reading the cases, I just feel that
the instruction told them: you have to find this as public monies, because what I told
them was that monies received by the charter school were public monies, and I don’t
believe that I could do that.” The court continued, “I will also indicate, just
parenthetically, that I have no problem with 424 applying to charter schools. I don’t
75
think that is a valid argument. I reject that argument. The only reason I’m reversing is
strictly on jury instructional error.”
The prosecutor asked, “Your honor, is that only as to public money, the statement
on public money?” The court confirmed that it was. “Right. That was the only thing.”
Later, the court reiterated that “[t]he issue is whether or not the jury made an independent
decision of finding that it was public money, because it’s an element of the crime.” It
further stated “I think there is an issue about whether the jury was directed to find, as a
matter of law, that the money that flowed to the charter school was public money. I
know as a reality it’s public money and - - but the next issue is: can I, as a judge, order
them to find that it’s public money? And I don’t think I can. That is what I’m holding.
That’s my decision.”
The People timely filed a notice of appeal pursuant to section 1238, subdivision
(a)(3).
B. Discussion
In their opening brief, the People present a single issue for our consideration:
“When charter schools are operated by non-profit organizations do they become immune
from liability for purposes of section 424 and 426 as a matter of law because they are not
“districts” within the meaning of the statutes?” They spend the entirety of their opening
brief addressing this issue despite the trial court’s explicit rejection of the defense
argument to that effect.
For instance, the People’s lead argument is that People v. Holtzendorff (1960) 177
Cal. App. 2d 788, which Selivanov (and Berkovich, though adoption) relied upon below to
support the contention that Ivy Academia was not a “district” or “public agency,” “is not
instructive on the question of whether a charter school is a district within the meaning of
sections 424 and 426.” The People assert that “the trial court clearly adopted” the
defense argument that “private non-profit charter schools were immune from the statute
because the legislature had expressly failed to name them within section 424.” They
claim this was error: “the court, relying upon the defense’s representation that
Holtzendorff was the only, and leading, authority on the issue, erred as a matter of law in
76
granting a new trial as to the section 424 counts on that basis.” The People further
contend that the court instead should have followed People v. Johnson (2012) 209
Cal. App. 4th 800, which in their view “provides clear authority for criminal liability as a
matter of law based upon the exhibition of state supervision and regulatory control.”
In response to these arguments, Selivanov (and Berkovich, through adoption)
contends that “the People do not address the jury instruction upon which the trial court
based its new trial order.” He also points us to the trial court’s explanations of its rulings
(see ante, at p. 76), which indeed make clear that the trial court granted the motion for
new trial solely on the ground that it took the element of “public moneys” away from
jury. Selivanov urges us to affirm the trial court’s ruling on this basis. Although he
contends that “[r]ight or wrong on the issue of whether charter schools are legally
districts, that issue does not impact the trial court’s new trial order, and thus should not be
considered by this Court on review of that order,” Selivanov devotes the remainder of his
brief to opposing the People’s arguments, “[i]n the event this Court wishes to consider
the People’s irrelevant issue.”
In their reply brief, the People acknowledge that “[t]he trial court’s order only
referenced the jury instruction issue,” and that “[t]he court granted a new trial because it
believed the jury, not the court, needed to decide whether funds belonging to Ivy
Academia were ‘public moneys’ under Penal Code sections 424 and 426.” They then
contend for their first time in their reply brief “that this was legally erroneous (i.e., the
original instruction was correct) because all funds belonging to charter schools are, by
definition, ‘public moneys,’ and Ivy Academia was a charter school.” They also assert
for the first time, initially in a footnote and then in the final three paragraphs of their
reply brief, that the trial court “also misstated the harmless error standard.”
The People have forfeited both of these belatedly raised arguments. “Withholding
a point until the reply brief deprives the respondent of an opportunity to answer it . . . .
Hence, a point raised for the first time therein is deemed waived and will not be
considered, unless good reason is shown for failure to present it before.” (People v.
Baniqued (2000) 85 Cal. App. 4th 13, 29; see also People v. Tully, supra, 54 Cal.4th at
77
p., 1075 [“It is axiomatic that arguments made for the first time in a reply brief will not
be entertained because of the unfairness to the other party.”].) Here, the People indicate
that they “may have overlooked” these crucial issues in their opening brief because they
“assumed that the court’s eventual new-trial grant agreed” with the primary arguments set
forth in defendants’ written submissions rather than those the court discussed and actually
ruled on at the hearing on the new trial motions. While we appreciate the People’s
candor, particularly their acknowledgements that Selivanov’s “points regarding the
framing of the issues . . . are well taken,” their faulty assumptions regarding the substance
of the trial court’s ruling do not in our view constitute good reason for their failure to
address the pertinent issue in their opening brief. Moreover, we are not of the opinion
that justice requires us to reach the issue. (See People v. Masotti (2008) 163 Cal. App. 4th
504, 508; People v. Norwood (1972) 26 Cal. App. 3d 148, 152.) The court’s ruling was
not an acquittal; the People may retry defendants on the challenged counts if they wish.
We thus turn to the arguments the People made in their opening brief, which do
not address the basis for the court’s ruling or argue why that basis is legally incorrect.
Although an “order granting new trial will be affirmed on appeal without regard to the
particular reason given if there is a good and sufficient reason present which is within the
terms of the motion” (People v. Montgomery (1976) 61 Cal. App. 3d 718, 728), such an
order will not be reversed unless the appellant affirmatively demonstrates—by making
proper argument in its opening brief—that the ruling is erroneous. “The very settled rule
of appellate review is a trial court’s order/judgment is presumed to be correct, error is
never presumed, and the appealing party must affirmatively demonstrate error on the face
of the record.” (People v. Davis (1996) 50 Cal. App. 4th 168, 172.) The People have not
made that demonstration here. Even if the argument they present in their opening brief is
correct – that charter schools are by definition “districts” for purposes of sections 424 and
426 – they have not properly contested the court’s instruction regarding public moneys.
We accordingly affirm the trial court’s decision to grant defendants’ new trial motions.
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DISPOSITION
The trial court is directed to modify defendants’ restitution orders as follows: The
restitution Selivanov owes to Ivy Academia must be reduced to $205,499.48, for which
Selivanov is solely liable. Berkovich’s order must be modified to strike any language
making Selivanov jointly and severally liable for her $22,396.60 restitution to Ivy
Academia. The trial court further is directed to forward copies of the amended restitution
orders to the California Department of Corrections and Rehabilitation. The judgment of
the trial court is otherwise affirmed in full.
CERTIFIED FOR PUBLICATION
COLLINS, J.
We concur:
EPSTEIN, P. J.
MANELLA, J.
79