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United States v. Grandinetti

decided: December 20, 1989.

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
PHILLIP GRANDINETTI, JR., DEFENDANT-APPELLANT



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 86 CR 699, Harry D. Leinenweber, Judge.

Posner and Ripple, Circuit Judges, and Eschbach, Senior Circuit Judge.

Author: Eschbach

ESCHBACH, Senior Circuit Judge.

This appeal is from a jury trial wherein the defendant was convicted on charges of conspiracy, misapplication of savings and loan ("S & L") funds, and fraud. He now claims that the evidence presented at trial is insufficient to support the convictions. His claims ring hollow, for the evidence provides more than enough support. Accordingly, we affirm.

I.

In April, 1987, Philip Grandinetti, Jr. ("Grandinetti"), Marvin Juron ("Juron"), and William Reinschreiber ("Reinschreiber") were charged with criminal violations by a nine-count information. Count One charged the group with conspiracy to misapply funds of A.J. Smith Federal Savings and Loan Association ("Smith Federal"), a federally insured financial institution, and conspiracy to make false statements to Smith Federal relating to that misapplication, all in violation of 18 U.S.C. § 371.*fn1 In furtherance of this conspiracy Grandinetti purportedly took part in bribing Smith Federal's president, Reinschreiber, and in submitting to Smith Federal inflated appraisals and documents containing false information. Count Two charged that the trio of Grandinetti, Juron, and Reinschreiber caused the misapplication of Smith Federal funds in violation of 18 U.S.C. §§ 657 & 2.*fn2 The crux of this Count against Grandinetti was, again, that Grandinetti participated in the Reinschreiber bribe and the submission of false information to Smith Federal. Counts Three through Nine charged Grandinetti and Juron with a scheme to defraud Smith Federal and Hawkeye Bank & Trust Company ("Hawkeye"), another federally insured financial institution, and with furthering that scheme through mail fraud in violation of 18 U.S.C. § 1341.*fn3 These Counts realleged, basically, the scheme outlined in Counts One and Two, and further alleged that Grandinetti had participated in the submission to Hawkeye of inflated appraisals and forged collateral assignments for the purpose of inducing a loan. Seven incidences were recited in which the mails were used to further the scheme.

The trio's case went to trial in March, 1988, and the following story emerged: Grandinetti and Juron were partners in a real estate company called Juron Development Company ("JDC" or "the Company"). Grandinetti was the major player in the Company, receiving 90% of all JDC gains on the sale of real estate (and bearing 90% of all losses) and 62.5% of all JDC profit (or loss) from real estate rentals. His responsibilities were sales and day-to-day operations. Juron was the Company's law and finance man. In 1979 the Company purchased a condominium development called English Valley. A substantial part of the purchase price was paid with $675,000 obtained from Smith Federal. Also obtained from Smith Federal was $2,621,000 needed to finance construction on the project and commitments to loan $1.5 million to purchasers of English Valley condos. JDC sold 46 condominiums by November of 1980 and used the proceeds from these sales to pay down the construction loan, among other things. That same November, however, a recession hit the area; English Valley sales slowed and ultimately stopped. JDC was left with 49 unsold English Valley units, bleak prospects, and virtually no cash flow from which the remaining balance on the Smith Federal loan could be paid.

On January 29, 1981, Juron transferred the 49 unsold units to 49 trusts, naming himself as beneficiary. This apparently was the first step in an effort to have the units transferred out of JDC in return for money from Smith Federal. The next step was to get help from "the inside" of Smith Federal. Help was obtained when Juron and Grandinetti bribed Reinschreiber with $25,000. The story of the bribe was related at trial by Anthony Finnochio ("Finnochio"), an acquaintance and confidant of Grandinetti. Finnochio testified that he received a phone call from Grandinetti around late February of 1981 in which Grandinetti asked him if he was interested in lunch and told him that he was meeting Juron by Smith Federal. Finnochio accepted the lunch invitation and drove to Grandinetti's office. Once there, Finnochio was informed by Grandinetti that they were going to make a payment to Reinschreiber and showed Finnochio an envelope stuffed with $25,000 in $100 bills. The pair left for a Wendy's restaurant across the street from Smith Federal. They met Juron and the three of them sat down to eat, Grandinetti and Juron sitting away from Finnochio in order to speak privately. While eating Finnochio overheard the following:

Grandinetti: Are you sure the deal will go through?

Juron: If the old man accepts the package, then we will have a deal.

"Old man" was a nickname used by the two for Reinschreiber. Finnochio also saw Grandinetti reluctantly hand Juron what appeared to be the envelope containing the $25,000. After lunch, Juron left for Smith Federal. Finnochio later saw him in Reinschreiber's office talking to Reinschreiber (the office is glass-enclosed) while Finnochio was in Smith Federal to use its restroom (the one at Wendy's being inoperative).

About two weeks after the bribe, Reinschreiber arranged with an appraiser for the submission to Smith Federal of bogus, grossly inflated appraisals of the English Valley condominiums. These appraisals valued the units at prices 40% higher than approximate market value. A little later Grandinetti and Juron negotiated transfers of most of the 49 units to Finnochio, Barry Kipnis ("Kipnis") and Richard Rosen ("Rosen"), Kipnis and Rosen being JDC's accountants. Prior to these negotiations Grandinetti had told Finnochio that sales at English Valley were dead and that transfers would relieve JDC's financial pressures. On April 1 the five men entered into several purchase agreements, each one providing, among other things, (1) that the purchaser would buy condos at the prices set out in the agreements (which corresponded exactly with the values that Reinschreiber had given the appraiser-overstating approximate market value by 40%); (2) that the purchaser would apply for an 80% of purchase price mortgage from Smith Federal (the remaining 20% coming from a down payment); (3) that JDC would bear all costs and expenses associated with the deal; (4) that JDC would hold the purchaser harmless with respect to the 20% down payment; (5) that JDC would receive all rents; and (6) that the purchaser could take all tax deductions. Riders were signed by Grandinetti and Juron making them co-guarantors of all debt incurred in the deal. On April 7, 1981, and on various later dates, the transfers occurred. No money ever changed hands between the parties and JDC. No down payments were ever made.

Later in April closing documents were submitted to Smith Federal. The documents included the inflated appraisals and the purchase agreements containing false information. The closing documents were reviewed by Smith Federal's loan committee, of which Reinschreiber was a member, and, with his advice, the loans were approved. $2.1 million in below-market interest rate funds then were disbursed to JDC.

JDC had projects other than English Valley. One of them was the Fairway Shopping Center, which was financed in part by a $500,000 loan from Hawkeye Bank. Hawkeye had been doing business with Juron for some time and with Grandinetti even longer. In fact, Grandinetti had introduced Juron to Hawkeye's president, Douglas Grinde ("Grinde"). The relationship was a continuing one, in part because JDC could never pay off the $500,000 loan. On June 15, 1982, Juron, Grandinetti, and Grinde met to discuss a solution to the loan problem.*fn4 At the meeting Juron requested new funds of $1.2 million, out of which the $500,000 loan could be repaid, and offered in exchange collateral including second assignments on the English Valley trusts. To induce ...


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