Unpublished Disposition, 893 F.2d 1339 (9th Cir. 1990)

MEMORANDUM^** 

Glen P. Grant ("Grant") appeals his convictions for conspiracy, and aiding and abetting both the misapplication of bank funds and the making of false entries in bank records. Grant contends that the district court erred in denying his proposed jury instructions on (1) the good faith defense, and (2) the principle that a person cannot be convictd merely for possessing knowledge that a crime is being committed. Grant also contends that the district court erred in prohibiting his counsel from arguing to the jury that it could draw an unfavorable inference against the government from the fact that a certain witness did not testify. We have jurisdiction pursuant to 28 U.S.C. § 1291. We affirm.

BACKGROUND

Grant, Timothy J. O'Healy ("O'Healy") and Richard J. Quigley ("Quigley") were charged under a 16-count indictment. Quigley was named in each count; Grant and O'Healy were named in ten counts. Count 1 charged the defendants with conspiracy to commit the charged substantive offenses, 18 U.S.C. § 371. Count 2 charged Quigley with misapplication of bank funds, 18 U.S.C. § 656, and Grant and O'Healy with aiding and abetting the commission of this offense, 18 U.S.C. § 2. Counts 9 through 16 charged Quigley with making false entries in bank records, 18 U.S.C. § 1005, and Grant and O'Healy with aiding and abetting the commission of these offenses, 18 U.S.C. § 2.

In sequence, Quigley pleaded guilty; Grant's motion for separate trial was granted; O'Healy pleaded guilty; Grant went to trial. The evidence presented at the trial, viewed in the light most favorable to the prosecution, revealed that:

In 1983, Pea Soup Anderson's Inc. ("Pea Soup") was financially overextended and, as a result, overdrew its accounts at First Valley Bank ("First Valley"). Between June and September 1983, First Valley's president, Quigley, engaged in a check-kiting scheme with Pea Soup's president, O'Healy, and controller, Grant, which resulted in the improper advance of $3.25 million in bank funds to Pea Soup. Quigley, O'Healy and Grant were aware that their activities in this regard were illegal, and Quigley, with the aid of O'Healy and Grant, actively concealed the wrongdoing from First Valley's board of directors.

While conceding that Quigley and O'Healy had engaged in a check-kiting scheme, counsel for Grant offered evidence based on two theories of defense. The first theory was that Grant knew nothing about the scheme and acted in good faith throughout his tenure at Pea Soup. The second was that, even if he had knowledge of the scheme, he was not a participant during the period alleged in the indictment, June through September 1983.

Grant proposed jury instructions on his good faith and "guilty knowledge" defenses. The trial court refused to give these proposed instructions. However, the court did instruct the jury on the specific intent required for each of the offenses charged against Grant.

SCOPE OF REVIEW

A defendant is entitled to a jury instruction on a theory of defense if the theory is legally sound and evidence in the case makes it applicable. United States v. Solomon, 825 F.2d 1292, 1295 (9th Cir. 1987); United States v. Scott, 789 F.2d 795, 797 (9th Cir. 1986). However, " [a] defendant is not entitled to any particular form of an instruction so long as the instructions given fairly and adequately cover the defendant's theories of defense." Solomon, 825 F.2d at 1295. When reviewing a claim of error relating to jury instructions, we examine the instructions in the context of the overall charge. Id.; United States v. Cusino, 694 F.2d 185, 187 (9th Cir. 1982), cert. denied 461 U.S. 932 (1983). Our cases are not entirely consistent as to the proper standard for reviewing a district court's denial of a proposed jury instruction. United States v. Davis, 876 F.2d 71, 72 (9th Cir. 1989) (comparing cases applying de novo review with cases applying an abuse of discretion standard). We need not resolve that issue here, however, because we conclude that the district court's denial of the proposed jury instructions was proper whether we review it de novo or under the more deferential abuse of discretion standard.

DISCUSSION

Grant proposed two instructions on the good faith theory of defense. First, Grant proposed a general good faith instruction (No. 8) directed to the entire indictment. Second, Grant proposed a good faith instruction (No. 19) which, on its face, addresses only the misapplication count.

It is well-settled in this circuit that " [a] defendant is not entitled to a separate good faith instruction when the court gives an adequate instruction on specific intent." United States v. Green, 745 F.2d 1205, 1209 (9th Cir. 1984), cert. denied, 474 U.S. 925 (1985). See also Cusino, 694 F.2d at 188 (instruction on "specific intent to defraud can be deemed an instruction on good faith"); United States v. Bonanno, 852 F.2d 434, 440 (9th Cir. 1988). Here, the instructions given on specific intent were thorough.

Grant relies on our decision in United States v. Unruh, 855 F.2d 1363 (9th Cir. 1987), which he interprets as requiring a separate good faith instruction in cases where a defendant has a good faith belief that the bank had consented to the activities that would otherwise amount to misapplication of bank funds. Such reliance, however, is misplaced: Grant materially misreads the applicability of Unruh. Unruh was convicted of aiding and abetting her employer and co-defendant, Forde, in a check-kiting scheme involving two banks which Forde controlled. We first determined that consent of the bank's board of directors may be a defense to charges of misapplying bank funds in violation of 18 U.S.C. § 656. Id. at 1368-69. In the course of reviewing the sufficiency of the evidence to sustain Unruh's conviction, we noted, among other things, that Unruh knew "that Forde had fully informed the banks of his actions, and that the directors allowed the practice to continue for some months." Id. at 1369. We concluded that Unruh's conviction must be vacated and the case remanded for new trial because " [t]he jury may have found Unruh guilty because it was not instructed that the consent of the board and the good-faith belief that the board had consented were defenses to her criminal intent in participating in the scheme." Id. at 1370 (emphasis added).

Here, Grant does not contend that First Valley's board of directors consented to or permitted the activities undertaken by Quigley, Grant and O'Healy. Nor is there any evidence to support an inference of board consent. We therefore conclude that Unruh is inapposite and that the district court did not err in rejecting Grant's proposed good faith instructions.

Grant's second theory of defense was that regardless of his knowledge of the check-kiting scheme, he did not participate in the scheme during the period alleged in the indictment. Grant proposed two instructions relating to this line of defense. The first, Instruction No. 9, provided as follows: "You may not find a defendant guilty merely because you find that he had knowledge that a crime was being committed." The second, Instruction No. 10, provided in part: "even if you believe that a defendant knew a crime was being committed and failed to act to prevent it, that belief is not sufficient to convict that defendant of a crime." These proposed instructions were rejected by the district court.

The district court did, however, instruct the jury that it must not find Grant guilty unless it finds that Grant actively participated in the alleged wrongdoing. The instructions for each charged offense set forth the act or acts that Grant must be found to have committed in order to be proved guilty. Thus, the jury instructions given fairly and adequately covered Grant's second theory of defense. Accordingly the district court did not err in rejecting Grant's Proposed Instructions Nos. 9 and 10. See Solomon, 825 F.2d at 1295.

Grant argues that the district court erred in prohibiting his counsel from arguing to the jury that an unfavorable inference might be drawn against the government from the fact that O'Healy did not testify. It is well-established that the trial judge has broad discretion in controlling closing argument, and the ruling of the trial judge will not be disturbed on appeal absent an abuse of discretion. United States v. Guess, 745 F.2d 1286, 1288 (9th Cir. 1984); United States v. Makhlouta, 790 F.2d 1400, 1403 (9th Cir. 1986).

We find no abuse of discretion here. By the close of Grant's trial, O'Healy had pleaded guilty to some, but not all, of the charges brought against him, and he had yet to be sentenced. Thus, O'Healy was still a defendant in the case. His failure to testify, therefore, is neither unexpected nor attributable to the government. Where, as here, the missing witness argument would be misleading, the trial judge may properly refuse to allow it. See United States v. Bramble, 680 F.2d 590, 592 (9th Cir. 1982).

For the reasons stated, the convictions are AFFIRMED.