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People v. Spaccia

California Court of Appeals, Second District, Third Division

June 23, 2017

THE PEOPLE, Plaintiff and Respondent,
PIER'ANGELA SPACCIA, Defendant and Appellant.


         APPEAL from a judgment of the Superior Court of Los Angeles County Nos. BA382701 & BA376026, Kathleen A. Kennedy, Judge. Affirmed in part, reversed in part, with directions.

          Dwyer Kim and John P. Dwyer, under appointment by the Court of Appeal, for Defendant and Appellant.

          Kamala D. Harris, Attorney General, Gerald A. Engler, Chief Assistant Attorney General, Lance E. Winters, Senior Assistant Attorney General, Victoria B. Wilson, Supervising Deputy Attorney General, and Idan Ivri, Deputy Attorney General, for Plaintiff and Respondent.

          LAVIN, J.


         This case arises out of the highly publicized corruption scandal in the City of Bell (Bell). The scandal erupted in 2010, after it was discovered that the city manager, assistant city manager, and five city council members were receiving astronomical salaries and fringe benefits, which they had taken care to conceal from their constituents. The subsequent investigation focused in large part on the actions of the longtime city manager, Robert Rizzo, and the assistant city manager, defendant and appellant Pier'Angela Spaccia.

         As pertinent here, a jury convicted Spaccia of 11 counts relating to the corruption scandal, including five counts of misappropriation of public funds (Pen. Code, § 424), one count of conspiracy to misappropriate public funds (Pen. Code, § 182, subd. (a)(1)), four counts of conflict of interest by a public official (Gov. Code, §§ 1090, 1097) and one count of secreting an official record (Gov. Code, § 6200). Spaccia challenges the judgment of conviction on several grounds.

         With respect to the five counts of misappropriation of public funds, Spaccia asserts we must reverse the two convictions related to unauthorized loans she received from Bell due to insufficient evidence. We reject this contention because the jury could reasonably have concluded she was criminally negligent by failing to take steps to determine whether those loans were authorized. Spaccia also asserts that the instructions given here for all of the misappropriation counts incorrectly allowed the jury to convict her based upon her status as a city officer alone, without also requiring the jury to find that she exercised some material degree of control over public funds. We agree the instructions were erroneous in light of People v. Hubbard (2016) 63 Cal.4th 378 (Hubbard), a decision issued after Spaccia's trial, clarifying the scope of Penal Code section 424. Furthermore, we cannot say the error was harmless beyond a reasonable doubt. Accordingly, we reverse the five convictions for misappropriation of public funds in counts 3, 4, 10, 12 and 13.

         Further, Spaccia contends the conflict of interest conviction based on her involvement in changing Bell's pension plan must be reversed because the plan is not a contract within the meaning of Government Code section 1090. Instead, she argues the pension plan is a form of deferred compensation incident to her employment with Bell, and because she was convicted of conflicts of interest in relation to her employment contracts in counts 4, 5, and 6, she cannot be convicted in count 2 for making the same employment contracts. We affirm the conviction on count 2 because amendments to the pension plan effectively modified the terms of Spaccia's employment with Bell, and therefore constituted the making of a contract within the meaning of Government Code section 1090.

         Finally, with respect to sentencing, Spaccia contends the abstract of judgment erroneously states she is required to serve her sentence in state prison due to a current or prior conviction for a serious or violent felony (Pen. Code, § 1170, subd. (h)(3)). The People concede the point, and we direct the court to correct the abstract of judgment.

         Procedural background

         By information dated October 3, 2013, [1] the People charged Spaccia with 13 counts related to the Bell public corruption scandal: one count of conspiracy to misappropriate public funds, in violation of Penal Code section 182, subdivision (a)(1)[2] (count 1); four counts of conflict of interest, in violation of Government Code sections 1090 and 1097 (counts 2, 5, 6 and 7); six counts of misappropriation of public funds in violation of section 424, subdivision (a) (counts 3, 4, 10, 11, 12 and 13); and two counts of unlawful secretion of an official record in violation of Government Code section 6200 (counts 8 and 9). The information alleged that the losses for counts 3 through 7, and 11 through 13, exceeded $1, 300, 000 (§ 12022.6, subd. (a)(3)), and involved theft of more than $100, 000 (§ 1203.045, subd. (a)).

         A jury acquitted Spaccia on count 8 and the court declared a mistrial as to count 11, after finding the jury was hopelessly deadlocked on that count; the court later dismissed count 11. The jury found Spaccia guilty of the remaining counts and found all allegations true.

         The court sentenced Spaccia to an aggregate determinate term of 11 years and eight months. The court selected count 4 as the base term and imposed the upper term of four years. (§ 424, subd. (a).) For counts 3, 10, 12, and 13, the court imposed a total of four years-one-third the midterm of three years for each count-to run consecutive. (§ 424, subd. (a).) The court imposed eight months for count 2-one-third the midterm of two years-to run consecutive. (Gov. Code, §§ 1090, 1097.) For counts 5, 6, and 7, the court imposed the midterm of two years, to run concurrent. (Gov. Code, §§ 1090, 1097.) For counts 1 and 9, the court imposed the midterm of three years, to run concurrent. (§ 182, subd. (a)(1); Gov. Code, § 6200.) Finally, the court imposed an additional three years for the high value property enhancement, to run consecutive. (§ 12022.6, subd. (a).) Spaccia was ordered to serve her sentence in state prison pursuant to section 1170, subdivision (h)(3), due to a current or prior serious or violent felony.[3]

         In addition to a restitution fine ($2, 200), a court assessment ($440), and a conviction assessment ($330), the court imposed a victim restitution order under section 1202.4, subdivision (f), in the amount of $8, 254, 776.

         Factual background


         The City of Bell is a small city in Los Angeles County. In 2006, Bell became a charter city; prior to that time, it was a general law city. Robert Rizzo was Bell's Chief Administrative Officer during the entire period relevant here.

         In 2002, Spaccia began working for Bell as a consultant. In 2003, Rizzo invited her to take a full-time employee position as Assistant to the Chief Administrative Officer. Initially, Spaccia was Bell's fiscal officer. Rizzo assigned Spaccia to mentor Lourdes Garcia so that she would eventually take over that position. Garcia had a long history with Bell; she started as an account clerk and worked her way up to director of administrative services.[4] Due to a personality clash between Garcia and Spaccia, Rizzo reassigned Spaccia in 2005 to handle special projects, including budgeting, audits, and Bell's annual financial reports. In 2007, Spaccia's title changed from Assistant to the Chief Administrative Officer to Assistant Chief Administrative Officer, but her job responsibilities did not change. In 2010, Rizzo removed Spaccia from Bell entirely and assigned her to work in the City of Maywood.[5] The city council terminated Spaccia's employment in July 2010.

         During her employment at Bell, Spaccia took several extended leaves of absence to care for family members and to recover from surgeries she underwent for back problems. Spaccia was fully paid during her absences, and was not required to take sick or vacation leave.

         Pension plan[6]

         One of Spaccia's first assignments at Bell was to create a new, supplemental pension plan. Spaccia worked with Alan Pennington, an actuary and pension fund specialist at a subsidiary of Wells Fargo. Although he dealt almost exclusively with Spaccia, Pennington understood Rizzo was the decision maker, and Spaccia was the messenger, regarding the new pension plan.

         At the time, non-safety employees of Bell were eligible for a pension benefit through CalPERS, which provided 2 percent of salary per year of service, starting at age 55. Rizzo wanted the new plan to provide an additional 1 percent benefit, for a total retirement benefit of 3 percent of salary per year of service.[7]

         At trial, Pennington explained that certain pension plans are subject to an income cap pursuant to ERISA.[8] The amount of the income cap is set by the Internal Revenue Service (IRS) on an annual basis, and employers must observe the cap so that their contributions to the plan qualify for favorable tax treatment. The income cap is changed annually, and ranged between $200, 000 and $260, 000 during the time Pennington worked with Bell. The effect of the income cap is to limit the amount of benefit an employee can receive to a maximum, calculated with reference to the income cap. In other words, an employee would receive a retirement benefit equal to 2 percent of his or her salary per year of service, based either upon a percentage of the employee's actual salary at the time of retirement or a percentage of the income cap amount, whichever is lower. As a result of the income cap, the pension benefit received by high income employees could be less than the targeted percentage of their salary.[9]

         In 2003, when Spaccia and Pennington were creating the new pension plan, the only person impacted by the income cap was Rizzo. However, Rizzo was adamant that he receive a full 1 percent pension benefit from the new pension plan. In order to provide that benefit, Pennington proposed the creation of two sub-plans within Bell's new pension plan. The first, to be called the supplemental plan, was a qualified plan subject to the income cap, which provided a 1 percent benefit. Employees whose income did not exceed the cap would receive the targeted benefit of an additional 1 percent of their salary. The second plan, to be called the replacement plan, was a non-qualified plan, designed to provide only high income employees with an additional benefit that would bring their total additional pension benefit to 1 percent-i.e., it would replace that portion of the 1 percent benefit eliminated by the supplemental plan's income cap. The city council adopted the supplemental and replacement pension plans on June 30, 2003.

         Because both the income cap and Rizzo's salary changed annually, it was necessary to adjust the formula used to calculate the replacement benefit periodically to guarantee Rizzo a total benefit equal to 1 percent of his salary. Over the years, Spaccia and Pennington communicated regularly about these calculations. Changes to the pension plan were presented to and adopted by the city council by resolution.

         Eventually, Spaccia's salary also exceeded the IRS income cap, and she too was eligible for the replacement plan. Her 2008 employment contract explicitly noted her eligibility for the replacement pension plan. Spaccia's communications with Pennington show she was well aware she would receive the replacement pension plan benefit.

         In 2004, Spaccia told Pennington that Rizzo wanted to limit the number of participants potentially eligible for benefits under the replacement plan. She instructed Pennington to develop some limitations to the plan so that only she and Rizzo could receive the benefit. The proposed amendments closing the replacement plan to new participants and requiring participants to have certain dates and years of service were later approved and adopted by the city council by resolution.

         Pennington estimated that Bell would need to contribute more than $15 million to fund the replacement plan.

         Employment contracts for Rizzo and Spaccia[10] Compensation

         When Spaccia first began working at Bell, employment contracts were prepared by Bell's outside counsel, Edward Lee. In 2005, however, Rizzo directed Spaccia to prepare employment agreements for all executive and administrative management employees. She understood that Rizzo planned to submit the 2005 agreements to the city council for approval, together with the five-year budget she was preparing for their review. Rizzo told Spaccia, as well as Garcia, that the 2005 agreements had been approved by the city council.

         The employment contracts and subsequent amendments Spaccia prepared provided her, as well as Rizzo, with substantial compensation.

         When Spaccia was initially hired as a full-time employee on July 1, 2003, her contract provided a base salary of $3, 935 per two week pay period, or $102, 310 annually. Pursuant to the agreements and amendments she prepared, Spaccia's salary rose steadily each year. At the time her employment was terminated in 2010, Spaccia earned a base salary of $13, 192 per two week pay period-more than $340, 000 annually. At trial, Spaccia acknowledged her salary and benefits were excessive.

         Rizzo's salary also increased substantially during this period, rising from $9, 615 per two week period in 2002 (approximately $250, 000 annually) to $27, 048 per two week period in 2010-more than $700, 000 annually.

         Pennington said Rizzo and Spaccia had the highest government salaries he had ever seen.

         Fringe benefits

         By virtue of their employment contracts and amendments, as well as resolutions adopted by the city council, Spaccia and Rizzo also received significant fringe benefits which, like their salaries, increased substantially over time.

         For example, in 2006, the third amendment to Spaccia's employment contract provided that Bell would fund Spaccia's retirement savings plan in the maximum allowable amount. The City paid between $33, 000 and $44, 000 per year to provide this benefit to Spaccia. Rizzo received the same benefit.

         With respect to leave accruals, Bell also provided a substantial benefit. When Spaccia was originally hired, she accrued vacation and sick leave commensurate with her years of employment at Bell, i.e., as a new employee. In 2005, however, the second amendment to her contract provided she would accrue vacation leave commensurate with her years of PERS service credit. As a result, she accrued vacation based upon 15 years of service rather than two years of service-a significant increase. Over time, the city council also approved resolutions that substantially increased vacation and sick leave accruals for Spaccia and Rizzo. At times, Rizzo and Spaccia each received two paychecks-one for their base salary and the other for the cash value of accrued vacation and sick leave. By 2008, Spaccia and Rizzo were earning 33 hours of vacation leave every two weeks.

         The City also provided increased benefits by purchasing five year PERS service credits for Spaccia, Rizzo, and other senior Bell managers. The purchase of an additional five years of service credit provided employees with increased retirement and leave benefits, to the extent those benefits were calculated using years of service.

         Spaccia's 2008 contract also provided that Bell would pay her portion of FICA and Medicare withholding. Eventually, Bell also paid Spaccia's share of the required CalPERS contributions. Rizzo received similar increases and benefits.

         Loans from Bell[11]

         In 2002, the city council authorized an $80, 000 loan from Bell to Rizzo. As discussed in greater detail post, Rizzo took several additional loans from Bell (without approval from the city council), which he opted to repay using the cash value of his accrued sick and vacation leave. He later expanded this “loan program” to include other employees as well as city council members. Spaccia received six purported loans from Bell, including $77, 500 in 2003, $100, 000 in 2009, and $130, 000 in 2010.

         Employment contract for Randy Adams[12]

         In 2009, Rizzo decided to hire a new police chief to improve Bell's police department. Spaccia knew Randy Adams because they worked together for approximately 10 years in the City of Ventura. Adams had a long career in law enforcement and was both well established and well regarded. He had been the Chief of Police in Simi Valley and Glendale. Rizzo asked Spaccia to contact Adams to see if he would be interested in moving to Bell. Adams met with Rizzo and several council members to discuss the possibility, and he eventually agreed to work for Bell.

         Over the course of several months, Spaccia met and corresponded with Adams about his salary and benefits package. Adams demanded a high salary because he had planned to retire; to make it worthwhile to work instead of retiring, he asked Bell to pay him the amount of the pension he would have received if he retired in addition to a salary commensurate with his experience. The City ...

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