Justia U.S. 7th Circuit Court of Appeals Opinion Summaries

Most commodities trading takes place with the participants using computers to execute hyper‐fast trading strategies at speeds, and in volumes, that far surpass those common in the past. Coscia commissioned and used a computer program to place small and large orders simultaneously on opposite sides of the commodities market in order to create illusory supply and demand, to induce artificial market movement. He was convicted under the anti‐spoofing provision of the Commodity Exchange Act, 7 U.S.C. 6c(a)(5)(C) and 13(a)(2), and of commodities fraud, 18 U.S.C. 1348(1) and was sentenced to 36 months’ imprisonment. The Act defines “spoofing” as “bidding or offering with the intent to cancel the bid or offer before execution.” The Seventh Circuit affirmed, finding the convictions supported by sufficient evidence. The anti‐spoofing provision provides clear notice and does not allow for arbitrary enforcement; it is not unconstitutionally vague. With respect to the commodities fraud violation, the court upheld a jury instruction on materiality: that the alleged wrongdoing had to be “capable of influencing the decision of the person to whom it is addressed.” The district court properly applied a 14‐point loss enhancement in calculating the sentence, given the nature and complexity of Coscia’s criminal enterprise. View "United States v. Coscia" on Justia Law

Coexist was formed by Hubman, an admitted con man, after a court found that his previous enterprise, Hubman Foundation was not a charity but a sham designed to insulate Hubman from his debts and obligations. Hubman was introduced to Fehrenbacher, the president of a wholesale banking institution that packaged and sold mortgage notes to investment banks, and of a retail loan broker. In 2009, Fehrenbacher offered Hubman a deal via email that promised returns of 25-30% per week and that any invested funds would not be at risk and would be held in escrow. Coexist ultimately wired $2 million from Coexist, plus $2.8 million of Hubman's money to Assured Capital, following Fehrenbacher’s instructions. It was a Ponzi scheme. Hubman complained to the FBI and filed a civil suit. Assured ultimately paid him $4.3 million. Fehrenbacher then returned $1,494,250 to Coexist. The $2 million that Coexist “invested” was actually the money of Stewart, a retired professional baseball player. The Stewarts obtained a judgment for $2 million against Hubman and Coexist. Hubman did not pay. Coexist filed suit against Fehrenbacher and his companies. The Seventh Circuit affirmed a finding that the defendants violated a Florida law prohibiting the sale of unregistered securities and an order of rescission. View "Coexist Foundation, Inc. v. Fehrenbacher" on Justia Law

From 2003-2006, while employed as Director of Application for the American Hospital Association (AHA), Sayyed directed overpriced contracts to companies in exchange for kickbacks. Sayyed eventually pled guilty to mail fraud, 18 U.S.C. 1341, was sentenced to three months’ imprisonment, and was ordered to pay the AHA $940,450.00 restitution under the Mandatory Victims Restitution Act. 18 U.S.C. 3663A. As of November 2015, Sayyed still owed $650,234.25. In post‐conviction proceedings, the government sought to enforce the restitution judgment under 18 U.S.C. 3613, which permits such enforcement “in accordance with the practices and procedures for the enforcement of a civil judgment.” The government served citations to Vanguard and Aetna to discover assets in Sayyed’s retirement accounts, then sought turnover orders alleging that the companies possessed retirement accounts with approximately $327,000 in non‐exempt funds. Sayyed argued that his retirement accounts were exempt “earnings” subject to the 25% garnishment cap of the Consumer Credit Protection Act. The district court granted the government’s motion. The Seventh Circuit affirmed, agreeing that because Sayyed, who was 48‐years‐old at the time, had the right to withdraw the entirety of his accounts at will, the funds were not “earnings.” The CCPA garnishment cap only protects periodic distributions pursuant to a retirement program. View "United States v. Sayyed" on Justia Law

The Illinois Department of Public Health furnishes funds to organizations that provide health services, including the Broadcast Ministers Alliance, Access Wellness and Racial Equity, and Medical Health Association, which, collectively, received more than $11 million from the Department between 2004 and 2010. About $4.5 million of those dollars flowed through the grantees to Advance Health, Social & Educational Associates which was owned and controlled by the Dingles, who spent the diverted funds on personal luxuries, such as yachts and vacation homes. In 2012, Leon was charged with conspiracy to commit mail fraud (18 U.S.C. 371), 13 counts of mail fraud (18 U.S.C. 1341), and two counts of money laundering (18 U.S.C. 1957(a)). The charges against Karin were similar. A jury convicted them on all counts. The district court apparently considered their ages (Leon was 78 and Karin 76 at the time): Leon received a 72‐month sentence based on a range of 78-97 months; Karin received a 36‐month sentence based on a range of 41-51 months. The Seventh Circuit affirmed, rejecting arguments that the jury instructions violated the Fifth Amendment because they allegedly made acquittal only optional upon a finding of reasonable doubt; the court abused its discretion under Federal Rule of Evidence 403 when it permitted the admission of evidence of Leon’s marital infidelity; and the sentences were unreasonable. View "United States v. Dingle" on Justia Law

King obtained personal identifying information for more than 100 people, including the Director of the National Security Agency, then created and attempt to use 185 credit and debit cards. He also prepared and submitted 62 false tax refund claims. Reported actual losses from his crimes totaled only $10,980. King was arrested in June 2014. He was not detained before trial. In November King was arrested again, having resumed his fraudulent activities. King pled guilty to five counts, including aggravated identity theft, 18 U.S.C. 1028A(a)(1), which requires a minimum sentence of 24 months consecutive to any other sentence. The court sentenced King to concurrent terms of 24 and 30 months on three access device fraud counts, 18 U.S.C. 1029(a) and 1029(b)(1) and the fraudulent tax refund count, 18 U.S.C. 287, which was below the applicable guideline range, then added the mandatory consecutive 24 months. The Seventh Circuit affirmed. The district judge did what he was supposed to do: calculate the offense level and criminal history category under the Guidelines, then use his independent judgment under 18 U.S.C. 3553(a) to impose a sentence tailored to the individual offender and his crimes. The court rejected King’s argument that section 3553(a)'s “parsimony principle,” which instructs the court to impose a sentence “sufficient, but not greater than necessary,” to serve the statutory purposes of sentencing, required an adjustment of the guideline calculations themselves. View "United States v. King" on Justia Law

Lunn was convicted of five counts of bank fraud, 18 U.S.C. 1344, based on his operation of a Chicago investment advisory firm that advised mostly high-net-worth clients. The charges arose from Lunn’s conduct surrounding three extensions of credit by Leaders Bank, in which Lunn had invested: a line of credit he obtained for himself; a loan that Lunn arranged for former Chicago Bulls player Scottie Pippen; and a loan that Lunn arranged for Geras, a Lunn Partners client. Lunn provided false financial information with respect to his own loan; misled Pippen about the nature of the transaction and forged Pippen’s name; and forged Geras’s signature. The Seventh Circuit affirmed the convictions, rejecting Lunn’s claims that the court’s multiple intrusions into his testimony were so serious that he did not receive a fair trial and that the court erred in refusing to give a “good faith” instruction. The court instructed the jury that the government was required to prove, beyond a reasonable doubt, that Lunn “knowingly executed” a scheme to defraud “with the intent to defraud.” A good faith instruction was unnecessary. View "United States v. Lunn" on Justia Law

Reed operated companies that he claimed would make loans of $50 million to $1 billion to entrepreneurs. Reed charged advance fees of $10,000 to $50,000 to apply for these loans. Reed’s companies actually had no funds to lend. Reed and his co‐defendants took in $200,000 from six clients, but never closed a loan. Reed was indicted for wire fraud. On the fourth day of trial, Reed’s lawyer told the court that Reed wanted to enter a “blind” guilty plea. The judge placed Reed under oath, explained his rights, and discussed his understanding of the consequences of pleading guilty, before accepting the plea. Four months later, before sentencing, Reed moved to substitute attorneys. His new attorney moved to withdraw the plea, arguing that Reed’s attorney’s ineffective representation had coerced Reed to plead guilty. The court denied the motion. Reed sought a below‐guidelines sentence of probation, emphasizing that his wife (who has a disabling illness) and three children (one of whom is also disabled) depend on him for financial and other support. The Guidelines range was 57-71 months incarceration. The district judge sentenced Reed to 64 months in prison. The Seventh Circuit affirmed, finding Reed’s allegations of ineffective assistance vague. The district judge adequately considered Reed’s claims of family hardship. View "United States v. Reed" on Justia Law

Between 2003 and 2011, Jackson operated three Cicero, Illinois daycares in succession, housed in a building next to the Ark of Safety Apostolic Faith Temple where he served as pastor. Subsidies from the State of Illinois’ Child Care Assistance Program largely funded the daycares. CCAP subsidies are paid directly to the childcare provider. Jackson and his wife, Faria, submitted or directed the submission of dozens of CCAP applications, employment verification letters, redetermination forms, and monthly childcare certificate reports that contained materially false information. The state paid over $2.28 million in subsidies to Jackson’s daycares. A jury convicted Jackson and Faria of mail fraud, 18 U.S.C. 1341; wire fraud, 18 U.S.C. 1343, and making a false statement, 18 U.S.C. 1001 for his role in the scheme. The Seventh Circuit affirmed, rejecting a challenge to the sufficiency of the evidence. Faria was not unduly prejudiced by the joint trial or by the jury seeing a redacted copy of the indictment. View "United States v. Jackson" on Justia Law

Unreliable corporate meeting minutes were properly excluded in tax fraud trial. Petrunak was the sole proprietor of Abyss, a fireworks business regulated by ATF. In 2001, ATF inspectors inspected Abyss and reported violations. An ALJ revoked Abyss’s explosives license. Abyss went out of business. Five years later, Petrunak mailed the inspectors IRS W-9 forms requesting identifying information and then sent them 1099s, alleging that Abyss had paid each of them $250,000. Because the inspector’s tax return did not include the fictional $250,000, the IRS audited her and informed her that she owed $101,114 in taxes; she spent significant time and energy unraveling the situation. Petrunak submitted those sham “payments” as business expenses; he reported a loss exceeding $500,000 in his personal taxes. Petrunak admitted to filing the forms and was charged with making and subscribing false and fraudulent IRS forms, 26 U.S.C. 7206(1). He sought to introduce corporate meeting minutes under the business records exception, claiming that the records would have demonstrated his state of mind in preparing the forms. The minutes included statements bemoaning that the IRS was not more helpful, and declarations that the ATF agents perjured themselves. The Seventh Circuit upheld exclusion of the records, noting that the records contained multiple instances of hearsay and had no indicia of reliability. View "United States v. Petrunak" on Justia Law

In the 1990s, Terzakis met Berenice Ventrella, the trustee for a family trust with extensive real‐estate holdings. Terzakis managed and developed real estate and eventually managed some of Berenice’s property. In 2007, they created an LLC to hold one of Berenice’s properties. Berenice appointed her son Nick, who had Asperger syndrome, as the Ventrella Trust’s successor trustee. After Berenice's 2008 death, Terzakis opened an account for the “Estate of Berenice Ventrella,” took Nick to banks and had him transfer funds from Berenice’s accounts into this new account, transferred $4.2 million from the estate account to the LLC account, which he controlled, then transferred $3.9 million from the LLC account to his personal accounts. Nick was the only witness with personal knowledge of Terzakis’s statements about the transfers. Prosecutors interviewed Nick. The government informed the grand jury that Nick had cognitive problems; Nick did not testify. Days before the limitations period expired, the grand jury returned a five‐count indictment for transmitting stolen money, 18 U.S.C. 2314. Before trial, the government learned that Nick had been diagnosed with brain cancer, with a prognosis of six months. The government informed Terzakis of the diagnosis. The parties resumed plea negotiations. Terzakis rejected the government’s plea offer. The government dismissed the case, citing Nick’s unavailability. The Seventh Circuit affirmed denial of Terzakis’s motion to recover attorney fees under 18 U.S.C. 3006A. View "United States v. Terzakis" on Justia Law