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

Curtis, a lawyer, filed 1996-1997 returns reporting tax obligations of $218,983 and $248,236, but made no payments. His partner had taken $600,000 from the practice and declared bankruptcy; Curtis underwent an expensive divorce. Curtis failed to file a return for 1998. Curtis entered into an installment agreement. He filed a return for 2000 but failed to pay $90,000. He entered into a second agreement, but filed returns for 2003 and 2004 reflecting unpaid tax liabilities of $176,802 and $61,000. Curtis did not make estimated payments and stopped making installment payments. He filed returns for 2007, 2008 and 2009, but paid nothing. Curtis was charged with misdemeanor willfully failing to pay taxes owed for 2007, 2008 and 2009, 26 U.S.C. 7203. The court allowed evidence under Rule 404(b), of Curtis’s history of failing to pay his taxes and his withdrawals of money from his law practice for personal expenses. Curtis did not object, but objected to the government’s proposed evidence that he failed to pay payroll taxes for his employees in 2013, arguing that any violations after the charged years did not bear on his state of mind during the time of the charged offenses. Although the court gave Curtis’s proposed instruction on good faith, it declined to modify the pattern instruction to include a requirement for bad motive, with respect to willfulness. The Seventh Circuit affirmed his convictions. View "United States v. Curtis" on Justia Law

DiFoggio worked as an FBI cooperating witness and introduced Medrano to a man purporting to be Castro, a health care consultant. Castro told Medrano that by bribing a corrupt official he could obtain contract approval from Los Angeles County for the purchase of bandages for its hospital system. Castro was an undercover FBI agent. There was no corrupt official. When the medical bandages deal was concluded, Medrano approached Castro about making another deal to involve his friend, Buenrostro. Buenrostro and Castro brought Barta into the discussions; A bribe would be paid to the corrupt official by Castro to obtain a county contract for Sav‐Rx, a company founded by Barta, to provide pharmaceutical dispensing services. Sav‐Rx would service the contract through a business started by Buenrostro and Medrano. Barta wrote a check for $6,500 to Castro. Buenrostro and Medrano were to pay their 35 percent share after that last meeting. Before that happened, they were arrested. In a separate opinion, the Seventh Circuit held that Barta was entrapped as a matter of law. Neither Buenrostro nor Medrano argued entrapment. The Seventh Circuit affirmed their convictions for conspiracy to commit bribery, rejecting challenges to the sufficiency of the evidence and the sentences. View "United States v. Buenrostro" on Justia Law

Hawkins and Racasi were analysts on the staff of a member of the Cook County Board of Review, when they accepted money from Haleem, a corrupt Chicago police officer acting as an undercover agent to reduce the penalties for his own crimes. The Board hears complaints by property owners who believe that the assessed valuation (which affects real-estate taxes) is excessive. Haleem paid Hawkins and Racasi to arrange for lower assessments. They took his money, and the assessments were reduced, except for one parcel about which the protest was untimely. A jury found that they had violated 18 U.S.C.666 (theft or bribery concerning programs receiving federal funds) and 1341 (mail fraud), plus corresponding prohibitions of conspiracy. Hawkins and Racasi contend that they took the money with the intent to deceive Haleem and did nothing in exchange and that the jury was improperly instructed. The Seventh Circuit affirmed the section 666 convictions, but vacated the section 1341 convictions. The jury may have found that defendants intended to be influenced; but if they did not, they intended to be rewarded for the positions they held, if not for services delivered. They were guilty either way. Section 1341 covers only bribery and kickbacks. View "United States v. Racasi" on Justia Law

A jury convicted Garten of conspiracy to commit mail and wire fraud in the conduct of telemarketing, 18 U.S.C. 1349, 2326(1). The district court then sentenced her to 168 months in prison and a five-year term of supervised release, and ordered Garten to pay $909,278 in restitution. The Seventh Circuit affirmed, rejecting challenges to the sufficiency of the evidence supporting conviction, the admission of testimony that a non-testifying co-conspirator had pleaded guilty to the same offense, the court’s statement, “that’s accurate” in overruling Garten’s objection to testimony that the “gross amount” on an exhibit was the amount “stolen from the consumer,” and that the evidence was insufficient to support the district court’s finding that the loss involved totaled nearly $6 million. View "United States v. Garten" on Justia Law

Lawson’s business, Evangel Capital, held itself out as a lender with $250 million in assets available to churches and other religious institutions. It issued firm commitment financing letters for multi-million-dollar projects but never closed a single loan and never had more than $10,000 in its bank accounts. Potential borrowers paid fees totaling $270,000, which they were told would be used to pay for appraisals and required documents. The fees were used for personal expenses. A jury convicted Lawson of wire fraud, 18 U.S.C. 1343, and he was sentenced to 52 months’ imprisonment. The judge had allowed the prosecutor to show that Lawson failed to report his income, but not that he failed to file tax returns, telling the jury that the evidence was admitted for the purpose of showing whether Lawson acted with knowledge or fraudulent intent, but not how it illuminated those issues. Lawson did not object. The Seventh Circuit affirmed. The tax evidence could not have affected a rational jury’s verdict, even if taken as propensity evidence, given the undisputed proof that Lawson converted the fees to his personal use and did not spend the money for the purposes he told clients it was needed. View "United States v. Lawson" on Justia Law

From 2002-2010, Salutric, an investment adviser whose firm had more than 1,000 clients, defrauded clients by diverting assets from their Schwab accounts to unapproved, high-risk investments, including restaurants, car dealerships, real estate developments, and an entertainment company. Salutric or his associates had interests in the investments. Salutric’s clients were unaware of these ventures. Salutric represented via falsified paperwork, including forged signatures, that he had clients’ permission to make withdrawals from the Schwab accounts. Six individuals and retirement plans covering 72 small-business employees lost a total of $3,898,818. Salutric pleaded guilty to wire fraud. The court adopted the PSR, including its calculation of an advisory sentencing range of 151 to 188 months in prison, noting victim impact statements which were supplements to the PSR. There were no objections; neither party objected to the court’s declaration that it would consider a statement by the daughter of victims. The court discussed, in detail, 48 letters submitted on behalf of Salutric by family, friends, and community figures detailing his community service and praising his character. After evaluation of the section 3553(a) factors, the court ordered Salutric to serve 96 months. The Seventh Circuit affirmed, rejecting challenges to the court’s consideration of statements by non-victims. View "United States v. Salutric" on Justia Law

Sykes pleaded guilty to participation in a bank fraud scheme, 18 U.S.C. 1344, and was sentenced to 57 months’ imprisonment. The district court determined that her total offense level was 23 and that her criminal history category was III, resulting in an advisory guidelines range of 57 to 71 months. The court applied two enhancements, holding that Sykes could reasonably have foreseen, and thus was responsible for, the scheme’s entire intended loss amount of $653,417 (14-level enhancement under USSG 2B1.1(b)(1)(H)) and that a two-level enhancement was warranted under USSG 2B1.1(b)(10)(C), because Sykes’s offense involved “sophisticated means.” The court rejected her submission that her family circumstances as sole caregiver to her children justified a below-guidelines sentence. The Seventh Circuit affirmed, holding that the district court was correct in its determination that the evidence supported the 14-level enhancement; did not clearly err in its estimation of the factual record; was correct in its view that the fraudulent scheme involved sophisticated means; and adequately took into account Sykes’s family circumstances in imposing sentence. View "United States v. Sykes" on Justia Law

Chicago’s Minority and Women-owned Procurement Program requires companies contracting with the city to hire or subcontract with minority-owned businesses (MBEs). An MBE must be at least 51 percent owned by members of a minority group, and its management and operations must be controlled by those members. RCN, a cable provider, participates in the MBE program. RCN seeks out MBE subcontractors using the city’s directory, where it found defendants in 2003. Defendants, white men, held out their cable installation business, ICS, as an MBE, but used false documentation and hired a black front-man to pose as ICS’s president. ICS fired defendant Giovenco before the fraud was discovered, but he continued to receive checks. In total, RCN paid ICS $8,303,562 before the city investigated. Its members dissolved ICS, trying to avoid detection. Convicted of mail fraud, 18 U.S.C. 1341, Potter was sentenced to 54 months’ imprisonment, and Giovenco was sentenced to 36 months. The Seventh Circuit affirmed, rejecting Giovenco’s claim that, because he no longer worked for ICS at the time of the mailings underlying the charges, he could not be held legally accountable for the scheme, and Potter’s challenge to his sentence, arguing that RCN did not actually suffer a loss. View "United States v. Potter" on Justia Law

In opening and closing arguments during his trial on three counts of tax evasion for failing to pay almost $239,400 in income tax between 2005 and 2007, 26 U.S.C. 7201, Stuart’s attorney argued that he believed he owed no taxes. Stuart thought that the United States had no authority to tax income. Stuart had adopted these views after reading a book called “Cracking the Code,” which urges people to resist paying income taxes, but his counsel told the jury that Stuart learned his ideas from his fellow church patrons. Counsel described Stuart as a curious, determined, and “kooky, not criminal” person. Only after he received no response to his inquiries from the IRS, the Secretary of the Treasury, or his accountants about his tax ideas, counsel stated, did Stuart begin to refrain from paying income tax. His attorney did not call any witnesses; Stuart did not testify and the jury found him guilty. The Seventh Circuit affirmed, rejecting an argument of ineffective assistance of counsel. View "United States v. Stuart" on Justia Law

Indiana’s Bureau of Motor Vehicles will not register or transfer a vehicle title unless the buyer furnishes a Social Security number. For corporations and similar entities, it requires a federal employer identification number (EIN). It is possible to obtain an EIN without having a Social Security number. Aliens whose visas do not allow them to work in the U.S. and aliens who lack authority to be in the U.S. can get an EIN. Defendants established a business that obtained an EIN, registered a limited liability company, and submitted the required paperwork and fees, using clients’ real names and addresses. Clients paid $350, which included fees for the BMV. Defendants were convicted of conspiracy (8 U.S.C. 1324(a)(1)(A)(v)(I)), to violate 8 U.S.C. 1324(a)(1)(A)(iii) and (iv) by shielding unauthorized aliens from detection and encouraging them to reside in the U.S. and conspiracy to commit mail or wire fraud, 18 U.S.C. 1349. The Seventh Circuit reversed and vacated. The Count One convictions could be sustained only if provision of any service—food, medicine, transportation—to an unauthorized alien is a felony. To convict of mail or wire fraud, the false statements must have deprived a victim of “money or property.” There was no allegation that title papers and licenses are Indiana’s “property.” View "United States v.Reyes" on Justia Law