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

After being caught in a 2011 ATF sting operation out of a Milwaukee warehouse, Wamiq was convicted of four counts of knowingly shipping, transporting, receiving, possessing, selling, distributing, or purchasing contraband under the Cigarette Trafficking Act (CCTA). The same jury convicted Khan, who acted independently of Wamiq, of three counts under the CCTA, 18 U.S.C. 2342(a). The Seventh Circuit affirmed the convictions, rejecting challenges to evidentiary rulings and the sufficiency of the evidence. The court also upheld the forfeiture orders and Wamiq’s sentence, rejecting Wamiq’s challenges to the court’s findings as to the loss amount caused by Wamiq’s unlawful conduct and Wamiq’s acceptance of responsibility.View "United States v. Wamiq" on Justia Law

Nayak owned outpatient surgery centers and made under-the-table payments to physicians that referred patients to his centers, including cash payments and payments to cover referring physicians’ advertising expenses. Nayak instructed some of his collaborators not to report these payments on their tax returns. Nayak was charged with honest-services mail fraud, 18 U.S.C. 1341 and 1346, and obstruction of the administration of the tax system, 26 U.S.C. 7212(a). Although the indictment a alleged that Nayak intended “to defraud and to deprive patients of their right to honest services of their physicians” through his scheme, there was no allegation that Nayak caused or intended to cause any sort of tangible harm to the patients in the form of higher costs or inferior care. After denial of his motion to dismiss, Nayak entered a conditional guilty plea, reserving his right to appeal denial of his motion to dismiss the mail fraud charge. On appeal he argued that tangible harm to a victim is a necessary element of honest-services mail fraud, at least in cases not involving fraud by a public official. The Seventh Circuit affirmed, holding that actual or intended tangible harm is not an element.View "United States v. Nayak" on Justia Law

In 2000 the SEC charged First Choice and others with fraud. The district court appointed a receiver to take charge of the defendants’ assets for victims of the $31 million fraud. The receiver found that some assets had been used to acquire oil and gas leases in Texas and Oklahoma and attempted to sell them and use the proceeds to compensate the victims. Over the next 14 years, third parties sought to establish ownership interests in the leases. In this case, CRM sought to contest the receiver’s proposed sale of oil leases in Osage, Oklahoma, which it claims to have operated since 2002. The district court denied CRM’s motion to intervene and approved the sale. The Seventh Circuit affirmed, noting that CRM knew as early as 2004 that the receiver was claiming the leases, but waited until the protracted and expensive receivership was finally moving toward an end and the receiver’s assets were dwindling to take action.View "Sec. & Exch. Comm'n v. First Choice Mgmt. Servs., Inc." on Justia Law

Durham, Cochran, and Snow took control of Fair Finance Company, a previously well-established and respected business, and used money invested in Fair to support their lavish lifestyles and to fund loans to related parties that would never be repaid. When auditors raised red flags, the auditors were fired. When Fair experienced cash-flow problems, it misled investors and regulators so it could keep raising capital. One of the company’s directors, under investigation in a separate matter, alerted the FBI that Fair was being operated as a Ponzi scheme. The FBI seized Fair’s computer servers and, after an investigation uncovered more than $200 million in losses to thousands of victims, many of them elderly or living on modest incomes, arrested the three. A jury convicted them of conspiracy, securities fraud, and wire fraud. The Seventh Circuit affirmed, except with respect to Durham’s wire fraud convictions. The government failed to enter into the trial record key documentary evidence supporting those counts. The court rejected arguments relating to sufficiency of the evidence; sufficiency of the wiretap application; the court’s refusal to give a proposed theory-of-defense jury instruction on the securities fraud count; alleged prosecutorial misconduct during the rebuttal closing argument; and claimed sentencing errors.View "United States v. Durham" on Justia Law

Brothers Daniel and John owned four companies that offered remodeling services to homeowners. They provided honest work on construction jobs for cash customers, but duped numerous people into refinancing their homes and paying the loan proceeds directly to their companies, then left the jobs unfinished. They targeted neighborhoods on the South and West sides of Chicago, using telemarketers who looked for “elderly, ignorant homeowners,” and had customers sign blank contracts. They referred homeowners to specific loan officers and required the homeowners to sign letters of direction, so the title companies sent checks directly to the companies. From 2002 to 2006, the brothers collected about $1.2 million from more than 40 homeowner-victims. They were convicted of wire fraud, 18 U.S.C. 1343. The district court found that the loss calculation was more than $400,000 but less than $1,000,000 and accordingly increased the offense level, then applied enhancements because the conduct involved: vulnerable victims; violation of a prior court order; sophisticated means; mass-marketing; and leadership or organization of the scheme. The district court sentenced each brother to 168 months’ imprisonment. The Seventh Circuit affirmed. The district court reasonably estimated the amount of loss and properly enhanced the offense level further for the other five aggravating factorsView "United States v. Sullivan" on Justia Law

In 2008-2009 Scalzo was a bank officer at two institutions. He originated and approved loans for unqualified borrowers without adequate financial information or collateral. He forged borrowers’ signatures, redirected funds from the loans to his own personal use without the knowledge of the borrowers, and took funds from some fraudulent loans to pay off balances on previous fraudulent loans, to conceal the original fraud. Scalzo pled guilty to one count of bank fraud, 18 U.S.C. 1344, and one count of money laundering, 18 U.S.C. 1956. The Information listed as part of the scheme six bank loans and three Credit Union loans. Scalzo objected to inclusion of two Credit Union loans in the restitution order. The sentencing range was the same with or without these loans, so the court deferred ruling on restitution and sentenced Scalzo to 35 months of imprisonment. The government filed its additional brief a week later. Having received no additional briefing from Scalzo for 82 days, the court relied on the PSR, the plea agreement and the government’s additional submissions; found that Scalzo arranged the Credit Union loans to conceal the bank fraud; noted that the Credit Union loans were listed as part of the fraudulent scheme detailed in the Information to which Scalzo pled guilty and that the Credit Union lost a substantial amount of money; and ordered him to pay restitution of $679,737.23. The Seventh Circuit affirmed.View "United States v. Scalzo" on Justia Law

Davis, a nurse and assistant professor of nursing at Chicago State University, ran several public health programs aimed at improving the health care of the African-American community. As program director for the Chicago Chapter of the National Black Nurses Association (CCBNA), Davis solicited and oversaw public and private grants, contracts, and funds awarded to CCBNA. Between December 2005 and March 2009, Davis solicited and obtained contracts and grants totaling approximately $1,062,000 from Illinois state agencies. Davis diverted approximately $377,000 by writing checks to herself, friends, and family members; concealing conflicts of interest; hiring unqualified family members and other acquaintances for positions in projects; forging co-signatures; and falsifying information. Davis pleaded guilty to mail fraud and money laundering. In the plea agreement, the parties concurred that based on the factors contained in 18 U.S.C. 3553, Davis could be sentenced to, and the government would recommend, no higher than a below-guidelines sentence of 41 months’ imprisonment. The advisory guidelines range was 57–71 months. Davis waived the right to appeal the reasonableness of the sentence but reserved the right to challenge any procedural error at sentencing. The Seventh Circuit affirmed, rejecting a claim that the district court erred procedurally by failing to adequately take into account her mental health in considering mitigating factors. View "United States v. Davis" on Justia Law

When purchasing a house, the defendants submitted loan documents containing false incomes and bank statements, and failed to disclose that husband’s company was selling and his wife was buying. The company received $750,000 and rebated money paid above that amount to husband. The $1 million in loans they received resulted in $250,000 extra that was not disclosed as going to the couple. They were able to sell the house four months later for the same inflated amount, without raising any concerns. They failed to disclose on the HUD-1 forms in the second transaction that they would be giving the buyer kickbacks. The buyer received $1,090,573.06 in loans, but defaulted without making a payment. The lender eventually sold the house for $487,500. Defendants were convicted of three counts of wire fraud, 18 U.S.C. 1343 and aiding and abetting wire fraud, 18 U.S.C. 2. The Presentence Investigation Report determined that the lender’s loss was $603,073.06 and recommended a 14-point enhancement under USSG 2B1.1(b)(1)(H). The Seventh Circuit affirmed the convictions but remanded for explanation of why the loss was “reasonably foreseeable” and why the sentencing enhancement was proper. Involvement in a fraudulent scheme does not necessarily mean it was reasonably foreseeable that all the subsequent economic damages would occur; there was no evidence that defendants knew they were selling to what turned out to be a fictional buyer. View "United States v. Domnenko" on Justia Law

Illinois legalized riverboat casino gambling in 1990. Since then, the state’s once‐thriving horseracing industry has declined. In 2006 and 2008, former Governor Blagojevich signed into law two bills that imposed a tax on in‐state casinos of 3% of their revenue and placed the funds into a trust for the benefit of the horseracing industry. Casinos filed suit under the Racketeering Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1964, alleging that defendants, members of the horseracing industry, bribed the governor. On remand, the district court granted summary judgment for the racetracks, finding sufficient evidence from which a reasonable jury could find that there was a pattern of racketeering activity; that a jury could find the existence of an enterprise‐in‐fact, consisting of Blagojevich, his associates, and others; sufficient evidence that the defendants bribed Blagojevich to secure his signature on the 2008 Act; but that the casinos could not show that the alleged bribes proximately caused their injury. The Seventh Circuit reversed in part. Viewing the evidence in the light most favorable to the plaintiffs, there was enough to survive summary judgment on the claim that the governor agreed to sign the Act in exchange for a bribe. View "Empress Casino Joliet Corp. v. Johnston" on Justia Law

Thomas and Chapman were part of a scheme to fleece real estate lenders by concocting multiple false sales of the same homes and using the loan proceeds from the later transactions to pay off the earlier lenders. They were convicted of multiple counts of wire fraud. Thomas was also convicted of aggravated identity theft for using an investor’s identity without permission to craft a phony sale of a home that the victim never owned. The Seventh Circuit affirmed, rejecting: challenges to the sufficiency of the evidence; a claim by Thomas that there was no proof that he created or used the falsified documents at issue; Chapman’s claim that there was no evidence that he was the Lamar Chapman identified by the evidence, because no courtroom witness testified to that effect; Chapman’s claim that his due process rights were violated when the government dropped a co-defendant from the indictment; and a claim that the government failed to turn over unspecified exculpatory evidence. The court noted testimony from several victims, an FBI investigator, an auditor, and an indicted co-defendant who had already pleaded guilty. View "United States v. Chapman" on Justia Law