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

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

In 2000, Marr’s father founded Equipment Source, which sold used forklifts. Marr managed sales and daily operations, advertising online and selling online or by phone. In 2002, his father opened a merchant account at Palos Bank, to process credit card transactions, with Marr as a signatory. Marr sold forklifts that he never owned or possessed. Customers would contact Marr to complain that they received an invoice and notice of shipment, and that Equipment Source charged the credit card, but that the forklift never arrived. While Marr gave varying explanations, he rarely refunded money or delivered the forklifts. Customers had to contact their credit card companies to dispute the charges. The credit card company would send notice of the dispute to Palos Bank, which noticed a high incidence of chargebacks on Equipment Source’s merchant account and eventually froze the company’s accounts. Its loss on Equipment Source’s merchant account was $328,881.89. In 2003, the FBI executed a search warrant at Equipment Source’s offices and Equipment Source ceased doing business. Eight years later, the government charged Marr with six counts of wire fraud. At trial, the government presented testimony from 14 customers who paid for forklifts but never received them; two bank employees who dealt with chargebacks, and a financial expert witness, who confirmed the $328,881.89 loss. The Seventh Circuit affirmed Marr’s conviction, rejecting arguments that the government relied upon improper propensity evidence, that jury instructions incorrectly explained the law, and that the district court lacked the authority to order restitution. View "United States v. Marr" on Justia Law

Massuda invested $4,000,000 in Concessions, Inc., which was part owner, with Tony Rezko, of a group of Panda Express restaurants. Rezko, who controlled several companies, hoped to expand the business. Rezko was indicted and convicted on federal fraud and bribery charges, for which he received a lengthy prison sentence in 2011. Rezko’s real estate ventures collapsed. Massuda filed suit against Rezko’s corporations and associated people, raising claims of unjust enrichment, fraud, and aiding and abetting a breach of fiduciary duty. The district court concluded that all of Massuda’s claims, except portions of her fraud claim, were derivative, and on that ground dismissed those counts with prejudice for failure to state a claim. Massuda declined to amend her fraud allegations, which were then dismissed. The Seventh Circuit affirmed, rejecting a claim that if the holder of a majority interest acts in a way that helps him and hurts the minority, there is a direct claim. A direct claim exists when a majority shareholder engages in wrongdoing in such a way as to dilute the voting power of the minority shareholders; a dilution of voting power is a direct harm to the shareholders that is not felt by the company. View "Massuda v. Panda Express Inc." on Justia Law

Locke and co‐conspirator engaged in real estate fraud. Locke’s presentence report recommended a 16-point addition to the offense level, calculating a loss of $2,360,914.51 based on all of the properties underlying 15 original counts, although 10 counts had been dismissed. She made a written objection. The probation office argued that relevant conduct could be considered in determining the loss amount, but that even if the loss amount was based solely on Locke’s convicted conduct, the loss amount would exceed $1 million. At sentencing, Locke’s lawyer stated that he was withdrawing the objection to the loss calculation. The district court sentenced Locke to 71 months and ordered her to pay $2,360,916.51 in restitution to 13 entities. The Seventh Circuit remanded, finding that the district court did not make the findings necessary when using relevant conduct to increase the sentence and were insufficient under the Mandatory Victim Restitution Act, 18 U.S.C. 3663A. On remand, Locke successfully moved to bar any evidence regarding relevant conduct not already in the record at the first sentencing. The district court recalculated without the two‐level enhancement for offenses involving 10 or more victims. Locke admitted that she had withdrawn her objections to the amount of loss in the first sentencing, but asserted that her loss amount should not be greater than the restitution amount calculated without regard to relevant conduct. The district court sentenced Locke to 57 months of imprisonment and ordered her to pay $340,789 in restitution, reduced by the amount recovered from sales of the property. The Seventh Circuit discussed the factors that distinguish loss and restitution, but affirmed Locke’s sentence based on waiver.View "United States v. Locke" on Justia Law

The Ho-Chunk Nation, a federally recognized Indian Tribe, operates casinos in Wisconsin and nets more than $200 million annually from its gambling operations. Cash Systems, one of three businesses involved in this case, engaged in issuing cash to casino customers via automated teller machines and kiosks, check-cashing, and credit- and debit-card advances. Whiteagle, a member of the Nation, held himself out as an insider and offered vendors an entrée into the tribe’s governance and gaming operations. Cash Systems engaged Whiteagle in 2002 as a confidential consultant. Cash Systems served as the Nation’s cash-access services vendor for the next six years, earning more than seven million dollars, while it paid Whiteagle just under two million dollars. Whiteagles’s “in” was his relationship with Pettibone, who had been serving in the Ho-Chunk legislature since 1995. Ultimately, Whiteagle, Pettibone, and another were charged with conspiracy (18 U.S.C. 371) to commit bribery in connection with the contracts with the Ho-Chunk Nation and substantive bribery (18 U.S.C. 666). Whiteagle was also charged with tax evasion and witness tampering. Pettibone pleaded guilty to corruptly accepting a car with the intent to be influenced in connection with a contract. Whiteagle admitted that he had solicited money and other things of value for Pettibone from three companies, but denied actually paying bribes to Pettibone and insisted that he and Pettibone had advocated for Whiteagle’s clients based on what they believed to be the genuine merits of those clients. Convicted on all counts, Whiteagle was sentenced, below-guidelines, to 120 months. The Seventh Circuit affirmed, rejecting challenges to the sufficiency of the evidence on the bribery charges, the loss calculation, and admission of certain evidence.View "United States v. Whiteagle" on Justia Law