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

After being rejected for a mortgage because Hall had a bankruptcy and their joint income was too low, Hall and Phillips applied with Bowling, a mortgage broker, under the “stated income loan program.” Bowling prepared an application that omitted Hall’s name, attributed double their combined income to Phillips, and falsely claimed that Phillips was a manager. Phillips signed the application and employment verification form. Fremont extended credit. They could not make the payments; the lender foreclosed. Bowling repeated this process often. He pleaded guilty to bank fraud and, to lower his sentence, assisted in prosecution of his clients. Phillips and Hall were convicted under 18 U.S.C. 1014. The district court prohibited them from eliciting testimony that Bowling assured them that the program was lawful and from arguing mistake of fact in signing the documents. The Seventh Circuit first affirmed, but granted rehearing en banc to clarify elements of the crime and their application to charges of mortgage fraud and reversed. The judge excluded evidence that, if believed, might have convinced a jury that any false statements made by the defendants were not known by them to be false and might also have rebutted an inference of intent to influence the bank. View "United States v. Phillips" on Justia Law

Iacona worked as a process server for D&L, an investigation service owned by Clymer and agreed to purchase the business. Clymer structured the arrangement so that she would retain ownership of the business while Iacona paid $2000 per month for two years toward a purchase price of $95,000, with a balloon payment of the remaining balance. The agreement contemplated a line of credit to pay a recurring monthly expense for an investigative research service. In reality, Iacona established several lines of credit in the name of D&L and in Clymer’s name. He misrepresented his position with the company and the company’s income. He had his sister represent herself as Clymer, used Clymer’s social security number and personal information, and incurred significant debt unrelated to the business. Iacona was convicted of fraud in connection with an access device and aggravated identity theft, 18 U.S.C. 1029(a)(2) and 1028A. The Seventh Circuit affirmed, rejecting a claim of prosecutorial misconduct. Where the evidence supports an inference that the defendant has lied, then a comment in closing argument as to his credibility, is a hard but fair blow, as long as the argument is based on the evidence and not a comment on the prosecutor’s personal opinion . View "United States v. Iacona" on Justia Law

When a Cook County, Illinois property owner fails to timely pay property, the amount of tax past due becomes a lien on the property. The county sells tax liens at auctions, with bids stated as percentages of the taxes past due. The percentage bid, multiplied by the amount of past‐due taxes, plus any interest, is the “penalty” that the owner must pay to clear the lien. The lowest penalty wins the bid. When bids are identical, the auctioneer tries to award the lien to the bidder who raised his hand first. The rules permit only one agent of a potential buyer or related entities, to bid. Plaintiffs accused defendants of fraud for having multiple bidders representing a single potential buyer and sought damages under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1961 and for interference with a prospective business advantage under Illinois tort law. On remand, a jury found in favor of the plaintiffs and awarded damages of $7 million, to which the judge added $13 million in attorneys’ fees and expenses. The Seventh Circuit affirmed, describing the defendants as hyperaggressive adversaries who drove up the plaintiffs’ legal costs without justification. View "BCS Servs., Inc. v. BG Inv., Inc." on Justia Law

Simon is a CPA, a professor of accounting, and an entrepreneur “whose business dealings require a flowchart to unravel” and included managing three foreign companies. For tax years 2003 through 2006, the Simon family received approximately $1.8 million from those companies and spent approximately $1.7 million. Simon paid just $328 in income taxes for 2005, and claimed refunds for the other years, while pleading poverty to financial aid programs in order to gain need‐based scholarships for his children at private schools. Charged with filing false tax returns, 26 U.S.C. 7206(1) and 18 U.S.C. 2; failing to file reports related to foreign bank accounts, 31 U.S.C. 5314, 5322 and 18 U.S.C. 2; mail fraud, 18 U.S.C. 1341; and financial aid fraud, 20 U.S.C. 1097 and 18 U.S.C. 2, Simon sought to demonstrate that money received from the entities was loaned to him and was not taxable or constituted partnership distributions, not taxable because they did not exceed his basis in the partnership. The Seventh Circuit affirmed Simon’s convictions, rejecting challenges to evidentiary rulings and jury instructions. View "United States v. Simon" on Justia Law

Volpentesta owned and operated a construction business and used the company to defraud customers, investors, subcontractors, and the government. Charged with six counts of mail and wire fraud and 17 counts of federal tax violations, Volpentesta was represented by Federal Defender Gaziano. Due to the volume of discovery (about 11,000 pages of Bates-stamped discovery and 40 banker’s boxes of documents seized by the IRS), Gaziano ensured that Volpentesta could review the discovery electronically from the jail. When Volpentesta complained that the computer was too slow, Gaziano obtained an order for periodic transport to review the documents. Volpentesta eventually filed nine motions to substitute counsel, most related to the difficulty in reviewing discovery. The court ultimately allowed him to proceed pro se. Volpentesta was convicted, sentenced to a total of 133 months in prison, and ordered to pay more than one million dollars in restitution. The Seventh Circuit affirmed, rejecting arguments that he was deprived of his Sixth Amendment right to effective assistance of counsel; that his waiver of his right to counsel was not knowingly, voluntarily, and intelligently given; and that the district court erroneously denied his motions to continue the trial once he had decided to represent himself. View "United States v. Volpentesta" on Justia Law

Rosen, as owner of Kully Construction, submitted a development plan to the city of East St. Louis for a $5,624,050 affordable housing project to be constructed with a combination of private and public funds: $800,000 in federal grant funds, $1,124,810 in Tax Increment Financing (TIF), and $3,699,240 from Rosen and Kully. Rosen constructed elaborate lies about his credentials and history. After obtaining a contract for 32 units, Rosen learned that the project was under-funded by about $2.7 million dollars. To conceal the problem, Rosen misrepresented to the city that he could build 56 units without increasing construction costs, then substituted less-expensive prefab modular housing units in place of the promised new construction; he nonetheless submitted an itemized list of materials and expenses related to construction. He also submitted falsified tax returns to obtain financing and falsified statements that he had obtained financing. After the scheme was discovered, Rosen pleaded guilty to seven counts of wire fraud, and based on the court’s calculation of the loss amount and determination that Rosen was an organizer or leader of criminal activity, was sentenced to 48 months in prison. The Seventh Circuit affirmed. View "United States v. Rosen" on Justia Law

Kennedy pleaded guilty to mail fraud, 18 U.S.C. 1341, wire fraud, 18 U.S.C. 1343, and threatening an informant, 18 U.S.C. 1513(b), for his role in a scheme to sell counterfeit art online and at art shows. At sentencing hearings, the government provided a list of 135 victims’ names, addresses, and loss amounts, and sought restitution of $821,714.65. The district court found that the prosecution had met its burden as to 21 victims and sentenced Kennedy to 96 months’ imprisonment and ordered him to pay restitution of $316,425.65. The Seventh Circuit affirmed the sentence. View "United States v. Kennedy" on Justia Law

Gary and Deborah divorced in 2003 and agreed to a marital settlement. Gary purchased an annuity, to pay him $200 per month until his death; the settlement required him to pay her “$200 per month…in lieu of her interest in [the annuity].” Two years later, Gary filed for Chapter 7 bankruptcy and asked the court to discharge financial obligations to his ex-wife under the settlement. Gary attempted to blackmail Deborah into cooperation, using nude photos of her sister as a child. He is now in prison for bankruptcy fraud and possession of child pornography. 18 U.S.C. 152(6), 2252A(a)(5)(B). Deborah and the bankruptcy trustee agreed that she had an unsecured claim for $158,455.63, including $12,400 representing 62 monthly payments that the trustee had received under the annuity. Gary owned the annuity, so these payments were part of the bankruptcy estate and their inclusion in her claim was a mistake. The trustee successfully moved the bankruptcy judge to permit transfer to Deborah of $1000 in annuity payments collected since settling her claim, and to direct the company to make future payments to her directly. The Seventh Circuit reversed, directing the court either to order Deborah to return the $1000 or order the trustee to deduct it from her claim and to instruct the company to resume making payments to the trustee. View "Peel v. Peel" on Justia Law

abiu worked as a bank teller, 2003-2007. He searched account records for account holders with balances exceeding $100,000, then stole their information and, along with codefendants, compromised that information to divert money into fraudulently opened bank accounts. Postal inspectors lawfully searched his home and seized notes containing names, Social Security numbers, and account information of 86 customers, and an unspecified number of fake driver’s licenses and Social Security cards bearing the names of some of those customers, but only 17 customers suffered a loss. The losses were reimbursed by the banks. Rabiu pleaded guilty to bank fraud and aggravated identity theft, 18 U.S.C. 1344, 1029(a)(2), 1028A(a)(1), admitting participation in the scheme, but insisting that some of the names and identifying information on the phony driver’s licenses and Social Security cards were fictitious and not from customers. The government successfully sought a four-level upward sentencing adjustment under U.S.S.G. 2B1.1(b)(2)(B) based on 50 or more victims. The government cited a definition of “victim,” which, for offenses involving identity theft, was broadened in 2009, after Rabiu’s arrest, to include “any individual whose means of identification was used unlawfully or without authority.” The Seventh Circuit affirmed. Although the court overstated the number of victims, it was clear that the judge would have imposed the same sentence even had he accepted Rabiu’s calculation; the error was harmless. View "United States v. Rabiu" on Justia Law

Stern represented Allen in a discrimination suit, after which they became romantically involved. Allen and her husband had separated and had executed a settlement agreement awarding Allen $95,000, to be paid in installments. A month later, Allen visited a bankruptcy attorney, Losey, giving Stern’s name as “friend/referral” on an intake form. In filing for bankruptcy, Allen did not disclose the marital settlement. While her bankruptcy was pending, Allen received the money. A month after her bankruptcy discharge, Allen transferred the settlement proceeds to Stern, who opened a CD in his name. The attorney for Allen’s ex-husband informed the bankruptcy trustee that Allen failed to disclose the settlementand the discharge was revoked. Allen pleaded guilty to making a false declaration in a bankruptcy proceeding, 18 U.S.C. 152(3). She told a grand jury that Stern had not referred her to Losey and was convicted of making a material false statement in a grand jury proceeding, 18 U.S.C. 1623. The court admitted Losey’s client-intake form as evidence of perjury. Stern was convicted of conspiring to commit money laundering, 18 U.S.C. 1956(h). The Seventh Circuit affirmed Allen’s conviction, holding that the intake form was not a communication in furtherance of legal representation and was not subject to attorney-client privilege. Reversing Stern’s conviction, the court held that the judge erred in excluding Stern’s testimony about why he purchased the CDs. View "United States v. Stern" on Justia Law