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

Orillo, her husband (a doctor), and another owned Chalice, a home health care provider. Chalice was an enrolled provider with Medicare and could seek reimbursement of home health care through that program. Orillo falsified forms by altering the codes and information that had been completed by the Chalice nurses to make the patient’s condition appear worse and the health care needs greater than the actuality. Those alterations caused Medicare software to generate different reimbursement rates Orillo also aided her husband in paying kickbacks to a Chicago doctor in return for referrals of Medicare patients. Orillo pled guilty to healthcare fraud, 18 U.S.C. 1347 and paying kickbacks to physicians for patient referrals under a federal health care program, 42 U.S.C. 1320a-7b and 18 U.S.C. 2, and was sentenced to 20 months’ imprisonment. Orillo conceded that her scheme caused a loss, to Medicare, in excess of $400,000, and agreed to entry of a $500,000 forfeiture judgment.The district court determined that the loss amount for the healthcare fraud count was $744,481 and ordered her to pay that amount in restitution. The Seventh Circuit affirmed, rejecting Orillo’s argument that the loss and restitution amount should be limited to only those stemming from visible alterations. View "United States v. Orillo" on Justia Law

Philpot, former Clerk of Lake County, Indiana, took $25,000 in incentive payments from a federally funded child‐support fund (42 U.S.C. 658a(a)) without the required approval of the county fiscal body. The Indiana Department of Child Services disburses those federal funds to the counties, Ind. Code 31‐25‐4‐23(a), which have a relatively free hand in directing the money, although “amounts received as incentive payments may not, without the approval of the county fiscal body, be used to increase or supplement the salary of an elected official.” Philpot had used the funds to provide himself and staff members with bonuses. Convicted of mail fraud, 18 U.S.C. 1341, and theft from a federally funded program 18 U.S. 666(a)1A, he was sentenced to 18 months in prison. The Seventh Circuit affirmed, despite claims concerning whether Philpot “knowingly” violated the statute and the fact that Philpot had voluntarily returned the funds. View "United States v. Philpot" on Justia Law

The Berkowitz family has a history of IRS problems. Yair began participating in his father’s schemes in 1999, acquiring the information of dead people and federal prisoners to prepare fraudulent tax returns. Between 2003 and 2009, 58 individuals received refund checks in a conspiracy that involved more than 3,000 false state and federal tax returns. Yair received tax returns from Marvin in Israel, mailed the returns from various U.S. postal codes to avoid IRS suspicion, and controlled accounts where proceeds were deposited. When refund checks issued, Yair traveled to pick them up and made payments to co‐conspirators. In 2006, IRS agents told Yair that money he received from Marvin was obtained by fraud. Yair denied knowledge of the scheme. He began to reduce his direct involvement, but continued to receive money from the scheme and met with an undercover IRS agent about expanding the fraud. The scheme was uncovered. Yair, Marvin, and others were charged with conspiracy to defraud the IRS, wire fraud, and mail fraud. Yair pleaded guilty only to wire fraud based on a 2006 PayPal transfer of $250. At sentencing, the district court followed the Presentence Report’s recommendation and ordered Yair to pay more than $4 million in restitution along with his prison sentence; his liability was joint and several with his co‐defendants. The Seventh Circuit found the award appropriate and affirmed.View "Unted States v. Berkowitz" on Justia Law

Jin, a naturalized American citizen of Chinese origin, with a bachelor’s degree in physics from a Chinese university and master’s degrees in physics and computer science from American universities, was employed as a Motorola software engineer, 1998-2007. Her duties involved a cellular telecommunications system: Integrated Digital Enhanced Network (IDEN). While on medical leave in China, 2006-2007, she sought a job with a Chinese company, Sun Kaisens, which develops telecommunications technology for the Chinese armed forces. She returned to the U.S., bought a one‐way ticket to China on a plane scheduled to leave Chicago days later, then downloaded thousands of internal Motorola documents, stamped proprietary, disclosing details of IDEN, which she was carrying with $31,000 when stopped by Customs agents. She stated she intended to live in China and work for Sun Kaisens. She was convicted of theft of trade secrets, but acquitted of economic espionage, under the Economic Espionage Act, 18 U.S.C. 1831, 1832, and sentenced to 48 months in prison. The Seventh Circuit affirmed, rejecting arguments that what she stole was not a trade secret and that she neither intended nor knew that the theft would harm Motorola. The court characterized the sentence as lenient, given Jin’s egregious conduct, which included repeatedly lying to federal agents.p View "United States v. Jin" on Justia Law

After the mutual funds, known as the Lancelot or Colossus group, folded in 2008, the trustee in bankruptcy filed independent suits or adversary actions seeking to recover from solvent third parties, including the Funds’ auditor, law firm, and some of the Funds’ investors, which the Trustee believes received preferential transfers or fraudulent conveyances. The Funds had invested in notes issued by Thousand Lakes, which was actually a Ponzi scheme, paying old investors with newly raised money. In these proceedings the trustee contends that investors who redeemed shares before the bankruptcy received preferential transfers, 11 U.S.C. 547, or fraudulent conveyances, 11 U.S.C. 548(a)(1)(B) and raised a claim under the Illinois fraudulent-conveyance statute, using the avoiding power of 11 U.S.C. 544. The bankruptcy court rejected the claims, citing the statutory exception: “the trustee may not avoid a settlement payment or transfer made to a financial participant in connection with a securities contract, except under section 548(a)(1)(A) of this title.” The Seventh Circuit affirmed. A transfer from the Funds to each redeeming investor occurred “in connection with” a securities contract. View "Peterson v. Somers Dublin, Ltd." on Justia Law

Gray’s friend Johnson offered to act as co‐borrower to help Gray buy a house, if Gray promised that she would only be on the loan as a co‐borrower for two years. In return, Johnson received a finder’s fee from the daughter of the builder-seller (Hinrichs). Mortgage broker Bowling sent their application to Fremont, a federally insured lender specializing in stated‐income loans, with which the lender typically did not verify financial information supplied by applicants. Bowling testified that he told both women that they would be listed as occupants, that their incomes would be inflated, and what the monthly payment would be. The closing proceeded; Gray and Johnson received a $273,700 mortgage from Fremont and, on paper, a $48,300 second mortgage from Hinrichs. Gray and Johnson acknowledge that the application that they signed contained several false statements. Bowling became the subject of a federal investigation. Sentenced to 51 months’ imprisonment, he agreed to testify against his clients. The Seventh Circuit affirmed the convictions of Gray and Johnson under 18 U.S.C. 1014, which prohibits “knowingly” making false statements to influence the action of a federally insured institution. Rejecting an argument that the district court erred by denying an opportunity to present testimony to show Bowling’s history of duping clients, the court stated that his prior wrongdoing was not very probative of Gray’s and Johnson’s guilt. View "United States v. Gray" on Justia Law

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