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

Armbruster, a CPA with experience working at a Big Four accounting firm, began serving as the controller for Roadrunner's predecessor in 1990 and became Roadrunner’s CFO. Roadrunner grew rapidly, acquiring transportation companies and going public in 2010. In 2014, Roadrunner’s then‐controller recognized shortcomings in a subsidiary's (Morgan) accounting and began investigating. In 2016, many deficiencies in Morgan’s accounting remained unresolved. The departing controller found that Morgan had inflated its balance sheet by at least $2 million and perhaps as much as $4–5 million. Armbruster filed Roadrunner's 2016 third quarter SEC Form 10‐Q with no adjustments of the carrying values of Morgan balance sheet items and including other misstatements. Roadrunner’s CEO learned of the misstatements and informed Roadrunner’s Board of Directors. Roadrunner informed its independent auditor. Roadrunner’s share price dropped significantly. Roadrunner filed restated financial statements, reporting a decrease of approximately $66.5 million in net income over the misstated periods.Criminal charges were brought against Armbruster and two former departmental controllers. A mixed verdict acquitted the departmental controllers on all counts but convicted Armbruster on four of 11 charges for knowingly falsifying Roadrunner‘s accounting records by materially misstating the carrying values of Morgan's receivable and prepaid taxes account, 15 U.S.C. 78m(b)(2), (5), i78ff(a), 18 U.S.C. 2, fraudulently influencing Roadrunner’s external auditor, and filing fraudulent SEC financial statements, 18 U.S.C.1348. The Seventh Circuit affirmed. While the case against Armbruster may not have been open‐and‐shut, a rational jury could have concluded that the government presented enough evidence to support the guilty verdicts. View "United States v. Armbruster" on Justia Law

Nine Illinois energy consumers sued their electricity provider, ComEd, and its parent, Exelon, on behalf of themselves and those similarly situated for damages under the Racketeer Influenced and Corrupt Organizations Act (RICO) alleging injury from increased electricity rates. These rates increased, they allege, because ComEd bribed former Illinois Speaker of the House Michael Madigan to shepherd three bills through the state’s legislature: the Energy Infrastructure and Modernization Act of 2011 (EIMA); 2013 amendments to that legislation; and the Future Energy Jobs Act of 2016. Although Illinois law still required public utilities to file rates with the Illinois Commerce Commission (ICC), EIMA implemented statutorily prescribed, performance-based rate increases that limited ICC discretion in reviewing rates and authorized at least $2.6 billion in ComEd spending on smart meters and smart grid infrastructure, costs that were required to be passed on to customers. In 2016, FEJA provided $2.35 billion in funding for nuclear power plants operated, paid for through a new fee for utility customers, and allowed ComEd to charge ratepayers for all energy efficiency programs and for some expenses relating to employee incentive compensation, pensions, and other post-employment benefits.The Seventh Circuit affirmed the dismissal of the suit. Paying a state’s required filed utility rate is not a cognizable injury for a RICO damages claim. View "Brooks v. Commonwealth Edison Co." on Justia Law

The Seventh Circuit affirmed the judgment of the district court denying Petitioner's petition for a writ of habeas corpus under 28 U.S.C. 2241 challenging his money-laundering convictions, holding that Petitioner did not face the kind of "fundamental miscarriage of justice" that must exist to justify relief under section 2241.After a jury trial, Petitioner was convicted of violations of the Mann Act, 18 U.S.C. 2421-24, the money-laundering statute, 18 U.S.C. 1956, and associated conspiracies and sentenced to a 432-month term of imprisonment. Petitioner later filed his habeas petition arguing that he was convicted on the money-laundering counts for conduct that was not a crime. The district court denied relief. The Seventh Circuit affirmed, holding that Petitioner failed to establish that he faced a "fundamental miscarriage of justice" necessary to justify relief under section 2241. View "Roberts v. LeJeune" on Justia Law

Capital held tens of millions of dollars for a sole investor, with Stevanovich as its sole director. Capital invested in the multi-billion-dollar Petters Ponzi scheme, getting out before the scheme collapsed in 2008. Some investors lost everything[ Capital earned tens of millions. The Petters bankruptcy court entered a $578,366,822 default judgment against Capital in 2015, but it had dissolved. In 2018, the Trustee filed a post-judgment supplementary proceeding in the Northern District of Illinois against Stevanovich, an Illinois resident. Under Illinois law, a judgment creditor may recover assets from a third party if the judgment debtor has an Illinois state law claim of embezzlement against the third party. In his turnover motion, the Trustee argued that Stevanovich embezzled Capital’s funds to purchase high-end wine for his personal use and transferred the goods to Stevanovich’s personal wine cellar in Switzerland. The Trustee submitted ample evidence to support his claim for $1,948,670.79. The district court granted the turnover order without conducting an evidentiary hearing and found that Stevanovich embezzled the funds. The Seventh Circuit affirmed, rejecting Stevanovich’s claims that the wine purchases were an investment strategy for Capital and that the five-year statute of limitations for embezzlement applied, accruing from the dates of the wine purchases. The court applied the seven-year statute of limitations for supplementary proceedings accruing from the date of the bankruptcy court judgment. Stevanovich failed to present any evidence creating an issue of fact that necessitated a hearing. View "Kelley v. Stevanovich" on Justia Law

Miller and Krasilnikova are married. Miller pled guilty to wire fraud. His sentence included an order to pay approximately $1.1 million in restitution. Days after Miller received his sentence, Krasilnikova agreed to sell their family home to a third party for $855,000. The United States then gave notice of a lien on the property, 18 U.S.C. 3613(c), asserting that Miller had a one-half interest in the proceeds and that his share should be used to pay restitution. Krasilnikova argued that she was the sole owner; the title to the property was only in Krasilnikova’s name.The Seventh Circuit upheld an order dividing the sale proceeds equally so that Miller’s share will be applied to the restitution order. The district court properly considered additional evidence. Under Illinois law, courts evaluating ownership can look past title and instead ask who actually exercised control over the property at issue. A series of property transfers and mortgages casts significant doubt on the legitimacy of Krasilnikova’s paper title. Ample evidence suggests that Miller and Krasilnikova manipulated property and financial records and even forged signatures to conceal the true ownership of the property. View "Krasilnikova v. United States" on Justia Law

Goulding, an accountant and lawyer, has a history of mail fraud and tax fraud. Goulding formed 15 funds that hired Nutmeg’s advisory services, which he managed. The funds invested in illiquid securities, many of which were close to insolvent. Gould wrote all of the disclosure documents, which overvalued the funds. Goulding made baseless statements about increases in value. Goulding did not use outside advisors and engaged in commingling, holding some securities in his own name.The Securities and Exchange Commission charged Goulding under the Investment Advisers Act of 1940, 15 U.S.C. 80b, with running Nutmeg through a pattern of fraud, including touting his supposed financial expertise while failing to disclose his crimes, in addition to violating the Act’s technical rules. The district court issued an injunction removing Goulding from the business and appointing a receiver. A magistrate judge enjoined Goulding from violating the securities laws, required him to disgorge $642,422 (plus interest), and imposed a $642,422 civil penalty. The Seventh Circuit affirmed the finding of liability and the financial awards. The extent of Goulding’s wrongdoing makes it hard to determine his net unjustified withdrawals; as the wrongdoer, he bears the consequence of uncertainty. The restitution reflects a conservative estimate of Goulding’s ill-got gains. Nor did the judge err by declining to trace funds from their source to Goulding’s pocket. View "Securities and Exchange Commission v. Goulding" on Justia Law

Weller was convicted of insider trading, Securities Exchange Act, 15 U.S.C. 78j(b). Fleming, a vice president of Life Time Fitness, had learned that his company was likely to be acquired by a private equity firm at an above-market price. Fleming told a friend, Beshey, who told Clark and Kourtis (who knew that the information had been misappropriated), who told others, including Weller. Most of them profited by trading on the information and showed their appreciation by “kickbacks.”Weller unsuccessfully argued that he did not know that Fleming violated a duty to his employer by passing the information to Beshey and that the government did not prove a financial benefit to Fleming. The Seventh Circuit affirmed his convictions. Although Weller did not interact with all of the others, he did conspire with at least Kourtis to misuse material non-public information for their own benefit. The court upheld Weller’s 366-day below-Guidelines sentence, noting that Weller profited more than the others. View "United States v. Weller" on Justia Law

Deutsche Bank employed Chanu and Vorley as precious metals traders. They received training that “market manipulation” was prohibited. The two engaged in “spoofing,” placing orders for precious metals futures contracts on one side of the market that, at the time the orders were placed, they intended to cancel prior to execution. At times they placed opposite orders. The government alleged that they placed such orders with the intent “to create and communicate false and misleading information regarding supply or demand in order to deceive other traders” and entice them to react to the false and misleading increase in supply or demand. After the court rejected Speedy Trial Act motions, the two were acquitted of conspiracy to commit wire fraud affecting a financial institution. 18 U.S.C. 1343. Vorley was convicted of three counts of wire fraud; Chanu was found guilty of seven counts of wire fraud.The Seventh Circuit affirmed. Manual spoofing violated the wire fraud statute; the defendants’ s actions amounted to a scheme to defraud by means of false representations or omissions and the implied misrepresentations were material. The court upheld the denial of the defendants’ request to modify jury instructions explaining the term “scheme to defraud” and to issue a good‐faith instruction. The court found no legal error in the district court's ends‐of‐justice rationale for excluding time in considering Speedy Trial issues. View "United States v. Chanu" on Justia Law

Eaden defrauded his employer, SIT, of more than $200,000 by falsely inflating the profits at his store (to obtain unearned performance‐based bonuses) by billing SIT’s largest customer (Gibson) for products it did not purchase and by submitting false claims to a rewards program sponsored by a tire manufacturer. After receiving a tip, police investigated, and SIT hired a forensic accounting firm, which concluded that Eaden received more than $47,000 in unearned bonuses. At sentencing, the district court imposed 46 months’ imprisonment, three years of supervised release, and ordered restitution of $244,673.00, and the forfeiture of Eaden’s bonuses from 2014-2016, $88,106.78.The Seventh Circuit affirmed his convictions, rejecting arguments that the court deprived him of a fair trial by informing prospective jurors that a grand jury had issued Eaden’s indictment based on probable cause, meaning “it’s probably true that [Eaden] had some connection with criminal activity” and wrongly admitted a lay witness’s opinion testimony regarding a subset of his fraud charges. The witness used the word "fraudulent" in discussing Eaden's submissions to the rewards program. Based on miscalculation, the court reduced Eaden’s restitution and forfeiture obligations by $189,709 and $40,817.81, respectively. View "United States v. Eaden" on Justia Law

Tinimbang invested $811,400, founding Donnarich Home Health in 2005 with his then-wife Josephine and their children. In 2006-2007, the others forced him out of management; Tinimbang maintained his equity position. Josephine and their son, Richard, later incorporated two healthcare businesses: Josdan and Patient Home; some of the funding came from Donnarich’s assets. Tinimbang later asserted that he was not compensated for those asset transfers or for his removal as Donnarich’s president.Josephine and others were charged with conspiracy to commit healthcare fraud (18 U.S.C. 1349) and conspiracy to launder the proceeds of healthcare fraud and unlawful payments for patient referrals (18 U.S.C. 1956(h)) by using Donnarich and Josdan to fraudulently bill Medicare and creating shell companies to deposit checks. The government sought the forfeiture of assets involved in or traceable to the conspiracies. Josephine fled. Guerrero, an employee, pled guilty and agreed to forfeit assets. The district court entered a preliminary order of forfeiture.Tinimbang asserted a claim to the assets by instituting ancillary proceedings, citing his investment in Donnarich, his removal without compensation, and the allegedly improper transfers from Donnarich to Josdan and Patient. Tinimbang did not provide any financial tracing. The government “reviewed the movement of funds” and did not trace any of Tinimbang’s investment to the forfeiture assets. The Seventh Circuit affirmed summary judgment in favor of the government. Tinimbang had not carried his burden to show a vested or superior interest in the forfeited assets at the time of the criminal acts. View "United States v. Tinimbang" on Justia Law