Justia White Collar Crime Opinion Summaries

Articles Posted in US Court of Appeals for the Seventh Circuit
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Jennings, who was not a medical professional, ran Results Weight Loss Clinic in Lombard, Illinois. Jennings paid Mikaitis, who was working full‐time for a hospital in Lockport, Illinois cash to secure a Drug Enforcement Agency registration number for the clinic and to review patient charts. Over the next two years, Jennings ordered over 530,000 diet pills (controlled substances) for over $84,000 using Mikaitis’s credit card and DEA number. Mikaitis appeared at Results weekly to get $1,750 cash and review four to eight charts. Results also gave drugs—in person and by mail— to many patients whose charts he never reviewed. A nurse practitioner who worked at the clinic later testified she noticed almost immediately that Jennings was unlawfully distributing drugs. Jennings paid Mikaitis about $98,000 cash, in addition to reimbursement for drug costs.Mikaitis was tried on 17 counts. He denied knowing about illegal activity. The district judge issued a deliberate avoidance (ostrich) instruction. Convicted, Mikaitis was sentenced to 30 months. The Seventh Circuit affirmed. Ample evidence demonstrated that Mikaitis subjectively believed that there was a high probability he was participating in criminal activity and that he took specific, deliberate actions to avoid learning that fact. Mikaitis was a medical professional with corresponding duties. The jury was free to conclude the red flags were obvious to him. View "United States v. Mikaitis" on Justia Law

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In 2015-2019, Wood defrauded homeowners facing foreclosure, convincing them to "refinance" and make their mortgage payments to him. Wood convinced some clients to stall foreclosures by manipulating the bankruptcy process. A Wisconsin bankruptcy judge enjoined Wood from continuing his scheme. Wood disregarded that order, defrauding 73 victims of almost $400,000. Many were evicted from their homes. Wood was charged with six counts of wire fraud, 18 U.S.C. 1343; one count of mail fraud, section 1341; one count of bankruptcy fraud, section 157; and criminal contempt of court, section 401(3). Wood violated his pretrial supervision by contacting his victims and soliciting money for mortgage services. Wood pled guilty to wire fraud and bankruptcy fraud; his PSR recommended a sentence of 72 months, based on a Guidelines range of 70-87 months. The court expressed skepticism about Wood’s allocution, citing Wood’s previous fraudulent crimes, his “heartlessness,” and the profound, non-monetary harm to his victims and legitimate creditors. Concluding that the Guidelines inadequately accounted for Wood’s behavior, the court observed Wood’s “crime stands apart" and that the closest comparator was a fraudulent scheme in another case (Iriri). The court observed that Iriri was induced to commit fraud, whereas Wood committed his crime completely unprompted.The Seventh Circuit affirmed Woods' 144-month sentence. Wood’s sentence turned on the unique characteristics and qualities of his crime. That is not an abuse of discretion. The court’s reference to Iriri “is so limited as to flirt with irrelevance.” View "United States v. Wood" on Justia Law

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Wegbreit founded Oak Ridge, a financial-services company, and worked with attorney Agresti to reduce his tax liability. At Agresti’s suggestion, Wegbreit transferred his Oak Ridge interest to a trust that would convey that interest to an offshore insurance company as a premium for a life insurance policy benefitting the trust. Agresti, as trustee, acquired a variable life insurance policy from Threshold (later Acadia), which shares a U.S. office with Agresti’s law firm. The Wegbreits leveraged the policies by means of policy loans and purchases by shell companies. Acadia, at Samuel’s direction, sold his Oak Ridge interest for $11.3 million. The proceeds were wired directly to Agresti, who conveyed them to Acadia; the Wegbreits did not report any taxable income from the sale. After an audit, the IRS determined that the trust income and policy gains, including those from the Oak Ridge sale, were taxable to the Wegbreits, who had underreported their 2005-2009 income by $15 million. The Wegbreits disputed that conclusion in the tax court. After discovery revealed suspicious documents related to the trust and policies, the IRS asserted civil fraud penalties.The judge found that the trust was a sham lacking economic substance that should be disregarded for tax purposes, agreed with the IRS assessment of tax liability, and imposed fraud penalties. The Seventh Circuit affirmed, noting that the Wegbreits had previously “stipulated away” their assertions, and ordering the Wegbreits’ attorney to show cause why he should not be sanctioned under Rule 38 for filing a frivolous appeal. View "Wegbreit v. Commissioner of Internal Revenue" on Justia Law

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Palladinetti and others purchased 30 Chicago-area apartment buildings and resold individual apartments as condominiums. Using a process that Palladinetti helped create, his co-defendants bought the buildings, falsely representing to lenders that they had made down payments. Palladinetti served as his co-defendants’ attorney for the purchases and sales and as the registered agent for LLCs formed to facilitate the scheme. The group recruited buyers for the condominiums and prepared their mortgage applications, misrepresenting facts to ensure they qualified for the loans.Palladinetti and his co-defendants were charged with seven counts of bank fraud, 18 U.S.C. 1344(1) and (2), and nine counts of making false statements on loan applications, 18 U.S.C. 1014 and 2. Count one involved a $345,000 mortgage that Palladinetti’s wife obtained for the purchase of a residence. That mortgage application was prepared using the group’s fraudulent scheme in July 2005. The government agreed to dismiss all other counts if Palladinetti were convicted on count one. Because Palladinetti stipulated to almost all elements of section 1344(1), the trial was limited to whether the bank he defrauded was insured by the FDIC when the mortgage application was submitted.The Seventh Circuit affirmed his conviction. The testimony and exhibits demonstrated that one entity was continuously insured, 1997-2008, that on the date the mortgage was executed that entity was “Washington Mutual Bank” and also did business as “Washington Mutual Bank, FA,” and that entity was the lender for the mortgage at issue. View "United States v. Palladinetti" on Justia Law

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Married since 1967, John and Frances Rogers filed joint federal income tax returns for many years. They underreported their tax obligations many times; the misreporting was the product of a fraudulent tax scheme designed by John, a Harvard‐trained tax attorney. The Seventh Circuit has affirmed the Tax Court’s rulings in favor of the IRS every time.Frances challenged two Tax Court decisions denying her “innocent spouse relief,” 26 U.S.C. 6015. The Seventh Circuit affirmed, having previously affirmed the denial of Frances’s request for innocent spouse relief for the 2004 tax year. The Tax Court took considerable care assessing Frances’s claims, denying them largely on the basis that she was aware of too many facts and too many warning signs during the relevant tax years to escape financial responsibility for the clear fraud perpetrated on the U.S. Treasury. The Tax Court applied the correct standard, with the possible exception of one factual error in its 2018 opinion regarding the couple’s lavish lifestyle but any error was harmless. Frances holds a master’s degree in biochemistry, a law degree, an M.B.A., and a doctorate in education. She assisted in managing her husband’s law firm while he sought treatment for alcoholism; she fired the office manager, maintained accounting records, endorsed and deposited checks, and paid expenses. View "Rogers v. Commissioner of Internal Revenue" on Justia Law

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Jarigese was the vice president of Castle Construction and the president of its successor, Tower, when he signed three contracts for public construction projects. Each contract was designated by Markham’s mayor, Webb, as “design-build” projects, not subject to a public bidding process. Webb invited only one company to submit a proposal for a new city hall, a senior living facility, and the renovation and expansion of a park district building. Webb signed each contract on behalf of Markham. Webb solicited bribes, which were paid to KAT Remodeling. Webb later testified that he had formed KAT years earlier and used its bank account as a repository for bribes. KAT never performed work of any kind. Jarigese hand-delivered bribes, by check and by cash. Webb understood that Jarigese had created an invoice from KAT to disguise the nature of the payment. Evidence at trial showed that Webb solicited bribes from others, using the same pattern.The Seventh Circuit affirmed Jarigese’s convictions for nine counts of wire fraud, 18 U.S.C. 1343 and 1346, and one count of bribery, 18 U.S.C. 666(a)(2). Evidence of Webb’s solicitation of other bribes was not evidence of “other bad acts” but rather was directly relevant to proving the charged scheme. The evidence was sufficient to support the convictions and there was no evidence of unwarranted discrepancy with respect to Jarigese’s 41-month sentence. View "United States v. Jarigese" on Justia Law

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Elgin met Garbutt at an international convention. Garbutt, who holds dual citizenship, moved from Belize into Elgin’s Gary, Indiana home and worked on her successful campaign to become Trustee of Calumet Township. Elgin hired Garbutt to work at the Trustee’s Office as her “executive aide” at a salary of $60,000 per year. Garbutt’s unofficial duties included Elgin’s political campaign work. He understood that he should not perform political work at the Township Office but began to do so. Elgin also hired her friend Shelton, who also worked on Elgin’s campaign. Elgin and Garbutt had a falling out. Elgin demoted Garbutt, docked his salary barred him from attending meetings, and took away his government car. Garbutt eventually began a partnership with an FBI agent who directed him to conduct warrantless searches of his co‐workers’ offices.Elgin took a plea deal, Shelton was convicted of conspiracy to commit wire fraud and conspiracy to commit honest services wire fraud, after learning, mid‐trial, about the warrantless searches. The district court denied Shelton's post‐trial motion for relief. The Sixth Circuit reversed. The district court erred in finding that Shelton lacked any reasonable expectation of privacy in her office. Garbutt’s document collection, undertaken at the direction of the FBI, violated her Fourth Amendment rights. No warrant would have issued without the information gathered as a result of the unlawful searches; the evidence obtained from the search authorized by that warrant should have been suppressed. View "United States v. Shelton" on Justia Law

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In 1999-2016, Wilkinson convinced approximately 30 people to invest $13.5 million in two hedge funds that he created. By 2008, Wilkinson lost the vast majority of their money. Wilkinson told them that the funds’ assets included a $12 million note with an Australian hedge fund, Pengana. The “Pengana Note” did not exist. Wilkinson provided fraudulent K-1 federal income tax forms showing that the investments had interest payments on the Pengana Note. To pay back suspicious investors, Wilkinson solicited about $3 million from new investors using private placement memoranda (PPMs) falsely saying that Wilkinson intended to use their investments “to trade a variety of stock indexes and options, futures, and options on futures on such stock indexes on a variety of national securities and futures exchanges.” In 2016, the Commodity Futures Trading Commission filed a civil enforcement action against Wilkinson, 7 U.S.C. 6p(1).Indicted under 18 U.S.C. 1341, 1343, Wilkinson pleaded guilty to wire fraud, admitting that he sent fraudulent K-1 forms and induced investment of $115,000 using fraudulent PPMs. The court applied a four-level enhancement because the offense “involved … a violation of commodities law and ... the defendant was … a commodity pool operator,” U.S.S.G. 2B1.1(b)(20)(B). Wilkinson argued that he did not qualify as a commodity pool operator because he traded only broad-based indexes like S&P 500 futures, which fit the Commodity Exchange Act’s definition of an “excluded commodity,” “not based … on the value of a narrow group of commodities.” The Seventh Circuit affirmed. Wilkinson’s plea agreement and PSR established that Wilkinson was a commodity pool operator. View "United States v. Wilkinson" on Justia Law

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In 2005-2007, Merchant purchased Michigan hotel properties from NRB and financed the purchases through NRB, using corporate entities as the buyers. Merchant sold interests in those entities to investors. The hotels had been appraised at inflated amounts and sold for about twice their fair values. When the corporate entities defaulted on their loan payments, NRB foreclosed in 2009. Merchant claimed that NRB’s executives colluded with an appraiser to sell overvalued real estate to unsuspecting purchasers, wait for default, foreclose, and then repeat the process.In 2010, an investor sued Merchant, Merchant’s companies, NRB, and 12 others for investor fraud. In 2014 the FDIC took NRB into receivership and substituted for NRB as a defendant. Merchant and his companies brought a cross-complaint, alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) and state laws. A Fifth Amended Cross-Complaint raised 14 counts against 10 defendants, including two law firms that provided NRB’s legal work. The district court dismissed several counts; others remain active.The Seventh Circuit affirmed the dismissal of claims against the law firms. The counts under state law are untimely under Illinois’s statute of repose. The cross-complaint effectively admits that one firm played no role in NRB’s alleged fraud perpetrated against Merchant in 2005-2007. The cross-complaint failed to allege that either law firm conducted or participated in the activities of a RICO enterprise; neither firm could be liable under 18 U.S.C. 1962(c). View "Muskegan Hotels, LLC v. Patel" on Justia Law

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Meza, deep in debt, fell for fraudulent international trading programs promising incredible profits. He then tricked people he knew into investing in these programs. The scam involved ridiculous promises. The district judge called the dupes “the most improbable victims” she had ever seen. Meza was acquitted on one count of wire fraud and acquitted on another The judge sentenced him to 19 months in prison and ordered him to pay $881,500 in restitution. The Seventh Circuit affirmed. The trial court adequately explained its reasons for aggregating losses and excluded all losses around the time of the wire supporting the acquitted count: $295,000. The sentencing hearing covered the misrepresentations and losses in detail. Meza’s restitution did not include unconvicted and acquitted conduct. View "United States v. Meza" on Justia Law