United States v. Bernard Seidling

In the

United States Court of Appeals

For the Seventh Circuit

No. 13-1854

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

BERNARD C. SEIDLING,

Defendant-Appellant.

Appeal from the United States District Court for the

Western District of Wisconsin.

No. 3:11-cr-00126-bbc-1 — Barbara B. Crabb, Judge.

ARGUED SEPTEMBER 30, 2013 — DECIDED DECEMBER 16, 2013

Before WOOD, Chief Judge, and BAUER and KANNE, Circuit

Judges.

BAUER, Circuit Judge. Defendant-Appellant, Bernard C.

Seidling (“Seidling”), was charged with creating and executing

a scheme to defraud by knowingly mailing documents

containing false information to small claims courts in Wiscon-

sin and hiding the filings of the actions from the named

defendants. Seidling stipulated to the facts of the charge and

waived his right to a jury trial. Seidling then moved for a

2 No. 13-1854

judgment of acquittal; he argued that the elements of the mail

fraud statute could not be met because he never intended the

false statements and misrepresentations to be communicated

to the victims. On December 26, 2012, the United States District

Court for the Western District of Wisconsin found Seidling

guilty of fifty counts of mail fraud in violation of 18 U.S.C.

§ 1341. Seidling appeals the judgment of the district court on

the grounds that there was no convergence between the

victims’ losses and the fraudulent statements. For the reasons

that follow, we affirm the conviction and sentence.

I. BACKGROUND

From 2003 to 2009, Wisconsin operated small claims courts

in order to resolve smaller disputes more quickly and effi-

ciently. In general, the small claims courts operated in the

following manner: individuals eighteen years of age or older

were permitted, with or without a lawyer, to file a summons or

complaint for small claims. The individuals could file the

action in any county in which the defendant resided or did a

substantial amount of business, where the claim arose, or as

otherwise provided by law. Wis. Stat. § 801.50(2). The claimant

was obligated to arrange for service of the documents on the

defendant or, if the defendant could not be served, to pay to

have the complaint published in a newspaper circulated in

the area where the defendant resided. If the claimant was

unable to locate a defendant to serve the lawsuit, or a defen-

dant did not appear before the court, the case could be certified

to the small claims court where a default judgment would be

granted.

No. 13-1854 3

Once a default judgment was granted in the small claims

action, the claimant could pay an additional fee to have the

judgment docketed in the county where the claim was filed.

The judgment against the defendant would then be added to

the electronic Wisconsin Circuit Court Access System. After

the electronic judgment was added to the system, the claimant

could seek execution of the judgment against the defendant’s

nonexempt property in the county in which it was located. For

property located in a different county, the claimant could

request that the court issue an order directing the sheriff of

that county to collect the nonexempt property to satisfy the

judgment.

A. Fraudulent Conduct and Indictment

Beginning in or about 2003 and ending on December 31,

2009, Seidling filed small claims actions against twenty-four

individuals and one corporation. Seidling used fourteen fake

business names to file the claims in ten counties in the Western

District of Wisconsin, and typically sought judgments of no

more than $5,000.1 Seidling’s claims contained various false

1

Specifically, Seidling filed small claims in the counties of Iron, Eau Claire,

Jackson, Sawyer, Dane, Barron, Chippewa, Dunn, Ashland, and Polk.

Seidling used a variety of fake business names in the lawsuits: D&A

Enterprises; Diverse Services; JVC Investments; MW Enterprises; A&B

Enterprises; DD Enterprises; Midwest, LP; and JDR Enterprises. The

defendant corporation was Footsmart and the individuals listed as

defendants included Kenneth and Tamera McCormick, David Smith,

David and Jezzeeca Lindquist, Steve Sletner, Sharmin Carlson (a/k/a

Sharmin Hanson), Mark Woychik, Nancy Drake, Nicole Penegor, Clarence

and Shirley Schielfelbein, Neil and Marian O’Donnell, Dori Stepan,

(continued...)

4 No. 13-1854

statements and misrepresentations, including: listing false

addresses for the named defendants, falsifying facts concern-

ing attempts to serve documents on the defendants, using fake

business names, and falsely certifying to the courts that notice

of the claims were published in the appropriate area’s newspa-

pers. Seidling knew that none of the defendants he listed in the

complaints lived or did business at the addresses he provided.

For this reason, none of them were served with the complaints,

summons, or other pleadings; none of them were aware of any

attempts to serve them; and none of them saw notice of the

lawsuits published in the newspapers.

For each lawsuit, Seidling used the United States Postal

Service to mail pleadings, proof of attempted service, and other

case documents to the Wisconsin small claims courts. When

the defendants did not appear, the small claims courts issued

default judgments in each case. Seidling attempted to collect

one judgment through garnishment; he was unsuccessful

because the named defendant no longer worked for the

garnishee. Seidling successfully obtained approximately five

orders directing sheriffs to execute the collection of various

defendants’ property. Based on this conduct, the government

indicted Seidling with fifty counts of mail fraud in violation of

18 U.S.C. § 1341.

On December 6, 2011, Seidling pleaded not guilty to all

charges and a trial schedule was set for May 2012. On

March 26, 2012, Seidling moved to dismiss the indictment. He

1

(...continued)

Raymond and Jerrianne Closs, Jodi Clay, and Leo Schuch.

No. 13-1854 5

argued that the facts were insufficient to establish the material-

ity requirement, since the false statements and misrepresenta-

tions contained in the complaints were not made directly to the

victims of the fraud. The magistrate judge recommended that

the district court deny Seidling’s motion; the district court

adopted the magistrate’s recommendation and denied

Seidling’s motion to dismiss on July 25, 2012.

B. Bench Trial and Sentencing

On April 12, 2012, the parties filed a joint motion to resolve

the case through a bench trial on the stipulated facts; the

district court granted the motion. On October 17, 2012, Seidling

filed a motion of acquittal pursuant to Fed. R. Crim. P. 29.

Again, Seidling argued that the government failed to satisfy

the materiality element of bank fraud because any false

statements and misrepresentations were made to the small

claims court and not to the victims. Seidling contended that his

misrepresentations had no tendency or ability to influence the

victims to give up their money or property. The parties briefed

the issue, and on December 26, 2012, the district court denied

Seidling’s motion for acquittal; the court ultimately found

Seidling guilty on all fifty charges in the indictment.

The intended loss set out in the indictment was in the

amount of $75,000. However, the government discovered fifty-

eight additional lawsuits that had been filed by Seidling with

approximately sixty victims and an intended loss of $295,220.

The combined total intended loss amount was calculated to be

$370,220. Although none of the targeted defendants suffered

immediate pecuniary harm, many of them experienced, and

continue to experience, challenges in reopening the lawsuits,

6 No. 13-1854

getting them dismissed, clearing their credit, and removing the

fraudulent lawsuits from the Wisconsin Circuit Court Access

System.

A presentencing investigation report (“PSR”) filed with the

district court on February 25, 2013, provided an advisory

Sentencing Guidelines calculation of an offense level of

nineteen: a base level of seven plus an increase by twelve levels

for the intended loss of $370,220. The PSR recommended a

three-level reduction under U.S.S.G. § 3E1.1 for acceptance of

responsibility, which would result in an adjusted offense level

of sixteen. The probation office calculated Seidling’s criminal

history category to be II, resulting in an advisory Guidelines

range of twenty-four to thirty months. The United States

Attorney’s Office agreed with the PSR recommendation for a

three-level reduction for acceptance of responsibility, but

recommended a sentence at the top of the Guidelines range

based on Seidling’s history of fraud, the large number of

victims, and the intended loss amount.

At sentencing on April 11, 2013, the district court judge

declined to apply the three-level reduction on the basis of

acceptance of responsibility for Seidling, stating, “I am not

persuaded that you qualify for the three-level downward

departure … you have done nothing else to suggest … that you

feel any responsibility for the harm you caused your victims.”

The court sentenced Seidling to thirty-six months in prison for

each of the fifty counts in the indictment to run concurrently,

followed by three years of supervised release. No restitution

was ordered, but Seidling was fined $10,000 and ordered to

pay a $100 criminal assessment for each count. The court made

clear that it would have imposed the same sentence even if it

No. 13-1854 7

had granted Seidling a three-level reduction for acceptance of

responsibility due to the victims’ “emotional trauma” caused

by Seidling’s fraudulently obtained judgments. Seidling filed

a timely notice of appeal on April 23, 2013.

First, Seidling argues that this Court should adopt the

theory of convergence and find that, because Seidling never

communicated with nor intended to communicate with the

victims of the fraud, the government did not prove the

materiality element of a mail fraud scheme. Second, Seidling

contends that at his sentencing, the district court’s denial of a

downward departure for acceptance of responsibility resulted

in procedural error that was not harmless.

II. DISCUSSION

A. Mail Fraud Scheme and the Element of Materiality

A district court’s denial of a motion for judgment of

acquittal is reviewed de novo in the light most favorable to the

government to determine whether any rational trier of fact

could have found the essential elements of the charged offense

beyond a reasonable doubt. United States v. Johns, 686 F.3d 438,

446 (7th Cir. 2012); United States v. Reynolds, 801 F.2d 952, 954

(7th Cir. 1986). A conviction of mail fraud under 18 U.S.C.

§ 1341 requires three essential elements: (1) a scheme or artifice

to defraud, (2) the use of the mailing system for the purpose of

executing the scheme, and (3) the defendant’s participation in

the scheme with the intent to defraud. United States v.

Stockheimer, 147 F.3d 1082, 1087 (7th Cir. 1998). Nothing in the

statutory text of 18 U.S.C. § 1341 requires a scheme to defraud

to involve deception of the same person or entity whose money

or property is the intended object of the scheme.

8 No. 13-1854

The Supreme Court in Neder v. United States, 527 U.S. 1,

21–25 (1999), held that under federal fraud statutes the govern-

ment must prove that the deceptive conduct underlying the

scheme to defraud must be “material.” Specifically, the

Supreme Court stated, “[i]n general, a false statement is

material if it has a natural tendency to influence or [is] capable

of influencing, the decision of the decisionmaking body to

which it was addressed.” Id. at 16 (quoting United States v.

Gaudin, 515 U.S. 506, 509 (1995)) (internal quotation marks

omitted). The Supreme Court has never held that materiality

requires the false statement to be made directly to the victims

of the scheme. In fact, the Supreme Court held otherwise,

finding that a scheme to defraud existed even when the

scheme was unsuccessful and “no one relied on any misrepre-

sentation.” Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639,

647–48 (2008) (emphasis added).

Seidling argues that materiality under Neder requires

“convergence”: that the party who is deceived must be the

same as the party that is defrauded of money or property by

the mail fraud scheme. Though he deceived the Wisconsin

small claims courts, the clerks of the court, and the process

servers, Seidling claims he lacked the requisite intent to obtain

money or property from the actual victims of the scheme. Since

the misrepresentations were not directly communicated to the

victims, and he did not intend for them to be communicated to

the victims, Seidling argues that the misrepresentations had no

tendency to influence the victims to part with their money or

property and were therefore immaterial. Seidling relies on this

Court’s ruling in United States v. Walters, 997 F.2d 1219 (7th Cir.

1993), to argue that the government is required to establish

No. 13-1854 9

that the defendant intended to obtain money or property from

the same persons he deceived in order to prove a scheme to

defraud.

Seidling misinterprets our holding in Walters. In Walters, a

sports agent devised a scheme to sign college athletes as clients

when they were negotiating for professional contracts. Id. at

1221. The agent hid the existence of the contracts from colleges

and told the athletes to do the same because the contracts

would make the athletes ineligible for college scholarships. Id.

Unbeknownst to the agent, colleges routinely mailed forms to

prospective scholarship recipients requesting that they verify

their eligibility for the scholarships. Id. The agent was con-

victed of mail fraud charges, but his conviction was reversed

on appeal. Id. at 1227. This Court found that the agent lacked

the requisite intent, since the mailings were not foreseeable to

him, he did not cause the mailings to be made, and the

mailings did not advance his scheme. Id. at 1222. The essence

of this Court’s holding was that the mailings were not “essen-

tial to the [agent’s] scheme” to defraud and he lacked the intent

to receive money from the universities that granted scholar-

ships to ineligible athletes who had signed with him. Id. The

central issue in Walters was not one of convergence, but rather

involved the defendant’s knowledge of the use of the mail

system and whether the universities were in fact victims of

his scheme (whether the agent intended the money lost by

universities who granted scholarships to ineligible athletes to

end up in his own pocket). Id. at 1226.

In contrast, the uncontested facts of this case show that

Seidling knowingly used the mail system to carry out his

scheme and that the mailings were integral to the success of his

10 No. 13-1854

scheme to defraud victims of their money or property. Al-

though Seidling never directly communicated with the victims

that owned the money or property he sought, he deceived the

Wisconsin small claims courts in an effort to defraud the

individuals and one entity he named as defendants in the

lawsuits. Seidling undoubtedly intended for the money or

property lost by the victims to ultimately end up in his

possession. In short, the small claims courts were merely a

conduit in Seidling’s scheme to defraud his victims. Our

holding in Walters is consistent with the district court’s

decision.

This Court has found that mail fraud under 18 U.S.C. § 1341

does not require the defendant to communicate directly with

his victims. In United States v. Cosentino, 869 F.2d 301 (7th Cir.

1989), this court addressed a scheme to defraud involving

deception of a third-party. The defendants, heads of an

insurance company, created a scheme to defraud the company

of its assets by deceiving regulators at the Department of

Insurance into believing the company was not approaching

insolvency. Id. at 304. This Court noted that the deception of

the regulators allowed the company to wrongfully remain in

business, which negatively impacted the financial assets of its

policyholders. Id. at 307. Although the decision did not

specifically discuss the theory of convergence, this Court

affirmed the defendants’ mail fraud convictions even though

the entity deceived was not the ultimate victim of the scheme

that was deprived of money or property. Our holding in

Cosentino shows that this Court does not interpret the mail

No. 13-1854 11

fraud statute as requiring convergence between the misrepre-

sentations and the defrauded victims.2

2

The First, Fifth, Eighth, and Tenth Circuits have also interpreted § 1341 in

accordance with this Court’s reasoning in Cosentino. The First Circuit in

United States v. Christopher stated that, “[w]e find no reason to read into the

[fraud] statutes an invariable requirement that the person deceived be the

same person deprived of the money and property by the fraud.” 142 F.3d

46, 54 (1st Cir. 1998) (upholding the wire fraud conviction of a defendant

that deceived state insurance regulators, which resulted in the financial

losses of policyholders). In United States v. McMillian, the Fifth Circuit held

that “[t]he government was not required to prove that misrepresentations

were made directly to any of the victims.” 600 F.3d 434, 449–50 (5th Cir.

2010) (upholding convictions for conspiracy and mail and wire fraud

offenses after defendants filed false financial reports with the Department

of Insurance resulting in risk and financial loss to policyholders). The

Eighth Circuit in United States v. Blumeyer held that “a defendant who

makes false representations to a regulatory agency in order to forestall

regulatory action that threatens to impede the defendant’s scheme to obtain

money or property from others is guilty [of violating the mail fraud

statute].” 114 F.3d 758, 767–68 (8th Cir. 1997) (reinstating the guilty verdicts

of defendants including their convictions for mail and wire fraud when the

defendants made misrepresentations to the Department of Insurance, which

defrauded citizens of their right to an honest government and caused

financial losses to policyholders). Finally, the Tenth Circuit in United States

v. Kennedy stated that it is “neither necessary to allege nor prove that

the false pretenses, representations, or promises were actually made to

anyone, much less to each individual in the distinct mail fraud counts.” 64

F.3d 1465, 1475–76 (10th Cir. 1995) (affirming defendant’s convictions for

racketeering, mail fraud, and money laundering when the defendant made

fraudulent promises to investors to immediately purchase metal for them

at locked-in prices).

12 No. 13-1854

B. Sentencing Adjustment for Acceptance of Responsi-

bility

Section 3E1.1 of the United States Sentencing Guidelines

provides for a two-point reduction of a defendant’s offense

level for acceptance of responsibility; the government may

permit an additional point reduction when a defendant

avoided trial by entering a guilty plea. Simply entering a guilty

plea prior to trial does not automatically entitle a defendant for

a reduction under § 3E1.1; the defendant bears the burden of

demonstrating that he is entitled to the reduction by a prepon-

derance of the evidence. See, e.g., United States v. Akindele, 84

F.3d 948, 956 (7th Cir. 1996).

Factual determinations of the district court regarding

acceptance of responsibility under U.S.S.G. § 3E1.1 are re-

viewed by this Court for clear error. United States v. Fudge,

325 F.3d 910, 923 (7th Cir. 2003). The district court judge

who makes sentencing determinations is due great deference

because he or she is in a unique position to evaluate a defen-

dant’s words and demeanor in order to determine his accep-

tance of responsibility. United States v. Gilbertson, 435 F.3d 790,

798–99 (7th Cir. 2006). The findings of the trial judge in

sentencing will only be reversed if the decision lacks any

foundation or the court is “left with the definite and firm

conviction that a mistake has been committed.” United States v.

Souffront, 338 F.3d 809, 832 (7th Cir. 2003); United States v.

McIntosh, 198 F.3d 995, 999 (7th Cir. 2000).

The probation officer and the United States Attorney’s

Office recommended a downward departure under § 3E1.1

for a total of a three-point reduction. The district court rejected

No. 13-1854 13

the recommendations of the probation office and the govern-

ment and denied the adjustment for acceptance of responsibil-

ity. Seidling argues that this decision lacked any foundation

and was not harmless error. First, Seidling contends that the

victims did not provide factual information to support the pain

and trauma experienced due to Seidling’s scheme. Second,

Seidling argues that the record fails to indicate that he lacked

remorse to justify denying acceptance of responsibility. We

find that the district court did not clearly err at sentencing and

gave sufficient consideration to the issue before denying

Seidling the downward adjustment for acceptance of responsi-

bility.

Although Seidling entered a plea of guilty, he continuously

rejected the contention that his conduct caused damage to the

victims. For example, in his response to a letter written by

victim Dori Stepan, Seidling stated, “I am sorry that Ms. Stepan

feels the way she does.” In no way does this response indicate

that Seidling feels responsible for the pain Ms. Stepan was, and

is still, experiencing. And there was Seidling’s response to

victim Mark Woychik’s statement before the court that

described in detail how Seidling’s actions have impacted him

and how Seidling continuously disregarded any difficulties he

caused the courts or his victims. Seidling responded to the

statement by saying, “Mr. Woychik exaggerated and misstated

the events in St. Croix County Circuit Court.” Again, Seidling’s

response avoids responsibility and actually redirects blame

towards the victim. In denying a downward adjustment for

acceptance of responsibility, the judge told Seidling,

You did agree to waive a jury or court trial and

proceed on the basis of stipulated facts, but you

14 No. 13-1854

have done nothing else to suggest that you believe

you committed this—to suggest that you believe

that you committed any real offense or that you feel

any responsibility for the harm that you caused your

victims.

In the district court opinion, the judge meticulously

detailed the accounts of Seidling’s victims to illustrate the

impact of Seidling’s scheme. Contrary to Seidling’s contention

that he was “punished” for choosing to remain silent at his

sentencing, the judge considered all of the relevant information

available during sentencing, particularly her observation of

Seidling’s words, his demeanor, and the statements of his

victims, before determining that Seidling was not qualified to

receive the three-level downward adjustment. Given Seidling’s

history of fraudulent behavior, his lack of remorse towards his

numerous victims, and the extensive details of his scheme

provided in the record, we find that the district court did not

err in denying a reduction in sentencing for acceptance of

responsibility.

III. CONCLUSION

In sum, although Seidling’s false statements and misrepre-

sentations were not made directly to the victims, they still

satisfy the requisite materiality element of mail fraud and

support Seidling’s conviction. Additionally, the district court

properly considered all relevant factors during sentencing and

did not err when it denied Seidling a downward departure for

acceptance of responsibility. For the foregoing reasons, the

decision of the district court is AFFIRMED.