Petition for Writ of Certiorari — Kevin LeBeau, Petitioner v. United States
Supreme Court briefJun 23, 2020
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No.
In the
Supreme Court of the United States
KEVIN LEBEAU,
Petitioner,
v.
UNITED STATES OF AMERICA, et al.,
Respondents.
On Petition for a Writ of Certiorari to the
United States Court of A ppeals
for the Seventh Circuit
PETITION FOR A WRIT OF CERTIORARI
Damon M. Cheronis
Counsel of Record
Ryan J. Levitt
Law Office of Damon M. Cheronis
140 S. Dearborn Street, Suite 411
Chicago, Illinois 60603
(312) 663-4644
damon@cheronislaw.com
ryan@cheronislaw.com
296380
A
(800) 274-3321 • (800) 359-6859
i
QUESTIONS PRESENTED
This Court has long recognized that juries should be
formally and explicitly instructed on the concept of
materiality when considering charges of bank fraud,
yet no such instruction was given at trial. Thus,
1.
Was the omission of the concept of materiality
from the bank fraud elements instruction error
requiring a new trial?
Amcore Bank, the lender at issue, was not simply
negligent in issuing this loan—it was reckless. Given
the Seventh Circuit’s decision in United States v.
Litos, 847 F.3d 906 (7th Cir. 2017), and the
government’s own concession in Mr. LeBeau’s alleged
co-schemer’s case, United States v. Schlyer, 17 CR 30,
which was pending in the United States District Court
for the Northern District of Illinois before Judge Amy
J. St. Eve, Mr. LeBeau was prejudiced by sentencing
counsel’s failure to challenge the $789,000 in
restitution sought and ordered to Amcore Bank. As his
sentencing counsel did not challenge the restitution
amount at sentencing, and Seventh Circuit precedent
forecloses restitution challenges in a 28 U.S.C. § 2255
petition:
2.
Did the Seventh Circuit erroneously deny a
Strickland claim to a restitution judgment
brought on direct appeal?
ii
PARTIES TO THE PROCEEDINGS
All parties to the proceedings are those listed in the
caption, as well as Mr. Brian Bodie, who was Mr.
LeBeau’s co-defendant before the district court and
had his appeal consolidated with Mr. LeBeau before
the Seventh Circuit Court of Appeals.
The proceedings in federal trial and appellate courts
identified below are directly related to the abovecaptioned case in this court:
United States v. LeBeau, No. 14 CR 488-02, United
States District Court for the Northern District of
Illinois, Judgment entered March 14, 2018.
United States v. LeBeau, No. 18-1656, United States
Court of Appeals for the Seventh Circuit, Judgment
entered February 4, 2020, petition for rehearing or
reahearing en banc denied March 4, 2020.
United States v. Bodie, No. 14 CR 488-01, United
States District Court for the Northern District of
Illinois, Judgment entered October 19, 2018.
United States v. Bodie, No. 18-3366, United States
Court of Appeals for the Seventh Circuit, Judgment
entered February 4, 2020.
United States v. Schlyer, No. 17 CR 30, United States
District Court for the Northern District of Illinois,
Judgment entered on April 19, 2018.
iii
TABLE OF CONTENTS
QUESTIONS PRESENTED ......................................... i
PARTIES TO THE PROCEEDINGS ............................ ii
TABLE OF APPENDICES ............................................v
TABLE OF AUTHORITIES ...................................... vi-x
OPINIONS BELOW ...................................................... 1
JURISDICTION ............................................................ 1
CONSTITUTIONAL PROVISIONS ............................. 1
INTRODUCTION ....................................................... 2-6
STATEMENT OF THE CASE ................................. 6-13
REASONS FOR GRANTING THE PETITION .... 13-26
I.
THIS
COURT’S
INTERVENTION
IS
NECESSARY TO UNIFY FEDERAL LAW
CONCERNING
MATERIALITY,
BANK
FRAUD, INSTRUCTIONS TO THE JURY, AND
THE WAIVER DOCTRINE
...................................................................... 13-17
II.
THE
COURT’S
INTERVENTION
IS
NECESSARY
TO
CURE
INJUSTICES
WORKED BY THE MVRA AND RESTRICTIVE
SCOPE OF 28 U.S.C. § 2255 PETITIONS
...................................................................... 18-26
iv
CONCLUSION .............................................................27
v
TABLE OF APPENDICES
Page
A P P E N DI X A — O P I N IO N O F T H E
UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT, DATED
FEBRUARY 4, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . 1a
APPENDIX B — EXCERPT OF TRANSCRIPT
OF PROCEEDINGS IN THE UNITED
STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS
EA STERN DI V ISION, DATED
MARCH 13, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23a
APPENDIX C — EXCERPT OF TRANSCRIPT
OF PROCEEDINGS IN THE UNITED
STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS,
EA STERN DI V ISION, DATED
MARCH 15, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30a
APPENDIX D — DENIAL OF REHEARING
OF THE UNITED STATES COURT OF
APPEALS FOR THE SEVENTH CIRCUIT,
FILED MARCH 4, 2020 . . . . . . . . . . . . . . . . . . . . . 33a
APPENDIX E — EXCERPT OF TRANSCRIPT
OF PROCEEDINGS IN THE UNITED
STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS,
EA STERN DI V ISION, DATED
A P R I L 1 9 , 2 0 1 8 (U N I T ED STA T E S
V. SCHLYER, 17 CR 30) . . . . . . . . . . . . . . . . . . . . . . 35a
vi
TABLE OF AUTHORITIES
Cases
Allen v. Chandler, 555 F.3d 596 (7th Cir. 2009)
............................................................................22
Arnaiz v. Warden, 594 F.3d 1326 (11th Cir 2010)
............................................................................25
Bailey v. Hill, 599 F.3d 976 (9th Cir. 2010)
............................................................................24
Barnickel v. United States, 113 F.3d 704
(7th Cir. 1997) ........................................................5, 23
Bartelho v. United States, 2016 WL 9584199
(1st Cir. 2016) ...............................................................24
Brooks v. Hanson, 763 Fed. Appx. 750
(10th Cir. 2019) ............................................................25
Campbell v. United States, 330 Fed. Appx. 482
(5th Cir. 2009) ..............................................................24
Coleman v. Brooks, 133 Fed. Appx. 51 (4th Cir. 2005)
............................................................................24
Ferguson v. United States, 2017 WL 5500919
(S.D. Ohio 2017) ...........................................................24
Gray v. Greer, 800 F.2d 644 (7th Cir. 1986)
............................................................................18
vii
Hester v. United States, 139 S.Ct. 509 (2019)
........................................................................5, 25
Kaminski v. United States, 339 F.3d 84 (2d Cir. 2003)
............................................................................24
McMann v. Richardson, 397 U.S. 759 (1970)
............................................................................18
Obado v. New Jersey, 328 F.3d 716 (3rd Cir. 2003)
............................................................................24
Paroline v. United States, 572 U.S. 434 (2014)
............................................................................25
Smullen v. United States, 94 F.3d 20 (1st Cir. 1996)
............................................................................24
Strickland v. Washington, 466 U.S. 668 (1984)
.................................................................... passim
United States v. Ajayi, 808 F.3d 1113 (7th Cir. 2015)
............................................................................14
United States v. Bania, 787 F.3d 1168 (7th Cir. 2015)
........................................................................5, 23
United States v. Bernard, 351 F.3d 360 (8th Cir. 2003)
............................................................................24
United States v. Cruz-Rodriguez, 570 F.3d 1179
(10th Cir. 2009) ............................................................16
United States v. Drougas, 746 F.2d 8 (1st Cir. 1984)
............................................................................16
viii
United States v. Fernandez, 282 F.3d 500
(7th Cir. 2002) ..............................................................17
United States v. Groce, 891 F.3d 260 (7th Cir. 2018)
............................................................................16
United States v. Klein, 216 Fed. Appx. 84
(2d Cir. 2007) ................................................................14
United States v. Litos, 847 F.3d 906 (7th Cir. 2017)
................................................................... passim
United States v. Moran, 393 F.3d 1 (1st Cir. 2004)
............................................................................14
United States v. Natale, 719 F.3d 719 (7th Cir. 2013)
............................................................................15
United States v. Neder, 527 U.S. 1 (1999)
..............................................................2, 3, 13, 14
United States v. Omer, 395 F.3d 1087 (9th Cir. 2005)
............................................................................14
United States v. Perez, 116 F.3d 840 (9th Cir. 1997)
............................................................................16
United States v. Pribble, 127 F.3d 583 (7th Cir. 1997)
............................................................................17
United States v. Reynolds, 189 F.3d 521 (7th Cir. 1999)
........................................................................3, 17
United States v. Rutigilano, 887 F.3d 98 (2d Cir. 2018)
............................................................................24
ix
United States v. Steffen, 687 F.3d 1104 (8th Cir. 2012)
............................................................................14
United States v. Wiggins, 530 F.3d 1018
(D.C. Cir. 1976) .............................................................16
United States v. Williams, 390 F.3d 1319
(11th Cir. 2004) ...........................................................14
Virgin Islands v. Rosa, 399 F.3d 283 (3rd Cir. 2005)
............................................................................16
Statutes
18 U.S.C. § 1014 .......................................................6, 11
18 U.S.C. § 1343 ...........................................................19
18 U.S.C. § 1344 ................................................... passim
18 U.S.C. § 3663A ................................................. passim
28 U.S.C. § 1254 ............................................................ 1
28 U.S.C. § 2255 ................................................... passim
Rules
Fed. R. Crim. P. 30 .......................................................15
Fed. R. Crim. P. 52 .......................................................15
x
Constitutional Provisions
U.S. Const. amend. V .................................................... 1
U.S. Const. amend. VI ..............................................1, 18
Other Authority
Eighth Circuit Instruction No. 6.18.1344 ....................14
Eleventh Circuit Instruction No. O52 .........................14
Fifth Circuit Instruction No. 10.03A ...........................14
First Circuit Instruction No. 4.18.1344 .......................14
Tenth Circuit Instruction No. 2.58 ..............................14
Third Circuit Instruction No. 6.18.1344 ....................... 1
1
Kevin LeBeau respectfully petitions for a writ of
certiorari to review the judgment of the United States
Court of Appeals for the Seventh Circuit.
OPINIONS BELOW
The opinion of the Seventh Circuit (App. 1a) is reported
at 949 F.3d 334.
JURISDICTION
The Seventh Circuit entered judgment on February 4,
2020, and denied a timely filed petition for panel
rehearing or rehearing en banc on March 4, 2020. 181656 ECF 70, 76. It subsequently issued its mandate
on March 19, 2020. ECF 77. On the same date, March
19, 2020, and applicable to this petition, this Court
entered an order extending the time for filing petitions
to 150 days from the date of the lower court judgment.
It has jurisdiction under 28 U.S.C. § 1254(1).
CONSTITUTIONAL PROVISIONS
“No person shall be . . . deprived of life, liberty, or
property, without due process of law.” U.S. Const.
amend. V.
“In all criminal prosecutions, the accused shall have
the Assistance of Counsel for his defence.” U.S. Const.
amend. VI.
2
INTRODUCTION
Mr. LeBeau is an individual who, sometime before the
alleged scheme, took over ownership of his family’s
health club, the Duke LeBeau Health Club. 18-1656
ECF 25 p. 2.1 As the economy shifted and the city of
Aurora installed a multi-million-dollar state-of-the-art
health club just down the road, Duke LeBeau’s Health
Club, which was as much a community center as it was
a health club, became unviable. Id. Mr. LeBeau was
referred by a friend to Brian Bodie and Mr. Bodie’s
attorney, Robert Schlyer, who proposed a plan to
convert the health club and the land on which it sat
into an elaborate mix-use condo development project.
Id. at 1-2. Mr. LeBeau, a personal accountant and
health club manager by trade, had no experience in
such endeavors. Id. Under the direction of Mr. Bodie
and Mr. Schlyer, the project stalled. Id. at 2. To keep it
afloat, either Mr. Bodie, Mr. Schlyer, or both,
committed fraud in order to buy time and keep their
creditors at bay. Mr. LeBeau put forth nothing but an
honest, albeit poorly thought out, effort to transform
his family’s longstanding asset. For his part, likely
more of a result of his association with the other two
rather than a bona fide intent to defraud, he was found
guilty of all counts. ECF 109.
1 “ECF” refers to docket filings made in the district court. Docket
filings before the Seventh Circuit are noted as “18-1656 ECF”
followed by the entry number.
3
This case presents two fundamental questions for this
Court to consider. First, as it has long recognized,
materiality is an element of the federal mail, wire, and
bank fraud statutes. United States v. Neder, 527 U.S.
1, 25 (1999). As such, "district courts should include
materiality in the jury instructions for section 1344.”
United States v. Reynolds, 189 F.3d 521, 525 n. 2 (7th
Cir. 1999).
The district court’s § 1344(1) elements instruction to
the jury did not include the concept of materiality. App.
31a-32a.
On appeal, the Seventh Circuit, for the first time,
acknowledged that the federal bank fraud statute
requires proof of materiality:
The better course, consistent with Neder, is to require
the materiality instruction on all bank-fraud charges,
whether brought under section 1344(1) or (2). App.
31a.
Despite recognizing that Mr. Lebeau’s “point is a
serious one,” App. 8a, and that district courts should
include the concept of materiality within their jury
instructions “until such time as we receive greater
clarity from the Supreme Court about what is
required,” App. 9a, the Seventh Circuit offered no relief
for Mr. LeBeau. It offered no relief despite the fact that
his jury was not instructed on materiality, nor required
to find its existence proven beyond a reasonable doubt.
Id. It reasoned that Mr. LeBeau’s trial counsel waived
4
this objection, and even if he merely forfeited the
argument, it did not affect a substantial right. App.
10a-11a.
The Seventh Circuit, respectfully, failed to recognize
that in other circuits, as well as this Court, such a
“harsh result” is excused only if other instructions
presented to the jury adequately embrace the concept
of materiality.
This Court’s intervention is necessary to remedy the
Seventh Circuit’s legal error. Counsel and Mr. LeBeau
request that it grant certiorari and reverse the decision
below by: (1) expressly acknowledging that materiality
is an element of both sections of the federal bank fraud
statute, § 1344; (2) hold and clarify that facts such as
these constitute mere forfeiture and not waiver; and (3)
acknowledge the critical importance of district courts
instructing juries regarding the element of materiality
by holding the failure to do so here constituted plain
error.
The second question concerns Mr. LeBeau’s Strickland
claim brought on direct appeal challenging the district
court’s judgment with respect to restitution.
Procedurally, this issue presents an important
question as to how defendants can challenge
restitution orders post-sentencing. The Seventh
Circuit mistakenly asserted the following at the outset
of its opinion:
5
LeBeau has insisted, however, that he wishes to
press it, and so (with the reminder that he will not be
able to raise an ineffectiveness claim again in a
motion under 28 U.S.C. § 2255) we will examine it.
App. 15a.
This statement was incorrect—the law of the Seventh
Circuit is that if not raised on direct appeal, defendants
have no vehicle whatsoever in which to raise such an
error. See, e.g., United States v. Bania, 787 F.3d 1168,
1172 (7th Cir. 2015) (“[a] 28 U.S.C. § 2255 motion, for
instance, cannot be used as a vehicle for challenging
the restitution component of a sentence”); Barnickel v.
United States, 113 F.3d 704, 705 (7th Cir. 1997) (“[i]t
has been well established both in this Circuit and in
others for some time that a fine-only conviction is not
enough of a restraint on liberty to constitute ‘custody’
within the meaning of the habeas corpus statutes”).
As will be discussed, there is a plain and obvious basis
to conclude that Mr. LeBeau made out a successful
Strickland claim: former district court judge and
current Seventh Circuit Judge Amy J. St. Eve
subsequently and expressly found the identical
restitution request to be improper in Mr. LeBeau’s
codefendants severed proceeding.
Given the increasing scrutiny 18 U.S.C. § 3663A et seq.,
The Mandatory Victim’s Restitution Act, has been
receiving in recent years from this Court, see, e.g.,
Hester v. United States, 139 S.Ct. 509 (2019), this
Court should correct the legal error and hold that the
6
Seventh Circuit erroneously denied Mr. LeBeau’s
Strickland claim.
STATEMENT OF THE CASE
On June 29, 2016, Mr. LeBeau and Bodie were charged
in various counts of an eight-count superseding
indictment with bank fraud and making false
statements effecting a financial institution, in violation
of 18 U.S.C. §§ 1344 and 1014 respectively. ECF 70.
Duke LeBeau Health Club was a community health
club in Aurora, located at the intersection of Indian
Trail and Deerpath Road, started in 1974, and ran by
Kevin LeBeau’s father and his uncle, Duke LeBeau. 181656 ECF 25 p. 2. Kevin LeBeau had been involved in
the business since its inception. Id. In 1991, Kevin
LeBeau and a man named Anthony Geib took over
ownership as 50/50 partners in the business. Id. Kevin
LeBeau assumed full time management duties over the
health club on a day-to-day basis at that time. Id. In
order to finance the project, a mortgage loan was taken
out from Old Second National Bank. Id. To cover this
loan and operational expenses, Kevin LeBeau
borrowed
money
from
family
friends
and
acquaintances, namely, Kurt Green, Douglas Wilson,
and Mary Wagner. Id.
Sometime in the early 2000’s, the city of Aurora built
an ultra-modern, multi-million-dollar state-of-the-art
health club nearby Duke LeBeau’s Health Club, and
membership started dwindling. Id. After talking it over
7
with a number of friends and family members, Kevin
LeBeau was put in touch with Brian Bodie. Id. Brian
Bodie, a sophisticated businessman, agreed to come
into the project as a guarantor, and create a plan to
redevelop the land on which the health club sat, as a
condominium project. Id. at 1-2.
In March 2004, Mr. Bodie began to negotiate a new
mortgage with Amcore Bank to refinance the property.
Id. at 2. The loan application was submitted in May
2004. Id. As part of the application, Kevin LeBeau
submitted a personal financial statement, and
subsequently a second personal financial statement,
which required him to truthfully and completely
represent his current financial condition, including
outstanding debts and obligations. Id. Brian Bodie and
his two companies were also listed as guarantors. Id.
Ultimately, Amcore agreed to issue a loan in the
amount of $1.925 million on September 1, 2004. Id. The
loan further provided that the mortgage shall not be
encumbered without first obtaining the consent of the
bank. Id.
By late 2005, Kevin LeBeau and Brian Bodie began
falling behind on the loan. Id. After Amcore Bank
representative Roger Teppen discussed the delinquent
payments—primarily with Brian Bodie—Amcore
issued a demand later on March 15, 2006. Id. Mr.
Teppen testified that he continued discussions after
issuing the demand letter and learned that Mr. Bodie
and Mr. LeBeau were in conversations with an
investor to purchase the loan. Id. To delay further
8
adverse action, the bank agreed to accept a payment of
$151,000 towards the balance of the loan and received
that payment on April 4, 2006. Id. By mid-June 2006,
when it was indicated the investor would have taken
over the loan but had not, Mr. Teppen received a letter
from Mr. Bodie describing plans to redevelop the land
and property into a mixed-use condominium project.
Id. The letter indicated that in conjunction with Paul
McCue, an Aurora developer, the rezoning process was
underway, in the first stage of a three-stage process,
that conversations had occurred involving the local
alderman and city planner for Aurora about rezoning
the property for a mixed-use 180-unit condo
development with two commercial lots, and that a
verbal sale was in place for one of the commercial lots.
Id. With the hopes of completing the zoning process by
the end of the year, Mr. Bodie requested that Amcore
forebear on taking action on the loan in exchange for
accepting interest only payments for one year as well
as a lump-sum payment of $75,000 towards the
principal balance on the loan. Id. at 3. In subsequent
oral conversations, Mr. Bodie and Mr. Teppen
continued to negotiate the terms of the forbearance. Id.
Discussions continued into late 2006. Id.
In order to add urgency to the process, Amcore filed a
foreclosure complaint in August 2006. Id. Ultimately,
in January 2007, Amcore agreed to forebear on taking
further action related to the loan for a two-month
period in exchange for a payment of $150,000 towards
the loan. Id. Brian Bodie had enlisted the aid of an
attorney, Robert Schlyer, an attorney with whom he
9
had a relationship and who performed work out of his
company’s office. Id. Mr. Schlyer signed and delivered
that agreement on behalf of the guarantors. Id.
The two months came to pass on March 29, 2007
without as much progress as expected. Id. Thus, the
parties began to negotiate an amended forbearance
agreement. Id. The government’s witnesses submitted
that in order to achieve an amended forbearance
agreement, the defendants, through Robert Schlyer,
made additional false representations. For example, on
April 23, 2007, Mr. Schlyer submitted a letter to
Amcore’s attorney, Fred Harbecke, which contained
the proposed terms for an amended forbearance
agreement. Id. at 3-4. The letter stated that Duke
LeBeau, Inc. has formulated an investment
mechanism with the counsel of Ariel Weissberg to
obtain investor funding through the use of property
exchanges. Id. at 4. Through that mechanism, the
project expected to have approximately $1.55 million
in funds available after the closings of those properties,
which was scheduled to occur on or around September
29, 2007 at the offices of Ariel Weissberg. Id. Through
these efforts, the project expected to pay off Amcore in
full. Id. Mr. Schlyer further represented that the
zoning phase of the project would be completed by the
end of June, and he also sent draft operating and
subscription agreements attached to his letter. Id. On
May 11, 2007, Amcore agreed to amend the
forbearance agreement and not take further action
until August 15, 2007. Id.
10
After entering into the amended forbearance
agreement, Mr. Harbecke received additional
materials from Mr. Schlyer, including a private
placement memorandum, detailing the ongoing efforts
to redevelop the property. Id. The documents described
how Aurora Green Development was a new company
formed for the purpose of redeveloping this property.
Id. After providing an overview of the company and the
development efforts and plans, the materials described
how the company had enlisted R.C. Wegman
Construction Company to help with the constructionrelated aspects of the property, Ariel Weissberg to help
with the legal aspects, and Intech Consultants for
engineering. Id.
Ultimately, the redevelopment efforts stalled, the loan
was never paid off, and Amcore took ownership of the
property in 2009 after a sheriff’s sale, and
subsequently transferred the assets to its successor,
BMO Harris, in 2010. Id. at 5.
At trial, the government called a number of investors
who agreed to provide funds for the redevelopment
efforts in exchange for a future stake in the project.
Those included Janice Pace, Elaine Brinkman and
Prestman Brinkman, Joseph Sitko, Mary Wagner,
Delores Palmquist, and Douglas Wilson. Id.
The government’s case against Mr. LeBeau and Mr.
Bodie also emphasized alleged misrepresentations
made to Amcore and investors with respect to the
zoning process. Id. at 7. For example, as mentioned,
11
Roger Teppen received a letter from Mr. Bodie
indicating that the project was in the first stage of a
three-stage process for rezoning the parcel of land, had
formally met with city officials regarding the process,
and expected to have rezoning completed by the end of
2006. Id. A number of government witnesses stated
that this representation was false, as the zoning
process was far more involved than suggested by Mr.
Bodie, and further, that there were no guarantees in
the process and there could not necessarily be until
zoning had in fact been approved. Id.
The government also emphasized a number of the
misrepresentations contained in the April 23, 2007
prospectus sent to Amcore by Mr. Schlyer. Id. at 8.
Those materials were prepared by a graphic designer,
Mark Oda, at the request of Mr. Bodie, with whom he
was acquainted through his ex-wife. Id.
Finally, Mr. LeBeau was individually charged with two
counts of making a false statement for the purpose of
influencing the actions of a financial institution in
violation of 18 U.S.C. § 1014. ECF 1 pp. 13-15. Those
counts pertained to his personal financial statements
submitted to Amcore on September 1, 2004, and May
27, 2005 respectively. 18-1656 ECF 25 p. 8. More
specifically, the government claimed that he did not
disclose his outstanding obligations to Mary Wagner,
Kurt Green, and Douglas Wilson on these statements
submitted to Amcore. Id. Mary Wagner testified that
by the end of 2002, she and her husband had loaned
Mr. LeBeau a total of $59,000 as a personal loan in
12
order to help him buy out his then-partner in the
business. Id. at 9. Kurt Green stated that stretching
back to the 90’s, he had loaned Mr. LeBeau money on
a couple of occasions, and by the end of 2005, was still
owed approximately $50,000. Id. And prior to his
subsequent investment in 2006, Douglas Wilson
testified that he had loaned Mr. LeBeau $30,000 in
July 2000, and still had not been paid back as of 2005
or the time of his testimony. Id. Trial counsel argued
that upon closer examination of the financial
statements, especially in light of Mr. LeBeau’s dealing
with Vice President of Amcore, Layne Burns, the
financial statements were accurate, or accurate
enough with respect to Mr. LeBeau’s mental state, as
his obligations related to the property were simply
subtracted from the then-existing value of his interest
in the property and the land. Id at 9-10.
On March 16, 2017, after an approximately week-anda-half long jury trial, the jury returned a verdict of
guilty for both defendants on all counts. ECF 109, 110.
On March 13, 2018, the district court sentenced Mr.
LeBeau to a total term of 36 months’ incarceration.
ECF 170. Mr. LeBeau timely filed his notice of appeal
on March 22, 2018. ECF 175. In his appeal, Mr.
LeBeau argued, inter alia, that the district court erred
in omitting the concept of materiality from the bank
fraud elements instruction, and that Mr. LeBeau was
prejudiced by sentencing counsel’s failure to challenge
the $789,000 in restitution sought and ordered to
Amcore Bank. 18-1656 ECF 25.
13
On February 4, 2020, Seventh Circuit filed its opinion
and order denying Mr. LeBeau’s appeal. App. 1a. In
that opinion, the Seventh Circuit recognized, for the
first time, that materiality is an element for all bank
fraud related charges, and juries should be instructed
accordingly. App. 9a. Even so, it found that such an
omission here did not affect Mr. LeBeau’s substantial
rights, and in any event, he waived any argument
regarding the issue. App. 14a-15a. As for Mr. LeBeau’s
Strickland claim with respect to the district court’s
restitution order, and United States v. Litos, 847 F.3d
906 (7th Cir. 2017), the Seventh Circuit found, in
essence, that Mr. LeBeau had not carried his burden of
establishing the elements of a Strickland claim. App.
16a-17a. Mr. LeBeau’s timely filed petition for
rehearing or rehearing en banc was denied on March
4, 2020. App. 34a.
REASONS FOR GRANTING THE PETITION
1.
THIS
COURT’S
INTERVENTION
IS
NECESSARY TO UNIFY FEDERAL LAW
CONCERNING
MATERIALITY,
BANK
FRAUD, INSTRUCTIONS TO THE JURY,
AND THE WAIVER DOCTRINE.
In United States v. Neder, 527 U.S. 1, 25 (1999), this
Court recognized that materiality is an essential
element of the federal mail, wire, and bank fraud
statutes. Even so, the Seventh Circuit has not always
followed Neder, including recently when it held that in
order to prove bank fraud under § 1344(1), the
14
government needs to prove only four other elements—
materiality not included. United States v. Ajayi, 808
F.3d 1113, 1119 (7th Cir. 2015). The government
argued the same before the Seventh Circuit. See 181656 ECF 55 p. 30.
The First Circuit has recognized that materiality is an
element of § 1344(1). See United States v. Moran, 393
F.3d 1, 13 (1st Cir. 2004). Nonetheless, it does not
include materiality within its element instruction,
although it later defines the term itself. See First
Circuit Instruction No. 4.18.1344. In any event, it
subjects the omission of the concept of materiality from
a jury instruction to plain error analysis. Moran, 393
F.3d at 13.
The Second, Third, Fifth, Sixth, Eighth, Ninth, and
Eleventh Circuit have all held materiality to be an
element of § 1344(1), and instruct juries accordingly.
See United States v. Klein, 216 Fed. Appx. 84, 90 (2d
Cir. 2007); Third Circuit Instruction No. 6.18.1344;
Fifth Circuit Instruction No. 10.03A; Eighth Circuit
Instruction No. 6.18.1344; United States v. Steffen, 687
F.3d 1104, 1109 (8th Cir. 2012); United States v. Omer,
395 F.3d 1087, 1088 (9th Cir. 2005) (per curiam); Tenth
Circuit Instruction No. 2.58; 11th Circuit Instruction
No. O52; United States v. Williams, 390 F.3d 1319,
1324 (11th Cir. 2004).
In the decision below, the Seventh Circuit has now
joined the near-nationwide consensus. Despite this
recognition, and this Court’s earlier decision in Neder,
15
supra, as the Seventh Circuit recognized, clarity is still
lacking from this Court. See App. 9a. In the first
instance, then, this case presents a unique opportunity
for it to expressly hold that materiality is an element
of a § 1344(1) charge.
Despite the near-universal acceptance of materiality,
and its importance to § 1344, the Seventh Circuit,
citing Rules 30(d) and 52(b), offered no relief to Mr.
LeBeau, as it found waiver.
This finding contradicted the Seventh Circuit’s own
prior holdings, as most recently set forth in United
States v. Natale, 719 F.3d 719, 729 (7th Cir. 2013). In
Natale, the Seventh Circuit noted that a defendant’s
affirmative approval of a proposed instruction, as
opposed to passive silence, can amount to waiver
instead of mere forfeiture. Id. It further noted that
simple statements such as “no objection” or “no
problem” can amount to wavier. Id. at 730. The Court
also noted that other circuits do not apply such a rigid
rule, id. at n. 2 (citations omitted), and further,
conceded that “[t]his approach can sometimes produce
especially harsh results.” Id. at 730. This is especially
true given that in virtually every criminal trial in the
Northern District of Illinois, judges will hold a pretrial
conference and go through each instruction
individually and require an affirmative response from
trial counsel. Id. Thus, the Court concluded that
“waiver is not an absolute bar,” especially in situations
where “jury instructions . . . inaccurately state the law
by minimizing or omitting elements required for
16
conviction,” as such a scenario “more readily present[s]
the circumstances that allow consideration of waived
issues.” Id.; see also United States v. Groce, 891 F.3d
260, 269 (7th Cir. 2018) (reviewing jury instruction for
plain error despite arguable waiver of the issue).
In so holding, the Seventh Circuit no doubt produced a
“harsh” and unjust result—one that its sister circuits
do not always share. See, e.g., United States v. CruzRodriguez, 570 F.3d 1179, 1183 (10th Cir. 2009) (“an
issue that was not objected to out of neglect is forfeited
and is subject to plain error review on appeal”); Virgin
Islands v. Rosa, 399 F.3d 283, 291 (3rd Cir. 2005)
(considering whether defendant was personally aware
of abandonment of a known right, and whether that
decision was tactical, in determining whether to apply
waiver or forfeiture doctrine); United States v. Perez,
116 F.3d 840, 845 (9th Cir. 1997) (requiring the
defendant to both be aware of and invite the error i.e.
intentionally relinquish a known right to find waiver);
United States v. Drougas, 746 F.2d 8, 30 (1st Cir. 1984);
United States v. Wiggins, 530 F.3d 1018, 1020 (D.C.
Cir. 1976).
Thus, this case presents the opportunity to clarify the
proper standard to review erroneous but not objected
to jury instructions, with all the more reason given this
case concerns an essential element of the offense.
Moreover, even under its harsher standard, the
Seventh Circuit failed to adequately reconcile its own
precedent. In Fernandez, it found that even though no
17
materiality instruction was given with respect to an
honest services fraud, the instructions, when viewed in
their entirety, adequately embraced the concept of
materiality. United States v. Fernandez, 282 F.3d 500
(7th Cir. 2002). The Seventh Circuit reached a similar
conclusion in Reynolds, 189 F.3d 521; namely, that the
instructions adequately placed the question of
materiality before the jury even though the
instructions did not explicitly use the term
“materiality.” Id. at n. 2; see also United States v.
Pribble, 127 F.3d 583, 589 (7th Cir. 1997).
The relevance of these opinions is that in finding an
elements instruction lacking the materiality element
to have no effect on a defendant’s substantial rights,
they all recognized the importance of other instructions
given to the jury sufficiently placing the concept of
materiality before it. That alone is what justifies the
sometimes “harsh results” under the Seventh Circuit’s
more exacting standard of review. But here, the
Seventh Circuit made no such finding, and erroneously
so. Instead, it offered only an unsupported, conclusory
line that “LeBeau’s stories to Amcore” would
absolutely have been found to be material. App. 12a.
The problem, again, is that this was solely an issue for
the jury to decide, and it was precluded from doing so
given that it was never informed—in any sense—that
it was in fact required to make such a finding.
18
II.
THE
COURT’S
INTERVENTION
IS
NECESSARY TO CURE INJUSTICES
WORKED
BY
THE
MVRA
AND
RESTRICTIVE SCOPE OF 28 U.S.C. § 2255
PETITIONS.
As will be discussed, Mr. LeBeau would not have been
saddled with a $789,000 restitution judgment to a
reckless lender but for his counsel’s ineffective
performance at sentencing. Based on the restricted
grounds for bringing a habeas petition, and the
Seventh Circuit’s erroneous conclusion, that will be the
precise result for Mr. LeBeau—and others to come—
without this Court’s intervention.
The Sixth Amendment guarantees to each criminal
defendant “the Assistance of Counsel for his defence.”
Given counsel’s critical role in the ability of our
adversarial system to produce just results, “the right
to counsel is the right to the effective assistance of
counsel.” Strickland v. Washington, 466 U.S. 668, 686
(1984) (citing McMann v. Richardson, 397 U.S. 759,
771 n. 14 (1970)). Defense counsel can deprive a
defendant of this “firmly established” right, Gray v.
Greer, 800 F.2d 644, 646 (7th Cir. 1986), simply by
failing to provide “adequate legal assistance.”
Strickland, 466 U.S. at 686. Under the familiar twopronged test of Strickland, in order to prevail on a
claim of ineffective assistance of counsel, a petitioner
must show that (1) counsel’s performance was deficient
and (2) that the defendant was prejudiced by counsel’s
deficient performance. Id. at 687.
19
As mentioned, at Mr. LeBeau’s sentencing hearing, his
counsel did not object to the $789,000 in restitution
that was ordered to Amcore Bank, the lender in this
case. ECF 170. Mr. LeBeau’s alleged co-schemer,
Robert Jon Schlyer, the attorney for the scheme, was
tried and convicted separately, in case 17 CR 30 before
Judge Amy J. St. Eve and her appointment to this
Court. His sentencing hearing was held on April 19,
2018. App. 35a. Relying on United States v. Litos,
supra, Judge St. Eve concluded that Amcore Bank was
not a “victim” within the meaning of the Mandatory
Restitution to Victims of Certain Crimes Act
(“MRVA”), and ordered that Mr. Schlyer owed Amcore
Bank no restitution at all. See App. 67a. Judge
Gettleman, who had previously sentenced Mr. LeBeau
without the aid of the arguments advanced by Mr.
Schlyer’s counsel, ordered that Mr. LeBeau’s
restitution obligations be satisfied jointly and severally
with both his co-defendant, Brian Bodie, and Mr.
Schlyer. ECF 170 p. 8.
As to the substance of the argument, this case fell
squarely within the bounds of Litos. In Litos, the
defendants were convicted of conspiring to commit wire
fraud and bank fraud in violation of 18 U.S.C. §§ 1343
and 1349. Id. at 907. The only question before the
Seventh Circuit on appeal was the propriety of a
restitution order compensating Bank of America for
the loss it suffered in issuing the loan. Id. Judge Posner
began his opinion by noting that although Bank of
America was not a co-conspirator, the bank “did not
20
have clean hands.” Id. More specifically, the loan at
issue was a “joke” on its face, the bank ignored clear
signs that the loan was phony, and “[h]ad the bank
done any investigating at all, rather than accept at
face value obviously questionable claims that the
mortgagors were solvent, it would have discovered that
none of them could make the required down payments,
let alone pay back the mortgages.” In short, the
Seventh Circuit found that the bank was not simply
negligent but acted recklessly in issuing the loan. Id.
at 908. And because it was “knowing[ly] involve[d] in
potentially harmful activity,” it was not entitled to
restitution under the relevant provisions of the MVRA.
Id.
In his matter, Amcore Bank was no less reckless than
Bank of America was in Litos. The alleged scheme was
never devised to end in foreclosure. Before making the
loan, Amcore Bank knew full well that Mr. LeBeau was
deep in debt at the time he applied for the loan. They
knew that in 2003, Mr. Bodie had paid only $843 in
income taxes, and in 2004, he reported a net loss of
$400,000. App. 173. Moving forward, in 2005 and 2006,
the bank knew about Mr. LeBeau and Mr. Bodie’s
income and debts—that they were in significantly
worse financial shape than the government claimed
was represented on the mortgage agreement and the
loan application. Id. They knew this based on
communications with their lawyer, and they knew
there was $700,000 in liens and a huge increase in
interest expenses were reported prior to issuing the
21
loan. App. 37a. The bank continued negotiating
nonetheless.
When the loan fell behind and continued to fall behind,
the bank ignored the advice of its own lawyers, allowed
forbearance, and accepted large payments. See App.
4a. The bank knew that Mr. LeBeau was going through
bankruptcy. App 38a. It knew that Mr. Bodie had
incurred $183,000 in debt. Id. The bank continually
agreed to forebear on the loan and delay a sheriff’s sale.
App. 41a. The bank even ignored an offer to buy the
collateral for $600,000 from Carl Santangelo in 2008.
Id. Instead, the bank held onto the collateral, and after
the bottom fell out of the real estate market, only then
did the bank sell the collateral for $375,000 at a
sheriff’s sale. And Amcore Bank’s behavior generally,
as revealed by the government’s own 2011 Department
of Treasury Audit, caused the taxpayers of this country
a loss of $163 million. App. 36a.
Importantly, when questioned by Judge St. Eve, the
government conceded, “[we] do not think, given the
government’s report, that you can dispute that Amcore
Bank, at a minimum, had its head in the sand,” and
that the government “[has] never said that Amcore
Bank is blameless . . . [or] that there should be no
consideration to other factors which you may take as
mitigating.” App. 58a. Then, after Judge St. Eve
brought up Litos, supra, the government further
conceded that “it is a difficult decision to reconcile,”
noting however that “restitution is different from loss.”
Id.
22
Before pronouncing her sentence, Judge St. Eve also
stated that she was “troubled by the role of the bank
here.” App. 47a. She further noted that Mr. Schlyer’s
arguments were “really not contested.” Id. “[T]he bank
here, as . . . said before, had at least its head in the
sand. They had clear signs that fraud was going on
here and did not do anything about it. Part of it may
have been the time. It does not matter. The bank’s role
here is problematic to the Court.” Id. Judge St. Eve
ultimately found that no restitution should be ordered
to Amcore Bank. App. 67a.
There can be little question that Mr. LeBeau was
prejudiced by counsel’s deficient performance. Had his
counsel raised the same argument as his co-defendant
who was charged in a separate case with defrauding
the same lender in the same scheme and the exact
same loan at issue, then the result would have been the
same—following Litos, we can be near certain that the
district court would not have ordered Mr. LeBeau to
pay restitution to this reckless lender. Of course, we
need not be “near certain,” but find only that there is a
“reasonable probability” that the result would have
been different to satisfy Strickland’s prejudice prong.
See, e.g., Allen v. Chandler, 555 F.3d 596, 600 (7th Cir.
2009).
The Seventh Circuit’s opinion denying this challenge
was flawed and in need of redress in a number of
important respects. At the outset, the panel observed
that:
23
LeBeau has insisted, however, that he wishes to
press it, and so (with the reminder that he will not be
able to raise an ineffectiveness claim again in a
motion under 28 U.S.C. § 2255) we will examine it.
App. 15a.
This statement was, respectfully, incorrect—the law of
the Seventh Circuit is well-settled that if not raised on
direct appeal, Mr. LeBeau had no vehicle whatsoever
in which to raise such an error. See, e.g., United States
v. Bania, 787 F.3d 1168, 1172 (7th Cir. 2015) (“[a] 28
U.S.C. § 2255 motion, for instance, cannot be used as a
vehicle for challenging the restitution component of a
sentence”); Barnickel v. United States, 113 F.3d 704,
705 (7th Cir. 1997) (“[i]t has been well established both
in this Circuit and in others for some time that a fineonly conviction is not enough of a restraint on liberty
to constitute ‘custody’ within the meaning of the
habeas corpus statutes”).
Even on direct appeal, the Seventh Circuit’s
consideration of the substantive argument was
erroneous. Counsel respectfully has significant
disagreements with the panel’s finding that this
transcript and its related context is insufficient to
establish the prejudice prong of a Strickland claim;
specifically, the panel’s argument that “one district
court’s conclusion is not binding on another. LeBeau
provides no support for his assumption that additional
argument would have prompted the district court here
24
to follow the example of its colleague in Schlyer.” App.
38.
On the contrary, there is practically no better evidence
than another district court’s decision of the exact same
mixed question of law and fact—Mr. Schlyer’s
sentencing hearing was practically a petri dish for this
issue—and no doubt established, at a minimum, a
reasonable probability that the result would have been
different.
Even so, the Seventh Circuit should have given more
careful scrutiny to the issue given the fact that under
its precedent, that as cited above, it misunderstood, he
was forced to press the issue on direct appeal.
All other circuits are essentially in universal
agreement on the fact that collateral attacks on
restitution orders are not cognizable in a § 2255
petition. See, e.g., Bartelho v. United States, 2016 WL
9584199, * 1 (1st Cir. 2016) (citing Smullen v. United
States, 94 F.3d 20, 25-26 (1st Cir. 1996); United States
v. Rutigilano, 887 F.3d 98, 104-05 (2d Cir. 2018) (citing
Kaminski v. United States, 339 F.3d 84, 86 (2d Cir.
2003); Obado v. New Jersey, 328 F.3d 716, 718 (3rd Cir.
2003); Coleman v. Brooks, 133 Fed. Appx. 51, 53 (4th
Cir. 2005); Campbell v. United States, 330 Fed. Appx.
482, 482 (5th Cir. 2009) (per curiam); Ferguson v.
United States, 2017 WL 5500919, * 3 (S.D. Ohio 2017);
United States v. Bernard, 351 F.3d 360, 361 (8th Cir.
2003); Bailey v. Hill, 599 F.3d 976, 978 (9th Cir. 2010);
Brooks v. Hanson, 763 Fed. Appx. 750, 752 (10th Cir.
25
2019); Arnaiz v. Warden, 594 F.3d 1326, 1328 (11th Cir
2010).
Now, as the law stands, Mr. LeBeau is left without
recourse, despite the increasing scrutiny the MVRA
has faced in producing unjust results and exorbitant
restitution orders.
For example, in Paroline v. United States, 572 U.S. 434
(2014), this Court alluded to the fact that the MVRA,
at least in the context of child pornography offenses,
was “unworkable.” And more recently, Justices
Gorsuch and Sotomayor authored a compelling dissent
to the denial of a petition requesting consideration of
whether the restitution component of a sentence needs
to be considered by a jury, as opposed to a judge. Hester
v. United States, 139 S.Ct. 509 (2019). As they noted,
“[r]estitution plays an increasing role in federal
criminal sentencing today.” Id. at 510. Prior to the
passage of the MVRA in 1996, restitution orders were
comparatively rare. Id. But as the studies they cited
show, “from 2014 to 2016 alone, federal courts
sentenced 33,158 defendants to pay $33.9 billion in
restitution,” and more widely, “1996 and 2016, the
amount of unpaid federal criminal restitution rose
from less than $6 billion to more than $110 billion.” Id.
As was also noted, “the effects of restitution orders . . .
can be profound. Failure or inability to pay restitution
can result in suspension of the right to vote, continued
court supervision, or even reincarceration.” Id.
26
Here, Mr. LeBeau was expressly ordered to pay
restitution not just as a standalone component of its
judgement, but as a condition of his supervised release.
ECF 170. Failure to do so could subject him to spend
the remaining term of supervised release, or one
additional year, incarcerated in the Bureau of Prisons.
See 18 U.S.C. § 3585. The case thus presents a much
needed opportunity to cure an injustice worked by the
MVRA, particularly in light of the restrictive scope of §
2255 petitions, and to safeguard the right to the
effective assistance of counsel.
27
CONCLUSION
For the foregoing reasons, the petition for writ of
certiorari should be granted.
Respectfully Submitted,
/s/ Damon M. Cheronis
DAMON M. CHERONIS
Counsel of Record
RYAN J. LEVITT
LAW OFFICE OF DAMON M. CHERONIS
140 S. Dearborn Street, Suite 411
Chicago, Illinois 60603
(312) 663-4644
damon@cheronislaw.com
ryan@cheronislaw.com
APPENDIX
1a
APPENDIX A — Appendix
OPINIONAOF THE UNITED
STATES COURT OF APPEALS FOR THE
SEVENTH CIRCUIT, DATED FEBRUARY 4, 2020
UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
Nos. 18-1656 & 18-3366
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
KEVIN LEBEAU and BRIAN BODIE,
Defendants-Appellants.
Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 14 CR 488 — Robert W. Gettleman, Judge.
September 10, 2019, Argued
February 4, 2020, Decided
Before Wood, Chief Judge, and K anne and Brennan,
Circuit Judges.
Wood, Chief Judge. Intending to transform a failing
health club into a mixed-use condominium development,
Kevin LeBeau and Brian Bodie obtained a $1,925,000
loan from Amcore Bank in 2004. By the next year,
2a
Appendix A
unfortunately, the loan had fallen into default, and so the
pair sought and obtained a forbearance agreement (later
amended) from Amcore. These measures did not help
either. Ultimately the two men were indicted in 2014 on
multiple counts of bank fraud and making false statements
to the bank in connection with the loan and forbearance
agreements. The case went to trial in 2017, and the jury
convicted both LeBeau and Bodie on all counts. The
court sentenced each one to 36 months’ imprisonment
and restitution of more than a million dollars; both have
appealed.
LeBeau raises three arguments in this court: first,
that the district court erred by failing to give the jury an
instruction on materiality for the bank-fraud offenses;
second, that the court should not have admitted evidence
related to certain victims’ losses in the scheme and
their status as prior victims of fraud; and finally, that he
received ineffective assistance of counsel at the sentencing
stage, where his lawyer failed to challenge the amount of
restitution. Bodie contends that his conviction must be
thrown out because the superseding indictment was timebarred. He also disputes the sufficiency of the evidence to
convict him. Finding no prejudicial error in any of these
respects, we affirm the district court’s final judgments.
I
A
At trial, the jury learned that Kevin LeBeau owned
and operated a health club located on approximately ten
3a
Appendix A
acres of land he owned in Aurora, Illinois. Around 2004,
the business ran into difficulties, prompting LeBeau
to team up with Brian Bodie to redevelop the land as a
condominium project. Bodie was an attractive partner
because he ran two mortgage companies, PreStar
Financial Corp. and Mortgage Desk. The two submitted
a loan application to Amcore Bank, a federally insured
financial institution, in May 2004, and the bank gave them
a $1,925,000 mortgage loan in September 2004. LeBeau
and Bodie executed full personal guarantees on the loan
and listed Bodie’s two companies as guarantors.
As the borrower, LeBeau was required to submit
truthful and complete personal financial statements to the
bank. But from the start, he did not do so. LeBeau failed
to disclose more than $130,000 in outstanding personal
loans in his initial personal financial statement, which he
submitted in September 2004; he repeated the omission
in a second statement submitted in May 2005.
It did not take long for LeBeau and Bodie to fall behind
on the Amcore loan. By late 2005 they were in discussions
with a bank representative about how to proceed. Raising
the stakes, the bank issued a demand letter in March 2006.
In response, LeBeau and Bodie paid $151,000 toward the
balance of the loan—a step that convinced the bank to
delay further action at that time. In July 2006 Bodie sent
a letter to Amcore requesting a forbearance agreement for
the defaulted loan. In that letter, Bodie represented that
he and LeBeau had begun the formal process to obtain
rezoning and development permissions from the city. This
was false: in fact, they had only informally discussed this
possibility with city officials.
4a
Appendix A
Amcore filed a foreclosure complaint in state court
in August 2006. For the next several months, discussions
among the defendants, along with their attorney, Robert
Schlyer, about a possible forbearance agreement took
place. LeBeau and Bodie offered to make payments toward
the loan principal and interest, and they represented that
they had external investors committed to the project.
In January 2007 Amcore agreed to enter into a
two-month forbearance agreement on the condition that
LeBeau and Bodie make a $150,000 payment. LeBeau
obtained the money for the payment by securing a
$300,000 investment in the development project from
Delores and Kenneth Palmquist. He represented to the
Palmquists that the condominium development would be
worth at least $6 million and that they would receive 14%
annual interest on the principal as well as an interest in
the underlying land. But he did not inform the Palmquists
that he and Bodie were in default on the project loan and
that Amcore had initiated foreclosure proceedings. Nor
did he disclose to Amcore that he obtained the money
for the forbearance fee by granting the Palmquists an
interest in the mortgaged property without the bank’s
authorization.
Matters were no better for LeBeau and Bodie
by March 2007: they were still unable to fulfill their
obligations under the loan, and so they sought an amended
forbearance agreement from the bank. In April, Schlyer
sent materials to Amcore indicating that the defendants
had assembled a development team, the zoning phase of
the project would be completed by June 2007, development
5a
Appendix A
was underway on the parcel, and there were three
subscribers ready to invest $1.5 million in the development
company. None of these representations was true. They
had the desired effect, however, when Amcore agreed to
enter an amended forbearance agreement in May 2007.
In the end, LeBeau and Bodie made no further
payments on the Amcore loan and development never
commenced on the parcel. Amcore took ownership of
the property in 2009 after a sheriff’s sale, and it was
ultimately sold by Amcore’s successor, BMO Harris, for
$375,000. None of the individual investors recouped their
investment principal.
B
On August 28, 2014, a grand jury returned a ninecount indictment charging LeBeau and Bodie with bank
fraud in violation of 18 U.S.C. § 1344(1) and (2), and
making false statements in violation of 18 U.S.C. § 1014.
(Schlyer was separately charged and tried by a jury in
the Northern District of Illinois for his role in the scheme.
He was convicted on two counts of wire fraud affecting a
financial institution, 18 U.S.C. § 1343, and one count of bank
fraud, 18 U.S.C. § 1344. 17-CR-30 (N.D. Ill.)). On June 29,
2016, the grand jury returned an eight-count superseding
indictment. The superseding indictment eliminated two
of the false-statement counts and associated allegations
against Bodie, reorganized some of the counts, added more
recent conduct that indisputably fell within the statute of
limitations, and amended the section 1344 counts to allege
violations of only section 1344(1). It charged LeBeau with
6a
Appendix A
three counts of bank fraud, in violation of section 1344(1),
and four counts of making false statements to the bank,
in violation of section 1014; Bodie was charged with three
counts of bank fraud and three false-statement counts.
In March 2017, after a week-and-a-half long trial, the
case was submitted to a jury. The district court instructed
the jury that in order to carry its burden on the section
1344(1) counts, the government had to establish that (1)
there was a scheme to defraud a bank, (2) the defendants
knowingly executed or attempted to execute the scheme,
(3) the defendants acted with the intent to defraud, and
(4) at the time of the charged offense the deposits of the
bank were insured by the Federal Deposit Insurance
Corporation. The instruction did not state that the
government was required to prove the “scheme involved
a materially false or fraudulent pretense, representation,
or promise ...,” as recommended in the Seventh Circuit
Pattern Criminal Jury Instructions. See Pattern Criminal
Jury Instructions of the Seventh Circuit (2012 Ed.) (plus
2015-2017 and 2018 changes), http://www.ca7.uscourts.
gov/pattern-jury-instructions/7th_criminal_ jury_instr.
pdf (“Pattern Instr.”), at 447. As noted earlier, the jury
convicted both defendants on all counts, and both received
sentences of 36 months in prison, two years of supervised
release, and restitution in the amount of $1,016,000.
II
A
We begin with LeBeau’s challenge to the jury
instructions for the bank-fraud counts. The statute
7a
Appendix A
prohibiting bank fraud, 18 U.S.C. § 1344, has two parts.
Section 1344(1) states that “Whoever knowingly executes,
or attempts to execute, a scheme or artifice—(1) to
defraud a financial institution ... shall be fined not more
than $1,000,000 or imprisoned not more than 30 years,
or both.” Subpart (2) prohibits a scheme or artifice “to
obtain any of the moneys, ... or other property owned by,
or under the custody or control of, a financial institution,
by means of false or fraudulent pretenses, representations,
or promises.” § 1344(2). Counts One, Two, and Three of
the superseding indictment (the only ones that referred to
section 1344) all accused the defendants of offenses under
section 1344(1): “knowingly participat[ing] in a scheme
to defraud a financial institution,” Count One, ¶¶ 2, 11,
or “knowingly execut[ing] and attempting to execute the
above-described scheme,” Count Two, ¶ 2, Count Three,
¶ 2. The only false statements charged in the indictment
appear in Counts Four through Eight, all of which refer
only to 18 U.S.C. § 1014.
When discussing the proposed jury instruction for
the section 1344 counts prior to trial, the government
stated that because it had not brought charges under
section 1344(2), materiality was not an element and there
was no need for an instruction on it. The district court
said, “I assume the defendants agree to that?” Bodie’s
counsel responded, “I agree to it,” and LeBeau’s counsel
responded, “Yes, Judge.”
The district court instructed the jury on the elements
of section 1344 as follows:
8a
Appendix A
1) There was a scheme to defraud a bank, as
described in Counts One, Two, and Three of
the indictment; and
2) The defendant know ingly executed or
attempted to execute the scheme; and
3) The defendant acted with the intent to
defraud; and
4) At the time of the charged offense the deposits
of the bank were insured by the Federal Deposit
Insurance Corporation.
This instruction mirrors the Pattern Instructions,
with the key exception that it does not ask the jury to
decide whether “the scheme involved a materially false
or fraudulent pre-tense, representation, or promise.” See
Pattern Instr. at 447. LeBeau asserts that this omission
impermissibly relieved the government of part of its
evidentiary burden and prejudiced him.
LeBeau’s point is a serious one, supported by Supreme
Court precedent and some of our decisions. In United
States v. Neder, 527 U.S. 1, 119 S. Ct. 1827, 144 L. Ed.
2d 35 (1999), the Supreme Court held that “materiality
of falsehood is an element of the federal ... bank fraud
statute[].” Id. at 25. It did not limit that holding to
section 1344(2). Rather, it determined that “fraud”
itself requires the element of materiality. Id. at 23. We
have since said that Neder requires “district courts [to]
include materiality in the jury instructions for section
9a
Appendix A
1344.” United States v. Reynolds, 189 F.3d 521, 525 n.2
(7th Cir. 1999). The Committee Comment to the Pattern
Instruction for section 1344 is even more explicit:
Although the Seventh Circuit has not yet
addressed the application of Neder to § 1344(1)
specifically, the Ninth Circuit, in United States
v. Omer, 395 F.3d 1087 (9th Cir. 2005), held that
materiality is an element of a § 1344(1) violation
under Neder. In light of the general admonitions
in Neder and Reynolds, this instruction has
been modified to reflect this requirement.
Pattern Instr. at 448.
On the other hand, we have not consistently followed
this guidance. Recently we stated that to prove bank fraud
under section 1344(1), the government needs to prove only
the four elements contained in the jury instruction in this
case. United States v. Ajayi, 808 F.3d 1113, 1119 (7th Cir.
2015). The additional materiality element, we said, was
required only when section 1344(2) was charged. Id.
The better course, consistent with Neder, is to
require the materiality instruction on all bank-fraud
charges, whether brought under section 1344(1) or (2).
The government has informed us that this is its current
practice, and we encourage that practice to continue until
such time as we receive greater clarity from the Supreme
Court about what is required.
10a
Appendix A
The question whether the court’s omission of the
materiality element in LeBeau’s case requires reversal
does not, however, turn on whether the court erred in this
respect. It turns instead on the fact that LeBeau’s counsel
affirmatively consented before trial to the instruction
without the materiality element, and counsel never
withdrew that position.
If a defendant negligently bypasses an opportunity
to challenge a jury instruction—i.e. he forfeits it—he
may nevertheless later attack that instruction for plain
error. FED. R. CRIM. P. 30(d) and 52(b). “However, a
defendant who waives—rather than forfeits—his objection
cannot avail himself of even the demanding plain error
standard of review.” United States v. Natale, 719 F.3d
719, 729 (7th Cir. 2013). “Although passive silence with
regard to a jury instruction permits plain error review ... a
defendant’s affirmative approval of a proposed instruction
results in waiver.” Id. We have “strictly applied this rule
to affirmative expressions of approval without examining
whether the statements were a ‘knowing and intentional
decision’ or resulted from ‘negligently bypassing a valid
argument.’” Id. “As a result, affirmative statements as
simple as ‘no objection’ or ‘no problem’ when asked about
the acceptability of a proposed instruction have resulted
in waiver.” Id. at 730.
LeBeau argues that his counsel did not affirmatively
approve the court’s instructions and that the interests of
justice require us to overlook any waiver that occurred.
The first point finds no support in the record. The judge
could not have been more direct. After the government
11a
Appendix A
explained why it was not proposing a materiality
instruction, the judge said “I assume the defendants agree
to” an elements instruction that omitted materiality, and
LeBeau’s counsel said “Yes, Judge.” That can only be
read as direct acquiescence in the proposed instruction.
Moreover, because this discussion took place in pretrial
proceedings, counsel had the opportunity to confirm what
the government said and to raise a later objection to the
instruction at any time before the case went to the jury.
But he did not. He therefore waived the argument.
LeBeau’s second argument—that we can overlook
a genuine waiver—fails to grapple with the nature of a
true waiver. In United States v. Olano, 507 U.S. 725, 113
S. Ct. 1770, 123 L. Ed. 2d 508 (1993), the Supreme Court
said that when a defendant has waived a right (that is, has
intentionally relinquished or abandoned a known right, see
Johnson v. Zerbst, 304 U.S. 458, 464, 58 S. Ct. 1019, 82 L.
Ed. 1461 (1938)), that right has been extinguished. 507 U.S.
at 733. See United States v. Waldrip, 859 F.3d 446, 449 (7th
Cir. 2017). This is not to say that the characterization of
the defendant’s action is not critical. At times, there may
be some ambiguity in the defendant’s statement, and so
the court must decide whether it is looking at waiver or
the type of negligent oversight that triggers plain-error
review. See Natale, 719 F.3d at 729-30. In this case,
however, we see no such ambiguity. We note as well that we
speculated in Natale that waiver might not be “an absolute
bar on our consideration of issues not preserved below”
and that “[w]hen the ‘interests of justice’ so require, we
may reach the merits of a waived issue.” Id. at 731 (citing
Fleishman v. Cont’l Cas. Co., 698 F.3d 598, 608 (7th Cir.
2012)). But this was dicta.
12a
Appendix A
Such an exception to the ban on review of waived
issues would be difficult to square with the Supreme
Court’s teachings, but we need not pursue this possibility
any further in LeBeau’s case. First, the waiver is clear.
Second, even if we thought it was ambiguous enough to
support plain-error review, the omission of the materiality
element from LeBeau’s jury instruction did not affect his
substantial rights, Olano, 507 U.S. at 732; in fact, it is hard
to imagine a jury that would not have found LeBeau’s
stories to Amcore to be material, meaning “capable of
influencing the decision of the person to whom it was
addressed.” See Pattern Instr., 18 U.S.C. §§ 1341 & 1343
Definition of Material, at 431 (cross-referenced in Comment
to § 1344(1) at 448). LeBeau candidly acknowledges that
the jury instructions given in Neder and Reynolds were
found to be sufficient or at worst harmless error despite
omitting a required element. The same is true here. The
district court could reasonably have determined that the
term ‘fraud’ “embodies the concept of materiality,” and
that the instructions as given “adequately place[d] the
question of materiality before the jury.” United States
v. Pribble, 127 F.3d 583, 589 (7th Cir. 1997); see also
United States v. Fernandez, 282 F.3d 500, 509 (7th Cir.
2002) (finding in the health-services fraud context that
omission of an explicit reference to materiality in the jury
instruction was not plain error because the instructions
viewed in their entirety adequately embraced the concept
of materiality).
LeBeau waived any arg ument he might have
presented about the need to include a separate materiality
instruction on the charges under section 1344(1) when he
13a
Appendix A
affirmatively consented to proposed language. Moreover,
even if he merely forfeited this point, any possible error
did not affect his substantial rights.
B
We next consider LeBeau’s assertion that the district
court erred by allowing the government to introduce
evidence of Amcore’s and various investors’ losses as a
result of the fraudulent scheme. LeBeau did not object to
this evidence at trial, and so our review is only for plain
error. See United States v. Thomas, 933 F.3d 685, 690
(7th Cir. 2019); Fed. R. Crim. P. 52(b). “On plain-error
review, we may reverse if: (1) an error occurred, (2) the
error was plain, (3) it affected the defendant’s substantial
rights, and (4) it seriously affected the fairness, integrity,
or public reputation of the proceedings.” Thomas, 933 F.3d
at 690. “Plain error will be found only when the exclusion
of the erroneously admitted evidence probably would have
resulted in an acquittal.” United States v. Rangel, 350 F.3d
648, 650 (7th Cir. 2003).
At trial, the government introduced evidence showing
that Amcore’s successor eventually foreclosed on the
property and recouped only $375,000—far less than
the remaining balance on the loan—in a sheriff’s sale.
The jury also heard evidence that individual investors
lost the principal they had ploughed into the supposed
condominium project. Others who had made personal
loans to LeBeau were never repaid. One investor, Janice
Pace, testified about having previously been a victim of an
unrelated investment fraud and about how the defendants
14a
Appendix A
pitched investment in their development as a way for the
Paces to recover from their previous losses.
LeBeau argues that “pecuniary loss is not an element
of a fraud charge that the government is required to prove
in order to sustain a conviction.” This evidence, he says,
amounts to “victim impact testimony” that should have
been excluded under Federal Rule of Evidence 403, as it
has little or no probative value and is highly prejudicial.
The government responds that the evidence was relevant
because it showed the scope and methods of the fraudulent
scheme and helped to “establish defendants’ mens rea,
including knowledge that their efforts to avoid payment
and delay foreclosure could cause substantial risk of
loss.” The government also argues that the evidence of
LeBeau’s outstanding debt was admissible for the purpose
of supporting the charge that the personal financial
statements he filed with Amcore in order to obtain the
development loan were false.
Because LeBeau did not object at trial to introduction
of any of this evidence, the district court did not have a
chance to exercise its discretion. As a result, LeBeau
“must essentially show that the evidence was so obviously
and egregiously prejudicial that the trial court should
have excluded it even without any request from the
defense, and that no reasonable person could argue for
its admissibility.” United States v. LeShore, 543 F.3d 935,
939 (7th Cir. 2008).
LeBeau has not met this demanding standard. Even
if evidence of pecuniary losses was unnecessary given the
15a
Appendix A
amount of other evidence produced at trial supporting the
jury’s verdict, we cannot say that LeBeau probably would
have been acquitted but for this contested evidence.
C
Finally, LeBeau argues that the court erred in
calculating restitution. Once again, this is a new argument
on appeal. This time he asserts that his sentencing
counsel’s failure to make a proper objection amounted to
ineffective assistance of counsel in violation of his Sixth
Amendment rights. We generally discourage raising
this argument on direct appeal, since the record so often
sheds no light on counsel’s thinking. LeBeau has insisted,
however, that he wishes to press it, and so (with the
reminder that he will not be able to raise an ineffectiveness
claim again in a motion under 28 U.S.C. § 2255) we will
examine it.
In his sentencing memorandum, LeBeau agreed to a
total loss figure of $1,016,000—$789,000 to Amcore and
$227,000 to the Palmquists. This is the precise amount
that the district court ordered as restitution. The question
for us is whether counsel’s failure to, or decision not to,
object to that amount fell below the minimum acceptable
performance level and was so prejudicial to LeBeau that
his Sixth Amendment rights were violated. See Strickland
v. Washington, 466 U.S. 668, 687, 104 S. Ct. 2052, 80 L. Ed.
2d 674 (1984). For counsel’s performance to be deficient,
he must have “made errors so serious that counsel was
not functioning as the ‘counsel’ guaranteed the defendant
by the Sixth Amendment.” Id.
16a
Appendix A
LeBeau argues that his counsel should have objected
to the inclusion of Amcore’s losses because Amcore was
not properly categorized as a victim entitled to restitution
under the Mandatory Victims Restitution Act, 18 U.S.C.
§ 3663A. This is so, LeBeau asserts, because Amcore was
reckless in loaning money to the defendants and entering
into a forbearance agreement with them. He reasons that
the bank’s loss should therefore be deemed the result of its
own recklessness rather than the defendants’ misconduct.
For support he turns to our decision in United States v.
Litos, 847 F.3d 906 (7th Cir. 2017). In Litos, we reversed
an order of restitution to Bank of America because the
bank did not “have clean hands” and acted recklessly
by “clos[ing] its eyes” to phony loan applications and
questionable claims about the solvency of the mortgagors
involved. Id. at 907-10.
LeBeau contends that Amcore was equally reckless
here because it knew that LeBeau and Bodie were in dire
financial straits and ignored the advice of its own lawyers
when it entered into the forbearance agreements. He also
notes that the district court in Schlyer’s trial was troubled
by Amcore’s lack of diligence and accordingly declined
to order restitution to the bank. LeBeau presumes that
if his sentencing counsel had raised the same argument
Schlyer’s counsel made, the district court in his case would
have reached the same conclusion.
But one district court’s conclusion is not binding on
another. LeBeau provides no support for his assumption
that additional argument would have prompted the district
court here to follow the example of its colleague in Schlyer.
We add that Litos is readily distinguishable. There we
17a
Appendix A
found that the loan applications were “a joke on their
face” and showed clear signs of being phony. That was not
the case here. There were certainly indications that the
defendants were struggling—that was why they needed
a forbearance agreement. But part of the defendants’
fraudulent scheme involved raising significant funds to
pay the bank in exchange for the forbearance agreements.
Those payments misled Amcore into believing that the
risk was manageable. Each time the defendants paid
what the bank demanded, even though they did so by
committing fraud on others. Whether the bank was
reckless is debatable and it is not certain what the district
court would have decided had the defendants timely raised
the argument.
Nothing on this record raises a reasonable probability
that LeBeau’s counsel would have succeeded with an
attack on the restitution order. We see neither deficient
performance nor prejudice, and so we find no violation of
his Sixth Amendment right to counsel.
III
We now move on to the two claims Bodie raises on
appeal: (1) the timeliness and validity of the superseding
indictment, and (2) the sufficiency of the evidence to
convict him on all counts.
A
Bodie did not raise a statute of limitations defense
in the district court. While this omission does not result
in waiver, see Fed. R. Crim. P. 12(b), it does result in
18a
Appendix A
forfeiture, see United States v. Ross, 77 F.3d 1525, 1536
(7th Cir. 1996). Accordingly, we review whether the
superseding indictment is time-barred only for plain error.
Fed. R. Crim. P. 52(b).
The superseding indictment, which is the one on which
Bodie focuses, was filed on June 29, 2016. The limitations
period for the crimes charged is ten years. 18 U.S.C.
§ 3293(1). The superseding indictment charged Bodie
with violations of section 1344 stemming from conduct
in January and May 2007, and with violations of section
1014 stemming from conduct in July 2006 and April 2007.
All conduct charged occurred within the ten-year period
extending backward from June 29, 2016. On its face,
therefore, the superseding indictment against Bodie was
not untimely.
Bodie argues nonetheless that the superseding
indictment materially broadened the original charges,
preventing it from ‘relating back’ to the original
indictment (which had been returned on August 28,
2014) and leaving it time-barred. But the relation-back
doctrine merely allows a superseding indictment charging
conduct now outside the statute of limitations to supplant
a “still-pending original indictment ... so long as it neither
materially broadens nor substantially amends the charges
initially brought against the defendant.” Ross, 77 F.3d
at 1537. The doctrine does not bar the government from
charging new conduct that is independently within the
limitations period set by the new indictment. Because all
charges against Bodie in the superseding indictment were
timely, it does not matter if they were materially different
from those in the original indictment.
19a
Appendix A
The only conduct charged in the superseding
indictment that fell outside of the ten-year period
was LeBeau’s submission of false personal financial
statements. This conduct was also charged in the original
indictment, however, and so there is no relation-back
problem. In any event, LeBeau did not challenge the
superseding indictment. Accordingly, Bodie’s challenge
to the timeliness of the superseding indictment is without
merit.
B
Last, Bodie contests the sufficiency of the evidence to
convict him. Bodie’s charges stem from the defendants’
efforts to obtain the original and amended forbearance
agreements from Amcore Bank in January and May 2007.
“In reviewing the sufficiency of the evidence, we
review the evidence in the light most favorable to the
government, and we will overturn a jury verdict only if
no rational trier of fact could have found the essential
elements of the crime beyond a reasonable doubt.” United
States v. Garten, 777 F.3d 392, 400 (7th Cir. 2015). This
is a “heavy burden” for the defendant. United States v.
Brandt, 546 F.3d 912, 915 (7th Cir. 2008). We will not reweigh the evidence or “second-guess the jury’s credibility
determinations.” United States v. Coscia, 866 F.3d 782,
795 (7th Cir. 2017).
Recall that Counts 1-3 are for bank fraud under
18 U.S.C. § 1344(1), which criminalizes “knowingly
execut[ing], or attempt[ing] to execute, a scheme or
artifice—(1) to defraud a financial institution... .” Count 1
20a
Appendix A
charges a scheme to defraud with the original forbearance
agreement as the execution. The false statements
discussed in Count 6, along with other evidence, support
this charge. Count 2 charges a scheme to defraud with the
deposit of the Palmquists’ money as the execution. The
record shows that the defendants fraudulently obtained a
$300,000 investment from Delores and Kenneth Palmquist
in exchange for a purported interest in the property, and
they used $150,000 of it as consideration for the original
forbearance agreement with the bank. Personnel from
the bank testified that this payment was a critical factor
in the bank’s willingness to enter into a forbearance
agreement and that they did not know where the money
came from. Count 3 charges a scheme to defraud with
the amended forbearance agreement as the execution.
The false statements discussed in Counts 6 and 7 support
this charge.
Counts 6-8 are for false statements in violation of
section 1014, which criminalizes “knowingly mak[ing] any
false statement or report ... for the purpose of influencing
in any way the action of ... any institution the accounts
of which are insured by the Federal Deposit Insurance
Corporation... .”
On Count 6, the government introduced into evidence
a letter Bodie sent to Amcore Bank on July 21, 2006,
requesting a forbearance agreement on the defaulted loan
he and LeBeau previously obtained from the bank. In the
letter, Bodie indicated that he and LeBeau, working with
a local developer, had begun the formal re-zoning process
with the city:
21a
Appendix A
We are in the first phase of a three-stage
process and have had conversation [sic] with
the aldermen and the city planner for the City
of Aurora. ... We expect to have zoning approval
by year end, at which time we will refinance
the loan with another financial institution. I
hope these terms meet with your approval, as
we are confident our zoning request will meet
with approval by the City of Aurora.
At trial the city’s director of economic development
and its director of zoning each testified that this letter
misrepresented what was happening. They stated that the
formal process for requesting re-zoning had not begun as
of the time Bodie and LeBeau obtained the forbearance
agreement.
On Count 7, the government introduced evidence that
on April 4, 2007, LeBeau and Bodie’s lawyer, Schlyer,
sent the bank materials falsely purporting to show that
development was underway on the health club site and that
LeBeau and Bodie had secured subscription agreements
from three investors totaling $1.5 million. Bodie hired
someone to produce these documents. The evidence at
the trial, however, indicated that LeBeau and Bodie knew
that the materials were misleading, yet they either told
Schlyer to send them to the bank, or at least they knew
he was doing so.
Evidence before the jury also supported the charges
in Count 8. It learned that on April 23, 2007, Schlyer sent
the bank a letter and other materials representing that the
22a
Appendix A
defendants had formalized an investment mechanism for
the development, that the subscription agreements were
genuine, that they had assembled a development team, and
that they expected zoning to be complete by June 2007.
These materials supported the defendants’ request for an
amended forbearance agreement, which the bank granted
on May 8, 2007. Bodie signed this agreement.
Bodie disputes his knowledge of both of Schlyer’s
April 2007 communications with the bank and asserts
that he was not involved in the negotiation of the original
and amended forbearance agreements after July 2006.
But the jury was not obliged to believe his testimony, and
in fact did not.
It was rational for the jury to conclude that the
evidence established beyond a reasonable doubt that Bodie
knowingly and intentionally made, and caused others to
make, false representations to Amcore about the status
of the development in order to obtain the forbearance
agreements. We therefore reject his contention that the
evidence was insufficient to support the jury’s verdict.
IV
We A ffirm the district court’s final judgments in both
of these appeals.
23a
Appendix BOF TRANSCRIPT
Appendix b — EXCERPT
IN the UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS,
EASTERN DIVISION, DATED MARCH 13, 2018
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
vs.
KEVIN LeBEAU,
Defendant.
No. 14 CR 488-1
Chicago, Illinois
March 13, 2018
2:03 p.m.
TRANSCRIPT OF PROCEEDINGS - Sentencing
BEFORE THE HONORABLE
ROBERT W. GETTLEMAN
[page 60] There will be a period of two years’
supervised release. I’m going to go through those
conditions in a second. There’s no money to pay a fine here.
24a
Appendix B
The restitution amount that I have is a million 466.
Is that still the amount we’re talking about, Mr. Raman?
MR. RAMAN: If that amount includes the bank loss of
789, plus the Palmquists’ $227,000, plus what Your Honor
had ordered with respect to the Paces, that sounds right.
We did -THE COURT: And Wilson.
MR. RAMAN: Oh, and then Mr. Wilson, I think it
would actually be a little higher.
MS. STERN: Excuse me, Your Honor. May I speak
with the parties about restitution?
THE COURT: Sure. (Discussion off the record.)
MR. RAMAN: Your Honor, we’re going to -- we
just had a conference, and we think that the restitution
should actually be slightly less. It should be 1,016,000,
which includes the loss to the bank, plus the loss to the
Palmquists.
THE COURT: Well, if everybody agrees on that
figure, I’m not good at math, so I’ll go along with you. Will
you give Claire just a breakdown of that, Mr. Raman -MR. RAMAN: Yes, sir.
[page 61] THE COURT: -- so we can put it in the J&C?
I’d like to get the J&C finished tomorrow.
25a
Appendix B
All right. There’s a $700 special assessment. Yes, I
think I said eight counts before. I meant seven. There
were eight counts altogether.
All right. Let’s go through the supervised release
conditions. They begin on page 23 of the PSR. Let me
go through them, because we’re asked to do that by our
Court of Appeals these days.
If there’s anything you disagree with, counsel and
Mr. LeBeau, please tell me as I go through them. Some of
them are mandatory, and some of them are discretionary.
First of all, you can’t commit another crime. You can’t
possess a controlled substance. You have to cooperate in
a DNA sample, which is standard.
You have to make the restitution that we’ve already
mentioned. This is while you’re on supervised release for
those two years.
Seek employment, which I know you’re going to.
That’s No. 4.
Refrain from meeting with anybody who is a -- well,
refrain from meeting anybody involved in criminal
activity, particularly Bodie and Schlyer.
Has he been sentenced, Schlyer?
MR. RAMAN: He’s being -- Schlyer. Mr. Schlyer is
[page 62] being sentenced next Tuesday, Your Honor.
26a
Appendix B
THE COURT: Okay. All right.
Also refrain from excessive use of -- well, it says any
use of alcohol. Is there a reason for that?
MS. STERN: One moment, Your Honor.
THE COURT: Usually we put excessive use of alcohol.
MS. STERN: No, Your Honor, excessive would be fine.
THE COURT: All right. We’ll put excessive then.
Okay. That’s the legal limit for driving. Any use of
narcotics.
Refrain -- you cannot possess a firearm, destructive
device, or weapon.
You have to remain in the jurisdiction where you’re
being supervised unless allowed to leave it.
Report to probation as directed. Allow them to visit
you at any reasonable time. I usually exclude work. I don’t
know what kind of work Mr. LeBeau may be getting, but
I don’t think that’s appropriate, so we’re going to take
that out.
MS. STERN: Excuse me, Your Honor. I believe he
works out of his home.
THE COURT: Well, it says “at home.” If he were to
get a job -- if he were to get a job, I just think it’s not a
good idea --
27a
Appendix B
MS. STERN: Okay.
THE COURT: -- to do that, so that’s why I usually
[page 63] take that out of there.
Notify your probation officer if there’s any change
in your -- you know, major change in your life, like your
address or workplace, that sort of thing.
Notify if you have any -- within 72 hours, notify
a probation officer if you have any contact with law
enforcement for any reason at all, even minor things, just
to make sure that we don’t get a report when we don’t
need one.
On the special conditions, I don’t think we need No. 3,
very frankly. Given Mr. LeBeau’s history and everything,
I think we can omit that.
Because this was a financial crime, don’t incur any
credit charges or lines of credit without approval.
You’ve got to give the probation officer any requested
financial information.
Notify the Court of any material change in your
circumstances, No. 7.
No. 8, provide the documentation to the IRS as
required. We all have to do it anyway.
28a
Appendix B
Don’t -- and finally, No. 11 is just sort of a -- we see it
all the time. I don’t know why it’s there, but anyway, it’s not
to act as an informer or special agent without permission
of the Court.
Any objection to any of those?
MR. WEISBROD: No, sir.
[page 64] MR. RAMAN: No, Your Honor.
THE COURT: Did I miss one?
MS. STERN: No. 10, Your Honor.
THE COURT: Oh, No. 10? Okay. I missed one, which
is not uncommon.
What page is it on, Ms. Stern?
MS. STERN: Let me look.
MR. WEISBROD: Which No. 10?
MR. RAMAN: No. 10 is on page 29 at the top of the
page.
THE COURT: Oh, that’s why I missed it, because of
the fold in the page.
Okay. You have to pay the penalty that we -- the
restitution basically that we talked about, in the amount
29a
Appendix B
of at least 10 percent of your net monthly income.
All right. Now, are those conditions agreeable?
MR. WEISBROD: Yes, sir.
--
THE COURT: Okay. All right. Now as far as reporting
MR. WEISBROD: We would request voluntary
surrender.
MR. RAMAN: That’s fine, Your Honor.
THE COURT: Okay. I’ve been giving it at least
six weeks to get designated. I would -- do you have a
recommendation of an institution?
I would recommend Oxford Camp, frankly.
30a
Appendix Cof transcript
Appendix c — excerpt
of proceedings in the united states
district court for the northern
district of illinois, eastern division,
dated march 15, 2017
[1138]UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
No. 14 CR 488
UNITED STATES OF AMERICA,
Plaintiff,
vs.
KEVIN LEBEAU AND BRIAN BODIE,
Defendants.
VOLUME NO. 7 AM
TRANSCRIPT OF PROCEEDINGS - TRIAL
BEFORE THE HONORABLE ROBERT W.
GETTLEMAN AND A JURY
Chicago, Illinois
March 15, 2017
9:52 a.m.
***
[1288]happened during the trial. You should use your notes
only as aids to your memory. The notes are not evidence.
31a
Appendix C
All of you should rely on your independent recollection of
the evidence, and you should not be unduly influenced by
the notes of other jurors. Notes are not entitled to any
more weight than the memory or impressions of each juror.
Now, the defendants have been accused of more than
one crime. The number of charges is not evidence of guilt
and shouldn’t influence your decision.
You must consider each charge and the evidence
concerning each charge separately. Your decision on
one charge, whether it’s guilty or not guilty, should not
influence your decision on any other charge.
Now, Counts 1, 2, and 3 of the superseding indictment
charge each defendant with bank fraud. And in order to
find a defendant guilty of these charges, the government
must prove each of the following elements beyond a
reasonable doubt:
First, that there was a scheme to defraud a bank
as described in Counts 1, 2, and 3 of the indictment -of the superseding indictment; two, that the defendant
knowingly executed or attempted to execute the scheme;
and three, that the defendant acted with the intent to
defraud; and four, at the time of the charged offense, the
deposits of the bank were insured by the Federal Deposit
Insurance Corporation.
Now, if you find from your consideration of all the
[1289]evidence that the government has proved each
of these elements beyond a reasonable doubt as to the
32a
Appendix C
charge that you are considering, then you should find the
defendant guilty of that charge.
If, on the other hand, you find from your consideration
of all the evidence that the government has failed to prove
any one of these elements beyond a reasonable doubt as
to the charge you are considering, then you should find
the defendant not guilty of that charge.
Now, for purposes of Counts 1, 2, and 3, a scheme
is a plan or course of action formed with the intent to
accomplish some purpose.
A scheme to defraud a bank means a plan or course of
action intended to deceive or cheat that bank or to obtain
money or to cause the potential loss of money by the bank.
A scheme to defraud need not involve any false statement
or misrepresentation of fact.
A person acts with intent to defraud if he acts
knowingly with the intent to deceive or cheat the victim
in order to cause a gain of money or property to the
defendant or another or the potential loss of money or
property to another.
A participant in a scheme to defraud may be guilty
even if all the benefits of the fraud accrue to others.
For purposes of Counts 1, 2, and 3, the bank fraud
statute can be violated whether or not there is any loss or
****
33a
Appendixof
D rehearing of
Appendix D — denial
the united states court of appeals for
the seventh circuit, filed march 4, 2020
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
No. 18-1656
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
KEVIN LEBEAU,
Defendant-Appellant.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 14 CR 488
Robert W. Gettleman, Judge.
ORDER
Defendant-appellant filed a petition for rehearing and
rehearing en banc on February 14, 2020. No judge1 in
1. Judge A my J. St. Eve did not pa r ticipate in the
consideration of this matter.
34a
Appendix D
regular active service has requested a vote on the petition
for rehearing en banc, and all members of the original
panel have voted to deny panel rehearing. The petition
for rehearing en banc is therefore DENIED.
35a
Appendix EOF TRANSCRIPT
APPENDIX E — EXCERPT
OF PROCEEDINGS IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS, EASTERN DIVISION,
DATED APRIL 19, 2018 (UNITED STATES V.
SCHLYER, 17 CR 30)
[1]IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
Docket No. 17 CR 30
UNITED STATES OF AMERICA,
Plaintiff,
vs.
ROBERT JON SCHLYER,
Defendant.
Chicago, Illinois
April 19, 2018
9:37 o’clock a.m.
TRANSCRIPT OF PROCEEDINGS – SENTENCING
BEFORE THE HONORABLE AMY J. ST. EVE
***
[42]MR. RA MAN: No, no proposed additional
conditions, Judge.
THE COURT: Okay.
36a
Appendix E
So, let’s turn then to the 3553 factors.
Mr. Bischoff.
MR. BISCHOFF: Judge, I’ll start with the bank and
why I don’t think the bank’s loss -- and I’ll put those in
air quotes -- should be attributed to Mr. Schlyer in this
particular case.
I’ve looked at all of the cases involving banks where
arguments have been made that the bank was complicit
in a scheme, and almost in every single case where it was
close, the deciding factor was that the employee of the
bank’s behavior was found to be outside the scope of their
employment; and, therefore, the bank was able to maintain
its victim status.
This case is different. The bank has known for years
what Bodie and LeBeau were up to. It’s not a question
of just they were negligent or even reckless in failing to
discover certain things. They knew exactly what LeBeau
and Bodie were doing.
In 2004, 2005 -- especially 2004 -- they knew that
Bodie had lied to them about a million-dollar asset that
he had in Wachovia Bank. He lied to them; they noted it
in their records; and, they don’t even follow up with him.
They just [43]dismiss it. One of the things I was struck by
-- and I know the Court has had an opportunity to read
Mr. Zacharias’ statement, as well as the Department of
Treasury report, which slams Amcore Bank.
37a
Appendix E
I might point out that Amcore Bank’s behavior cost the
taxpayers $163 million in losses because of their behavior.
And this loan was a perfect example of why they were
chastised by the government.
A nd this is the government that’s chastising,
admonishing Amcore Bank. So, I find it kind of ironic
that the government wouldn’t agree with me that these
things happened.
But they also knew, with regard to Mr. LeBeau, that
he was deep in debt when he was applying for these -- the
loan. They knew that Bodie had paid only $843 in income
taxes in 2002. In 2003 -- or 2002, he paid nothing. In 2003,
he paid $843. And in 2004 -- and they have his income tax
return -- he reported a net loss of $400,000 and they give
him a loan.
Well, okay. I’m not going to hold that against them.
That’s 2004. But it really becomes egregious and
unforgivable in 2005 and 2006, when they learn that Mr.
Bodie and Mr. LeBeau are lying to them. Lying to them
about their assets, lying to them about their income, and
lying to them about the debt that they incurred, in direct
violation of the [44]mortgage agreement and the loan
application.
Then they learned about it in the most unseemly
way, when they were communicating with LeBeau and
Bodie’s lawyer behind their back and they learned there
was $700,000 in liens accrued in that short period of time.
38a
Appendix E
You know, Mr. Zacharias wrote that -- he noted that
in 2004, borrower reported a $315,000 net loss -- this is
LeBeau -- on revenues of $697,000. Interest expense in
2004 was 439,000 compared to 2003 interest expense of
178,000.
The bank provided no explanation for the huge
increase in interest expenses, and he asks where did
the money go and why was it so disproportionate to the
interest expense of 2003? A huge red flag had been raised
indicating fraud.
Well, what does Amcore Bank do? Well, they don’t
foreclose. They negotiate further with Mr. LeBeau and
Mr. Bodie. All this is happening long before Mr. Schlyer
becomes involved.
I’m appalled by the January through February
through April negotiations that took place between the
bank and Mr. Bodie and Mr. LeBeau. Now, note, these
guys negotiate very well on their own behalf. This is not
involving Mr. Schlyer.
A nd they learn, again, that Mr. LeBeau is in
bankruptcy. They learn that Bodie’s incurred $183,000
more in debt. And they learn that they’re lying to them
about the [45]debt. And they’re planning to solve their
problem by using a shill to purchase the property and
then to enter into a lease-back agreement.
And it’s so funny because I was asking the witnesses
in cross-examination, you know, what this meant. I mean,
39a
Appendix E
I know what it meant. I didn’t just step off the boat. And
this person who is in the industry pretended he didn’t
know what I was talking about. And I’m offended by it. He
knew -- he knows what a shill is. He knows exactly what
they were doing, which is to really perpetrate a fraud.
But it didn’t trouble them. And they entered into a
forbearance agreement on the foreclosure itself.
And knowing all of these things, Judge, I think, takes
them -- the bank -- to the next level of not just being
reckless or negligent, which is forgivable. You maintain
your victim status in that case. But as the case law
says and as the Guidelines say, a person who knowingly
participates in the charged scheme does not qualify as a
victim.
And the only time they ever -- if you know anything
about banking, you know the last thing they want to do is
go to foreclosure and end up with a sale, because it hurts
their credit rating. It limits the amount of money they
have to loan out. And that’s how banks make their money,
through their loans.
So, obviously, their strategy was to forbear. And [46]
it’s written down in the problem loan status reports what
the strategy is. It’s not to go to sale. Even though their
own lawyer is saying go to sale, they ignore them -- ignore
Mr. Harbecke -- because their strategy is to delay.
And they’ve got a lot of money from that strategy.
That was obviously the goal. You know, Mr. Schlyer raised
40a
Appendix E
$250,000 for them. And, of course, they put their head in
the sand and never asked where that money came from.
And after Mr. Schlyer was out of the picture, they raised
another 300,000, $400,000 in investments -- or, I should
say, in paybacks.
Knowing this, they move forward. And that makes
them complicit. That makes them co-schemers to my way
of thinking. And I know that’s very strong language, but
this is not like the case law has seen, and it’s not like the
other situations I’ve seen. This was egregious, and the
federal government said so in their own findings.
So, I think for that particular reason, the bank is
not a victim. But there’s other reasons the bank can’t be
considered a victim in this case. It really comes down to
how you construe loss -- actual loss.
The government has the burden of proving that the
scheme caused the loss; and, of course, you’re looking at
whether or not it was temporally and factually not too
attenuated. In this case, I really just can’t wrap my brain
[47]around how this five-month period of time, this fivemonth scheme, during which the bank entered into two
forbearances, that the bank could now turn around for
their loss, which occurred in 2011 arguably -- I don’t know
how you can say that loss was caused by these two delays,
which they were looking to do anyway. It’s temporally
attenuated, and it’s factually attenuated.
And you can’t forget the fact that after Mr. Schlyer is
long gone, he’s out of the picture, they’re still forbearing
41a
Appendix E
with Mr. Santangelo, with Mr. LeBeau and Mr. Bodie.
And they don’t rush to sheriff sale. Even when they had a
chance to get some money back -- Mr. Santangelo offered
him $600,000 at one point, which they rejected. Some
duty to mitigate your losses. Long after this, they’re just
delaying, delaying, delaying, because they’re getting
payments back.
I don’t know how you attribute that to Mr. Schlyer,
even when you’re talking about intended loss. I think it’s a
very weak argument in this case. Because if you’re looking
at that five-month period during which Mr. Schlyer raises
$250,000, along with Bodie and LeBeau, what’s the intent?
I mean, the intent isn’t to cause the bank a loss during that
five-month period. That’s exactly the opposite of what it
was intended. The intent is to pay back. And that’s exactly
what the bank wanted.
So, to say that this scheme, the intent was to cause
[48]the bank to lose a penny, it just doesn’t hold up.
I think it would be disgraceful if the bank were to
receive a penny in restitution, which, of course, we can
talk about later. But I think it would be disgraceful. I
think it sends a terrible message that a bank can behave
in this manner and still be considered to be a victim. The
bank is not a victim.
I’ll move on to talk about my 3553(a) argument with
regard to abuse of trust. I want the Court to know that Mr.
Schlyer’s involvement with Mrs. Palmquist was wrong. I
can’t defend that. He helped her -- he helped these guys,
and his actions certainly caused her to lose money.
42a
Appendix E
But I also want the Court to understand that his
interaction with Ms. Palmquist was very brief. And he’s
not the one who sold the Aurora development to her. He’s
not the one who pocketed the money. And he’s not the one
who really had anything to gain or, in their case, to lose
in this case.
When you look at what -- the fact that the government
didn’t even ask for an abuse-of-trust enhancement against
Kevin LeBeau or Brian Bodie, it almost feels -- with all
due respect, it feels slightly vindictive and it’s troubling
to me. Because in the Guideline itself, when it talks about
the type of activity that is the basis for abuse of trust, it
lists accountants. That’s who Mr. LeBeau was. He was Ms.
Palmquist’s accountant for 30 years. And she testified [49]
that but for her trust in Mr. LeBeau, she wouldn’t have
invested in this particular development.
And with regard to Mr. Bodie, this is a guy whose
name in Aurora was gold. His father was her doctor. Now,
he was a mortgage broker, also listed in the Application
Notes to 3B313.
So, I’m baffled by the fact that this is only being
asked of Mr. Schlyer. And I’d ask, based on the disparity
argument, that the Court not apply abuse of trust, not
apply those two levels.
I’m also troubled by certain things, Judge. I have to
comment on these things because they’re troubling, with
regard to some of the actions -- or some of the arguments
put forth by the government in this case.
43a
Appendix E
I am troubled by the fact that they asked the Court
to consider relevant conduct in relation to the Paces, Rick
and Janice Pace. Mr. Schlyer had next to nothing to do
with their investment in the Aurora development, which
wasn’t even an investment in the Aurora development. It
turned out to be an investment in Mortgage Desk, which
is one of Brian Bodie’s fly-by-night companies, one of his
scams. And as the FBI agent stated in his own 302s, all of
that money went into fund Mr. Bodie’s companies. None
of it ever went into Mr. Schlyer’s pocket. None of it was
ever mentioned in connection with this particular scheme.
[50]But I just don’t know how the government thinks
about these things. I wouldn’t have put this forward
because it would have been embarrassing when I see what
the Paces did in order to get their money. I mean, these
are grown people.
And what they did was they took out loans on two of
their properties in Florida. And what I have learned by
digging through the extensive discovery in this case -- and
it took me a while to find it -- and they knew it -- is that the
Paces inflated their income on their loan application. Mr.
Pace inflated it from $4,000 a month to $9,000 a month.
Janice Pace inflated her income from $2500 a month -these are the actual numbers -- to four thou- -- or to $6,000
a month, for a total income of 15,000, when, in fact, their
total income was 6500.
They knew that. And what they did when they were
being interviewed by Agent Palumbo was say, “Well, I
was told to do it.” Well, that’s not an excuse last I checked.
44a
Appendix E
They also took out three loans on two properties from
three different lenders. You know what that means. Now,
I don’t have their whole loan packets, but I can add two
plus two. It’s pretty obvious what they were doing, which
was to commit mortgage fraud in Bodie’s scheme.
I mean, look, they had a minor role in that scheme, but
what they did was wrong. It’s fraud. They don’t qualify as
victims. I know they lost their money. I have sympathy
[51]for them for getting caught up with Brian Bodie. But
Brian Bodie was the driving force behind all this and he
ripped off a lot of people. He was a charismatic individual
who misled and stole from a lot of people.
And talk about abuse of trust. I mean, this is a guy who
really dragged a lot of people down with him. I talked to
two people who used to work in that office. Barb Mizones
lost $70,000 of her own money because of him -- because
of Bodie.
And I don’t understand why the government can’t
see that you can be involved in a scheme without knowing
every aspect of the scheme or being involved in the full
scope of a scheme. That’s just the law.
I’m troubled by the fact that the Court was given a
letter from Janice Whelan. How could they not see that
this woman has absolutely no credibility whatsoever? She
lied in two places I can identify in the letter itself where
she says she sued these guys.
45a
Appendix E
She never brought an action. I checked every Clerk’s
Office from around the state. I couldn’t find this action
that she alleges she brought. She certainly never sued
Mr. Schlyer.
Then she said she was financially ruined because of
this particular event. And I’m unclear what Mr. Schlyer
allegedly did; but, in any event, financially ruined.
And, then, she sends an e-mail to Agent Palumbo
[52]saying, “Well, I exaggerated about being financially
ruined. My husband had a fantastic life insurance policy.”
Palumbo calls her and she says, according to his 302, “Hey,
you’re the greatest FBI agent ever. Didn’t want to look like
a total loser. Turns out I actually am financially ruined.”
And, then, you look at her record with the ARDC.
She was disbarred in 2005; claims her husband was too
sick; around the year 2000 he’s at the Mayo Clinic; he’s
just completely disabled. And it turns out she enlists her
husband to help her perpetrate a fraud after she lost her
law license.
I mean, it’s an incredible story. If I brought this to
Hollywood as a movie script, they’d reject it. No one’s
going to believe it. And her husband loses his law license
in 2009.
How do you submit something like that to the Court
in aggravation? It’s embarrassing.
46a
Appendix E
I’m also extremely troubled by something that
happened at the trial, that I didn’t catch until the
government started making certain statements in their
sentencing memorandums; and, that had to do with the
subscription agreements that, quote, according to the
government, Mr. Schlyer had marked in numerous places.
Where? I still don’t know. And it was reckless, and it
was wrong to make that statement.
And, you know, that was a very strong piece of [53]
evidence with regard at least to the bank, because the jury
had no evidence that Mr. Schlyer had drafted any of these
documents or marked on any of these documents or forged
any of these documents but for the evidence that he had
marked number “9.” It looked like a “9” that he had done
on another particular document for comparison’s sake.
Well, the government has every right to make that
comparison. That’s the law. I couldn’t rebut it. I couldn’t
have -- I didn’t have any writing samples to rebut it. Even
if I had found the writing samples I later dug out of the
massive discovery, I couldn’t have authenticated it. Had I
known or known this was coming, I could have gotten my
own expert. I wish I put it in my motion for a new trial.
I didn’t think of it then. The Court -- you may do with it
what you want. I would certainly have raised it.
But back to sentencing. I found writing samples. And
I’m not a writing expert, and neither is he, though. And I
found samples that clearly indicate that this was written
by LeBeau or Bodie and not him, just by the slant of
47a
Appendix E
the writing, just by the unique nature in which certain
numerals were made. And the number “9” -- write “9,”
Judge. “9” probably looks exactly like the “9” they were
using as evidence against Mr. Schlyer. Almost everybody’s
loops and goes down. I should have caught it.
But I’m troubled by that. This effort to make [54]Mr.
Schlyer look so much worse than he is.
But I’ll tell you something, I misjudged Mr. Schlyer,
too. I just thought he was some privileged guy who just
was out there taking advantage of the people. And what I
have learned about my client is that he had a very troubling
life and had no privilege. And I’ve learned about his acts of
charity and his respect and his love in the community. And
I’m blown away by it. I’ve never seen so much mitigation
in my 30 years of practicing law.
You heard Mr. Schlyer’s father come in here and
speak on his behalf, but it was a troubled childhood and
the marriage did not work out. And Mr. Schlyer, even
though they’ve managed to develop a relationship now, it
wasn’t -- it didn’t exist when Mr. Schlyer was growing up.
His mother raised him alone. They grew up in public
housing. They were on food stamps. And he was dealing
with a mother who was extremely troubled, undiagnosed
mental illness. Schizophrenia, bipolar disorder. And she
was, as you might expect, volatile. And yet Mr. Schlyer
held it together. He really was the man of the house
growing up. And he was always working whenever he
could.
48a
Appendix E
And he stayed in school when a lot of people wouldn’t
have. And he got his degree. And he was a tremendous
athlete. He received scholarships to go swim in college,
and he went on to law school.
[55]And, of course, you met Penny Schlyer, his wife.
And you saw -- you heard Ms. Schlyer who gave a very
eloquent speech. And nothing I can say could be as
eloquent as what Penny Schlyer said before this Court.
They’ve raised three wonderful children. His oldest
boy Ryan has Asperger’s Syndrome, and I just shudder
to think of how incarceration is going to impact on that
boy. And I’m not just saying it. I mean, there are times
I hear things and I just -- I could repeat it and that’s the
argument. But here I’ve actually seen it.
I’ve seen letters written by the principal of the school.
I’ve seen so many people who have spoken up on his behalf
and talked about his son. I’ve seen effort he’s made to
learn all about the disease and be the rock of that family
and make sure that his son, who really wouldn’t have had
any friends in a different environment and wouldn’t have
been able to function, has really functioned quite well in
school. He’s on the swim team.
One of the things that I pointed out was how his
situation -- Ryan’s Asperger’s -- it really just made it
where he could never relax, never sit still. And Rob figured
out as a swimmer that they shared this particular hobby,
and that when Ryan was in the pool, he could think and
he --
49a
Appendix E
(Brief pause.)
MR. BISCHOFF: So, all of the boys have done very
[56]well. Christian service awards, they’ve all won that.
Rob’s a community leader, active in his church. He’s
been a mentor, a coach, an athlete. He’s a national Level
3 swim official. That’s not something that you can just
sign up for. You have to be qualified for that. He runs a
charity for the last 13 years. He’s raised $1.3 million for
prostate research.
The collateral consequences of incarceration are
astounding in this case. I think it’s a very strong factor
in this particular case.
He’s already lost his law license. He’s voluntarily
surrendered that. He will never practice law again. His
reputation has been destroyed. He’s resigned as president
of the Ogden Dunes Home Association. He resigned his
national swim official license. He resigned as a precinct
captain of the Republican Party in Indiana. He’s likely
-- if he’s incarcerated, likely -- to lose his job. His boss
has indicated he can stay on in his employment if he’s not
and he can financially contribute to his family, as well as
restitution.
I think that something I neglected to note was the
delay in charging here, which I’m not going to publicly
get into that. I think my arguments are clear. I think in a
situation like this, there’s something very shameful about
it. But here’s a guy who waited ten years and has lived
his life [57]and built his family and built his career when
50a
Appendix E
this could have -- and there’s documented proof that this
could have been brought much sooner.
Retribution as a policy in this case is not as strong.
Most studies show that people feel we focus too much on
policy of retribution. But I believe that in this case, you’re
asking, you know, what does society think? How do we
appease society by meting out a just punishment? And
there are times when the only answer is incarceration,
and sometimes the only answer is a lengthy period of
incarceration.
I mean, here you have the community speaking out.
His whole community knows what he did here, and none of
them wants Rob to go to jail. So, the policy of retribution,
I would submit, is very weak in this case.
If you’re talking about deterrence, naturally you’re
talking about two different types of deterrence. There’s
specific and general deterrence. Specific deterrence is
very weak in this case because he’s never going to commit
another crime again as long as he lives. We all know that.
You know that from the character evidence that’s been
put forth.
But with regard to the issue of general deterrence, I
mean, I’ve cited case law that would indicate that when
you delay ten years, it certainly weakens that as a policy.
And I would also submit for someone like Rob, who is -you know, he’s a different case than most people that come
before you. [58]A felony conviction, along with probation
and restitution, has a tremendous deterrent effect to
somebody like Rob.
51a
Appendix E
The things that have happened to him, the collateral
consequences have a tremendous deterrent effect to
any lawyer. I would be, as a lawyer -- and I’ll speak for
Mr. Howard; I’m sure Mr. Kartik feels the same. This
is terrifying. And no lawyer in his right mind seeing
even probation and a felony conviction being meted out
as the punishment in this case would not think twice
before committing a similar act. So, I think that general
deterrence is satisfied.
Incapacitation is non-existent in this case. There’s
no -- we don’t -- he’s not a threat to society. There’s one
instance that we’re talking about. In the last ten years,
he’s been a model citizen. So, is there a need to lock him
up, to remove him from society? It doesn’t exist here.
Is rehabilitation a strong policy in this case?
Absolutely.
Judge, I’m going to wrap it up because I know this
has been a lengthy sentencing. It’s been fought -- very
hard fight, both sides.
I would note that Kevin LeBeau was sentenced to 36
months in front of Judge Gettleman. I would remind the
Court that he’s far guiltier than Mr. Schlyer is. And Mr.
Schlyer can actually do some good and actually is of the
character who would want to and carry out some good. I
don’t believe that’s [59]true of the co-schemers in this case.
I would ask the Court to sentence Mr. Schlyer to a
period of probation with appropriate conditions of release.
52a
Appendix E
And I would suggest that Mr. Schlyer be required to make
restitution to Mrs. Palmquist in a way that’s financially
doable and, also, because I think it would actually
accomplish some real good here.
THE COURT: Thank you, Mr. Bischoff.
Mr. Raman?
MR. RAMAN: Yes, your Honor.
I’d be remiss if I didn’t at least address the attacks
that have come here. I don’t mean to spend time on
it. I just wish to say that there’s some suggestions of
misconduct in the investigation and prosecution. Nothing
could be further from the truth. The only person who has
committed misconduct is Robert Schlyer, as far as this
courtroom is concerned.
And his crimes are impactful and they are incorrigible.
And because he was an attorney when he committed
them and because he used his status as an attorney to
scheme and defraud the victims in this case, he should be
sentenced to prison.
At the trial, your Honor and the jury heard about
the fraud, and you heard how serious it was. There were
many victims, including the FDIC-insured bank. And I
will address [60]the bank a little later in my presentation,
but what stands out to me and what make this case unique
-- and I’ve been doing this 25 years, mostly federal -- what
made it stand out to me were the real people who were
affected here.
53a
Appendix E
They were gravely harmed in their financial security
by the actions of this defendant and the people that he
schemed with. And as I had indicated earlier, we had
planned to call Mrs. Palmquist. It was sort of part of her
healing process to want to come and read her letter to the
Court. But, unfortunately, her husband’s hospitalization
made that not possible.
But she did write the letter. And your Honor had seen
the letter. She did deliver the letter to Judge Gettleman.
Mr. Bischoff was there. I think there was not a dry eye in
the house when she read her letter. It was very difficult,
even for someone of my age and experience in the criminal
justice system, to hear.
When I read the letter, I turned to the definition of
“fiduciary.” And that is what the defendant purported
to be when he met Mrs. Palmquist and her husband. He
purported to be a fiduciary. And the word “fiduciary”
has been defined as follows: A fiduciary is someone who
has undertaken to act for and on behalf of another in a
particular matter which gives rise to a relationship of
trust and confidence.
When Robert Schlyer met the Palmquists, he told
them [61]that he was a lawyer and he agreed to safeguard
their money. He agreed to serve as a fiduciary to trust
and act on behalf of them. That did not, unfortunately,
happen. And to put it very simply, very humble people
were defrauded by the defendant and his co-schemers,
and the only justice for that victimization is to punish him
for what happened.
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Appendix E
And your Honor will recall that there was a specific
reason for this transaction. In order to acquire funds to
pay the bank -- the FDIC bank -- the defendant and the
co-schemers engaged in this devastating fraud on Kenneth
and Dolores Palmquist. And she wrote the letter that ends
with a very simple call for justice. She asks the Court to
punish these men fairly but sternly.
So, we’re in a position here today, your Honor, where
there has to be some punishment for what Mr. Schlyer
did, and it has to be severe. He and his cohorts caused
immeasurable pain, grief, suffering, and other hardships
when they victimized Mrs. Palmquist and her husband.
They took money from a couple who are great
grandparents and caused a loss of approximately $227,000,
which represented their nest egg. And at the age of 88 and
86, they have been caused to live on modest means, which
for them means only Social Security.
And having lived with this case for a number of years,
I went to their home a number of times. They had a [62]
modest home in a modest suburb. And I’ve gone to their
new home, which is the one-bedroom apartment mentioned
in her letter. Mrs. Palmquist talked about being forced to
sell the family cottage that they had and the home of 58
years. The home that I visited. The toll to these people
has been significant monetarily, has been devastating;
but, it goes beyond that.
You have heard how this fraud caused Mrs. Palmquist
to think about causing harm to herself. Thankfully, she
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Appendix E
did not hurt herself. But that is something you can take
into account when you think about the aggravation that
was caused by this conduct.
The Palmquists deserve justice. And you should
punish Mr. Schlyer fairly but sternly, as Mrs. Palmquist
asks.
Now I will point out some facts that I think are very
important here when you address the aggravation in this
case.
First and foremost, as a lawyer, it was Mr. Schlyer
who personally took the $300,000 cashier’s check from
Mrs. Palmquist. And your Honor will remember that the
check was written out to him as attorney at law, trustee.
He represented to them that he was serving as their
trustee or, to use the word I mentioned before, as their
fiduciary. And he then gave them documents that were
false, fraudulent and worthless, because he knew that he
had just appeared as an attorney in the foreclosure lawsuit
earlier that month and he [63]was negotiating with the
bank about the fate of the loan.
He gave them the documents, which were fabricated.
They offered an interest as security for this investment
that he knew could not happen. And, then, he deposited
-- he personally deposited -- their money into his checking
account the very same day that he took it. And, then, he
spent the money on himself. Certainly, he didn’t spend all
of it. He spent a portion of it. But what’s ironic and sad is he
even spent some of it on his ARDC dues. His dues for the
56a
Appendix E
Attorney Registration and Disciplinary Commission that
we all have to pay in January before our licenses continue.
And, then, he did the more significant thing of
diverting the money to his co-schemer. He opened the
bank account as a signatory with Brian Bodie. And your
Honor will recall that the evidence showed that that bank
account at Park National Bank had Brian Bodie listed
as the president of the Aurora Development Trust and
Robert Schlyer listed as the vice president. And he opened
this account, and then he wrote a check to Amcore Bank
using the Palmquist money. And, then, he continued to
negotiate the forbearance when he knew that no plans
had been approved for rezoning the land.
So, what was the consequence of that? Well, we
know the consequence to the Palmquists. There was
consequence, though, to the bank, as well. And your
Honor’s in the unenviable position of determining how
much loss there was to [64]the bank.
And I’ve heard your Honor’s thoughtful comments
from earlier that, certainly, Mr. Schlyer may not
necessarily be responsible for the full amount of the
restitution here or the full amount of the loss. But I will
say this: As an attorney, as somebody who should know
better, as somebody who has been trained in the law
and is expected to adhere to more higher ethical and,
frankly, moral standards, the same standards that all of
these character witnesses talk about, he should not have
negotiated and passed along the false documents to the
bank. It caused a loss.
57a
Appendix E
THE COURT: What about Mr. Bischoff’s argument
about the role of the bank itself?
I do not think, given the government’s report, that
you can dispute that Amcore Bank, at a minimum, had
its head in the sand -MR. RAMAN: It may well -THE COURT: -- and their conduct -MR. RAMAN: And, your Honor, I -THE COURT: -- their conduct certainly contributed
to this.
MR. RAMAN: Their conduct -- and I’ll let your Honor
be the judge of that. I will say that we have never said that
Amcore Bank is blameless. We have never suggested that
there should be no consideration to other factors which
you may take [65]as mitigating.
But I will say this: It’s a form of blaming the victim.
The victim can certainly have some role, but to suggest
that that excuses Mr. Schlyer’s conduct from passing along
documents that were false and doing the other fraudulent
activities, that would not be right.
THE COURT: What about in terms of restitution
under U.S. vs. Litos, the 2017 Seventh Circuit opinion
that talks about -- not in terms of loss, which is why I
found the amount of loss that I did; but, it talks about in
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Appendix E
terms of restitution and what the Court should consider
in ordering restitution where the defendant bank is not
blameless, as we’ll say.
MR. RAMAN: Yes, your Honor. And I recall that
decision. I think it was Judge Posner -THE COURT: It was.
MR. RAMAN: -- who wrote that opinion. And it is a
difficult decision to reconcile.
But I will say that that -- I believe I cited other
precedent. Your Honor can -- I think your Honor was
looking at it in the right framework. Restitution is
different from loss.
THE COURT: Absolutely.
MR. RAMAN: And, so, your Honor can certainly
consider that when determining what the restitution is
that [66]would be appropriate for this defendant’s actions.
We didn’t hear from the Paces at trial, but Mrs. Pace
felt compelled to write a letter to the Court. Your Honor
has received that. I will simply say that, you know, it would
be incorrect of us, the government, to not pass on victim
impact letters, whether we believe the victim or not. And
in this case, I believed Mrs. Pace.
THE COURT: Do you dispute that they inflated the
income on their loan applications?
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Appendix E
MR. RAMAN: No. And, in fact, I mean, as much as I
respect Mr. Bischoff’s efforts in this case, I believe it was
in our discovery; and, I believe it was in our 302s.
There was never any hiding or concealment, as has
been suggested. If anything, we have provided more here
than meets the eye and have never withheld anything, as
was suggested.
The reality here is they suffered a loss; they wanted
to address the Court as victims; and, they felt, as your
Honor saw from the trial testimony of Ms. Janice Pace,
that they were victimized by this defendant, as well as
Mr. Bodie and Mr. LeBeau.
Now, I will get back, though, to the most affected
victim here, is the story of the Palmquists when I ask
your Honor to sentence this defendant. Because they’re
the very real people that I said, at least in my experience,
jumped out . . .
*
*
*
*
[70] . . . that situation is one of them.
I thank the Court for their time in dealing with this
situation the way you have and as fairly as possible. And
I put my faith in God and to the bench and what’s going
to happen next. So -THE COURT: Thank you, Mr. Schlyer.
60a
Appendix E
In sentencing you, the Court looks to the factors in
Section 3553(a); and, the sentence the Court is going to
impose will be sufficient, but not greater than necessary,
to comply with the purposes behind those factors.
This is a unique case that has factors on both sides.
So, I am going to take my time going through those.
The first factor: The nature and circumstances of
the offense. This is a serious offense with a significant
impact on a vulnerable victim and older couple whose life
savings were taken away, and they are still today feeling
the impact of that. And I am going to order restitution to
the Palmquists as part of my order.
And, Mr. Schlyer, I certainly hope you come through
with that, because your conduct contributed to their
financial ruins.
I understand that your co-schemers, LeBeau and
Bodie, are the ones who brought them in and had the
relationship. And restitution has been ordered at least as
to Mr. Bodie -- or Mr. LeBeau, who has been sentenced.
And I am sure Judge [71]Gettleman will order it as to Mr.
Bodie, as well. But your conduct had a significant, real
impact on their lives.
I am troubled that you were an attorney at the time,
and that you used your role as an attorney to carry out the
fraud. It is offensive, and it is offensive to the profession.
Having said that, I am also troubled that this conduct
is over a decade old, and that the indictment was not
61a
Appendix E
brought until almost a decade after it happened, for
whatever reason. I am not -- I do not know why. It does
not matter why. But the fact that it was brought almost
a decade later, a little over a decade after the conduct
happened, is concerning to the Court. And I will touch on
how that impacts the 3553 factors in a moment.
I am also troubled by the role of the bank here. I have
read Mr. Zacharias’ report and am putting weight into
that. It was really not contested.
I have read the government’s report that you
mentioned, that you have submitted to the Court, and
I -- it is clear that the bank here, as I said before, had
at least its head in the sand. They had clear signs that
fraud was going on here and did not do anything about
it. Part of it may have been the time. It does not matter.
The bank’s role here is problematic to the Court, and the
reports certainly support that.
[72]I do note that, as you have indicated, Mr. Bischoff,
that Mr. Schlyer’s role in this over a decade ago was rather
limited. Significant. And he did take the $300,000 check
from the Palmquists and kept some of the money for
himself. But it was, in terms of the scheme itself, limited.
The history and characteristics of Mr. Schlyer.
This is your first offense. It is a non-violent offense.
You have no criminal history. And I am well aware that
it took place over a decade ago.
62a
Appendix E
I do note your community support here in the
courtroom, and I am taking at face value and certainly
considering the comments of the individuals who came up
here and spoke on your behalf.
It is clear to me from what has been submitted that you
had a challenging childhood. You were able to overcome
those challenges. What is very telling to the Court, and
what separates you from many defendants who come
before the Court, Mr. Schlyer, and what is very reflective
of your character and significant to the Court in imposing
sentence today, is the acts that you have undertaken as
an adult.
Mr. Johnson’s comments. I see what happens to youth
who are arrested at an early stage and do not get on the
right track. When Mr. Johnson says that you saved his
life -- while possibly physically you did, but you certainly
saved the quality of his life in a manner and through
actions that are [73]telling about your character because,
as Mr. Johnson indicated, you did this without having any
benefit to yourself, without expecting anything in return.
The charity that you have run and the money that you
have raised for charity, the acts that you have done for
your friends, what is telling to the Court and, as I said,
what really distinguishes you from many defendants who
come before the Court, is I see good acts that are done
once defendants are caught; and, they know they are going
to be in this position some day and, so, they start on the
good acts.
63a
Appendix E
You have been engaging in these good acts, which are
reflective of your character, throughout your adult life,
before knowing that you would be facing the Court some
day, which is telling to the Court about your character
and, also, very relevant and tells me that the public does
not need further protection from you, and that you do not
need further deterrence from the Court.
Also significant to the Court is your close bond with
your child who has learning disabilities and the impact of
any long period of imprisonment that that would have on
him, and a very serious impact.
The Paces. I agree with Mr. Bischoff’s assessment in
his supplemental position paper on sentencing that their
conduct would not qualify as relevant conduct based on
what is before the Court. And it is not within the scope
of the [74]criminal activity that the defendant jointly
undertook in this case.
I am also troubled by the fact that the Paces inflated
their income on the loan application and engaged in fraud
themselves. But I am not considering that in imposing
sentence here, because I do not think it is appropriate.
I know you did not address this, Mr. Raman, but I
am troubled and disappointed that the government is
relying on a statement from Mrs. Whelan to enhance the
defendant’s sentence. What troubles me is -- and it is not
disputed and the defendant has submitted the records
from the ARDC -- that in 1997, she was suspended for 18
months for essentially stealing from clients; and, then,
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Appendix E
in 2005, she was disbarred for collecting Social Security
payments that were meant for her mother after her
mom had passed away. Two issues that go directly to the
credibility and truthfulness of an individual.
I am not putting any weight on the submission and
the comments of Ms. Whelan in imposing sentence today.
I do note that a consequence to Mr. Schlyer has also
been that he has lost his law license, and that will have
an impact.
The sentence the Court is going to impose will reflect
the serious nature of this offense. The real significance
here is the impact this has had on the Palmquists, and the
sentence is going to help address that and [75]hopefully
get some of the money back to them.
Promote respect for the law, for all of the factors that
I have indicated. And part of promoting respect for the
law is sentencing somebody who comes before the Court
after a decade of engaging in the criminal conduct.
Justly punishing the defendant. Affording adequate
deterrence. As I have indicated, I am not worried about
deterring Mr. Schlyer from future crimes, for all of the
reasons I have indicated.
And I agree with you, Mr. Bischoff, that I think -- and
the case law that you have provided to the Court -- that
an over-ten-year delay weakens the impact of general
deterrence of imposing any kind of a harsh sentence.
65a
Appendix E
Protecting the public from further crimes by you is not
a relevant fact here, nor is providing you with educational
or vocational training.
Mr. Bischoff, have I addressed all of your arguments,
or is there anything else before I impose sentence that you
would like me to either address or elaborate on?
MR. BISCHOFF: No, your Honor.
THE COURT: I asked you two questions there. So,
just so the record is clear, have I addressed all of your
arguments?
MR. BISCHOFF: You have.
THE COURT: Okay.
[76]Is there anything else you would like me to
elaborate on?
MR. BISCHOFF: No, your Honor.
THE COURT: One other factor. Your disparity
argument.
I am not convinced by your disparity argument in
imposing an abuse of a position of trust in the Guidelines.
The defendant was a lawyer at the time he did that. That
is a classic case for imposition of abuse of a position of
trust. Whether the government argued it or what Judge
Gettleman did with respect to the co-schemer are separate
arguments.
66a
Appendix E
But what is a disparity argument is the sentence
that Mr. LeBeau received before Judge Gettleman. His
Guidelines were higher than Mr. Schlyer’s; he also got
obstruction of justice, which is a significant factor; and,
he only received 36 months. So, I am considering that in
imposing sentence here.
I am also -- the final factor, under history and
characteristics -- considering, and that has an impact on
the Court, is that, again, unlike many defendants who
come before the Court, Mr. Schlyer actually does seem
remorseful for what he did and what happened to the
Palmquists here.
For all of those reasons, and pursuant to the
Sentencing Reform Act of 1984, it is the judgment of the
Court, Mr. Schlyer, that you are hereby sentenced to one
day [77]considered time served for the time you spent
with the marshals being processed, with a two-year term
of supervised release -- and the one day is on Counts 1
through 3, to run concurrent -- with a two-year time of
supervised release, to run concurrent on each of those
counts, with a special condition of six months of home
detention with electronic monitoring, where you must pay
for the electronic monitoring and you must have the phone
as is directed and required by Probation.
Within 72 hours of today, you must report in person
to the Probation Office in this district.
I am also ordering that you pay restitution to the
Palmquists in the amount of $227,000. You are jointly
and severally liable for that restitution payment with
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Appendix E
your co-schemers, LeBeau and Bodie, from Docket No.
14 CR 488. And I am ordering you a year from today, Mr.
Schlyer -- because I hope that you are serious -- or your
lawyers are serious -- that you are going to find a way to
make this restitution or start paying back this restitution.
As part of your sentence and a condition of your
supervised release, I am ordering that you send a letter
to the Court a year from today, April 19th of 2019, telling
me what you have paid back to them. Whether I am in
this position or a different position, I will still be in this
building. So, that letter is a condition of your supervised
[78]release.
Under U.S. vs. Litos, 847 F.3d 906, a Seventh Circuit
2017 opinion, for the reasons I indicated a moment ago, I
am not ordering restitution against -- as to Amcore Bank
from Mr. Schlyer.
I am not making any comment on what Judge
Gettleman should do with respect to the co-schemers. This
is just based on the evidence that is presented here, what
the Court has seen, what I have put in. If he chooses to
impose restitution on Amcore Bank, that is up to Judge
Gettleman. I am only basing it on what is before this Court.
You must pay a special assessment of a hundred
dollars on each count of conviction, for a total of $300, that
is due immediately.
While on supervised release, you shall not commit
another federal, state or local crime; you shall not
68a
Appendix E
unlawfully possess a controlled substance; and, you shall
submit to the collection of a DNA sample to the extent one
is required by the law.
In addition, you must make restitution under Section
3556, as I have just indicated, to the Palmquists.
And, Mr. Raman, if you would, please, provide Katie
with the address for that.
You shall seek and work conscientiously at lawful
employment, or pursue conscientiously a course of study or
****
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.