Appendix — Krilich v. United States

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APPENDIX A

IN THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

No. 02-1445

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

V.

ROBERT R. KRILICH, SR.,

Defendant-Appellant.

Appe«: from the United States District Court for the

Northern District of Illinois, Eastern Division

No. 94 CR 419 David H. Coar, Judge

Submitted September 11, 2002°

Decided December 31, 2002

Before

Hon. FRANK H. EASTERBROOK, Circuit Judge

Hon. KENNETH F. RIPPLE, Circuit Judge

Hon. TERENCE T. EVANS, Circuit Judge

* This appeal has been submitted under Operating Procedure 6(b) to the

panel that decided prior appeals in the case. The panel has concluded that

additional oral argument is unnecessary.

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ORDER

This is the fourth appeal we have considered in a criminal

prosecution commenced eight years ago. The last time the case

was here, we concluded that the evidence did not warrant any

reduction in sentence under U.S.S.G. § 5H1.1 or § 5H1.4. After

resolving other contentions, we remanded the case to the district

court “with instructions to impose a sentence in the range of

135 to 168 months. United States v. Krilich, 257 F.3d 689, 694

(7th Cir. 2001). The district court held a hearing to select an

appropriate sentence from this range. The final sentence, at 135

months, is the most favorable outcome that our mandate

permits. Yet Krilich has appealed again, arguing that his

sentence should have been lower.

Our remand did not permit the presentation of evidence or

legal theories supporting a different range. The lawful range had

been established on the basis of evidence and arguments

presented during multiple evidentiary hearings and appeals. We

held that a sentence must be imposed from the range 135-168

months. That decision became final when the Supreme Court

denied Krilich’s petition for certiorari. 122 S. Ct. 1175 (2002).

New arguments presented after a decision of the kind we

rendered do not justify departure from the mandate. See Barrow

v. Falck, 11 F.3d°729 (7th Cir. 1993). A change of law after the

rendition of an appellate opinion sometimes justifies revisiting

decided issues, but Krilich does not point to any favorable

change of law. Consequently the district judge had no authority

to impose a sentence lower than the one Krilich received.

AFFIRMED

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APPENDIX B

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

Case Number: 1:94-cr-00419

Title: USA v. Krilich

Assigned judge: Honorable David H. Coar

MINUTE ORDER of 2/15/02 by Hon. David H. Coar as to

Robert Krilich: Defendant’s motion for downward departure

from guidelines based on defendant’s changed medical

condition is denied [443-1] for the reasons stated in the attached

statement of reasons. (Enter statement of reasons) Mailed

notice.

This docket entry was made by the Clerk on February 20, 2002.

ATTENTION: This notice is being sent pursuant to Rule 77(d)

of the Federal Rules of Civil Procedure or Rule 49(c) of the

Federal Rules of Criminal Procedure. It was generated by

ICMS, the automated docketing system used to maintain the

civil and criminal dockets of this District. If a minute order or

other document is enclosed, please refer to it for additional

information.

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APPENDIX C

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

UNITED STATES OF AMERICA, )

Plaintiff, )

) No. 94CR 419

V. )

) Honorable David H. Coar

ROBERT R. KRILICH, SR. )

Defendant. )

STATEMENT OF REASONS

This matter is before this Court for resentencing of the

defendant Robert R. Krilich, Sr. (“Krilich ) after remand from

the Seventh Circuit of Appeals (U.S. v. Krilich, 257 F.3d 684).

This is the second time that Krilich has been ordered

resentenced. See U.S. v. Krilich, 159 F.3d 1020 (7th Cir. 1998).

The mandate of the Court of Appeals was clear: “the case is

remanded with instructions to impose a sentence in the range of

135 to 168 months. Nonetheless, Krilich filed a new motion

for a downward departure “based on Defendants Changed

Medical Condition. At the last resentencing hearing , this Court

concluded that Krilich had four major physical infirmities:

chronic cardiovascular disease; chronic peripheral vascular

disease with hypertension; obstructive pulmonary disease: and

lower back pain of lumbar and lumbosacral origin.

Defendant’s “changed medical condition relates to the

following series of events. Beginning on August 10, 2001,

Krilich complained to Bureau of Prison (“BOP ) staff about

abdominal pain, nausea, vomiting, and inability to hold down

liquids and medication. On August 14, 2001, he was taken by

Sa

ambulance to Samaritan Hospital of the Federal Medical Center

of Lexington, Kentucky. On August 15, 2001, Krilich

developed atrial fibrillation. There is some dispute as to

whether his heart resumed normal sinus rhythm spontaneously

or as a resuit of treatment; it is clear that a normal rhythm was

achieved. Later that day, the cause of the nausea and vomiting

was determined to be a bowel obstruction, which was removed

by suction. Dr. Joseph Messer, a cardiologist, submitted an

affidavit in support of the motion for downward departure, and

he opined that, as a result of the atrial fibrillation event on

August 15, 2001, (which Messer diagnosed as acute from

reviewing the medical records), Krilich has developed

“underlying electrical instability of his heart and he is at

greater risk of recurring atrial fibrillation and other cardio

arrhythmias.

In its most recent remand, the Seventh Circuit expressed

surprise that this Court based its finding as to Krilich’s heart

ailments on the testimony of a psychiatrist. Perhaps to mute that

concern, Krilich submitted the affidavits of two cardiologists,

Drs. Messer and Fintel. Dr. Fintel testified at the sentencing

hearing that he believes that Krilich suffers from coronary

artery disease based on his risk factors and the symptoms

reported in the medical records. One of the difficulties in

getting an accurate and complete diagnosis is that early in his

confinement the BOP was slow to recognize that Krilich had a

possible coronary problem requiring diagnostic procedures.

After they moved to administer the necessary tests, Krilich

balked at having invasive testing done. Thus, in an affidavit, Dr.

Tran, a staff physician at the BOP, reported that while Krilich

was at the federal medical facility in Rochester, Minnesota, he

was evaluated by a cardiologist from the Mayo Clinic who

recommended that Krilich lose weight, work on controlling his

hyperlipidemia and hypertension with dietary and lifestyle

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changes and continue with a cardiac assessment including a

coronary angiogram. Krilich refused to continue the assessment.

Dr. Rubin, the psychiatrist who testified at the previous

sentencing hearing, also testified at this hearing. He views

Krilich’s refusal to cooperate with his diagnostic and treatment

regimes as symptoms of major depressive disorder. His

psychological condition complicates Krilich’s physical

problems in two ways. First, the depression inhibits his

compliance with treatment regimes for both the depressive and

coronary conditions. Rubin interprets frequent references in the

medical notes to Knilich’s irritability and obstinacy as

symptoms of his depression. More significantly, Rubin cites to

several studies identifying a significant increase in risk of

mortality and coronary disease in patients who suffer from

major depression.

Rubin observed that although Krilich’s depression predates

his incarceration, the stress of being in prison has exacerbated

the problem, and the depression inhibits his ability to comply

with the prescribed treatment programs. The result is that

Krilich’s depressive condition is not improving and when

combined with his coronary problems, he faces at an increased

risk of a coronary incident and of death. Rubin was also critical

of the medication prescribed by the BOP. When asked whether

or how Krilich’s condition would be different outside prison,

Rubin opined that Krilich would suffer less prison-induced

stress on the outside and that he would have the support and

encouragement of his family so that he would be likely to

increase his compliance with the treatment regimen.

All three of Krilich’s experts took issue with the BOP’s

medical response to Krilich’s August 10, 2001 bout of intestinal

blockage. Messer and Fintel felt that because of his prior history

of angina and coronary problems, Krilich should have been

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taken to a hospital right away and his heart should have been

monitored throughout the incident. Rubin took issue with the

fact that between August 10 and August 15 or 16 when Krilich

was dehydrated and vomiting frequently, his medication for

depression was administered orally. According to Rubin, the

inability to digest this medication properly exacerbated his

depression and his risk of a coronary event. Rubin’s concerns

about the link between major depression and risk of coronary

disease were echoed by Fintel. Several published studies were

offered documenting the statistical significance of this

combination.

In its July 16, 2001 decision, the Seventh Circuit discussed

the interplay between U.S.S.G. § 5H1.1 and § 5H1.4 and the

showing that must be made to warrant a departure under these

provisions. As articulated by the Court of Appeals, to receive a

departure under § 5H1.4, a defendant must demonstrate an

“extraordinary physical impairment. Paraphrasing the

requirements, this showing can be made in one of four ways.

The defendant must prove by a preponderance of the evidence

that:

|) his bedridden condition is such that the physical condition

effectively does the imprisoning; or

2) through competent medical testimony, the defendant needs

constant care (which presumptively is not available ina prison

context); or

3) the care that the defendant needs will not be available to him

should he be incarcerated; or

4) the ailment is substantially more dangerous for prisoners than

nonprisoners such that “imprisonment would shorten the

defendant’s life span, making a given term a more harsh

punishment than the same term for a healthy person.

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Krilich clearly did not meet the requirements of (1) and (2)

above. He is not bedridden. In fact, Dr. Fintel testified that

Krilich has no limitations on everyday life activities such as

walking, eating, brushing his teeth. He has temporary

restrictions from doing prison work, but he is hardly bedridden.

Outside of prison, his condition would not be characterized as

effectively imprisoning him. Nor does he need constant care.

The best that can be said from Krilich’s evidence in this regard

is that he requires frequent medical followup.

The thrust of Krilich’s evidence in support of his motion is

addressed to items (3) and (4). Krilich’s theory is that as a result

of the convergence of his major depression, his coronary

condition, and other risk factors, he faces a greater risk of future

coronary incidents (and death) than persons without this

combination. If this was all that he offered, he would lose,

because these conditions would exist whether he was in prison

or out. For example, Dr. Rubin testified that the depression

predated his incarceration. Rubin attempts to provide the

necessary link by saying that the stress of prison both

exacerbates the depression and makes it difficult to treat

because the depression causes Krilich to not follow the

treatment regime prescribed to control and improve the

depression. Outside of prison, Rubin posits, Krilich could be

monitored more closely and the support of his family would

make him more inclined to take his medications. Thus, Rubin

concludes that unless the depression improves, the studies show

that Krilich is more at risk of death because of the combination

of major depression and coronary issues, and his life expectancy

will be less than someone without major depression and

coronary problems. Because as he sees it, the depression has not

and will not improve in prison and will improve if he is

released, he meets requirement (4). The problem with this

approach is that Rubin’s assumption that the depression will

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improve outside of prison either because of the removal of

prison related stress and/or a more diligent adherence to

treatment regimens is untested. Moreover, outside of prison

Krilich would be able to indulge his taste for alcohol and cigars,

which are also risk factors. Rubin did not explain the effect of

this trade-off in his overall risk profile of Krilich.

It is far from clear that Krilich will be more compliant with

his treaters outside of prison. For example, there is no evidence

that he was compliant before he went to prison (when he was

presumably less depressed) than he was after he was

incarcerated. If he was released and remained noncompliant,

Rubin conceded that the option to force him to take medication

is limited. This Court cannot conclude that Krilich meets

requirement (4).

As to requirement (3), Dr. Fintel testified that the August

2001 incident involving a bowel obstruction that led to atrial

fibrillation demonstrates that the level of monitoring,

coordination, and response necessary to provide care to

someone with Krilich’s condition cannot be provided by the

BOP. In order to make that argument, Krilich must extrapolate

from the August 2001 incident, a conclusion that if faced with

a future medical incident the BOP will react in a similar

manner. Taken ina light most favorable to Krilich, the evidence

indicates that the BOP botched Krilich’s treatment on that

occasion. The staff failed to diagnose the bowel obstruction

quickly enough, in light of his complaints symptomatic of

coronary problems, failed to monitor his heart quickly and

closely. Does it follow that this negligent behavior is endemic?

Krilich offers no credible evidence that the BOP’s response was

anything other than one act of negligence. Take away the

assumption of error and what is left is a disagreement among

medical providers about the proper course of treatment. Fintel

did not testify that Krilich needed care of a type and degree that

the BOP is incapable of providing. At best, he said that in this

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August 2001 incident, the BOP should have done better. On the

record, Krilich has not carried his burden as to requirement (3).

For these reasons, the motion for downward departure is

denied.

Enter:

/s/

David H. Coar

United States District Judge

Dated: February 15, 2002

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APPENDIX D

IN THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

UNITED STATES OF AMERICA, Plaintiff-Appellee,

Cross-Appellant,

Vv.

ROBERT R. KRILICH, Defendant-A ppellant,

Cross-Appellee.

Nos. 97-2721, 97-2977.

Argued April 7, 1998.

Decided Oct. 27, 1998.

Rehearing and Suggestion for Rehearing En Banc Denied

Jan. 26, 1999."

Before EASTERBROOK, RIPPLE, and EVANS, Circuit

Judges.

EASTERBROOK, Circuit Judge.

A golfer’s dream came true for Andy Sarallo. On June 19,

1985, Andy lined up at the ninth tee at Country Lakes Country

Club and struck the ball; an observer on the ninth green pulled

Andy’s ball out of the hole. Andy’s foursome jumped up and

down and shouted for joy. Because the ninth hole at Country

Lakes was the subject of a hole-in-one contest that day, Andy

had just won his choice of a 193] Cadillac or a check for

$40,000!

‘ Judge Flaum did not Participate in the consideration of the suggestion for

rehearing en banc. Judge Ripple and Judge Rovner voted to grant rehearing

en banc. Judge Ripple voted to grant rehearing.

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A hole-in-one is quite a thrill because it happens so

infrequently perhaps one chance in 40,000, rarer than a 300

game in bowling. But Andy’s chances were close to 100%,

because his father was mayor of Oakbrook Terrace, Illinois, and

the mayor’s support was needed for a bond offering to finance

an apartment complex to be built by Robert Knlich who

sponsored the contest, pulled the ball out of the hole, and

became the defendant in this criminal case. Krilich and Mayor

Sarallo agreed to use the golf tournament as the vehicle for a

payoff. Krilich palmed one of Andy’s golf balls, put his hand

into the cup, and displayed the ball. Delivering the bribe in this

way enabled Krilich to shift the cost to the National

Hole-In-One Association, which provided insurance. Thus fraud :

and bribery were coupled. Krilich admitted this scheme in a

proffer to the United States Attorney, and he also conceded

bribing the mayor to alter the zoning of some land and

orchestrating the extraction of funds from municipal bond

offerings. The bonds Industrial Revenue Bonds, interest on

which is not taxable to the investors were sold to finance

Krilich’s developments. Because the bonds were limited to

specific projects (tax exemption depended on that link), the

funds were placed in trust, and the trustee banks were to release

the money only to reimburse expenses associated with the

projects. Preferring to use the money elsewhere, such as for

payments on his yacht, Krilich instructed vendors to falsify their

invoices and had those bogus invoices sent to the banks for

payment out of the trust accounts.

Krilich was convicted of conspiracy to violate the Racketeer

Influenced and Corrupt Organizations statute, 18 U.S.C.

§ 1962(d) (RICO), and a fraud statute, 18 U.S.C. § 1014.

Krilich maintains on appeal that the district court erred by

permitting the prosecutor to use some of the proffer’s contents

at his trial, that 18 U.S.C. § 1014 does not apply to his conduct,

Coe lh IT SETS TR: eee

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_ that the instructions improperly removed some issues from the

jury’s consideration, and that he is not criminally liable for

other reasons.

The United States argues in a cross-appeal that Krilich’s

64-month prison sentence is too low.

Statements made during plea negotiations are inadmissible,

Fed.R.Evid. 410; Fed.R.Crim.P. | I(e)(6), but a defendant may

waive the right to prevent their use. United States v.

Mezzanatto, 513 U.S. 196 (1995). The agreement Krilich signed

contains a conditional waiver:

[S]hould [Krilich] subsequently testify contrary to

the substance of the proffer or otherwise present a

position inconsistent with the proffer, nothing shall

prevent the government from using the substance of the

proffer at sentencing for any purpose, at trial for

impeachment or in rebuttal testimony, or in a

prosecution for perjury.

By authorizing the prosecutor to use his statements if he

should contradict himself, Krilich made his representations

more credible and thus strengthened his hand in negotiations.

See Mezzanatto, 513 U.S. at 207: Eric Rasmusen, Mezzanatto

and the Economics of Self-Incrimination, 19 CARDOZO L. REV.

1541 (1998). A prosecutor may be reluctant to negotiate; what

has the defendant to offer? A statement that shows how the

defendant’s aid could assist the prosecutor in other cases (or

lead to the appropriate sentence in this one) may get

negotiations under way and set the stage for a favorable bargain.

But a prosecutor needs assurance that the defendant is being

candid. A conditional waiver of the kind Krilich si gned tends to

keep the defendant honest, which makes the proffer device

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more useful to the both sides. For this strategy to work the

conditional waiver must be enforceable; its effect depends on

making deceit costly. We therefore reject the argument that

waivers should be construed against prosecutors; that might

help Krilich today but would hinder bargaining for other

defendants tomorrow. We give this waiver neither a stingy

reading nor a generous one, but a natural reading, which leaves

the parties in control through their choice of language.

This agreement allowed the prosecutor to use the proffer as

evidence if Krilich were to “testify contrary to the substance of

the proffer or otherwise present a position inconsistent with the

proffer. Introduction of the statements thus was proper if either

his testimony, see United States v. Goodapple, 958 F.2d 1402,

1409 (7th Cir.1992), or evidence that he presented through the

testimony of others, see United States v. Richardson, 130 F.3d

765, 778 (7th Cir.1997); United States v. Dortch, 5 F.3d 1056,

1068 (7th Cir.1993), contradicted the proffer. Because Krilich

did not testify, only the second clause is at issue. Krilich wants

us to limit this clause to evidence presented through his own

witnesses; evidence obtained by cross-examination of the

prosecution’s witnesses does not count, he insists. But that

would be an unnatural reading of the language. Evidence is

evidence, whether it comes out on direct or cross-examination.

One can “otherwise present a position through arguments of

counsel alone, so it is easy to see how a position can be

“presented by evidence developed on cross-examination and

elaborated by counsel. When the prosecution’s witnesses are

inclined to accommodate the defense, as many were in this case,

developing one’s position through cross-examination is

especially attractive.

The prosecutor’s position about the effect of the language

is as unrealistic as Krilich’s. According to the prosecutor,

putting on any defense permits the United States to introduce

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~

the statements. A plea of not guilty followed by passivity at trial

is about all the defense. can do, the prosecutor

contends though, when pressed at oral argument, the

prosecutor allowed that Krilich could have avoided introduction

of the statements if he had limited his cross-examination to “the

credibility, weight and sufficiency of the government’s evidence

in ways that were extrinsic to the facts of the case. On this

understanding, asking a witness on cross-examination whether

he had been convicted of perjury would be “extrinsic to the

facts of the case, but asking the witness whether he had been

in a position to see what happened at the ninth green on June 19

would open the door to the use of the proffer. Such a distinction

makes sense of neither the language in the contract nor the

reason why the waiver was conditional. The prosecutor wanted

to give Krilich an incentive to tell the truth; Krilich wanted

assurance that he could defend himself at trial if bargaining

collapsed (for otherwise he was delivering himself into the

prosecutor’s hands); conditioning the use of the proffer

Statements on the presentation of a position “inconsistent with

the proffer does both of those things only if the judge must

find genuine inconsistency before allowing use of the

statements.

Impeachment of a witness need not be “contrary to or

“inconsistent with a defendant’s admission of guilt in a

bargaining proffer. To take a simple example, the statements “I

faked the hole-in-one on the ninth hole (Krilich, in the proffer)

and “I did not see Krilich palm a golf ball at the ninth hole on

June 19 (a witness, on cross-examination) are not inconsistent.

Investigation via cross-examination of witnesses’ ability (or

willingness) to observe and recount the facts they claim to have

observed therefore could not have justified introduction of the

proffer statements. Millions of people who live in Illinois did

not see. what happened at the ninth green on June 19; others

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who did see what happened may have had reasons to

misrepresent what they saw; proof that a given person who

took the stand at trial was in the set of non-observers (or liars)

is not “inconsistent with the proffer. Statements are

inconsistent only if the truth of one implies the falsity of the

other. The statements “Krilich pulled a palmed ball from the

cup at the ninth hole and “ Krilich wasn’t at the ninth hole

when Andy hit his shot are inconsistent because the former

statement cannot be true if the latter is. This appeal turns on

whether Krilich elicited such inconsistent testimony. The

district judge concluded that he had, and that assessment is not

clearly erroneous.

Several witnesses testified, in response to questions from

Krilich’s attorney, that the ninth hole at Country Lakes Country

Club is close to the clubhouse and easily observed. Krilich

wanted the jury to infer that no one would attempt to fake a

hole-in-one there; that implication is inconsistent with the

proffer. Defense counsel got two witnesses to say that they were

at the ninth hole when Andy hit the shot but didn’t think that

Krilich was at the ninth hole then. This line of

cross-examination was not designed to cast doubt on the

witnesses’ ability to see clearly or suggest that they are not

trustworthy. Their testimony implied that Krilich did not fake

the hole-in-one, contrary to what he admitted in his proffer.

Similarly, in response to evidence that Krilich paid a bribe to

obtain favorable zoning, his lawyer elicited testimony on

cross-examination that no bribe was required because the city

attorney thought the new zoning to be correct. Counsel likewise

led witnesses to testify that the procedures followed for altering

the zoning were not exceptional. Krilich’s attomey also had the’

vice president of his company testify that he was not aware of

any bribes paid to any public official in connection with any

project. The implication was that if someone so close to Krilich

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(and the projects) was unaware of bribes, there must not have

been any. These statements go well beyond casting doubt on the

prosecutor’s evidence; they advance a position inconsistent with

the proffer or so the trial judge sensibly could conclude.

Krilich insists that if the conditional waiver means what we

think it means, then it is unenforceable because involuntary.

Mezzanatto says that waivers of the plea-statement rules are

unenforceable if given “unknowingly or involuntarily (513

U.S. at 210), but this is a far cry from saying that waivers mean

whatever the defendants say they understood them to mean; no

party to a contract has Humpty Dumpty’s power over lan guage

either directly or through the gambit that unanticipated

consequences render the agreement “involuntary. A waiver is

voluntary in the absence of coercion, Colorado v. C onnelly, 479

U.S. 157 (1986); United States v. Brooks, 125 F.3d 484, 492

(7th Cir.1997), and is knowing if made “with a full awareness

of both the nature of the right being abandoned and the

consequences of the decision to abandon it. Moran v. Burbine,

475 U.S. 412, 421 (1986). Krilich does not contend that his

assent was coerced and offers no support for a conclusion that

he didn’t understand the rights that Rules 410 and 1 1(e)(6)

confer. A defendant’s understanding of the consequences of his

waiver need not be perfect; it was Krilich’s understanding of the

rights being relinquished, not of all possible repercussions of

relinquishing them, that made his waiver knowing. See

Colorado v. Spring, 479 U.S. 564 (1987).

One of the racketeering acts supporting Krilich’s RICO

conviction is a bribe of Nicholae Ionescu, Zoning Administrator

and City Engineer of Oakbrook Terrace. F acing troubles with

federal environmental authorities, Krilich asked Ionescu to

supply an affidavit stating that development should be allowed

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to continue. Ionescu signed the affidavit and that afternoon met

with Krilich at a restaurant, where without saying a word

Krilich passed Ionescu an envelope containing $300. Krilich

contends that a “gratuitous after-the-fact payment is

insufficient to prove bribery in Illinois,-whose law controls on

this question.

Illinois does not treat payment before-the-fact as an element

of bribery. See, e.g., People v. Wright, 105 Ill.App.3d 187, 434

N.E.2d 26 (2d Dist.1982). A corporation that pays employees

at the end of the workweek instead of at the beginning does not

give gifts every Friday. Thus Krilich must be arguing that,

because the payment was gratuitous, it could not be a bribe.

That’s a tautology, but whether a payment was “gratuitous is

a question of fact, rightly left to the jury. Krilich believes that

the prosecutor adduced insufficient evidence of illicit intent

behind the payment. But a reasonable jury could infer that this

was a bribe indeed, that Ionescu was on Krilich’s payroll, so

often had he been bribed before. The lack of any comment

during the payoff is strong evidence that this payment was

expected (for lonescu’s part) and offered as compensation for

the affidavit (for Krilich’s).

The indictment charges that Sarallo solicited the hole-in-one

bribe in April 1985. At trial, however, the prosecution elicited

testimony from Terry Pearson, Krilich’s bagman, that the bribe

was solicited in the months preceding April 1984. Everyone

agrees that the hole-in-one bribe was in exchange for Sarallo’s

support in an April 1984 vote regarding the Oakbrook Terrace

bond issue, so the date in the indictment is a blunder. Citing

Stirone v. United States, 361 U.S. 212 (1960), Krilich argues

that the prosecutor, by arguing the new date at trial,

constructively amended the indictment in violation of the grand

ee

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jury clause of the fifth amendment. But charging that an act

occurred on one date and proving that it occurred at a different

time is a classic variance, which does not change the nature of

the crime alleged. United States v. Nicosia, 638 F.2d 970, 976

(7th Cir.1980). Compare Stirone with United States v. Miller,

471 U.S. 130 (1985). Cases such as United States v.

Willoughby, 27 F.3d 263, 265-66 (7th Cir.1994), like Stirone

itself, involved the substitution of one criminal offense for

another; a change of dates does not (the date of acrime is not an

element of the offense). Krilich has not argued that the

difference between the allegations and the proof prejudiced his

ability to defend himself; variance here was harmless. United

States v. Cina, 699 F.2d 853, 858-59 (7th Cir.1983).

IV

Krilich was convicted of fourteen counts of violating 18

U.S.C. § 1014:

Loan and credit applications generally; renewals

and discounts; crop insurance.

Whoever knowingly makes any false statement or

report, or willfully overvalues any land, property or

security, for the purpose of influencing in any way the

action of the Farm Credit Administration, Federal Crop

Insurance Corporation or a company the Corporation

reinsures, the Secretary of Agriculture acting through

the Farmers Home Administration, the Rural

Development Administration, any Farm Credit Bank,

production credit association, agricultural credit

association, bank for cooperatives, or any division,

officer, or employee thereof, or of any regional

agricultural credit corporation established pursuant to

law, or a Federal land bank, a Federal land bank

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association, a Federal Reserve bank, a small business

investment company, a Federal credit union, an insured

State-chartered credit union, any institution the accounts

of which are insured by the Federal Deposit Insurance

Corporation, the Office of Thrift Supervision, any

Federal home loan bank, the Federal Housing Finance

Board, the Federal Deposit Insurance Corporation, the —

Resolution Trust Corporation, the Farm Credit System

Insurance Corporation, or the National Credit Union

Administration Board, a branch or agency of a foreign

bank (as such terms are defined in paragraphs (1) and

(3) of section I(b) of the International Banking Act of

1978 [12 U.S.C. § 3101(1) and (3) ] ), or an

organization operating under section 25 or section

25(a) of the Federal Reserve Act, upon any application,

advance, discount, purchase, purchase agreement,

repurchase agreement, commitment, or loan, or any

change or extension of any of the same, by renewal,

deferment of action or otherwise, or the acceptance,

release, or substitution of security therefor, shall be

fined not more than $1,000,000 or imprisoned not more

than 30 years, or both. The term “State-chartered credit

union includes a credit union chartered under the laws

of a State of the United States, the District of

Columbia, or any commonwealth, territory, or

possession of the United States.

Krilich’s agents made the false statements so that he could

tap bond proceeds held in trust by banks. He argues that this

provision applies only to statements made to obtain loans or

other extensions of credit; because the withdrawals of the trust

funds were not lending transactions, the statute was not

violated, he submits. United States v. Devoll, 39 F.3d 575,

579-80 (5th Cir.1994), supports this contention, but this court

2la

and at least two more have applied § 1014 to transactions other

than loans. United States v. Tucker, 773 F.2d 136, 139 (7th

Cir.1985); United States v. Yung Soo Yoo, 833 F.2d 488 (3d

Cir.1987); United States v. Bonnette, 781 F.2d 357, 366 (4th

Cir.1986). Tucker affirmed a conviction of a con artist who

forged shipping documents that led a bank to permit a draw

against a letter of credit; so far as the opinion reveals, the letter

of credit was fully funded and the only loser was the would-be

purchaser. See also United States v. Erskine, 588 F.2d 721 . Fan

(9th Cir.1978) (Kennedy, J.) (§ 1014 applies to “a loan or one

of the other transactions listed in the statute ). Krilich ignores

this adverse precedent but apparently wants us to overrule

Tucker in order to follow Devoll.

Krilich faces an uphill battle. The text of the statute is

straightforward and broad: it applies to “any statement made

for the purpose of influencing in “any way the action of “any

of the covered institutions in “any application. Krilich caused

vendors to make false statements in applications presented to

federally insured banks. To overcome § 1014’s breadth Krilich

relies on the title of the section, specifically the phrase “{lJoan

and credit applications generally. The title, according to

Krilich, informs the reader that the statute applies only to

applications for loans or credit, and not to applications for funds

held in trust. Yet if the title limits the statute’s breadth, then

Krilich might as well argue that because his statements were not

made in connection with “crop insurance the statute does not

apply to them. Although a statute’s title can inform the

understanding of ambiguous text, it does not “limit the plain

meaning of the text. Pennsylvania Department of Corrections

v. Yeskey, 524 U.S. 206 (1998) (quoting from Trainmen v.

Baltimore & Ohio R.R., 331 U.S. 519, 528 (1947)). This text is

not ambiguous, and only last year the Supreme Court reminded

us not to add elements to § 1014. See United States v. Wells,

22a

519 U.S. 482 (1997) (materiality is not mentioned in § 1014, a

“natural reading of § 1014 would not make it an element, and

therefore the prosecutor need not establish that the false

statement is material to the financial institution’s decision).

The drumbeat of “any in § 1014 is not the only reason to

conclude that it applies to transactions other than loans (and

crop insurance). It deals with misstatements to “a Federal

Reserve bank, . . . the Office of Thrift Supervision, . . . the

Federal Housing Finance Board, the Federal Deposit Insurance

Corporation, the Resolution Trust Corporation, the Farm Credit

System Insurance Corporation, [and] the National Credit Union

Administration Board, among others. None of these

institutions makes loans (or underwrites crop insurance); and

although one could quibble with this assessment by saying that

the discount activities of the Federal Reserve and some of the

operations of the FDIC (or RTC) as receiver of failed financial

institutions involve loans, the Office of Thrift Supervision and

other listed bodies are just regulators. If their inclusion in the

statute is tc have meaning, then § 1014 must cover statements

that are not designed to influence an extension of

credit indeed, must cover statements that have nothing to do

with the payment of money. Krilich’s statements, like those in

Tucker, were-designed to induce a financial institution to

disburse money, so they are within the reach of § 1014.

Tiebreakers and doubt resolvers such as the Rule of Lenity

therefore do not help Krilich; his problem is not that the statute

is ambiguous, but that it is comprehensive. Legislative history

likewise is of no assistance, given the Supreme Court’s view

that legislative history may not be employed to limit the effect

of a broadly worded statute. Brogan v. United States, 522 U.S.

398 (1998).

Williams v. United States, 458 U.S. 279 (1982), on which

Krilich relies so heavily, does not support his thesis. Williams

23a

posed the question whether a no-funds check is a “false

statement forthe purposes of § 1014; the Court concluded that

the only “statement made by a check is an instruction to the

drawee bank to pay, and that the implication that funds are

available for that purpose is not covered by § 1014 because a

misleading implication differs from a false statement.

Cf. Bronston v. United States, 409 U.S. 352 (1973). Krilich

can find no comfort in this conclusion; he induced vendors to

make literally false statements. Only by departing from the

holding of Wells that courts must not restrict the scope of

§ 1014 could we accept Krilich’s understanding of the statute.

This does not conclude the appeal on the § 1014 counts,

because the district judge instructed the jury that the falsified

invoices and requisitions “were ‘applications’ within the

meaning of this statute and that the funds withdrawn from the

trust accounts pursuant to authorizations by the banks were

‘advances’ within the meaning of the statute. Krilich arg ues

that this instruction amounted to summary judgment on the

“application or advance element of § 1014, violating the sixth

amendment by depriving him of a jury trial on all elements of

the offense. See Sullivan v. Louisiana, 508 U.S. 275, 277

(1993); United States v. Ladish Malting Co., 135 F.3d 484, 490

(7th Cir.1998).

Krilich objected to this instruction but did not give a reason.

Under Fed.R.Crim.P. 30 reasons are essential, so the prosecutor

contends that our role is limited to a search for plain error.

Fed.R.Crim.P. 52(b). Krilich responds that the reasons were

“self-evident , making recitation otiose, and adds that the

_ district judge must have been aware of United States v. Gaudin,

515 U.S. 506 (1995), which demonstrates that issues such as

these are for juries to decide. Yet it is exactly to avoid

speculation about what judges must or should have known that

24a

Rule 30 calls for litigants to explain themselves. A citation to

Gaudin could have led the district judge to withdraw the

instruction and avoid this error. Rule 30 does not require

elaborate or detailed argument, see United States v. O'Neill,

116 F.3d 245, 247 (7th Cir.1997), but counsel must say enough

to inform the judge why the instruction is wrong, so that errors

can be prevented. United States v. Roth, 860 F.2d 1382, 1390

(7th Cir. 1988).

An instruction that removes from the jury’s purview

questions that under Gaudin the sixth amendment commits to

its decision is plain error only if it “seriously affect[s] the

fairness, integrity or public reputation of judicial proceedings.

Johnson v. United States, 520 U.S. 461 (1997), quoting from

United States v. Olano, 507 U.S. 725, 736 (1993). This showing

Krilich does not even attempt to make. He does not say that he

denied at trial that the requisitions were “applications, or the

disbursements “advances ; the evidence that they were is

overwhelming, and no jury could have found otherwise, so Rule

52(b) precludes reversal on account of this error.

V

The United States cross-appeals, contending that the district

judge applied the Sentencing Guidelines improperly. Because

the underlying conduct for the RICO conviction was bribery,

the relevant guideline is § 2C1.1(b)(2)(A):

If the value of the payment, the benefit received or to be

received in return for the payment, or the loss to the government

from the offense, whichever is greatest, exceeded $2,000,

increase by the corresponding number of levels from the table

in § 2F1.1 (Fraud and Deceit).

After finding that Krilich’s benefit was between $5 million

and $10 million, the district court used the table at

25a

§ 2F1.1(b)(1) to calculate an increase of 14 offense levels but

immediately departed downward 7 levels.

Application Note 7(b) to § 2F 1.1 provides: “Where the loss

determined above significantly understates or overstates the

seriousness of the defendant’s conduct, an upward or downward

departure may be warranted. The judge concluded that a

mechanical application of the table significantly overstates the

seriousness of Krilich’s conduct. According to the United

States, the Guidelines do not permit a departure for this reason.

Although § 2C1.1 refers to the table in § 2F1.1, it does not

adopt the application notes to that table, the prosecutor insists.

Many guidelines incorporate the table in § 2F 1.1, and this is not

the first time we have had to decide whether judges may refer

to the application notes that explain (or limit) the operation of

that table. But the last time the subject came up, the parties’

positions were reversed: the defendant argued that § 2F1.1’s

table should be applied without reference to its application

notes, and the United States contended that reference to the

notes was necessary, indeed obligatory. We held that the table

is far from self- explanatory and that reference to its application

notes is essential to its accurate application. United States v.

Kim Tae Sung, 51 F.3d 92, 94-95 (7th Cir.1995). What’s sauce

for the goose is sauce for the gander. The district judge was

entitled to accept the invitation extended by Application Note

7(b). See Koon v. United States, 518 U.S. 81, 94-96 (1996).

Any departure, even one based on factors identified by the

Sentencing Commission as appropriate, must be carefully

considered and explained. We have considerable doubt that the

district court’s departure satisfies this requirement. Application

Note 7(b) authorizes a downward departure if the table

overstates the seriousness of the defendant’s conduct. But the

district judge did not directly address this issue; instead the

judge believed that the Sentencing Commission should have

26a

made the sentence depend on the loss to third parties rather than

the gain to the perpetrator, and it was the lack of a “loss table

that led him to cut in half the number of levels produced by the

“gain table. According to the judge, Krilich’s scheme produced

a profit for him without an offsetting loss to anyone else, which

justified a reduced sentence. Add the gain to the loss and divide

by two to get the right result, the judge reasoned.

There is much to be said, as a matter of first principles, for

using loss rather than gain as the starting point in determining

sanctions. See Richard A. Posner, ECONOMIC ANALYSIS OF

LAW § 7.2 (Sth ed.1998); Gary S. Becker, Crime and

Punishment: An Economic Approach, 76 J. POL. ECON. 169

(1968). Sometimes the Guidelines follow this approach. The

table in § 2F1.1 is a loss table, designed for fraud cases (so the

touchstone is the victim’s loss rather than the offender’s gain).

But other guidelines, of which § 2C1.1 is an example, use

additional benchmarks; § 2C1.1 requires the judge to use the

greatest of payment, loss, or benefit, according to the monetary

categories in the § 2F 1.1 table. Because departure is proper only

when a case presents a circumstance “of a kind or to a degree

not adequately considered by the Sentencing Commission,

18 U.S.C. § 3553(b), a district court’s disagreement with the

Commission’s resolution of an issue it considered is never an

appropriate ground for departure. Koon, 518 U.S. at 106.

The district judge’s -approach is questionable in

implementation in addition to being incompatible with the

Guidelines. Because the Commission’s tables are log-linear

(and thus diminish the effect of large numbers), the approach of

adding gain to loss and dividing by two should have been

applied to the dollar figures, not to the offense level. Suppose

the gain was $9 million and the loss zero. The average would be

$4.5 million, which under the table in § 2F1.1 would produce

a 13-level increase (only one fewer than the 14-level increase

27a

appropriate for the $5 million to $10 million range). Cutting the

number of levels in half, to seven, gave Krilich the same

sentence that would have been meted out to an offender whose

gain (or loss caused) was between $120,000 and $200,000. The

district judge never explained why Krilich is no more culpable

than a person whose crime produces a gain or loss in that range.

What is more, we doubt the premise that Krilich committed

a victimless crime. The district judge emphasized that Krilich

did not obtain money from the municipalities but simply

capitalized on their ability to facilitate investments whose return

would not be taxed to the bondholders. That may be so, but the

United States Treasury lost approximately a dollar in tax

revenue for every dollar Krilich saved. The benefit to Krilich

was a reduction in the rate of interest he had to pay to borrow

the money for his projects. If interest on the bonds had been

taxable, he would have had to pay more to make the investors

indifferent between purchasing the taxable instruments and

investing in tax-free instruments of equivalent risk, such as

municipal bonds. The correspondence between Krilich’s gain

and loss to the public fisc is not exact, because some investors

(pension trusts, for example) do not pay immediate taxes on any

of their investments--though their beneficiaries will pay taxes

when they receive their pensions. Calculating the actual loss in

tax revenues from providing investors with a tax shield that the

law does not allow is quite complex, and we do not suggest that

a district court is required to undertake the calculation, but the

existence of a substantial tax loss is undeniable. The difficulty

of determining loss in bribery cases is one reason why the

Commission could sensibly decide to focus on perpetrators’

gains, which often can be ascertained more readily.

So although a departure might be justified under

Application Note 7(b), the district court’s reasoning is

inadequate to support a seven-level departure. Before deciding

28a

on remand whether the table in § 2F1.1 “significantly . . .

overstates the seriousness of the defendant’s conduct, the

district court must recalculate Knilich’s gain. Having decided to

take a meat axe to the table in § 2F1.1 indeed, having

announced even before hearing evidence about Krilich’s gain

that he would do this the judge saw little reason to decide

whether the gain exceeded $10 million, as the prosecution

contended. Such a finding would add one extra level, but the

judge was determined to allow no more than seven from the

table, and whether the calculation was 14-7 =7 or 15-8 =7

did not matter. Because the starting point does matter, it must

be ascertained with more confidence than the judge expressed

in his pronouncement that the $5 million to $10 million range

was as good a starting point as any.

On remand the judge should give no weight to the second

factor that influenced the departure: the disparity between

Krilich’s presumptive sentence under § 2F1.1 and Mayor

Sarallo’s actual sentence, and between Knilich’s sentence and

those sentences handed out in the Operation Greylord

prosecutions of judicial corruption during the 1980s.

Consideration of variance among the sentences of different

offenders is permissible only when the disparity is

“unjustified. United States v. Meza, 127 F.3d 545,549- 50 (7th

Cir.1997). Differences that occur as a result of a proper

application of the Guidelines in light of the prosecutor’s

charging decisions are never “unjustified as Meza defines that

term. Krilich has not argued that the Guidelines were

incorrectly applied in either his or Sarallo’s case. In exchange

for Sarallo’s cooperation, the prosecutor refrained from

charging his most serious offenses. That decision greatly

reduced Sarallo’s sentence but should not redound to the benefit

of the uncooperative Krilich. As for the difference between

Krilich’s sentence and the penalties imposed more than 10 years

29a

ago on state judges who received bribes: if pre-Guidelines

sentences under a regime allowing great judicial discretion (and

thus great disparity) were allowed to influence the current

sentencing mechanism, the Guidelines would be defeated.

Sentences today depend on the Guidelines, not on how pre-

Guideline cases were handled. United States v. Fonner, 920

F.2d 1330, 1335 (7th Cir. 1990).

The convictions are affirmed. The judgment is vacated, and

the case is remanded for resentencing.

RIPPLE, Circuit Judge, concurring in part and dissenting in

part.

I agree with the opinion of Chief Judge Politz in United

States v. Devoll, 39-F.3d 575, 579 (Sth Cir.1994), that +8

U.S.C. § 1014 applies only to lending activities by the financial

institutions protected by the statute. Contrary to the implication

in the majority opinion, Devoll does not stand alone and in

opposition to the positions of several other circuits. Notably,

each of the cases that has applied the statute has dealt with a

situation involving the protected bank’s function of extending

credit. See United States v. Yung Soo Yoo, 833 F.2d 488, 489

(3d Cir. 1987) (defendant convicted of “making false statements

to a federally insured bank in order to influence its action on a

commitment ); United States v. Bonnette, 781 F.2d 357, 359

(4th Cir. 1986) (crediting defendant’s account on basis of “sight

draft with auto title attached); United States v. Tucker, 773

F.2d 136, 139 (7th Cir. 1985) (whether a letter of credit is within

the scope of the statute); cf: United States v. Erskine, 588 F.2d

721, 722 (9th Cir. 1978) (holding that the “elements of a section

1014 violation include these requisite mental states: knowledge

of falsity, and the intent to influence action by the financial

institution concerning a loan or one-of the other transactions

listed in the statute ). All of these cases are in harmony with the

30a

Supreme Court’s explicit determination that the statute was

designed to provide “penalties for making false statements or

reports in connection with loans or other similar transactions.

Williams v. United States, 458 U.S. 279, 289-90 (1982)

(quoting H.R.Rep. No. 91- 1556 at 35 (1970), U.S. Code Cong.

& Admin. News at 5582).

The funds held by the bank in this case involved no

extension of credit. Therefore, the statute is inapplicable, and

the convictions based on this section ought to be reversed.

In all other respects, | join the judgment and opinion of the

court.

3la

APPENDIX E

IN THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

No. 02-1445 7

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

V.

ROBERT R. KRILICH, SR..,

Defendant-Appellant.

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division

No. 94 CR 419 David H. Coar, Judge

January 27, 2003

Before

Hon. FRANK H. EASTERBROOK, Circuit Judge

Hon. KENN&TH F. RipPLE, Circuit Judge

Hon. TERENCS T. EVANS, Circuit Judge

ORDER ©

-Defendant-appellant filed a petition for rehearing and

rehearing en banc on January 14, 2003. No judge in regular

active service has requested a vote on the petition for rehearing

32a

en banc, and all of the judges on the panel have voted to deny

rehearing. The petition for rehearing is therefore DENIED.

* Judge Flaum did not participate in the consideration of the matter.