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Seventh Circuit White Collar Litigation Update – November 2018

Longer Sentences for Chicago-Based Defendants is Justified, Court Holds
United States v. Hatch, No. 18-1282 (Nov. 29, 2018)

Defendant was convicted of trafficking firearms in Chicago. The Sentencing Guidelines called for a period of incarceration between 30 and 37 months. The district judge sentenced him to 55 months – almost 50% longer than the high end of the range. The judge justified the above-Guidelines sentence because of Chicago’s peculiar problem with crime, particularly gun violence: “[The] Guidelines as they are structured today [don’t] adequately reflect the seriousness of this particular type of offense as it relates to this geographic area.” Defendant appealed his sentence, in part, because of what he viewed to be the district court’s improper emphasis on the geographic location of his offense, rather than on his individual conduct and personal characteristics.

The Court affirmed, holding that “locality-specific” factors may justify an above-guidelines sentence. Chicago’s “rise in local crime made the offense more serious” than what the Guidelines contemplated. While this case involved gun violence, the Court’s opinion could be used to justify above-guidelines sentences for white collar offenses committed in the Chicago-area. For example, one could imagine a district judge enhancing public corruption sentences for Chicago-based politicians merely based on the general history of corruption in Illinois.

Mortgage Fraudster’s Guilty Plea Stands Despite Court’s Failure to Advise of Multi-Million Dollar Forfeiture
United States v. Austin, No. 16-3211 (Oct. 29, 2018)

Defendant was charged with a multi-year mortgage-fraud scheme involving dozens of loans totaling millions of dollars. In the middle of trial, he decided to plead guilty without a written plea agreement. The district court held a plea colloquy, as required by Rule 11, during which the defendant was advised that he was waiving his trial rights, was informed about the maximum period of incarceration he could receive, and was told that the Sentencing Guidelines would be considered at sentencing. He was not told that his sentence would include an order requiring him to forfeit the millions of dollars in proceeds of his offense or assets he acquired with those proceeds. At sentencing, in addition to incarceration of 144 months, the court ordered forfeiture of $4,374,070 in cash and other of defendant’s assets.

On appeal, defendant argued that he was deprived of his right under Rule 11(b)(1)(J) to be informed of “any applicable forfeiture” prior to having his guilty plea accepted. The government did not contest that Rule 11 was violated. Nevertheless, because defendant did not raise the Rule 11 issue at the time of sentencing, the Court reviewed it only for plain error. Finding no basis to conclude that defendant’s decision to plead guilty would have been different if he had been advised of the potential forfeiture, the Court rejected that challenge to his conviction.

Blanket Appellate Waiver Again Affirmed
United States v. Bolin, No. 18-2208 (Nov. 7, 2018)

Defendant entered into a written plea agreement containing the government’s standard appellate waiver. The broad language provides that a defendant waives his right to a direct appeal of “all provisions of the guilty plea and sentence imposed.” At sentencing, the court imposed what it called “an additional special assessment of $5,000,” separate and apart from the mandatory $100 special assessment. The court gave no reason for imposing that additional monetary amount and failed to address defendant’s status as an indigent.

Defendant appealed the $5,000 additional assessment. He argued that because monetary assessments were not explicitly referenced in the appellate waiver, he was not foreclosed from challenging them on appeal. The Court disagreed. Although not itemizing each part of the judgment order, the waiver specifically encompasses “all provisions of the sentence imposed,” which would include any monetary aspect, including an assessment.

iPhone Screen Notifications Not Protected by Fourth Amendment
United States v. Brixen, No. 18-1636 (Nov. 7, 2018)

We’ve all had it happen: You’re sitting in a public place with your iPhone on the table when a text message or other notification pops up. Maybe you don’t care. But maybe you do because it’s about something you’d rather not share with the general public. Well, then, you’d be smart to keep the phone in your pocket.

Brixen wasn’t that stupid. When he was on his way to meet someone he thought was a teenage girl with whom he had been Snapchatting, he kept his phone in his pocket. It turned out that he was walking into a sting, and the “girl” was an undercover officer. Incident to his arrest, the officer confiscated Brixen’s iPhone and then sent a Snapchat to him, which popped up on his iPhone’s lock screen – proving that he was the same person who had been communicating with the “girl.” Brixen moved to suppress that evidence as constituting an unreasonable search of his cell phone under the Fourth Amendment.

The Court affirmed the district court’s denial of Brixen’s motion. It concluded that the officer’s actions did not amount to a search of the iPhone, and thus the Fourth Amendment was not implicated. In so holding, the Court found decisive the fact that the officer “did not open or otherwise manipulate” the cell phone or attempt to retrieve any content or information from “within the phone.” Because the phone’s internal content “was not affirmatively accessed by law enforcement officers, no search occurred.”

Restitution to Family of Defendant’s Co-Conspirator is Allowable
United States v. Price, No. 17-3077 (Oct. 19, 2018)

A defendant may be ordered to pay restitution to “any person directly harmed by the defendant’s criminal conduct in the course of the scheme, conspiracy, or pattern” of his offense. 18 U.S.C. § 3662(a)(2). However, no participant in defendant’s offense can be considered a victim for purposes of restitution. Id., § 3663(a)(1)(A). Here, during the course of their conspiracy, defendant murdered one of his mates. The district judge at sentencing imposed an $11,000 restitution order in favor of the decedent’s wife for expenses arising from his death.

Defendant appealed, arguing that restitution couldn’t be ordered to the family of a co-conspirator for losses deriving from events pertaining to that person’s involvement in the conspiracy. The Court disagreed. While a co-conspirator is not entitled to restitution, family members may be. The question is whether the losses to the family members are purely derivative of the losses to the co-conspirator, or whether the family members have suffered independent losses. Here, the Court held it was the latter: the decedent’s wife was independently victimized by the defendant’s murder of her husband. She was not merely seeking restitution for harm done to her husband.

This article was first published in the November 2018 issue of the Seventh Circuit White Collar Litigation Update on the 7th Circuit Bar Association’s website.

Loeb & Loeb partner Corey Rubenstein authors this monthly newsletter containing helpful summaries and practice pointers for key Seventh Circuit Court opinions involving civil and criminal white collar matters.