Articles Posted in US Court of Appeals for the Seventh Circuit

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The Cosgriffs reside in South Beloit, Roscoe Township, Winnebago County, Illinois. They installed a $50,000 pool at their home. When township employees came to the home to reassess its property value after the pool addition, one of the Cosgriffs’ dogs bit one of the employees. That employee and Roscoe Township sued the Cosgriffs. The Cosgriffs started a petition campaign encouraging taxpayers to notify the township that its employees should not trespass on private property. The Cosgriffs’ next property assessment was significantly higher than their last. The Cosgriffs challenged the increased assessment before the Winnebago County Board of Review, which ruled in favor of the Cosgriffs and substantially reduced the assessment. The Cosgriffs then sued Winnebago County and individual defendants, alleging that the defendants acted unconstitutionally when they increased the Cosgriffs’ property assessment because the Cosgriffs spoke out against township employees trespassing on private property. The district court dismissed the Cosgriffs’ 42 U.S.C. 1983 claims, reasoning that comity principles barred federal courts from hearing these claims. The Seventh Circuit affirmed. Because the Cosgriffs challenge the administration of a local tax system under section 1983, their claims fall outside the scope of the statute. Available state remedies are plain, adequate, and complete. View "Cosgriff v. Winnebago County" on Justia Law

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Fadden earned over $100,000 per year but did not submit tax returns. After an audit, the IRS garnished his wages. Fadden filed for bankruptcy, triggering an automatic stay. Fadden claimed that he had no interest in any real property nor in any decedent’s life insurance policy or estate. Fadden actually knew that he would receive proceeds from the sale of his mother’s home (listed by the executor of her estate for $525,000) and would receive thousands of dollars as a beneficiary on his mother’s life insurance policies. A week later, Fadden mentioned his inheritance to a paralegal in the trustee’s office and asked to postpone his bankruptcy. When Fadden finally met with his bankruptcy trustee and an attorney, he confirmed that his schedules were accurate and denied receiving an inheritance. The Seventh Circuit affirmed his convictions under 18 U.S.C. 152(1) for concealing assets in bankruptcy; 18 U.S.C. 152(3) for making false declarations on his bankruptcy documents; and 18 U.S.C. 1001(a)(2) for making false statements during the investigation of his bankruptcy. Counts 1 and 2 required proof of intent to deceive. Fadden proposed a theory-of-defense instruction based on his assertion that his conduct was “sloppiness.” The Seventh Circuit upheld the use of pattern instructions, including that “knowingly means that the defendant realized what he was doing and was aware of the nature of his conduct and did not act through ignorance, mistake or accident.” View "United States v. Fadden" on Justia Law

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El-Bey, a "Moorish national," created an EIN for the Trust, naming himself as the trustee and fiduciary. El-Bey filed six tax returns for the Trust, each seeking a $300,000 refund, signing each return, identifying himself as the fiduciary, and listing his date of birth as the date of trust creation. The IRS flagged these returns as frivolous and notified El-Bey that he would be assessed a $5,000 penalty per return if he failed to file a corrected return. El-Bey returned the letters to the IRS, including vouchers and tax forms bearing no relation to the returns. Based on the fourth and fifth tax returns, the IRS mailed two $300,000 refund checks, which El-Bey deposited, using the funds to purchase vehicles and to buy a house. After the sixth return, El-Bey was indicted on two counts of mail fraud, 18 U.S.C. 1341, and six counts of making false claims to the IRS, 18 U.S.C. 287. The district court allowed El-Bey to proceed pro se and appointed standby counsel over El-Bey’s objection. El-Bey advanced irrelevant arguments, interrupted the judge, and made it challenging to manage the trial. The court expressed frustration, but later instructed the jurors, who indicated that they could continue to be impartial. The Seventh Circuit remanded for a new trial. Statements by the court in the presence of the jury conveyed that El-Bey was guilty or dishonest and impaired El-Bey’s credibility in the eyes of the jury. View "United States v. El-Bey" on Justia Law

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DiCosola started a business that produced compact discs in novelty shapes, for use as promotional items. The business morphed into a full‐service printing business, reaching about $1 million in gross annual sales and employing up to 10 people, including DiCosola’s immigrant father, who invested his retirement savings. In 2005, DiCosola started a side business for producing music, which sapped cash from the printing business. DiCosola’s 2007 loan application was rejected. He reapplied in 2008, providing fabricated tax returns that inflated his income by hundreds of thousands of dollars. Citibank issued DeCosola a loan of $273,500. DiCosola similarly used fabricated tax returns to obtain loans from Amcore, for $450,000 and $300,000. In 2009, after a few payments, DiCosola defaulted on the loans. In 2009, DiCosola falsified IRS forms to claim a refund of $5.5 million. In 2012, DiCosola was indicted for bank fraud, 18 U.S.C. 1344; making false statements to a bank, 18 U.S.C. 1014; wire fraud affecting a financial institution, 18 U.S.C. 1343; filing false statements against the United States, 18 U.S.C. 287. DiCosola was found guilty, sentenced to 30 months’ imprisonment, and ordered to pay restitution of $822,088.00. The Seventh Circuit affirmed, rejecting challenges relating to the testimony of DiCosola’s accountant. View "United States v. DiCosola" on Justia Law

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McGaugh has a Merrill Lynch Individual Retirement Account (IRA). In 2011, he requested that Merrill Lynch use money from that IRA to purchase 7,500 shares of FPFC stock. Merrill Lynch refused. McGaugh initiated a $50,000 wire transfer from his IRA directly to FPFC, on October 7, 2011. On November 28, FPFC issued a stock certificate titled “Raymond McGaugh IRA FBO Raymond McGaugh,” which it mailed to Merrill Lynch. Merrill Lynch says it received the certificate in early 2012, but did not retain it, believing McGaugh’s transaction to have exceeded the 60‐day window for IRA rollovers, 26 U.S.C. 408(d)(3). Merrill Lynch attempted to send the certificate to McGaugh twice, but the Postal Service returned it. The second time, it was marked “refused.” Merrill Lynch then sent the certificate to McGaugh via FedEx; it was not returned. The shares were never deposited into McGaugh’s IRA. The IRS contends that McGaugh possesses the certificate; McGaugh denies that allegation. Merrill Lynch characterized the wire transfer as a taxable distribution and issued Form 1099R. McGaugh claims he never received that form. In March 2014 the IRS issued a deficiency notice and assessed $13,538 tax due and a $2,708 substantial‐tax‐understatement penalty. The Tax Court held that McGaugh did not take a taxable distribution from his IRA. The Seventh Circuit affirmed, finding that McGaugh was never in actual or constructive receipt of the IRA funds. View "McGaugh v. Commissioner Internal Revenue" on Justia Law