United States v. Arthur Friedman
971 F.3d 700
| 7th Cir. | 2020Background
- Arthur Friedman and co‑owner Leon Bilis ran Prestige Leasing, a luxury used‑car dealership that exported vehicles but retained titles and obtained bank loans using those titles as collateral for cars no longer on the lot.
- Friedman and Bilis submitted false loan applications in others’ names (often without their knowledge), falsified income/corporate documents, forged signatures, and used customer deposits and floor‑plan investor funds to pay down the fraudulent loans.
- The scheme unraveled in 2011; Bilis pleaded guilty and cooperated with the government, while Friedman went to trial on five counts of bank fraud (convicted on three counts, including a count involving a $62,589.57 American Eagle Bank loan in Blekhman’s name).
- Friedman moved pretrial to dismiss or exclude Bilis’s testimony, asserting privileged communications were shared with joint counsel (Steinback) and tainted Bilis; the district court held an evidentiary hearing, credited Steinback, and denied relief.
- Post‑verdict Friedman moved for acquittal and two motions for new trial (including a challenge to government closing‑argument language and later “newly discovered” bank forbearance/loan documents); the district court denied all motions.
- At sentencing the court applied enhancements for obstruction (perjury) and sophisticated means, calculated loss of $4,722,347 (including floor‑plan investor losses), imposed 108 months’ imprisonment (below Guidelines), and ordered restitution in that amount.
Issues
| Issue | Plaintiff's Argument (United States) | Defendant's Argument (Friedman) | Held |
|---|---|---|---|
| Conflict of interest / joint‑counsel privilege | No privileged communications were disclosed; no evidence of prejudice from joint counsel continuing to represent Bilis | Steinback’s continued representation tainted prosecution; presumption that confidences were shared during joint representation | Denial of dismissal/new trial affirmed — district court found no privileged communications shown and credited Steinback’s testimony |
| Jury instructions (aiding/acting through another) | Instructions tracked Seventh Circuit patterns and were legally correct | Instructions understated mens rea; challenge not preserved at trial | Waiver: Friedman affirmed instructions pretrial and forfeited/waived the challenge |
| Sufficiency of evidence on count five (Blekhman loan) | Ample circumstantial and testimonial evidence tied Friedman to the Blekhman loan scheme | Insufficient proof Friedman’s role in that specific loan; Blekhman did not testify | Conviction sustained — viewing evidence favorably to government, a rational jury could find guilt beyond a reasonable doubt |
| Government closing argument (“go with your gut”) | Jury may use common sense and life experience; “gut” used synonymously with common sense and clarified by court | “Gut” comments invited jurors to decide by feeling, minimizing reasonable‑doubt standard | No new trial — remarks were not prejudicial given court’s instructions and overwhelming evidence |
| Newly discovered evidence (bank forbearance/loan documents) | Documents were discoverable earlier with due diligence; materiality was only impeaching/cumulative | Documents show bank incentivized Bilis to lie; would have materially affected credibility | Denied — Friedman could have obtained documents pretrial; evidence was cumulative/impeaching and would not probably produce acquittal |
| Sentencing enhancement: obstruction (perjury) | Friedman lied about sharing privileged confidences; perjury supports §3C1.1 enhancement | Testimony credible; no willful obstruction | Enhancement upheld — district court credibility findings not clearly erroneous |
| Sentencing enhancement: sophisticated means | Scheme involved extensive planning, fake buyers, forged docs, misuse of exported titles, and multi‑year concealment | Claims those were “basic lies,” not sophisticated | Enhancement upheld — scheme showed planning and concealment beyond garden‑variety fraud |
| Loss calculation and restitution (including floor‑plan investors) | Investor losses were caused by and used to perpetuate the bank‑fraud scheme; included in loss/restitution | Investor losses separate from bank fraud and should be excluded | Loss and restitution affirmed — record supports that investor funds were used to conceal/pay down fraudulent loans |
Key Cases Cited
- United States v. White, 970 F.2d 328 (7th Cir. 1992) (attorney‑client privilege is testimonial and no prejudice absent evidence of a breach)
- United States v. Hernandez‑Perdomo, 948 F.3d 807 (7th Cir. 2020) (standard of review for denial of motion to dismiss)
- United States v. LeBeau, 949 F.3d 334 (7th Cir. 2020) (affirmative approval of jury instructions effects waiver)
- United States v. Flores, 929 F.3d 443 (7th Cir. 2019) (distinguishing waiver and forfeiture and applicable review standards)
- United States v. Wade, 962 F.3d 1004 (7th Cir. 2020) (sufficiency‑of‑evidence standard viewing facts in government’s favor)
- United States v. Wolfe, 701 F.3d 1206 (7th Cir. 2012) (improper closing remarks rarely reversible; five‑factor prejudice analysis)
- United States v. Muresanu, 951 F.3d 833 (7th Cir. 2020) (sophisticated‑means enhancement requires intentional planning or concealment)
- United States v. Harris, 791 F.3d 772 (7th Cir. 2015) (consider level of planning/concealment for sophisticated‑means enhancement)
- United States v. O’Malley, 833 F.3d 810 (7th Cir. 2016) (standards for newly discovered evidence under Rule 33)
- United States v. Bogdanov, 863 F.3d 630 (7th Cir. 2017) (loss calculations at sentencing may rest on reasonable estimates)