76 F.4th 724
7th Cir.2023Background
- Five defendants (Agee, Isley, K. Smith, N. Smith, Griffin) worked at or with Banc-Serv (an LSP) and Banc-Serv’s partner lender (BBB); they packaged and submitted SBA loan applications and purchase requests.
- The Government charged a scheme to obtain SBA 7(a) and Express guarantees by misrepresenting borrower eligibility and intended use of proceeds (e.g., disguising past‑due payroll taxes and personal debt as ‘working capital’), leading the SBA to purchase defaulted loans.
- The second amended indictment charged conspiracy to commit wire fraud affecting a financial institution (18 U.S.C. § 1349) and several wire‑fraud counts; after an 8‑day trial, the jury convicted all defendants (Mr. Smith convicted only of the lesser‑included conspiracy).
- At sentencing the court adopted PSR loss calculations based on SBA payouts/purchased balances, applied the sophisticated‑means enhancement, imposed restitution and imprisonment, and each defendant appealed.
- The Seventh Circuit affirmed convictions and sentences except it corrected a clerical error in Griffin’s amended judgment (supervised‑release condition wording).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Constructive amendment of the indictment | Gov: indictment charged conspiracy to commit wire fraud affecting a financial institution; scheme to defraud SBA exposed banks to new/increased risk so fits §1349 | Defs: Government tried the case as a conspiracy to defraud the SBA (non‑financial institution), thus constructively amending the indictment | No constructive amendment; conspiracy to defraud SBA can fall under §1349 where scheme exposed financial institutions to a new/increased risk of loss. |
| Protectable money/property interest under wire fraud (Ciminelli/right‑to‑control) | Gov: SBA guarantees and payouts are property; defendants deprived SBA of guarantees or induced payouts | Defs: Claims are a forbidden right‑to‑control theory; Ciminelli bars treating regulatory control as property and misrepresentations did not change borrower creditworthiness | Ciminelli considered; but Gov proved deprivation of property (valuable guarantees/payouts), not mere right‑to‑control, so wire‑fraud theory stands. |
| Jury instructions — ambiguity/good‑faith & Pinkerton | Gov: court’s good‑faith instruction covered defense; Pinkerton instruction appropriate | Agee: requested ambiguity instruction re SBA rules; Pinkerton projected any alleged conspiracy error onto substantive counts | Denial of ambiguity instruction was not error; the good‑faith instruction properly captured defense and Pinkerton instruction was proper. |
| Sufficiency of evidence as to Griffin and M. Smith joining the conspiracy | Gov: circumstantial proof (emails, approvals, bridge‑loan structures, signatures, communications) shows knowing participation | Griffin/Smith: evidence insufficient to prove they knowingly joined the conspiracy | Evidence sufficient; a rational juror could find both knowingly joined. |
| Sentencing — loss, restitution, sophisticated‑means | Gov: loss = SBA payouts/purchased balances; restitution for victims of the scheme; enhancement for sophisticated means applies | Defs: challenge causation/measure of loss (government‑benefits rule), inclusion of certain loans, and application of sophisticated‑means to individuals | District court’s loss and restitution findings affirmed (loans were ineligible/caused SBA payouts); government‑benefits rule inapplicable here; sophisticated‑means enhancement properly applied to each defendant’s conduct. |
| Clerical error in Griffin’s amended judgment | Gov & Griffin: the written amended judgment misstates supervised‑release condition compared to oral pronouncement | Griffin: seeks correction to match oral sentence | Court modified Griffin’s amended judgment: Condition 14 restored to ‘participate in a mental health evaluation and treatment if deemed necessary.’ |
Key Cases Cited
- Stirone v. United States, 361 U.S. 212 (Sup. Ct. 1960) (indictment must allege the offense tried; constructive amendment doctrine)
- Ciminelli v. United States, 143 S. Ct. 1121 (Sup. Ct. 2023) (rejects broad right‑to‑control theory; wire/mail fraud requires deprivation of money or property)
- Pasquantino v. United States, 544 U.S. 349 (Sup. Ct. 2005) (an entitlement to be paid money is property for fraud statutes)
- Cleveland v. United States, 531 U.S. 12 (Sup. Ct. 2000) (schemes altering regulatory decisions do not necessarily target property)
- Kelly v. United States, 140 S. Ct. 1565 (Sup. Ct. 2020) (limits on treating regulatory control as property under fraud statutes)
- Serpico v. United States, 320 F.3d 691 (7th Cir. 2003) (wire fraud affects a financial institution where scheme creates a new or increased risk of loss)
- Kelerchian v. United States, 937 F.3d 895 (7th Cir. 2019) (discusses property interest in regulated products; context matters)
- Wayland v. United States, 549 F.3d 526 (7th Cir. 2008) (upholding sophisticated‑means enhancement based on overall, prolonged fraudulent scheme)
- Jackson v. Virginia, 443 U.S. 307 (Sup. Ct. 1979) (standard for reviewing sufficiency of the evidence)