United States v. David Weimert
2016 U.S. App. LEXIS 6461
7th Cir.2016Background
- In late 2008–early 2009 AnchorBank (and its holding company ABCW) needed cash to meet a $116M loan payment; IDI (a nonbank subsidiary) owned a 50% interest in a Texas real-estate project (Chandler Creek) that IDI was instructed to try to sell.
- David Weimert was VP of AnchorBank and president of IDI; he solicited buyers, obtained two competing letters of intent (from Kalka and from The Burke Group), and negotiated terms including a small ownership stake and a 4% facilitation fee for himself.
- The IDI board knew of Weimert’s personal interest and waived the conflict after hearing advice from counsel and after Weimert represented that at least one buyer (the Burkes) required his participation; the board approved sale to The Burke Group and the fee.
- The Burke deal closed, IDI received proceeds and relief of mortgage liability, Weimert acquired a small interest and received the fee; later SEC inquiry into use of TARP funds prompted prosecution.
- A jury convicted Weimert on five of six counts of wire fraud under 18 U.S.C. § 1343; on appeal the Seventh Circuit majority reversed and ordered acquittal, holding that the conduct amounted to deception about negotiating positions (not material facts) and thus not wire fraud.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Weimert’s misstatements about buyers’ negotiating positions satisfied the materiality element of wire fraud | Government: false statements/omissions about buyers’ demands induced IDI to approve the deal and obtain property (fee and equity) | Weimert: statements were about negotiating positions/opinions (customary negotiating puffery), not material facts or promises | Reversed — statements about negotiating positions are not material for wire fraud when all deal terms were disclosed |
| Whether deception of third parties (buyers) can support fraud against IDI | Government: third-party deception that furthers scheme is actionable (third-party theory) | Weimert: misstatements to buyers were ordinary negotiation tactics or nonfraudulent; no evidence buyers were acting in bad faith | Reversed — third-party misstatements here were about negotiating positions and insufficient to show scheme to obtain money/property by fraud |
| Whether Weimert breached fiduciary duties so as to make his concealment criminal (officer self-dealing) | Government: as IDI president, he owed loyalty/honesty; misleading the board about necessity of his participation induced payment | Weimert: his interest and fee were disclosed; board waived conflict after counsel; civil fiduciary issues do not automatically convert to federal fraud | Reversed — disclosed self-interest and board waiver meant no hidden kickback; breach of fiduciary duty alone insufficient for wire fraud |
| Whether the evidence supported judgment of acquittal under de novo review | Government: jury reasonably could find scheme, intent, and wire use beyond reasonable doubt | Weimert: evidence only shows negotiation misrepresentations, not material falsehoods or promises | Reversed — acquittal required because criminal law cannot reach commonplace negotiation deceptions absent clearer statutory guidance |
Key Cases Cited
- Skilling v. United States, 561 U.S. 358 (2010) (limits on honest-services fraud; rule of lenity cautioned)
- Neder v. United States, 527 U.S. 1 (1999) (materiality standard: tendency to influence decisionmaker)
- Seidling v. United States, 737 F.3d 1155 (7th Cir. 2013) (false statement to a non-victim can further scheme and be actionable)
- Kwiat v. United States, 817 F.2d 440 (7th Cir. 1987) (breach of fiduciary duty plus mail/wire use is insufficient alone for fraud conviction)
- McNally v. United States, 483 U.S. 350 (1987) (limits of mail fraud scope prior to honest-services statute)
- Durham v. United States, 766 F.3d 672 (7th Cir. 2014) (standards for de novo review of Rule 29 motions)