867 F.3d 793
7th Cir.2017Background
- Michele DiCosola owned CD Shape Cutters, a printing/duplicating business that fell into financial distress after 2007; he also ran a side music business that drained cash.
- In 2008 he submitted fabricated, never-filed tax returns (signed by his accountant John Cerami) to Citibank and Amcore to obtain loans (Citibank $273,567; Amcore $450,000 loan and $300,000 line of credit); he defaulted in 2009.
- In 2009 DiCosola filed tax returns claiming about $8.4 million in purported loan/1099‑OID income and sought a $5.5 million refund based on fabricated Forms 1099‑OID; the IRS flagged the filings as frivolous.
- Indicted in 2012 on bank fraud, false statement to a bank, wire fraud, filing false statements to the United States (tax), and bankruptcy fraud; bankruptcy counts later dropped; tried by jury (loan counts) and bench (tax counts).
- Convicted on five remaining counts; sentenced to 30 months’ imprisonment, two years supervised release, and ordered to pay $822,088 restitution to CitiMortgage/Harris Bank; this appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| New trial based on accountant Cerami’s testimony and alleged coerced grand jury testimony | Cerami’s grand jury testimony was coerced/altered to call the returns "hypothetical," destroying Cerami’s credibility; that tainted the indictment and trial | Government did not call Cerami at trial; Cerami gave inconsistent statements and prepared hypothetical returns; jury had sufficient evidence of knowing misrepresentation | No abuse of discretion; evidence was sufficient and inconsistencies did not warrant a new trial |
| Napue claim: government failed to correct a false statement by a government witness | The loan officer’s testimony that DiCosola received "cash back" was false and the government failed to correct it (subornation of perjury) | The statement was an inadvertent, reasonable reading of loan docs, was quickly corrected, immaterial and not relied on by the government | Napue claim fails; error was harmless and not willful misconduct by the government |
| Sufficiency of evidence for tax fraud (1099‑OID theory) | DiCosola sincerely believed in the OID theory; his reliance on tax seminars/books shows lack of criminal intent | Circumstantial evidence (financial motive, sudden self‑filing, dramatic change from prior returns, persistence after IRS told him theory was frivolous) shows knowledge and intent to defraud | Conviction affirmed; circumstantial evidence was sufficient for the bench to find fraudulent intent |
| Restitution amount to Harris/Amcore Bank ($559,088) | Restitution unsupported: government relied on presentence report and parole officer testimony; auction proceeds should have reduced bank loss; no direct bank documents introduced | Parole officer’s interviews (bank rep and auctioneer) provided credible information; defendant failed to present contrary evidence or valuations | No abuse of discretion; parole officer testimony sufficed and defendant failed to rebut valuation or show auction proceeds reduced obligation |
Key Cases Cited
- Napue v. Illinois, 360 U.S. 264 (Sup. Ct.) (prosecutor must correct known false testimony by government witnesses)
- United States v. Fountain, 840 F.2d 509 (7th Cir. 1988) (grand jury transcript disclosure and sufficiency standards)
- United States v. Dessart, 823 F.3d 395 (7th Cir. 2016) (circumstantial evidence can support criminal intent in tax fraud cases)
- United States v. Scalzo, 764 F.3d 739 (7th Cir. 2014) (restitution awards reviewed for abuse of discretion; defendant bears burden to rebut loss calculations)