United States v. Bernard Seidling , 737 F.3d 1155 ( 2013 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 13-1854
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
BERNARD C. SEIDLING,
Defendant-Appellant.
Appeal from the United States District Court for the
Western District of Wisconsin.
No. 3:11-cr-00126-bbc-1 — Barbara B. Crabb, Judge.
ARGUED SEPTEMBER 30, 2013 — DECIDED DECEMBER 16, 2013
Before WOOD, Chief Judge, and BAUER and KANNE, Circuit
Judges.
BAUER, Circuit Judge. Defendant-Appellant, Bernard C.
Seidling (“Seidling”), was charged with creating and executing
a scheme to defraud by knowingly mailing documents
containing false information to small claims courts in Wiscon-
sin and hiding the filings of the actions from the named
defendants. Seidling stipulated to the facts of the charge and
waived his right to a jury trial. Seidling then moved for a
2 No. 13-1854
judgment of acquittal; he argued that the elements of the mail
fraud statute could not be met because he never intended the
false statements and misrepresentations to be communicated
to the victims. On December 26, 2012, the United States District
Court for the Western District of Wisconsin found Seidling
guilty of fifty counts of mail fraud in violation of 18 U.S.C.
§ 1341. Seidling appeals the judgment of the district court on
the grounds that there was no convergence between the
victims’ losses and the fraudulent statements. For the reasons
that follow, we affirm the conviction and sentence.
I. BACKGROUND
From 2003 to 2009, Wisconsin operated small claims courts
in order to resolve smaller disputes more quickly and effi-
ciently. In general, the small claims courts operated in the
following manner: individuals eighteen years of age or older
were permitted, with or without a lawyer, to file a summons or
complaint for small claims. The individuals could file the
action in any county in which the defendant resided or did a
substantial amount of business, where the claim arose, or as
otherwise provided by law. Wis. Stat. § 801.50(2). The claimant
was obligated to arrange for service of the documents on the
defendant or, if the defendant could not be served, to pay to
have the complaint published in a newspaper circulated in
the area where the defendant resided. If the claimant was
unable to locate a defendant to serve the lawsuit, or a defen-
dant did not appear before the court, the case could be certified
to the small claims court where a default judgment would be
granted.
No. 13-1854 3
Once a default judgment was granted in the small claims
action, the claimant could pay an additional fee to have the
judgment docketed in the county where the claim was filed.
The judgment against the defendant would then be added to
the electronic Wisconsin Circuit Court Access System. After
the electronic judgment was added to the system, the claimant
could seek execution of the judgment against the defendant’s
nonexempt property in the county in which it was located. For
property located in a different county, the claimant could
request that the court issue an order directing the sheriff of
that county to collect the nonexempt property to satisfy the
judgment.
A. Fraudulent Conduct and Indictment
Beginning in or about 2003 and ending on December 31,
2009, Seidling filed small claims actions against twenty-four
individuals and one corporation. Seidling used fourteen fake
business names to file the claims in ten counties in the Western
District of Wisconsin, and typically sought judgments of no
more than $5,000.1 Seidling’s claims contained various false
1
Specifically, Seidling filed small claims in the counties of Iron, Eau Claire,
Jackson, Sawyer, Dane, Barron, Chippewa, Dunn, Ashland, and Polk.
Seidling used a variety of fake business names in the lawsuits: D&A
Enterprises; Diverse Services; JVC Investments; MW Enterprises; A&B
Enterprises; DD Enterprises; Midwest, LP; and JDR Enterprises. The
defendant corporation was Footsmart and the individuals listed as
defendants included Kenneth and Tamera McCormick, David Smith,
David and Jezzeeca Lindquist, Steve Sletner, Sharmin Carlson (a/k/a
Sharmin Hanson), Mark Woychik, Nancy Drake, Nicole Penegor, Clarence
and Shirley Schielfelbein, Neil and Marian O’Donnell, Dori Stepan,
(continued...)
4 No. 13-1854
statements and misrepresentations, including: listing false
addresses for the named defendants, falsifying facts concern-
ing attempts to serve documents on the defendants, using fake
business names, and falsely certifying to the courts that notice
of the claims were published in the appropriate area’s newspa-
pers. Seidling knew that none of the defendants he listed in the
complaints lived or did business at the addresses he provided.
For this reason, none of them were served with the complaints,
summons, or other pleadings; none of them were aware of any
attempts to serve them; and none of them saw notice of the
lawsuits published in the newspapers.
For each lawsuit, Seidling used the United States Postal
Service to mail pleadings, proof of attempted service, and other
case documents to the Wisconsin small claims courts. When
the defendants did not appear, the small claims courts issued
default judgments in each case. Seidling attempted to collect
one judgment through garnishment; he was unsuccessful
because the named defendant no longer worked for the
garnishee. Seidling successfully obtained approximately five
orders directing sheriffs to execute the collection of various
defendants’ property. Based on this conduct, the government
indicted Seidling with fifty counts of mail fraud in violation of
18 U.S.C. § 1341.
On December 6, 2011, Seidling pleaded not guilty to all
charges and a trial schedule was set for May 2012. On
March 26, 2012, Seidling moved to dismiss the indictment. He
1
(...continued)
Raymond and Jerrianne Closs, Jodi Clay, and Leo Schuch.
No. 13-1854 5
argued that the facts were insufficient to establish the material-
ity requirement, since the false statements and misrepresenta-
tions contained in the complaints were not made directly to the
victims of the fraud. The magistrate judge recommended that
the district court deny Seidling’s motion; the district court
adopted the magistrate’s recommendation and denied
Seidling’s motion to dismiss on July 25, 2012.
B. Bench Trial and Sentencing
On April 12, 2012, the parties filed a joint motion to resolve
the case through a bench trial on the stipulated facts; the
district court granted the motion. On October 17, 2012, Seidling
filed a motion of acquittal pursuant to Fed. R. Crim. P. 29.
Again, Seidling argued that the government failed to satisfy
the materiality element of bank fraud because any false
statements and misrepresentations were made to the small
claims court and not to the victims. Seidling contended that his
misrepresentations had no tendency or ability to influence the
victims to give up their money or property. The parties briefed
the issue, and on December 26, 2012, the district court denied
Seidling’s motion for acquittal; the court ultimately found
Seidling guilty on all fifty charges in the indictment.
The intended loss set out in the indictment was in the
amount of $75,000. However, the government discovered fifty-
eight additional lawsuits that had been filed by Seidling with
approximately sixty victims and an intended loss of $295,220.
The combined total intended loss amount was calculated to be
$370,220. Although none of the targeted defendants suffered
immediate pecuniary harm, many of them experienced, and
continue to experience, challenges in reopening the lawsuits,
6 No. 13-1854
getting them dismissed, clearing their credit, and removing the
fraudulent lawsuits from the Wisconsin Circuit Court Access
System.
A presentencing investigation report (“PSR”) filed with the
district court on February 25, 2013, provided an advisory
Sentencing Guidelines calculation of an offense level of
nineteen: a base level of seven plus an increase by twelve levels
for the intended loss of $370,220. The PSR recommended a
three-level reduction under U.S.S.G. § 3E1.1 for acceptance of
responsibility, which would result in an adjusted offense level
of sixteen. The probation office calculated Seidling’s criminal
history category to be II, resulting in an advisory Guidelines
range of twenty-four to thirty months. The United States
Attorney’s Office agreed with the PSR recommendation for a
three-level reduction for acceptance of responsibility, but
recommended a sentence at the top of the Guidelines range
based on Seidling’s history of fraud, the large number of
victims, and the intended loss amount.
At sentencing on April 11, 2013, the district court judge
declined to apply the three-level reduction on the basis of
acceptance of responsibility for Seidling, stating, “I am not
persuaded that you qualify for the three-level downward
departure … you have done nothing else to suggest … that you
feel any responsibility for the harm you caused your victims.”
The court sentenced Seidling to thirty-six months in prison for
each of the fifty counts in the indictment to run concurrently,
followed by three years of supervised release. No restitution
was ordered, but Seidling was fined $10,000 and ordered to
pay a $100 criminal assessment for each count. The court made
clear that it would have imposed the same sentence even if it
No. 13-1854 7
had granted Seidling a three-level reduction for acceptance of
responsibility due to the victims’ “emotional trauma” caused
by Seidling’s fraudulently obtained judgments. Seidling filed
a timely notice of appeal on April 23, 2013.
First, Seidling argues that this Court should adopt the
theory of convergence and find that, because Seidling never
communicated with nor intended to communicate with the
victims of the fraud, the government did not prove the
materiality element of a mail fraud scheme. Second, Seidling
contends that at his sentencing, the district court’s denial of a
downward departure for acceptance of responsibility resulted
in procedural error that was not harmless.
II. DISCUSSION
A. Mail Fraud Scheme and the Element of Materiality
A district court’s denial of a motion for judgment of
acquittal is reviewed de novo in the light most favorable to the
government to determine whether any rational trier of fact
could have found the essential elements of the charged offense
beyond a reasonable doubt. United States v. Johns, 686 F.3d 438,
446 (7th Cir. 2012); United States v. Reynolds, 801 F.2d 952, 954
(7th Cir. 1986). A conviction of mail fraud under 18 U.S.C.
§ 1341 requires three essential elements: (1) a scheme or artifice
to defraud, (2) the use of the mailing system for the purpose of
executing the scheme, and (3) the defendant’s participation in
the scheme with the intent to defraud. United States v.
Stockheimer, 147 F.3d 1082, 1087 (7th Cir. 1998). Nothing in the
statutory text of 18 U.S.C. § 1341 requires a scheme to defraud
to involve deception of the same person or entity whose money
or property is the intended object of the scheme.
8 No. 13-1854
The Supreme Court in Neder v. United States, 527 U.S. 1,
21–25 (1999), held that under federal fraud statutes the govern-
ment must prove that the deceptive conduct underlying the
scheme to defraud must be “material.” Specifically, the
Supreme Court stated, “[i]n general, a false statement is
material if it has a natural tendency to influence or [is] capable
of influencing, the decision of the decisionmaking body to
which it was addressed.” Id. at 16 (quoting United States v.
Gaudin, 515 U.S. 506, 509 (1995)) (internal quotation marks
omitted). The Supreme Court has never held that materiality
requires the false statement to be made directly to the victims
of the scheme. In fact, the Supreme Court held otherwise,
finding that a scheme to defraud existed even when the
scheme was unsuccessful and “no one relied on any misrepre-
sentation.” Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639,
647–48 (2008) (emphasis added).
Seidling argues that materiality under Neder requires
“convergence”: that the party who is deceived must be the
same as the party that is defrauded of money or property by
the mail fraud scheme. Though he deceived the Wisconsin
small claims courts, the clerks of the court, and the process
servers, Seidling claims he lacked the requisite intent to obtain
money or property from the actual victims of the scheme. Since
the misrepresentations were not directly communicated to the
victims, and he did not intend for them to be communicated to
the victims, Seidling argues that the misrepresentations had no
tendency to influence the victims to part with their money or
property and were therefore immaterial. Seidling relies on this
Court’s ruling in United States v. Walters, 997 F.2d 1219 (7th Cir.
1993), to argue that the government is required to establish
No. 13-1854 9
that the defendant intended to obtain money or property from
the same persons he deceived in order to prove a scheme to
defraud.
Seidling misinterprets our holding in Walters. In Walters, a
sports agent devised a scheme to sign college athletes as clients
when they were negotiating for professional contracts. Id. at
1221. The agent hid the existence of the contracts from colleges
and told the athletes to do the same because the contracts
would make the athletes ineligible for college scholarships. Id.Unbeknownst to the agent, colleges routinely mailed forms to
prospective scholarship recipients requesting that they verify
their eligibility for the scholarships. Id. The agent was con-
victed of mail fraud charges, but his conviction was reversed
on appeal. Id. at 1227. This Court found that the agent lacked
the requisite intent, since the mailings were not foreseeable to
him, he did not cause the mailings to be made, and the
mailings did not advance his scheme. Id. at 1222. The essence
of this Court’s holding was that the mailings were not “essen-
tial to the [agent’s] scheme” to defraud and he lacked the intent
to receive money from the universities that granted scholar-
ships to ineligible athletes who had signed with him. Id. The
central issue in Walters was not one of convergence, but rather
involved the defendant’s knowledge of the use of the mail
system and whether the universities were in fact victims of
his scheme (whether the agent intended the money lost by
universities who granted scholarships to ineligible athletes to
end up in his own pocket). Id. at 1226.
In contrast, the uncontested facts of this case show that
Seidling knowingly used the mail system to carry out his
scheme and that the mailings were integral to the success of his
10 No. 13-1854
scheme to defraud victims of their money or property. Al-
though Seidling never directly communicated with the victims
that owned the money or property he sought, he deceived the
Wisconsin small claims courts in an effort to defraud the
individuals and one entity he named as defendants in the
lawsuits. Seidling undoubtedly intended for the money or
property lost by the victims to ultimately end up in his
possession. In short, the small claims courts were merely a
conduit in Seidling’s scheme to defraud his victims. Our
holding in Walters is consistent with the district court’s
decision.
This Court has found that mail fraud under 18 U.S.C. § 1341does not require the defendant to communicate directly with
his victims. In United States v. Cosentino, 869 F.2d 301 (7th Cir.
1989), this court addressed a scheme to defraud involving
deception of a third-party. The defendants, heads of an
insurance company, created a scheme to defraud the company
of its assets by deceiving regulators at the Department of
Insurance into believing the company was not approaching
insolvency. Id. at 304. This Court noted that the deception of
the regulators allowed the company to wrongfully remain in
business, which negatively impacted the financial assets of its
policyholders. Id. at 307. Although the decision did not
specifically discuss the theory of convergence, this Court
affirmed the defendants’ mail fraud convictions even though
the entity deceived was not the ultimate victim of the scheme
that was deprived of money or property. Our holding in
Cosentino shows that this Court does not interpret the mail
No. 13-1854 11
fraud statute as requiring convergence between the misrepre-
sentations and the defrauded victims.2
2
The First, Fifth, Eighth, and Tenth Circuits have also interpreted § 1341 in
accordance with this Court’s reasoning in Cosentino. The First Circuit in
United States v. Christopher stated that, “[w]e find no reason to read into the
[fraud] statutes an invariable requirement that the person deceived be the
same person deprived of the money and property by the fraud.” 142 F.3d
46, 54 (1st Cir. 1998) (upholding the wire fraud conviction of a defendant
that deceived state insurance regulators, which resulted in the financial
losses of policyholders). In United States v. McMillian, the Fifth Circuit held
that “[t]he government was not required to prove that misrepresentations
were made directly to any of the victims.” 600 F.3d 434, 449–50 (5th Cir.
2010) (upholding convictions for conspiracy and mail and wire fraud
offenses after defendants filed false financial reports with the Department
of Insurance resulting in risk and financial loss to policyholders). The
Eighth Circuit in United States v. Blumeyer held that “a defendant who
makes false representations to a regulatory agency in order to forestall
regulatory action that threatens to impede the defendant’s scheme to obtain
money or property from others is guilty [of violating the mail fraud
statute].” 114 F.3d 758, 767–68 (8th Cir. 1997) (reinstating the guilty verdicts
of defendants including their convictions for mail and wire fraud when the
defendants made misrepresentations to the Department of Insurance, which
defrauded citizens of their right to an honest government and caused
financial losses to policyholders). Finally, the Tenth Circuit in United States
v. Kennedy stated that it is “neither necessary to allege nor prove that
the false pretenses, representations, or promises were actually made to
anyone, much less to each individual in the distinct mail fraud counts.” 64
F.3d 1465, 1475–76 (10th Cir. 1995) (affirming defendant’s convictions for
racketeering, mail fraud, and money laundering when the defendant made
fraudulent promises to investors to immediately purchase metal for them
at locked-in prices).
12 No. 13-1854
B. Sentencing Adjustment for Acceptance of Responsi-
bility
Section 3E1.1 of the United States Sentencing Guidelines
provides for a two-point reduction of a defendant’s offense
level for acceptance of responsibility; the government may
permit an additional point reduction when a defendant
avoided trial by entering a guilty plea. Simply entering a guilty
plea prior to trial does not automatically entitle a defendant for
a reduction under § 3E1.1; the defendant bears the burden of
demonstrating that he is entitled to the reduction by a prepon-
derance of the evidence. See, e.g., United States v. Akindele, 84
F.3d 948, 956 (7th Cir. 1996).
Factual determinations of the district court regarding
acceptance of responsibility under U.S.S.G. § 3E1.1 are re-
viewed by this Court for clear error. United States v. Fudge,
325 F.3d 910, 923 (7th Cir. 2003). The district court judge
who makes sentencing determinations is due great deference
because he or she is in a unique position to evaluate a defen-
dant’s words and demeanor in order to determine his accep-
tance of responsibility. United States v. Gilbertson, 435 F.3d 790,
798–99 (7th Cir. 2006). The findings of the trial judge in
sentencing will only be reversed if the decision lacks any
foundation or the court is “left with the definite and firm
conviction that a mistake has been committed.” United States v.
Souffront, 338 F.3d 809, 832 (7th Cir. 2003); United States v.
McIntosh, 198 F.3d 995, 999 (7th Cir. 2000).
The probation officer and the United States Attorney’s
Office recommended a downward departure under § 3E1.1
for a total of a three-point reduction. The district court rejected
No. 13-1854 13
the recommendations of the probation office and the govern-
ment and denied the adjustment for acceptance of responsibil-
ity. Seidling argues that this decision lacked any foundation
and was not harmless error. First, Seidling contends that the
victims did not provide factual information to support the pain
and trauma experienced due to Seidling’s scheme. Second,
Seidling argues that the record fails to indicate that he lacked
remorse to justify denying acceptance of responsibility. We
find that the district court did not clearly err at sentencing and
gave sufficient consideration to the issue before denying
Seidling the downward adjustment for acceptance of responsi-
bility.
Although Seidling entered a plea of guilty, he continuously
rejected the contention that his conduct caused damage to the
victims. For example, in his response to a letter written by
victim Dori Stepan, Seidling stated, “I am sorry that Ms. Stepan
feels the way she does.” In no way does this response indicate
that Seidling feels responsible for the pain Ms. Stepan was, and
is still, experiencing. And there was Seidling’s response to
victim Mark Woychik’s statement before the court that
described in detail how Seidling’s actions have impacted him
and how Seidling continuously disregarded any difficulties he
caused the courts or his victims. Seidling responded to the
statement by saying, “Mr. Woychik exaggerated and misstated
the events in St. Croix County Circuit Court.” Again, Seidling’s
response avoids responsibility and actually redirects blame
towards the victim. In denying a downward adjustment for
acceptance of responsibility, the judge told Seidling,
You did agree to waive a jury or court trial and
proceed on the basis of stipulated facts, but you
14 No. 13-1854
have done nothing else to suggest that you believe
you committed this—to suggest that you believe
that you committed any real offense or that you feel
any responsibility for the harm that you caused your
victims.
In the district court opinion, the judge meticulously
detailed the accounts of Seidling’s victims to illustrate the
impact of Seidling’s scheme. Contrary to Seidling’s contention
that he was “punished” for choosing to remain silent at his
sentencing, the judge considered all of the relevant information
available during sentencing, particularly her observation of
Seidling’s words, his demeanor, and the statements of his
victims, before determining that Seidling was not qualified to
receive the three-level downward adjustment. Given Seidling’s
history of fraudulent behavior, his lack of remorse towards his
numerous victims, and the extensive details of his scheme
provided in the record, we find that the district court did not
err in denying a reduction in sentencing for acceptance of
responsibility.
III. CONCLUSION
In sum, although Seidling’s false statements and misrepre-
sentations were not made directly to the victims, they still
satisfy the requisite materiality element of mail fraud and
support Seidling’s conviction. Additionally, the district court
properly considered all relevant factors during sentencing and
did not err when it denied Seidling a downward departure for
acceptance of responsibility. For the foregoing reasons, the
decision of the district court is AFFIRMED.