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United States v. Stein

United States Court of Appeals, Seventh Circuit

June 26, 2014

UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
GUY STEIN, Defendant-Appellant

Argued May 22, 2014

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 10 CR 1104 -- Rebecca R. Pallmeyer, Judge.

For United States of America, United States of America: Renai Scherri Rodney, Attorney, Office of The United States Attorney, Chicago, IL.

For Guy Stein, Defendant - Appellant: Brooke Laurine Lewis, Attorney, Glenn Seiden, Attorney, Seiden Law Group, P.C., Chicago, IL.

Before POSNER, FLAUM, and MANION, Circuit Judges.

OPINION

Manion, Circuit Judge

Guy Stein pleaded guilty to one count of wire fraud stemming from a check-kiting scheme that, along with related conduct, caused a total loss of approximately $1 million to multiple financial institutions. In this appeal, Stein argues that approximately $440,000 of that loss should not have been counted against him because one of the principals of two of the financial

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institutions was complicit in his scheme. Finding no error with the district court's resolution of this issue, we affirm.

I. Background

Guy Stein ran legitimate companies--Big City Tickets and Advanced Design Consulting--for which he maintained bank accounts at three different banks. In need of " working capital financing assistance for [his] construction projects," he approached his friend Kevin Wiley. Wiley was a one-third owner of two currency exchanges, and he proposed that Stein write checks from his (underfunded) bank accounts to cash at the exchanges. That way, Stein would have use of the money to run his business for anywhere between a few to several days. At the end of that period, if his business had turned the profit he needed, the checks would clear without any problem. If not, he could write more checks, cash them, deposit enough proceeds to ensure the earlier checks cleared, and have more money to keep running his businesses in the hope of eventually turning a profit.[1] Stein did the latter for about five months, beginning in May 2010. Stein also used a third exchange, not related to Wiley, for this purpose. There was, however, a hitch in this plan. To clear previous checks and obtain the working capital needed for the next period, he would have to write larger (or more) checks each cycle. Further, each time a check was cashed, the exchange charged a fee of approximately 2%. Accordingly, the balance was spiraling upward while the annualized percentage rate for " borrowing" this working capital was anywhere from 100% to over 200% " interest" (depending on whether the period between cashing and clearing checks, over which the roughly 2% fee was spread, was several days or only a few days).[2] All the time, this juggling act (a check-kiting scheme) provided only a small amount of working capital. Needless to say, this was a totally irrational method of financing his construction projects. We do not need to know why Stein did not get a traditional loan or even look ahead to where this scheme would lead. Regardless, things came to a head when Stein was injured in a car accident and was not physically able to orchestrate the next round of checks. At that juncture, the Wiley exchanges suffered a loss of about $440,000 from checks that the banks did not clear because Stein's bank accounts had insufficient funds. The third exchange, Grand Avenue Currency Exchange, likewise lost about $250,000. Together with some related conduct not at issue in this appeal, the total loss to financial institutions as a result of Stein's conduct was over a million dollars.

When his fraud came to light, Stein pleaded guilty to one count of wire fraud, in violation of 18 U.S.C. § 1343. At his initial sentencing, the district court calculated his guideline range as 33-41 months based on his crime of conviction and a loss amount of about $1,170,000 (which took into account some money he had paid back). However, the district court noted that Stein's scheme was not designed to enrich himself. Rather, his fraud was orchestrated to keep his businesses afloat and pay his employees. For these and other relatively sympathetic factors, the district court sentenced him below the guidelines to 24 months' imprisonment. Stein appealed, arguing that the district court erred in its loss calculation. While on appeal, we granted a limited remand so the district court could consider Stein's motion for reconsideration of sentence. The district court granted that

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motion and revised the loss amount, for purposes of calculating the guidelines, down to about $960,000. This resulted in a guideline range of 27-31 months. See U.S.S.G. ยง 2B1.1(b)(1)(H), (b)(1)(I) (offense level increases by two above a one million dollar threshold). Sticking with its earlier reasoning, the district court again gave a below-guidelines sentence of 21 months' imprisonment. However, the ...


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