United States v. Persfull

• Decision Date: 06 October 2011
• Docket Number: Nos. 10–1188,10–2156.,s. 10–1188
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Joseph R. PERSFULL and James Persfull, Defendants–Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

660 F.3d 286

UNITED STATES of America, Plaintiff–Appellee,

v.Joseph R. PERSFULL and James Persfull, Defendants–Appellants.

Nos. 10–1188

10–2156.

United States Court of Appeals, Seventh Circuit.

Argued April 12, 2011.Decided Oct. 6, 2011.

Michael D. Love (argued), Attorney, Office of the United States Attorney, Rockford, IL, for Plaintiff–Appellee.

Ronald F. Neville (argued), Attorney, Neville, Pappas & Mahoney, Chicago, IL, for Defendant–Appellant in No. 10–1188.

Michael J. Kelly, Jr. (argued), Barry Levenstam, Attorneys, Jenner & Block LLP, Chicago, IL, for Defendant–Appellant in No. 10–2156.Before KANNE and EVANS ^*, Circuit

Judges, and CLEVERT, District Judge.^**

CLEVERT, District Judge.

The same day that James Persfull discharged his debts in a Chapter 7 bankruptcy, his mother, Eileen Persfull, died, leaving James and his brother, Joseph, equal shares in the estate.¹ James signed a disclaimer of his interest, but never told the trustee about his inheritance. Following a series of transactions between James, Joseph, and various accounts, the United States Attorney's office launched an investigation, and the brothers were charged with bankruptcy fraud. James was also charged with impeding a bankruptcy trustee in the course of his duties and fraudulently concealing assets. Throughout their trial, neither James nor Joseph disputed the post-bankruptcy financial transactions that led to James's possession of portions of the inheritance. Instead, they argued that it was brotherly love—not a sinister scheme—that led to the transfers. Following their convictions, James and Joseph appealed. We affirm.

I. BACKGROUND

On March 14, 2003, James Persfull filed a Chapter 7 Bankruptcy Petition, Schedules of Assets and Liabilities, and Statement of Financial Affairs. At the initial meeting of creditors on April 21, 2003, the following exchange took place between James, his attorney Donald Sullivan, and the bankruptcy trustee, James Stevens:

Stevens: Are you currently entitled to receive any type of inheritance at all?

Persfull: No, sir.

Stevens: You understand that if you are notified within the next six months that you are entitled to receive an inheritance that your [sic] are required to notify your attorney and the Trustee?

Persfull: Yes, sir.

Sullivan: Now, we would point out that his mother is very ill and he's explained that to me, and I've also explained that if he does get an inheritance or an interest in property that he has to disclose that to my office.

Stevens: Good, good. Alright with that I'll conclude your meeting. Thank you.

Two days after that meeting Eileen died testate appointing James and Joseph to serve as executors with equal shares in the estate, and Stevens filed a No Asset Report discharging James's debts. James, who never notified Stevens that he was entitled to an inheritance, signed two documents (1) declining to serve as executor of his mother's estate; and (2) disclaiming his interest in any type of property that he would receive as a result of his mother's death. The irrevocable disclaimer stated that it had been delivered to Joseph.

Over a year and a half later, Stevens learned that James may have an interest in two parcels of real estate and was entitled to an inheritance. Stevens reopened the bankruptcy on January 19, 2005, and was reappointed trustee before meeting with James and his attorney on February 1. When asked whether he had brought a mortgage current or paid it off, James admitted that he received two loans from Joseph—one for approximately $28,000 and the other which allowed him to retire the mortgage on his Briar Cliff residence. However, later in the conversation James told Stevens to check with Joseph about the source of the money because he wasn't sure if it was a loan or had something to do with his inheritance. For the first time, James mentioned that his mother had died, but he denied knowing anything about his mother's estate.

After obtaining copies of the will, declination, and the disclaimer, Stevens requested that James quit claim his interest in the Briar Cliff residence to Stevens as trustee. James never complied with this request or otherwise amended his bankruptcy schedules to disclose any inheritance, life insurance benefits, annuity interests, joint interests in stocks, T-bills, or savings bonds. Instead, knowing that Stevens wanted to sell the Briar Cliff home, James obtained a mortgage loan on the home and deposited the proceeds ($79,908.90) in his Amcore Bank account on March 18, 2005. He used approximately $15,000 of the proceeds to buy a car, and transferred $55,000 to an E*Trade account he owned.

Stevens unsuccessfully attempted to contact Joseph by phone. By letter dated April 20, 2005, Stevens informed Joseph that he had filed a lien again Eileen's 5215 South Massasoit Avenue home. Joseph did not respond. James, on the other hand, requested a meeting and asked how much money he needed to pay the creditors in full. James informed Stevens that the Briar Cliff home was worth something less than $175,000 and that there was a lien on the home. James informed Stevens that he had $50,000 to pay creditors.

By November 2005, James had transferred money from his E*Trade account back to his Amcore account and paid Stevens $50,000. Stevens received an additional $8,231.86 in December from the proceeds of the sale of Eileen's South Massasoit Avenue home. During the closing of that sale, James and Joseph provided a signed, handwritten document indicating that the proceeds were to be split between them equally. In addition, an attorney helped prepare a handwritten “Affidavit of Heirship” falsely stating that Eileen died “leaving no last will and testament.” James provided the information for the affidavit and signed the same.

James and Joseph were charged in a six-count superseding indictment on December 16, 2008. Both were charged in count one with bankruptcy fraud in violation of 18 U.S.C. § 157(3). James was charged in counts two, four, and five with bankruptcy fraud in violation of 18 U.S.C. § 152(1), and in count three with obstruction of justice in violation of 18 U.S.C. § 1503. Joseph was charged in count six with making a false statement in violation of 18 U.S.C. § 1001. Trial began on September 14, 2009, and James was convicted on all counts charged. Joseph was convicted on count one. Counts three and six were eventually dismissed.

At trial, the government introduced evidence regarding the inconsistent use of the disclaimer and assets that were not disclosed in James's bankruptcy schedules. For example, James and Joseph submitted separate claims as the beneficiaries of Eileen's two whole-life insurance policies issued by Metropolitan Life Insurance Company. Using the same Naperville, Illinois, address on their respective claim forms, each son received an identical benefit payments check from Metropolitan. Joseph's check and James's check (which was endorsed by James and Joseph) were deposited into the same account—a TCF bank account owned jointly by Eileen and Joseph prior to Eileen's death. Although Metropolitan's records contained copies of the declaration and disclaimer, Metropolitan did not distribute the policy benefits in accordance with the disclaimer.

In addition, on May 5, 2003 Joseph notified Phoenix Mutual Life Insurance of Eileen's death. He submitted two claim forms later that month—one signed by him and the other signed by James. With those forms, Joseph provided copies of the disclaimer and declination. The letter stated in part: “[E]nclosed with these forms is a ‘Disclaimer of Inheritance’ form which was signed by my brother ‘James' to exclude him from any dealings with the estate, due to him going thru a bankruptcy presently.” Phoenix honored the disclaimer and Joseph's request for the proceeds and issued a check for the full benefits to Joseph. That check was deposited at the same time and to the same account as the Metropolitan proceeds checks.

Meanwhile, on October 2, 2003, Joseph telephoned Jackson National Life Insurance to notify them of his mother's death. Separate packages of claim forms for the individual fixed annuity death benefit policy were sent to James and Joseph at the same Naperville address. James and Joseph submitted separate claims for the Jackson Life benefits on October 14, 2003, each of which elected a lump sum distribution, and both claim forms bore the signature of the same witness. Jackson Life routinely honored disclaimers of benefits, but the records relating to Eileen's annuity policy did not contain any disclaimer documents or references to any disclaimer.

Jackson Life mailed separate letters dated October 30, 2003, to James and Joseph at the Naperville address confirming that the benefits had been deposited into their beneficiary access accounts at Jackson Bank. James's beneficiary access account was opened at Jackson Bank on October 29, 2003, with the deposit of the policy proceeds, $29,307.78. Joseph's Naperville address was the address on the account. James signed each of the three checks that were written on the account, totaling more than $29,000, and all were deposited into one of James's accounts at Amcore Bank.

On December 4, 2003, James used the funds in his Amcore Bank account to pay $22,095.75 on his mortgage loan and stop foreclosure proceedings on his Briar Cliff home. The source of the funds in the Amcore account was three checks written by James on his Jackson Federal beneficiary account. Further, on February 13, 2004, Amcore received a TCF Bank official check in the amount of $140,000 that was applied to the Briar Cliff loan payment to reduce the balance from $148,406.54 to $8,406.54. The source of the funds was the TCF Bank account jointly owned by Joseph and Eileen prior to her death. The funds in the TCF deposit account came from various sources, but the most significant were the proceeds of the Metropolitan policies, the Phoenix policy, proceeds from an American Funds...