In the United States Court of Appeals For the Seventh Circuit ____________
No. 06-3192 UNITED STATES OF AMERICA, Plaintiff-Appellee, v.
JAMES P. ROTI, Defendant-Appellant. ____________ Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 04 CR 448—James B. Zagel, Judge. ____________ ARGUED APRIL 9, 2007—DECIDED MAY 3, 2007 ____________
Before EASTERBROOK, Chief Judge, and KANNE and WILLIAMS, Circuit Judges. EASTERBROOK, Chief Judge. Saddled with a judgment for more than $400,000 on account of a guarantee of his small corporation’s debts, James Roti decided to hide his assets from creditors. He has been convicted of bankruptcy fraud, see 18 U.S.C. §157, and concealing assets from the bankruptcy trustee, see 18 U.S.C. §152. His sentence is 21 months’ imprisonment. Roti concedes that he parked some assets with family members and moved others to accounts unknown to his creditors, and that he lied to his principal creditor, to the federal bankruptcy court, and to the trustee. Roti says that his lawyer Andrew Werth put 2 No. 06-3192
him up to it, and at trial he contended that he should be acquitted because Werth managed the scheme’s details. The jury rejected that defense—for it was no defense at all. That two people cooperate to swindle a third does not excuse either of the schemers, even if one of them is a lawyer. Advice of counsel is not a free-standing defense, though a lawyer’s fully informed opinion that certain conduct is lawful (followed by conduct strictly in compli- ance with that opinion) can negate the mental state required for some crimes, including fraud. See United States v. Sprong, 287 F.3d 663, 665-66 (7th Cir. 2002); cf. United States v. Cheek, 3 F.3d 1057, 1061 (7th Cir. 1993). But Roti does not contend that Werth assured him that concealing assets and lying to the court would be lawful. Roti did not call Werth as a witness or introduce any opinion letter. So it is hard to understand how Werth’s role, whatever it was, can negate scienter. Roti does not deny knowing that he was lying under oath, if not at the outset (he says that he signed blank schedules that Werth filled in and filed) then in his oral declaration at the creditors’ meeting under 11 U.S.C. §341 that all of the schedules were complete and correct. What Roti did propose to offer is evidence that, after the fraud was uncovered, he filed suit against Werth. That suit was taken over by Roti’s trustee in bankruptcy and settled for $15,000. According to Roti, the settlement shows Werth’s recognition of his culpability for Roti’s predicament. The district court held, however, that Fed. R. Evid. 408 barred the introduction of evidence about the settlement, and Roti’s principal argument on appeal is that the decision was mistaken because Rule 408 does not apply in criminal prosecutions. United States v. Prewitt, 34 F.3d 436 (7th Cir. 1994), states that Rule 408 is limited to civil cases. See also United States v. Ghilarducci, 480 F.3d 542 (7th Cir. No. 06-3192 3
2007) (decided while this case was on appeal). But Roti’s lawyer did not call Prewitt to the district judge’s atten- tion until after trial or make an argument along its lines. The point therefore has been forfeited, and our review is limited to a search for plain error—of which there was none, for multiple reasons. One reason is that the district judge ruled that he would exclude the evidence under Fed. R. Evid. 403 independent of Rule 408. That decision was not an abuse of discretion. It should be evident from what we have said already that Roti proposed a wild goose chase; the district judge properly limited the inquiry into this distraction. Indeed, we doubt that the evidence was relevant, and if that’s so then it was inadmissible independently as a result of Rule 402. The problem is not only that Werth’s culpability would not excuse Roti’s but also that the settlement of a civil claim does not imply anything helpful about Roti’s state of mind. There were at least four possibilities consistent with settlement: (a) Werth failed to investigate Roti’s finances adequately before filing the bankruptcy petition and schedules; (b) Werth misled Roti about what he was going to omit from the bankruptcy schedules; (c) Werth told Roti to lie in both the schedules and the creditors’ meeting; (d) Roti lied to Werth as well as to the court, and Werth did nothing wrong but sought to avoid the cost and distraction of defending the suit. All four situations produce a settlement, so the fact that Werth agreed to pay something would not have helped a jury distinguish among the possibilities. More than that, however, is what has happened to Rule 408 since Prewitt. The panel in Prewitt deemed Rule 408 inapplicable to criminal prosecutions because its text did not specifically mention criminal litigation. Prewitt did not discuss Fed. R. Evid. 1101(b) or say, after the fashion of Green v. Bock Laundry Machine Co., 490 U.S. 504 (1989), that application of Rule 408 to criminal prosecutions 4 No. 06-3192
would be absurd. In 2006 the Supreme Court promulgated an amendment to Rule 408 demonstrating that at least the new version (which took effect on December 1, 2006) applies to criminal cases. The amended rule provides: Rule 408. Compromise and Offers to Compromise (a) Prohibited uses.—Evidence of the following is not admissible on behalf of any party, when offered to prove liability for, invalidity of, or amount of a claim that was disputed as to validity or amount, or to impeach through a prior inconsistent state- ment or contradiction: (1) furnishing or offering or promising to fur- nish—or accepting or offering or promising to accept—a valuable consideration in compro- mising or attempting to compromise the claim; and (2) conduct or statements made in compromise negotiations regarding the claim, except when offered in a criminal case and the negotiations related to a claim by a public office or agency in the exercise of regulatory, investigative, or enforcement authority. (b) Permitted uses.—This rule does not require exclusion if the evidence is offered for purposes not prohibited by subdivision (a). Examples of permis- sible purposes include proving a witness’s bias or prejudice; negating a contention of undue delay; and proving an effort to obstruct a criminal inves- tigation or prosecution. Note that the new Rule 408(a)(2), by creating a partial exception for criminal cases, shows that the rest of the rule applies to both civil and criminal litigation. The Committee Note accompanying the amended Rule 408 explains that this was done because the Committee agreed No. 06-3192 5
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In the United States Court of Appeals For the Seventh Circuit ____________
No. 06-3192 UNITED STATES OF AMERICA, Plaintiff-Appellee, v.
JAMES P. ROTI, Defendant-Appellant. ____________ Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 04 CR 448—James B. Zagel, Judge. ____________ ARGUED APRIL 9, 2007—DECIDED MAY 3, 2007 ____________
Before EASTERBROOK, Chief Judge, and KANNE and WILLIAMS, Circuit Judges. EASTERBROOK, Chief Judge. Saddled with a judgment for more than $400,000 on account of a guarantee of his small corporation’s debts, James Roti decided to hide his assets from creditors. He has been convicted of bankruptcy fraud, see 18 U.S.C. §157, and concealing assets from the bankruptcy trustee, see 18 U.S.C. §152. His sentence is 21 months’ imprisonment. Roti concedes that he parked some assets with family members and moved others to accounts unknown to his creditors, and that he lied to his principal creditor, to the federal bankruptcy court, and to the trustee. Roti says that his lawyer Andrew Werth put 2 No. 06-3192
him up to it, and at trial he contended that he should be acquitted because Werth managed the scheme’s details. The jury rejected that defense—for it was no defense at all. That two people cooperate to swindle a third does not excuse either of the schemers, even if one of them is a lawyer. Advice of counsel is not a free-standing defense, though a lawyer’s fully informed opinion that certain conduct is lawful (followed by conduct strictly in compli- ance with that opinion) can negate the mental state required for some crimes, including fraud. See United States v. Sprong, 287 F.3d 663, 665-66 (7th Cir. 2002); cf. United States v. Cheek, 3 F.3d 1057, 1061 (7th Cir. 1993). But Roti does not contend that Werth assured him that concealing assets and lying to the court would be lawful. Roti did not call Werth as a witness or introduce any opinion letter. So it is hard to understand how Werth’s role, whatever it was, can negate scienter. Roti does not deny knowing that he was lying under oath, if not at the outset (he says that he signed blank schedules that Werth filled in and filed) then in his oral declaration at the creditors’ meeting under 11 U.S.C. §341 that all of the schedules were complete and correct. What Roti did propose to offer is evidence that, after the fraud was uncovered, he filed suit against Werth. That suit was taken over by Roti’s trustee in bankruptcy and settled for $15,000. According to Roti, the settlement shows Werth’s recognition of his culpability for Roti’s predicament. The district court held, however, that Fed. R. Evid. 408 barred the introduction of evidence about the settlement, and Roti’s principal argument on appeal is that the decision was mistaken because Rule 408 does not apply in criminal prosecutions. United States v. Prewitt, 34 F.3d 436 (7th Cir. 1994), states that Rule 408 is limited to civil cases. See also United States v. Ghilarducci, 480 F.3d 542 (7th Cir. No. 06-3192 3
2007) (decided while this case was on appeal). But Roti’s lawyer did not call Prewitt to the district judge’s atten- tion until after trial or make an argument along its lines. The point therefore has been forfeited, and our review is limited to a search for plain error—of which there was none, for multiple reasons. One reason is that the district judge ruled that he would exclude the evidence under Fed. R. Evid. 403 independent of Rule 408. That decision was not an abuse of discretion. It should be evident from what we have said already that Roti proposed a wild goose chase; the district judge properly limited the inquiry into this distraction. Indeed, we doubt that the evidence was relevant, and if that’s so then it was inadmissible independently as a result of Rule 402. The problem is not only that Werth’s culpability would not excuse Roti’s but also that the settlement of a civil claim does not imply anything helpful about Roti’s state of mind. There were at least four possibilities consistent with settlement: (a) Werth failed to investigate Roti’s finances adequately before filing the bankruptcy petition and schedules; (b) Werth misled Roti about what he was going to omit from the bankruptcy schedules; (c) Werth told Roti to lie in both the schedules and the creditors’ meeting; (d) Roti lied to Werth as well as to the court, and Werth did nothing wrong but sought to avoid the cost and distraction of defending the suit. All four situations produce a settlement, so the fact that Werth agreed to pay something would not have helped a jury distinguish among the possibilities. More than that, however, is what has happened to Rule 408 since Prewitt. The panel in Prewitt deemed Rule 408 inapplicable to criminal prosecutions because its text did not specifically mention criminal litigation. Prewitt did not discuss Fed. R. Evid. 1101(b) or say, after the fashion of Green v. Bock Laundry Machine Co., 490 U.S. 504 (1989), that application of Rule 408 to criminal prosecutions 4 No. 06-3192
would be absurd. In 2006 the Supreme Court promulgated an amendment to Rule 408 demonstrating that at least the new version (which took effect on December 1, 2006) applies to criminal cases. The amended rule provides: Rule 408. Compromise and Offers to Compromise (a) Prohibited uses.—Evidence of the following is not admissible on behalf of any party, when offered to prove liability for, invalidity of, or amount of a claim that was disputed as to validity or amount, or to impeach through a prior inconsistent state- ment or contradiction: (1) furnishing or offering or promising to fur- nish—or accepting or offering or promising to accept—a valuable consideration in compro- mising or attempting to compromise the claim; and (2) conduct or statements made in compromise negotiations regarding the claim, except when offered in a criminal case and the negotiations related to a claim by a public office or agency in the exercise of regulatory, investigative, or enforcement authority. (b) Permitted uses.—This rule does not require exclusion if the evidence is offered for purposes not prohibited by subdivision (a). Examples of permis- sible purposes include proving a witness’s bias or prejudice; negating a contention of undue delay; and proving an effort to obstruct a criminal inves- tigation or prosecution. Note that the new Rule 408(a)(2), by creating a partial exception for criminal cases, shows that the rest of the rule applies to both civil and criminal litigation. The Committee Note accompanying the amended Rule 408 explains that this was done because the Committee agreed No. 06-3192 5
with the result of Prewitt, which concluded that admis- sions of fault made in compromise of a civil securities enforcement action were admissible against the accused in a criminal action for mail fraud, but not Prewitt’s view that Rule 408 is wholly inapplicable to criminal prosecu- tions. Our point is not that the amended Rule 408 governs on this appeal. It took effect after the trial, and the Supreme Court’s order promulgating the amendment did not direct retroactive application. Instead we refer to this development to show that failure to apply Prewitt to Roti’s trial would not seriously affect the fairness, integrity, or reputation of judicial proceedings, one ingredient of plain- error review. See United States v. Olano, 507 U.S. 725, 735-37 (1993). Criminal defendants do not acquire vested rights to the benefit of appellate opinions whose rationale has been repudiated. See Lockhart v. Fretwell, 506 U.S. 364 (1993). The 2006 change shows that Prewitt gave an overbroad reason for what was a sound conclusion on the case’s facts. There is no reason to deem Prewitt’s rationale, which is no longer authoritative, such a fundamental component of criminal procedure that it must be applied on plain-error review. Roti’s reply brief presents an argument that was not made in either the district court or his opening brief: that after Cunningham v. California, 127 S. Ct. 856 (2007), district judges no longer may find facts that affect federal sentences. Although this argument could be dispatched as forfeited, it has become popular since the Supreme Court’s decision, and it is best to close the door before other lawyers waste their time and ours pursuing it. Cunningham holds that California’s determinate sen- tencing law violates the sixth amendment, as understood in Apprendi v. New Jersey, 530 U.S. 466 (2000); Blakely v. Washington, 542 U.S. 296 (2004); and United States v. 6 No. 06-3192
Booker, 543 U.S. 220 (2005), by granting the judge rather than the jury the power to find facts that raise the maxi- mum lawful sentence. Roti contends that Cunningham applies to the federal Sentencing Guidelines as well as to California’s system. Yet Booker itself held that the Guidelines as enacted violate the sixth amendment. The remedial portion of Booker solved that constitutional problem by making the Guidelines advisory. Given that adjustment, findings of fact under the Guidelines no longer determine statutory maximum sentences. Cunningham therefore has no effect on post-Booker federal practice. District judges remain free, as the remedial portion of Booker instructs, to make findings of fact that influence sentences, provided that the sentence is constrained by the maximum set by statute for each crime. See, e.g., United States v. Hawkins, 480 F.3d 476 (7th Cir. 2007). One observation before we close. Roti is in prison, but Andrew Dean Werth remains licensed to practice law. According to the Attorney Registration and Disciplinary Commission of Illinois, he is in good standing and no disciplinary inquiry has ever been conducted. If Roti’s testimony at trial is correct, however, then Werth planned and executed a federal crime for which Roti has taken the fall. If Roti was lying at trial about Werth’s role (as the district judge concluded when holding that Roti obstructed justice by his perjury), there remains the possibility that Werth turned a blind eye to his client’s fraud and facili- tated misuse of the bankruptcy process. The settlement may reflect Werth’s recognition that he seriously mis- handled the situation—though, as we mentioned, it may show only Werth’s desire to put costly litigation behind him and get on with life. Neither knaves nor fools should be representing debtors who need legal assistance. We will send copies of this opinion (and of the briefs, which provide No. 06-3192 7
additional factual detail) to the ARDC and the disciplinary committee of the federal district court so that appro- priate inquiries can be made into Werth’s fitness. In asking these bodies to conduct an inquiry, we do not express any opinion about whether Werth has engaged in sanctionable conduct. AFFIRMED
A true Copy: Teste:
________________________________ Clerk of the United States Court of Appeals for the Seventh Circuit
USCA-02-C-0072—5-3-07