Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-15-02453/USCOURTS-ca7-15-02453-0/pdf.json

Parties Involved:
United States of America
Appellee
David Weimert
Appellant

Document Text:

In the 

United States Court of Appeals 

For the Seventh Circuit ____________________

No. 15‐2453

UNITED STATES OF AMERICA,

Plaintiff‐Appellee,

v.

DAVID WEIMERT,

Defendant‐Appellant.

____________________

Appeal from the United States District Court for the

Western District of Wisconsin.

No. 3:14‐cr‐00022‐jdp‐1 — James D. Peterson, Judge.

____________________

ARGUED JANUARY 22, 2016 — DECIDED APRIL 8, 2016

____________________

Before BAUER, FLAUM, and HAMILTON, Circuit Judges.

HAMILTON, Circuit Judge. In the midst of the 2008–09 finan‐

cial crisis, a Wisconsin bank called AnchorBank was strug‐

gling to stay above water. Under pressure to find cash to pay

its own lenders, the bank’s president told vice president Da‐

vid Weimert to try to sell the bank’s share in a commercial real

estate development in Texas. Weimert, who is the defendant

Case: 15-2453 Document: 32 Filed: 04/08/2016 Pages: 40
2 No. 15‐2453

and appellant in this criminal wire fraud case, successfully ar‐

ranged a sale that exceeded the bank’s target price by about

one third. The deal also relieved the bank of a liability of twice

the sale price.

Given the version of the facts we must accept for this ap‐

peal, however, Weimert saw an opportunity to insert himself

into the deal personally. He persuaded two potential buyers

that he would be a useful partner for them. Both buyers in‐

cluded in their offer letters a term having Weimert buy a mi‐

nority interest in the property. The bank agreed. It also agreed

to pay Weimert an unusual bonus to enable him to buy the

minority interest. We must also assume that the successful

buyer, at least, would have been willing to go forward with‐

out Weimert as a partner, and that Weimert deliberately mis‐

led his board and bank officials to believe that the successful

buyer would not close the deal if he were not included as a

minority partner. The government prosecuted Weimert for

wire fraud on the theory that his actions added up to a scheme

to obtain money or property by fraud, and the jury convicted

him on five of six counts of wire fraud under 18 U.S.C. § 1343.

We reverse and order judgment of acquittal. Federal wire

fraud is an expansive tool, but as best we can tell, no previous

case at the appellate level has treated as criminal a person’s

lack of candor about the negotiating positions of parties to a

business deal. In commercial negotiations, it is not unusual

for parties to conceal from others their true goals, values, pri‐

orities, or reserve prices in a proposed transaction. When we

look closely at the evidence, the only ways in which Weimert

misled anyone concerned such negotiating positions. He led

the successful buyer to believe the seller wanted him to have

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No. 15‐2453 3

a piece of the deal. He led the seller to believe the buyer in‐

sisted he have a piece of the deal. All the actual terms of the

deal, however, were fully disclosed and subject to negotiation.

There is no evidence that Weimert misled anyone about any

material facts or about promises of future actions. While one

can understand the bank’s later decision to fire Weimert when

the deception about negotiating positions came to light, his

actions did not add up to federal wire fraud. Weimert is enti‐

tled to judgment of acquittal. We order his prompt release

from federal prison, on the stated terms of supervised release

in his sentence, pending issuance of our mandate.

I. The Standard of Review

We review de novo the denial of a motion for judgment of

acquittal. United States v. Durham, 766 F.3d 672, 678 (7th Cir.

2014), citing United States v. Claybrooks, 729 F.3d 699, 704 (7th

Cir. 2013). We construe the evidence in the light most favora‐

ble to the government, asking whether a rational trier of fact

could have found the elements of the crime beyond a reason‐

able doubt. Durham, 766 F.3d at 678, quoting United States v.

Love, 706 F.3d 832, 837 (7th Cir. 2013).

Given our deference to jury determinations on evidentiary

matters, we rarely reverse a conviction for mail or wire fraud

due to insufficient evidence. See United States v. Mullins, 800

F.3d 866, 870 (7th Cir. 2015) (“Sufficiency challenges are very

difficult to win ... .”). We have sometimes said that such ap‐

peals face “a nearly insurmountable hurdle.” E.g., United

States v. Domnenko, 763 F.3d 768, 772 (7th Cir. 2014), quoting

United States v. Torres‐Chavez, 744 F.3d 988, 993 (7th Cir. 2014).

The hurdle is not actually insurmountable, though. See, e.g.,

Durham, 766 F.3d at 678–79 (reversing on two counts); United

States v. Dooley, 578 F.3d 582, 588–89 (7th Cir. 2009) (reversing

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4 No. 15‐2453

on one count); see also United States v. Lake, 472 F.3d 1247, 1260

(10th Cir. 2007); United States v. Izydore, 167 F.3d 213, 220 (5th

Cir. 1999); United States v. Goodman, 984 F.2d 235, 239–40 (8th

Cir. 1993). Even more to the point, the Supreme Court has re‐

versed mail and wire fraud convictions that would have dra‐

matically expanded the scope of the statutes. Skilling v. United

States, 561 U.S. 358, 413–15 (2010) (affirming the reversal of

honest‐services wire fraud conviction); Cleveland v. United

States, 531 U.S. 12, 26–27 (2000) (reversing wire fraud convic‐

tion for failure to demonstrate loss of property); McNally v.

United States, 483 U.S. 350, 360–61 (1987) (reversing wire fraud

conviction on honest services theory of fraud prior to statu‐

tory revision). We take a similar step here.

II. The Limits of Mail and Wire Fraud  

A. The Breadth of Mail and Wire Fraud

Before giving a detailed account of the evidence, we ex‐

plain the legal standards we apply. The wire fraud statute pro‐

hibits schemes to defraud or to obtain money or property by

means of “false or fraudulent pretenses, representations, or

promises” if interstate wire or electronic communications are

used to execute the scheme. 18 U.S.C. § 1343. To convict a per‐

son under § 1343, the government must prove that he “(1) was

involved in a scheme to defraud; (2) had an intent to defraud;

and (3) used the wires in furtherance of that scheme.” United

States v. Faruki, 803 F.3d 847, 852 (7th Cir. 2015), quoting

Durham, 766 F.3d at 678.

To prove a scheme to defraud, the government must show

that Weimert made a material false statement, misrepresenta‐

tion, or promise, or concealed a material fact. United States v.

Powell, 576 F.3d 482, 490 (7th Cir. 2009); see also Neder v. United

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No. 15‐2453 5

States, 527 U.S. 1, 25 (1999) (holding “materiality of falsehood”

is an element of federal mail and wire fraud statutes). Intent

to defraud requires proof that the defendant acted willfully

“with the specific intent to deceive or cheat, usually for the

purpose of getting financial gain for one’s self or causing fi‐

nancial loss to another.” Faruki, 803 F.3d at 853, quoting United

States v. Howard, 619 F.3d 723, 727 (7th Cir. 2010).

Like its cousin mail fraud, the wire fraud statute has been

interpreted to reach a broad range of activity. Courts have

taken an expansive approach to what counts as a material

misrepresentation or concealment in a scheme to defraud. As

we will see, it is possible to put together broad language from

courts’ opinions on several different points so as to stretch the

reach of the mail and wire fraud statutes far beyond where

they should go.

First, for example, materiality has been defined in broad

and general terms as having a tendency to influence or to be

capable of influencing the decision‐maker. Neder, 527 U.S. at

16; United States v. Seidling, 737 F.3d 1155, 1160 (7th Cir. 2013).

Second, the concept of a misrepresentation is also broad,

reaching not only false statements of fact but also misleading

half‐truths and knowingly false promises. Powell, 576 F.3d at

490–91; United States v. Sloan, 492 F.3d 884, 890 (7th Cir. 2007),

citing United States v. Stephens, 421 F.3d 503, 507 (7th Cir. 2005);

see generally Durland v. United States, 161 U.S. 306, 312 (1896)

(mail fraud not limited to common law fraud but includes

“representations as to past or present, or suggestions and

promises as to the future”). It can also include the omission or

concealment of material information, even absent an affirma‐

tive duty to disclose, if the omission was intended to induce a

false belief and action to the advantage of the schemer and the

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disadvantage of the victim. United States v. Morris, 80 F.3d

1151, 1160–61 (7th Cir. 1996), quoting Emery v. American Gen‐

eral Finance, Inc., 71 F.3d 1343, 1346 (7th Cir. 1995); see also

United States v. Keplinger, 776 F.2d 678, 697–98 (7th Cir. 1985).

Third, wire fraud does not require the false statement to

be made directly to the victim of the scheme. Deception of

someone else can suffice if it carries out the scheme. Seidling,

737 F.3d at 1160.

Fourth, it is no defense that the intended victim of wire

fraud was too trusting and gullible or, on the other hand, was

too smart or sophisticated to be taken in by the deception.

United States v. Coffman, 94 F.3d 330, 333 (7th Cir. 1996); see

also United States v. Colton, 231 F.3d 890, 903 (4th Cir. 2000) (“If

a scheme to defraud has been or is intended to be devised, it

makes no difference whether the persons the schemers in‐

tended to defraud are gullible or skeptical, dull or bright.”)

(citation omitted).

These and other expansive glosses on the mail and wire

fraud statutes have led to their liberal use by federal prosecu‐

tors. As one future federal judge put it during his tenure as a

prosecutor, these statutes are “our Stradivarius, our Colt 45,

our Louisville Slugger, our Cuisinart—and our true love.”

Jed S. Rakoff, The Federal Mail Fraud Statute (Part I), 18 Duq. L.

Rev. 771, 771 (1980). Mail and wire fraud statutes “have long

provided prosecutors with a means by which to salvage a

modest, but dubious, victory from investigations that essen‐

tially proved unfruitful.” John C. Coffee, Jr. & Charles K.

Whitehead, The Federalization of Fraud: Mail and Wire Fraud

Statutes, in White Collar Crime: Business and Regulatory Of‐

fenses § 9.05, at 9‐73 (1990).

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The mail and wire fraud statutes have “been invoked to

impose criminal penalties upon a staggeringly broad swath of

behavior,” creating uncertainty in business negotiations and

challenges to due process and federalism. Sorich v. United

States, 555 U.S. 1204, 129 S. Ct. 1308, 1308–11 (2009) (Scalia, J.,

dissenting from denial of certiorari on scope of “honest ser‐

vices” theory of fraud). We must take care not to stretch the

long arms of the fraud statutes too far. See Pasquantino v.

United States, 544 U.S. 349, 377 (2005) (Ginsburg, J., dissenting)

(Supreme Court has “also recognized that incautious reading

of the statute could dramatically expand the reach of federal

criminal law, and we have refused to apply the proscription

exorbitantly”).

B. Fraud and Commercial Negotiations

This case presents a test of how far the mail and wire fraud

statutes reach when parties negotiate a substantial commer‐

cial transaction that involves, as almost all will, the use of the

mails or interstate wire communications. Some deceptions in

commercial negotiations certainly can support a mail or wire

fraud prosecution. A party may not misrepresent material

facts about an asset during a negotiation to sell it. For exam‐

ple, a seller or his agent may not falsely tell potential buyers

or investors that a piece of property has no history of environ‐

mental problems if soil and groundwater contamination on

the property was discovered the year before. The buyer would

be led to purchase a property worth far less than she was led

to believe, given the looming remediation costs. Similarly, a

company may not inform a potential investor that it expects

patent protection for its key intellectual property if its patent

application was recently rejected as barred by prior art. The

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investor would be led to believe that he was investing in a val‐

uable asset that was actually worthless. The misrepresenta‐

tions materially alter one party’s understanding of the subject

of the deal.

In prior cases, we have also said that a company may not

hide behind disclaimers while deliberately understating ex‐

pected losses in disclosures to investors. The information

would be material to the price buyers of securities are willing

to pay. United States v. Morris, 80 F.3d 1151, 1167–68 (7th Cir.

1996). Nor may a company choose to advertise the success of

one investor in isolation while omitting the crippling losses of

ninety percent of its investors. United States v. Biesiadecki, 933

F.2d 539, 541–43 (7th Cir. 1991). Nor may a party falsify loan

documents to defraud mortgage lenders, United States v. Shen‐

eman, 682 F.3d 623, 629 (7th Cir. 2012), forge a buyer’s signa‐

ture on a check, United States v. Powell, 576 F.3d 482, 491 (7th

Cir. 2009), or use false advertising to guarantee investors im‐

possible returns, United States v. Sloan, 492 F.3d 884, 890–91

(7th Cir. 2007). In short, the federal mail and wire fraud stat‐

utes reach a seller’s or buyer’s deliberate misrepresentation of

facts or false promises that are likely to affect the decisions of

a party on the other side of the deal.

These practices deviate far from behavioral norms for

business transactions in a market economy governed by the

rule of law. There are more difficult cases, however. “Not all

conduct that strikes a court as sharp dealing or unethical con‐

duct is a ‘scheme or artifice to defraud.’” United States v. Col‐

ton, 231 F.3d 890, 901 (4th Cir. 2000) (alteration omitted), quot‐

ing Reynolds v. East Dyer Development Co., 882 F.2d 1249, 1252

(7th Cir. 1989) (affirming summary judgment and sanctions

for defendants in civil RICO case alleging failure to disclose

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information that home lots were not suitable for building).

The mail and wire fraud statutes “do not cover all behavior

which strays from the ideal.” United States v. Colton, 231 F.3d

at 901 (citation and internal quotation marks omitted). We

have also explained that a corporate officer’s breach of fiduci‐

ary duty, when combined with a mailing or wire communica‐

tion, is not sufficient to show mail or wire fraud. United States

v. Kwiat, 817 F.2d 440, 444 (7th Cir. 1987) (reversing convic‐

tions). And “we do not imply that all or even most instances

of non‐disclosure of information that someone might find rel‐

evant come within the purview” of the mail and wire fraud

statutes. United States v. Keplinger, 776 F.2d 678, 697–98 (7th

Cir. 1985) (affirming mail fraud convictions for scheme to sub‐

mit false laboratory results on safety of medications).

C. Fraud and Negotiating Positions

As shown below, the central issue in this case is whether

the mail and wire fraud statutes can be stretched to criminal‐

ize deception about a party’s negotiating positions, such as a

party’s bottom‐line reserve price or how important a particu‐

lar non‐price term is. We conclude that they cannot.

From strands of case law, it is true, one can piece together

a mail or wire fraud case based on such deception about ne‐

gotiating positions. To track the specific rules we discussed

above: First, information about a party’s negotiating position

is surely material in the sense that it is capable of influencing

another party’s decisions. Second, actionable deception can

include false statements of fact, misleading half‐truths, decep‐

tive omissions, and false promises of future action. All of

these descriptions may fit deceptions about negotiating posi‐

tions, at least if a negotiator’s present state of mind is treated

as a fact. Third, the false statement may be made to someone

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other than the owner or holder of the money or property tar‐

geted by the scheme. And fourth, it is no defense that the in‐

tended victim either trusted the defendant too much or was

too savvy to be fooled.

But Congress could not have meant to criminalize decep‐

tive misstatements or omissions about a buyer’s or seller’s ne‐

gotiating positions. See United States v. Coffman, 94 F.3d 330,

334 (7th Cir. 1996) (“it would not do to criminalize business

conduct that is customary rather than exceptional and is rela‐

tively harmless”). Buyers and sellers negotiate prices and

other terms. To state the obvious, they will often try to mis‐

lead the other party about the prices and terms they are will‐

ing to accept. Such deceptions are not criminal.

To take a simple example based on price, suppose a seller

is willing to accept $28,000 for a new car listed for sale at

$32,000. A buyer is actually willing to pay $32,000, but he first

offers $28,000. When that offer is rejected and the seller de‐

mands $32,000, the buyer responds: “I won’t pay more than

$29,000.” The seller replies: “I’ll take $31,000 but not a penny

less.” After another round of offers and demands, each one

falsely labeled “my final offer,” the parties ultimately agree

on a price of $30,000. Each side has gained from deliberately

false misrepresentations about its negotiating position. Each

has affected the other side’s decisions. If the transaction in‐

volves interstate wires, has each committed wire fraud, each

defrauding the other of $2,000? Of course not. But why not?

The government’s answer at oral argument was the ab‐

sence of “intent to defraud.” That answer begs the question.

How do we recognize “intent to defraud” if a party has

gained a better deal by misleading the other party about its

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No. 15‐2453 11

negotiating position? If a party’s negotiation position is mate‐

rial for purposes of the mail and wire fraud statutes, each has

obtained a financial gain by deliberately misleading the

other.1

The better answer is that negotiating parties, and certainly

the sophisticated businessmen in this case, do not expect com‐

plete candor about negotiating positions, as distinct from

facts and promises of future behavior. Deception about nego‐

tiating positions—about reserve prices and other terms and

their relative importance—should not be considered material

for purposes of mail and wire fraud statutes.

Even after receiving the government’s post‐argument sup‐

plemental authority, we know of no other case in which a

court has found that deceptive statements about negotiating

positions amounted to a scheme to defraud under the mail or

wire fraud statutes. This absence is consistent with more gen‐

eral understandings in the law.

In the Restatement (Second) of Torts treatment of fraud,

for example, statements about a party’s opinions, preferences,

priorities, and bottom lines are generally not considered state‐

ments of fact material to the transaction. See Restatement

(Second) of Torts § 538A cmts. b, g (distinguishing between

representations of facts—where the maker has definite

knowledge—and opinions—including a “maker’s judgment

as to quality, value, authenticity or similar matters as to which

                                                  1 One might raise a practical objection to this simple example: it will

usually be too difficult to prove that a negotiating position was deliber‐

ately deceptive in such a two‐person negotiation over a car. But in much

larger business deals involving negotiating teams, internal emails and dis‐

cussions would routinely provide such evidence if one were to look.

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12 No. 15‐2453

opinions may be expected to differ”). Rules of professional

conduct for attorneys require honesty in dealing with others,

but they draw a similar line on negotiation positions. See

Model R. Prof. Conduct 4.1(a) cmt. 2 (“Under generally ac‐

cepted conventions in negotiations, certain types of state‐

ments ordinarily are not taken as statements of material fact.

Estimates of price or value placed on the subject of a transac‐

tion and a party’s intentions as to an acceptable settlement of

a claim are ordinarily in this category ... .”); see also G. Rich‐

ard Shell, When Is It Legal to Lie in Negotiations?, 32 Sloan Man‐

agement Rev. 93, 96 (1991) (“There are thus no legal problems

with lying about how much you might be willing to pay or

which of several issues in a negotiation you value more

highly. Demands and reservation prices are not, as a matter of

law, material to a deal.”).

To show how these general considerations govern this

case, we lay out in Part III the sequence of negotiations in this

sale. Then, in Part IV, we work through the more detailed legal

analysis of the government’s case against Weimert, including

the issues posed by Weimert’s status as a corporate officer of

one party to the deal, acting under a disclosed conflict of in‐

terest. We recount the facts in the light reasonably most favor‐

able to the government. The question to keep in mind is

whether the facts here go beyond misstatements or omissions

about negotiating positions or are otherwise sufficient to sup‐

port the wire fraud convictions.

   

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No. 15‐2453 13

III. The Sale  

A. AnchorBank, Its Affiliates, and the Crisis of 2008–09

This case stems from a bank’s attempts in late 2008 and

early 2009 to sell its interest in a commercial real estate devel‐

opment. The bank was actually several companies, with a

publicly traded holding company, Anchor BanCorp Wiscon‐

sin, Inc. (“ABCW”), at the top. ABCW owned both Anchor‐

Bank, fsb, a federal savings bank, and a non‐bank subsidiary

called Investment Directions, Inc., or “IDI,” which invested in

real estate.

The boards and officers of the three companies inter‐

locked. Defendant David Weimert was both a vice president

of AnchorBank and the president of IDI. As IDI president,

Weimert identified investment opportunities and managed

development projects. In that capacity, he reported to the IDI

board of directors, which had to approve any sales or pur‐

chases.

The financial crisis of 2008 put AnchorBank and ABCW in

a difficult financial position. They were trying to negotiate ex‐

tensions on a $116 million loan from U.S. Bank, with a sizable

payment due on March 31, 2009. By late December 2008, the

holding company realized it would have a difficult time

avoiding default. Adding to the pressure, federal bank regu‐

lators had told AnchorBank that its balance sheet was so

shaky that it could not send a cash dividend to the parent

holding company to help with the payment to U.S. Bank.  

B. The Push to Sell Chandler Creek

One possible source of cash for the holding company was

to have IDI sell assets and transfer the cash to the parent hold‐

ing company to help with the loan payment. On December 29,

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14 No. 15‐2453

2008, Mark Timmerman, president of the bank, told Weimert

to try to sell IDI’s 50 percent interest in a Texas commercial

real estate development known as Chandler Creek. Timmer‐

man told Weimert he wanted to sell IDI’s interest for no less

than the book value of its investment, about $6 million.

Weimert faced a big challenge. Witnesses testified uni‐

formly that in the first quarter of 2009, the market for selling

commercial real estate was just terrible. Adding to the chal‐

lenge, IDI owned only 50 percent of Chandler Creek. The

other 50 percent was owned by The Burke Real Estate Group,

which was the general partner, meaning it had management

control of the property. The Burke Group also had a right of

first refusal if IDI tried to sell to anyone else. In addition, IDI

and The Burke Group were each liable for the full $15 million

mortgage on the property, and IDI had to carry the full $15

million as a liability on its books. Adding even more to the

challenge, Timmerman wanted Weimert to sell the property

in time to obtain cash for the March 31 payment to U.S. Bank.

Weimert had already tried twice in 2008 to sell the IDI in‐

terest to The Burke Group. Those overtures had been re‐

buffed. After receiving Timmerman’s December 29 email,

Weimert tried again, treating the sale as an urgent matter for

the whole AnchorBank enterprise. In early January 2009, he

put together a written investor proposal for IDI’s Chandler

Creek interest and circulated it to potential buyers. The pro‐

posal estimated that IDI’s 50 percent interest was worth ap‐

proximately $16.8 million but said that IDI was willing to ac‐

cept $9 million. Weimert’s efforts to find a buyer in January

were not successful, though. Time was running out.

   

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No. 15‐2453 15

C. Weimert Secures Two Offers to Buy Chandler Creek

On January 27, 2009, Weimert went back to Brian Burke of

The Burke Group in hopes of arranging a sale. Burke was still

not interested, but he was shaken when he saw Weimert’s in‐

vestor proposal. Realizing that IDI might sell to a stranger

who would then become his partner, he continued talking

with Weimert. The two sketched some possible terms of a

transaction. Giving the government the benefit of Burke’s con‐

fused and inconsistent testimony on the point, we assume that

Weimert suggested in this meeting that he buy about five per‐

cent of IDI’s 50 percent share and that The Burke Group buy

the other 45 percent.

While the Burkes considered the proposal, Weimert also

contacted another potential buyer, Nachum Kalka, with

whom Weimert had done deals before. Despite The Burke

Group’s right of first refusal, he was interested in making a

deal. Kalka’s interest could also help Weimert and IDI push

The Burke Group to make an offer without further delay. Be‐

cause of The Burke Group’s right of first refusal and the pos‐

sibility that a bid by Kalka would help IDI even if The Burke

Group bought the property, Weimert and Kalka discussed

having IDI agree to pay Kalka a break‐up fee to compensate

him for his trouble if IDI sold to someone else. Kalka received

the proposal and Chandler Creek’s financial statements from

Weimert and forwarded the information to his investment

partner.

In the second half of February, events moved quickly.

About February 16, Weimert asked Richard Petershack, an

outside lawyer for IDI, to draft a proposed “template” letter

of intent for potential buyers of the Chandler Creek interest.

Petershack testified that Weimert told him to use $8.5 million

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16 No. 15‐2453

as the purchase price, with financing of $6.5 million available

through AnchorBank. Weimert also told Petershack to include

a term that Weimert said buyers were requiring: that Weimert

himself “stay in the deal because of my institutional

knowledge of the project.” Petershack also testified that Wei‐

mert told him that IDI had agreed to compensate him for his

efforts in “facilitating the deal and finding potential inves‐

tors” by paying him a fee of four percent of the purchase price.

On this record, we must assume that Weimert was lying to

Petershack at that time about the buyers requiring that he par‐

ticipate and IDI agreeing to the four percent fee.

Petershack prepared the template letter of intent as in‐

structed. He sent copies to Weimert and to Kalka, and also to

AnchorBank president Timmerman. By sending the draft to

Timmerman, Petershack sought to confirm authority for Wei‐

mert’s participation in the deal and the fee. He also wanted to

inform Timmerman of Kalka’s role as a “stalking horse” to

push the Burkes to make an offer. Petershack received no

word back from Kalka or Timmerman on the substance of the

letter of intent, either generally or on Weimert’s involvement

in particular.

Two days later, on February 18, Weimert had dinner in

California with Brian Burke and his father and business part‐

ner, William Burke. Weimert gave them a copy of the template

letter of intent. He told them of Kalka’s interest as a competing

buyer. To Weimert’s frustration, though, the Burkes were not

yet willing to make a formal offer, at least until another buyer

had made an offer.

On February 22, 2009, Weimert called Kalka and his in‐

vestment partner. Both Weimert and the partner agreed that

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No. 15‐2453 17

Weimert’s involvement as a buyer would be beneficial; Wei‐

mert knew the property and had worked with the Burkes for

several years. (Kalka’s testimony was unclear as to whether

his partner or Weimert first proposed that Weimert partici‐

pate as a buyer.) In a follow‐up email to Weimert, Kalka later

confirmed “it is imperative that you David Weimert be in‐

volved personally in the Chandler Creek transaction.” Wei‐

mert’s involvement needed to be “economic” to assure Kalka

of Weimert’s services in overseeing the investment. Kalka

wrote that Weimert “might show this,” presumably the email,

“to your Board to make sure that this is happening.”

The following day, February 23, Weimert sent the IDI

board of directors a memorandum on the Chandler Creek ne‐

gotiations. He summarized key points from his conversations

with Kalka and his partner. Kalka was to serve as a “stalking

horse” in the investment and had ample funds to make the

investment. In exchange, Kalka would receive $75,000 as a

break‐up fee if his offer was not selected. Finally, Weimert

added: “It is imperative that Mr. Weimert be involved eco‐

nomically to assure his management—and investment liaison

involvement in perpetuity while Mr. Kalka and or his inves‐

tors are involved.” Weimert went on to note as a “bottom line

... [that] Kalka will not do this without me being a Manager

of the Investment and Liaison to his Group and the Burke’s

... .” As best we can tell from the record, this statement to the

board about Kalka and his partner was true.

Turning to The Burke Group as a possible buyer, Weimert

told the board that the Burkes’participation was still possible,

with the Burkes signaling in preliminary discussions that

“they also desire my involvement both economically ... and

my 10 year contribution toward the successful direction of

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18 No. 15‐2453

this Project.” (Note the difference at this stage between what

Kalka “required” and what the Burkes “desired.”) Weimert

suggested that, to have sufficient funds to buy his share, he

would require a fee of at least three percent of the purchase

price and an additional one percent to help him pay off an

outstanding note to AnchorBank.

About the same time, attorney Petershack sent Weimert a

revised template letter of intent, which Weimert forwarded to

Kalka on February 24. The revised template listed Weimert as

buying a four and seven‐eighths percent ownership of Chan‐

dler Creek and included the four percent fee for Weimert.

Later that day, Kalka submitted a signed version of the letter

of intent offering $8.5 million for the property. On February

25, Weimert forwarded the Kalka offer to The Burke Group.

He explained that the IDI board would meet soon and encour‐

aged the Burkes to make an offer. The Burke Group quickly

responded by sending its signed letter of intent to Weimert,

but it offered only $8 million.

D. The IDI Board Approves and Sells to The Burke Group

By late February 2009, then, Weimert had secured two of‐

fers that exceeded Timmerman’s target price for Chandler

Creek by at least $2 million. But both offers also posed what

all IDI directors and other bank officials recognized as a con‐

flict of interest: Weimert was both a buyer and an officer of the

seller. Weimert submitted both letters of intent to the IDI

board of directors along with two memoranda that were cen‐

tral to the government’s case.2

                                                  2 Strictly speaking, neither letter of intent was a firm offer. Both were

subject to various contingencies, and the letters were drafted to require

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No. 15‐2453 19

The first, called “A Personal Note,” was a short summary

of the evolution of the deal. Weimert wrote falsely that he had

“had no intention of being involved in this Project.” But the

deal had evolved, he said, so that “The Kalka’s Group re‐

quired [Weimert’s involvement], ... and Bill Burke actually

felt that [Weimert] would continue to ‘Add a Positive Dimen‐

sion’ to the Management of Chandler Creek.” In addition to

describing his involvement falsely as “inadvertent,” Weimert

said he needed to participate to close the deal.

Weimert’s second document, called “Evolution of This

Deal,” also reported on his negotiations with Kalka and the

Burkes. As part of the Kalka offer, Kalka had “insisted” that

Weimert “run this investment” and “have money in the deal

so ‘I don’t run away.’” As for the Burkes, Weimert falsely told

the board that they continued to “be especially focused on my

continued involvement.” Weimert concluded by recommend‐

ing selling to The Burke Group. Although it was offering a

lower purchase price, the Burke deal would also release IDI

from its potential $15 million liability to Bank of America on

the Chandler Creek mortgage.

The IDI board convened on February 27, 2009 to consider

the sale of Chandler Creek. At the board meeting, Weimert

presented each offer to the board and recommended a sale to

The Burke Group. He also told the board that his participation

in the deal was necessary. The directors found this proposal

unusual, to say the least. In light of the conflict of interest that

                                                 

further negotiations on details, even after execution, before either side

would be bound to the terms of the proposed transaction. See, e.g., A/S

Apothekernes Laboratorium for Specialpraeparater v. I.M.C. Chemical Group,

Inc., 873 F.2d 155, 158 (7th Cir. 1989) (holding that executed draft letter of

intent imposed only a limited duty to negotiate in good faith).

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20 No. 15‐2453

everyone recognized, the board excused Weimert from the

meeting while it discussed the conflict issue with outside

counsel.

The attorney advised the board that Weimert’s involve‐

ment was not illegal. He asked the board two questions: first,

whether the transaction could be completed without Wei‐

mert’s involvement; and second, whether the transaction was

necessary and in the best interest of the company. The board

members said they understood that Weimert “had to be in‐

volved or the Burkes were not going to be a purchaser,” and

that the deal was good for the company, especially with the

need to raise cash to make the looming payment due to U.S.

Bank at the end of March. The attorney advised the board to

waive the conflict and go forward with the sale. On this ad‐

vice, the board waived the conflict, accepted The Burke

Group’s purchase offer, and approved the four percent fee for

Weimert in the amount of $311,000.

According to David Omanchinski, a member of the An‐

chorBank board of directors, Weimert had also told him at

about the time of the IDI board meeting that “he did not be‐

lieve the deal could get done without his participation in it,”

and that Weimert would not have received his fee or any ad‐

ditional compensation if it had not been tied to The Burke

Group deal.

The final terms of the deal were rather different from the

terms proposed in the letter of intent and approved by the IDI

board. IDI’s attorney worked on the revisions. There is no ev‐

idence that Weimert had anything furtherto do with IDI’s side

of the transaction. On behalf of IDI, the attorney actually re‐

moved Weimert’s participation from the purchase agreement

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No. 15‐2453 21

itself. He reasoned that Weimert’s purchase was a matter be‐

tween him and The Burke Group and was more appropriate

for a side deal between them than as part of the primary trans‐

action. The attorney also drafted the separate agreement for

Weimert’s ownership, requiring Weimert to commit that he

would in fact make the promised investment. In exchange for

the four and seven‐eighths percent ownership interest, Wei‐

mert would contribute $100,000 to his partnership with The

Burke Group.

On March 30, IDI and The Burke Group closed the deal, in

the nick of time for IDI to send the cash from the sale to the

parent holding company, ABCW, which then used it to pay

U.S. Bank on March 31. The Burke Group bought IDI’s 50 per‐

cent stake of Chandler Creek for $7,792,000 and relieved IDI

of its mortgage obligation. The purchase was financed with a

$6,233,000 loan from AnchorBank. IDI also paid Kalka the

agreed $75,000 break‐up fee. And Weimert received his

agreed fee and bought a share of Chandler Creek from The

Burke Group.

E. Weimert’s SEC Testimony and the Prosecution

At this point, one might think, all parties were satisfied

with the deal. The Burke Group got a good deal and owned

more than 95 percent of the Chandler Creek property. The

bank had sold the property for nearly $2 million more than it

was willing to accept. It had also managed to move millions

of dollars upstream to ABCW so that it could make its pay‐

ment to U.S. Bank. And Weimert was hundreds of thousands

of dollars ahead, with cash and a fractional interest in Chan‐

dler Creek.

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22 No. 15‐2453

Then the Securities and Exchange Commission investi‐

gated AnchorBank and its affiliates’ use of TARP funds. The

investigation included the Chandler Creek deal, which could

be viewed as an indirect mechanism to channel AnchorBank’s

TARP money through the loan to The Burke Group to IDI and

then on to ABCW.

In April 2012, Weimert gave testimony before the SEC re‐

garding the deal. He testified that the Burkes had not insisted

on his involvement, but that instead he had told the Burkes he

would “like to be part of the transaction.” Weimert said he

had felt he “was the broker in the transaction and deserved a

piece of the transaction.” Weimert further testified that he was

“an earmark to the deal,” a description he claims he used to

alert the IDI board that he “wanted to make sure that they

understood that I wasn’t absolutely necessary for this deal.”

All IDI directors testified at Weimert’s trial, though, that Wei‐

mert had not described his role as an “earmark” but had told

them instead that his participation was required by the

Burkes.3  

In February 2014, a few weeks before the five‐year statute

of limitations would have run, a federal grand jury indicted

Weimert on six counts of wire fraud. The indictment alleged

a scheme to defraud IDI through materially false and fraudu‐

lent pretenses to obtain an ownership interest in IDI’s share of

Chandler Creek and to receive the four percent fee. Specific

                                                  3 Anchor BanCorp Wisconsin, Inc. filed for Chapter 11 bankruptcy

protection on August 12, 2013. The approved bankruptcy reorganization

plan allowed ABCW to escape almost all of its TARP loan obligations and

to reduce its obligations to U.S. Bank. See In re Anchor BanCorp Wisconsin

Inc., No. 3:13‐BK‐14003 (Bankr. W.D. Wis. 2013).

Case: 15-2453 Document: 32 Filed: 04/08/2016 Pages: 40
No. 15‐2453 23

misrepresentations included Weimert’s affirmative state‐

ments that the Burkes required his involvement and his de‐

ception about who first proposed that he have a piece of the

deal. Weimert pled not guilty. At trial, the jury convicted Wei‐

mert on five of the six counts. The district court denied Wei‐

mert’s Rule 29 motion for judgment of acquittal. The court

sentenced Weimert to 18 months in prison, well below the ad‐

visory guideline range of 87–108 months, and also ordered

three years of supervised release, a $25,000 fine, $322,515 in

restitution, and the relinquishment of his interest in Chandler

Creek. Weimert has appealed.

IV. Analysis

To reiterate, we review de novo the denial of a motion for

judgment of acquittal, United States v. Durham, 766 F.3d 672,

678 (7th Cir. 2014), citing United States v. Claybrooks, 729 F.3d

699, 704 (7th Cir. 2013), construing the evidence in the light

most favorable to the government, Durham, 766 F.3d at 678,

quoting United States v. Love, 706 F.3d 832, 837 (7th Cir. 2013).

Even under this deferential standard of review, Weimert is

entitled to a judgment of acquittal. All terms of the transac‐

tion, including Weimert’s participation as a buyer, were dis‐

closed to all interested parties. The government’s evidence of

deception—all of it—addressed not material facts or promises

but rather parties’ negotiating positions, which are not mate‐

rial for purposes of mail and wire fraud. In Part A, below, we

first explain the government’s theory. In Part B, we conclude

that Weimert did not commit a crime by anything he told the

potential buyers. We address in Part C Weimert’s deception of

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24 No. 15‐2453

the IDI board and in Part D whether his role as a corporate

officer can support the convictions. 4

A.  The Government’s Theory

The government’s theory is that Weimert obtained prop‐

erty (the fee and the share of Chandler Creek) by deceiving

the IDI board and his ABCW/AnchorBank supervisors, as

well as Petershack, Kalka, and the Burkes. The government’s

case relied on Weimert’s direct communications with the IDI

bank executives and directors, and on a third‐party theory of

fraud based on deceiving the buyers rather than IDI, from

whom he actually obtained property. See United States v. Seid‐

ling, 737 F.3d 1155, 1160–61 (7th Cir. 2013). The government

argued that Weimert committed wire fraud by telling Peter‐

shack about the need for his participation and fee, by failing

to disclose to Kalka that he was a stalking‐horse bidder, by

misrepresenting Kalka’s involvement to the Burkes, and by

repeatedly telling the IDI board and bank officials that he had

not originated the idea of participating as a buyer and that the

buyers required that he participate in the deal.

B. Deception of the Buyers

We first address the government’s theory that Weimert

committed wire fraud by misleading Kalka about whether his

bid, which was not successful, was a “stalking horse” bid.

“Stalking horse” is not a legal term of art, and it was never

                                                  4 We reject the government’s forfeiture argument. At the close of the

government’s case‐in‐chief, Weimert moved for judgment of acquittal, ar‐

guing that the government had failed to establish the element of material‐

ity. The court reserved ruling. Weimert renewed the motion in writing at

the end of the trial. The materiality issue was not forfeited.

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No. 15‐2453 25

defined precisely in the trial. The term is often used in bank‐

ruptcy proceedings to describe an initial bid for assets invited

by the debtor to set a floor for competing bids. See, e.g.,

RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. —,

132 S. Ct. 2065, 2069 (2012). In that context there is nothing

even suspicious about the practice.

In this case, however, the government seems to use the

term to describe a bidder who does not actually mean to fol‐

low through on the bid, but whose bid is being used by the

seller to trick another potential bidder to make or increase a

bid. This theory of fraud fails on the evidence, so we need not

evaluate its legal viability.

There is no evidence that Kalka’s bid was anything other

than a good‐faith bid. Kalka and his partner offered a higher

price. They hoped to win the purchase, and they had the as‐

sets to close the deal. Kalka knew Weimert was hoping to elicit

another bid, or at least that his offer would have to be subject

to The Burke Group’s right of first refusal. That’s why the

$75,000 break‐up fee made sense. But there simply is no evi‐

dence that there was anything fraudulent about Kalka’s bid or

role. We need not consider the legal question whether a com‐

plete bluff to the Burkes about the Kalka bid might support a

wire fraud conviction, though bluffs in negotiations are not

unusual.

The government also argued that Weimert misled the

Burkes. First, the government pointed to the contradiction in

Weimert telling the Burkes on one hand that Kalka would be

a terrible partner for the Burkes—thus encouraging the

Burkes to make their own offer—but telling them on the other

hand that Kalka would be an attractive partner. This theory

cannot support a conviction for wire fraud. In the negotiating

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26 No. 15‐2453

dance, Weimert was trying to coax the Burkes to make a seri‐

ous and prompt offer to buy IDI’s share of Chandler Creek.

The inconsistent opinions he expressed to reluctant bidders

about how well they would like having Kalka and his investor

as partners in the investment did not rise beyond puffery.

They cannot reasonably be deemed material. See United States

v. Coffman, 94 F.3d 330, 334 (7th Cir. 1996) (noting in wire fraud

case that nearly “all sellers engage in a certain amount of puff‐

ing; all buyers ... know this; it would not do to criminalize

business conduct that is customary rather than exceptional”).

Second, the government argued that Weimert misled the

Burkes about whether Kalka was requiring Weimert to partic‐

ipate in the deal. That led the Burkes to include in their letter

of intent a term having Weimert buy a minority stake in Chan‐

dler Creek. Although Kalka was in fact requiring Weimert’s

participation, any deception of the Burkes on that score would

not have been material because it was deception of the oppos‐

ing party in a transaction about the negotiating positions of

third parties.

C. Weimert’s Deception of the IDI Board

The government relies most heavily on the theory that

Weimert deceived the IDI board and its affiliates about

whether The Burke Group required his participation in the

purchase. According to the government, Weimert crafted an

elaborate scheme to obtain money and property by leading

IDI to believe the buyers insisted on his participation and by

leading the buyers to believe that IDI wanted him to partici‐

pate. On this record, giving the benefit of conflicting evidence

to the government, we must assume that he did so, and that

he did so by deceiving the various parties about the negotia‐

tions with other parties. He told Kalka and Petershack that IDI

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No. 15‐2453 27

supported his involvement in the deal and that Timmerman

had approved. He told the Burkes that IDI and Kalka all

wanted him in the deal. And he told the IDI board that the

Burkes required his participation. The deception was espe‐

cially plausible in early 2009, when many owners were trying

to sell shaky real estate investments. A seller who was willing

to keep some “skin in the game” had more credibility than a

seller who was trying to walk away from the property en‐

tirely.

To the extent the Chandler Creek deal is properly under‐

stood as an arms‐length, three‐party deal, with IDI selling

most of its interest to The Burke Group and a fraction to Wei‐

mert, these deceptions do not support the criminal convic‐

tions. They misled parties who were negotiating a commercial

deal only about the negotiating positions—the preferences,

values, and priorities—of other parties.

IDI was not misled as to the nature of the asset it was sell‐

ing or the consideration it received. Cf. United States v. Shene‐

man, 682 F.3d 623, 629 (7th Cir. 2012) (lenders induced by fal‐

sified loan documents); United States v. Morris, 80 F.3d 1151,

1167–68 (7th Cir. 1996) (investors induced by misleading sales

tactics at pricing). And IDI was not misled as to Weimert’s in‐

terest in seeing the deal done. Cf. United States v. George, 477

F.2d 513–14 (7th Cir. 1973) (employee received hidden kick‐

backs that caused employer to overpay for assets).

At bottom, even the centerpiece of the government’s

case—Weimert falsely told the IDI board and Omanchinski

that the Burkes required his participation—amounted to no

more and no less than a false prediction about how the Burkes

would respond to a counteroffer to exclude Weimert’s partic‐

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28 No. 15‐2453

ipation. In other words, it was deception about a party’s ne‐

gotiating position. Weimert’s false story about who had first

come up with the idea to have him participate would have

been material only for what it signaled about how important

his participation was to the parties. In other words, it was im‐

portant only in predicting how various parties were likely to

respond to a counteroffer proposing to reduce or eliminate his

role. For the reasons explained above in Part II, such decep‐

tions about parties’ preferences and values, and thus their ne‐

gotiating positions, are not material for purposes of wire

fraud and cannot support Weimert’s convictions.

D. Weimert’s Role as Fiduciary

But is it correct to consider the Chandler Creek deal as an

arms‐length transaction among three separate parties? After

all, Weimert was an officer of IDI. He owed the corporation

fiduciary duties of loyalty and honesty. The government’s

strongest argument is that Weimert’s actions amounted to a

scheme to defraud IDI because, even if an outsider might be

permitted to mislead it about negotiating positions, Weimert

could not do so about his own role in the transaction. Based

on the testimony of IDI directors, we must assume that they

trusted Weimert on all aspects of the Chandler Creek deal, in‐

cluding what he told them about the buyer insisting that he

participate in the deal.

In light of the disclosure of all terms of the sale, as well as

our doubts that an officer or other fiduciary must disclose his

negotiating position when dealing with the company about

his own compensation, we think the better approach is to treat

this as closer to an arms‐length transaction, at least for pur‐

poses of criminal law.

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No. 15‐2453 29

One cornerstone of civil corporation law is that corporate

officers and directors owe fiduciary duties of loyalty and hon‐

esty to the corporation. E.g., Nixon v. Blackwell, 626 A.2d 1366,

1376 (Del. 1993) (when directors are on both sides of transac‐

tion, they must demonstrate “their utmost good faith and the

most scrupulous inherent fairness of the bargain”); Racine v.

Weisflog, 477 N.W.2d 326, 329 (Wis. App. 1991) (officers and

directors are under fiduciary duty of individual loyalty, good

faith, and fair dealings in corporate business). The questions

here involve whether Weimert breached his fiduciary duty to

IDI and how such a breach of a civil duty affects the analysis

under the law of criminal wire fraud.

Proof of a breach of fiduciary duty is neither necessary to

nor sufficient proof of mail or wire fraud, but such a breach is

often relevant. First, while the “existence of a [fiduciary] duty

is relevant and an ingredient in some” wire fraud prosecu‐

tions, it is not essential to establish wire fraud. United States v.

Colton, 231 F.3d 890, 900–01 (4th Cir. 2000) (quotation marks

omitted); see also United States v. Keplinger, 776 F.2d 678, 697–

98 (7th Cir. 1985) (citations omitted). Concealment is often ac‐

companied by a violation of a fiduciary duty, but it need not

be.

More pertinent for this case, a breach of fiduciary duty

combined with a mailing or wire communication is insuffi‐

cient alone to establish mail or wire fraud. United States v.

Kwiat, 817 F.2d 440, 444 (7th Cir. 1987) (reversing mail fraud

conviction of corporate officer through scheme for self‐deal‐

ing: “Neither the language nor the legislative history of § 1341

hints that it is an all‐purpose remedy for corporate misman‐

agement.”); Disher v. Information Resources, Inc., 691 F. Supp.

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30 No. 15‐2453

75, 86 (N.D. Ill. 1988) (“Not every common law breach of fi‐

duciary duty that involves mailings or use of the telephone

constitutes a violation of the mail and wire fraud statutes.”),

aff’d, 873 F.2d 136 (7th Cir. 1989). The government must still

demonstrate a scheme to defraud, including “some sort of

fraudulent misrepresentation or omissions calculated to de‐

ceive persons of ordinary prudence and comprehension.”

Disher, 691 F. Supp. at 86, quoting United States v. Wellman, 830

F.2d 1453, 1462 (7th Cir. 1987); see also United States v. Feldman,

711 F.2d 758, 763 (7th Cir. 1983) (“Yet not every breach of duty

by an employee works as a criminal fraud ... . Such activities

must be accompanied by a scheme formed with the intent to

defraud.”) (emphasis in original) (citations omitted).

In some cases, such as “honest services” mail and wire

fraud cases that rely on 18 U.S.C. § 1346, a breach of a fiduci‐

ary duty may lie at the core of the offense, such as when an

officer or director receives a hidden kickback or bribe from a

party transacting business with his company. That is clear

from Skilling v. United States, 561 U.S. 358, 405–09 (2010),

where the Supreme Court held that an “honest services”

fraud prosecution requires proof of a kickback or bribe. At the

same time, the Skilling Court also rejected the government’s

argument that self‐dealing alone, even undisclosed self‐dealing,

would violate fraud statutes without a kickback or bribe. Id.

at 409–11. Also important for our thinking in this case, the

Court emphasized that uncertainty in criminal law weighed

in favor of lenity. Id. at 410–11. For other illustrations of the

bribe‐kickback point, see, e.g., United States v. Nayak, 769 F.3d

978, 980–81 (7th Cir. 2014) (affirming mail fraud conviction of

doctor who paid bribes and kickbacks to encourage other doc‐

tors to refer their patients); United States v. Vrdolyak, 593 F.3d

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No. 15‐2453 31

676, 678 (7th Cir. 2010) (explaining guilty plea based on hid‐

den kickback from buyer to seller’s director).

There was no such hidden kickback or bribe here. Nor was

there even undisclosed self‐dealing. Weimert’s interest in the

Chandler Creek sale was fully disclosed to the IDI board. Eve‐

ryone recognized the conflict of interest, and they took the ap‐

propriate steps to deal with it as a corporation should when

an officer or director has a material, personal interest in a

transaction with the corporation. See Del. Code Ann. tit. 8,

§ 144; Benihana of Tokyo, Inc. v. Benihana, Inc., 906 A.2d 114, 120

(Del. 2006). Weimert did not participate in the board’s deci‐

sion to approve the sale. The board received independent ad‐

vice from counsel about the conflict and the transaction before

approving it. And there is no evidence that Weimert played

any role in the later negotiations needed to close the sale to

The Burke Group on somewhat modified terms, for a lower

price.

Since Weimert had such a substantial financial interest in

the deal that was disclosed to the board, it is helpful to view

the role of Weimert’s fiduciary duty as if this were a transac‐

tion involving Weimert’s own compensation. If Weimert’s role

as a corporate officer with fiduciary duties were to play a de‐

cisive role here, it would be because he would have owed a

duty to the corporation to be completely honest regarding the

Chandler Creek sale, including how his participation in the

deal came about and what he knew about how the Burkes

were likely to have responded to a counteroffer excluding

Weimert. So, to the extent that fiduciary standards are rele‐

vant to this criminal case, the best guidance concerns the ex‐

tent of a corporate officer’s fiduciary duty toward the corpo‐

ration in negotiating his own compensation.

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32 No. 15‐2453

When a corporate officer is negotiating his own compen‐

sation with the corporation, the scope of that fiduciary duty

appears to be a matter of controversy and divided authority.

Courts often use sweeping language to describe that duty.

See, e.g., Nixon, 626 A.2d at 1376 (directors on both sides of

transaction must demonstrate “their utmost good faith and

the most scrupulous inherent fairness of the bargain”); see

also Maksym v. Loesch, 937 F.2d 1237, 1242 (7th Cir. 1991)

(when attorney agrees with client to side‐deal benefitting the

attorney, “the burden of proof is upon the attorney to show

the fairness of the agreement, the utmost good faith, complete

disclosure on his part and a full understanding of all the facts

and legal consequences on the part of the client”).

Taken literally, such a broad fiduciary duty could require

a corporate officer negotiating with the corporation about his

own compensation to reveal the weaknesses in his own nego‐

tiating position as part of his duty of good faith. He might be

required, for example, to disclose that he would be willing to

take less compensation than he is asking for. And under that

reasoning, Weimert would have been obliged to tell the direc‐

tors that the Burkes probably would have been willing to go

forward with the purchase even without his participation.

That is not the law with corporate fiduciary duties or with

other fiduciary duties, however, or at the very least it is not so

clearly the law as to support a criminal conviction.

For example, Delaware courts teach that “an officer may

negotiate his or her own employment agreement as long as

the process involves negotiations performed in an adversarial

and arms‐length manner.” In re Walt Disney Co. Derivative Lit‐

igation, 825 A.2d 275, 290 (Del. Ch. 2003) (emphasis omitted)

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No. 15‐2453 33

(denying motion to dismiss), later judgment for defendants aff’d,

906 A.2d 27 (Del. 2006).

Similarly, a Texas court applying Delaware law has ex‐

plained that when a corporate officer negotiates and renews

his own employment terms, he “acts in his individual capac‐

ity, as it is evident that the company and the employee are ad‐

verse to each other in the context of negotiating that em‐

ployee’s compensation.” Pride International, Inc. v. Bragg, 259

S.W.3d 839, 850 (Tex. App. 2008), citing In re Walt Disney, 906

A.2d at 49–51. As another example of controversy on the civil

side of the fiduciary duty issue, see Fernandez v. City of Miami,

147 So.3d 553 (Fla. App. 2014), where a majority held that a

city attorney breached his fiduciary duty in negotiating a gen‐

erous severance term in his own employment contract with

the city, while the dissenting judge argued that the relation‐

ship was not a fiduciary one when negotiating compensation.

Id. at 564–65 (Shepherd, C.J., dissenting), citing Pride Int’l, 259

S.W.3d at 850, and In re Walt Disney, 906 A.2d at 49–51.

In the related area of an attorney’s fiduciary duties to cli‐

ents, we have cautioned that the broader scope of fiduciary

duty quoted above does not apply with full force when the

attorney’s compensation is the issue: “Fiduciary law does not

send the dark cloud of presumptive impropriety over the con‐

tract that establishes the fiduciary relationship in the first

place and fixes the terms of compensation for it.” Maksym, 937

F.2d at 1242. We continued: “Most fiduciary relationships are

established by contract and are not eleemosynary, yet the con‐

tracts establishing them are held valid without the court’s im‐

posing on the lawyer or other fiduciary the difficult burden of

demonstrating that he made full disclosure of the terms of the

contract and that those terms were ‘fair,’whatever exactly that

Case: 15-2453 Document: 32 Filed: 04/08/2016 Pages: 40
34 No. 15‐2453

means.” Id. Thus, while an attorney’s fiduciary duty is broad,

the law does not require an attorney negotiating with a client

over a fee to disclose the lowest fee the attorney would be will‐

ing to accept. That remains a matter for negotiation without a

duty of complete disclosure of the attorney’s negotiating po‐

sition.

Along these lines, it is also useful to recall a legal dispute

in the appellate courts at the time of the events at issue in this

case. The dispute concerned the fiduciary duty imposed by

statute, § 36(b) of the Investment Company Act of 1940, 15

U.S.C. § 80a–35(b), with respect to compensation advisors re‐

ceive from mutual funds. In 2008, a panel of this court held

that agreed‐upon compensation was lawful, without subject‐

ing the rates to judicialreview forreasonableness. Jones v. Har‐

ris Associates L.P., 527 F.3d 627, 632–33 (7th Cir. 2008). By way

of illustration, we explained that corporate officers’ fiduciary

duties did not “prevent them from demanding substantial

compensation and bargaining hard to get it.” Id. at 632. Bar‐

gaining “hard” can include bluffs about negotiating positions.

Showing the room for controversy, rehearing en banc was de‐

nied by an equally divided court, 537 F.3d 728 (7th Cir. 2008),

and then, after the events in this case, the Supreme Court re‐

versed, adopting a standard that allows for judicial review of

the reasonableness of such fees charged by mutual fund fidu‐

ciaries. Jones v. Harris Associates L.P., 559 U.S. 335 (2010).

Our point here is not to resolve whether or not the govern‐

ment proved a civil breach of fiduciary duty by Weimert in

the Chandler Creek sale. The concerns raised by our dissent‐

ing colleague about the duties, incentives, and sometimes

conflicting interests of corporate officers and directors are im‐

Case: 15-2453 Document: 32 Filed: 04/08/2016 Pages: 40
No. 15‐2453 35

portant, have considerable force, and deserve further consid‐

eration as a part of the civil law governing those relationships.

Our point is a narrower one: that at the time relevant in this

case, civil corporate law standards of fiduciary duty did not

provide a clear answer for a situation like this: a corporate of‐

ficer negotiating with his employer in a three‐sided deal in

which he, his employer, and a third party took part, in which

his personal financial interest was known, but in which he

misled that employer about his and others’ negotiating posi‐

tions on the transaction. Perhaps IDI and AnchorBank would

have had a viable civil case against Weimert, or perhaps not.

But particularly in light of the rule of lenity invoked in Skil‐

ling, 561 U.S. at 410–11, we do not believe the government has

proven criminal wire fraud in the circumstances of this unu‐

sual, and seemingly unprecedented, prosecution. This is not

a case where a party used a secret side‐deal to induce a victim

to part with an asset at a discount. The final contract terms

were in plain view and were in fact discussed and negotiated

by the interested parties. We leave the civil law issues and

remedies for civil cases.

V. Conclusion

Federal mail and wire fraud statutes encompass a broad

range of behavior. Their limits can be difficult to draw with

certainty. But there are limits nonetheless, and they must be

defined by more than just prosecutorial discretion. Deception

and misdirection about a party’s values, priorities, prefer‐

ences, and reserve prices are common in negotiation. We must

be wary of criminalizing these tactics, at least without much

clearer direction from Congress. Weimert’s dealings in selling

Chandler Creek were sharp and self‐interested, but they did

not amount to wire fraud. By the time IDI signed the contract

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36 No. 15‐2453

to sell, all terms of the deal were on the table. IDI might have

been able to secure a better deal if it had known the underly‐

ing priorities of prospective buyers and Weimert, but that is

for now, at least, a matter for the corporate boardroom and

civil law, not a federal criminal trial.

Weimert’s motion for a judgment of acquittal should have

been granted. Accordingly, we need not reach the other issues

Weimert raises on appeal. The judgment of the district court

is REVERSED. We order Weimert released from Bureau of

Prisons custody within 72 hours of issuance of this opinion,

subject to the terms of supervised release of his sentence,

pending issuance of our mandate. Pending issuance of our

mandate, the district court shall have jurisdiction to modify

and enforce those terms of supervised release as appropriate.

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No. 15‐2453    37

FLAUM, Circuit Judge, dissenting.

I respectfully disagree with the analysis and conclusion of

the majority. At the outset, I do not believe that the scenario

presented in this case can be viewed as an arms‐length, three‐

party transaction. Weimert, as president of IDI, was acting on

behalf of IDI in negotiating the deal. Unlike a situation involv‐

ing three independent parties, in the transaction at hand, the

IDI board had every reason to expect that Weimert would

fairly and honestly represent its interests. The record does not

reflect an expectation at the start of negotiations that Weimert

would be entitled to equity or any sort of bonus arising out of

the Chandler Creek deal. Thus, I cannot accept the majority’s

conclusion that this situation amounts to hard bargaining

among disinterested parties, and that the IDI board received

what it agreed to and expected in the Chandler Creek sale. In

fact, IDI likely would have received a higher purchase price

had Weimert not taken a bite out of the deal. IDI received

roughly 96 percent, rather than 100 percent, of the purchase

price due to Weimert’s creation of equity for himself.

I also do not agree that this case is similar to a routine ne‐

gotiation among buyers and sellers in which the parties ben‐

efit from deliberately false misrepresentations about their ne‐

gotiating positions. Such situations, which the majority con‐

tends are customary and relatively harmless, entail actual

arms‐length transactions among independent parties. By con‐

trast, Weimert, the president of IDI, was not at arms‐length

with the IDI board. Moreover, in the typical negotiation in‐

volving a buyer and seller, the parties are aware that they are

solely bargaining with one another; in the case at hand, the

IDI board had no reason to believe that it was also negotiating

with Weimert, in addition to the potential buyers.

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38 No. 15‐2453

Although the final contract terms were disclosed when the

IDI board considered and approved the deal, the evidence

suggests that the IDI board only approved the deal because

Weimert represented that it would not get done without his

involvement. All of the board members later testified that

they would not have voted to waive the conflict of interest and

pay Weimert’s fee if they had known that the Burkes did not

require his involvement. This evidence undermines the no‐

tion that the IDI board simply agreed to the terms that were

in plain view and received what it expected. Rather, the deal

the board approved was based on misrepresentations by its

own representative and the board would not have approved

the deal if it had known the truth. Further, I find the majority’s

assertion that the final contract terms were “in fact discussed

and negotiated by the interested parties” to be an incomplete

portrayal of the facts, since the only parties to negotiate the

letter of intent that the IDI board approved were Weimert, as

IDI’s representative, and the Burkes. Although the final con‐

tract terms were slightly different than those initially ap‐

proved by the board, that letter of intent formed the basis for

a transaction in which the parties assumed and ultimately

mandated Weimert’s participation.  

If one focuses on Weimert’s misrepresentations to the IDI

board while he was supposedly acting on its behalf, the ma‐

teriality inquiry is different than the majority proffers. Even if

Weimert’s statements to Kalka and the Burkes—parties at

arms‐length—were closer to puffery, Weimert’s deception of

the IDI board and his ABCW/AnchorBank supervisors was

more insidious than mere bluffing. Furthermore, even assum‐

ing Weimert’s participation was a non‐core term of the deal,

IDI was misled as to the amount it could receive for the prop‐

erty as well as Weimert’s interest in seeing the deal completed.

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No. 15‐2453    39

Weimert’s misrepresentations induced the IDI board to ap‐

prove the deal and were, therefore, material to the board’s de‐

cision. See Neder v. United States, 527 U.S. 1, 16 (1999).

Our case law also supports the conclusion that Weimert’s

misrepresentations to the Burkes were material to the IDI

board’s decision to approve the deal. See United States v. Seid‐

ling, 737 F.3d 1155, 1160 (7th Cir. 2013) (noting that “[i]n gen‐

eral, 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” (quoting

Neder, 527 U.S. at 16) (internal quotation marks omitted)). As

mentioned previously, all of the board members testified that

they would not have voted to waive the conflict of interest and

pay Weimert’s fee if they had known that the Burkes did not

require his involvement. Weimert’s statements were also ma‐

terial to his supervisors at AnchorBank, who testified that

they would not have approved payment of his fee through

bank payroll if it had not been their understanding that Wei‐

mert had to be involved in the deal.

In sum, I conclude that Weimert committed wire fraud by

deceiving his own company and taking a portion of the deal

for himself. I am not unsympathetic to the majority’s commen‐

tary regarding the “expansive glosses” on the mail and wire

fraud statutes that have led to their liberal use by federal pros‐

ecutors, but Weimert’s deception of his own board meets the

Supreme Court’s standard for materiality. Neder, 527 U.S. at

16.

Additionally, even if one assumes that Weimert’s misrep‐

resentations to the Burkes and Kalka did not, standing alone,

rise to the level of criminal wire fraud, they do constitute such

when combined with his statements to the IDI board. In

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40 No. 15‐2453

United States v. Seidling, we held that wire fraud does not re‐

quire that the false statement be made directly to the victim of

the scheme—here, the IDI board. 737 F.3d at 1160. Seidling in‐

volved a misrepresentation to a third party that furthered the

scheme to defraud the victim. Id. As in Seidling, Weimert’s

misrepresentations to the Burkes and Kalka were integral to

the success of his scheme to defraud IDI. Thus, no matter how

insignificant these misrepresentations may have been to the

Burkes and Kalka, I conclude that they still satisfy the requi‐

site materiality element of wire fraud and support Weimert’s

conviction.

Beyond whether this is properly viewed as an arms‐

length, three‐party transaction, I am further concerned with

the majority’s fiduciary duty analysis. The parties did not ad‐

dress the issue of fiduciary duty and, in any event, it is not

central to the criminal wire fraud analysis. See United States v.

Kwiat, 817 F.2d 440, 444 (7th Cir. 1987). What is critical is Wei‐

mert’s position of trust as IDI’s president.

I also find questionable the majority’s framing of Wei‐

mert’s misrepresentations as a permissible employment com‐

pensation negotiating strategy. I do not view this as a situa‐

tion in which Weimert, who had not been promised any sort

of compensation arising out of the sale of Chandler Creek,

was negotiating the terms of his employment at arms‐length

with the IDI board. Instead, Weimert was simultaneously rep‐

resenting and deceiving the IDI board for his own pecuniary

gain.

For the foregoing reasons, I respectfully dissent and

would affirm the judgment of conviction.

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