In the

United States Court of Appeals

For the Seventh Circuit ____________

Nos. 05-4258 & 05-4329

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

PETER PALIVOS and LOUIS MARIN,

Defendants-Appellants.

____________

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 00 CR 1065—Joan Humphrey Lefkow, Judge.

____________

ARGUED JANUARY 17, 2007—DECIDED APRIL 10, 2007

____________

Before FLAUM, KANNE, and EVANS, Circuit Judges.

EVANS, Circuit Judge. Peter Palivos, an attorney, and

Louis Marin, a loan broker, were indicted, along with

a number of other defendants, for their involvement in

a shady 1996 real estate deal. Both were convicted—

Marin of assisting in the preparation and presentation

of a false tax return and Palivos of conspiracy to obstruct justice—though he was acquitted of obstruction of

justice. They appeal their convictions.

The deal involved a complex loan fraud scheme in

which the seller of a problem-plagued restaurant, the

Waterfalls, in Antioch, Illinois, secretly fronted money
2 Nos. 05-4258 & 05-4329

1 When we refer to “Palivos” we mean Peter. When necessary, we

will use full names to distinguish between Peter and George.

2 George Palivos and Bouzanis are fugitives believed to be living

in Greece.

to the buyer to finance the sale. The seller, also a

defendant in this case, was JACPG, Inc., a private

corporation with a small number of shareholders,

including Palivos and his brother George Palivos,1

 also

a defendant. The buyer was Peter Bouzanis,2

 who had no

financial resources, only limited experience in the

restaurant business, was a felon, and had a lackluster

credit history. Other than that, he seemed perfect.

The mortgage to finance the purchase was obtained

from The Money Store and was partially guaranteed

by the United States Small Business Administration

(SBA). The loan itself was for approximately $1.25

million. Because of misrepresentations made during

the loan application process, The Money Store and the

SBA were not aware that 100 percent of the funds for

the closing came from the seller.

Making the deal go through required a bit of imagination. To qualify for the loan, Bouzanis presented false

income tax returns to The Money Store. He also completed a document that allowed the lender to obtain his

federal income tax forms. Because the 1994 tax return

Bouzanis filed with the Internal Revenue Service

showed an adjusted gross income of $8,005, hardly

enough to convince any lender to give him a big loan,

Marin instructed his accountant to prepare an amended

income tax return for Bouzanis showing an income of

$52,000.
Nos. 05-4258 & 05-4329 3

Obviously, Bouzanis had no money for a down payment so, as we said, the sellers provided it. Bouzanis

was required to come to the closing with over $350,000

for a down payment and evidence of $45,000 in working capital. To come up with the money, Palivos’s

brother-in-law Dimitrios Bousis went to a bank where he

was a long-time customer and pledged his own accounts

to guarantee a $354,000, 5-day, interest-free bank loan

to Bouzanis. The bank cut a cashier’s check indicating

that it represented the proceeds from a loan. Because

the sellers knew the down payment could not

be encumbered, they asked the bank to void that check

and issue a replacement with no reference to a loan.

Bousis and Palivos also helped Bouzanis convince the

lender he had $45,000 in working capital. Palivos

purchased a $45,000 cashier’s check which Bousis

deposited into his bank account. Bousis then wrote a

$45,000 personal check to Bouzanis, who deposited it in

an account that he had opened that same day for the

new restaurant business.

To explain why so much money changed hands

around the time of the closing, the parties fabricated a

purchase price dispute and manufactured a paper trail.

The paper trail consisted of bogus letters between the

parties discussing the poor condition of the restaurant.

The dispute was then “settled” by a payment after the

closing of $392,500 to Bouzanis. Bouzanis then wrote a

check to Palivos for $25,000 in “Partial Repayment of

Loan,” as stated on the check memo. The proceeds

remaining from the sale were distributed to JACPG

shareholders. Palivos received $75,000. That sum,

along with the $25,000 from Bouzanis, amounted to a

$100,000 gain for Palivos from the fraudulent transfer.
4 Nos. 05-4258 & 05-4329

After Bouzanis purchased the restaurant he immediately defaulted on the loan. That, in turn, led to a criminal investigation by the SBA Office of Inspector General

and the Federal Bureau of Investigation. The government served grand jury document subpoenas on the

subjects of the investigation, including Nicholas Black,

a real estate lawyer who represented JACPG. Black

is central to Palivos’s appeal.

After he was served with the subpoena in 2000, Black

talked with George Palivos, who reminded Black of the

so-called purchase price dispute. George Palivos asked

Black if he had kept notes from the transaction. Black

said that if notes were not in his file, “they would be.”

Black testified at trial that what he meant by that

statement was that he would make up notes.

A few days later, George Palivos showed Black other

letters that had been made up at the time of the sale to

document the phony purchase price dispute. Peter

Palivos joined the discussion and told Black that it

would be “nice” if Black found similar notes in his file.

After Black located his file from the closing, he met

again with Peter and George Palivos. At that time, there

were no notes in Black’s file about the dispute or about

the check from Bouzanis to Peter Palivos. Again Peter

Palivos told Black that it would be “nice” and “helpful”

if there were notes, which would appear as if they

were written at the time of the “dispute” in 1996. Black

said “they would be in the file.” It was important that

the notes be “found” in Black’s file because he had

prepared the paperwork for the deal.

Later, though, Black seemed to get cold feet and

expressed concern about fabricating the notes. Saying

that sometimes doctors involved in malpractice litigation manufactured notes, Peter Palivos told Black to find
Nos. 05-4258 & 05-4329 5

old paper and an old pen to write the notes and suggested that he rub the paper against something so no

one could tell when the notes were written. Black did as

was suggested and manufactured notes: one about the

purchase price dispute and one about money Bouzanis

refunded to Palivos after the closing. Black personally

delivered the notes, as required by the subpoena, to a

government agent. He also gave Palivos copies of the

letters. Palivos thanked Black and said he appreciated

what he had done.

But the government was not fooled by the notes.

Almost immediately, agents went to Black’s office to

question him. They also submitted the notes to the IRS

Crime Laboratory for analysis. The results of a laboratory indentation analysis revealed what was written on

the legal pad paper directly above the notes—that is,

paper that presumably would have been used before

the notes were created. The indentations showed a

reference to July 1997, confirming the government’s

doubts about Black’s statement that he wrote the notes

in April 1996.

The government arranged a meeting with Black’s

attorney. In the meeting, the attorney was told that the

government had forensic evidence showing that the

notes were written long after the closing. Black was not

present.

Soon after that meeting Black changed lawyers, and

his new attorney informed the government that Black

wanted to cooperate with the investigation. During

several meetings with the government, Black explained

what he knew about the fraud and the subsequent

obstruction of justice. He also testified before the

grand jury. Black was charged for his involvement
6 Nos. 05-4258 & 05-4329

with the loan fraud and the subsequent obstruction of

justice. He ultimately pled guilty.

We turn our attention back to Palivos. In the district

court Palivos filed at least six post-trial motions for

relief from his conviction. All were denied. He now raises

several, somewhat related, issues on appeal.

First, he contends that he was convicted based only on

Black’s testimony, which he claims was false and was

given because Black was manipulated into framing him.

We review the denial of his request for a new trial for

an abuse of discretion, United States v. Van Eyl, 468

F.3d 428 (7th Cir. 2006), and reject it.

Palivos says that the government misled Black,

causing him to plead guilty and testify falsely. The

alleged manipulation involves the notes in Black’s file

regarding the purchase price dispute. As we said, at an

interview with Black’s lawyer, the government said

that there was forensic evidence showing that the notes

were written well after the closing. Palivos argues that

the government said the evidence was ink analysis,

which, in fact, did not exist. The government denies

ever saying there was ink analysis; rather, the evidence

was the indentation analysis showing a 1997 date had

been written on the sheet of paper above the one on

which the notes were written, making it unlikely that

the notes were written in 1996—at the time the deal

was going down.

There are problems with Palivos’s argument. Black’s

attorney at the time talked with the government, but

Black himself was not involved in the conversation.

There is no evidence that the government misled Black’s

attorney into thinking there was ink analysis, rather

than simply indentation analysis. Furthermore, even
Nos. 05-4258 & 05-4329 7

if the government engaged in artifice, Palivos would

still not have a claim: “Artifice and stratagem may be

employed to catch those engaged in criminal enterprises.” United States v. Swiatek, 819 F.2d 721, 725 (7th

Cir. 1987), quoting Sorrells v. United States, 287 U.S.

435, 441 (1932).

More importantly, a new trial is ordered, on the basis

of the use of perjured testimony, only if a defendant

establishes that (1) there was perjured testimony, (2) of

which the government knew or should have known, and

(3) that testimony could have affected the outcome of the

trial. United States v. Burke, 425 F.3d 400 (7th Cir.

2005). Palivos has not shown that Black’s testimony

is, in fact, false. Black has always maintained that he

testified truthfully at trial. The jury was entitled to

believe him.

There was other evidence as well. There was testimony

from Dean Kalamantianos, who practiced law

with Black and attended the real estate closing.

Kalamantianos testified that Black told him about the

bogus notes that he prepared at the request of Palivos.

And although there was no ink analysis, there was

forensic evidence in the form of indentation evidence.

Palivos has not shown that the district court abused its

discretion by denying his request for a new trial based

on this claim.

Next, we consider Palivos’s argument that he should

have a new trial, apparently because 5 days after trial

he found “newly discovered evidence,” which he says also

reveals a government violation of Brady v. Maryland,

373 U.S. 83 (1963), and his confrontation and due

process rights. We say “apparently” because the argument, presented in an almost stream-of-consciousness

manner, is rather difficult to pin down.
8 Nos. 05-4258 & 05-4329

To obtain a new trial under Federal Rule of Criminal

Procedure 33, Palivos must show that the new evidence

(1) was discovered after trial; (2) could not have been

discovered sooner with due diligence; (3) was material

in the sense that it bore directly on guilt or innocence

and was simply impeaching or cumulative; and (4) if

presented at a new trial would probably result in

acquittal. United States v. Hodges, 315 F.3d 794, 801

(7th Cir. 2003). For a Brady violation to exist, entitling

a defendant to a new trial, he must establish (1) that the

prosecution suppressed evidence; (2) that the evidence

was favorable to the defendant; and (3) that it is material to an issue at trial. Evidence is material if there is

a “reasonable probability that, had the evidence been

disclosed to the defense, the result of the proceeding

would have been different.” United States v. Bagley, 473

U.S. 667, 682 (1985); see also United States v. Irorere,

228 F.3d 816 (7th Cir. 2000). Impeachment evidence

falls within the Brady rule. Giglio v. United States, 405

U.S. 150 (1972). We review for abuse of discretion the

denial of a motion for new trial based upon newly

discovered evidence claimed to violate Brady. See United

States v. Asher, 178 F.3d 486 (7th Cir. 1999); United

States v. Silva, 71 F.3d 667 (7th Cir. 1995).

Palivos contends that an unsigned letter, dated

February 13, 2003, apparently written by attorney Elliot

Samuels to Black, is Brady material. It may be that he

also contends two or three other letters, including a

September 19, 2002, letter from Samuels to Aotirios

Bregiannos in Athens, Greece, also are Brady material.

The February 13 letter states in part:

Regarding these documents, it was represented by

certain government agents that scientific, forensic
Nos. 05-4258 & 05-4329 9

tests had conclusively established that the documents were recently prepared and added to your

file and, therefore, were not genuine. We now know

that the government’s motive for this deception (as

it later proved to be) was to induce you to cooperate

against certain individuals who had played various

roles in the Waterfalls deal. . . . Fortunately for us,

some of the indicted defendants entered not guilty

pleas, which required the government to reveal and

disclose the results of all scientific reports, otherwise

these documents never would have seen the light

of day. Contrary to the representations made, the

forensic tests performed on the documents clearly

do not substantiate and, in fact, contradict the

assertions made by the government which induced

you to cooperate.

The September 19 letter to Bregiannos states that

“certain misrepresentations have been made to us by

federal agents.”

Palivos’s theory is that the letters show that the

government misrepresented the forensic evidence

regarding the notes in Black’s file. He claims Black

would not have entered a guilty plea except for those

misrepresentations. And Palivos contends that after

finding out he had been duped, Black considered withdrawing his guilty plea based on prosecutorial misconduct. Ultimately, realizing he might face more serious

consequences by withdrawing his plea, Black changed

his mind. The upshot of Palivos’s argument is that the

Samuels letters show Black was misled, and if he had

not been misled, he would not have ended up testifying

against Palivos.

That is a leap. And the argument lacks factual support. We are not told the basis for Samuels’ belief that
10 Nos. 05-4258 & 05-4329

the government misrepresented the forensic evidence. In

fact, Samuels stated in an affidavit that his letter was

“bogus.” Additionally, we find it curious that even if

what Samuels’ letter says is true, it does not show any

real motive for Black to lie. Under Palivos’s view of the

facts, Black was the victim. Finally, there is no reasonable probability that a letter, termed bogus by the

writer, which claims the government duped its own

witness, would have changed the outcome of the proceedings. We also find that it was not an abuse of

discretion for the district judge to decline to hold an

evidentiary hearing on these remarkable claims.

Palivos also claims that he was denied a fair trial

because the prosecutors misrepresented the evidence,

violated the trial court’s order, and made improper

arguments to the jury. We review for an abuse of

discretion the denial of a motion for a new trial based on

prosecutorial misconduct. United States v. Andreas, 216

F.3d 645 (7th Cir. 2000). We must determine whether

the prosecutor’s remarks “so infected the trial that he

was denied due process.” United States v. Emenogha, 1

F.3d 473, 481 (7th Cir. 1993); see also United States v.

Xiong, 262 F.3d 672 (7th Cir. 2001).

Once more, we return to Black’s testimony. Palivos

says that an assistant United States attorney, William

Hogan, stated to the court that the defense was not in

for any surprises at trial. But when Black took the

stand, he told the jury a story about two pads of paper

and two pens (with which he wrote the backdated notes

for his file) when, prior to that time, he had said there

was one pen and a pad of paper. We are not overly

impressed about the surprise value of testimony regarding two pads of paper, rather than one. A surprise

would be if Black previously maintained that he did not
Nos. 05-4258 & 05-4329 11

write the notes and then suddenly testified that he did.

Plus, the discrepancy is gift-wrapped cross-examination

material.

Palivos also contends that AUSA Hogan failed to give

the defense notice that the testimony of JACPG’s

accountant, Jerrold Weinstein, would be different at

trial from that given before the grand jury. We do not

quite follow the argument. Prior to Weinstein’s trial

testimony, Hogan advised the court that Weinstein

would testify that Palivos was a shareholder in JACPG,

whereas in front of the grand jury he said he had no

knowledge whether Palivos was a shareholder in

JACPG. That would seem to provide notice of the

change in the testimony.

Palivos also argued that any testimony from Weinstein

about Palivos’s connection with JACPG would be hearsay because the basis of his knowledge was a conversation in which John or Chris Katris (two of the JACPG

shareholders) told him that the “P” in JACPG stood

for Peter. A lengthy conference was held outside the

presence of the jury as to whether this testimony was

inadmissible hearsay. The court ruled for the defense as

to the “P” issue but went on to say:

I believe that in order for this witness to give appropriate evidence, he works with the principal of the

corporation. And so there as long as the question is

focused with his work, the testimony—there is going

to be some hearsay admissible.

The judge likened Weinstein’s probable testimony with

that of an expert witness, which prompted the defense

to jump on another argument: that they had not received

proper notice of expert testimony. The judge then

arrived at the conclusion that Weinstein was a lay
12 Nos. 05-4258 & 05-4329

witness with special expertise, and in order for him to

apply his expertise in his job, he had to ask questions of

the principals as to how corporation money should be

distributed. With that, testimony recommenced.

During his testimony, Weinstein was not asked about

the “P” in JACPG but at some point was asked how the

money from the sale was distributed. He said, two

shareholders each received $150,000 and two (George

and Peter Palivos) each received $75,000. No simultaneous objection was lodged to the question which

resulted in these answers, but after direct examination,

defense counsel contended that it was hearsay and

should be stricken. After some wrangling, the judge

disagreed.

Palivos argues that all of this amounted to prosecutorial misconduct; that is, that in questioning Weinstein,

AUSA Hogan simply disregarded the court’s ruling. That

argument cannot be sustained. The court’s ruling as to

what was excluded was very specific and was complied

with. But there was some confusion as to what would

be allowed and why. It cannot be said that the questions which were asked were in clear violation of the

judge’s ruling. And no simultaneous objection was

made to the testimony. And even with all that said, it is

rather hard to see why an accountant cannot testify

about the people to whom funds were distributed and

why.

Other claimed misconduct involves AUSA Hogan’s

reference to the defense case as weak and their arguments misleading. It is doubtful that any remarks called

to our attention were improper, but certainly if they

were, our review of the record shows that they did not

infect the trial with unfairness.
Nos. 05-4258 & 05-4329 13

Palivos’s final claim is that the judge failed to instruct

the jury on the elements of the offense of conspiracy to

obstruct justice. This claim fails as well. When we

review jury instructions for alleged errors of law, we

reverse only if the instructions, “viewed as a whole,

misguide the jury to the litigant’s prejudice.” United

States v. Souffront, 338 F.3d 809, 834 (7th Cir. 2003).

We note that as long as “ ‘the instructions treat the

issues fairly and accurately,’ they will not be disturbed

on appeal.” Souffront, 338 F.3d at 834, quoting United

States v. Thibodeaux, 758 F.2d 199, 202 (7th Cir. 1985).

Furthermore, Palivos did not object to the instructions

in the trial court, nor did he propose alternate instructions.

The instruction was as follows:

A conspiracy is an agreement between two or more

persons to accomplish an unlawful purpose. Peter

Palivos is charged with conspiracy in Count 6.

To sustain the charge of conspiracy, the government must prove the following: First, that the

conspiracy as charged existed and, second, that each

defendant knowingly became a member of the

charged conspiracy with an intention to further the

conspiracy. And, third, that an overt act was committed by at least one conspirator in furtherance of

the charged conspiracy.

If you find from your consideration of all the

evidence that each of these propositions has been

proved beyond a reasonable doubt, then you should

find the defendant guilty of the charged conspiracy.

If, on the other hand, you find from your consideration of all the evidence that any of these propositions has not been proved beyond a reasonable
14 Nos. 05-4258 & 05-4329

doubt, then you should find the defendant not guilty

of the charge of conspiracy.

A conspiracy may be established even if its purpose was not accomplished. It is not necessary that

all the overt acts charged in the indictment be

proved and the overt act proved may itself be a

lawful act. To be a member of the conspiracy, the

defendant need not join at the beginning or know all

the other members or the means by which its purpose was to be accomplished. The government must

prove beyond a reasonable doubt that the defendant

was aware of the common purpose and was a willing

participant.

To sustain the charge of obstruction of justice the

government must prove the following propositions:

First, that defendant Peter Palivos influenced,

obstructed, impeded or endeavored to influence,

obstruct or impede the due administration of justice.

Second, that defendant Peter Palivos acted knowingly. And, third, that defendant Peter Palivos’ acts

were done corruptly; that is, by producing and

causing the production of materially false and

misleading documents in response to the grand jury

subpoena served upon Nicholas Black with the

purpose of wrongfully impeding the due administration of justice.

If you find from your consideration of all the

evidence that each of these propositions has been

proved beyond a reasonable doubt, then you should

find the defendant guilty. If, on the other hand, you

find from your consideration of all of the evidence

that any one of these propositions has not been

proved beyond a reasonable doubt, then you should

find the defendant not guilty. The word endeavor
Nos. 05-4258 & 05-4329 15

described any effort or act to influence, obstruct or

impede the due administration of justice. The endeavor need not be successful but it must have at

least a reasonable tendency to influence, obstruct or

impede the due administration of justice.

While the relationship between the conspiracy and the

obstruction of justice could have been stated a bit more

clearly, we find that, viewed as a whole, the instructions fairly and accurately informed the jury of the

elements of the crime.

We turn next to Mr. Marin. His basic contention is not

that he is blameless, but rather that he was charged

with the wrong crime. We agree.

Marin was charged with a violation of 26 U.S.C.

§ 7206(2). That section requires that a person willfully

aid or assist in “the preparation or presentation

under . . . the internal revenue laws, of a return . . .

which is fraudulent . . . as to any material matter . . . .”

There seems to be no dispute that to be a violation of

this section the return must have been filed with the

Internal Revenue Service. The fifth superseding Indictment in this case says that Marin aided in the preparation and presentation to the IRS an

individual income tax return (Form 1040) on behalf

of Peter Bouzanis for the calendar year 1994, which

return defendant LOUIS MARIN did not believe

was true and correct as to every material matter,

in that at line 12 of the Form 1040, it falsely stated

that Peter Bouzanis earned business income of

$52,000, when in fact, as defendant LOUIS MARIN

well knew, Peter Bouzanis did not earn such business income[.]
16 Nos. 05-4258 & 05-4329

The problem is that the return for which there is some

evidence of fraud is not the return which was filed with

the IRS and cited in the indictment.

For the 1994 tax year, Bouzanis filed (on February 16,

1995) an individual income tax form 1040, showing

wages, etc. of $11,005, as shown on a W-2 form, and

adjusted gross income of $8,005. That paltry income, as

we previously observed, would hardly inspire any

lender to loan him $1.25 million. So Marin enters the

picture. Marin said in his statement to Thomas Heinzer,

a Special Agent with the SBA, Office of Inspector

General, that he requested his friend, an accountant, to

prepare a “bogus” tax return for Bouzanis and that the

accountant insisted that the form be filed with the IRS.

The form, Marin continued, was used “to reflect a more

favorable income history” for Bouzanis. The point of the

whole enterprise, of course, was to obtain the loan.

So another 1040 was filed with the IRS. It showed

business income (line 12) of $52,000. Attached to this

form was a Schedule C—Profit or Loss From Business

for sole proprietorships, reflecting the $52,000. This

is the return cited in the indictment. But there is little,

if any, evidence in the record that this return was

fraudulent.

Also, it is not the return which was given to The

Money Tree. That was yet another form—a Form 1040A

individual tax return. It showed wages, salaries, etc. of

$52,000. There is, of course, no W-2 attached to the

1040A because there was no such salary. The salary

was, in Marin’s word, “bogus.” This is the return the

lenders received, but it is undisputed that this return

was not filed with the IRS.

Special Agent Heinzer testified that the only return

he was “concerned about” was the one turned over to
Nos. 05-4258 & 05-4329 17

The Money Store—the 1040A. Marin’s statement establishes that the 1040A was false and that it was used in

an attempt to obtain a loan. But, to repeat, this return

was not filed with the IRS.

As to the form which was filed—the 1040 with the

Schedule C attached—the evidence falls short of showing beyond a reasonable doubt that it was false. Probably it was, but that is not good enough. In testimony

before the grand jury which was read during the trial,

Heinzer acknowledged that no one checked to see

whether Bouzanis and Company had made $52,000. It is

true that at trial he also testified that there is no

Bouzanis and Company and that a subpoena was sent to

the Illinois Secretary of State for records regarding that

company or corporation and none were found. Crossexamination showed, however, that Heinzer did not

know whether Bouzanis was operating an unincorporated enterprise. Or, we might add, an illegal enterprise.

In short, we conclude that beyond a reasonable doubt

the 1040A was patently false and it was used to defraud

The Money Store and the SBA. Also, beyond a reasonable doubt, that form was not filed with the IRS. The

1040 with the Schedule C was filed, but it cannot be

said that it was false beyond a reasonable doubt. Marin

aided in the commission of the fraud in this case, but

he did not violate § 7206(2). Accordingly, his conviction

must be vacated.

The judgment of conviction as to Peter Palivos is

AFFIRMED; the judgment of conviction against Louis

Marin is VACATED.
18 Nos. 05-4258 & 05-4329

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—4-10-07