In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 06-1570

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

GIGI A. ZACCAGNINO,

Defendant-Appellant.

____________

Appeal from the United States District Court

for the Central District of Illinois.

No. 03 CR 10095—Michael M. Mihm, Judge.

____________

ARGUED OCTOBER 17, 2006—DECIDED NOVEMBER 3, 2006

____________

Before FLAUM,Chief Judge, andBAUER andEASTERBROOK,

Circuit Judges.

FLAUM, Chief Judge. In September 2002, Gigi A.

Zaccagnino, her husband Peter Zaccagnino, and Wendell

Gates were indicted on a number of charges stemming from

a fraudulent investment scheme. On March 23, 2005, Gigi

Zaccagnino entered a plea of guilty on three separate

counts: racketeering conspiracy (Count 1); conspiracy to

commit mail fraud and wire fraud (Count 7); and money

laundering conspiracy (Count 15). The other charges

against her were eventually dropped. On February 15,

2006, Gigi Zaccagnino was sentenced to 97 months in

prison. Her sentence reflected a ten-level increase pre-
2 No. 06-1570

1 Before the bond scheme began, Peter and Gigi Zaccagnino

operated a used car business in Florida for several years. That

business, Fleetwood Motors One, Inc., filed for bankruptcy in

March 1998.

scribed by the United States Sentencing Guidelines because

the amount of laundered funds exceeded $20 million. Gigi

Zaccagnino now appeals the sentencing court’s finding that

she was responsible for the entire amount of loss caused by

the investment scheme. For the following reasons, we

affirm.

I. BACKGROUND

In 1997, Peter Zaccagnino began operating a fraudulent

scheme in which he sold historical bonds—bonds issued by

railroads or by foreign governments—to investors, falsely

claiming that the bonds were valid security for a line of

credit that could be used to buy notes in a high-yield

investment.1

 In reality, the bonds had no value to anyone

other than collectors. Peter Zaccagnino obtained over $6.8

million from the sale of these bonds. During this time, Gigi

Zaccagnino attended meetings where her husband represented to investors that the bonds could yield seven to

thirty percent of their valuation within a year. She also

notarized some of the investment documents.

Peter Zaccagnino sold the historical bonds through two

corporate entities and deposited most of the sales proceeds

into the corporations’ accounts. One of those corporations was Wonder Glass Products. Gigi Zaccagnino was

the secretary, treasurer, and director of that corporation.

She opened a corporate bank account for Wonder Glass

in May 1997 and held sole signatory authority on the

account. Just two days after Wonder Glass was incorporated, it began paying Gigi Zaccagnino a salary. In a
No. 06-1570 3

December 1998 credit card application, she represented

that she received $5,200 a month from her employment

with Wonder Glass.

In March 1998, Gigi Zaccagnino incorporated a business

called Diamond in the Rough (“DIR”) in the British Virgin

Islands. Peter Zaccagnino promoted DIR as a firm that

placed client funds into high-yield offshore investment

programs, promising investors substantial earnings. Gigi

Zaccagnino served as president, secretary, and director of

DIR. Money from the historical bond sales was then

transferred into an off-shore DIR bank account. Gigi

Zaccagnino used $300,000 from that account to buy corporate stock in her name.

Throughout 1998, Peter Zaccagnino offered investors

various “high-yield investments” that he claimed involved

major international banks. To document the purported

success of these investments, Peter Zaccagnino prepared

and mailed fake account statements and other documents

to investors. The statements showed substantial earnings

on the bogus investments, which encouraged investors to

send more money.

To further this scheme, Peter Zaccagnino held a meeting

in Peoria, Illinois in October 1999. At the meeting, Gigi

Zaccagnino sat at a table and made prospective investors

promise that they would not record the meeting. Meanwhile, Peter Zaccagnino told them that they could make

huge sums of money with the proposed investments

and that he had been arranging similar investments

successfully for so long that he was ready to retire. This

foreign investment scheme earned Peter Zaccagnino

millions in addition to the money from the historical

bond sales.

The SEC began investigating the historical bond sales

and obtained a preliminary injunction against Peter

Zaccagnino in December 1998 and a permanent injunction
4 No. 06-1570

in June 1999. Notwithstanding the injunctions, Peter

Zaccagnino continued selling the bonds. He was careful,

however, about putting his name on corporate documents

after the SEC investigation; instead, Gigi Zaccagnino

and others served as corporate officers and directors of

corporations involved in the criminal enterprise. For this

reason, some of the people whose names appeared on

corporate documents had no apparent connection to the

fraudulent activities. For example, Marlene and Patsy

Irace, Peter Zaccagnino’s sister and brother-in-law, are

listed as president and secretary of an entity that was used

to deal with disgruntled investors, even though they were

not aware of or involved in the investment scheme. Peter

Zaccagnino also used his mother’s name as a front for a

corporation under his control.

The Presentence Report (“PSR”) for Gigi Zaccagnino

recommended that she be held accountable for the total loss

related to the investment scheme—approximately

$21,241,846.17. The PSR calculated her total offense

level as 32, which included a ten-level increase because

the loss amount exceeded $20 million. Before sentencing,

Gigi Zaccagnino objected to the PSR’s finding that she

was responsible for the total loss amount. In particular, she

argued that she should not be held accountable for funds

received before December 1999, as she was unaware of the

criminal conduct before that date.

At the sentencing hearing, Gigi Zaccagnino reiterated this

argument, clarifying that she became aware of the criminal

conduct in December 1999, when she overheard her husband and one of his business partners laughing about the

falsity of the statements they sent to investors. This district

court rejected Gigi Zaccagnino’s version of events. The judge

stated that although it considered the possibility that the

defendant had been an innocent dupe in the early days of

the conspiracy, in reviewing the record, he concluded that

“her involvement . . . was simply too substantial.” Tran-
No. 06-1570 5

script of Sentencing Hearing at 504, United States v.

Zaccagnino, No. 03 CR 10095 (C.D. Ill. Feb. 15, 2006).

Specifically, the court noted her role as a director of the

corporations, her role as a signatory on the corporate

accounts, and her involvement in the preparation of

documents. Id. The court said to Gigi Zaccagnino, “I cannot

pinpoint at what moment you became criminally aware of

what your husband was doing, but I place it at a time

earlier than you do.” Id. at 519. The court further commented on her lavish lifestyle during the period of the

conspiracy, noting that she spent “with wild abandon on

real estate, cars, [and] jewelry,” and that she lied “on

virtually every application [she] made for credit or loan.” Id.

at 520.

II. DISCUSSION

In determining relevant conduct under the guidelines,

a defendant engaged in a jointly undertaken criminal

activity is liable for all reasonably foreseeable acts performed in furtherance of the jointly undertaken criminal

activity. U.S. SENTENCING GUIDELINES MANUAL § 1B1.3

(2004) (hereinafter “U.S.S.G.”). However, “[a] defendant’s

relevant conduct does not include conduct of members of

a conspiracy prior to the defendant joining that conspiracy; even if the defendant knows of that conduct.” Id. at

§ 1B1.3, cmt. n.2(ii). Therefore, a sentencing court

must assess the reasonable foreseeability of the loss by

inquiring into the scope of the criminal activity the defendant agreed to undertake jointly. United States v. Flores, 5

F.3d 1070, 1083 (7th Cir. 1993). Determining the amount of

loss reasonably foreseeable to Gigi Zaccagnino was especially important in this case because U.S.S.G. § 2S1.1(b)(2)

provides for a ten-level increase in a defendant’s base

offense level if the value of the funds involved in a money

laundering scheme is greater than $20 million.
6 No. 06-1570

2 The government essentially argues that because Gigi

Zaccagnino claimed during other stages of the proceedings

that she was responsible for a loss amount in the range of $5

million to $10 million, she cannot now claim that she is only

responsible for approximately $1.1 million. Gigi Zaccagnino

contends that she is using the $1.1 million figure as her fallback position because there are only two “hard” numbers in this

case relating to her criminal responsibility: the total amount

of loss and the amount she personally received.

The definition of loss is a question of law subject to

de novo review, while the amount of loss is a finding of

fact reviewed for clear error. United States v. Vivit, 214 F.3d

908, 914 (7th Cir. 2000). Gigi Zaccagnino challenges the

sentencing court’s finding that she was involved in

the conspiracy from the beginning and was therefore

responsible for the entire loss occasioned by it. Because

both the start date of her involvement in the conspiracy and

the loss amount for which she is responsible are questions

of fact, this Court reviews the district court’s findings for

clear error.

Although this case ultimately turns on whether Gigi

Zaccagnino is responsible for a loss of less than $20 million,

the government divides that question into two: (1) whether

Gigi Zaccagnino waived the argument that she

is responsible for only the $1,102,573.25 that she personally

received; and (2) whether the district court plainly erred in

finding that she was responsible for $21,241,846.17, the

total amount of loss. Because Gigi Zaccagnino argued at all

times that she was responsible for less than the total loss

amount, and any amount under $20 million could lessen her

sentence, it is unnecessary to consider the government’s

waiver argument.2

Gigi Zaccagnino argues that the district court clearly

erred by holding her accountable for the entire loss occasioned by the fraudulent investment scheme because the
No. 06-1570 7

evidence demonstrates that she personally received only

$1.1 million. However, Zaccagnino’s reliance on the amount

of money that she personally received is misplaced. If the

court correctly determined that losses in excess of $1.1

million were reasonably foreseeable to the defendant after

she joined the conspiracy, the amount she personally

received is irrelevant.

Gigi Zaccagnino also claims that the district court is

sentencing her based on her husband’s activities rather

than her actual involvement in the conspiracy, and that

significant losses occurred before she joined the criminal

enterprise. She contends that neither the PSR nor the

sentencing court determined at what point she knowingly

became involved in the fraudulent activities. Furthermore,

she asserts, the government offered no evidence suggesting that she was aware of the criminal activity before

late 1999. By then, the historical bonds scheme was essentially over.

Although no witness directly challenged Zaccagnino’s

claim that she was duped until 1999, the court chose not to

credit her version of events. In fact, the court specifically

said that it placed the defendant’s awareness “at a time

earlier” than she did. Transcript of Sentencing Hearing at

519, Zaccagnino, No. 03 CR 10095. We defer to the sentencing court’s credibility assessment. See Carnes Co. v. Stone

Creek Mech., Inc., 412 F.3d 845, 848 (7th Cir. 2005) (recognizing that a trial court’s assessment of credibility can

virtually never amount to clear error). The fact that Gigi

Zaccagnino notarized documents, was a named officer, and

opened corporate accounts in the early days of the scheme

permit the inference that she participated in the conspiracy

from the start. Moreover, the SEC injunction against Peter

Zaccagnino in 1998, which should have put the defendant

on notice of the criminal activity well before December

1999, also supports the district court’s finding.
8 No. 06-1570

Gigi Zaccagnino also claims that the court failed to

determine the scope of the agreement she entered into when

she joined the conspiracy. We disagree. The district court

specifically found that her involvement was substantial,

and it reiterated some of the evidence supporting its

conclusion: the corporate directorships, the signatory

authority, and preparation of documents. As a result of her

substantial involvement, the court expressly rejected the

defendant’s claim that she was an innocent dupe in the

beginning. She attempts to align herself with other relatives of Peter Zaccagnino whose only involvement in the

scheme was that their names appeared on corporate

documents. As discussed above, however, Gigi Zaccagnino’s

involvement in the conspiracy went beyond having her

name on corporate documents.

Finally, Gigi Zaccagnino seizes on the fact that the

court said, “there was no legitimate business here period

from what I’ve been able to determine. None.” Transcript of

Sentencing Hearing at 504, Zaccagnino, No. 03 CR 10095.

Because the PSR recognized that the Zaccagninos legitimately operated a used car business for several years, Gigi

Zaccagnino argues, the court’s statement demonstrates a

misunderstanding of the facts. Therefore, she reasons, its

decision to hold her responsible for the entire loss was

premised on error. This argument fails for two reasons.

First, Gigi Zaccagnino takes the district court’s statement

out of context. The court was referring only to the illegitimacy of the investment scheme. Nothing in the transcript

indicates that the court was questioning the legitimacy of

a car dealership that went bankrupt in 1998. Second, the

fact that the defendant may have assisted her husband in

operating a legitimate business has no bearing on whether

she was also helping him operate fraudulent ones.

Because Gigi Zaccagnino did not demonstrate that the

sentencing court clearly erred in holding her accountable for
No. 06-1570 9

the entire amount of the investors’ losses, we affirm her

sentence.

III. CONCLUSION

For the reasons outlined above, we AFFIRM Gigi

Zaccagnino’s conviction and sentence.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—11-3-06