### In the



# United States Court of Appeals

For the Seventh Circuit

____________________

No. 20

‐ 1306

S AMUEL W EGBREIT and E LIZABETH J. W EGBREIT

,

Petitioners

‐ Appellants

,

v.

C OMMISSIONER OF I NTERNAL R EVENUE

, Respondent

‐ Appellee

.

____________________

Appeal from the United States Tax Court.

No. 7109

‐ 13

— Mary Ann Cohen

, Judge

.

____________________

A RGUED D ECEMBER 7, 2020

— D ECIDED D ECEMBER 29, 2021

____________________

Before S YKES

, Chief Judge

, and B RENNAN and S T

. E VE

,

Circuit Judges

.

S YKES

, Chief Judge

. Samuel and Elizabeth Wegbreit

sheltered several million dollars of income in a life

‐ insurance

policy held by a sham trust. The IRS caught on to the

Wegbreits’ scheme and issued a deficiency notice showing

that they owed millions in back taxes. The Wegbreits

challenged the notice in the tax court. After discovery

revealed a series of suspicious documents and transactions

relating to the Wegbreits’ finances, the IRS added civil fraud2 No. 20

‐ 1306

allegations. The tax court agreed with the IRS, finding that

the Wegbreits underreported their income by nearly $15

million and engaged in a pattern of conduct intended to

defraud the government.

We affirm. The Wegbreits’ rambling brief spans 78 pages

yet somehow develops only two coherent arguments

remotely related to the tax court’s decision. And those two

arguments are baseless: the Wegbreits stipulated them away

in the tax court. We therefore order John E. Rogers, the

Wegbreits’ attorney, to show cause why he should not be

sanctioned under Rule 38 for filing this frivolous appeal.

I. Background

Samuel Wegbre it founded and served as an executive of

Oak Ridge, LLC, a financial

‐ services company. In 2003 as his

interest in Oak Ridge gained value, Samuel worked with

Thomas Agresti, his attorney, to reduce his tax liability.

Agresti proposed that Samuel transfer his Oak Ridge interest

to a trust benefitting his wife, Elizabeth, and the couple’s

children. With Agresti as trustee, the tru st would in turn

convey the Oak Ridge interest to an offshore insurance

company as an initial premium for a life

‐ insurance policy

benefitting the trust. Samuel agreed to Agresti’s scheme

without conducting any research or seeking independent

legal advice.

The record include s three versions of the Samuel

Wegbreit Trust Fund agreement, with suspicious differences

between them. Most notably, two of the agreements identify

only $18,750 in cash as initial trust assets, but the third also

lists an insurance policy issued by Acadia Life Ltd.—a policy

that was not issued by Acadia until 2004, the year after theNo. 20

‐ 1306 3

trust was formed. Another oddity is worth mentioning. One

of the documents declares that it is restating the trust agree

‐

ment dated January 25, 2002, over a year before Samuel even

met with Agresti. No one could produce the purported 2002

agreement, nor could the Wegbreits explain why there were

multiple trust agreements, the discrepancies between them,

or which was operative.

Agresti, acting as trustee, acquired a variable life

‐

insurance policy from Threshold Alliance, Ltd. 1 Although

nominally based in the Cook Islands, Threshold shares a

United States office with Agresti’s law firm. The policy lists

its issuance date as January 25, 2002—the same day the

mysterious 2002 trust agreement was supposedly execut

‐

ed—and states that coverage does not start until the first

premium is paid. As the initial premium payment, Samuel

transferred his Oak Ridge interest to the trust, which it in

turn conveyed to Threshold. Threshold’s supposed policy

administrator, however, denies signing the transfer docu

‐

ments and ever working for the comp any.

In 2004 Agresti swapped the Threshold policy for the one

issued by Bermuda

‐ based Acadia Life Ltd. At the time of the

exchange, over 80% of the Threshold policy’s value consisted

of Samuel’s Oak Ridge interest. The remainder was com

‐ prised of interests in shell companies organized and run by

Agresti and his associates.

1 Variable life

‐ insurance policies split premiums between a cash account

and an investment account, and thus provide an investment vehicle. See

generally Norem v. Lincoln Benefit Life Co.

, 737 F.3d 1145, 1147 (7th Cir.

2013).4 No. 20

‐ 1306

The Wegbreits leveraged the insurance policies for their

personal benefit in two ways. First, the shell companies

made expensive purchases, including show horses and

several Florida condominiums, on the Wegbreits’ behalf.

Second, the Wegbreits regularly requested policy loans from

Acadia on behalf of the family trust, which would in turn

deposit the money into a bank account in Samuel’s name.

Between 2004 and 2008, the Wegbreits received over

$3 million in policy loans, none of which they reported as

taxable income.

The biggest payoff came when Acadia, at Samuel’s

direction, sold his Oak Ridge interest to an investment firm

for $11.3 million. Although the purchase agreement was

finalized in 2004, the Wegbreits stipulated in the tax court

that the sale occurred in January 2005, and the record shows

that the money changed hands later that month. Because the

proceeds were wired directly to Agresti, who passed them

on to Acadia, the Wegbreits did not report any taxable

income from the sale.

After a 2008 audit, the IRS determined that the trust

income and Acadia policy gains, including those from the

Oak Ridge sale, were taxable to the Wegbreits. In total they

underreported their income from 2005 to 2009 by nearly

$15 million. The Wegbreits disputed the IRS’s conclusion in

the tax court. After discovery revealed the suspicious

documents related to the trust and life

‐ insurance policies,

the Commissioner of Internal Revenue amended his answer

to assert civil fraud penalties.

After trial the tax court found that Samuel never

effectively transferred his Oak Ridge interest to the trust.

The rest of the tax scheme collaps ed from there. Without theNo. 20

‐ 1306 5

Oak Ridge interest, the trust never paid the initial premium

for the Threshold policy—a condition to its issuance—and

Agresti could not exchange the invalid Threshold policy for

the Acadia policy. The judge additionally found that the

trust was a sham lacking economic substance and thus

should be disregarded for tax pu rposes. With the trust and

insurance policies out of the way, the judge agreed with the

Commissioner’s assessment of the Wegbreits’ tax liability.

She also imposed fraud penalties, noting that the record

displayed several indications of fraud, including false and

misleading documents and failure to cooperate with tax

authorities.

II. Discussion

We review the tax court’s legal conclusions de novo and

its factual findings for clear error. Cole v. Comm’r

, 637 F.3d

767, 773 (7th Cir. 2011). We also presume that the Commis

‐

sioner’s assessment of a tax deficiency is correct. Id. To shift

the burden to the Commissioner, the taxpayer must show

that the assessment “lacks a rational foundation or is arbi

‐

trary and excessive.” Id. (quotation marks omitted).

Although “[t]he purpose of an appeal is to evaluate the

reasoning and result reached by the” court below, Jaworski v.

Master Hand Contractors, Inc.

, 882 F.3d 686, 690 (7th

Cir. 2018), the Wegbreits raise a bevy of legal topics wholly

irrelevant to the tax court’s decision, from statutory

‐

diversification rules for life

‐ insurance portfolios to the

grantor

‐ trust doctrine. When they do address germane

issues, their brief flagrantly violates Rule 28’s requirement to

support each argument “with citations to the authorities and

parts of the record on which [they rely].” F ED

. R. A PP

. P.

28(a)(8)(A). As just a sample, the brief cites a 489

‐ page6 No. 20

‐ 1306

insurance treatise—all of it—in support of a single proposi

‐

tion and the “entire record” in support of another. Notwith

‐ standing this general incoherence, we can discern two

contested issues on which the Wegbreits’ brief satisfies the

bare minimum of Rule 28: the date of the sale of Samuel’s

Oak Ridge shares, and the Commissioner’s compliance with

26 U.S.C. § 6751 in seeking fraud penalties. The bala nce of

the Wegbreits’ conclusory arguments are waived. See, e.g.

, Cole

, 637 F.3d at 773.

A. Oak Ridge Sale Date

The Internal Revenue Code states that “[t]he amount of

any item of gross income shall be included in the gross

income for the taxable year in which received by the taxpay

‐

er,” unless the taxp ayer’s accounting method permits oth

‐

erwise. 26 U.S.C. § 451(a). The Wegbreits maintain that the

Commissioner is barred by the statute of limitations from

assessing any back taxes based on 2004 income, see id.

§ 6501(a), and that because the Oak Ridge sale was consum

‐

mated in 2004, the proceeds are taxable income for 2004.

The flaws in this argument are numerous. Most

obviously, the Wegbreits stipulated below that the sale

occurred on January 1, 2005. They ask us to release them

from this stipulation, but they never made such a request to

the tax court. That’s a waiver. See Soo Line R.R. Co. v.

Consolidated Rail Corp.

, 965 F.3d 596, 601 (7th Cir. 2020).

Moreover, their request to undo the stipulation consists of an

utterly undeveloped assertion that the date of a sale is a legal

conclusion that cannot be conceded. That’s a double waiver.

See Shipley v. Chi. Bd. of Election Comm’rs

, 947 F.3d 1056, 1063

(7th Cir. 2020) (undeveloped, cursory arguments are

waived). And the assertion is wrong: The date of a sale is aNo. 20

‐ 1306 7

question of fact (or at least a mixed question of fact and law),

Williams v. Comm’r

, 1 F.3d 502, 505 (7th Cir. 1993), and thus

fair game for stipulation, T AX C T

. R. 91(a) (permitting

stipulation of a fact or an application of law to a fact).

In any event, the Wegbreits’ argument is factually base

‐

less because the evidence unambiguously shows, and the

Wegbreits concede, that the funds were received in January

2005. In a single conclusory sentence, the Wegbreits assert

that Acadia is an “accrual base” t axpayer permitted to report

the sale proceeds as 2004 income, see 26 U.S.C. § 451(b)(1)(A),

but this unsupported, cursory argument is waived too,

Shipley

, 947 F.3d at 1063. In yet another woeful failure to

grapple with the tax court’s decision, the Wegbreits also do

not explain why Acadia’s accounting method matters since

the judge found that th e Acadia policy was never valid and

the trust purportedly holding the policy was a sham.

B. Compliance with § 6751

With a few exceptions, the IRS may not assess any

penalty “unless the initial determination of such assessment

is personally approved (in writing) by the imme diate

supervisor of the individual making such determination or

such higher level official as the Secretary may designate.”

§ 6751(b)(1). The Wegbreits insist that we must vacate the tax

court’s fraud penalty because the Commissioner did not

comply with § 6751.

As with the Oak Ridge sale date, the Wegbreits’

stipulations in the tax court foreclose this argument. They

agreed both to the factual basis for the Commissioner’s

compliance with § 6751 and to the ultimate conclusion: The

Commissioner “complied with the written approval8 No. 20

‐ 1306

requirement under

... § 6751(b)(1).” Their attempts to skirt

this unequivocal stipulation are perfunctory and raised for

the first time on appeal. Either constitutes a waiver. Soo Line

,

965 F.3d at 601.

C. Sanctions

Rule 38 permits us to impose sanctions for frivolous

appeals. F ED

. R. A PP

. P. 38. The presumptive sanction for a

frivolous tax appeal is $5,000. Veal

‐ Hill v. Comm’r

, 976 F.3d

775 (7th Cir. 2020) (per curiam). “An appeal is frivolous if

the appellant’s claims are cursory, totally undeveloped, or

reassert a previously rejected version of the facts. An appeal

is also frivolous if it presents arguments that are so

insubstantial that th ey are guaranteed to lose.” McCurry v.

Kenco Logistics Servs., LLC

, 942 F.3d 783, 791 (7th Cir. 2019)

(citations omitted). This appeal fits both standards.

The Wegbreits’ brief, signed by attorney John E. Rogers,

is woefully deficient. The bulk of its 78 pages consists of

rambling, unsupported assertions, most of which do not

bear any relationship to the reasoning in the tax court’s

decision. As we’ve explained, the only two discernable,

arguably relevant arguments are sure losers, stipulated away

without excuse and frivolous to boot. On top of these glaring

shortcomings, the Wegbriets accuse the IRS’s attorneys of

threatening and intimidating th em to settle the case, yet they

offer no evidence for such a serious allegation. This baseless

accusation is irresponsible and entirely inappropriate for a

lawyer admitted to practice before this court.

We have cautioned Rogers before about the

consequences of bringing frivolous appeals, Sugarloaf Fund,

LLC v. Comm’r

, 953 F.3d 439, 441 (7th Cir. 2020), but thatNo. 20

‐ 1306 9

warning apparently went unheeded. We therefore order

Rogers to show cause within 14 days why he should not be

sanctioned for bringing this utterly frivolous appeal in

violation of Rule 38 of the Federal Rules of Appellate

Procedure. We also direct the Clerk of Court to forward this

opinion to the Illinois Attorney Registration and

Disciplinary Commission for any action it deems

appropriate.

A FFIRMED ; O RDER TO S HOW C AUSE I SSUED