In the
United States Court of Appeals
For the Seventh Circuit
Nos. 09-3403 & 09-3684
U NITED S TATES OF A MERICA,
Plaintiff-Appellee/
Cross-Appellant,
v.
M ICHAEL S EGAL,
Defendant-Appellant/
Cross-Appellee.
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 1:02-cr-00112—Ruben Castillo, Judge.
A RGUED JANUARY 13, 2011—D ECIDED M AY 3, 2011
Before R IPPLE, E VANS ,and SYKES, Circuit Judges.
E VANS, Circuit Judge. Michael Segal is here again—for
the third time. He was originally indicted in 2002. The
indictment was superseded several times, with a fourth
version returned in 2004. In its fourth reincarnation, the
indictment charged Segal and his company, Near North
Insurance Brokerage (NNIB), with a bevy of counts in-
2 Nos. 09-3403 & 09-3684
cluding racketeering, mail and wire fraud, embezzlement,
false statements, and conspiracy to impede the Internal
Revenue Service.
Following a trial, a jury found Segal guilty on all
charged counts except one that the government dis-
missed during the trial. Subsequently, during post-trial
proceedings, the district court knocked out seven counts.
At the end of the day, 19 counts were left standing. NNIB
was also convicted. Segal was sentenced to serve a 121-
month term, pay $841,527.96 in restitution, and forfeit
$30 million plus his interest in the racketeering enter-
prise (i.e., NNIB). Segal and NNIB appealed.
Before the appeal was heard, we resolved a somewhat-
related appeal filed by Segal growing out of an action
by a trustee appointed by the court to manage the affairs
of NNIB and a related entity. Segal came out on the short
end of that appeal. See United States v. Segal, 432 F.3d
767 (7th Cir. 2005). Segal fared marginally better on his
appeal from the criminal trial: we affirmed his convic-
tion, but remanded the case to the district court for
further proceedings regarding the forfeiture issue. See
United States v. Segal, 495 F.3d 826 (7th Cir. 2007).
Back in the district court, the forfeiture was cut to
$15 million. Both sides were unhappy. Both appealed. The
government claimed the amount should have stayed at
$30 million; Segal claimed $1.5 million (“at the most”) was
the right figure. Before the new appeal was resolved,
Segal received what we suspect he must have viewed as
a ticket to a do-over of the whole shebang—the Supreme
Court issued its opinion in Skilling v. United States, 130
Nos. 09-3403 & 09-3684 3
S. Ct. 2896 (2010). Why is that? Well, the alleged scheme
that ran though the indictment against him claimed
that Segal was involved in money/property fraud along
with fraud involving the deprivation of his “honest
services.” In Skilling, the Supreme Court trimmed the
theory of honest services fraud so it only applies to a
defendant involved in either bribery or a kickback
scheme. We asked the parties to submit supplemental
briefs regarding Skilling and they have done so.
The evidence fails to suggest that Segal was involved in
either bribery or a kickback scheme. So the instructions
given to the jury regarding honest services fraud were
wrong. However, Skilling holds that an error such as
occurred here does not require the reversal of a convic-
tion if it is shown to be harmless beyond a reasonable
doubt. This is so because a general verdict may be sup-
ported by an alternative, and valid, legal theory such as
money/property fraud alleged in the indictment against
Segal. That’s the route we followed in affirming, in part,
the conviction of the defendant in United States v. Black,
625 F.3d. 386 (7th Cir. 2010).
So the issue here boils down to this: would the jury
have still convicted Segal had it not been told that in
addition to the valid money/property fraud allegations,
an allegation of honest services fraud could also be
taken into consideration? We conclude that the jury
would—and most certainly did—convict Segal for
money/property fraud, irrespective of the honest services
charge. This is because even if the jury concluded
that there was an honest services violation, that viola-
4 Nos. 09-3403 & 09-3684
tion had to be premised on money/property fraud. That
is, to the extent Segal was depriving others of his honest
services, it was because he was taking their money.
NNIB was required to use a premium fund trust
account (PFTA) to hold, as a fiduciary, premium deposits
from insureds. The deposits were supposed to sit in the
PFTA until it came time to pay the carriers. The govern-
ment charged and presented evidence of a fraudulent
scheme whereby Segal took the money deposited in the
PFTA and used it to expand his business by purchasing
and investing in other insurance brokerages and compa-
nies.
The jury was instructed that the mail and wire fraud
counts required that the government prove either a
scheme to 1) defraud, 2) obtain money, or 3) deprive
others of “honest services in the operation of Near North
Insurance Brokerage and the maintenance of Near North
Insurance Brokerage’s Premium Fund Trust Account”
(emphasis added). Accordingly, any honest services
violation had to be based on the PFTA. This requirement
was repeated in the jury instructions’ explanation of a
“scheme” and a “scheme to defraud another of a right
to honest services.”
If the jury convicted Segal of honest services fraud for
failing to maintain the PFTA, it raises the question
how did Segal fail to maintain the PFTA? Under the
evidence presented, there is one overwhelming answer.
He failed to maintain the PFTA by taking out the funds
that were supposed to go the insurance carriers. That is,
Segal fraudulently represented to the insureds and insur-
Nos. 09-3403 & 09-3684 5
ance carriers that he would hold the insurance premiums
in trust, but instead took the money on a shopping
spree—at one point the PFTA was short $30 million. This
is monetary fraud. If the jury found an honest services
violation, it was only because of this underlying fraud.
The jury could not have found Segal guilty for failing
to maintain the funds in trust without concluding that
Segal was taking the money.
So that leaves us with two possible conclusions, neither
of which help Segal. The jury convicted Segal based on an
honest services theory which, under the evidence pre-
sented, required that the jury conclude that Segal was
guilty of monetary fraud. Or the jury dumped the
honest services theory and simply relied on monetary
fraud. Either way, a conviction for monetary fraud is
left standing.
Segal’s arguments to the contrary get him nowhere. First,
he argues there was no victim. But that is not correct, the
jury instructions specifically name “insurance carriers
and/or customers” as the victims. Nor does it matter, as
Segal appears to contend, if the victim suffered no loss.
Loss is not required to prove fraud, whether monetary
or otherwise. See United States v. Sorich, 523 F.3d 702, 709-
10, 712-13 (7th Cir. 2008); United States v. Hamilton, 499
F.3d 734, 736-37 (7th Cir. 2007).
Segal also argues that in Neder v. United States, 527 U.S. 1
(1999), the Supreme Court held that “defraud,” as used
in the mail and wire fraud statutes, means fraud as it was
understood at common law, and here the elements
of common law fraud were not met. But Neder focused on
6 Nos. 09-3403 & 09-3684
and reached a conclusion as to only one element of fraud
at common law: materiality. Neder, 527 U.S. at 22-25 (“we
hold that materiality of falsehood is an element of the
federal mail fraud, wire fraud, and bank fraud statutes”).
Neder was silent, for instance, on intent to cause harm.
Regardless, Segal would have us construe Neder as re-
quiring a specific intent to cause injury. We reject this
request. Not only because Neder does not contain any
such holding, but because we have already held that this
is not the case. See Hamilton, 499 F.3d at 736 (if you
obtain money by fraud “you are not excused just
because you had an honest intention of replacing the
money”); United States v. Davuluri, 239 F.3d 902, 906 (7th
Cir. 2001) (“Exposing the victim to a substantial risk of
loss of which the victim is unaware can satisfy the
intent requirement. That Davuluri sincerely intended his
scheme to generate a profit is irrelevant”) (citations
omitted). We decline to read into Neder conclusions it
did not reach.
Contrary to Segal’s assertion that this case was
presented as one primarily resting on an honest services
violation, the case, and the government’s presentation,
were about the money. Even the government noted
when discussing honest services during its closing argu-
ment that the honest services violation was premised
on Segal’s taking money. The term “honest services”
does not appear in Segal’s closing argument and is men-
tioned only once in the government’s rebuttal. Segal’s
attempt to equate the government’s references to “fidu-
ciary” in its closing as equivalent to mentioning “honest
services” fails. They are not the same thing and even
Nos. 09-3403 & 09-3684 7
Segal’s counsel admitted at argument that he was
unsure how “fiduciary” was used in the context of “fidu-
ciary fraud.” The parties just didn’t emphasize honest
services during the trial as strongly as Segal now contends.
In sum, Segal’s convictions stand. Even so, re-
sentencing is required because the district court may
have thought that Segal committed honest services
fraud and money and property fraud, and increased the
sentence accordingly. Black, 625 F.3d at 388-89.
But we still have the issue of the $15 million forfeiture
order—the only issue at play until Skilling arrived on the
scene. As we noted earlier, both sides argue the district
court got it wrong. We disagree.
We remanded the case to the district court in 2007 to
determine if there was any double-counting when Segal
was forced to forfeit his enterprise and $30 million—some
of which Segal may have reinvested in his enterprise.
We asked the district court to determine what part of the
$30 million was not reinvested in the enterprise, but
rather went to benefit Segal personally and should there-
fore be subject to forfeiture. This is a question of fact.
Therefore, we review the court’s decision on remand only
for clear error. United States v. Swanson, 394 F.3d 520, 528
(7th Cir. 2005).
Not surprisingly, Segal did not leave detailed records
of his crimes. As originally noted by the district court
back in 2004, Segal’s “lackluster accounting system,
which was a deliberate attempt to conceal his fraudulent
conduct, preclude[s] such a detailed accounting.” United
States v. Segal, 339 F. Supp. 2d 1039, 1049 (N.D.Ill. 2004). On
8 Nos. 09-3403 & 09-3684
remand, the district court did exactly what we asked of it.
Using the evidence that was available, it cogently ex-
plained the amount of money that Segal took for
personal use. None of the shortcomings alleged by the
government or Segal rise to the level of clear error. Setting
a restitution figure in a case like this is akin to hitting
a zone rather than a point. The zone the district court
ended up in seems eminently reasonable to us.
We R EMAND this case to the district court so that the
court can consider resentencing Segal in the event that
any honest services conviction affected his sentence. Of
course, if the court would have imposed the same
sentence irrespective of any honest services fraud, no
resentencing is necessary. The judgment of the district
court is otherwise A FFIRMED.
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