Judges: Hamilton
Filed: Apr. 08, 2016
Latest Update: Mar. 02, 2020
Summary: 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 A
Summary: 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 An..
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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
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
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
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
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
6 No. 15‐2453
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).
No. 15‐2453 7
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
8 No. 15‐2453
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
No. 15‐2453 9
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
10 No. 15‐2453
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
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.
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.
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,
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.
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
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
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
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
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).
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 further to do with IDI’s side
of the transaction. On behalf of IDI, the attorney actually re‐
moved Weimert’s participation from the purchase agreement
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.
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).
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
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.
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
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
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‐
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.
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.
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
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.
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)
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
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 judicial review for reasonableness. 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‐
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
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.
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.
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.
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
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.
