United States v. Kowalski

103 F.4th 1273

UNITED STATES of America, Plaintiff-Appellee, v. Jan R. KOWALSKI, Defendant-Appellant.

No. 23-2374

United States Court of Appeals, Seventh Circuit

Argued April 3, 2024

Decided June 6, 2024

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:19-cr-00226-2 — Virginia M. Kendall, Judge.

Maureen B. McCurry, Attorney, Office of the United States Attorney, Chicago, IL, for Plaintiff-Appellee.

William S. Stanton, Attorney, Law Office of William S. Stanton, Park Ridge, IL, for Defendant-Appellant.

Before St. Eve, Kirsch, and Lee, Circuit Judges.

St. Eve, Circuit Judge.

Jan Kowalski used and abused her position as an attorney to shield her brother's assets in bankruptcy, hiding approximately $357,000 in her attorney trust account. She then obfuscated the concealment by invoking attorney-client privilege, lying under oath, and fabricating documents. She now appeals her within-Guidelines sentence of 37 months' imprisonment, arguing that the district court erred in applying two enhancements in calculating her Sentencing Guidelines range: the § 2B1.1(b)(10)(C) sophisticated-means enhancement, and the § 3B1.3 abuse of position of trust enhancement. She also argues her sentence is substantively unreasonable. We affirm.

I. Background

A. Factual Background

Jan Kowalski, an Illinois attorney, came to her brother Robert Kowalski's aid after he filed for bankruptcy in 2018— first concealing Robert's assets and later lying to the bankruptcy court.

1. Concealing Assets

Kowalski's involvement in Robert's bankruptcy proceedings began around the summer of 2018. Using her Interest on Lawyers Trust Account ("IOLTA")—a trust account designed for lawyers to hold clients' and third parties' property separate from their own assets—Kowalski concealed approximately $357,000 of her brother's assets from his creditors and the bankruptcy trustee.

Kowalski accomplished this feat through dozens of IOLTA transactions. Between August and October 2018, she deposited around $350,000 in cashier's checks that almost always listed Robert as both remitter and payee, and thousands more in checks and money orders payable to either Robert or one of his business entities for "rent." She also withdrew thousands of dollars to purchase property on two occasions. On the first, she withdrew around $2,500 to use as earnest money in a failed attempt to purchase property in the name of a fictitious trust of which Robert was the beneficiary. And on the second, she withdrew around $75,000 to successfully purchase property in Robert's name. Later, she used yet more funds from her IOLTA to purchase another $350,000 of cashier's checks payable to or for the benefit of Robert. Over the next several months, she redeposited around $325,000 into her IOLTA, and then withdrew another $240,000 after that.

2. Bankruptcy Proceeding Misconduct

After entering an appearance on Robert's behalf in the bankruptcy proceedings in November 2018, Kowalski took steps to hide her concealment of Robert's assets.

Kowalski's deceitful activities before the bankruptcy court were numerous. She began with an array of written and verbal false statements. In a motion to quash subpoenas seeking records from her IOLTA, for example, she falsely represented that the IOLTA funds "represent[ed] both her earned fees, settlement funds, and her clients' security retainers," and further invoked attorney-client privilege to insist that "[a]ny financial transaction between . . . [her] and her clients" was protected. She reiterated similar false statements in a later filing.

Kowalski continued her false statements in a hearing before the bankruptcy court. Under oath, she testified that the cashier's checks were legitimate attorney's fees stemming from agreements with Robert's business entities; that the withdrawn-then-redeposited cashier's checks were loans she intended to, but did not, make to Robert; and that she withdrew more than $200,000 from her IOLTA as part of her regular practice of zeroing out the account at the end of the year.

Then, compounding this deception, Kowalski introduced exhibits purporting to be IOLTA client ledgers and retention agreements to support her false statements. She later admitted to fabricating these documents.

In subsequent proceedings, the bankruptcy trustee confronted Kowalski with the inconsistencies between her personal bank records and earlier testimony. Again under oath, Kowalski testified that she gave the withdrawn IOLTA funds to an unidentified "client" or "business partner." She refused to identify the individual, and the district court placed her in contempt. She ultimately named Lawrence Lis several weeks later. Lis, however, denied ever receiving funds from Kowalski.

Kowalski failed to appear at a bankruptcy court hearing the next month. Her attorney informed the court that Kowalski was at her law office with the police, filing a report that money had been stolen from her office.

Finally, in a hearing a few months later, Kowalski again lied under oath, insisting she had given the withdrawn funds to Lis. But this time, she added that Lis later returned the money, which she put in a lockbox in her office. She testified that she later discovered the money had been stolen, speculating that "it was agents of the trustee." And once more, she insisted that the money did not belong to the trustee but was instead money she had "earned."

B. Procedural Background

A grand jury charged Kowalski and several others in a 37-count indictment. For her part, Kowalski faced four counts of bankruptcy fraud in violation of 18 U.S.C. § 157(1)-(3), and one count of concealing assets from the bankruptcy trustee in violation of 18 U.S.C. § 152(1). She pleaded guilty only to the concealing assets charge.

The United States Probation Office prepared a presentence investigation report, which recommended applying four sentencing enhancements. Two are relevant here: a two-level enhancement under U.S.S.G. § 2B1.1(b)(10)(C), on the ground that Kowalski employed "sophisticated means" in committing the offense, and a two-level enhancement under U.S.S.G. § 3B1.3, on the ground that she abused a position of trust or used a special skill to facilitate or conceal the offense.

Kowalski objected to both enhancements. As to the former, she argued that her conduct was neither particularly complex nor intricate, and that she did not know her brother's trusts were fictitious. As to the latter, she argued that she had no bankruptcy law expertise and thus did not use any special skills. The district court overruled the objections. It found Kowalski employed sophisticated means by fabricating false client ledgers and retention agreements and providing false testimony to support those documents. And it found that Kowalski abused a position of trust by relying on her status and credibility as an attorney to cover up the offense

Based on Kowalski's offense level of 21 and criminal history category of I, the court calculated a Sentencing Guidelines range of 37 to 46 months' imprisonment. It ultimately imposed a 37-month sentence, which Kowalski now appeals.

II. Analysis

Kowalski lodges three challenges to her sentence: two procedural and one substantive.

When a defendant challenges a sentence both procedurally and substantively, "[w]e review a district court's sentencing decision in two steps." United States v. Oregon, 58 F.4th 298, 301 (7th Cir. 2023). First, we assess de novo whether the district court committed any "significant procedural error," including whether it correctly calculated the applicable Guidelines range. United States v. Davis, 43 F.4th 683, 687 (7th Cir. 2022) (quoting Gall v. United States, 552 U.S. 38, 51, 128 S.Ct. 586, 169 L.Ed.2d 445 (2007)). Second, if the sentence is procedurally sound, we "review the substantive reasonableness of [the] sentence under an abuse of discretion standard." United States v. Walsh, 47 F.4th 491, 496 (7th Cir. 2022).

A. Procedural Challenges

We begin with Kowalski's procedural challenges. She argues that the district court erred by improperly applying the §§ 2B1.1(b)(10)(C) and 3B1.3 enhancements.

In assessing these challenges, we review the district court's underlying factual findings for clear error, but review de novo whether those findings "adequately support the imposition of the enhancement[s]." United States v. Barker, 80 F.4th 827, 834 (7th Cir. 2023) (quoting United States v. Brown, 843 F.3d 738, 742 (7th Cir. 2016)). A finding of fact is clearly erroneous only when, after considering all the evidence, we are "left with the definite and firm conviction that a mistake has been made." United States v. Dickerson, 42 F.4th 799, 804 (7th Cir. 2022) (quoting United States v. Cruz-Rea, 626 F.3d 929, 938 (7th Cir. 2010)).

1. Sophisticated-Means Enhancement

The sophisticated-means enhancement applies where the offense "involved sophisticated means and the defendant intentionally engaged in or caused the conduct constituting sophisticated means." U.S.S.G. § 2B1.1(b)(10)(C). " '[S]ophisticated means' means especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense." § 2B1.1 cmt. n.9(B). The enhancement "does not require a brilliant scheme, just one that displays a greater level of planning or concealment than the usual fraud case." United States v. Lundberg, 990 F.3d 1087, 1097 (7th Cir. 2021) (cleaned up).

Kowalski argues that merely using her own bank account to conceal her brother's assets was unsophisticated and "on par with a typical bankruptcy fraud." The district court did not err in rejecting this argument. Indeed, Kowalski's scheme surely "exceeded the garden-variety scheme" to conceal bankruptcy assets, United States v. Friedman, 971 F.3d 700, 716 (7th Cir. 2020), which requires only that the defendant "knowingly and fraudulently conceal[ ] from a . . . trustee . . . any property belonging to the estate of a debtor," see 18 U.S.C. § 152(1)...