United States v. Rumsavich
United States Court of Appeals for the Seventh Circuit
313 F.3d 407 (2002)
Peter Rumsavich (defendant) had several failing businesses. To pay off his debts, Rumsavich put on a financial seminar to convince investors to buy high-risk bonds that were backed by one of the unprofitable businesses. Rumsavich created advertisements for the seminar that contained false representations about his qualifications and sent the advertisements to areas known to have numerous elderly residents on fixed incomes. At the seminar, Rumsavich had the attendees fill out surveys about their personal situations, assets, and incomes. Rumsavich then gave a presentation containing false representations, including untrue statements that were intended to make the high-risk bonds appear to be good investments. Next, based on the survey responses, Rumsavich invited specific individuals to one-on-one meetings about investing their money with him. For these personal meetings, Rumsavich typically targeted elderly widows who had (1) fixed incomes, (2) a strong need to obtain more money to be secure, (3) little financial knowledge because their late husbands had handled most of the family finances, and (4) physical or emotional issues. At the personal meetings, Rumsavich used false information and played on the potential investor’s fears and vulnerabilities to get the potential investor to invest money with him. For example, Rumsavich targeted Gladys Paine, an elderly widow with little financial knowledge and whose late husband had handled the family portfolio while he was alive. Paine was afraid of becoming bankrupt before she died and being unable to pay for her own nursing-home care. After listening to a one-on-one pitch from Rumsavich that contained false representations, Paine invested her entire life savings with Rumsavich. Rumsavich did not fulfill his promises to Paine or other investors. Instead, Rumsavich spent the investors’ monies to pay down his own business and personal debts and to pay himself and his wife large salaries. Ultimately, Rumsavich was convicted of federal mail-fraud and perjury charges. During Rumsavich’s sentencing, the district court applied (1) a two-level enhancement because Rumsavich had targeted vulnerable victims and (2) a second two-level enhancement because Rumsavich had misused his position of trust as a financial planner. On appeal, Rumsavich argued that the vulnerable-victim enhancement was inappropriate because many of his victims were sophisticated investors, not vulnerable members of society.
Rule of Law
Holding and Reasoning (Coffey, J.)
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