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United States v. Domnenko

United States Court of Appeals, Seventh Circuit

August 18, 2014

UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
VIKTOR and LILYA DOMNENKO, Defendants-Appellants

Argued March 31, 2014

Page 769

Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 08-CR-00179-5 & 08-CR-00179-6 -- Charles R. Norgle, Judge.

For United States of America, Plaintiff - Appellee (13-1004): Derek Owens, Attorney, Office of The United States Attorney, Chicago, IL.

For Viktor Domnenko, Defendant - Appellant (13-1004): Lauren Faust Kaeseberg, Attorney, Sheldon Sorosky, Attorney, Kaplan & Sorosky, Chicago, IL.

For United States of America, Plaintiff - Appellee (13-1005): Derek Owens, Attorney, Office of The United States Attorney, Chicago, IL.

For Lilya Domnenko, Defendant - Appellant (13-1005): Lauren Faust Kaeseberg, Attorney, Sheldon Sorosky, Attorney, Kaplan & Sorosky, Chicago, IL.

Before WOOD, Chief Judge, and WILLIAMS, and HAMILTON, Circuit Judges.

OPINION

Page 770

WILLIAMS, Circuit Judge.

Viktor and Lilya Domnenko committed fraud twice in relation to the same house, once while buying it and once while selling. When purchasing the house, they submitted loan documents containing false incomes, doctored bank statements, and failed to disclose that the transaction was far from arm's length since Viktor's company was selling and his wife was buying. And, the Domnenkos had a deal with Viktor's company that they would purchase the house for $750,000 and any money paid to the company above that amount would go directly to Viktor. So, the approximate $1 million in loans the Domnenkos received resulted in roughly $250,000 extra that was not disclosed on the settlement papers as going to the Domnenkos, even though it actually did. As a result of that $1 million loan, the Domnenkos were able to sell the house four months later for close to the same inflated amount, rather than the actual $750,000 that they paid for it, without raising any eyebrows. They also failed to disclose on the HUD-1 forms in the second transaction that they would be giving kickbacks from the sale to the buyer's side. Based on those facts, we reject their argument that the evidence failed to support their convictions for wire fraud. However, just because they were involved in a fraudulent scheme does not necessarily mean it was reasonably foreseeable that all the subsequent economic damages would occur, especially when there was no evidence that they knew they were selling the house to what turned out to be a fictional buyer. For that reason, we remand for further explanation by the district court as to why the loss of roughly $600,000 was " reasonably foreseeable" and why the 14-point sentencing enhancement was proper.

I. BACKGROUND

Because the Domnenkos challenge their convictions based on the sufficiency of the evidence, we draw all reasonable inferences from the facts in the light most favorable to the government. See United States v. Torres-Chavez, 744 F.3d 988, 993 (7th Cir. 2014).

This case stems from two separate sales of the same house located in Wheaton, Illinois. Viktor Domnenko was a partner in JVS, a real estate investment group that originally owned the property. JVS sold the house on February 21, 2007 to Viktor's wife, Lilya Domnenko. Although Lilya's name was going to be on all the paperwork, Viktor told his partners that he would be the actual purchaser, agreed to a purchase price of $750,000, and testimony at trial showed that he pulled the strings

Page 771

behind the purchase. Lilya obtained two loans from Washington Mutual Bank (" WAMU" ) to buy the house, but those loans were secured based on documents that included the following misrepresentations: (1) Lilya's monthly income from Viktor's construction company was $37,500 (but she actually earned only $1,000 per month according to Viktor and Lilya's jointly filed and signed tax returns); (2) Lilya owned a First Eagle National bank account with a listed balance of $175,000 (but the balance was actually $109); and (3) Lilya individually owned another bank account at Fifth Third Bank (but it was actually jointly owned with Viktor). In ...


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