In the Courts

In United States v. Roti, — F.3d –, 2007 WL 1287402 (7th Cir. May 3, 2007), the Seventh Circuit held that advice of counsel is not a free-standing defense to bankruptcy fraud, but merely a means to negate the required mental state for the crime charged. Because, on the facts presented, following advice of counsel did not negate scienter, the conviction was affirmed.

Defendant, the sole shareholder of an Illinois corporation, was convicted of bankruptcy fraud on charges that during bankruptcy proceedings he attempted to hide assets from creditors and the bankruptcy trustee. On appeal, he argued that he should have been acquitted because he took those actions upon advice of his lawyer, and that his lawyer had managed the details of the scheme. He also argued that the trial court erred in barring him from introducing evidence that he had sued his lawyer, resulting in a $150,000 settlement. The Seventh Circuit disagreed with both arguments. The circuit court noted that advice of counsel is not a free-standing defense. Advice of counsel may be relevant to the defendant's state of mind where it can be shown that the defendant strictly followed the advice of an attorney in the belief that the attorney was directing him in accord with the law. In this case, the defendant did not argue that his lawyer told him that hiding assets and lying about his actions were lawful, so the advice is not relevant to scienter. The court also held that the fact that he later sued his lawyer was not relevant to any element of the crimes charged.