United States of America v. Leon Fadden

A grand jury returned a three-count

indictment against Leon Fadden for conduct related to bankruptcy

fraud. Before trial, Fadden proposed a theory-of-defense

jury instruction for Counts 1 and 2. The district court

rejected that instruction, instead reciting the Seventh Circuit

Pattern Instructions. A jury convicted Fadden of all three

counts. Fadden now appeals his convictions on Counts 1 and

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2, arguing that the district court denied him a fair trial by refusing

to read the jury his theory-of-defense instructions. We

affirm.

I. BACKGROUND

Leon Fadden believed that the Internal Revenue Code did

not apply to him. From 2005 to 2013, he earned over $100,000

per year but did not submit tax returns. After an audit, the IRS

determined that Fadden owed back taxes and began to garnish

his wages.

Facing further levies on his paycheck, Fadden filed for

bankruptcy. This filing triggered an automatic stay that prevented

the IRS from collecting during his bankruptcy case.

The following month, Fadden filed bankruptcy schedules—

forms in which the debtor lists financial information such as

debts, assets, income, and expenses. There, Fadden claimed

that he had no legal, equitable, or future interest in any real

property. He also claimed that he had no interest in any decedent’s

life insurance policy or estate.

But Fadden’s schedules did not tell the whole story. Before

he filed for bankruptcy, Fadden knew that he would receive

proceeds from the sale of his mother’s home—at the time

listed by the executor of his mother’s estate for $525,000. And

Fadden knew that he would receive thousands of dollars as a

beneficiary on two of his mother’s life insurance policies.

Three days before Fadden was scheduled to meet with the

bankruptcy trustee—and more than a week after filing his

schedules—Fadden spoke to a paralegal in the U.S. Trustee’s

Office. During that conversation, Fadden mentioned for the

first time that he was entitled to an inheritance and asked to

postpone his bankruptcy. But when Fadden finally met with

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his bankruptcy trustee and an attorney for the U.S. Trustee, he

confirmed that his schedules were accurate and denied receiving

an inheritance. He also denied having spoken to the

paralegal at the U.S. Trustee’s Office.

A grand jury returned a three-count indictment against

Fadden for his failure to report these assets and for his statements

during the meeting. Count 1 charged him with violating

18 U.S.C. § 152(1) by concealing assets in bankruptcy.

Count 2 charged him with violating 18 U.S.C. § 152(3) by making

false declarations on his bankruptcy schedules and statement

of financial affairs. Count 3 charged him with violating

18 U.S.C. § 1001(a)(2) by making false statements during the

investigation of his bankruptcy.

Counts 1 and 2 required the government to prove that

Fadden acted with an intent to deceive. At trial, Fadden

planned to argue that the government hadn’t shown that he

acted with that intent. To bolster this strategy, Fadden proposed

the following theory-of-defense instruction:

It is the theory of the defense that Mr. Fadden

did not fail to disclose his inheritance on the

schedules for the purpose of deceiving the

bankruptcy trustee. Rather, his omissions were

part of his continued failures to abide by the

particulars demanded in the bankruptcy filings

and his course of conduct throughout the bankruptcy,

which is inconsistent with an intent to

deceive. If you find that Fadden’s omissions as

charged in counts 1 and 2 were not made with

an intent to deceive you must find him not

guilty of those counts.

(R. 110 at 5.)

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The court rejected Fadden’s instruction and instead recited

the pattern instructions for the charged offenses. See Pattern

Criminal Jury Instructions of the Seventh Circuit, 134, 136, 272

(2012 ed., rev. 2013). For the intent component of Count 1, the

court instructed that “the government must prove … [t]he defendant

knowingly concealed [assets] … [and] acted fraudulently,

that is with the intent to deceive any creditor or the

bankruptcy judge.” (R. 124, Trial Tr., at 136.) As to Count 2,

the court told the jury that “the government must prove …

[t]he defendant made the declaration, certification or verification

under penalty of perjury knowingly and with the intent

to deceive any creditor, the trustee or the bankruptcy judge.”

(Id. at 137.) In addition to delivering the elements of Counts 1

and 2—both of which included the requirement that the government

prove “intent to deceive”—the court told the jurors

that “knowingly means that the defendant realized what he

was doing and was aware of the nature of his conduct and did

not act through ignorance, mistake or accident.” (Id. at 139–

140.)

Throughout the trial, Fadden insisted that it was sloppiness

rather than an intent to deceive that led him to omit assets

from his schedules. During his opening statement, Fadden’s

appointed counsel argued that Fadden is a tax cheat and

that he doesn’t believe he has to pay taxes. Counsel then argued

that Fadden was determined to use the bankruptcy proceeding’s

automatic stay as a lifeline while he collected his inheritance.

Fadden contended that he did so carelessly: he got

his instructions from Google and did none of the things he

needed to do when filing for bankruptcy. Fadden explained

that “the heart of this case … is whether … [he] had an intent

to deceive.” (R. 123, Trial Tr., at 28.) And he argued that the

inconsistencies between his answers on his bankruptcy filings

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and his interactions with government officials demonstrate

that he did not have that intent.

Fadden returned to his theory-of-defense at closing. He related

what he saw as the key details—his filing, his receipt of

the inheritance, his failure to follow any of the requirements

of the bankruptcy proceeding, and his conversations with

government officials. Fadden told the jury that those details

showed that “there just wasn’t an intent to deceive.” (R. 124,

Trial Tr., at 169.) After closing arguments, the court read the

jury its instructions. The jury found Fadden guilty of each

count.

On appeal, Fadden challenges the district court’s denial of

his theory-of-defense instruction as to counts 1 and 2. This,

Fadden argues, denied him a fair trial. We find that Fadden

was not entitled to this instruction, so we affirm.

II. ANALYSIS

In general, a defendant is entitled to a theory-of-defense

instruction if: the instruction represents a correct statement of

the law; the evidence supports the instruction; the theory of

defense is not part of the charge to the jury; and the denial of

the instruction would deprive the defendant a fair trial. E.g.,

United States v. Jackson, 598 F.3d 340, 349 (7th Cir. 2010). We

review the district court’s denial of Fadden’s instruction de

novo. United States v. Canady, 578 F.3d 665, 672 (7th Cir. 2009).

In part, Fadden’s instruction fails because it restates the district

court’s charge. To the extent that it does not, it misstates

the law. Therefore, the district court correctly concluded that

Fadden was not entitled to his theory-of-defense instruction.

Fadden argues that his statement of law appears in the final

sentence of his proposed instructions—“If you find that

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Fadden’s omissions as charged in Counts 1 and 2 were not

made with an intent to deceive you must find him not guilty

of those counts.” In essence, this would tell jurors not to find

Fadden guilty if they found that he acted without an intent to

deceive. While that statement of the law is accurate, the court

already told the jury all it needed to know. On both counts,

the court instructed the jury that the government needed to

demonstrate that Fadden acted with “intent to deceive.” A defendant

is not entitled to the logical equivalent of an instruction

the court provides. See Canady, 578 F.3d at 672.

To the extent that Fadden’s instruction goes beyond the

district court’s, it misstates the law. Fadden also asked the district

court to instruct the jury that his “omissions were part of

his continued failures to abide by the particulars demanded

in the bankruptcy filings and his course of conduct throughout

the bankruptcy, which is inconsistent with an intent to deceive.”

(R. 110 at 5 (emphasis added).) Yet finding that Fadden

was careless and that he acted with an intent to deceive would

have been entirely consistent with the statute. Instructing the

jury otherwise, as Fadden requested, would have misstated

the law.

III. CONCLUSION

The jury heard Fadden’s defense through the court’s

charge and during opening and closing arguments. It wasn’t

persuaded. Fadden’s argument that the district court erroneously

denied his theory-of-defense instruction falls short as

well. In part, Fadden’s instruction fails because it did not add

any information beyond the court’s instruction. And the portion

that went beyond the court’s instruction misstates the

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law. Fadden concedes that he lost a fair fight on Count 3. The

same is true for Counts 1 and 2.

AFFIRMED.