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Segal appeals conviction again

Former Near North owner seeks to have fraud ruling overturned

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Segal appeals conviction again

CHICAGO—Michael Segal, the former Near North National Group Inc. owner convicted of fraud in 2004, is seeking a rehearing of his previously unsuccessful attempt to overturn his conviction.

Mr. Segal recently filed for a hearing of his case by the full panel of the 7th U.S. Circuit Court of Appeals after a three-judge panel of the same court turned down his previous appeal.

Mr. Segal, who was convicted in connection with charges that he looted Near North Insurance Brokerage Inc.'s premium fund trust account of $35 million for his own and his company's use, argues that the appeals panel's May 3 decision conflicts with the U.S. Supreme Court's 2010 decision on the application of the “honest services” provision in a federal fraud law in ruling on the case of former Enron Corp. CEO Jeffrey Skilling.

In that case, the Supreme Court ruled that prosecutions under the “honest services” provision of the fraud statute—which essentially involves fiduciary duty—should apply only to schemes involving bribes and kickbacks.

The appeals panel ruled that while there was no evidence to suggest that Mr. Segal was involved in a bribery or kickback scheme, there was an underlying fraud, and the jury “would—and most certainly did—convict Segal for money/property fraud, irrespective of the honest services charge.”

According to Mr. Segal's latest filing, the 2010 ruling in Skilling vs. the United States means that the appeals panel “converted the violation of Illinois insurance regulations which, after Skilling, should not ever be an indictable offense, to money/property fraud without any evidence that Segal lied to any insurance client of Near North or any insurance company that provided coverage for Near North's clients.” Violation of state insurance regulations is not a federal offense, the filing states.

In a statement, Mr. Segal, who is serving a 10-year sentence in federal prison in Oxford, Wis., said “my conviction is about compliance with an obscure and esoteric Illinois insurance regulation that provides for no criminal penalty. The only documented peer review forensic accounting in the record proves that there never was any use of other people's money.... Had the Supreme Court decided Skilling before my prosecution, I could never have been convicted.”