                               In the

    United States Court of Appeals
                 For the Seventh Circuit
                     ____________________


Nos. 14-3664, 14-3725
OHIO NATIONAL LIFE ASSURANCE CORP.,
                        Plaintiff-Appellee / Cross-Appellant,

                                 v.

DOUGLAS W. DAVIS, et al.,
                                             Defendants-Appellants,
                                and
STEVEN EGBERT,
                                        Defendant / Cross-Appellee.
                     ____________________

       On appeals from the United States District Court for the
           Northern District of Illinois, Eastern Division.
            No. 10 C 2386 — Thomas M. Durkin, Judge.
                     ____________________

  ARGUED SEPTEMBER 16, 2015 — DECIDED OCTOBER 20, 2015
                ____________________

   Before BAUER, POSNER, and EASTERBROOK, Circuit Judges.
    POSNER, Circuit Judge. This diversity suit presents chal-
lenging issues of Illinois insurance law concerning what is
called “stranger-originated life insurance” (STOLI, as the co-
gnoscenti call it). The district court resolved the case at the
2                                       Nos. 14-3664, 14-3725


summary judgment stage in favor of the plaintiff, the insur-
ance company Ohio National, awarding it damages of
$726,000 (we round all figures to the nearest $1000) against
all the defendants but Egbert, whom the court awarded the
$91,000 that he had paid the company in premiums. The de-
fendants (other than Egbert) have appealed the denial of
their motion to vacate the summary judgment in favor of
Ohio National, and Ohio National has appealed the award
to Egbert.
    A preliminary matter: The defendants claim to have been
prejudiced by Ohio National’s violation of Local Rule 56.2 of
the Northern District of Illinois. The rule requires a party
moving for summary judgment against a pro se litigant to
inform his opponent of the procedures for complying with
Fed. R. Civ. P. 56. Timms v. Frank, 953 F.2d 281, 285–86 (7th
Cir. 1992). The defendants argue that the lack of notice pre-
vented them from mounting an effective defense to Ohio
National’s motion for summary judgment. The district court
disagreed, ruling that the defendants had not been preju-
diced because they’d eventually been able to submit the evi-
dence they thought necessary for an effective defense and
that evidence had not altered the judge’s belief that Ohio Na-
tional was entitled to summary judgment. The judge’s re-
sponse was proper.
   The facts are complicated (the briefs occupy 150 pages,
and the district judge’s commendably thorough two opin-
ions occupy 50 pages). Defendant Mavash Morady, an in-
surance agent, contracted with Ohio National to sell life in-
surance policies issued by it. Defendant Douglas Davis, a
lawyer formerly licensed in California, approached elderly
persons and persuaded them to become the nominal (in a
Nos. 14-3664, 14-3725                                         3


sense to be explained) buyers of the policies, with Mavash
Morady as the insurance agent. Davis promised to pay these
persons small amounts of money for obtaining policies, and
in exchange for the promises they filled out applications for
life insurance. A typical such buyer was Charles M. Bona-
parte, Sr. His application was accepted, the policy was is-
sued to him, and the defendants had him place the policy in
the Charles M. Bonaparte Sr. Irrevocable Life Insurance
Trust (which they created), designating the trust as the poli-
cy’s owner and beneficiary. This was an irrevocable trust,
with Davis as trustee. The defendants paid (in the name of
the trust) the premiums on the insurance policy; Bonaparte
paid nothing.
    Life insurance trusts are nothing new; they are a familiar
way of shielding the proceeds of a life insurance policy from
liability for estate tax. See Jon J. Gallo, “The Use of Life In-
surance in Estate Planning: A Guide to Planning and Draft-
ing—Part I,” 33 Real Property, Probate & Trust J. 685, 728–29
(1999). The wrinkle here is that the defendants were creating
trusts in the names of the insured in order to conceal from
Ohio National the fact that they rather than the insured con-
trolled the policy and that they planned to sell it as an in-
vestment. The need for concealment arose from the fact that
an insurance policy would be more valuable to an investor
the sooner the insured could be expected to die and there-
fore the proceeds of the policy realized, but by the same to-
ken more costly to the insurance company because it would
receive fewer premiums and have to pay the policy proceeds
sooner. In addition, controlling as they did the insurance
applications, the defendants could conceal some of the vul-
nerabilities of the (nominal) insured—make him appear
4                                       Nos. 14-3664, 14-3725


more prosperous, healthier, and in short likelier to live a
longer time than was realistic to expect.
   The defendants needed a real person to be the insured—
they targeted elderly people because of their diminished life
expectancies and African-Americans because the average life
expectancy of an African-American is shorter than that of
other Americans—whose death would trigger the death
benefits. The reason the insured had to be a real person is
that proof of death is necessary to collect life insurance pro-
ceeds. Presumably the defendants arranged with the in-
sureds to have the family of an insured give the defendants a
copy of the death certificate upon his or her death.
   By having a real person buy a policy insuring his life, the
defendants were trying to appear to comply with the legal
requirement, discussed below, that one who buys an insur-
ance policy must have an interest in the continued life of the
insured rather than in his early death. Ohio National pre-
sumably does some research to make sure its insureds are
real people, although it didn’t do enough to discover and
protect itself against what the defendants were doing.
    So the defendants had named Bonaparte’s trust the
“Charles M. Bonaparte Sr. Irrevocable Life Insurance Trust”
in order to hide the fact that Bonaparte’s life insurance poli-
cy was financed by a third party. For to the insurance com-
pany it looked like a normal insurance transaction—it’s
common for people to create life insurance trusts, with the
life-insurance policy as the trust’s asset because, as we said,
there are tax benefits. But the defendants in this case were
creating life-insurance trusts to hoodwink Ohio National.
Nos. 14-3664, 14-3725                                          5


    Although each trust was the beneficiary of an insurance
policy, the trust documents would list either members of the
insured’s family or the insured’s other trusts as the trust
beneficiaries, thereby also making them the beneficiaries of
the policy, since the policy was the trust’s asset. A few weeks
or months after the creation of each trust, however, Davis
would have the nominal buyer of the policy (such as Charles
Bonaparte) assign the beneficial interest in the trust (and
therefore in the policy) to a company owned by another de-
fendant, Paul Morady, Mavash Morady’s husband. Paul
would make the initial premium payments to Ohio National
but then resell the beneficial interest in the trust to an inves-
tor who hoped that the insured would die soon, for upon his
death the investor would obtain the proceeds of the policy
because he now was its beneficiary. Having acquired the
beneficial interest in the policy the investor would pay the
remaining premiums as they came due. (Defendant Steven
Egbert was one of the investors; at the end of this opinion we
discuss his special status in the case.)
    Ohio National would not have sold the policies to the
persons recruited by the defendants had it known that the
premiums would be paid or financed by an unrelated third
party (an investor) in the expectation that the policy would
be transferred to him. The company’s contracts with its
agents, such as Mavash Morady, required them to conform
to its business-practice advisories, which contained an “ab-
solute prohibition against participation in any type of pre-
mium financing scheme involving an unrelated third par-
ty”—an exact description of the defendants’ stranger-
originated life insurance scheme.
6                                         Nos. 14-3664, 14-3725


    An insurance policy on a person’s life generally is void if
the person did not consent to the issuance of the policy. See
Bajwa v. Metropolitan Life Ins. Co., 804 N.E.2d 519, 526–29 (Ill.
2004). For remember that the beneficiary of a life insurance
policy has a financial interest in the insured’s dying as soon
as possible, not only because this minimizes the amount of
premiums the beneficiary has to pay, see Susan Lorde Mar-
tin, “Betting on the Lives of Strangers: Life Settlements,
STOLI, and Securitization,” 13 U. Pa. J. Business Law 173,
173–74 (2010), but also because of the time value of money—
a given amount of money is worth more if received today
than if received a year from now, because if received today it
can be invested and as a result it probably will be worth
more in a year. So the requirement of consent protects the
prospective insured; he is unlikely to consent to someone
becoming the beneficiary if he suspects that person of want-
ing to shorten his life.
    Along with the potential for foul play if a person is al-
lowed to have his life insured by whoever wants to own a
policy on his life, courts are concerned with the unseemli-
ness of gambling on when a person will die. Because of both
concerns, one can’t take out a life insurance policy on a per-
son unless one has an interest, financial or otherwise, in the
life of the insured rather than in his early death. Grigsby v.
Russell, 222 U.S. 149, 155 (1911) (Holmes, J.).
   Although the defendants did not attempt to off the in-
sureds, they did target as nominal buyers individuals who
they thought would have short life expectancies, and, as we
said, made them appear to have better survival prospects
than they did. Paul Morady testified that he “niched in Afri-
can-Americans” and that “African-Americans have … short-
Nos. 14-3664, 14-3725                                          7


er life expectancy than white Americans; therefore, the sale
of their beneficial interest should be more attractive” to in-
vestors. In addition, the defendants gave the insurance ap-
plications, including health information about the insureds,
to prospective investors (prospective buyers of the beneficial
interests in the insurance policies), thus enabling potential
investors to calculate the expected value of such an invest-
ment.
    Despite the fact that purchasers of a life insurance policy
as an investment also have a financial stake in the insured’s
early death (the stake is at its maximum if the insured dies
before the investor pays his first premium), the law allows
an investor to purchase the beneficial interest in an existing
policy on the life of the insured. Hawley v. Aetna Life Ins. Co.,
125 N.E. 707, 708–09 (Ill. 1919). There are social benefits,
thought to exceed the social costs discussed above, to these
transactions. The owner of the policy may have a desperate
need for money; the policy may be his only substantial asset;
and if he’s elderly or in very poor health the present value of
that asset may be substantial and he may have a pressing in-
terest in being able to cash it in by selling the beneficial in-
terest. And provided that the procurer of the policy has an
insurable interest, he can designate as the beneficiary some-
one who does not have an insurable interest. Bajwa v. Metro-
politan Life Ins. Co., 776 N.E.2d 609, 617 (Ill. App. 2002), af-
firmed (as modified on other grounds), 804 N.E.2d 519 (Ill.
2004).
    Under the terms of the policies in this case, the owners
alone had the right to change the beneficiaries. Cf. 4 Steven
Plitt et al., Couch on Insurance § 60:15 (3d ed. rev. 2015)
(“when the insured is not the owner of the policy, the in-
8                                        Nos. 14-3664, 14-3725


sured has no power to change the beneficiary as that power
resides in the owner”). The owners were the irrevocable life
insurance trusts, with Davis managing the policies as the
trustee. Although family members, or other trusts, of the in-
sureds were listed as the trust beneficiaries, the beneficial
interests were transferred to Paul Morady’s company within
a few months of the creation of the trusts, through contracts
prepared by Davis and signed by the insureds and the trust
beneficiaries. The insureds merely lent their names to the in-
surance applications, in exchange for modest compensation,
and the defendants forthwith transferred control over (effec-
tively ownership of) the policies to themselves. The defend-
ants, who had no interest in the insureds’ lives (as distinct
from their deaths), initiated, paid for, and controlled the pol-
icies from the outset.
    While “a man who purchased insurance on his own life
could validly assign or sell the policy to a person lacking an
insurable interest in the insured’s life, … ‘cases in which a
person having an interest lends himself to one without any,
as a cloak to what is, in its inception, a wager, have no simi-
larity to those where an honest contract is sold in good faith’
to a stranger.” PHL Variable Ins. Co. v. Bank of Utah, 780 F.3d
863, 867–68 (8th Cir. 2015) (emphasis in original), quoting
Grigsby v. Russell, supra, 222 U.S. at 156. Our case is not one
in which “a policy was procured in good faith by the person
himself to be assigned thereafter,” but instead one “in which
the policy was procured by a person who had no insurable
interest in the life of the person insured, thus making [it] a
wager contract.” Hawley v. Aetna Life Ins. Co., supra, 125 N.E.
at 708.
Nos. 14-3664, 14-3725                                         9


    It’s true that PHL (decided under Minnesota law) held
that a stranger-owned life insurance policy was not void for
lack of an insurable interest. But there the resemblance be-
tween that case and this one ends. In PHL a man had bought
a $5 million insurance policy on his own life with the pro-
ceeds of a premium-financing loan that he obtained from a
bank with the intention of later selling the policy to an inves-
tor. He owned the policy for two years, at the end of which
period, not having sold it, he surrendered it to repay the
loan. Thus the purchase of the policy was not “a mere cover
for taking out insurance in the beginning in favor of one
without [an] insurable interest,” PHL Variable Ins. Co. v. Bank
of Utah, supra, 780 F.3d at 865–66, 869, quoting Peel v. Reibel,
286 N.W. 345, 346 (Minn. 1939), because the insured owned
and controlled the policy before attempting to sell it. The in-
sureds’ family members in the present case retained benefi-
cial interests in the policies only briefly and never controlled
the trusts. The insureds were the defendants’ puppets and
the policies were bets by strangers on the insureds’ longevi-
ty.
    Consistent with the authorities cited above, the common
law of Illinois, which furnishes the rule of decision in this
case, has for at least a century and a half prohibited the pur-
chase of an insurance policy by a person who has no interest
in the survival of the insured. See Guardian Mutual Life Ins.
Co. v. Hogan, 80 Ill. 35, 44–46 (1875). Arrangements like the
defendants’ STOLI scheme are now prohibited by statute as
well, see 215 ILCS 159/50(a), 159/5, though these provisions,
enacted in 2009, were not yet in effect when the policies chal-
lenged in this case were issued.
10                                       Nos. 14-3664, 14-3725


    The district court found that Mavash Morady’s conduct
constituted fraud and a breach of her contract with Ohio Na-
tional and awarded the insurance company as damages the
$120,000 that she had received as commissions as an insur-
ance agent for the company. She admitted knowing that the
premiums on the disputed policies would be paid by her
husband, who had no interest in the continued life of the in-
sureds and planned to sell the policies to investors. Such
premium-financing arrangements were forbidden by her
contract with Ohio National because as we pointed out earli-
er the defendants’ scheme hurt the company. Mavash Mora-
dy argues that she wasn’t responsible for the false state-
ments on the applications for the insurance policies—rather,
one of her employees communicated with the insureds and
completed the forms. Yet her signature appears on the
forms, which moreover include information that she knew
was false—for example, statements that she knew the in-
sured persons. She knew none of them.
    Mavash Morady was only one defendant, and the dam-
ages awarded Ohio National were not limited to her fraudu-
lent conduct, but were based more broadly on the tort of civ-
il conspiracy, which is committed “when two or more peo-
ple combine to accomplish, through concerted action, either
an unlawful act or a lawful act in an unlawful manner.” Mul-
tiut Corp. v. Draiman, 834 N.E.2d 43, 51 (Ill. App. 2005); see
also Adcock v. Brakegate, Ltd., 645 N.E.2d 888, 894 (Ill. 1994).
The defendants conspired to violate Illinois’ common law
prohibition against insurance contracts procured by persons
who don’t have an insurable interest. The defendants argue
that they didn’t know that such contracts are illegal. That is
hard to believe but in any event ignorance of the law is no
Nos. 14-3664, 14-3725                                       11


defense (with some exceptions, none applicable to this case
however).
     Ohio National was the target of the conspiracy. The de-
fendants concealed the fact that they, rather than the in-
sureds, controlled the insurance policies from the outset by
listing the irrevocable trusts as the owners, and that they
would use their control to transfer income from the insur-
ance company to themselves and their investors by acceler-
ating the receipt of insurance proceeds by their choice of the
insureds and by false representations of the insureds’ life
expectancy. The net loss that the scheme ended up causing
Ohio National (beyond the commissions paid to Mavash
Morady) consisted of the more than $605,000 that the com-
pany incurred in litigation expenses to void the policies in
order to thwart efforts by the investors to collect policy pro-
ceeds upon the death of the insureds (persons to whom Ohio
National would never have sold policies at normal premi-
ums had it known in whose hands the ownership of the pol-
icies would end up). The total death benefits specified in the
illegal policies amounted to $2.8 million, and Ohio National
faced the prospect of being sued for those benefits when the
persons insured by the policies died. By voiding the policies
the insurance company accelerated its defense against the
claims that the investors were bound to make when the in-
sureds died.
   Of course generally the victorious party to a lawsuit can’t
charge his litigation expenses to the loser. But that is not
what Ohio National is doing. It is seeking reimbursement of
the expenses it has incurred in this litigation in order to
avoid future litigation over the death benefits in the policies
that it was fraudulently induced to issue. “[W]here the
12                                        Nos. 14-3664, 14-3725


wrongful acts of a defendant involve the plaintiff in litiga-
tion with third parties or place him in such relation with
others as to make it necessary to incur expense to protect his
interest, the plaintiff can then recover damages against such
wrongdoer, measured by the reasonable expenses of such
litigation, including attorney fees.” Ritter v. Ritter, 46 N.E.2d
41, 44 (Ill. 1943); see also National Wrecking Co. v. Coleman,
487 N.E.2d 1164, 1166 (Ill. App. 1985); Sorenson v. Fio Rito,
413 N.E.2d 47, 51–52 (Ill. App. 1980); cf. Nalivaika v. Murphy,
458 N.E.2d 995, 997 (Ill. App. 1983); Fednav International Ltd.
v. Continental Ins. Co., 624 F.3d 834, 840 (7th Cir. 2010); Re-
statement (Second) of Torts § 914(2) (1979).
    It’s true that Ohio National hasn’t been forced into litiga-
tion with those other parties, and that under Illinois law
“where an action based on the same wrongful act has been
prosecuted by the plaintiff against the defendant to a suc-
cessful issue, he can not in a subsequent action recover, as
damages, his costs and expenses in the former action.” Ritter
v. Ritter, supra, 46 N.E.2d at 44. But the exception carved by
Ritter in the passage we quoted earlier covers this case. The
defendants’ misconduct placed Ohio National in the position
of potentially having to litigate with the purchasers of the
insurance policies upon the death of the insureds, and the
expenses it incurred in the present suit to avoid such litiga-
tion by voiding the policies were in lieu of the future litiga-
tion that it would otherwise have had to engage in at con-
siderable expense. It paid in advance, as it were, the expens-
es “in litigation with third parties … necessary to … protect
[its] interest,” to quote from the Ritter opinion.
   So Ohio National gets its attorney’s fees but also gets to
keep the premiums paid by the defendants (except Egbert,
Nos. 14-3664, 14-3725                                        13


as we’ll discuss) on the voided policies and as a result ends
up with more money than if these contracts had never exist-
ed. The amount the defendants paid is in dispute. The de-
fendants say they paid $438,000 in premiums on the disput-
ed policies; Ohio National says they paid $105,000; but
whatever the amount, the company is entitled to retain the
premiums along with the attorney’s fees. Being to blame for
the illegal contracts the defendants have no right to recoup
the premiums they paid to obtain them; allowing recoup-
ment would, by reducing the cost, increase the likelihood of
unlawful activity.
    One issue remains to be discussed. Steven Egbert, a de-
fendant but not one of the conspirators, had purchased the
beneficial interest in one of the stranger-originated life in-
surance policies as an investment, and to preserve his bene-
ficial interest until the death of the insured (that is, to pre-
vent the insurance policy from lapsing) had paid the re-
quired premiums, amounting to $91,000, to Ohio National.
He filed a cross-motion for summary judgment asking the
district court to declare the policy valid or in the alternative
to order the insurance company to return his premiums. The
district judge complied with the latter request. The premi-
ums were being held by the district court in escrow, and so
the judge simply ordered the premiums sought by Egbert
distributed to him from the escrow.
   The company asks us to reverse the judge’s order, argu-
ing that Egbert knew or should have known that he had
bought an interest in a void contract. Generally when an il-
legal contract is voided, the parties “will be left where they
have placed themselves with no recovery of the money paid
for illegal services.” Gamboa v. Alvarado, 941 N.E.2d 1012,
14                                        Nos. 14-3664, 14-3725


1017 (Ill. App. 2011), quoting Ransburg v. Haase, 586 N.E.2d
1295, 1298 (Ill. App. 1992). But there is an exception for the
case in which the party that made the payments is not to
blame for the illegality. Id. There is no evidence that Egbert
knew the policy was void and, as we’ve said, the assignment
of an insurance policy to an investor is not itself unlawful.
Had he known it was void he would not have paid the pre-
miums. They were intended to compensate the company for
having to pay the death benefit to the policy’s beneficiary
(Egbert) when the insured died. Since the policy was void
from the outset through no fault of his, the premiums were
not an offset against the proceeds to the policy’s beneficiary,
because there would be no proceeds. Retention of the pre-
miums would thus have been a windfall for Ohio National
to which it had no entitlement. See Seaback v. Metropolitan
Life Ins. Co., 113 N.E. 862, 864 (Ill. 1916) (“when a policy of
insurance never attaches and no risk is assumed, the insured
may recover back the premiums unless he has been guilty of
fraud or the contract is illegal, and he is in pari delicto”). Eg-
bert paid substantial premiums and got nothing in return.
He caused no harm, as he was not involved in the conspira-
cy. The company would be unjustly enriched if allowed to
keep his $91,000.
     The entire judgment of the district court is therefore
                                                      AFFIRMED.
