Justia White Collar Crime Opinion Summaries

The Second Circuit affirmed the district court's dismissal of LBE's action alleging claims under the Sherman Act and the Racketeer Influenced and Corrupt Organizations Act (RICO). LBE alleged that Barbri and law schools entered into agreements whereby Barbri donates money to the schools, bribes their administrators, and hires their faculty to teach bar review courses. LBE further alleged that, in exchange, the law school gives Barbri direct access to promote and sell its products on campus.The court adopted the district court's well-reasoned and thorough analysis of LBE's allegations and held that the district court properly dismissed the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a plausible claim of relief. The district court concluded that internal contradictions and conclusory assertions in the complaint did not plausibly support LBE's claim that Barbri and the law schools conspired to enable Barbri to gain a monopoly. View "LLM Bar Exam, LLC v. Barbri, Inc." on Justia Law

Appellant Rainforest Chocolate, LLC appealed the grant of summary judgment motion in favor of appellee Sentinel Insurance Company, Ltd. Rainforest was insured under a business-owner policy offered by Sentinel. In May 2016, Rainforest’s employee received an email purporting to be from his manager. The email directed the employee to transfer $19,875 to a specified outside bank account through an electronic-funds transfer. Unbeknownst to the employee, an unknown individual had gained control of the manager’s email account and sent the email. The employee electronically transferred the money. Shortly thereafter when Rainforest learned that the manager had not sent the email, it contacted its bank, which froze its account and limited the loss to $10,261.36. Rainforest reported the loss to Sentinel. In a series of letters exchanged concerning coverage for the loss, Rainforest claimed the loss should be covered under provisions of the policy covering losses due to Forgery, for Forged or Altered Instruments, and for losses resulting from Computer Fraud. Sentinel denied coverage. In a continuing attempt to obtain coverage for the loss, Rainforest also claimed coverage under a provision of the policy for the loss of Money or Securities by theft. Sentinel again denied coverage, primarily relying on an exclusion for physical loss or physical damage caused by or resulting from False Pretense that concerned “voluntary parting” of the property—the False Pretense Exclusion. Finding certain terms in the policy at issue were ambiguous, the Vermont Supreme Court reversed summary judgment and remanded for the trial court to consider in the first instance whether other provisions in the policy could provide coverage for Rainforest's loss. View "Rainforest Chocolate, LLC v. Sentinel Insurance Company, Ltd." on Justia Law

Baek purchased property through his LLC and obtained financing from Labe Bank; Frank was the loan officer. Frank later moved to NCB and asked Baek to move his business, representing that NCB would provide a larger construction loan at a lower rate. In 2006, Baek entered a construction loan with NCB for $11,750,000. Baek executed a loan agreement, mortgage, promissory note, and commercial guaranty. Baek’s wife did not sign the guaranty at closing. NCB maintains that, 18 months after closing, she signed a guaranty. One loan modification agreement bears her signature but Baek‐Lee contends that it was forged and that she was out of the country on the signing date. NCB repeatedly demanded additional collateral and refused to disburse funds to contractors. The Baeks claim that NCB frustrated Baek’s efforts to comply with its demands. In 2010, NCB filed state suits for foreclosure and on the guaranty. The Baeks filed affirmative defenses and a counterclaim, then filed a breach of contract and fraud suit against NCB. The Baeks later filed a federal Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1964(c), suit alleging fraud. The state court granted NCB summary judgment. The federal district court dismissed, citing res judicata. The Seventh Circuit affirmed. There has been a final judgment on the merits with the same parties, in state court, on claims arising from a single group of operative facts. View "Baek v. Clausen" on Justia Law

Metro, a managing clerk at a New York City law firm, engaged in a five-year scheme in which he disclosed material nonpublic information concerning corporate transactions to his friend Tamayo. Tamayo told his stockbroker, Eydelman, who made trades for Tamayo, himself, his family, his friends, and other clients. Metro did not hold the involved stocks himself and did not collect proceeds but relied on Tamayo to reinvest the proceeds from their unlawful trades in future insider trading. During the government’s investigation, Tamayo promptly admitted his role in the scheme and cooperated with the government. The insider trading based on Metro’s tips resulted in illicit gains of $5,673,682. The court attributed that entire sum to Metro in determining his 46-month sentence after Metro pled guilty to conspiracy to violate securities laws, 18 U.S.C. 371, and insider trading, 15 U.S.C. 78j(b) and 78ff. Metro denies being aware of Eydelman’s existence until one year after he relayed his last tip to Tamayo, and contends that he never intended any of the tips to be passed to a broker or any other third party. The Third Circuit vacated the sentence. The district court failed to make sufficient factual findings to support the attribution of the full $5.6 million to Metro and gave too broad a meaning to the phrase “acting in concert.” View "United States v. Metro" on Justia Law

Plaintiffs, 92 investors in a Ponzi scheme called the British Lending Program (BLP), filed suit against PNC, alleging, among other things, (1) violations of Missouri's Uniform Fiduciaries Law (UFL); (2) aiding and abetting the breach of fiduciary duties; (3) conspiracy to breach fiduciary duties; and (4) conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962(d). Specifically, plaintiffs alleged that PNC's predecessor, Allegiant, conspired with and aided Martin Sigillito in his scheme to defraud investors when it served as custodian for the self-directed IRAs of those who chose to invest in the BLP at its inception. The court granted summary judgment to PNC, concluding that even if the court overlooked plaintiffs' failure to cite any legal authorities in support of their RICO and common-law claims, those claims fail on the merits. In this case, the evidence is insufficient to establish a reasonable fact dispute as to whether Allegiant, PNC's predecessor, objectively manifested an agreement to participate in criminal activity with Sigillito, had a meeting of the minds with Sigillito, or substantially assisted or encouraged Sigillito's conduct. The court also rejected plaintiffs' UFL claim, concluding that no evidence exists that Allegiant processed any transaction with actual knowledge that Sigillito was breaching his fiduciary duties, and the evidence fails to show that Allegiant acted in bad faith. Accordingly, the court affirmed the judgment. View "Aguilar v. PNC Bank, N.A." on Justia Law

Peterson, a Madison Wisconsin entrepreneur, owned a polyurethane scrap-foam material company and a development company, with Shapiro and Spahr. Peterson made unauthorized intercompany loans and used corporate funds to pay off his personal gambling debts. Eventually all of his businesses failed, the companies defaulted, and federal agents investigated. Peterson was indicted on 13 counts: bank fraud, making false statements to banks, money laundering, and pension theft. The judge entered judgment of acquittal on two counts and at sentencing imposed a within-guidelines prison term of 84 months on the remaining six. The Seventh Circuit rejected claims of evidentiary and instructional error and his arguments for judgment of acquittal or a new trial as having no merit; the evidence was easily sufficient to support the jury’s verdict. The court also upheld the joinder of the pension-theft count for trial with the others. The court vacated the sentence. The judge correctly calculated the gross receipts Peterson derived from his fraud; because he was the sole perpetrator, all proceeds of the fraud were properly attributed to him. But Peterson repaid in full a $300,000 wire transfer before detection of his fraud, so that sum should not have been included in the total loss amount. View "United States v. Peterson" on Justia Law

Defendants were in the business of processing and selling industrial wood products and maintained a large inventory at numerous distribution centers throughout the United States. In 2002, defendants and plaintiffs entered into an asset purchase agreement (PA), which provided for the merger of the two companies, changes in personnel, and until plaintiffs' purchase of an inventory unit, plaintiffs, for a fee, would provide defendants with "all management and administrative services associated with purchasing, processing, and maintaining [defendants'] inventory." In 2003, plaintiffs' books were audited by a certified public accountant, Schmidt. Schmidt found unusual entries in the books and many entries that did not appear to be related to normal inventory activity. After Schmidt completed his work on defendants' books, the bookkeeper who was employed by plaintiffs but was providing inventory-related services to defendants, was discovered to have embezzled at least $360,000 from defendants' accounts. Three legal actions (including this case) ensued. The issue on review in this case was whether the trial court erred in denying defendants' motion for a new trial under ORCP 64 (B)(4),2 based on the asserted ground of newly discovered evidence. The trial court determined that defendants' proffered evidence did not satisfy the legal standard for granting a new trial under that rule. The Court of Appeals reversed, concluding that defendants' post-trial proffer qualified as newly discovered evidence, that the evidence was material for defendants, and that defendants exercised reasonable diligence in attempting to produce the evidence at trial. Because the Supreme Court concluded that, irrespective of whether the proffered evidence was newly discovered and material for defendants, defendants failed to exercise reasonable diligence to produce the evidence at trial. Ultimately, the Court concluded the trial court did not err in denying defendants' motion for a new trial. View "Greenwood Products v. Greenwood Forest Products" on Justia Law

H & Q and the Doll Companies owned membership units of Double D Excavating, LLC. The Doll Companies opened account 121224 in the name of "Double D Excavating" and deposited a check payable to the LLC and opened account 119992 in the name of David Doll. The Doll Companies deposited into Account 121224 multiple payments that LLC customers made to the LLC and then transferred funds from Account 121224 to Account 119992, commingled funds from Account 119992 with funds belonging to the Doll Companies, and used those funds to pay Doll Companies' expenses. H&Q claims that the Doll Companies failed to give notice or obtain consent for any of those activities and represented to H&Q that the LLC was struggling financially and needed additional financial assistance. The Doll Companies contributed a portion of the funds from Account 119992 back to the LLC and, according to H&Q, represented to H&Q that these were fresh capital contributions. H&Q also invested additional capital. After discovering the Doll Companies' alleged conduct, H&Q filed suit asserting state law claims and claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1961. The Eighth Circuit affirmed dismissal, agreeing that the complaint did not sufficiently allege any racketeering activity. View "H & Q Props, Inc. v. Doll" on Justia Law

Stonebridge, an engraver of promotional pocket knives, sued its former distributor Cutting-Edge and its members; competitor knife engraver TaylorMade and its sole member and manager Taylor, a former Stonebridge employee; and Massey, a TaylorMade employee and former Stonebridge employee, arising from Massey’s copying Stonebridge’s computer files and using those files to solicit business from Stonebridge customers. Stonebridge brought claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1961-1968; the Arkansas Deceptive Trade Practices Act (ADTPA), Ark. Code 4-88-101; and Arkansas common law. The district court partially found for Stonebridge on its fraud and conversion claims, dismissed the remaining eight claims, and denied the parties’ motions for attorney fees. The Eighth Circuit upheld: the finding that defendants converted the copies of certain files created by Stonebridge; an award of damages for unjust enrichment; a finding Stonebridge did not establish the existence of a business expectancy under Arkansas law; a finding Cutting-Edge fraudulently induced Stonebridge to send sample knives while intending to employ TaylorMade as its engraver on the orders placed as a result of seeing the samples; and dismissal of the RICO and ADTPA claims. View "Stonebridge Collection, Inc. v. Carmichael" on Justia Law

KBP is a Polish entity, formed to develop a business park near Krakow. Plaintiffs are KBP shareholders and defendants are either current or former shareholders. The plaintiffs alleged a fraudulent scheme to loot the company by payments for services never performed and sought relief under RICO, 18 U.S.C. 1962(a)–(d), with supplemental state claims for fraud, conversion, breach of fiduciary duty, tortious interference with prospective business advantage, civil conspiracy, violation of the Illinois Uniform Fraudulent Transfer Act, and for an accounting. The defendants allegedly invested some of their proceeds in a Chicago subdivision. Polish authorities charged the defendants for crimes related to KBP. In the RICO civil suit, the defendants’ abuse of the discovery process resulted in several sanctions rulings; when the plaintiffs objected to the magistrate’s relatively lenient decisions, the district judge found the sanctions too light and imposed more onerous ones, including contempt and an order barring the defendants from using certain evidence, and ultimately a $413,000,000 default judgment. The Seventh Circuit affirmed.View "Domanus v. Lewicki" on Justia Law