Justia White Collar Crime Opinion Summaries

Defendant Money & More Inc. (M&M) allegedly maintained and operated a Ponzi scheme. Pursuant to a petition filed by the State, the district court issued a temporary restraining order freezing Defendants' assets and later entered a preliminary injunction. Several hundred individuals and dozens of corporations that made fraudulent investments formed Money & More Investors LLC (MMI) and assigned to it their rights, interests, and claims against Defendants, who included the individuals comprising M&M. After reaching a settlement agreement with Defendants, MMI filed a motion to intervene in the State's preservation action. The district court granted MMI both intervention as of right under Utah R. Civ. P. 24(a) and, in the alternative, permissive intervention under Utah R. Civ. P. 24(b). The Supreme Court affirmed the grant of intervention as of right, holding that MMI met all the elements of rule 24(a) where (1) MMI's motion to intervene was timely; (2) MMI had a direct interest relating to the property; (3) MMI sufficiently established that the original parties to the suit would inadequately represent MMI's interests; and (4) MMI would be bound by the judgment.View "State v. Bosh" on Justia Law

In 2005, Weight Watchers discovered that its bookkeeper, Dianne Belk, had embezzled nearly $1,000,000 from the business over a six-year period. Belk embezzled the money by writing checks to herself from Weight Watchers accounts. She concealed her writing of unauthorized checks by inputting legitimate vendors' names in the computerized bookkeeping system as the ostensible payees. However, Belk would type her name as payee on the paper checks. Belk then would cash the checks at local banks and casinos, including the Rainbow Casino, and she often would gamble with the embezzled money. Belk reported her winnings to the Internal Revenue Service via W-2G forms provided by the casino, and she paid taxes on those winnings. According to the complaint, Belk lost roughly $240,000 of the stolen funds to Rainbow Casino. More than three years after first learning of Belk's embezzlement activities, Weight Watchers filed suit against Belk, Robert Belk, Jr. (Dianne's husband), Rainbow Casino-Vicksburg Partnership, L.P., Bally Technologies Inc. (the casino's management company),and five John Doe defendants. Weight Watchers' claims against Rainbow Casino and Bally Technologies were based on fraud, unjust enrichment, conversion, and negligence. Rainbow moved for summary judgment, arguing that the three-year statute of limitations had begun to run in 2005 when Weight Watchers first learned that Belk had been cashing unauthorized checks at the casino. Rainbow also argued, in the alternative, that summary judgment was appropriate because the casino was a holder in due course and that it did not have a legal duty to investigate the circumstances surrounding issuance of the checks. In this appeal, the Supreme Court was asked to determine whether the statute of limitations barred an action against a casino for its alleged involvement in an embezzlement scheme. Finding that the Weight Watchers failed to provide any evidence of fraudulent concealment by the casino, the Court agreed with the trial court that the statute of limitations had run at the time the suit was filed.View "WW, Inc. v. Rainbow Casino-Vicksburg Partnership, LP" on Justia Law

Satyam approached the Trust about forming a joint venture to provide engineering services to the automotive industry. Satyam represented that it was an IT-services provider with a base of automotive customers, that it was publicly-traded, audited, and financially stable. The Trust formed VGE, a separate legal entity; in 2000, VGE and Satyam formed SVES under the laws of India; VGE contributed $735,000. VGE and Satyam signed agreements calling for binding arbitration. In 2005, Satyam initiated arbitration. VGE counterclaimed that Satyam had breached its obligations. The arbitrator rejected VGE’s counterclaims, found that Satyam never competed with SVES, and found an event of default entitling Satyam to purchase VGE’s shares in the joint venture for book value. Satyam filed an enforcement action. The district court ordered VGE to comply with the award. The Sixth Circuit affirmed. Following a 2007 contempt proceeding, VGE complied. In 2010, VGE and the Trust sued, alleging that, starting before the joint venture, Satyam engaged in a massive fraud scheme about its financial stability, and claiming civil violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1961–1968. The district court dismissed, based on res judicata defense, and denied leave to amend. The Sixth Circuit reversed. The complaint adequately alleged that Satyam wrongfully concealed the factual predicate to claims, so the defense of claim preclusion does not apply. View "Venture Global Eng'g, LLC v. Satyam Computer Servs., Ltd." on Justia Law

Plaintiff-Appellee John Niemi and several investors intended to build a large luxury ski condominium complex. Niemi was unable to find traditional financing for the project, and turned to Florida businessman, Defendant Michael Burgess. Burgess claimed to represent a European investor, Defendant-Appellee Erwin Lasshofer. As part of the funding scheme, plaintiff had to pay certain fees and pledge a collateral deposit before $250 million dollars would be loaned to him (and his business partners/investors) for the condo project. For his part, Burgess was eventually convicted and sentenced to federal prison for fraud and money laundering. Plaintiffs sued seeking return of the money they pledged, alleging the lost loan irreparably damaged its business, caused millions in lost profits, and sent its other real properties into foreclosure. Burgess maintained he took direction from Lasshofer; Lasshofer claimed he unwittingly did business with a con man. The district court granted plaintiffs' motion for a preliminary injunction effectively freezing Lasshofer's worldwide assets pending final judgment. Lasshofer appealed the grant of the preliminary injunction. Upon careful review, the Tenth Circuit concluded that plaintiffs, Niemi and individual investors in his condo project, lacked standing to bring suit. Therefore the district court erred in granting the injunction. The injunction was vacated and the case remanded for further proceedings. View "Niemi, et al v. Burgess, et al" on Justia Law

An employee benefit plan, providing healthcare benefits, believed that Walgreens fraudulently overcharged it and other insurance providers by filling prescriptions for generic drugs with a dosage form that differed from, and was more expensive than, the dosage form prescribed. The plan sued Walgreens and companies that manufactured the generic drugs at issue, claiming a scheme to defraud insurers, in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1961-1968. The district court dismissed for failure to state a claim. The Seventh Circuit affirmed, finding that the complaint alleged misconduct by the defendants but did not plausibly allege the type of concerted activity undertaken on behalf of an identifiable enterprise required for a successful RICO claim. RICO is not violated every time two or more participants commit a predicate crime listed in the statute. View "United Food & Commercial Workers Unions v. Walgreen Co." on Justia Law

Plaintiff appealed from the district court's judgment dismissing her claims against her ex-husband and his brother for failure to state a claim and untimeliness. Plaintiff alleged that, in representing a certain investment as worthless and concealing the $5.5 million received on its account, defendants conspired in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962(d), committed common law fraud, and breached fiduciary duties, and that her ex-husband was unjustly enriched. The court held that the district court's reasons for dismissing the fraud-based claims were erroneous and that the district court erred in ruling on the existing record that the RICO, common law fraud, and breach of fiduciary duty claims were time-barred. The court sustained the dismissal of the unjust enrichment claim as untimely. Accordingly, the court affirmed in part and vacated and remanded in part. View "Cohen v. Cohen" on Justia Law

In these two civil enforcement actions for securities fraud, various entities that were defrauded by defendants appealed from the district court's order approving initial pro rata distributions recovered from defendants and associated entities by the Receiver in accordance with the Plan proposed by the Receiver. Interested parties, 3M Group, contended principally that the district court should have rejected the proposed pro rata distributions because under the Plan, fraud victims who chose allegedly safer investments fare no better than victims whose investments were riskier. Interested party, KCERA, contended that the district court should have rejected the proposed Plan because it did not provide an adjustment for inflation to compensate for longer-term investors. The court considered all of the contentions of the 3M Group and KCERA in support of their respective appeals and found them to be without merit. Accordingly, the court affirmed the order. View "CFTC v. 3M Employee Welfare Benefit Assoc. Trust I, et al." on Justia Law

Belmont did not pay subcontractors and suppliers on some projects. Gad, its CEO, disappeared. West Bend Mutual paid more than $2 million to satisfy Belmont’s obligations and has a judgment against Belmont, Gad, and Gizynski, who signed checks for more than $100,000 on Belmont’s account at U.S. Bank, payable to Banco Popular. Gizynski told Banco to apply the funds to his outstanding loan secured by commercial real estate. Banco had a mortgage and an assignment of rents and knew that Belmont was among Gizynski’s tenants; it did not become suspicious and did not ask Belmont how the funds were to be applied. Illinois law requires banks named as payees to ask the drawer how funds are to be applied. The district judge directed the parties to present evidence about how Belmont would have replied to a query from the Bank. Gizynski testified that Gad, as CEO, would have told the Bank to do whatever Gizynski wanted. The judge found Gizynski not credible, but that West Bend, as plaintiff, had the burden of production and the risk of non-persuasion. The Seventh Circuit affirmed, rejecting an argument based on fiduciary duty, but reversed an order requiring Banco to pay West Bend’s legal fees View "W. Bend Mut. Ins. Co v. Belmont St. Corp." on Justia Law

Plaintiff-Appellant Waterford Investment Services, Inc. appealed the district court’s ruling that it must arbitrate certain claims that a group of investors brought before the Financial Industry Regulatory Authority (FINRA). The investors alleged in their FINRA claims that they received bad advice from their financial advisor, George Gilbert. The investors named Gilbert, his current investment firm, Waterford, and his prior firm, Community Bankers Securities, LLC (CBS), among others as parties to the arbitration. In response, Waterford filed this suit asking a federal district court to enjoin the arbitration proceedings and enter a declaratory judgment that Waterford need not arbitrate the claims. The district court, adopting the recommendations of a magistrate judge, concluded that because Gilbert was an "associated person" of Waterford during the events in question, Waterford must arbitrate the investors' claims. Upon review of the matter, the Fourth Circuit affirmed, finding that Gilbert was inextricably an "associated person" with Waterford, and that the district court did not abuse its discretion in adopting the magistrate judge's opinion. View "Waterford Investment Services v. Bosco" on Justia Law

Principals of Cybercos defrauded lending institutions out of more than $100 million in loan. In 2002, Huntington granted Cyberco a multi-million-dollar line of credit, and Cyberco granted Huntington a continuing security interest and lien in all of Cyberco's personal property, including deposit accounts. After discovering the fraud, the government seized approximately $4 million in Cyberco assets, including $705,168.60 from a Huntington Bank Account. Cyberco principals were charged in a criminal indictment with conspiring to violate federal laws relating to bank fraud, mail fraud, and money laundering. Count 10 issued forfeiture allegations against individuals regarding Cyberco assets, including the Account. In their plea agreements, defendants agreed to forfeit any interest they possessed in the assets or funds. The district court entered a preliminary order of forfeiture with regard to the assets, including the Account. Huntington filed a claim, asserting ownership interest in the forfeited Account. The district court found that Huntington did not have a legal claim. On remand, the district court again denied the claim. The Sixth Circuit reversed. A party who takes a security interest in property, tangible or intangible, in exchange for value, can be a bona fide purchaser for value of that property interest under 21 U.S.C. 853(n)(6)(B). View "United States v. Huntington Nat'l Bank" on Justia Law